8 Sensitivities.

8 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 2013

(XLS:) Notes to the Supplementary Financial Statements – Sensitivities – Effect on embedded value as at 31 December 2013

 

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 LGC.

LGAS and LGR1

8,454

614

(525)

295

(241)

128

LGA

933

115

(96)

38

(37)

Total covered business

9,387

729

(621)

333

(278)

128

 

 

 

 

 

 

 

 

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

LGAS and LGR1

8,454

(261)

115

85

(268)

73

LGA

933

12

4

n/a

129

Total covered business

9,387

(261)

127

89

(268)

202

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 LGC.

LGAS and LGR1

544

76

(63)

(5)

15

LGA

107

14

(12)

1

(1)

Total covered business

651

90

(75)

1

(6)

15

 

 

 

 

 

 

 

 

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

LGAS and LGR1

544

(5)

23

16

(23)

10

LGA

107

2

2

n/a

17

Total covered business

651

(5)

25

18

(23)

27

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 £913m negative impact on UK embedded value and a £108m negative impact on UK new business contribution for the year.

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