16 Sensitivities.

In accordance with the guidance issued by the European Insurance CFO Forum in October 2005 the table below shows the effect of alternative assumptions on the long term embedded value and new business contribution.

Effect on embedded value as at 31 December 2012

(XLS:) Notes to the Supplementary Financial Statements – sensitivities – effect on embedded value as at 31 December 2012

 

As published
£m

1%
lower risk discount
rate
£m

1%
higher risk discount rate
£m

1%
lower interest rate
£m

1%
higher interest rate
£m

1%
higher equity/
property yields
£m

Protection and Annuities and Savings1

8,022

595

(507)

230

(191)

109

US Protection

974

119

(99)

40

(41)

Total covered business

8,996

714

(606)

270

(232)

109

 

 

 

 

 

 

 

 

As published
£m

10%
lower equity/property values
£m

10%
lower maintenance expenses
£m

10%
lower lapse rates
£m

5%
lower mortality (UK annuities)
£m

5%
lower mortality (other business)
£m

Protection and Annuities and Savings1

8,022

(240)

106

83

(260)

83

US Protection

974

9

1

n/a

137

Total covered business

8,996

(240)

115

84

(260)

220

Effect on new business contribution for the year

(XLS:) Notes to the Supplementary Financial Statements – sensitivities – effect on new business contribution for the year

 

As published
£m

1%
lower risk discount
rate
£m

1%
higher risk discount rate
£m

1%
lower interest rate
£m

1%
higher interest rate
£m

1%
higher equity/
property yields
£m

1.

Includes Group capital and financing.

Protection and Annuities and Savings1

377

59

(49)

1

2

12

US Protection

98

19

(16)

1

(3)

Total covered business

475

78

(65)

2

(1)

12

 

 

 

 

 

 

 

 

As published
£m

10%
lower equity/property values
£m

10%
lower maintenance expenses
£m

10%
lower lapse rates
£m

5%
lower mortality (UK annuities)
£m

5%
lower mortality (other business)
£m

Protection and Annuities and Savings1

377

(6)

16

18

(14)

14

US Protection

98

1

3

n/a

17

Total covered business

475

(6)

17

21

(14)

31

Opposite sensitivities are broadly symmetrical.

Sensitivity to changes in assumptions may not be linear, and as such, they should not be extrapolated to changes of a much larger order. A 2% higher risk discount rate would result in a £888m negative impact on UK embedded value and a £82m negative impact on UK new business contribution for the year.