Aviva 2009 Annual Report Download - page 307

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305
Performance review
Aviva plc MCEV financial statements continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
M14 – Risk allowance within present value of in-force (VIF) continued
Within the VIF in the tables, there are additional allowances for risks not included within the basic present value of future
profits calculation.
Time value
Non- of financial
Frictional hedgeable options and
Restated PVFP costs risks guarantees VIF
2008 £m £m £m £m £m
United Kingdom 2,470 (176) (165) (76) 2,053
France 1,827 (174) (147) (414) 1,092
Ireland 637 (10) (24) — 603
Italy 196 (22) (12) (13) 149
Poland 1,074 (14) (73) (8) 979
Spain 422 (18) (32) (18) 354
Other Europe 169 (4) (4) (2) 159
Aviva Europe 4,325 (242) (292) (455) 3,336
Delta Lloyd 1,208 (246) (132) (319) 511
Europe 5,533 (488) (424) (774) 3,847
North America (1,224) (29) (43) (150) (1,446)
Asia 262 (20) (23) (26) 193
Australia 132 (27) (26) (10) 69
Asia Pacific 394 (47) (49) (36) 262
Total 7,173 (740) (681) (1,036) 4,716
M15 – Implied discount rates (IDR)
In the valuation of a block of business, the implied discount rate is the rate of discount such that a traditional embedded value
for the business equates to the MCEV.
The cash flows projected are the expected future cash flows including expected investment cash flows from equities, bonds
and properties earning a risk premium in excess of risk free, statutory reserves and required capital. The risk premiums used are
consistent with those used in the expected existing business contribution within operating earnings. As the risk premiums are
positive, a discount rate higher than risk-free is required to give a value equal to the market-consistent embedded value.
Average derived risk discount rates are shown below for the embedded value.
2009
2009 %
United Kingdom 10.6%
France 10.8%
Ireland 4.8%
Italy 9.2%
Poland 7.1%
Spain 8.4%
Other Europe 8.9%
Aviva Europe 8.9%
Delta Lloyd 8.1%
Europe 8.6%
North America 41.2%
Asia 9.2%
Australia —
Asia Pacific 9.2%
Total 10.8%
Financial statements MCEV