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Note 23 | 12 Months Ended
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Dec. 31, 2023
Assets and Liabilities under reinsurance and insurance contracts [Abstract] |
Disclosure of Assets and Liabilities under reinsurance and insurance contracts [Text Block] | Assets and liabilities under insurance and reinsurance contracts The Group has insurance subsidiaries mainly in Spain, Latin America (mostly in Mexico) and Turkey. Specifically, the insurance entities located in Spain and Mexico together accounted for approximately 95% in terms of total liabilities under insurance and reinsurance contracts as of December 31, 2023. The main product offered by the insurance subsidiaries is life insurance to cover the risk of death (risk insurance) and life-savings insurance. Within life and accident insurance, a distinction is made between freely sold products and those offered to customers who have taken mortgage or consumer loans, which cover the principal of those loans in the event of the customer’s death. There are two types of savings products: individual insurance, which seeks to provide the customer with savings for retirement or other events, and group insurance, which is taken out by employers to cover their commitments to their employees. The insurance business is affected by different risks, including those that are related to the BBVA Group such as credit risk, market risk, liquidity risk and operational risk and the methodology for risk measurement, control and follow-up applied in the insurance activity is similar (see Note 7), although it has a differentiated management due to the particular characteristics of the insurance business, such as the coverage of contracted obligations and the long term of the commitments. Additionally, the insurance business generates certain specific risks, of a probabilistic nature: –Technical risk: arises from deviations in the estimation of the casualty rate of insurances, either in terms of numbers, the amount of such claims and the timing of its occurrence. –Longevity risk: is the risk of incurring higher benefit payments than expected due to an increase in the life expectancy of the insured persons. The insurance activity is fully integrated into the BBVA Group's risk management framework. From the definition of the risk appetite to the management limits, the governance model, the admission process, the organizational scheme and the development of computer systems/models, everything is designed with a global approach and under consistent and homogeneous criteria, aligned with other financial business of the BBVA Group. This also means that control activities and information flow are fully integrated into internal processes, from local reporting to the corporate bodies of the BBVA Group. The insurance industry is highly regulated in each geographical area. In this regard, it should be noted that the insurance industry is undergoing a gradual regulatory transformation through new accounting and risk-based capital regulations, which have already been published in several countries. The amounts that the consolidated insurance entities are entitled to receive from reinsurance contracts they maintain with third parties are recognized under the heading “Assets under reinsurance and insurance contracts” in the consolidated balance sheets. As of December 31, 2023 and 2022, the balance under this heading amounted to €211 million and €183 million, respectively. The heading “Liabilities under insurance and reinsurance contracts” in the consolidated balance sheets includes the liabilities recorded under insurance contracts of the consolidated insurance entities in accordance with IFRS 17 (see Note 2.2.8). The breakdown of the balance of this heading as of December 31, 2023 and 2022 is as follows:
Liabilities under insurance and reinsurance contracts (Millions of Euros)
| 2023 | 2022 ⁽¹⁾
Insurances | 12,110 | 10,131
Liabilities for remaining coverage | 10,900 | 9,157
Estimates of the present value of cash flows | 9,361 | 7,745
Risk adjustment | 171 | 155
Cost service margin | 1,213 | 1,097
Loss component | 1 | 1
Premium reserve - Simplified Model | 154 | 159
Liabilities for incurred claims | 1,210 | 974
Estimates of the present value of cash flows | 1,191 | 959
Risk adjustment | 19 | 15
Reinsurances | — | —
Total | 12,110 | 10,131
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3). In addition, the breakdown of “Liabilities under insurance and reinsurance contracts” in the consolidated balance sheets by type of product as of December 31, 2023 and 2022 is shown in the table below:
Liabilities under insurance and reinsurance contracts by type of product (Millions of Euros)
| 2023 | 2022 ⁽¹⁾
Liabilities for remaining coverage | 10,900 | 9,157
Life insurance | 10,657 | 8,962
Individuals life insurance ⁽²⁾ | 8,900 | 7,592
Group insurance ⁽³⁾ | 1,757 | 1,370
Non-life insurance | 243 | 195
Liabilities for incurred claims | 1,210 | 974
Total | 12,110 | 10,131
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3). (2) Provides coverage in the event of death, disability and serious illness. (3) The insurance policies purchased by employers (other than BBVA Group) on behalf of their employees. The variation in liabilities under insurance and reinsurance contracts analyzed by liability for the remaining coverage and liability for incurred claims for the years 2023 and 2022 is shown below:
Variation in liabilities under insurance and reinsurance contracts analyzed by liabilities for the remaining coverage and the liabilities for incurred claims. December 2023 (Millions of Euros)
| Liability for remaining coverage | Liability for incurred claims | Total
| Excluding loss component | Loss component
Initial balance | 7,871 | 1,286 | 974 | 10,131
Result from insurance service | (2,817) | (5) | 1,532 | (1,289)
Insurance revenue | (2,887) | (10) | — | (2,897)
Amounts related to changes in liability for remaining coverage | (995) | (10) | — | (1,005)
Recovery of insurance acquisition cash flows | (23) | — | — | (23)
Other | (1,869) | — | — | (1,869)
Insurance expense | 70 | 5 | 1,532 | 1,607
Incurred claims and other expenses | — | — | 1,509 | 1,509
Amortization of insurance acquisition cash flows | 70 | — | — | 70
Changes to liability for incurred claims | — | — | 23 | 23
Impairment (reversal) from loss component | — | 5 | — | 5
Financial income/ expenses from insurance contracts | 495 | 68 | 1 | 564
Exchange differences | 795 | 212 | 59 | 1,067
Cash flows | 2,692 | 302 | (1,357) | 1,637
Final balance | 9,036 | 1,864 | 1,210 | 12,110
Variation in liabilities under insurance and reinsurance contracts analyzed by liabilities for the remaining coverage and the liabilities for incurred claims. December 2022 (Millions of Euros)
| Liability for remaining coverage | Liability for incurred claims | Total
| Excluding loss component | Loss component
Initial balance | 7,657 | 1,218 | 1,097 | 9,972
Result from insurance service | (2,201) | (244) | 1,260 | (1,186)
Insurance revenue | (2,329) | (246) | — | (2,575)
Amounts related to changes in liability for remaining coverage | (828) | (246) | — | (1,074)
Recovery of insurance acquisition cash flows | (4) | — | — | (4)
Other | (1,497) | — | — | (1,497)
Insurance expense | 128 | 2 | 1,260 | 1,390
Incurred claims and other expenses | — | — | 1,112 | 1,112
Amortization of insurance acquisition cash flows | 116 | — | — | 116
Changes to liability for incurred claims | — | — | 148 | 148
Impairment (reversal) from loss component | 12 | 2 | — | 13
Financial income/ expenses from insurance contracts | (749) | 55 | 2 | (692)
Exchange differences | 820 | 228 | 51 | 1,099
Cash flows | 2,345 | 30 | (1,437) | 938
Final balance | 7,871 | 1,286 | 974 | 10,131
Likewise, the variation of liabilities under insurance and reinsurance contracts, distinguishing between their different valuation components for the years 2023 and 2022 is shown below:
Variation in liabilities under insurance and reinsurance contracts analyzed by valuation component. December 2023 (Millions of Euros)
| Estimated present value of future cash flows | Risk adjustment | Contractual service margin ⁽¹⁾ | Total
Initial balance | 8,056 | 150 | 1,097 | 9,303
Insurance service result | (384) | — | (23) | (406)
Changes that relate to current services | (749) | (26) | (185) | (960)
Contractual service margin release | — | — | (185) | (185)
Risk adjustment release | — | (26) | — | (26)
Experience adjustments | (749) | — | — | (749)
Changes that relate to future services | (189) | 26 | 163 | —
Changes in estimates that adjust the contractual service margin | 35 | (6) | (36) | (7)
Changes in estimates that result in losses (reversals) on onerous contracts | (6) | — | 4 | (2)
Contracts initially recognized in the year | (218) | 32 | 194 | 8
Changes that relate to past services | 554 | — | — | 554
Adjustments to liability for incurred claims | 554 | — | — | 554
Financial income/ expenses from insurance contracts | 508 | 11 | 45 | 564
Exchange rate differences | 935 | 6 | 94 | 1,035
Cash flows | 623 | — | — | 623
Contracts transferred to / from a third party | — | — | — | —
Final balance | 9,738 | 167 | 1,213 | 11,118
(1) In general the transitional approach for calculating the contractual service margin has been the fair value approach for long-term contracts and the full retrospective approach for short-term contracts (see Note 2.3).
Variation in liabilities under insurance and reinsurance contracts analyzed by valuation component. December 2022 (Millions of Euros)
| Estimated present value of future cash flows | Risk adjustment | Contractual service margin ⁽¹⁾ | Total
Initial balance | 7,945 | 112 | 948 | 9,006
Insurance service result | (606) | 46 | 49 | (511)
Changes that relate to current services | (750) | (14) | (144) | (908)
Contractual service margin release | — | — | (144) | (144)
Risk adjustment release | — | (14) | — | (14)
Experience adjustments | (750) | — | — | (750)
Changes that relate to future services | (270) | 60 | 193 | (17)
Changes in estimates that adjust the contractual service margin | (50) | 45 | 3 | (3)
Changes in estimates that result in losses (reversals) on onerous contracts | (15) | — | (3) | (19)
Contracts initially recognized in the year | (204) | 15 | 194 | 5
Changes that relate to past services | 413 | — | — | 413
Adjustments to liability for incurred claims | 413 | — | — | 413
Financial income/ expenses from insurance contracts | (704) | (20) | 29 | (694)
Exchange rate differences | 1,009 | 11 | 72 | 1,093
Cash flows | 412 | — | — | 412
Contracts transferred to / from a third party | — | — | — | —
Final balance | 8,056 | 150 | 1,097 | 9,303
(1) In general the transitional approach for calculating the contractual service margin has been the fair value approach for long-term contracts and the full retrospective approach for short-term contracts (see Note 2.3). The maturity of those “Liabilities under insurance and reinsurance contracts” are shown below:
Maturity of the liabilities under insurance and reinsurance contracts (Millions of Euros)
| Up to 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | Total
2023 | 1,356 | 962 | 2,425 | 7,367 | 12,110
2022 ⁽¹⁾ | 1,754 | 663 | 1,664 | 6,050 | 10,131
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3). The classification and valuation models used to calculate the liabilities under insurance and reinsurance contracts are detailed in Note 2.2.8 of these consolidated Financial Statements. In general, in estimating compliance flows valued under the General Model, the Group has used tables based on the companies' own experience to estimate discounted future cash flows for all units of account, except for those cases in which the entity has not had sufficient historical data for the construction of the assumptions, so in such cases, regulatory tables have been used. In relation to the assets and liabilities under insurance and reinsurance contracts falling under IFRS 4, which was applicable to 2021, the consolidated balance sheets for that year presented mathematical reserves of €9,495 million (of which €7,265 million related to individual life insurance and €2,230 million to group insurance), provisions for unpaid claims amounted to €706 million and provisions for unexpired risks and other provisions amounted to €664 million. The cash flows of the “Liabilities under insurance and reinsurance contracts” under IFRS 4 as of December 31, 2021 are shown below:
Maturity (Millions of Euros). Liabilities under insurance and reinsurance contracts
| Up to 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | Total
2021 | 1,808 | 290 | 1,664 | 7,103 | 10,865
The table below shows the key assumptions under IFRS 4 as of December 31, 2021 used in the calculation of the mathematical reserves for insurance products in Spain and Mexico, respectively:
Mathematical reserves
|  | 2021 |
|  |  | Mortality table | Average technical interest rate |  |
|  |  |  |  | Spain | Mexico | Spain | Mexico |  |  |  |
Individual life insurance (1) |  |  |  |  | GRMF 80-2, GKM 80 / GKMF 95, PASEM, GKMF 80/95, PERFM 2000 | Tables of the Comisión Nacional de Seguros y Fianzas 2000-individual | 0.24%- 2.85% | 3.60% |  |  |  |
Group insurance (2) |  |  |  |  | PERFM 2000 | Tables of the Comisión Nacional de Seguros y Fianzas 2000-grupo | Depending on the related portfolio | 5.50 % |  |  |  |
(1) Provides coverage in the case of one or more of the following events: death, disability and / or serious illness. (2) Insurance policies purchased by companies (other than BBVA Group entities) on behalf of their employees.

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