Just group PLC | Annual Report and accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
23 INSURANCE CONTRACTS AND RELATED REINSURANCE continued (a) Terms and conditions of insurance contracts
The Group’s long-term insurance contracts, written by the Group’s life companies, Just Retirement Limited (“JRL”) and Partnership Life Assurance Company Limited (“PLACL”), include Retirement Income (Guaranteed Income for Life (“GIfL”), Defined Benefit (“DB”), and Care Plans), and whole of life and term protection insurance. The valuation of insurance liabilities are agreed by the Board using recognised actuarial valuation methods proposed by the Group’s Actuarial Reporting function. In particular, a prospective gross premium valuation method has been adopted for major classes of business. Although the process for the establishment of insurance liabilities follows specified rules and guidelines, the liabilities that result from the process remain uncertain. As a consequence of this uncertainty, the eventual value of claims could vary from the amounts provided to cover future claims. The Group seeks to provide for appropriate levels of contract liabilities taking known facts and experiences into account but nevertheless such liabilities remain uncertain. The estimation process used in determining insurance liabilities involves projecting future annuity payments and the cost of maintaining the contracts. For non-annuity contracts, the liability is determined as the sum of the discounted value of future benefit payments and future administration expenses less the expected value of premiums payable under the contract. (b) Principal assumptions underlying the calculation of insurance contracts The principal assumptions underlying the calculation of insurance contracts are explained below. This includes any areas sensitive to COVID-19 effects or other economic downturn. Mortality assumptions The COVID-19 pandemic has had a significant effect on mortality rates over the past three years. High COVID-19 mortality rates in 2020 and early 2021 contributed significantly to positive mortality experience variances in those respective reporting periods, whereas during 2022 rates have been closer to expected levels, for the UK population overall. The extent to which mortality rates may be elevated in future, as a result of the pandemic, is subject to considerable uncertainty. An allowance for future effects of COVID-19 has been implemented through a combination of using the latest CMI 2021 improvement model and applying an overlay to increase short term mortality rates but which tapers to zero in the long-term. The CMI 2021 improvement model has been used with core parameters, placing no weight on 2020 and 2021 experience. The overlay applies multipliers to mortality rates for each calendar year, uniformly across all ages. The Group will continue to follow closely the actual impact of COVID-19 on mortality and to analyse potential direct and indirect future impacts of the pandemic, including the possibility there will be enduring influences on the longevity of customers. The Group will consider the conclusions of such analysis, alongside assessment of other factors influencing mortality trends, in keeping its assumptions under regular review. Mortality assumptions have been set by reference to appropriate standard mortality tables. These tables have been adjusted to reflect the future mortality experience of the policyholders, taking into account the medical and lifestyle evidence collected during the underwriting process, premium size, gender and the Group’s assessment of how this experience will develop in the future. The assessment takes into consideration relevant industry and population studies, published research materials, and management’s own industry experience.
The standard tables which underpin the mortality assumptions are summarised in the table below.
2022
2021
Modified E&W Population mortality, with CMI 2021 model mortality improvements Modified E&W Population mortality, with CMI 2021 model mortality improvements Modified E&W Population mortality, with CMI 2021 model mortality improvements. Medically underwritten unchanged from 2021
Individually underwritten Guaranteed Income for Life Solutions (JRL) Individually underwritten Guaranteed Income for Life Solutions (PLACL)
Modified E&W Population mortality, with CMI 2019 model mortality improvements Modified E&W Population mortality, with CMI 2019 model mortality improvements Modified E&W Population mortality, with CMI 2019 model mortality improvements for standard underwritten business; Reinsurer supplied tables underpinned by the Self-Administered Pension Scheme (“SAPS”) S1 tables, with modified CMI 2009 model mortality improvements for medically underwritten business Modified E&W Population mortality, with CMI 2019 model mortality improvements Modified PCMA/PCFA or modified E&W Population mortality with CMI 2019 model mortality improvements
Defined Benefit (JRL)
Modified E&W Population mortality, with CMI 2021 model mortality improvements
Defined Benefit (PLACL)
Unchanged from 2021
Care Plans and other annuity products (PLACL)
Unchanged from 2021
Protection (PLACL)
TM/TF00 Select
All references to the use of the CMI 2019 or CMI 2021 models relate to improvements for calendar year 2020 onwards.
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