144 JUST GROUP PLC Annual Report and Accounts 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
22 INSURANCE CONTRACTS AND RELATED REINSURANCE continued (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
Over 10 years £m
Within 1 year £m
Total £m
1-5 years £m
5-10 years £m
2019
1,303.4 4,929.4 5,620.4 14,945.3 26,798.5 19,003.7 (295.9) (1,085.2) (1,152.5) (2,474.4) (5,008.0) (3,732.0) 1,007.5 3,844.2 4,467.9 12,470.9 21,790.5 15,271.7
Gross
Reinsurance
Net
Expected cash flows (undiscounted)
Carrying value (discounted) £m
Over 10 years £m
Within 1 year £m
Total £m
1-5 years £m
5-10 years £m
2018
Gross
1,243.2 4,715.5 5,353.2 14,667.9 25,979.8 17,273.8
Reinsurance
(358.3)
(1,320.8)
(1,399.0) (2,998.7)
(6,076.8)
(4,239.2)
Net
884.9 3,394.7 3,954.2 11,669.2 19,903.0 13,034.6
(e) Sensitivity analysis The Group has estimated the impact on profit before tax for the year in relation to insurance contracts and related reinsurance from reasonably possible changes in key assumptions relating to financial assets and liabilities. The sensitivities capture the liability impacts arising from the impact on the yields of the assets backing liabilities in each sensitivity. The impact of changes in the value of assets and liabilities has been shown separately to aid the comparison with the change in value of assets for the relevant sensitivities in note 16. To further assist with this comparison, any impact on reinsurance assets has been included within the liabilities line item. The sensitivity factors are applied via financial models. The analysis has been prepared for a change in each variable with other assumptions remaining constant. In reality, such an occurrence is unlikely, due to correlation between the assumptions and other factors. It should also be noted that these sensitivities are non-linear, and larger or smaller impacts cannot be interpolated or extrapolated from these results. The sensitivity factors take into consideration that the Group’s assets and liabilities are actively managed and may vary at the time that any actual market movement occurs. The impacts indicated below for insurance contracts also reflect movements in financial derivatives, which are impacted by movements in interest rates. Related reinsurance assets are not impacted by financial derivatives. The sensitivities below cover the changes on all assets and liabilities from the given stress. The impact of these sensitivities on IFRS net equity is the impact on profit before tax as set out in the table below less tax at the current tax rate. Description of sensitivity factor applied Interest rate and investment return The impact of a change in the market interest rates by +/- 1% (e.g. if a current interest rate is 5%, the impact of an immediate change to 4% and 6% respectively). The test consistently allows for similar changes to both assets and liabilities Expenses The impact of an increase in maintenance expenses by 10% Base mortality rates The impact of a decrease in base table mortality rates by 5% applied to both Retirement Income liabilities and loans secured by residential mortgages Mortality improvement rates The impact of a level increase in mortality improvement rates of 0.25% for both Retirement Income liabilities and loans secured by residential mortgages Immediate property price fall The impact of an immediate decrease in the value of properties by 10% Future property price growth The impact of a reduction in future property price growth by 0.5% Future property price volatility The impact of an increase in future property price volatility by 1% Voluntary redemptions The impact of an increase in voluntary redemption rates on loans secured by residential mortgages by 10% Credit defaults The impact of an increase in the credit default assumption of 10bps Sensitivity factor
Impact on profit before tax (£m)
Future property price volatility +1%
Future property price growth -0.5%
Immediate property price fall -10%
Credit defaults +10bps
Voluntary redemptions +10%
Mortality improvement +0.25%
Base mortality -5%
Maintenance expenses +10%
Interest rates -1%
Interest rates +1%
2019
(2,139.5)
2,551.3
(6.6)
29.8
14.0 (104.5)
(80.2) (72.7) (152.9) (79.4) (64.2) (143.6)
(55.6) (38.3) (93.9) (53.2) (30.0) (83.2)
(12.8) (87.7)
–
Assets
1,744.3 (2,077.5)
(42.9) (49.5)
(128.0)
(78.5) (64.5)
(76.8)
(85.8) (85.8)
Liabilities
Total
(395.2)
473.8
(98.2)
(181.3) (97.1) (64.2) (161.3)
(100.5)
2018
Assets
(1,710.2)
2,042.2
(7.1)
22.4
10.9
(15.1) (73.2) (88.3)
–
Liabilities
1,553.9 (1,842.5)
(30.5) (37.6)
(139.0) (116.6)
(97.7) (86.8)
(60.0) (60.0)
Total
(156.3)
199.7
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