Bank of Cyprus Credit Ratings and Financial Position
Transition to IFRS 17 from IFRS 4
IFRS 17 is an accounting standard. It does not change the economics of our insurance business
Overview
•
Accounting change impacting the phasing of profit recognition on insurance
contracts
•
Implementation on 1 January 2023 with retrospective application
•
•
IFRS 17 does not change the economics of the insurance contracts but
it does decrease the volatility of Group's insurance companies profitability
Profit is recognised over the lifetime of the contract rather than
substantially at inception, as was the case under IFRS 4
No expected impact on:
•
Regulatory capital of the Group
•
Insurance business solvency
•
Lifetime expected profit of insurance contracts
•
The Group's financial results over the longer-term; although near-
term reported net insurance result expected to be lower
Meaningful dividend generation from insurance business is
expected to continue
For more details on the transition to IFSR 17, please refer to section F9 of the press release
>
Balance Sheet and Capital
Equity 31 December 2022 under IFRS 17 vs IFRS 4
•
•
Group's Total Equity reduced by €52 mn reflecting:
Elimination of PVIF1 and related tax effect; c.€101 mn
decrease
Recognition of contractual service margin (CSM) liability;
c.€42 mn decrease
Remeasurement of insurance assets and liabilities; c.€91
mn increase
Group's Tangible Equity increased by €64 mn
2022 Profit & Loss
Decrease in Group's 2022 profit after tax by €14 mn reflecting:
•
•
•
Deferral of new business profit
Assumptions changes on the valuation of insurance contract
assets and liabilities
Less market volatility in P&L for unit-linked business under VFA²
as part of the changes adjusts the CSM
1)
Present value of in-force life insurance contracts
2)
Variable Fee Approach (VFA)
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