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 36. 36.1 36.1.2 36.1.3 1 year 3 years 5 years 10 years 20 years 8.6% 10.2% 11.9% 16.8% 15.1% Products with cash flows that do not vary with underlying items Valuation of insurance contract liabilities (continued) Discount rates Risk adjustment for non-financial risk The risk adjustment for non-financial risk represents the compensation that the Group requires for bearing the uncertainty about the amount and timing of the cash flows of groups of insurance contracts and covers insurance risk, lapse risk and expense risk. The risk adjustment reflects an amount that an insurer would rationally pay to remove the uncertainty that future cash flows will exceed the best estimate amount. The Group applies a confidence level Value-at-risk (VaR) approach on a variance-covariance matrix basis which can be converted into a single scenario. This approach produces output which is consistent with the Group’s economic capital (as reported in the Own Risk Self-Assessment to the Prudential Authority (PA) annually) results, is based on a confidence level which is constant over time and is a good fit for the Group’s operating environment. The simplification of assumptions underlying the applied approach does not impact the results materially, making this approach tractable and operationally straightforward. The confidence level applied is 80%. Critical accounting estimates and judgements in applying accounting policies (continued) These products include the non-participating and reinsurance contracts. The Group applies a bottom up approach for the discount rate. The PA Government bond curve represents a bottom up approach and meets the requirements of IFRS 17. The PA Government bond curve is readily available and is therefore used to discount the expected future cash flows. The discount rate for contracts with cash flows that do not vary with underlying items (non-participating contracts and reinsurance contracts) does not have a liquidity premium as the contracts are liquid. Products with cash flows that vary with underlying items The aggregate carrying value of the participating contracts is made up of the cash flows that do not vary with any underlying items plus the fair value of the residual statement of financial position. Any impact of the discount rate on the cash flows that do not vary with the underlying items will be neutralised by changes in the underlying items. Therefore, the carrying value of the participating contracts is independent of the discount rate used. The roll forward of the financing cost of the participating contracts is determined with reference to the change in fair value of underlying items which is independent of the discount rate. Where discounting is required the PA government bond curve is used. 2023 Life Insurance Contracts Issued ZAR 198 Notes to the Consolidated Financial Statements
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