Our Accounts 73
Notes to the Financial Statements continued
31 December 2012
Performance
The notes included within this section focus on the performance and results of the Society and Group. Information on the income generated,
benefits and claims paid, expenditure incurred and mutual bonus declared are presented here.
4. Net earned premiums
Accounting for net earned premiums
Long-term insurance contracts
Regular premiums on long-term insurance contracts are recognised as income when due for payment. For single premium business, recognition
occurs on the date from which the policy is effective. Reinsurance premiums payable are accounted for when due for payment.
Annual premium equivalent (APE), a measure of new business activity that is calculated as the sum of annualised regular premiums from new
business plus ten per cent of single premiums on new business written during the period.
General insurance contracts
General insurance premiums written reflect business coming into force during the year. Earned premium is written premium adjusted for unearned
premium. Unearned premium is that proportion of a premium written in a year that relates to periods of risk after the Statement of Financial
Position date. Unearned premiums are calculated on a time apportionment basis. The proportion attributable to subsequent periods is deferred
as a provision for unearned premiums.
Investment contracts
Premiums and claims relating to investment contracts are not recognised in the Statement of Comprehensive Income but are recorded as
contributions to and deductions from the investment contract liabilities recorded in the Statement of Financial Position.
Group Society
2012 2011 2012 2011
Gross written premiums £m £m £m £m
Long-term insurance contracts - participating business
Investments and savings - single premium 61.5 45.7 61.5 45.7
Statements and Reviews
Pensions and annuities - single premium 10.8 8.7 10.8 8.7
Investments and savings - regular premium 44.3 52.9 44.3 52.9
Pensions and annuities - regular premium 15.2 16.9 15.2 16.9
Long-term insurance contracts - non participating business
Pensions and annuities - single premium 677.3 601.1 677.3 601.1
Investments and savings - regular premium 0.3 0.5 0.1 0.2
Pensions and annuities - regular premium 6.8 7.7 6.8 7.7
Life and health protection - regular premium 131.7 116.9 131.2 116.4
Our Businesses
Long-term linked insurance contracts
Investments and savings - regular premium 0.3 0.9 0.3 0.9
Pensions and annuities - regular premium 0.4 1.8 0.4 1.8
Life and health protection - regular premium 11.2 10.5 11.2 10.5
General insurance contracts
Motor 1,109.1 1,124.9 – –
Risk Management
Household 140.3 128.8 – –
Other 235.5 201.9 – –
Change in unearned premiums provision 1.5 (122.7) – –
Gross earned premiums 2,446.2 2,196.5 959.1 862.8
Premiums ceded to reinsurers
Long-term insurance premiums (75.6) (68.1) (75.6) (99.7)
Corporate Governance
General insurance business (35.0) (27.7) – –
Change in unearned premiums provision 1.8 2.8 – –
(108.8) (93.0) (75.6) (99.7)
Net earned premiums 2,337.4 2,103.5 883.5 763.1
Gross written premiums for investment contracts
which are deposit accounted for and not included above 270.0 214.0 270.0 214.0
Our Accounts
All contracts are written in the UK apart from Highway Insurance Company Limited which writes a proportion of its general insurance business in
Ireland. These Irish net earned premiums totalled £3.9m in 2012 (2011: £10.1m).