Preliminary results year ended 31 December 2008
05 March 2009
Appendix B – Analysis of assets
B8 – Guarantees
As a normal part of their operating activities, various group companies have given guarantees and options, including investment return guarantees, in respect of certain long term insurance and fund management products.
For the UK Life with-profit business, provisions in respect of these guarantees and options are calculated on a market consistent basis, in which stochastic models are used to evaluate the level of risk (and additional cost) under a number of economic scenarios, which allow for the impact of volatility in both interest rates and equity prices. For UK Life non-profit business, provisions do not materially differ from those determined on a market consistent basis.
In all other Businesses, provisions for guarantees and options are calculated on a local basis with sensitivity analysis undertaken where appropriate to assess the impact on provisioning levels of a movement in interest rates and equity levels (typically a 1% increase in interest rates and 10% decline in equity markets). Refer to section A2 for further details.
