Aviva 2006 Annual Report Download - page 247

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Aviva plc
Annual Report and Accounts 2006 243
Sensitivity analysis – non-economic assumptions
The tables below show the sensitivity of the embedded value as at 31 December 2006 and the new business contribution before the
effect of required capital for 2006 to the following changes in non-economic assumptions:
–10% decrease in maintenance expenses (a 10% sensitivity on a base expense assumption of £10pa would represent an expense
assumption of £9pa). Where there is a “ look through” into service company expenses, the fee charged by the service company is
unchanged while the underlying expense decreases;
–10% decrease in lapse rates (a 10% sensitivity on a base assumption of 5% pa would represent a lapse rate of 4.5% pa);
–5% decrease in both mortality and morbidity rates disclosed separately for life assurance and annuity business.
No future management actions are modelled in reaction to the changing non-economic assumptions. In each sensitivity calculation,
all other assumptions remain unchanged. No changes to valuation bases have been included.
5%
5% decrease in
10% decrease in in mortality/
decrease in 10% in mortality/ morbidity rates
Embedded value As reported maintenance decrease in morbidity rates – annuity
(net of tax) on page 235 expenses lapse rates – life insurance business
31 December 2006 £m £m £m £m £m
France 2,291 35 35 20 (5)
Ireland 892 20 20 5 (5)
Italy 792 5 – – –
Netherlands (including Belgium, Germany and Luxembourg) 3,867 75 15 15 (45)
Poland 719 20 35 10 –
Spain 857 10 40 15 (5)
Other Europe 106 5 5 – –
Continental Europe 9,524 170 150 65 (60)
United States 1,478 25 15 15 (5)
Other 460 10 10 10 –
Rest of the World 1,938 35 25 25 (5)
International 11,462 205 175 90 (65)
United Kingdom 6,636 180 85 75 (120)
Total 18,098 385 260 165 (185)
5%
5% decrease
10% decrease in mortality/
decrease in 10% in mortality/ morbidity rates
New business contribution before required As reported maintenance decrease in morbidity rates – annuity
capital (gross of tax) on page 228 expenses lapse rates – life insurance business
31 December 2006 £m £m £m £m £m
France 153 5 7 6 –
Ireland 15 2 4 1 –
Italy 70 221–
Netherlands (including Belgium, Germany and Luxembourg) 56 10 9 5 (2)
Poland 28 2 3 2 –
Spain 184 419 5 –
Other Europe (4) – 1 – (1)
Continental Europe 502 25 45 20 (3)
United States 20 1 (1) – (1)
Other 43341–
Rest of the World 63 4 3 1 (1)
International 565 29 48 21 (4)
United Kingdom 327 21 25 23 (4)
Total 892 50 73 44 (8)
The demographic sensitivities shown above represent a standard change to the assumptions for all products. Different products will be
moreor less sensitive to the change, and impacts may partially offset.