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Net equity in reserves

Australian System of National Accounts: Concepts, Sources and Methods
Reference period
2020-21 financial year

Definition

15.131    Net equity in reserves represents policy-holders' claims on life insurance businesses and pension funds. These technical reserves are calculated by deducting all repayable liabilities from the value of total assets. It comprises the following:

  • Household claims on technical reserves of life insurance corporations and pension funds: this category represents households' net equity in, or claims on, the reserves of life insurance corporations and pension funds. In the case of life insurance corporations, it equates in large measure with the net policy liabilities of life offices to households. In the case of pension funds, it represents the funds' obligations to members including any surpluses and reserves. A claim by householders on insurance technical reserve of non-resident pension funds is also included in the ASNA.
  • Pension fund claims on life insurance corporations reserves: This category represents pension funds' net equity in, or claims on, life insurance corporation reserves. A significant number of pension funds invest their members' contributions in the statutory funds of life insurance corporations. These investments are typically held as unit-linked insurance or investment policies.

Sources and methods - quarterly

15.132    The table below outlines the data sources and methods used in the estimation of quarterly net equity in reserves in current prices. Volume/real estimates are calculated for the national balance sheet.

Table 15.11 Quarterly net equity in reserves
ItemComment
Net equity in reserves
 This represents both net equity of pension funds in life offices and net equity of households in pension, life insurance and rest of the world reserves.

Pension funds claims on life insurance corporations reserves represents net equity of pension funds in life offices, these data are collected directly the from APRA's quarterly Superannuation Reporting Standards (SRF 320.0 Statement of Financial Position).

In the ASNA, estimates are derived residually from the balance sheets of pension funds and life insurance sectors rather than trying to source data on household claims on technical reserves of life insurance corporations and pension funds directly. It follows that if reasonably accurate measurements of stocks/flows of the total assets and the repayable liabilities of pension and life insurance are compiled, an accurate measure of net equity in reserves (the residual) may be derived.

Life insurance technical reserves are calculated as the difference between total assets (financial and non-financial) and the liabilities including shareholder equity.

Pension funds technical reserves are calculated as the difference between total assets (financial and non-financial) and the repayable liabilities.

The data sources to derive household claims on pension funds and life insurance net equity in reserves are dependent on source data and methodology outlined in paragraphs 15.04 to 15.13 for compilation of financial instruments.

For life insurance companies, non-financial assets and for shareholders equity are derived from ABS Survey of Financial Information – Life Insurance Companies and Friendly Societies.

For pension funds non-financial assets are from the balance sheet information: from the APRA quarterly Statement of Financial Position – Superannuation; quarterly modelled estimates from the annual returns of  self-managed superannuation funds to the ATO; and the ABS Survey of Financial Information – Investment Managers.

Rest of the world insurance technical reserves are generated from models using direct source data from the ABS Survey of International Investment.