IFRS condensed financial statements
A11 - Effect of changes in assumptions and estimates during the period
This disclosure only allows for the impact on liabilities and related assets, such as reinsurance, deferred acquisition costs and AVIF, and does not allow for offsetting movements in the value of backing financial assets.
|
Effect on profit six month 2009 £m |
Effect on profit six month 2008 £m |
Effect on profit full year 2008 £m |
|
|---|---|---|---|
| Assumptions | |||
| Long-term insurance business | |||
| Interest rates | 1,876 | 1,136 | (521) |
| Expenses | - | - | 24 |
| Persistency rates | 10 | - | 2 |
| Mortality for assurance contracts | - | - | 44 |
| Mortality for annuity contracts | 6 | - | 26 |
| Tax and other assumptions | (1) | (58) | 93 |
| Investment contracts | |||
| Interest rates | (158) | (1) | (75) |
| Expenses | - | - | (27) |
| Persistency rates | - | - | 2 |
| Other assumptions | - | - | 36 |
| General insurance and health business | |||
| Change in loss ratio assumptions | 4 | (2) | (1) |
| Change in discount rate assumptions | 54 | - | (94) |
| Change in expense ratio assumptions | (1) | (1) | - |
| Total | 1,790 | 1,074 | (491) |
The impact of interest rates for long-term business relates primarily to the UK, Ireland and the Netherlands, driven by the market level of risk-free rates. Higher valuation interest rates in 2009 had the effect of reducing liabilities for traditional business and hence a positive impact on profit. This follows a reduction in market interest rates in 2008 which had the reverse effect. The overall impact on profit also depends on movements in the value of assets backing the liabilities, which is not included in this disclosure.