The condensed group financial statements under review have been prepared in accordance with IAS 34 Interim Financial Reporting, the South African Companies Act, the framework concepts and the measurement and recognition requirements of IFRS Accounting Standards and the Financial Pronouncements as issued by the Financial Reporting Standards Council and SAICA Financial Reporting Guides as issued by the Accounting Practices Committee (collectively 'JSE Listings Requirements').

Basis of preparation

The condensed group financial statements for the financial year under review have been prepared under the supervision of the finance director, Ms TTA Mhlanga, CA(SA). The condensed group financial statements for the financial year under review have been prepared on the historical cost basis, except for certain financial instruments that are fairly valued. The accounting policies used are in terms of IFRS Accounting Standards and are consistent with those applied in the most recent annual financial statements, apart from the new standards adopted in the current year.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the group's financial position, performance and cash flow since the last annual financial statements.

Adoption of new and revised accounting standards

The group has adopted the following new and/or revised standards and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC) of the IASB during the period under review. The date of initial application for the group being 1 July 2023.

Standard	Subject	Effective date
IFRS 17	Insurance contracts	1 January 2023
IAS 8	Accounting policies, changes in accounting estimates and errors – definition of accounting estimates – amendment	1 January 2023
IAS 1 and Practice statement 2	Presentation of financial statements – disclosure of accounting policies – amendment	1 January 2023
IAS 12	Income taxes – deferred tax related to assets and liabilities arising from a single transaction – amendment	1 January 2023
IAS 12	International tax reform – pillar two model rules – amendment	23 May 2023

In the group financial statements, the group has applied IFRS 17 for the first time. The group has not early adopted any other standard, interpretation or amendment that have been issued but is not yet effective. The adoption of the above standards with the exception of IFRS 17 Insurance contracts did not have a significant effect on the group financial statements.

1. Changes in accounting policies and disclosures

IFRS 17 Insurance contracts

IFRS 17 replaces IFRS 4 Insurance contracts for annual periods beginning on or after 1 January 2023. There is no third statement of financial position disclosed as the 2022 adjustment is R58 million, which is deemed immaterial.

In the current reporting period, the group, by virtue of consolidating Artex (previously called Mannequin) Cell AVL 18, has expanded its scope of activities to include the issuance of insurance contracts, limited to instances where the underlying parties insured by Cell AVL 18 (via Guardrisk) are not consolidated by ARM group. The adoption of IFRS 17 reflects the group's commitment to transparent and comprehensive financial reporting, aligning with international accounting standards and ensuring a more accurate representation of its financial position, performance, and risk exposures. This accounting policy adjustment is in accordance with the specific circumstances arising from the consolidation of Cell AVL 18 and its implications on the group's overall financial reporting framework.

The application of the new amendments to IFRS Accounting Standards in the current year has had an immaterial impact on the group's financial performance and positions for the current and prior years and/or on the disclosures set out in this consolidated financial information.

The nature of the changes in accounting policies can be summarised as follows:

1.1 Changes in classification and measurement

IFRS 17 establishes specific principles for the recognition and measurement of insurance contracts issued and reinsurance contracts held by the group.

The key principles of IFRS 17 are that the group:

• Identifies insurance contracts as those under which the group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder
• Separates specified embedded derivatives, distinct investment components and distinct non-insurance goods or services from insurance contracts and accounts for them in accordance with other standards
• Divides the insurance and reinsurance contracts into groups it will recognise and measure
• Recognises and measures groups of insurance contracts at:
  • A risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment cash flows in a way that is consistent with observable market information
  • An amount representing the unearned profit in the group of contracts (the contractual service margin or CSM)
• Recognises profit from a group of insurance contracts over the period the group provides insurance coverage, as the group is released from risk. If a group of contracts is expected to be onerous (ie loss-making) over the remaining coverage period, the group recognises the loss immediately as part of insurance service expense.

1.2 Changes to presentation and disclosure

For presentation in the statement of financial position, the group aggregates groups of insurance and reinsurance contracts issued and reinsurance contracts held and presents separately:

• Groups of insurance and reinsurance contracts issued that are assets
• Groups of reinsurance contracts held that are assets
• Groups of insurance contracts and reinsurance contracts issued that are liabilities
• Groups of reinsurance contracts held that are liabilities.

The groups referred to above are those established at initial recognition in accordance with the IFRS 17 requirements (IFRS 17.14-24).

The line item descriptions in the statement of profit or loss and other comprehensive income have been changed significantly compared with last year to incorporate the adoption of IFRS 17. IFRS 17 requires separate presentation of:

• Insurance revenue
• Insurance service expense
• Net expenses from reinsurance contracts held
• Net finance expenses from insurance contracts held
• Net finance expenses from reinsurance contracts held.

The group provides disaggregated qualitative and quantitative information in the notes to the financial statements about:

• The amounts recognised in its financial statements from insurance contracts
• Significant judgements, and changes in those judgements, made when applying the standard.

1.3 Transition

On transition date, the group:

• Had identified, recognised and measured each group of insurance contracts as if IFRS 17 had always applied
• Derecognised any existing balances that would not exist had IFRS 17 always applied
• Recognised any resulting net difference in equity.

2. Material accounting policies

Summary of material accounting policies for insurance contracts

2.1 Summary of measurement methods

The group issues the following contracts that are accounted for using different measurement methods:

The gross insurance side of Cell AVL 18's business emanates from the transfer of contracts from the Guardrisk cell, culminating in a singular contract that spans across various 'products' or subsections of cover. This contract is designed to cover diverse aspects of Cell AVL 18's offerings. The inward business will be modelled using the premium allocation approach (PAA) under IFRS 17. This approach allows for a streamlined representation of the coverage across all products, contributing to enhanced clarity and coherence in financial reporting.

On the reinsurance side, there is a single complex contract extending until 2026. There is an annual review possibility, despite the contractual term spanning four to five years. Given the nature of the reinsurance contracts, particularly the Hannover Re contract, the eligibility for PAA treatment is substantiated primarily on the grounds of coverage period. The ability to review and reprice annually fortifies the argument for PAA eligibility. Other reinsurance contracts automatically qualify for PPA, as none of the contracts contain contract terms exceeding 12 months.

2.2 Definitions and classifications

Contracts are classified as insurance contracts when the group assumes significant insurance risk by agreeing to compensate the policyholder if a specified uncertain future event adversely affects them. The Cell AVL 18 and Guardrisk arrangements are assessed for the transfer of significance of insurance risk. Applying this to the Cell AVL 18:

• Even if a reinsurance contract does not expose the issuer to the possibility of a significant loss, that contract is deemed to transfer significant insurance risk if it transfers to the reinsurer substantially all the insurance risk relating to the reinsured portions of the underlying insurance contracts.

The group holds reinsurance contracts to mitigate certain risk exposure. These are facultative reinsurance contracts. A reinsurance contract is an insurance contract issued by a reinsurer to compensate the group for claims arising from one or more insurance contracts issued by the group.

2.3 Separating components from insurance and reinsurance contracts

Some insurance contracts issued by the group have several components in addition to the provision of the insurance coverage service, such as an investment component, an investment management service, an embedded derivative, and a provision of some other distinct goods or non-insurance services.

The group assesses its products to determine whether some of these components are distinct and need to be separated and accounted for applying other standards. When these non-insurance components are non-distinct, they will be accounted for together with the insurance component as part of the accounting for an insurance contract.

Separating investment components

In assessing whether an investment component is distinct, the group considers whether the investment and insurance components are not highly interrelated and whether a contract with equivalent terms to the investment component is sold (or could be sold) separately in the same market or in the same jurisdiction by other entities (including entities issuing insurance contracts).

In determining whether investment and insurance components are highly interrelated, the group assesses whether it is unable to measure one component without considering the other and whether the policyholder is unable to benefit from one component unless the other component is present, ie whether cancelling one component also terminates the other.

The funds withheld by the group in relation to the reinsurance contract held by Artex, primarily serve as a risk mitigation strategy rather than constituting a distinct investment component. These funds are predominantly held to cover potential liabilities arising from insurance contracts and are not allocated for investment purposes independently.

The decision to retain funds is aligned with the group's approach to managing risk exposure and ensuring adequate resources are available to meet potential claim obligations. The group has not identified any distinct investment components under IFRS 17.

2.4 Level of aggregation

The group identifies portfolios by aggregating insurance contracts that are subject to similar risks and managed together. In grouping insurance contracts into portfolios, the group considers the similarity of risks rather than the specific labelling of the product lines. The group determines that all contracts within each product line, as defined for management purposes, have similar risks and, therefore, represent a portfolio of contracts when they are managed together.

Each portfolio is subdivided into groups of contracts to which the recognition and measurement requirements of IFRS 17 are applied. At initial recognition, the group segregates contracts based on when they were issued. A portfolio contains all contracts that were issued within a 12-month period. Each portfolio is then further disaggregated into three groups of contracts:

• a) Contracts that are onerous on initial recognition
• b) Contracts that, on initial recognition, have no significant possibility of becoming onerous subsequently
• c) Any remaining contracts in the portfolio.

In determining the appropriate group, the group measures a set of contracts together using reasonable and supportable information. The group applies significant judgement in determining at what level of granularity it has sufficient information to conclude that all contracts within a set will be in the same group. In the absence of such information, the group assesses each contract individually.

The determination of whether a contract or a group of contracts are onerous is based on the expectations as at the date of initial recognition, with fulfilment cash flow expectations determined on a probability-weighted basis. The group determines the appropriate level at which reasonable and supportable information is available to assess whether the contracts are onerous at initial recognition and whether the contracts not onerous at initial recognition have a significant possibility of becoming onerous subsequently.

Reinsurance contracts held are assessed separately from underlying insurance contracts issued. The group disaggregates a portfolio of its reinsurance contracts held into three groups of contracts:

• a) Those that, on initial recognition, have a net gain
• b) Those that, on initial recognition, have a net cost that is not immediately recognised in profit or loss
• c) Those that, on initial recognition, have a net cost that is immediately recognised in profit or loss.

2.5 Recognition

The group recognises groups of insurance contracts issued from the earliest of the following dates:

• a) The beginning of the coverage period of the group of contracts
• b) The date when the first payment from a policyholder in the group becomes due (in the absence of a contractual due date, this is deemed to be when the first payment is received)
• c) When the group determines that a group of contracts becomes onerous.

The group recognises only contracts issued within a one-year period that meet the recognition criteria by the reporting date. Subject to this limit, a group of insurance contracts can remain open after the end of the current reporting period and new contracts are included in the group when they meet the recognition criteria in subsequent reporting periods until such time that all contracts expected to be included within the group have been recognised.

2.6 Contract boundaries

The group includes in the measurement of a group of insurance contracts all the future cash flows expected to arise within the boundary of each of the contracts in the group.

The group estimates expected future cash flows for a group of contracts at a portfolio level and then allocates them to the group using a systematic and rational basis.

In determining which cash flows fall within a contract boundary, the group considers its substantive rights and obligations arising from the terms of the contract, and also from applicable laws and regulations. The group determines that cash flows are within the boundary of a contract if they arise from substantive rights and obligations that exist during the reporting period in which the group can compel the policyholder to pay the premiums or the group has a substantive obligation to provide the policyholder with services. A substantive obligation to provide services ends when:

• The group has the practical ability to reassess the risks of a particular policyholder and as a result change the price charged or the level of benefits provided for the price to fully reflect the new level of risk
• The boundary assessment is performed at a portfolio rather than individual contract level, there are two criteria that both need to be satisfied: the group must have the practical ability to reprice the portfolio to fully reflect risk from all policyholders', and the group's pricing must not take into account any risks beyond the next reassessment date.

In determining whether all the risks have been reflected either in the premium or in the level of benefits, the group considers all risks that policyholders would transfer had it issued the contracts (or portfolio of contracts) at the reassessment date. Similarly, the group concludes on its practical ability to set a price that fully reflects the risks in the contract or portfolio at a renewal date by considering all the risks that it would assess when underwriting equivalent contracts on the renewal date for the remaining coverage. The assessment of the group's practical ability to reprice existing contracts takes into account all contractual, legal and regulatory restrictions. In doing so, the group disregards restrictions that have no commercial substance. The group also considers the impact of market competitiveness and commercial considerations on its practical ability to price new contracts and repricing existing contracts. Judgement is required to decide whether such commercial considerations are relevant in concluding as to whether the practical ability exists at the reporting date.

Insurance contracts have a contract boundary of 12 months in line with the duration of the contractual terms.

2.7 Measurement of insurance contracts issued

The group applies the PAA to the measurement of insurance contracts.

On initial recognition, the group measures the liability for remaining coverage (LRC) at the amount of premiums received in cash. The group applies the policy of amortising insurance acquisition cash flows over the contract's coverage period.

The carrying amount of the LRC at the end of each subsequent reporting period represents the carrying amount at the start of the reporting period adjusted for the following:

• (i) The premiums received in the period and the amount recognised as insurance revenue for insurance contract services provided in that period
• (ii) Any adjustment to a financing component and any investment component paid or transferred to the liability for incurred claims.

The group has determined that there is no significant financing component therefore does not discount the liability for remaining coverage to reflect the time value of money and financial risk for such insurance contracts.

The carrying amount of the liability for incurred claims (LIC) comprises the fulfilment cash flows for settling the claims and expenses related to claims reported and incurred but not yet reported at the reporting date. For those claims that the group expects to be paid within one year or less from the date of incurring, the group does not adjust future cash flows for the time value of money and the effect of financial risk. However, claims expected to take more than one year to settle are discounted.

Applying the PAA, the insurance revenue is measured at the amount allocated from the expected premium receipts excluding any investment component. The allocation is done on the basis of the passage of time. The group applies judgement in determining the basis of allocation.

The group considers an insurance contract to be onerous if, at any time during the coverage period, facts and circumstances indicate that a group of insurance contracts is onerous.

The group calculates the difference between:

• The carrying amount of the liability for remaining coverage
• The fulfilment cash flows that relate to remaining coverage of the group.

To the extent that the fulfilment cash flows described above exceed the carrying amount, the group recognises a loss in profit or loss and an increase in the LRC.

For contracts issued to which an entity applies the premium allocation approach, the entity shall assume no contracts in the portfolio are onerous at initial recognition, unless facts and circumstances indicate otherwise. An entity shall assess whether contracts that are not onerous at initial recognition have no significant possibility of becoming onerous subsequently by assessing the likelihood of changes in applicable facts and circumstances.

2.8 Reinsurance contracts held

The group uses facultative reinsurance to mitigate some of its risk exposures. Reinsurance contracts held are accounted for under IFRS 17 when they meet the definition of an insurance contract, which includes the condition that the contract must transfer significant insurance risk.

Reinsurance contracts transfer significant insurance risk only if they transfer to the reinsurer substantially all the insurance risk relating to the reinsured portions of the underlying insurance contracts, even if a reinsurance contract does not expose the issuer (reinsurer) to the possibility of a significant loss.

The effect of non-performance risk of the reinsurer is assessed at each reporting date and the effect of changes in the non-performance risk is recognised in profit or loss.

Reinsurance contracts held are accounted for separately from underlying insurance contracts issued and are assessed on an individual contract basis. In aggregating reinsurance contracts held, the group applies the general approach and disaggregates a portfolio of its reinsurance contracts held into three groups of contracts:

• a) Contracts that on initial recognition have a net gain
• b) Contracts that, on initial recognition, have no significant possibility of resulting in a net gain subsequently
• c) Any remaining reinsurance contracts held in the portfolio.

The group recognises a group of reinsurance contracts at the earliest of the beginning of the coverage period of the group or the date an underlying onerous group of contracts is recognised. Cash flows are within the boundary of a reinsurance contract held, if they arise from the substantive rights and obligations of the cedant that exist during the reporting period in which the group is compelled to pay amounts to the reinsurer or has a substantive right to receive services from the reinsurer.

The boundary of a reinsurance contract held includes cash flows resulting from the underlying contracts covered by the reinsurance contract. This includes cash flows from insurance contracts that are expected to be issued by the group in the future if these contracts are expected to be issued within the boundary of the reinsurance contract held. Reinsurance contracts held have a contract boundary of 12 months due to the cancellation clause and ability to reprice annually.

The group measures reinsurance contracts held under the PAA, the initial measurement of the asset equals the reinsurance premium paid. The group measures the amount relating to remaining service by allocating the premium paid over the coverage period of the group. For all reinsurance contracts held, the allocation is based on the passage of time.

2.9 Modification and derecognition

The group derecognises the original contract and recognises the modified contract as a new contract if the terms of insurance contracts are modified and the following conditions are met:

• If the modified terms were included at contract inception and the group would have concluded that the modified contract:
  – Is outside of the scope of IFRS 17
  – Results in a different insurance contract due to separating components from the host contract
  – Results in a substantially different contract boundary
  – Would be included in a different group of contracts
• The original contract met the definition of an insurance contract with direct participating features, but the modified contract no longer meets the definition
• The original contract was accounted for applying the PAA, but the modified contract no longer meets the PAA eligibility criteria for that approach.

If the contract modification meets any of the conditions, the group performs all assessments applicable at initial recognition, derecognises the original contract and recognises the new modified contract as if it was entered for the first time.

If the contract modification does not meet any of the conditions, the group treats changes in cash flows caused by a modification as changes in estimates of fulfilment cash flows.

For insurance contracts accounted for applying the PAA, the group adjusts insurance revenue prospectively from the time of the contract modification for a change in estimates of the fulfilment cash flows.

The group derecognises an insurance contract when, and only when, the contract is:

• Extinguished (when the obligation specified in the insurance contract expires or is discharged or cancelled)
• Modified and derecognition criteria are met.

When the group derecognises an insurance contract from within a group of contracts, the group:

• Adjusts the free cash flow (FCF) allocated to the group to eliminate the present value of the future cash flows and risk adjustment for non-financial risk relating to the rights and obligations that have been derecognised from the group.

2.10 Presentation

The group has presented separately in the consolidated statement of financial position the carrying amount of portfolios of insurance contracts that are assets and those that are liabilities, portfolio of reinsurance contracts held that are assets, and those that are liabilities.

The group disaggregates the amounts recognised in the consolidated statement of profit or loss and other comprehensive income into an insurance service result comprising insurance revenue and insurance service expenses, and insurance finance income or expenses.

The group includes any assets for insurance acquisition cash flows recognised before the corresponding groups of insurance contracts are recognised in the carrying amount of the related portfolios of insurance contracts issued.

The group does not disaggregate the change in risk adjustment for non-financial risk between a financial and non-financial portion and includes the entire change as part of the insurance service result.

2.10.1 Insurance revenue

As the group provides insurance services under a group of insurance contracts issued, it reduces its LRC and recognises insurance revenue, which is measured at the amount of consideration the group expects to be entitled to in exchange for those services.

When applying the PAA, the group recognises insurance revenue for the period based on the passage of time by allocating premium receipts, including premium experience adjustments to each period of service.

At the end of each reporting period, the group considers whether there was a change in facts and circumstances indicating a need to change, on a prospective basis, the premium receipt allocation due to change in the expected pattern of claim occurrence for new and existing groups.

2.10.2 Insurance service expense

Insurance service expense arising from group insurance contracts issued comprises of:

• Changes in the LIC due to claims and expenses incurred in the period, excluding repayment of investment components
• Other directly attributable expenses
• Changes in the LIC due to claims and expenses incurred in prior periods (related to past service)
• Amortisation of insurance acquisition cash flows
• Loss component of onerous groups of contracts initially recognised in the period.

2.10.3 Income or expenses from reinsurance contracts held

The group presents income or expenses from a group of reinsurance contracts held and insurance finance income or expenses in profit or loss for the period, separately. Income or expenses from reinsurance contracts held are split into the following two amounts:

• Amount recovered from reinsurer
• An allocation of the reinsurance premium paid, provided together they equal total income or expenses from reinsurance contracts held.

The group presents cash flows that are contingent on claims as part of the amount recovered from reinsurer. Ceding commissions that are not contingent on claims of the underlying contracts are presented as a reduction in the premiums to be paid to the reinsurer.

2.10.4 Insurance finance income and expense

Insurance finance income or expense presents the effect of the time value of money and the change in the time value of money, together with the effect of financial risk and changes in financial risk.

2.11 Transition

The group has adopted IFRS 17 retrospectively, applying the fully retrospective approach. The group identified, recognised and measured each group of insurance contracts as if IFRS 17 had always applied, derecognised any existing balances that would not exist had IFRS 17 always been applied, and recognised any resulting net difference in equity.

3. Critical accounting judgements and key sources of estimation uncertainty

The directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the group's accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt with separately following), that the directors have made in the process of applying the group's accounting policies and that have the most significant effect on the amounts recognised in financial statements:

Assessment of significance of insurance risk: The group applies its judgement in assessing whether a contract transfers to the issuer significant insurance risk. A contract transfers significant insurance risk only if an insured event could cause the group to pay additional amounts that are significant in any single scenario and only if there is a scenario that has commercial substance in which the issuer has a possibility of a loss on a present value basis upon an occurrence of the insured event, regardless of whether the insured event is extremely unlikely. The assessment of whether additional amounts payable on occurrence of insured event are significant and whether there is any scenario with commercial substance in which the issuer has a possibility of a loss on a present value basis involves significant judgement and is performed at initial recognition on a contract-by-contract basis.

Separation of insurance contracts into components from insurance contracts: The group issues some insurance contracts that combine protection for the policyholder against different types of insurance risks in a single contract. IFRS 17 does not require or permit separating insurance components of an insurance contract unless the legal form of a single contract does not reflect the substance of its contractual rights and obligations. Overriding the 'single contract' unit of account presumption to disaggregate a single insurance contract involves significant judgement and is not an accounting policy choice. In determining whether a legal contract does not reflect its substance such that separate insurance elements are required to be recognised, the group considers the interdependency between the different risks covered, the ability of all components to lapse independently of each other and the ability to price and sell the components separately.

Consideration of whether there are investment components: The group considers all the terms of the contracts it issues to determine whether there are amounts payable to policyholder in all circumstances, regardless of contract cancellation, maturity, and the occurrence or non-occurrence of insured event. Some amounts, once paid by policyholder, are repayable to policyholder in all circumstances. The group considers such payments to meet the definition of investment component, notwithstanding that the amount repayable varies over the term of the contract as it is repayable only after it has first been paid by the policyholder.

Determination of contract boundary: The measurement of a group insurance contracts includes all the future cash flows arising within the contract boundary. In determining which cash flows fall within a contract boundary, the group considers its substantive rights and obligations arising from the terms of the contract, and also from applicable law and regulation. Cash flows are considered to be outside of the contract boundary if the group has practical ability to reprice existing contracts to reflect their reassessed risks and if the contract's pricing for coverage up to the date of reassessment considers only the risks till that next reassessment date. The group applies its judgement in assessing whether it has the practical ability to set a price that fully reflects all the risks in the contract or portfolio. The group considers contractual, legal and regulatory restrictions when making its assessment.

In doing so, the group disregards restrictions that have no commercial substance. The group also applies judgement to decide whether commercial considerations are relevant.

Level of aggregation: The group defines the portfolio as insurance contracts subject to similar risks and managed together. Contracts within a product line are expected to be in the same portfolio as they have similar risks and are managed together. The assessment of which risks are similar and how contracts are managed requires the exercise of judgement.

The ARM group considers its insurance products as a separate portfolio from its reinsurance products. No further disaggregation has been applied due to the immateriality of the individual lines of business within the respective insurance and reinsurance portfolios.

Assessment of directly attributable cash flows: The group applies judgement in assessing whether cash flows are directly attributable to a specific portfolio of insurance contracts. Insurance acquisition cash flows are included in the measurement of a group of insurance contracts only if they are directly attributable to the individual contracts in a group, or to the group itself, or the portfolio of insurance contracts to which the group belongs.

Disaggregation of changes in the risk adjustment for non-financial risk: The group does not disaggregate the risk adjustment for non-financial risk into an insurance service component and an insurance finance component, which would otherwise require a significant judgement and additional disclosure.

The group presents changes in the risk adjustment for non-financial risk included in the liability for remaining coverage that do not relate to future service as insurance revenue and changes in the risk adjustment for non-financial risk related to current and past service as insurance service expense.

Key sources of estimation uncertainty

Technique for estimation of future cash flows

In estimating FCF included in the contract boundary, the group considers the range of all possible outcomes in an unbiased way specifying the average expectation. The probability-weighted average represents the probability-weighted mean of all possible scenarios. In determining possible scenarios, the group uses all the reasonable and supportable information available to them without undue cost and effort, which includes information about past events, current conditions and future forecasts.

Cash flow estimates include both market variables directly observed in the market or derived directly from markets and non-market variables such as mortality rates, accident rates, average claim costs, probabilities of severe claims, and policy surrender rates. The group maximises the use of observable inputs for market variables and utilises internally generated group-specific data.

Method of estimating discount rates

In determining discount rates for different products, the group uses the bottom-up approach.

For cash flows of insurance contracts that do not depend on underlying items, the group applies the bottom-up approach. In this methodology, the discount rates are estimated based on points along the risk-free rate curve, specifically utilising the solvency assessment and management (SAM) risk-free curve for the corresponding currency and duration as the cash flows of the insurance contract. No liquidity adjustment is incorporated in this valuation process. The use of the SAM risk-free curve ensures alignment with the group's risk management strategy and provides a more accurate reflection of market conditions. The exercise of judgement in evaluating the liquidity characteristics of the group of insurance contracts remains integral to this process.

New standards issued but not yet effective

The following amendments, standards or interpretations have been issued but are not yet effective for the group. The effective date refers to periods beginning on or after, unless otherwise indicated.

Standard	Subject	Effective date
IAS 1	Presentation of financial statements – classification of liabilities as current or non-current – amendments	1 January 2024
IAS 7	Statement of cash flows – disclosures: supplier finance arrangements	1 January 2024
IFRS 7	Financial instruments – disclosures: supplier finance arrangements	1 January 2024
IFRS 16	Leases – lease liability in a sale and leaseback – amendment	1 January 2024
IAS 21	The effects of changes in foreign exchange rates – lack of exchangeability – amendments	1 January 2025
IFRS 7	Classification and measurement of financial instruments	1 January 2026
IFRS 1	First-time adoption of International Financial Reporting Standards – annual improvements – amendments	1 January 2026
IFRS 9	Classification and measurement of financial instruments – amendments	1 January 2026
IFRS 7	Financial instruments – annual improvements – amendments	1 January 2026
IFRS 9	Financial instruments – annual improvements – amendments	1 January 2026
IFRS 10	Consolidated financial statements – annual improvements – amendments	1 January 2026
IAS 7	Statement of cash flows – annual improvements – amendments	1 January 2026
IFRS 18	Presentation and disclosure in financial statements	1 January 2027
IFRS 19	Subsidiaries without public accountability – disclosures	1 January 2027

The group does not intend early adopting any of the above amendments or standards.

ARM continuously evaluates the impact of these standards and amendments, the adoption of which is not expected to have a significant effect on the condensed group financial statements.