27. Insurance liabilities
| Group | ||
| 2006 £m |
2005 £m |
|
| Life assurance business: | ||
| Unit linked insurance contracts | 379 | 325 |
| Other linked insurance contracts | 1,334 | 1,315 |
| Other insurance contracts | 496 | 659 |
| General insurance business | 5,247 | 4,913 |
| 7,456 | 7,212 | |
General insurance business
(i) Claims and loss adjustment expenses
| Group | |||
| Gross £m |
Reinsurance £m |
Net £m |
|
| Notified claims | 3,137 | (296) | 2,841 |
| Incurred but not reported | 1,367 | (131) | 1,236 |
| At 1 January 2005 | 4,504 | (427) | 4,077 |
| Cash paid for claims settled in the year | (3,474) | 147 | (3,327) |
| Increase/(decrease) in liabilities | |||
| – arising from current year claims | 4,220 | (96) | 4,124 |
| – arising from prior year claims | (344) | 29 | (315) |
| Net exchange differences | 7 | (1) | 6 |
| At 31 December 2005 | 4,913 | (348) | 4,565 |
| Notified claims | 3,465 | (208) | 3,257 |
| Incurred but not reported | 1,448 | (140) | 1,308 |
| At 1 January 2006 | 4,913 | (348) | 4,565 |
| Cash paid for claims settled in the year | (3,687) | 106 | (3,581) |
| Increase/(decrease) in liabilities | |||
| – arising from current year claims | 4,267 | (53) | 4,214 |
| – arising from prior year claims | (242) | 4 | (238) |
| Net exchange differences | (4) | — | (4) |
| At 31 December 2006 | 5,247 | (291) | 4,956 |
| Notified claims | 3,735 | (205) | 3,530 |
| Incurred but not reported | 1,512 | (86) | 1,426 |
| At 31 December 2006 | 5,247 | (291) | 4,956 |
(ii) Provisions for unearned premiums and unexpired short-term insurance risks
| Group | |||
| Unearned premium provision | Gross £m |
Reinsurance £m |
Net £m |
| At 1 January 2005 | 2,895 | (98) | 2,797 |
| Release in the year | (12) | 71 | 59 |
| At 1 January 2006 | 2,883 | (27) | 2,856 |
| Increase in the year | — | (16) | (16) |
| Release in the year | (33) | — | (33) |
| At 31 December 2006 | 2,850 | (43) | 2,807 |
| Group | ||
| Gross performance of life business (life contracts) | 2006 £m |
2005 £m |
| Profit from existing business: | ||
| Expected return | 26 | 30 |
| Experience variances | (3) | (2) |
| 23 | 28 | |
| New business contribution (2) | 12 | (4) |
| Operating assumption changes | 5 | 1 |
| Investment return variances | 1 | 7 |
| Economic assumption changes | (1) | 1 |
| Other | 17 | 19 |
| Total movement in the year | 57 | 52 |
| Group | ||
| Movement in provision for liabilities under life contracts and under linked and other investment contracts | Life contracts £m |
Investment contracts £m |
| At 1 January 2005 | 2,041 | 2,102 |
| Implementation of IAS 32, IAS 39 and IFRS 4 on 1 January 2005 | 47 | — |
| Premiums received | 429 | 86 |
| Fees and expenses | (11) | (21) |
| Investment return | 252 | 333 |
| Actuarial adjustments | (91) | — |
| Account balances paid on surrender and other terminations in the year | (368) | (204) |
| At 1 January 2006 | 2,299 | 2,296 |
| Premiums received | 588 | 83 |
| Fees and expenses | (30) | (19) |
| Investment return | 235 | 182 |
| Actuarial adjustments | (454) | — |
| Account balances paid on surrender and other terminations in the year | (429) | (296) |
| At 31 December 2006 | 2,209 | 2,246 |
Changes in assumptions during the year were not material to the profit recognised.
| Group | ||
| Assets backing linked liabilities | 2006 £m |
2005 £m |
| Debt securities | 1,540 | 1,514 |
| Equity securities | 2,243 | 2,255 |
| Other investments | 3 | 8 |
| Cash and cash equivalents | 73 | 52 |
| The associated liabilities are: | ||
| Linked contracts classified as insurance contracts | 1,713 | 1,640 |
| Linked contracts classified as investment contracts (within customer deposits) | 2,146 | 2,189 |
There are no options and guarantees relating to life assurance contracts that could in aggregate have a material effect on the amount, timing and uncertainty of the Group’s future cash flows.
© 2007