Aviva 2009 Annual Report Download - page 221

219
Performance review
Aviva plc Notes to the consolidated financial statements continued
Corporate responsibility
Governance
Shareholder information
Annual Report and Accounts 2009
Financial statements IFRS
Financial statements MCEV
Other information
39 – Liability for investment contracts continued
(c) Movements in the year
The following movements have occurred in the year:
(i) Participating investment contracts
2009 2008
£m £m
Carrying amount at 1 January 65,278 53,609
Provisions in respect of new business 5,973 3,391
Expected change in existing business provisions (1,256) (1,909)
Variance between actual and expected experience 2,469 (4,661)
Impact of operating assumption changes (49) (166)
Impact of economic assumption changes (57) 244
Other movements (1,316) 13
Change in liability recognised as an expense 5,764 (3,088)
Effect of portfolio transfers, acquisitions and disposals (246) 2,181
Foreign exchange rate movements (4,256) 12,576
Other movements 19 —
Carrying amount at 31 December 66,559 65,278
The variance between actual and expected experience of £2.5 billion was primarily driven by favourable movements in investment
markets in 2009, which had a direct or indirect impact on liability values. Equity markets recovered and the values of corporate
bonds and commercial mortgages were increased by the narrowing of credit spreads. For many types of long-term business,
including unit-linked and participating funds, movements in asset values are offset by corresponding changes in liabilities, limiting
the net impact on profit. Minor variances arise from differences between actual and expected experience for persistency, mortality
and other demographic factors.
The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of participating
investment contract liabilities. The £2.5 billion variance between actual and expected experience is not a change in assumptions.
For participating business, a movement in liabilities is generally offset by a corresponding adjustment to the unallocated divisible
surplus and does not impact on profit. Where assumption changes do impact on profit, these are included in the effect of
changes in assumptions and estimates during the year shown in note 42, together with the impact of movements in related
non-financial assets.
(ii) Non-participating investment contracts
2009 2008
£m £m
Carrying amount at 1 January 42,281 44,635
Provisions in respect of new business 3,045 5,314
Expected change in existing business provisions (1,847) (2,273)
Variance between actual and expected experience 2,495 (9,503)
Impact of operating assumption changes 107 (28)
Impact of economic assumption changes 4 5
Other movements 370 (169)
Change in liability 4,174 (6,654)
Effect of portfolio transfers, acquisitions and disposals (1,596) (14)
Foreign exchange rate movements (1,403) 4,314
Carrying amount at 31 December 43,456 42,281
The variance between actual and expected experience of £2.5 billion was primarily driven by favourable movements in investment
markets in 2009, which had a direct or indirect impact on liability values. Equity markets recovered and the value of corporate
bonds and commercial mortgages were increased by the narrowing of credit spreads. For unit-linked investment contracts,
movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit. Minor variances
arise from differences between actual and expected experience for persistency, mortality and other demographic factors.
The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of non-
participating investment contract liabilities. The £2.5 billion variance between actual and expected experience is not a change
in assumptions. The impact of assumption changes on profit are included in the effect of changes in assumptions and estimates
during the year shown in note 42, which combines participating and non-participating investment contracts together with the
impact of movements in related non-financial assets.
Financial statements IFRS