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 37. Management of risks (continued) 37.3 • • • The minimum capital requirements must be maintained at all times during the year. The table below summarises the minimum accumulated funds requirements across the Group and the actual accumulated funds held. To safeguard the entity’s ability to continue as a going concern. To continue to provide acceptable returns for policyholders and members, and benefits for other stakeholders. Long-Term Insurance The Group’s capital management objectives are: There is a risk that the Group may not cover the costs of acquisition and distribution if insufficient volumes of new business are sold. A mitigating factor is that a substantial portion of these costs are variable costs. Actual sales volumes are compared against budgeted and annual targeted sales on a monthly basis. This enables management to determine whether there are any factors that could impact the delivery of the targeted volumes. Where these are identified, an investigation occurs and the appropriate corrective action is taken. Data and model risk There is a risk that the Group may suffer a loss if the model used to calculate the insurance liabilities does not project the expected cash flows on the contracts accurately. This risk is mitigated by comparing the actual cash flows with the expected cash flows on a product basis at least annually. All new contract designs are also incorporated into the model. Detailed investigations are performed annually to ensure the integrity of the data used in the valuation process. Automated systems have been implemented to flag any anomalous transactions on an ongoing basis. There is a risk that the Group may suffer a loss from actual expenses being higher than those assumed when pricing or valuing contracts. This may be caused by factors increasing the expense charge in running the business, higher than expected expense inflation, or by an in-force policy book smaller than expected. Alternatively, lower than expected volumes of new business or higher than expected contract terminations may result in higher than expected unit costs per policy. To comply with the insurance regulatory capital requirements in the countries in which the Group operates. The Board’s policy is to maintain a strong capital base to protect policyholders’ and creditors’ interests and satisfy regulators whilst still creating value for policyholders. The level of accumulated funds required by the Group is determined by the Insurance Act 18 of 2017 in South Africa and Namibian legislation (Act 5 of 1998) in Namibia, together with the Group’s licence requirements. Expense investigations are performed annually and valuation expense assumptions are set based on the results of this investigation, taking cognisance of the budgeted expenses per policy for the next financial year. Actual expenses are compared against budgeted expenses on a monthly basis. Due to the mutual nature of the Group, expense savings or expenses losses compared to expected expenses will respectively result in a higher or lower profit allocation to the policyholders. Business volume risk Expense risk Capital management Financial risk management (continued) 226 Notes to the Consolidated Financial Statements
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