Aviva 2007 Annual Report Download - page 271
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Sensitivity analysis continued
Non-economic assumptions
The tables below show the sensitivity of the embedded value as at 31 December 2007 and the new business contribution
before the effect of required capital for 2007 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% decrease
5% decrease in mortality/
10% 10% in mortality/ morbidity
decrease in decrease morbidity rates
As reported maintenance in lapse rates – life – annuity
Embedded value (net of tax) on page 259 expenses rates assurance business
31 December 2007 £m £m £m £m £m
United Kingdom 7,106 165 95 50 (140)
France 2,660 40 40 25 (5)
Ireland 999 15 25 5 (5)
Italy 1,007 5 5 – –
Netherlands (including Belgium and Germany) 4,176 95 15 20 (55)
Poland 942 20 45 10 –
Spain 1,048 15 50 15 (5)
Other Europe 15655––
Europe 10,988 195 185 75 (70)
North America 1,588 30 10 10 –
Asia Pacific 637 10 10 10 –
Total 20,319 400 300 145 (210)
5% decrease
5% decrease in mortality/
10% 10% in mortality/ morbidity
decrease in decrease morbidity rates
New business contribution As reported maintenance in lapse rates – life – annuity
before required capital (gross of tax) on page 255 expenses rates assurance business
Year to 31 December 2007 £m £m £m £m £m
United Kingdom 360 19 23 15 (11)
France 169584–
Ireland 30261–
Italy 82221–
Netherlands (including Belgium and Germany) 93 10 6 3 (14)
Poland 35242–
Spain 189 5 19 5 –
Other Europe –11(1)–
Europe 598 27 46 15 (14)
North America 154433–
Asia Pacific 62653–
Total 1,174 56 77 36 (25)
The demographic sensitivities shown above represent a standard change to the assumptions for all products.
Different products will be more or less sensitive to the change and impacts may partially offset.
Aviva plc
Annual Report and
Accounts 2007
267
Financial
statements