Aviva 2007 Annual Report Download - page 234
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55 – Risk management continued
Sensititvity test results
Some results of sensitivity testing for long-term business, general insurance and health business and the fund management
and non-insurance business are set out below. For each sensitivity test the impact of a reasonably possible change in a
single factor is shown, with other assumptions left unchanged.
Sensitivity Factor Description of sensitivity factor applied
Interest rate and investment return The impact of a change in market interest rates by ± 1% (eg if a
current interest rate is 5%, the impact of an immediate change
to 4% and 6%). The test allows consistently for similar changes to
investment returns and movements in the market value of backing
fixed interest securities.
Expenses The impact of an increase in maintenance expenses by 10%.
Equity/property market values The impact of a change in equity/property market values by ± 10%.
Assurance mortality/morbidity (life insurance only) The impact of an increase in mortality/morbidity rates for assurance
contracts by 5%.
Annuitant mortality (life insurance only) The impact of a reduction in mortality rates for annuity contracts
by 5%.
Gross loss ratios (non-life insurance only) The impact of an increase in gross loss ratios for general insurance
and health business by 5%.
Long-term business
Sensitivities as at 31 December 2007
Impact on profit before tax (£m)
Interest Interest Equity/ Equity/ Assurance Annuitant
rates rates property property Expenses mortality mortality
+1% --1% +10% –10% +10% +5% –5%
Insurance participating 15 (10) – – (5) – –
Insurance non-participating (205) 165 45 (35) (5) (20) (295)
Investment participating (5) (25) – – (5) – –
Investment non-participating (35) 40 65 (60) – – –
Assets backing life shareholders’ funds (115) 140 180 (175) – – –
Total (345) 310 290 (270) (15) (20) (295)
Impact before tax on shareholders’ equity (£m)
Interest Interest Equity/ Equity/ Assurance Annuitant
rates rates property property Expenses mortality mortality
+1% --1% +10% –10% +10% +5% –5%
Insurance participating (5) 20 – – (5) – –
Insurance non-participating (320) 275 105 (95) (5) (20) (295)
Investment participating (5) (25) – – (5) – –
Investment non-participating (170) 190 65 (60) – – –
Assets backing life shareholders’ funds (165) 190 460 (455) – – –
Total (665) 650 630 (610) (15) (20) (295)
Sensitivities as at 31 December 2006
Impact on profit before tax (£m)
Interest Interest Equity/ Equity/ Assurance Annuitant
rates rates property property Expenses mortality mortality
+1% –1% +10% –10% +10% +5% –5%
Insurance participating (5) – 35 (35) – – (5)
Insurance non-participating 25 (210) 20 (40) (5) (20) (295)
Investment participating (30) (35) 10 (10) (5) – –
Investment non-participating (15) 15 40 (40) – – –
Assets backing life shareholders’ funds (280) 305 255 (255) – – –
Total (305) 75 360 (380) (10) (20) (300)
Aviva plc
Annual Report and
Accounts 2007
230
Financial
statements
Notes to the consolidated financial statements continued