Preliminary results - 12 months ended 31 December 2005
Time value of options and guarantees
The following table sets out the time value of options and guarantees relating to covered business by territory at 31 December 2005 and 31 December 2004.
| 2005 £m |
2004 £m |
|
|---|---|---|
| United Kingdom | 48 | 44 |
| Continental Europe | ||
| France | 84 | 79 |
| Ireland | 3 | 4 |
| Italy | 19 | 14 |
| Netherlands (including Belgium and Luxembourg) | 101 | 92 |
| Poland | 5 | 5 |
| Spain | 8 | 9 |
| Other Europe | 19 | 18 |
| International | 16 | 9 |
| 303 | 274 |
The time value of options and guarantees (TVOG) is most significant in the United Kingdom, France and the Netherlands. In the United Kingdom, this relates mainly to non-market value adjustment (MVA) guarantees on unitised with-profit business and guaranteed annuity rates. In France, this relates mainly to guaranteed crediting rates and surrender values on traditional business including the AFER fund. In the Netherlands, this relates mainly to maturity guarantees on unit-linked products and interest rate guarantees on traditional individual and group profit sharing business.
The TVOG has increased over the year to £303 million primarily due to the allowance included in new business contribution of £31 million. Also included is an increase of £16 million due to the 40 basis points fall in bond yields in continental Europe during 2005 which has largely been offset by the favourable impacts of investment returns and exchange rates.
