RBS 2010 Annual Report Download - page 347

Outstanding claims provisions are not discounted for the time value of
money except for claims, principally motor, settled by periodical
payments under the Courts Act 2003. Total reserves for claims
outstanding in respect of periodical payments are £1,180.0 million (2009 -
£91.6 million; 2008 - £29.0 million) gross and £826.6 million (2009 - £26.1
million; 2008 - £3.6 million) net of reinsurance. The corresponding
undiscounted amounts are £4,320.9 million (2009 - £275.7 million; 2008 -
£85.0 million) gross and £2,659.6 million (2009 - £61.8 million; 2008 -
£12.1 million) net of reinsurance. The amounts for 2010 include a
provision for estimated periodical payment orders incurred but not
reported which is excluded from 2009 and 2008. The rate of interest used
for the calculation of present values is 4.5% (2009 - 4.1%; 2008 - 5.0%).
The average interval between the date of the last future cash flow being
discounted and the end of the financial year is 49.4 years on open and
settled cases.
(ii) Provisions for unearned premiums and unexpired short-term insurance risks.
Group
Gross Reinsurance Net
£m £m £m
At 1 January 2009 2,711 (79) 2,632
Movement in the year (211) 12 (199)
Exchange differences (10) — (10)
At 1 January 2010 2,490 (67) 2,423
Increase in the year 2,191 (76) 2,115
Release in the year (2,393) 71 (2,322)
At 31 December 2010 2,288 (72) 2,216
The unearned premium provision is included within Accruals, deferred income and other liabilities (see Note 24).
Life business
Group
Gross performance of life business (life contracts) 2010
£m
2009
£m
2008
£m
Opening net assets 554 588 604
Profit from existing business
- expected return 37 35 41
- experience variances 6(38) (15)
43 (3) 26
New business contribution (1) 18 31 14
Operating assumption changes —10 2
Investment return variances (12) 32 (46)
Economic assumption changes 2(4) (2)
Transfer to shareholders' funds (71) (106) —
Disposal of subsidiaries (402) — —
Other (1) 6 (10)
Closing net assets 131 554 588
Note:
(1) New business contribution represents the present value of future profits on new insurance contract business written during the year.
345RBS Group 2010
Financial statements