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33 Insurance contract liabilities


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(i) Analysis of insurance contract liabilities

 

Notes

Gross
2008
£m

Reinsurance
2008
£m

Gross
2007
£m

Reinsurance
2007
£m

Life and pensions participating insurance contracts

(iii)

9,384

(1)

11,663

(1)

Life and pensions non-participating insurance contracts

(iv)

25,582

(1,847)

22,568

(1,302)

General insurance contracts

(v)

259

(11)

305

(19)

Insurance contract liabilities

 

35,225

(1,859)

34,536

(1,322)

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(ii) Expected insurance contract liability cash flows

 

Date of undiscounted cash flow

 

 

1.

Excludes unearned premium reserve of £131m (2007: £133m) for which there are no cash flows.

As at 31 December 2008

0-5
years
£m

5-15
years
£m

15-25
years
£m

Over
25 years
£m

Total
£m

Carrying
value
£m

Life and pensions participating insurance contracts

5,849

3,757

867

326

10,799

9,384

Life and pensions non-participating insurance contracts

8,148

13,360

11,559

14,334

47,401

17,695

General insurance contracts1

128

–

–

–

128

128

Insurance contract liabilities

14,125

17,117

12,426

14,660

58,328

27,207

 

 

 

 

 

 

 

 

Date of undiscounted cash flow

 

 

As at 31 December 2007

0-5
years
£m

5-15
years
£m

15-25
years
£m

Over
25 years
£m

Total
£m

Carrying
value
£m

Life and pensions participating insurance contracts

7,420

5,475

1,008

317

14,220

11,663

Life and pensions non-participating insurance contracts

5,403

10,800

9,672

12,266

38,141

15,294

General insurance contracts

158

–

–

–

158

158

Insurance contract liabilities

12,981

16,275

10,680

12,583

52,519

27,115

Insurance contract undiscounted cash flows are based on the expected date of settlement.

Amounts under unit linked contracts are generally repayable on demand and the [Group] is responsible for ensuring there is sufficient liquidity within the asset portfolio to enable liabilities to unit linked policyholders to be met as they fall due.

However, the terms of funds investing in less liquid assets permit the deferral of redemptions for predefined periods in circumstances where there are not sufficient liquid assets within the fund to meet the level of requested redemptions. Accordingly unit linked liabilities have been excluded from the table.

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(iii) Movement in participating insurance contract liabilities

 

Notes

Gross
2008
£m

Reinsurance
2008
£m

Gross
2007
£m

Reinsurance
2007
£m

As at 1 January

 

11,663

(1)

12,660

(1)

New liabilities in the year

 

333

–

219

–

Liabilities discharged in the year

 

(1,628)

–

(1,684)

–

Unwinding of discount rates

 

383

–

520

–

Effect of change in non-economic assumptions

37

58

–

(102)

–

Effect of change in economic assumptions

37

(1,348)

–

50

–

Other

 

(77)

–

–

–

As at 31 December

 

9,384

(1)

11,663

(1)

Expected to be settled within 12 months (net of reinsurance)

 

1,522

 

1,799

 

Expected to be settled after 12 months (net of reinsurance)

 

7,861

 

9,863

 

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(iv) Movement in non-participating insurance contract liabilities

 

Notes

Gross
2008
£m

Reinsurance
2008
£m

Gross
2007
£m

Reinsurance
2007
£m

1.

In 2007, the Effect of change in non-economic assumptions includes approximately £214m relating to the strengthening of assumptions for annuitant longevity on existing business. This was largely offset by mortality and changes to expense assumptions on term business (on a gross of reassurance basis), which reflected improved experience.

2.

In 2008, the Effect of changes in economic assumptions includes the impact arising from the current interest rate environment and increased credit spreads reducing liabilities, partially offset by the £650m of additional reserves for non profit annuity credit default, bringing the total reserve to £1.2bn.

As at 1 January

 

22,568

(1,302)

21,321

(1,237)

New liabilities in the year

 

3,020

(262)

2,463

(286)

Liabilities discharged in the year

 

(1,493)

79

(1,108)

78

Unwinding of discount rates

 

1,022

(88)

876

(126)

Effect of change in non-economic assumptions1

37

(87)

121

1

179

Effect of change in economic assumptions2

37

(1,366)

(26)

(902)

–

Foreign exchange adjustments

 

946

(82)

109

2

Acquisitions

 

1,172

(286)

–

–

Other

 

(200)

(1)

(192)

88

As at 31 December

 

25,582

(1,847)

22,568

(1,302)

Expected to be settled within 12 months (net of reinsurance)

 

751

 

1,475

 

Expected to be settled after 12 months (net of reinsurance)

 

22,984

 

19,791

 

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(v) Analysis of general insurance contract liabilities

 

 

Gross
2008
£m

Reinsurance
2008
£m

Gross
2007
£m

Reinsurance
2007
£m

Outstanding claims

 

99

(4)

132

(12)

Claims incurred but not reported

 

29

–

40

–

Unearned premiums

 

131

(7)

133

(7)

General insurance contract liabilities

 

259

(11)

305

(19)

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(vi) Movement in general insurance claim liabilities

 

 

 

Gross
2008
£m

Reinsurance
2008
£m

Gross
2007
£m

Reinsurance
2007
£m

As at 1 January

 

172

(12)

137

(5)

Claims arising

 

231

(4)

323

(6)

Claims paid

 

(235)

6

(255)

(2)

Adjustments to prior year liabilities

 

(40)

6

(33)

1

As at 31 December

 

128

(4)

172

(12)

Expected to be settled within 12 months (net of reinsurance)

 

88

 

122

 

Expected to be settled after 12 months (net of reinsurance)

 

36

 

38

 

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(vii) Unearned premiums

 

 

 

Gross
2008
£m

Reinsurance
2008
£m

Gross
2007
£m

Reinsurance
2007
£m

As at 1 January

 

133

(7)

144

(11)

Earned in the period

 

(133)

7

(144)

11

Gross written premiums in respect of future periods

 

131

(7)

133

(7)

As at 31 December

 

131

(7)

133

(7)

Expected to be earned within 12 months (net of reinsurance)

 

124

 

125

 

Expected to be earned after 12 months (net of reinsurance)

 

–

 

1

 

(viii) Claims development – general insurance
Changes may occur in the amount of the Group’s obligations at the end of a contract period. The top section of each table below illustrates how the estimate of total claims outstanding for each accident year developed over time. The bottom section of the table reconciles the cumulative claims to the amount appearing in the balance sheet.

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Gross of reinsurance

 

 

 

 

 

 

Accident year

2004
£m

2005
£m

2006
£m

2007
£m

2008
£m

Total
£m

Estimate of ultimate claims costs:

 

 

 

 

 

 

– At end of accident year

171

209

205

294

191

 

– One year later

166

195

192

277

–

 

– Two years later

160

191

192

–

–

 

– Three years later

160

191

–

–

–

 

– Four years later

162

–

–

–

–

 

Estimate of cumulative claims

162

191

192

277

191

1,013

Cumulative payments

(156)

(183)

(179)

(262)

(117)

(897)

Outstanding claims provision

6

8

13

15

74

116

Prior period outstanding claims

 

 

 

 

 

8

Claims handling provision

 

 

 

 

 

4

Total claims liabilities recognised in the balance sheet

 

 

 

 

 

128

 

 

 

 

 

 

 

Net of reinsurance

 

 

 

 

 

 

Accident year

2004
£m

2005
£m

2006
£m

2007
£m

2008
£m

Total
£m

Estimate of ultimate claims costs:

 

 

 

 

 

 

– At end of accident year

162

205

200

280

189

 

– One year later

161

193

188

267

–

 

– Two years later

157

189

189

–

–

 

– Three years later

158

189

–

–

–

 

– Four years later

159

–

–

–

–

 

Estimate of cumulative claims

159

189

189

267

189

993

Cumulative payments

(154)

(182)

(176)

(255)

(117)

(884)

Outstanding claims provision

5

7

13

12

72

109

Prior period outstanding claims

 

 

 

 

 

12

Claims handling provision

 

 

 

 

 

3

Total claims liabilities recognised in the balance sheet

 

 

 

 

 

124

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