Sensitivity analysis - non-economic assumptions
The tables below show the sensitivity of the embedded value as at 30 June 2005 and the new business contribution before the effect of required capital for the six months to 30 June 2005 to the following changes in non-economic assumptions:
- 10% decrease in maintenance expenses (a 10% sensitivity on a base expense assumption of £10pa would represent an expense assumption of £9pa). Where there is a “look through” into service company expenses, the fee charged by the service company is unchanged while the underlying expense decreases;
- 10% decrease in lapse rates (a 10% sensitivity on a base assumption of 5%pa would represent a lapse rate of 4.5%pa);
- 10% decrease in both mortality and morbidity rates.
In each sensitivity calculation, all other assumptions remain unchanged.
| Embedded value (net of tax) 30 June 2005 |
As reported in the Segmental analysis of life and related businesses embedded value £m |
10% decrease in maintenance expenses £m |
10% decrease in lapse rates £m |
10% decrease in mortality / morbidity rates £m |
|---|---|---|---|---|
| United Kingdom | 5,469 | 140 | 45 | (110) |
| Continental Europe | ||||
| France | 1,872 | 30 | 25 | 30 |
| Ireland | 595 | 10 | 5 | 5 |
| Italy | 682 | 5 | 5 | - |
| Netherlands (including Belgium and Luxembourg) | 2,394 | 75 | 5 | (60) |
| Poland | 506 | 15 | 25 | 15 |
| Spain | 633 | 10 | 20 | 10 |
| Other | 225 | 5 | 5 | - |
| International | 613 | 10 | 10 | 10 |
| 12,989 | 300 | 145 | (100) |
| New business contribution before required capital (gross of tax) 6 months to 30 June 2005 |
As reported in the New business contribution £m |
10% decrease in maintenance expenses £m |
10% decrease in lapse rates £m |
10% decrease in mortality / morbidity rates £m |
|---|---|---|---|---|
| United Kingdom | 135 | 7 | 8 | 8 |
| Continental Europe | ||||
| France | 71 | 2 | 3 | 3 |
| Ireland | 9 | - | 1 | - |
| Italy | 33 | 1 | - | - |
| Netherlands (including Belgium and Luxembourg) | 39 | 4 | 4 | (1) |
| Poland | 5 | - | 1 | 1 |
| Spain | 80 | 3 | 8 | 5 |
| Other | 3 | - | 1 | - |
| International | 18 | 1 | 1 | 2 |
| 393 | 18 | 27 | 18 |
The demographic sensitivities shown above represent a standard change to the assumptions for all products. Different products will be more or less sensitive to the change, and impacts may partially offset.
