Directors’ Report
• Reserved capital includes any APRA supervisory adjustment for CLAL as required by APRA as part of the IDII sustainability measures (phase 1 of which has been successfully completed in the financial year). • ClearView has implemented an incurred claims treaty for lump sum and income protection business which reduces the concentration risk exposure. There is no Asset Concentration Risk charge under LPS 117 relating to the Swiss Re exposure as at 30 June 2024. • As a result of limits under the incurred claims treaty, ClearView continues to hold a irrevocable letter of credit issued by a major Australian bank on behalf of Swiss Re with a dollar limit on the letter of credit of $70 million as an additional risk mitigation over the medium term to further reduce any likelihood of concentration risk exposure. The terms of the letter of credit were updated to align to the revised LPS 117 standard. • Fitch continues to assign ClearView with a Long-term Issuer Default Rating ( IDR ) of ‘BBB’. At the same time, Fitch assigned ClearView’s operating subsidiary, ClearView Life, an Insurer Financial Strength Rating ( IFS ) of BBB+. The outlooks for both ratings are stable and were reaffirmed as ‘stable’. The following graphs reflects the underlying (before tax) capital generation since FY20:
Chart 6: Life insurance underlying before tax capital generation
Life Insurance Underlying Before Tax 3 Capital Generation - $m
86.2
69.3
50.3
48.2
43.3
32.0
26.4
13.8
11.5
8.1
-29.5
-38.8
-40.1
-42.9
-54.2
FY20
FY21
FY22
FY23
FY24
New Business Captial Utilisation Underlying NBPT and In-force Generation Net Generation Before Tax
• ClearView’s life insurance business has generated $86.2 million (before tax) of underlying capital from its in- force portfolios prior to reinvestment in new business and the multi year IT transformation project. • New business capital utilisation is predominantly related to the upfront policy acquisition costs 2 of a policy– the capital strain varies between periods and is dependent on new business volumes. Each year, these acquisition costs are recovered via premiums and is repaid over the life of the policy (subject to lapse risk).
1 Excluding costs considered unusual to ordinary activities in each relevant financial year as disclosed as part of full year results, tax and growth in regulatory and ICAAP reserves. Excluding capital expenditure investment. Life Insurance business only – excludes listed segment. 2 Deferred acquisition costs are the upfront costs associated with policy acquisition that are collected via the premiums from policyholders over the life of the policy. 3 Life Insurance Underlying NPAT has been defined as the life insurance profit after tax excluding the effects of economic changes on both the AASB 17 insurance contract liability and the incurred income protection disabled lives reserves, the (non-cash) impairment of the asset for acquisition cash flows ( AIACF ), changes in the loss component that is predominantly driven by the level premium business, current year timing impacts of assumption changes on the contractual services margin and any costs considered unusual to the Group’s ordinary activities. Underlying NPAT includes the amortisation of capitalised software and leases, underlying investment income (the portfolio carry yield on the investment portfolio and interest rate earned on physical cash holdings), costs associated with the incurred claims reinsurance treaties and interest costs associated with corporate debt and Tier 2 Capital.
43
ClearView Wealth Limited
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