Underfunding of Policy Reserves
First written in FY2017. 2 of 4 entries say "Restated". Latest entry: FY2024-Q3.
The whole theme swung hardest in 2020: 3 of 8 companies on the "Worse" side.
5 other companies' latest entry also says "Restated".
- FY2024-Q3RestatedAnnual report
「The Company has voluntarily applied IFRS since the cumulative first quarter of fiscal 2023. Under IFRS, insurance contracts are measured using current estimates of future cash flows, the current discount rate and the current estimate of the risk adjustment for non-financial risk as of the reporting date. When assumptions used to measure insurance contracts change, the impact of changes in estimates of future cash flows and the risk adjustment for non-financial risk is adjusted through the contractual service margin (CSM). However, if a significant deterioration in insurance incident rates, lapse and surrender rates or maintenance expense rates, or a significant increase in non-financial risk, requires adverse changes in assumptions for a group of insurance contracts that cannot be fully adjusted through the CSM, the amount exceeding the CSM is recognized as a loss for the current period. This may result in an accounting loss and adversely affect the Company's performance. In addition, the discount rate used to measure insurance contracts is affected by changes in interest rates. If market conditions fluctuate significantly beyond the Company's ability to address them, its financial condition and performance may be adversely affected.」
The Company continues to describe the risk that deterioration in assumptions exceeding the CSM will result in losses under IFRS insurance contract measurements, as well as the risk of discount-rate fluctuations caused by market conditions. - FY2024-Q1ReframedAnnual report
「The Company has voluntarily applied IFRS since the cumulative first quarter of fiscal 2023. Under IFRS, insurance contracts are measured using current estimates of future cash flows, the current discount rate and the current estimate of the risk adjustment for non-financial risk as of the reporting date. When assumptions used to measure insurance contracts change, the impact of changes in estimates of future cash flows and the risk adjustment for non-financial risk is adjusted through the contractual service margin (CSM). However, if a significant deterioration in insurance incident rates, lapse and surrender rates or maintenance expense rates, or a significant increase in non-financial risk, requires adverse changes in assumptions for a group of insurance contracts that cannot be fully adjusted through the CSM, the amount exceeding the CSM is recognized as a loss for the current period. This may result in an accounting loss and adversely affect the Company's performance. In addition, the discount rate used to measure insurance contracts is affected by changes in interest rates. If market conditions fluctuate significantly beyond the Company's ability to address them, its financial condition and performance may be adversely affected.」
The former risk of insufficient policy reserves has, following the application of IFRS, become more specific as the risk that deterioration in insurance incident rates, lapse and surrender rates, maintenance expense rates and other assumptions exceeding the CSM will be recognized as a current-period loss. The impact of interest rates and market conditions through changes in the discount rate is also explicitly stated. - FY2018RestatedAnnual report
「In accordance with applicable laws and regulations, the Company sets aside policy reserves to prepare for future insurance claims and benefit payments. These policy reserves are calculated based on certain assumptions, but those assumptions are uncertain. If the Company's actual results deteriorate significantly beyond the assumptions used in its estimates, its policy reserves may prove insufficient, potentially weakening its financial soundness.」
The Company continues to identify the risk of insufficient policy reserves resulting from divergences between assumptions and actual results for mortality, morbidity, lapse and surrender rates, investment yields and other factors. - FY2017First statedAnnual report
「In accordance with applicable laws and regulations, the Company sets aside policy reserves to prepare for future insurance claims and benefit payments. These policy reserves are calculated based on certain assumptions, but those assumptions are uncertain. If the Company's actual results deteriorate significantly beyond the assumptions used in its estimates, its policy reserves may prove insufficient, potentially weakening its financial soundness.」
The Company identifies the potential shortfall in policy reserves caused by divergences between assumptions and actual results for mortality, morbidity, lapse and surrender rates, investment yields and other factors as a risk.