Our Accounts 97
Notes to the Financial Statements continued
31 December 2012
25. Long-term insurance and investment contract liabilities valuation assumptions (continued)
ii) Non participating insurance contracts
Interest rate 2012 2011
Non-profit temporary assurances 1.76% 1.88%
Other assurances 1.76% 1.88%
Mortality rate tables 2012 2011
Non-profit temporary assurances TMN00/TMS00 TFN00/TFS00 TMN00/TMS00 TFN00/TFS00
Other assurances AM92/AF92 AM92/AF92
Appropriate adjustments were made to the standard mortality tables to take account of actual experience.
Per policy expenses – regular premiums 2012 2011
Non-profit temporary assurances £27.17 £19.92
Other assurances £27.17 £35.79
Options and guarantees
There are no significant options and guarantees in the non-participating business.
c) RNPFN fund
RNPFN denotes Royal National Pension Fund for Nurses, which is a ring-fenced fund. The free assets attributable to this fund are
reported as insurance contract liabilities of the Society.
i) Participating business
For participating business, a market-consistent valuation is used to calculate the liability. This involves placing a value on liabilities similar to
the market value of assets with similar cash flow patterns. The key assumptions used in this valuation are set out in the tables below.
Statements and Reviews
Interest Rates
The risk-free interest rates assumed are:
Year 2012 2011
5 0.91% 1.14%
15 2.60% 2.81%
25 3.39% 3.37%
35 3.62% 3.48%
Other assumptions
Our Businesses
Best estimate assumptions are set for inflation, mortality, expenses and persistency. The future expense inflation assumption is
modelled as RPI plus 0.5% (2011: RPI plus 0.7%), where RPI in both 2012 and 2011 is modelled stochastically.
Asset mix for assets backing asset shares at the
valuation date: 2012 2011
Cash 16.32% 14.03%
Fixed interest 57.59% 57.86%
Risk Management
Equities 23.47% 25.40%
Property 2.62% 2.71%
Mortality rate tables 2012 2011
Conventional Life Business 60% AM/F00 ult 100% AM/F92 ult
Life Deferred Annuities 50% AM/F00 ult 100% AM/F92 ult
Pension Deferred Annuities 50% AM/F00 ult 100% AM/F92 ult
Unitised with-profits Business 60% AM/F00 ult 100% A67/70 ult
Corporate Governance
Per policy expenses – regular premiums 2012 2011
Conventional Life Business £34.84 £32.53
Pensions Deferred Annuities £45.34 £42.06
Life Deferred Annuities £34.84 £32.51
Unitised with-profits ISA £49.30 £43.06
Unitised with-profits Bond £41.18 £38.14
Our Accounts