1. Note Financial assets and liabilities classified as fair value through profit or loss on initial recognition Financial assets and liabilities at amortised cost PPS ProfitShare accounts and reinsurance contracts Total carrying amount Fair value 7 15 691 – – 15 691 15 691 7 6 607 – – 6 607 6 607 7 20 042 – – 20 042 20 042 7 57 – – 57 57 7 11 500 – – 11 500 11 500 9 – – 1 382 1 382 1 382 13 – 1 069 – 1 069 1 069 14 – 2 915 – 2 915 2 915 10 – – (32 293) (32 293) (32 293) – – (7 290) (7 290) (7 290) – – (240) (240) (240) 9 – – (118) (118) (118) 15 (4 495) – – (4 495) (4 495) 16 (15 086) – – (15 086) (15 086) 9 – – (13) (13) (13) 20 – (221) – (221) (221) (a) * Fair value analysis of financial statement line items with a fair value (continued) The note has been restated to align with IFRS 17 disclosures and to remove prepayments from the table Qualifying policyholders’ residual interest in the net assets of the PPS Group Group R’m 2022 Restated* Equity securities(a) Local listed International listed Debt securities(a) Government and local bonds International listed Unit trusts and pooled funds(a) Reinsurance contract assets Receivables Cash and cash equivalents PPS Profit-Share accounts Liability for remaining coverage and incurred claims Short-term insurance policy liabilities Investment contract liabilities Debt securities are designated at fair value through profit and loss and Equity securities and Unit trusts and pooled funds are mandatorily held at fair value through profit and loss. Payables Liabilities to unit trust holders Reinsurance contract liabilities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2023 33 10. 10.3 (a) • • • • • • • Estimates are determined as to the expected future mortality experience. The estimates of mortality claims are derived from the experience of the Company over the preceding three to five years. The main sources of uncertainty are epidemics such as AIDS and wide-ranging lifestyle changes, such as eating, smoking and exercise habits. These uncertainties could result in future mortality being significantly worse than in the past. However, continuing improvements in medical care and social conditions could result in improvements in longevity. Estimates are determined as to the future level of administration costs to be incurred in administering the policies in force at the current year-end, using a functional cost approach. This approach allocates expenses between policy and overhead expenses and within policy expenses, between new business, maintenance and claims. These future costs are assumed to increase each year in line with an assumed inflation rate. The assumed inflation rate is set at a level consistent with the assumed future investment returns. Variations in administration costs will arise from any cost reduction exercises implemented by management or from cost overruns relative to budget. The current level of expenses is taken as an appropriate expense base. Expense inflation is derived from the Prudential Authority’s nominal and real yield curves. Tax Persistency Estimates are determined as to the future rate at which policyholders will terminate their contracts prior to the original maturity date. These estimates are based on the experience of the business over the preceding three to five years. The future termination rates will vary with economic conditions, the profitability of the business and with changes in consumer behaviour. Morbidity Estimates are determined as to the expected number of temporary and permanent incapacity claims for each of the years in which the Group is exposed to risk. The estimates of disability and dread disease claims are derived from the experience of the Group over the preceding three to five years. The main source of uncertainty is epidemics such as AIDS, SARS, economic conditions and wide-ranging lifestyle changes, such as in eating, smoking and exercise habits. These uncertainties could result in future morbidity being worse than in the past for the age groups in which the Group has significant exposure to morbidity risk. The estimated morbidity experience determines the value of the future benefit payments in the policy liabilities. PPS Profit-Share accounts and Long-term insurance contract liabilities Assumptions, change in assumptions and sensitivities Process used to decide on assumptions The assumptions used for the insurance contracts disclosed in this note are as follows: Investment returns Risk-free fixed interest securities: the risk-free rates are based on the gross redemption yield of the Prudential Authority’s nominal yield curve. Renewal expense level and inflation The assumed future profit allowance on the liabilities is in line with the Group’s past practice and members’ reasonable expectations. It has been assumed that current tax legislation and rates continue unaltered. Allowance is made for future tax and tax relief. Future profit allocations Mortality 162 Notes to the Consolidated Financial Statements
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