NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2022 Change in Change in Change in liability liability variable 2022 2021 Variable % R’m % change R’m % change Liability per note 13.2 5 321 5 254 Worsening in mortality 10 1 633 30.70 1 287 24.49 Worsening in morbidity rates 10 2 695 50.64 2 576 49.02 Worsening in PI inception rate 10 957 17.99 926 17.63 Lowering of investment returns (1) 1 844 34.65 2 522 47.99 Lowering of terminations (10) 345 6.49 851 16.21 Worsening of maintenance expense level 10 1 254 23.56 1 765 33.60 Worsening of expense inflation rate 10 1 184 22.26 2 770 52.72 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 2021 and 2022: 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 13. PPS Profit-Share accounts and Long-term insurance policy liabilities (continued) 13.1 Long-term life insurance contracts – assumptions, change in assumptions and sensitivity (continued) 138 Notes to the Consolidated Financial Statements
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