Aviva 2007 Annual Report Download - page 194
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39 – Liability for investment contracts continued
(c) Movements in the year
The following movements have occurred in the year:
(i) Participating investment contracts
2007 2006
£m £m
Carrying amount at 1 January 49,400 47,258
Provisions in respect of new business 3,009 3,001
Expected change in existing business provisions (1,978) (2,237)
Variance between actual and expected experience (404) 2,131
Effect of adjusting to PS06/14 realistic basis –(105)
Impact of operating assumption changes (3) (43)
Impact of economic assumption changes 178 (125)
Effect of special bonus to with-profit policyholders (note 59) 399 –
Other movements (176) 51
Change in liability recognised as an expense 1,025 2,673
Effect of portfolio transfers, acquisitions and disposals –125
Foreign exchange rate movements 3,184 (656)
Carrying amount at 31 December 53,609 49,400
The effect of changes in main assumptions is given in note 42.
(ii) Non-participating investment contracts
2007 2006
£m £m
Carrying amount at 1 January 38,958 30,051
Provisions in respect of new business 8,575 5,695
Expected change in existing business provisions (1,094) (163)
Variance between actual and expected experience (3,231) 265
Impact of operating assumption changes (2) 15
Impact of economic assumption changes 20 (5)
Other movements 61 56
Change in liability 4,329 5,863
Effect of portfolio transfers, acquisitions and disposals 254 3,396
Foreign exchange rate movements 1,094 (352)
Carrying amount at 31 December 44,635 38,958
The negative variance between actual and expected experience relates to lower than expected investment returns on unit
funds and adverse lapse experience.
The effect of changes in main assumptions is given in note 42.
40 – Financial guarantees and options
This note details the financial guarantees and options we have given for some of our insurance and investment products.
As a normal part of their operating activities, various Group companies have given guarantees and options, including
investment return guarantees, in respect of certain long-term insurance and fund management products. Further
information on assumptions is given in notes 38 and 39.
(a) UK Life with-profit business
In the UK, life insurers are required to comply with the FSA’s realistic reporting regime for their with-profit funds for the
calculation of FSA liabilities. Under the FSA’s rules, provision for guarantees and options within realistic liabilities must be
measured at fair value, using market-consistent stochastic models. A stochastic approach includes measuring the time
value of guarantees and options, which represents the additional cost arising from uncertainty surrounding future
economic conditions.
Aviva plc
Annual Report and
Accounts 2007
190
Financial
statements
Notes to the consolidated financial statements continued