Interim results for 6 months ended 30 June 2006
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 30 June 2006, 30 June 2005 and 31 December 2005.
| 30 June 2006 £m |
30 June 2005 £m |
31 December 2005 £m |
|
|---|---|---|---|
| France | 56 | 81 | 84 |
| Ireland | 5 | 2 | 3 |
| Italy | 17 | 12 | 19 |
| Netherlands (including Belgium, Germany and Luxembourg) | 117 | 112 | 118 |
| Poland | 5 | 4 | 5 |
| Spain | 4 | 8 | 8 |
| Other Europe | - | 1 | 2 |
| Continental Europe | 204 | 220 | 239 |
| Rest of the World | 15 | 12 | 16 |
| International | 219 | 232 | 255 |
| United Kingdom | 46 | 44 | 48 |
| Total | 265 | 276 | 303 |
Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union’s Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom.
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 decreased to £265 million reflecting the £39 million impact of the 80 and 60 basis point increases in Continental Europe and the UK respectively over the period. Also included is an increase of £12 million due to the allowance within new business contribution which is offset by the expected reduction in TVOG for existing business.
