Aviva 2009 Annual Report Download - page 225

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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
40 – Financial guarantees and options continued
(d) Sensitivity
In providing these guarantees and options, the Group’s capital position is sensitive to fluctuations in financial variables including
foreign currency exchange rates, interest rates, real estate prices and equity prices. Interest rate guaranteed returns, such as
those available on guaranteed annuity options (GAOs), are sensitive to interest rates falling below the guaranteed level. Other
guarantees, such as maturity value guarantees and guarantees in relation to minimum rates of return, are sensitive to fluctuations
in the investment return below the level assumed when the guarantee was made.
41 – Reinsurance assets
This note details the reinsurance recoverables on our insurance and investment contract liabilities.
(a) Carrying amounts
The reinsurance assets at 31 December comprised:
2009 2008 2007
£m £m £m
Long-term business
Insurance contracts 4,299 4,466 4,298
Participating investment contracts — 52 22
Non-participating investment contracts 1,258 1,047 1,461
Outstanding claims provisions 40 145 94
5,597 5,710 5,875
General insurance and health
Outstanding claims provisions 1,194 1,737 1,634
Provisions for claims incurred but not reported 449 29 29
1,643 1,766 1,663
Provision for unearned premiums 332 418 511
Other technical provisions — — 5
1,975 2,184 2,179
Total 7,572 7,894 8,054
Of the above total, £4,493 million
(2008: £6,097 million, 2007: £4,796 million) is expected to be recovered more than one year
after the statement of financial position date.
The increase in the reinsurers' share of provisions for claims incurred but not reported during 2009 is due to a revised
allocation between outstanding claims and IBNR of reinsurance assets in respect of certain discontinued run-off business.
(b) Assumptions
The assumptions, including discount rates, used for reinsurance contracts follow those used for insurance contracts.
Reinsurance assets are valued net of an allowance for their recoverability.
(c) Movements
The following movements have occurred in the reinsurance asset during the year:
(i) In respect of long-term business provisions
2009 2008
£m £m
Carrying amount at 1 January 5,565 5,781
Asset in respect of new business 412 235
Expected change in existing business asset (57) 243
Variance between actual and expected experience (35) (1,141)
Impact of other operating assumption changes (189) (761)
Impact of economic assumption changes (250) 306
Other movements 486 (231)
Change in asset 367 (1,349)
Effect of portfolio transfers, acquisitions and disposals (41) 140
Foreign exchange rate movements (334) 993
Carrying amount at 31 December 5,557 5,565
Financial statements IFRS
The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of reinsurance assets.
The reduction in the reinsurance asset from assumption changes mainly relates to Ireland, with a corresponding reduction made
to gross insurance contract liabilities. For participating businesses, a movement in reinsurance assets is generally offset by a
corresponding adjustment to the unallocated divisible surplus and does not impact on profit. Where assumption changes do
impact 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 liabilities and other non-financial assets.