GROUP ACCOUNTING POLICIES (continued) 5. Insurance, investment and reinsurance contracts (continued) 5.1.6 Insurance revenue (continued) For contracts not measured under the PAA, insurance revenue comprises the following: Amounts relating to the changes in the LRC: a) claims and other directly attributable expenses incurred in the period measured at the amounts expected at the beginning of the period, excluding: o repayments of investment components and policyholder rights to withdraw an amount; o amounts of transaction-based taxes collected in a fiduciary capacity; o insurance acquisition expenses; and o amounts related to the risk adjustment for non-financial risk (see (b)); b) changes in the risk adjustment for non-financial risk, excluding: o changes included in insurance finance income (expenses); o changes that relate to future coverage (which adjust the CSM); and o amounts allocated to the loss component; c) amounts of the CSM recognised for the services provided in the period; and d) experience adjustments – arising from premiums received in the period other than those that relate to future service. For contracts not measured under the PAA, amortisation of insurance acquisition cash flows is reflected in insurance service expenses in the same amount as insurance acquisition cash flows recovery reflected within insurance revenue, as described above. Other expenses not meeting the above categories are included in other operating expenses in the consolidated statement of profit or loss. 5.1.7 Insurance finance income or expenses Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts arising from: a) the effect of the time value of money and changes in the time value of money; and b) the effect of financial risk and changes in financial risk. For contracts measured under the GMM, the main amounts within insurance finance income or expenses are: a) interest accreted on the FCF and the CSM; and b) the effect of changes in interest rates and other financial assumptions. For contracts measured under the VFA, insurance finance income or expenses comprise changes in the value of underlying items (excluding additions and withdrawals). The Group disaggregates changes in the risk adjustment for non-financial risk between insurance service result and insurance finance income or expenses. For the contracts measured under the GMM, the Group includes all insurance finance income or expenses for the period in profit or loss that is, the profit or loss option (the PL option) is applied. The changes include changes in the measurement of cohorts of contracts caused by changes in the value of underlying items (including additions and withdrawals). This is particularly relevant to movements in the PPS profit-share accounts, including exits net of forfeitures, and allocations of profit to PPS Profit-share accounts. 123 Group Accounting Policies
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