143
FINANCIAL STATEMENTS
22 INSURANCE CONTRACTS AND RELATED REINSURANCE continued (c) Movements The following movements have occurred in the insurance contract balances for Retirement Income products during the year.
Gross £m
Reinsurance £m
Net £m
Year ended 31 December 2019
17,273.8 (4,239.2) 13,034.6
At 1 January 2019
1,586.2 (1,265.1)
8.4 1,594.6
Increase in liability from premiums Release of liability due to recorded claims
354.1 (911.0)
599.7 (138.2) 886.5 (193.1)
461.5 693.4
Unwinding of discount
Changes in economic assumptions Changes in non-economic assumptions
(44.3) (33.1)
14.6
(29.7)
461.4 428.3
Other movements 1 At 31 December 2019
19,003.7 (3,732.0) 15,271.7
Gross £m
Reinsurance £m
Net £m
Year ended 31 December 2018
At 1 January 2018
16,633.0 (5,285.3) 11,347.7
Increase in liability from premiums Release of liability due to recorded claims
1,735.4 (1,213.2)
2.2 1,737.6 419.8 (793.4)
Unwinding of discount
547.4 (154.9)
392.5
Changes in economic assumptions Changes in non-economic assumptions
(286.6) (128.8)
136.4 (150.2)
98.1
(30.7)
(13.4)
544.5
531.1
Other movements 1 At 31 December 2018
17,273.8 (4,239.2) 13,034.6
1 Includes the impact of reinsurance recapture.
Effect of changes in assumptions and estimates during the year Economic assumption changes The principal economic assumption change impacting the movement in insurance liabilities during the year relates to discount rates 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 on backing assets. The principal assumption changes impacting the cash flows on backing assets during the year relate to voluntary redemptions on Lifetime Mortgages. Both existing in-force assets and new assets purchased during the year contribute to the movement in the discount rate. Differences between the discount rates recognised on new business written during the year and the prevailing discount rates on the entire portfolio of business also contribute to the movement in insurance liabilities. Non-economic assumption changes The principal non-economic assumption changes impacting the movement in insurance liabilities during the year relate to maintenance expenses and investment expenses for both JRL and PLACL. Expense assumption Cost reductions achieved within the Group have given rise to an overall reduction in maintenance expense and investment expense assumptions. This has resulted in a decrease in the carrying value of the Group’s insurance liabilities. The JRL GIfL maintenance expense assumption used at 31 December 2019 was £28.50 per plan (2018: £30.29), whilst the JRL DB maintenance assumption used at 31 December 2019 was £112.71 per scheme member (2018: £118.75). The PLACL GIfL maintenance expense assumption used at 31 December 2019 was £28.50 per plan (2018: £29.30), whilst the PLACL DB maintenance assumption used at 31 December 2019 was £175.40 per scheme member (2018: £161.40). Investment expenses refer to the fees incurred in the management of the Group’s debt and other fixed income securities. Investment expenses are allowed for via a reduction in the yield on those assets. The JRL investment expenses assumption used at 31 December 2019 was 6.7bps (2018: 6.8bps). The PLACL investment expense assumption used at 31 December 2019 was 4.3bps (2018: 9.7bps).
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