Aviva 2006 Annual Report Download - page 211

Overview Business review Governance Financial statements Other information
Aviva plc
Annual Report and Accounts 2006 207
50 – Risk management continued
Changes in sensitivities between 2005 and 2006 arise primarily from the acquisitions of Ark Life and AmerUs, and the effect of increases
in market interest rates. The different impacts of the economic sensitivities on profit and shareholders' equity arise from classification of
certain assets as available for sale in some business units, for which movements in unrealised gains or losses would be taken directly to
shareholders' equity. The economic impacts on profit before tax for insurance contracts relate mainly to the effect of minimum return
guarantees in the Netherlands. However in the case of the interest rate sensitivities, the impacts on shareholders' equity are more than
offset by the effect of changes in the market value of fixed interest securities in the United States that are classified as available for sale.
The mortality sensitivities relate primarily to the UK and Ireland.
The impact on the Group’s results from sensitivity to these assumptions can also be found in the EEV sensitivities included in the
alternative method of reporting long-term business profits section.
General insurance and health business
Sensitivities as at 31 December 2006
Impact on profit before tax (£m)
Interest Interest Equity/ Equity/ Gross loss
rates rates property property Expenses ratios
+1% –1% +10% -10% +10% +5%
Gross of reinsurance (270) 290 370 (370) (140) (350)
Net of reinsurance (270) 290 370 (370) (140) (325)
Impact before tax on shareholders’ equity (£m)
Interest Interest Equity/ Equity/ Gross loss
rates rates property property Expenses ratios
+1% –1% +10% -10% +10% +5%
Gross of reinsurance (270) 290 370 (370) (35) (350)
Net of reinsurance (270) 290 370 (370) (35) (325)
Sensitivities as at 31 December 2005
Impact on profit before tax (£m)
Interest Interest Equity/ Equity/ Gross loss
rates rates property property Expenses ratios
+1% –1% +10% -10% +10% +5%
Gross of reinsurance (275) 285 330 (330) (115) (305)
Net of reinsurance (275) 285 330 (330) (115) (305)
Impact before tax on shareholders’ equity (£m)
Interest Interest Equity/ Equity/ Gross loss
rates rates property property Expenses ratios
+1% –1% +10% -10% +10% +5%
Gross of reinsurance (275) 285 330 (330) (30) (305)
Net of reinsurance (275) 285 330 (330) (30) (305)
For general insurance, the impact of the expense sensitivity on profit also includes the increase in ongoing administration expenses,
in addition to the increase in the claims handling expense provision.