Introduction

Under IFRS 17, the amounts recognised in the statements of financial performance are required to be disaggregated into two main components:

1. Insurance Service Result – This includes:
   • Insurance revenue
   • Insurance service expenses
2. Insurance Finance Result – This includes:
   • Investment income
   • Net insurance finance expenses

Carrying Amount

At the end of each reporting period, the carrying amount of a group of insurance contracts is calculated by combining the following:

• Liability for Remaining Coverage (LRC):
  This comprises:
  • Fulfilment Cash Flows (FCF) related to future services allocated to the group at that date
  • Contractual Service Margin (CSM) of the group at that date
• Liability for Incurred Claims (LIC):
  This includes:
  • Fulfilment Cash Flows (FCF) related to past services allocated to the group at that date

Together, these form the total carrying amount of the group of insurance contracts.

Insurance Service Result

The Insurance Service Result is calculated as:

Insurance Service Result = Insurance Revenue + Insurance Service Expenses

Insurance Revenue

Insurance revenue is calculated as:

Insurance Revenue = Premiums ± Financing Effect – Investment Components

It includes:

• Release of Contractual Service Margin (CSM) during the period
• Release of Risk Adjustment (RA) for non-financial risk during the period
• Expected insurance service expenses at the start of the period
• Insurance acquisition expenses, where applicable

Insurance Service Expenses

Insurance service expenses consist of:

1. Incurred claims (excluding investment components) and other incurred insurance service expenses
2. Amortisation of insurance acquisition cash flows
3. Changes related to past service, i.e. changes in fulfilment cash flows relating to the liability for incurred claims
4. Changes related to future service, i.e.:
   • Losses on onerous groups of contracts
   • Reversals of such losses

Insurance Finance Result

The Insurance Finance Result includes:

• Investment Income
  (similar to what is typically recognised in traditional financial reporting)
• Insurance Finance Expenses
  (representing the financial effects related to insurance contract liabilities)

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Snapshots of Financials in the IFRS 17 World – Sample Profit and Loss Account: