Directors’ Report
loss recognition (net of loss recovery) from underlying earnings, in particular the capitalised effect on level premium business that is no longer cross subsidised under AASB 17. As noted above, the loss component (net of loss recovery) was impacted by the changes made to the claims assumptions in FY24. The net impact of the loss recognition in the year, caused a decrease in after-tax profit of -$12.2 million (FY23: -$4.6 million). Net economic assumption Impact on disabled lives reserves (DLR) (+$0.8 million) The income protection incurred disabled lives reserves are discounted using market discount rates that typically vary at each reporting date. ClearView separately reports this movement (consistently period to period). This represents a change in the claims costs given the discounting of the incurred claims reserves at market discount rates (including taking into account changes in inflation). ClearView has mandated PIMCO to manage the shareholder funds that relate to the insurance liabilities (including inflation), claims and capital reserves and surplus capital in the life company. The impact on earnings from changes in investment market values has also been reported below the line (underlying earning rate on the portfolio is reported as part of underlying NPAT). This resulted in an overall net increase after-tax profit of +$0.8 million (FY23: -$2.3 million). Current year timing impacts from assumption changes on the contractual service margin (+$2.3 million) As noted elsewhere in the report, certain assumptions have been updated at 30 June 2024. Whilst the overall impact of these assumption changes is adverse, under AASB 17 certain timing issues arise whereby the impact on reinsurance profits is recognised faster than the reduction to profit on gross contracts. In FY24, this has resulted in a profit being recognised in the first year of the assumption change. This is due to two factors: 1 The pattern of coverage units which are used to release the CSM into profit results in earlier recognition of reinsurance profit or loss than for gross contracts; and 2 In the first year of any assumption change, the impact on gross contracts is lower than the impact on reinsurance contracts due to the different contract boundaries.
Whilst the total impact from the assumption changes on the contractual services margin in FY24 was $5.0 million, the current year timing impacts from assumption changes on the contractual services margin was +$2.3 million (FY23: Nil). This has been excluded from Underlying NPAT, but included in reported profit. Costs unusual to ordinary activities (-$3.4 million) Other costs of $3.4 million (after tax) expensed include: • IT transformation costs of $2.7 million - these relate to the Life Insurance IT transformation project (the transformation and duplicate system costs associated with the implementation of the technology platform), that are considered costs unusual to the ordinary activities (FY23: $1.6 million). The costs of migration will be incurred over the next 12-18 months, subsequent to which the operational efficiencies are expected to be achieved from (and the transformation project will then be completed); • Other costs of $0.6 million (FY23: $1.0 million) related to the restructure and strategic review costs that have ceased.
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ClearView Annual Report 2024
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