Aviva 2009 Annual Report Download - page 217

215
Performance review
Aviva plc Notes to the consolidated financial statements continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
38 – Insurance liabilities continued
(iv) Movements
The following changes have occurred in the general insurance and health claims provisions during the year:
2009 2008
£m £m
Carrying amount at 1 January
Impact of changes in assumptions
Claim losses and expenses incurred in the current year
Decrease in estimated claim losses and expenses incurred in prior years
Exceptional strengthening of general insurance latent claims provisions (see below)
Incurred claims losses and expenses
Less:
Payments made on claims incurred in the current year
Payments made on claims incurred in prior years
Recoveries on claim payments
Claims payments made in the year, net of recoveries
Unwind of discounting
Other movements in the claims provisions
Changes in claims reserve recognised as an expense
Effect of portfolio transfers, acquisitions and disposals
Foreign exchange rate movements
14,360
(106)
7,328
(541)
60
6,741
(3,922)
(3,814)
298
(7,438)
41
—
(656)
(649)
(359)
12,941
120
8,720
(828)
356
8,368
(4,682)
(4,307)
293
(8,696)
33
(27)
(322)
128
1,613
Carrying amount at 31 December 12,696 14,360
The effect of changes in the main assumptions is given in note 42 and the economic assumption changes are explained in note 9.
Exceptional strengthening of claim provisions
In 2009 an exceptional charge of £60 million was incurred for the strengthening of reserves in respect of several specific
discontinued commercial liability risks written in Canada a significant number of years ago, which is included in change in
insurance liabilities.
In 2008 the Institute of Actuaries’ Asbestos Working Party report contributed to our view that experience variances, which
we had previously perceived as normal short-term volatility, reflected a real worsening of expected ultimate claims experience.
The market trend in mesothelioma claims was fully reflected as a significant one-off strengthening of gross latent claims reserves
in 2008 of £356 million, with a corresponding increase of £52 million in reinsurance recoverable. The net increase of £304 million
comprised £668 million on an undiscounted basis and discounting of £364 million.
(d) Loss development tables
(i) Description of tables
The tables that follow present the development of claim payments and the estimated ultimate cost of claims for the accident years
2001 to 2009. The upper half of the tables shows the cumulative amounts paid during successive years related to each accident
year. For example, with respect to the accident year 2002, by the end of 2009 £5,767 million had actually been paid in settlement
of claims. In addition, as reflected in the lower section of the table, the original estimated ultimate cost of claims of £6,250 million
was re-estimated to be £6,044 million at 31 December 2009.
The original estimates will be increased or decreased, as more information becomes known about the individual claims and
overall claim frequency and severity.
In 2005, the year of adoption of IFRS, only five years were required to be disclosed. This is being increased in each succeeding
additional year, until 10 years of information is included.
The Group aims to maintain strong reserves in respect of its general insurance and health business in order to protect against
adverse future claims experience and development. As claims develop and the ultimate cost of claims become more certain, the
absence of adverse claims experience will result in a release of reserves from earlier accident years, as shown in the loss
development tables and movements table (c)(iv) above. However, in order to maintain overall reserve adequacy, the Group
establishes strong reserves in respect of the current accident year (2009) where the development of claims is less mature and there
is much greater uncertainty attaching to the ultimate cost of claims. Releases from prior accident year reserves are also due to an
improvement in the estimated cost of claims.
Key elements of the release from prior accident year general insurance and health net provisions during 2008 were:
— £285 million from the UK, mainly due to an improved trend in bodily injury experience on both personal and commercial motor,
favourable experience on commercial liability and a reduction in public liability average claim costs.
— £312 million from Europe, mainly due to lower than expected IBNR and costs of settling motor and commercial liability claims.
— £111 million from Canada, mainly due to favourable motor bodily injury experience.
— £89 million from prior year health insurance provisions.
Key elements of the release from prior accident year general insurance and health net provisions during 2009 were:
— £230 million from the UK, including group reinsurance business, mainly due to an improved view of group reinsurance liabilities,
and favourable development on personal and commercial motor claims, and commercial property and commercial liability
large claims.
— £237 million from Europe mainly due to favourable development of personal motor and commercial property, especially
in respect of large claims.
— £79 million from Canada mainly due to favourable experience on motor and personal property.
Financial statements IFRS