140 JUST GROUP PLC Annual Report and Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
23 INSURANCE CONTRACTS AND RELATED REINSURANCE continued
Gross £m
Reinsurance £m
Net £m
Year ended 31 December 2019
At 1 January 2019
17,273.8 (4,239.2) 13,034.6
Increase in liability from premiums Release of liability due to recorded claims
1,586.2 (1,265.1)
8.4 1,594.6 354.1 (911.0)
Unwinding of discount
599.7 (138.2) 886.5 (193.1)
461.5 693.4
Changes in economic assumptions Changes in non-economic assumptions
(44.3) (33.1)
14.6
(29.7)
Other movements1 At 31 December 2019
461.4
428.3
19,003.7 (3,732.0) 15,271.7
1 Includes the impact of reinsurance recapture (see note 29).
Reinsurance in the tables above is the net position of reinsurance assets and reinsurance liabilities. There is no impact on the analysis above of the restatement of reinsurance asset and reinsurance liability comparatives discussed in note 2. Effect of changes in assumptions and estimates during the year Economic assumption changes The principal economic assumption changes impacting the movement in insurance liabilities during the year relates to discount rates and inflation for both JRL and PLACL. Discount rates The movement in the valuation interest rate captures the impact of underlying changes in risk-free curves and spreads and cash flows arising on backing assets held over the course of the year. This includes the effect of the reduced property growth rate assumed for lifetime mortgages. The movement of the discount rate includes purchases to support new business and trading for risk management purposes. For the year to 31 December 2020, the contribution from the decrease in discount rate of £1,189mwas largely due to falls in the risk free rate and changes to the backing asset portfolio including the lifetime mortgage portfolio sale. Inflation Insurance liabilities for inflation-linked products, most notably Defined Benefit business and expenses on all products are impacted by changes in future expectations of RPI, CPI and earnings inflation. For the year to 31 December the contribution was £(81)m from changes in market-implied inflation. A fall in inflation reduces the carrying value of the Group’s insurance liabilities. Non-economic assumption changes The principal non-economic assumption changes impacting the movement in insurance liabilities during the year relate to mortality and maintenance expenses assumptions for both JRL and PLACL. Note that impacts quoted below relate specifically to the liability cash flow impact of these changes; any resulting change to the discount rate is captured above. Mortality The mortality bases applied are outlined above in note 23(b). For the year to 31 December 2020, this resulted in a net reduction in insurance liabilities of £(27)m. A decrease in future expectations of longevity reduces the carrying value of the Group’s insurance liabilities. Maintenance expenses and inflation methodology This item primarily includes a reduction in the expense inflation arising from the changes to the calculation method of expense inflation, which included a reduction in the margin over the best estimate. For the year to 31 December 2020 this resulted in a net reduction in insurance liabilities of £(19)m. A decrease in maintenance expense assumptions decreases the carrying value of the Group’s insurance liabilities. (d) Estimated timing of net cash outflows from insurance contract liabilities The following table shows the insurance contract balances analysed by duration. The total balances are split by duration of Retirement Income payments in proportion to the policy cash flows estimated to arise during the year.
Expected cash flows (undiscounted)
Carrying value (discounted) £m
Within 1 year £m
Over 10 years £m
1-5 years £m
5-10 years £m
Total £m
2020
1,356.5 5,139.3 5,893.8 15,250.4 27,640.0 21,118.4
Gross
(211.6)
(766.6)
(818.8) (1,815.6) (3,612.6) (2,865.5)
Reinsurance
Net
1,144.9 4,372.7 5,075.0 13,434.8 24,027.4 18,252.9
Expected cash flows (undiscounted)
Carrying value (discounted) £m
Within 1 year £m
Over 10 years £m
1-5 years £m
5-10 years £m
Total £m
2019
Gross
1,303.4 4,929.4 5,620.4 14,945.3 26,798.5 19,003.7
Reinsurance
(295.9)
(1,085.2)
(1,152.5)
(2,474.4) (5,008.0)
(3,732.0)
Net
1,007.5 3,844.2 4,467.9 12,470.9 21,790.5 15,271.7
Powered by FlippingBook