Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004
10 ALTERNATIVE ASSUMPTIONS
The tables below for South Africa and the United States show the sensitivity of the value of in-force at 31 December 2004 and the value of new business for the year to 31 December 2004 to changes in key assumptions. For each sensitivity illustrated, all other assumptions have been left unchanged. The value of new business is shown before tax.
The sensitivity of the adjustment for discounting CGT, which is included in the shareholders’ adjusted net worth, to changes in the central discount rate is not material and is not included in the table below.
| £m | ||
| South Africa | Value of in-force business at 31 December 2004 |
Value of new life business at 31 December 2004 |
| Central assumptions | 1,005 |
98 |
| Value before cost of solvency capital | 1,248 |
111 |
| Cost of solvency capital | (243) |
(13) |
| Effect of: | ||
| Central discount rate +1% | 878 |
87 |
| Value before cost of solvency capital | 1,178 |
102 |
| Cost of solvency capital | (300) |
(15) |
| Central discount rate -1% | 1,149 |
111 |
| Value before cost of solvency capital | 1,327 |
120 |
| Cost of solvency capital | (178) |
(9) |
| Pre-tax investment return assumptions -1%, with bonus rates changing commensurately | 919 |
92 |
| Value before cost of solvency capital | 1,210 |
106 |
| Cost of solvency capital | (291) |
(14) |
| Voluntary discontinuance rates +10% | 984 |
90 |
| Maintenance expense levels +10%, with no corresponding increase in policy charges | 944 |
92 |
| Inflation assumption +1%, with no corresponding increase in policy charges | 970 |
93 |
| Mortality and morbidity assumptions for assurances +10%, and mortality assumptions for annuities -10%, with no corresponding increase in policy charges | 906 |
82 |
| For value of new business, acquisition expenses other than commission and commission-related expenses +10%, with no corresponding increase in policy charges | - |
92 |
| £m | ||
| United States | Value of in-force business at 31 December 2004 |
Value of new life business at 31 December 2004 |
| Central assumptions | 512 |
88 |
| Value before cost of solvency capital | 543 |
102 |
| Cost of solvency capital | (31) |
(14) |
| Effect of: | ||
| Central discount rate +1% | 489 |
83 |
| Value before cost of solvency capital | 525 |
98 |
| Cost of solvency capital | (36) |
(15) |
| Central discount rate -1% | 537 |
94 |
| Value before cost of solvency capital | 562 |
105 |
| Cost of solvency capital | (25) |
(11) |
| Pre-tax investment return assumptions -1%, with credited rates changing commensurately | 481 |
81 |
| Value before cost of solvency capital | 515 |
96 |
| Cost of solvency capital | (34) |
(15) |
| Voluntary discontinuance rates +10% | 479 |
82 |
| Maintenance expense levels +10%, with no corresponding increase in policy charges | 491 |
85 |
| Inflation assumption +1%, with no corresponding increase in policy charges | 510 |
86 |
| Mortality and morbidity assumptions for assurances +10%, and mortality assumptions for annuities -10%, with no corresponding increase in policy charges | 508 |
88 |
| Increasing Risk Based Capital to 200%, with 1% reduction in central discount rate | 512 |
83 |
| Value before cost of solvency capital | 562 |
105 |
| Cost of solvency capital | (50) |
(22) |
| For value of new business, acquisition expenses other than commission and commission-related expenses +10%, with no corresponding increase in policy charges | - |
85 |
