Aviva 2007 Annual Report Download - page 235
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Please find page 235 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.55 – Risk management continued
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 (25) 25 35 (35) – – (5)
Insurance non-participating (240) 60 35 (50) (5) (20) (295)
Investment participating (30) (35) 10 (10) (5) – –
Investment non-participating (70) 70 40 (40) – – –
Assets backing life shareholders’ funds (320) 345 290 (290) – – –
Total (685) 465 410 (425) (10) (20) (300)
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 sensitivities to economic movements relate mainly to business in the UK, USA and the Netherlands. In the UK and
USA, a fall in market interest rates has a beneficial impact on non-participating business and shareholders’ funds, due to
the increase in market value of fixed interest securities and the relative durations of assets and liabilities; similarly a rise in
interest rates has a negative impact. In the USA most debt securities are classified as available-for-sale, which limits the
overall sensitivity of IFRS profit to interest rate movements. In contrast, a rise in market interest rates has a positive impact
for non-participating business in the Netherlands, due to the effect of minimum investment return guarantees, which acts
to partly offset the impacts in the UK and USA.
The sensitivity to movements in equity and property market values relates mainly to holdings in the Netherlands, although
the impact on IFRS profit is moderated by the classification of equities as available for sale.
Changes in sensitivities between 2006 and 2007 reflect movements in market interest rates, portfolio growth, changes to
asset mix and the relative durations of assets and liabilities, and asset liability management actions.
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 2007
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 (230) 265 110 (110) (150) (390)
Net of reinsurance (275) 310 110 (110) (150) (365)
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 (230) 265 110 (110) (35) (390)
Net of reinsurance (275) 310 110 (110) (35) (365)
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 (225) 245 370 (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 (225) 245 370 (370) (35) (350)
Net of reinsurance (270) 290 370 (370) (35) (325)
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.
Aviva plc
Annual Report and
Accounts 2007
231
Financial
statements