4.3 Assumptions made in estimation of technical provisions for non-life insurance

The estimated value of claims and benefits paid has been presented in the provision development triangles in section 6.7.1.1. Methodologies used to calculate IBNR provision and for old portfolio provision are described in section 3.18.2.1.

When calculating a provision for capitalized annuity amount, estimated future increase of an average annuity is based on historical data taking into account other information that may result in an increase in the value of annuities in the future (for instance, increased insurance awareness, legislation changes etc.).

Future profitability of the portfolio of investments covering the provision for capitalized annuity amount is calculated as projected profitability of the portfolio of bonds maintained to maturity in line with the prudence principle.

The technical interest rate applied to all annuities was 3.6% both as at 31 December 2013 and 31 December 2012. At the same time, based on the forecast inflation rate and the pay growth rate, a growth rate of 3.9% was used for annuities both as at 31 December 2013 and 31 December 2012.

As regards life annuities, the period during which annuity claims are paid is determined based on the Polish Life Expectancy Tables for 2012 (31 December 2012: PLET for 2011), published by the Central Statistical Office. Additionally, calculation of the provision for capitalized value of annuity claims includes the cost of their future management in the amount of 3% of the value of paid claims.

An analysis of sensitivity of the net profit/loss as well as equity to changes in the assumptions used for calculation of the provision for capitalized value of annuity claims is presented in section 6.7.1.1.