Aviva 2009 Annual Report Download - page 271

269
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
56 – Risk management continued
Impact of the reattribution of the inherited estate on IFRS long-term business sensitivities
Prior to the reattribution of the inherited estates of CGNU Life Assurance Limited (CGNU) and Commercial Union Life Assurance
Company Limited (CULAC) (as detailed in note 44(b)), movements in the value of assets and liabilities in the with-profit funds
of CGNU and CULAC would result in corresponding movements in the value of the unallocated divisible surplus. IFRS profit in
these funds would only arise on the shareholders’ share of bonuses paid on claims during the year or added to policies at the
end of the year.
As a result of the reattribution, movements in the value of assets and liabilities in the New With-Profit Shareholders Funds
(NWPSF) and in the reattributed assets will lead to increased volatility of IFRS profit as the result will be borne by shareholders.
The main drivers of this increased volatility will be investment returns, the effect of writing new with-profit business in the fund,
changes in the cost of guarantees and changes in assumptions. This increase in potential volatility is the primary driver of the
change in IFRS long-term business sensitivities between 2008 and 2009.
The impact on the Group’s results from sensitivity to these assumptions can also be found in the MCEV sensitivities included
in the alternative method of reporting long-term business profits section.
General insurance and health business
Sensitivities as at 31 December 2009
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 (310) 295 105 (110) (135) (345)
Net of reinsurance (365) 365 105 (110) (135) (330)
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 (310) 295 105 (110) (35) (345)
Net of reinsurance (365) 365 105 (110) (35) (330)
Sensitivities as at 31 December 2008
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 (310) 300 90 (90) (170) (435)
Net of reinsurance (360) 360 90 (90) (170) (425)
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 (310) 300 90 (90) (40) (435)
Net of reinsurance (360) 360 90 (90) (40) (425)
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.
Fund management and non-insurance business
Sensitivities as at 31 December 2009
Impact before profit before tax (£m)
Interest
rates
+1%
Interest
rates
-1%
Equity/
property
+10%
Equity/
property
-10%
Total (20) 25 70 (30)
Financial statements IFRS
Impact before tax on shareholders’ equity (£m)
Interest
rates
+1%
Interest
rates
-1%
Equity/
property
+10%
Equity/
property
-10%
Total (40) 55 80 (50)