98 LV= Annual Report 2012
Notes to the Financial Statements continued
31 December 2012
25. Long-term insurance and investment contract liabilities valuation assumptions (continued)
Persistency - lapses, surrenders and paid up rates
A review of persistency is carried out annually. Assumptions are adjusted where necessary to reflect more recent experience as evidenced in the
persistency trend analysis or to reflect expected future trends as a result of anticipated future events.
Options and guarantees
The provisions held in respect of guaranteed annuity options are determined on a market consistent basis. The total amount provided in respect
of the future costs of the guaranteed annuity options was £92.3m (2011: £86.6m).
Bonuses
The cost of bonuses incurred during the year ended 31 December 2012 was £15.9m (2011: £21.0m) of which £0.7m (2011: £0.8m) was
included in the long-term insurance contract liabilities and £15.2m (2011: £20.2m) was included in gross benefits and claims paid in the
Statement of Comprehensive Income.
ii) Non participating business
Interest rate 2012 2011
Non-profits assurances 1.68% 1.44%
Non-profits general deferred annuities 1.68% 1.44%
Annuities in Payment (post 31/12/91) 1.68% 1.44%
Annuities in Payment (other) 2.10% 1.80%
Pension Deferred Annuities 2.10% 1.80%
Mortality rate tables 2012 2011
Non-profits assurances 72.0% AM/F00 ult 115% AM/F92 ult
Non-profits general deferred annuities 42.5% AM/F00 ult 85% AM/F92 ult
Annuities in Payment (Male) 61.2% as 2011 basis up to 2007, 61.2% IML00 with improvements of
then CMI_2009, with 120% medium cohort over 2000 to 2004
a long-term improvement and future improvements 120%
rate of 2.0% medium cohort subject to a floor of 1.5%
Annuities in Payment (Female) 72.3% as 2011 basis up to 2007, 72.3% IFL00 with improvements of
then CMI_2009, with a long-term greater of 90% of medium cohort and
improvement rate of 1.5% CMIR17 over 2000 to 2004 and future
improvements of greater of 90%
medium cohort and CMIR17
subject to a floor of 1.5%
Pension Deferred Annuities 42.5% AM/F00 ult 85% AM/F92 ult
Appropriate adjustments were made to the standard mortality tables to take account of actual experience and publicly available market data.
The provision for linked and unitised with-profits contracts is equal to the value of the units. A non-unit liability consisting mainly of a sterling
reserve calculated by carrying out cash flow projections on appropriate bases is included within the liability.
Options and guarantees
There are no significant options or guarantees in the non participating business.
iii) Linked fund
The provision for unit linked assurances is equal to the value of the assets to which the contracts are linked. There are two products included
within the linked fund, one is classified as an insurance product and the liability is included within the life and pension unit linked insurance
contract liabilities, the other is classified as an investment product and the liability is included within the investment contract liabilities.
Interest rate 2012 2011
Unit linked assurances 1.68% 1.44%
Mortality rate tables 2012 2011
Unit linked assurances 72% AM/F00 ult 115% AM/F92 ult