PPS Integrated Report 2021 167 | Notes to the Consolidated Financial Statements Change in Change in Change in liability liability variable 2021 2020 Variable % R’m % change R’m % change Liability per note 12.2 5 254 5 172 Worsening in mortality 10 1 287 24.49 1 041 20.11 Worsening in morbidity rates 10 2 576 49.02 2 003 38.74 Worsening in PI inception rate 10 926 17.63 769 14.88 Lowering of investment returns (1) 2 522 47.99 2 238 43.26 Lowering of terminations (10) 851 16.21 799 15.45 Worsening of maintenance expense level 10 1 765 33.60 1 541 29.80 Worsening of expense inflation rate 10 2 770 52.72 3 169 61.27 The above analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated – for example, change in interest rate and change in market values; change in lapses and future mortality. The size of the sensitivities were chosen to illustrate the impacts for changes in key variables that would have a significant impact on the non-DPF liabilities, as well as mainly chosen to facilitate comparison with the sensitivities disclosed by other major insurers. e. Compulsory margins The published liabilities are on the FSV basis and include the following margins that need to be added to the best estimate margins. The following compulsory margins which have not changed since 2005 were added for both 2020 and 2021: Assumption Margin Mortality 7.5% (increase or decrease, depending on which alternative increases liabilities) Morbidity 10% Medical 15% Lapse 25% (increase or decrease, depending on which alternative increases liabilities) Terminations for disability income benefits in payment 10% Surrenders 10% (increase or decrease, depending on which alternative increases liabilities) Expenses 10% Expense inflation 10% (of estimated escalation rate) Charge against investment return 25 basis points in the management fee for and equivalent asset-based or investment performance-based margin
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