4 ANALYSIS OF EXPERIENCE VARIANCES AND OPERATING ASSUMPTION CHANGES.


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Risk and Savings

International

For the year ended 31 December 2011

Experience variances
£m

Operating assumption changes
£m

Total
£m

Experience variances
£m

Operating assumption changes
£m

Total
£m

Persistency

5

9

14

3

(24)

(21)

Mortality/morbidity

(25)

(7)

(32)

(27)

(55)

(82)

Expenses

55

55

(7)

1

(6)

Other

 

 

 

 

 

 

– US capital restructure

15

 

 

163

 

 

[Bulk purchase annuity] data loading

42

 

 

 

 

– UK cost of capital unwind

54

 

 

 

 

– Modelling changes and other experience variances

21

 

 

(7)

 

 

 

132

44

176

156

10

166

 

112

101

213

125

(68)

57

2011 Risk and Savings mortality experience variances primarily relates to our group protection business which was impacted by a number of high value claims which predominately occurred during H1 11.

2011 Risk and Savings expense operating assumption changes reflects the change in long term expense assumptions in protection business and changes in the modelled long term unit cost and investment expenses assumptions in non profit savings and pensions.

Adverse International persistency and mortality operating assumptions changes mainly relate to LGA term assurances in the period after the end of the ordinary level premium period when policyholders may choose to continue their policies at reviewable rates.

The domicile of a US captive structure was moved from Bermuda to Vermont, which results in an acceleration of the emergence of surplus, and as a consequence increases the present value of the in-force business.

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Risk and Savings

International

For the year ended 31 December 2010

Experience variances
£m

Operating assumption changes
£m

Total
£m

Experience variances
£m

Operating assumption changes
£m

Total
£m

Persistency

(16)

(16)

(1)

(14)

(15)

Mortality/morbidity

(28)

(28)

(12)

(13)

(25)

Expenses

(1)

1

(10)

(1)

(11)

Other

 

 

 

 

 

 

– US capital restructure

30

 

 

16

 

 

– Bulk purchase annuity data loading

59

 

 

 

 

– UK cost of capital unwind

54

 

 

 

 

– Modelling changes and other experience variances

46

 

 

13

 

 

 

189

(15)

174

29

8

37

 

188

(58)

130

6

(20)

(14)

2010 Risk and Savings persistency assumption changes relate to the strengthening of lapse assumptions for individual protection and non profit pensions.

2010 Risk and Savings mortality assumption changes reflect the strengthening of the annuity business mortality assumptions partially offset by favourable individual protection mortality.

The 2010 US Capital restructuring programme involved replacing the Triple X financing solution with an internal reinsurance structure.

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