NATIONAL PROVIDENT LIFE LIMITED
Annual PRA Insurance Returns for the year ended
31 December 2014
IPRU(INS) Appendices 9.1, 9.3, 9.4, 9.4A, 9.6
Contents
Balance Sheet and Profit and Loss Account
Form 2 Statement of solvency - long-term insurance business 1
Form 3 Components of capital resources 2
Form 13 Analysis of admissible assets 5
Form 14 Long term insurance business liabilities and margins 11
Form 15 Liabilities (other than long term insurance business) 12
Form 16 Profit and loss account (non-technical account) 13
Form 17 Analysis of derivative contracts 14
Form 18 With-profits insurance capital component for the fund 16
Form 19 Realistic balance sheet 17
Long Term Insurance Business: Revenue Account and Additional Information
Form 40 Revenue account 19
Form 41 Analysis of premiums 20
Form 42 Analysis of claims 21
Form 43 Analysis of expenses 22
Form 44 Linked funds balance sheet 23
Form 46 Summary of new business 24
Form 47 Analysis of new business 25
Form 48 Assets not held to match linked liabilities 27
Form 49 Fixed and variable interest assets 28
Form 50 Summary of mathematical reserves 29
Form 51
Valuation summary of non-linked contracts (other than
accumulating with-profits contracts)
30
Form 52 Valuation summary of accumulating with-profits contracts 33
Form 53 Valuation summary of property linked contracts 37
Form 54 Valuation summary of index linked contracts 41
Form 57 Analysis of valuation interest rate 45
Form 58 Distribution of surplus 46
Form 59A/B With-profits payouts on maturity / surrender 47
Form 60 Long-term insurance capital requirement 49
Supplementary notes to the return
50
Additional information on derivative contracts
61
Additional information on controllers
63
Abstract of the Valuation Report
65
Abstract of the Realistic Report
83
Statement of information on the with-profits actuary
102
Directors' Certificate
103
Auditor's Report
104
Form 2
Statement of solvency - long-term insurance business
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Solo solvency calculation Company GL/
registration UK/ day month year Units
number CM
R2 3641947 GL
31 12 2014
£000
As at end of As at end of
this financial the previous
year year
1 2
Capital resources
Capital resources arising within the long-term insurance fund
11 37310 7533
12 165866 251561
13 203176 259094
Guarantee fund
Guarantee fund requirement
21 41292 38889
22 151932 205236
Minimum capital requirement (MCR)
Long-term insurance capital requirement
31 123875 116667
Resilience capital requirement
32
Base capital resources requirement
33 2902 3146
Individual minimum capital requirement
34 123875 116667
Capital requirements of regulated related undertakings
35
Minimum capital requirement (34+35)
36 123875 116667
Excess (deficiency) of available capital resources to cover 50% of MCR
37 83017 124760
Excess (deficiency) of available capital resources to cover 75% of MCR
38 52048 95594
Enhanced capital requirement
With-profits insurance capital component
39
Enhanced capital requirement
40 123875 116667
Capital resources requirement (CRR)
Capital resources requirement (greater of 36 and 40)
41 123875 116667
42 79301 142427
Contingent liabilities
51
Capital resources allocated towards long-term insurance business arising
outside the long-term insurance fund
Capital resources available to cover long-term insurance business capital
resources requirement (11+12)
Excess (deficiency) of available capital resources to cover guarantee fund
requirement
Excess (deficiency) of available capital resources to cover long-term
insurance business CRR (13-41)
Quantifiable contingent liabilities in respect of long-term insurance business
as shown in a supplementary note to Form 14
1
Form 3
(Sheet 1)
Components of capital resources
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Company GL/
registration UK/ Units
number CM
R3 GL
31 12 2014
£000
General Long-term Total as at Total as at
insurance insurance the end of the end of
business business this financial the previous
year year
1 2 3 4
Core tier one capital
Permanent share capital
11
10000 10000 10000
Profit and loss account and other reserves
12
229773 229773 289143
13
Positive valuation differences
14
15
16
Core tier one capital (sum of 11 to 16)
19
239773 239773 299143
Tier one waivers
21
Implicit Items
22
Tier one waivers in related undertakings
23
24
Other tier one capital
25
26
27
28
31
239773 239773 299143
32
33
22935 22935 31799
34
35
71884 71884 84250
36
37
94819 94819 116049
39
144954 144954 183094
Deductions from tier one (32 to 36)
Total tier one capital after deductions (31-37)
Total tier one capital before deductions
(19+24+25+26+27+28)
Investments in own shares
Intangible assets
Amounts deducted from technical provisions for discounting
Other negative valuation differences
Deductions in related undertakings
Unpaid share capital / unpaid initial funds and calls for
supplementary contributions
Total tier one waivers as restricted (21+22+23)
Perpetual non-cumulative preference shares as restricted
Perpetual non-cumulative preference shares in related
undertakings
Innovative tier one capital as restricted
Innovative tier one capital in related undertakings
day month year
3641947
Share premium account
Fund for future appropriations
Core tier one capital in related undertakings
2
Form 3
(Sheet 2)
Components of capital resources
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Company GL/
registration UK/ Units
number CM
R3 GL
31 12 2014
£000
General Long-term Total as at Total as at
insurance insurance the end of the end of
business business this financial the previous
year year
1 2 3 4
Tier two capital
41
42
43
44
45
46
Upper tier two capital in related undertakings
47
Upper tier two capital (44 to 47)
49
Fixed term preference shares
51
Other tier two instruments
52
58367 58367 76000
Lower tier two capital in related undertakings
53
Lower tier two capital (51+52+53)
59
58367 58367 76000
61
58367 58367 76000
Excess tier two capital
62
63
69
58367 58367 76000
Tier two waivers, innovative tier one capital and perpetual non-
cumulative preference shares treated as tier two capital (41 to
43)
Perpetual cumulative preference shares
Perpetual subordinated debt and securities
Total tier two capital before restrictions (49+59)
Further excess lower tier two capital
Total tier two capital after restrictions, before deductions
(61-62-63)
day month year
3641947
Implicit items, (tier two waivers and amounts excluded from line
22)
Perpetual non-cumulative preference shares excluded from line
25
Innovative tier one capital excluded from line 27
3
Form 3
(Sheet 3)
Components of capital resources
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Company GL/
registration UK/ Units
number CM
R3 GL
31 12 2014
£000
General Long-term Total as at Total as at
insurance insurance the end of the end of
business business this financial the previous
year year
1 2 3 4
Total capital resources
71
72
203321 203321 259094
73
145 145
74
75
76
77
79
203176 203176 259094
Available capital resources for GENPRU/INSPRU tests
81
193224 193224 244125
82
144954 144954 183094
83
144954 144954 183094
Financial engineering adjustments
91
92
93
94
95
34879 34879 42023
96
34879 34879 42023
Any other charges on future profits
Sum of financial engineering adjustments
(91+92-93+94+95)
Available capital resources for 50% MCR requirement
Available capital resources for 75% MCR requirement
Implicit items
Financial reinsurance - ceded
Financial reinsurance - accepted
Outstanding contingent loans
Assets in excess of market risk and counterparty limits
Deductions for related ancillary services undertakings
Deductions for regulated non-insurance related undertakings
Deductions of ineligible surplus capital
Total capital resources after deductions
(72-73-74-75-76-77)
Available capital resources for guarantee fund requirement
day month year
3641947
Positive adjustments for regulated non-insurance related
undertakings
Total capital resources before deductions
(39+69+71)
Inadmissible assets other than intangibles and own shares
4
Form 13
(Sheet 1)
Analysis of admissible assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Category of assets Total other than long term insurance business assets
Company GL/ Category
registration UK/ day month year Units of
number CM assets
R13 3641947 GL 31 12 2014 £000 1
As at end of this
financial year
As at end of the
previous year
1 2
Land and buildings
11
21
22
23
24
25
26
27
28
29
30
Other financial investments
Equity shares
41
Other shares and other variable yield participations
42
Holdings in collective investment schemes
43
139717 225667
Rights under derivative contracts
44
2 89
45
57450 52628
46
47
2627
48
Participation in investment pools
49
Loans secured by mortgages
50
51
52
Other loans
53
54
55
Other financial investments
56
Deposits with ceding undertakings
57
58
59
Assets held to match linked liabilities
Index linked
Property linked
Variable interest securities
Approved
Other
Loans to public or local authorities and nationalised industries or undertakings
Loans secured by policies of insurance issued by the company
Bank and approved credit & financial
institution deposits
One month or less withdrawal
More than one month withdrawal
Participating interests
Shares
Debts and loans
Fixed interest securities
Approved
Other
Non-insurance dependants
Shares
Debts and loans
Other group undertakings
Shares
Debts and loans
Investments in group undertakings and participating interests
UK insurance dependants
Shares
Debts and loans
Other insurance dependants
Shares
Debts and loans
5
Form 13
(Sheet 2)
Analysis of admissible assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Category of assets Total other than long term insurance business assets
Company GL/ Category
registration UK/ day month year Units of
number CM assets
R13 3641947 GL 31 12 2014 £000 1
As at end of this
financial year
As at end of the
previous year
1 2
60
61
62
63
71
72
73
74
75
76
77
78
1538
79
80
81
145 13
82
83
84
5165 559
85
86
39
87
89
202480 283161
Deferred acquisition costs (general business only)
Other prepayments and accrued income
Deductions from the aggregate value of assets
Grand total of admissible assets after deduction of admissible assets
in excess of market risk and counterparty limits (11 to 86 less 87)
Other assets
Tangible assets
Deposits not subject to time restriction on withdrawal with approved
institutions
Cash in hand
Other assets (particulars to be specified by way of supplementary note)
Accrued interest and rent
Dependants
due in 12 months or less
due in more than 12 months
Other
due in 12 months or less
due in more than 12 months
Direct insurance business
Policyholders
Intermediaries
Salvage and subrogation recoveries
Reinsurance
Accepted
Ceded
Reinsurers' share of technical provisions
Provision for unearned premiums
Claims outstanding
Provision for unexpired risks
Other
Debtors and salvage
6
Form 13
(Sheet 3)
Analysis of admissible assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Category of assets Total other than long term insurance business assets
Company GL/ Category
registration UK/ day month year Units of
number CM assets
R13 3641947 GL 31 12 2014 £000 1
As at end of this
financial year
As at end of the
previous year
1 2
91
202480 283161
92
93
145
94
95
96
97
98
99
100
101
140524 129412
102
343149 412572
103
Total assets determined in accordance with the insurance accounts
rules or international accounting standards as applicable to the firm
for the purpose of its external financial reporting (91 to 101)
Amounts included in line 89 attributable to debts due from related
insurers, other than those under contracts of insurance or reinsurance
Inadmissible assets of regulated related undertakings
Book value of related ancillary services undertakings
Other differences in the valuation of assets (other than for assets
not valued above)
Deferred acquisition costs excluded from line 89
Reinsurers' share of technical provisions excluded from line 89
Other asset adjustments (may be negative)
Reconciliation to asset values determined in accordance
with the insurance accounts rules or international
accounting standards as applicable to the firm for the
purpose of its external financial reporting
Total admissible assets after deduction of admissible assets
in excess of market risk and counterparty limits (as per line 89 above)
Admissible assets in excess of market and counterparty limits
Inadmissible assets directly held
Capital resources requirement deduction of regulated related
undertakings
Ineligible surplus capital and restricted assets in regulated related
insurance undertakings
7
Form 13
(Sheet 1)
Analysis of admissible assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Category of assets Total long term insurance business assets
Company GL/ Category
registration UK/ day month year Units of
number CM assets
R13 3641947 GL 31 12 2014 £000 10
As at end of this
financial year
As at end of the
previous year
1 2
Land and buildings
11
64285 71413
21
22
23
24
25
26
27
28
29
30
Other financial investments
Equity shares
41
789 987
Other shares and other variable yield participations
42
Holdings in collective investment schemes
43
488214 445161
Rights under derivative contracts
44
17056 40961
45
1962307 1770731
46
511589 469579
47
877 22760
48
38214 56267
Participation in investment pools
49
Loans secured by mortgages
50
656 59
51
52
175 200
Other loans
53
54
55
Other financial investments
56
Deposits with ceding undertakings
57
58
661 718
59
1735 1968
Assets held to match linked liabilities
Index linked
Property linked
Variable interest securities
Approved
Other
Loans to public or local authorities and nationalised industries or undertakings
Loans secured by policies of insurance issued by the company
Bank and approved credit & financial
institution deposits
One month or less withdrawal
More than one month withdrawal
Participating interests
Shares
Debts and loans
Fixed interest securities
Approved
Other
Non-insurance dependants
Shares
Debts and loans
Other group undertakings
Shares
Debts and loans
Investments in group undertakings and participating interests
UK insurance dependants
Shares
Debts and loans
Other insurance dependants
Shares
Debts and loans
8
Form 13
(Sheet 2)
Analysis of admissible assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Category of assets Total long term insurance business assets
Company GL/ Category
registration UK/ day month year Units of
number CM assets
R13 3641947 GL 31 12 2014 £000 10
As at end of this
financial year
As at end of the
previous year
1 2
60
61
62
63
71
72
73
74
75
76
77
78
30861 31818
79
80
81
60675 65512
82
83
84
27205 28009
85
86
63 126
87
89
3205362 3006270
Deferred acquisition costs (general business only)
Other prepayments and accrued income
Deductions from the aggregate value of assets
Grand total of admissible assets after deduction of admissible assets
in excess of market risk and counterparty limits (11 to 86 less 87)
Other assets
Tangible assets
Deposits not subject to time restriction on withdrawal with approved
institutions
Cash in hand
Other assets (particulars to be specified by way of supplementary note)
Accrued interest and rent
Dependants
due in 12 months or less
due in more than 12 months
Other
due in 12 months or less
due in more than 12 months
Direct insurance business
Policyholders
Intermediaries
Salvage and subrogation recoveries
Reinsurance
Accepted
Ceded
Reinsurers' share of technical provisions
Provision for unearned premiums
Claims outstanding
Provision for unexpired risks
Other
Debtors and salvage
9
Form 13
(Sheet 3)
Analysis of admissible assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Category of assets Total long term insurance business assets
Company GL/ Category
registration UK/ day month year Units of
number CM assets
R13 3641947 GL 31 12 2014 £000 10
As at end of this
financial year
As at end of the
previous year
1 2
91
3205362 3006270
92
93
22935 31799
94
95
96
97
98
99
100
1916699 1894543
101
(140524) (130618)
102
5004471 4801995
103
Total assets determined in accordance with the insurance accounts
rules or international accounting standards as applicable to the firm
for the purpose of its external financial reporting (91 to 101)
Amounts included in line 89 attributable to debts due from related
insurers, other than those under contracts of insurance or reinsurance
Inadmissible assets of regulated related undertakings
Book value of related ancillary services undertakings
Other differences in the valuation of assets (other than for assets
not valued above)
Deferred acquisition costs excluded from line 89
Reinsurers' share of technical provisions excluded from line 89
Other asset adjustments (may be negative)
Reconciliation to asset values determined in accordance
with the insurance accounts rules or international
accounting standards as applicable to the firm for the
purpose of its external financial reporting
Total admissible assets after deduction of admissible assets
in excess of market risk and counterparty limits (as per line 89 above)
Admissible assets in excess of market and counterparty limits
Inadmissible assets directly held
Capital resources requirement deduction of regulated related
undertakings
Ineligible surplus capital and restricted assets in regulated related
insurance undertakings
10
Form 14
Long term insurance business liabilities and margins
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Total business/Sub fund Long Term Insurance Business
Units £000
As at end of As at end of
this financial the previous
year year
1 2
Mathematical reserves, after distribution of surplus
11
3025135 2837140
12
Balance of surplus/(valuation deficit)
13
37310 7533
Long term insurance business fund carried forward (11 to 13)
14
3062445 2844673
Gross
15
13547 11596
Reinsurers' share
16
Net (15-16)
17
13547 11596
Taxation
21
Other risks and charges
22
1113 1095
Deposits received from reinsurers
23
Direct insurance business
31
662 171
Reinsurance accepted
32
Reinsurance ceded
33
4873 6371
Secured
34
Unsecured
35
Amounts owed to credit institutions
36
58899 66006
Taxation
37
4792 2133
Other
38
51935 70918
Accruals and deferred income
39
7096 3307
41
Total other insurance and non-insurance liabilities (17 to 41)
49
142917 161597
Excess of the value of net admissible assets
51
Total liabilities and margins
59
3205362 3006270
61
2649 2857
62
1735 1968
71
3168052 2998737
Increase to liabilities - DAC related
72
Reinsurers' share of technical provisions
73
1916699 1894543
Other adjustments to liabilities (may be negative)
74
(80280) (91286)
Capital and reserves and fund for future appropriations
75
76
5004471 4801995
Provision for "reasonably foreseeable adverse variations"
Amounts included in line 59 attributable to liabilities to related companies,
other than those under contracts of insurance or reinsurance
Amounts included in line 59 attributable to liabilities in respect of property
linked benefits
Total liabilities (11+12+49)
Total liabilities under insurance accounts rules or international accounting
standards as applicable to the firm for the purpose of its external financial
reporting (71 to 75)
Cash bonuses which had not been paid to policyholders prior
to end of the financial year
Claims outstanding
Provisions
Creditors
Debenture loans
Creditors
11
Form 15
Liabilities (other than long term insurance business)
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Company GL/
registration
UK/ day month year Units
number CM
R15 3641947 GL 31 12 2014 £000
As at end of As at end of
this financial the previous
year year
1 2
Technical provisions (gross amount)
Provisions for unearned premiums
11
Claims outstanding
12
Provision for unexpired risks
13
Credit business
14
Other than credit business
15
Other technical provisions
16
Total gross technical provisions (11 to 16)
19
Provisions and creditors
Taxation
21
Other risks and charges
22
Deposits received from reinsurers
31
Direct insurance business
41
Reinsurance accepted
42
Reinsurance ceded
43
Secured
44
Unsecured
45
Amounts owed to credit institutions
46
Taxation
47
220
Foreseeable dividend
48
Other
49
33999 27703
Accruals and deferred income
51
2395 3896
Total (19 to 51)
59
36613 31600
Provision for "reasonably foreseeable adverse variations"
61
Cumulative preference share capital
62
Subordinated loan capital
63
58367 76000
Total (59 to 63)
69
94980 107600
71
58367 76000
Amounts deducted from technical provisions for discounting
82
Other adjustments (may be negative)
83
8396 5829
Capital and reserves
84
239773 299143
85
343149 412572
Total liabilities under insurance accounts rules or international accounting
standards as applicable to the firm for the purpose of its external financial
reporting (69-82+83+84)
Equalisation provisions
Provisions
Creditors
Debenture
loans
Creditors
Amounts included in line 69 attributable to liabilities to related insurers, other
than those under contracts of insurance or reinsurance
12
Form 16
Profit and loss account (non-technical account)
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended
31 December 2014
Company GL/
registration
UK/ day month year Units
number CM
R16 3641947 GL 31 12 2014 £000
This financial Previous
year year
1 2
From Form 20
11
Equalisation provisions
12
13
(1200) 528
14
11437 1607
Investment income 15
3419
16
17
5435 5583
Investment charges
18
4500
19
2781 1577
20
21
(29) (15)
29
5412 (9541)
Tax on profit or loss on ordinary activities
31
3473 (1540)
Profit or loss on ordinary activities after tax (29-31)
39
1939 (8001)
41
Tax on extraordinary profit or loss
42
Other taxes not shown under the preceding items
43
Profit or loss for the financial year (39+41-(42+43))
49
1939 (8001)
Dividends (paid or foreseeable)
51
Profit or loss retained for the financial year (49-51)
59
1939 (8001)
Value re-adjustments on
investments
Loss on the realisation of
investments
Allocated investment return transferred to the general
insurance business technical account
Other income and charges (particulars to be specified
by way of supplementary note)
Profit or loss on ordinary activities before tax
(11+12+13+14+15+16-17-18-19-20+21)
Extraordinary profit or loss (particulars to be specified
by way of supplementary note)
Transfer (to)/from the
general insurance business
technical account
Transfer from the long term insurance business
revenue account
Income
Value re-adjustments on
investments
Gains on the realisation of
investments
Investment management
charges, including interest
13
Form 17
Analysis of derivative contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended
31 December 2014
Category of assets
Total other than long term insurance business assets
Company GL/ Category
registration
UK/ day month year Units of
number CM assets
R17 3641947 GL 31 12 2014 £000 1
Derivative contracts
Assets Liabilities Bought / Long Sold / Short
1 2 3 4
11
Interest rates
12
Inflation
13
Credit index / basket
14
861 93128
Credit single name
15
16
Equity stock
17
Land
18
Currencies
19
2 5 199 216
Mortality
20
Other
21
31
Equity index calls
32
Equity stock calls
33
Equity index puts
34
Equity stock puts
35
Other
36
Swaptions
41
Equity index calls
42
Equity stock calls
43
Equity index puts
44
Equity stock puts
45
Other
46
Total (11 to 46)
51
2 866 93327 216
52
53
2 866
Out of the
money
options
Adjustment for variation margin
Total (51 + 52)
THE NOTIONAL AMOUNTS IN COLUMNS 3 AND 4 ARE NOT A MEASURE OF EXPOSURE.
Please see instructions 11 and 12 to this Form for the meaning of these figures.
Value as at the end
of this financial year
Notional amount as at the end
of this financial year
Futures and
contracts
for
differences
Fixed-interest securities
Equity index
In the money
options
Swaptions
14
Form 17
Analysis of derivative contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended
31 December 2014
Category of assets
Total long term insurance business assets
Company GL/ Category
registration
UK/ day month year Units of
number CM assets
R17 3641947 GL 31 12 2014 £000 10
Derivative contracts
Assets Liabilities Bought / Long Sold / Short
1 2 3 4
11
3 801 1654 41872
Interest rates
12
10272 34480 371840 348400
Inflation
13
1156 405 98623
Credit index / basket
14
Credit single name
15
16
Equity stock
17
Land
18
Currencies
19
102 30 1664 9152
Mortality
20
Other
21
5523 52754
31
Equity index calls
32
Equity stock calls
33
Equity index puts
34
Equity stock puts
35
Other
36
Swaptions
41
Equity index calls
42
Equity stock calls
43
Equity index puts
44
Equity stock puts
45
Other
46
Total (11 to 46)
51
17056 35715 427912 498047
52
53
17056 35715
Out of the
money
options
Adjustment for variation margin
Total (51 + 52)
THE NOTIONAL AMOUNTS IN COLUMNS 3 AND 4 ARE NOT A MEASURE OF EXPOSURE.
Please see instructions 11 and 12 to this Form for the meaning of these figures.
Value as at the end
of this financial year
Notional amount as at the end
of this financial year
Futures and
contracts
for
differences
Fixed-interest securities
Equity index
In the money
options
Swaptions
15
Form 18
With-profits insurance capital component for the fund
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
With-profits fund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
As at end of As at end of
this financial year
the previous year
1 2
Regulatory excess capital
11
3205362 3006270
12
13
139209 130417
14
15
19
3066153 2875854
21
2885926 2706723
22
142917 161597
29
3028843 2868320
31
115534 108407
32
39
3144377 2976727
Regulatory excess capital (19-39)
49
(78224) (100874)
Realistic excess capital
51
(3084)
Excess assets allocated to with-profits insurance business
61
(75140) (100874)
62
39000 52000
63
40437 55307
64
65
66
Present value of other future internal transfers not
already taken into account
With-profits insurance capital component for fund (if 62 exceeds
63, greater of 61+62-63-64-65 and zero, else greater of 61-64-65 and
zero)
Sum of regulatory value of liabilities, LTICR and RCR
(29+31+32)
Realistic excess capital
Excess (deficiency) of assets allocated to with-profits insurance
business in fund (49-51)
Face amount of capital instruments attributed to the fund and
included in capital resources (unstressed)
Realistic amount of capital instruments attributed to the fund and
included in capital resources (stressed)
Present value of future shareholder transfers arising
from distribution of surplus
Regulatory value
of liabilities
Mathematical reserves (after distribution of
surplus) in respect of the fund's with-profits
insurance contracts
Regulatory current liabilities of the fund
Total (21+22)
Long-term insurance capital requirement in respect of the fund's
with-profits insurance contracts
Resilience capital requirement in respect of the fund's
with-profits insurance contracts
Regulatory value
of assets
Long-term admissible assets of the fund
Implicit items allocated to the fund
Mathematical reserves in respect of the fund's
non-profit insurance contracts
Long-term admissible assets of the fund
covering the LTICR of the fund's non-profit
insurance contracts
Long-term admissible assets of the fund
covering the RCR of the fund's non-profit
insurance contracts
Total (11+12-(13+14+15))
16
Form 19
Realistic balance sheet (Sheet 1)
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
With-profits fund Long Term Insurance Business
Financial year ended 31 December 2014
Units
£000
As at end of As at end of
this financial year
the previous year
1 2
Realistic value of assets available to the fund
11
3066152 2875854
12
13
21
22
77709 73126
23
24
25
26
3143861 2948980
27
29
3143861 2948980
Realistic value of liabilities of fund
31
1648577 1695400
32
33
34
35
(2261) (1673)
36
77220 93283
41
1162007 919152
42
1338 1547
43
5627 4132
44
45
127227 125102
46
47
138103 135903
49
1359345 1094225
Realistic current liabilities of the fund
51
135939 159355
59
3143861 2948980
Financing costs
Any other liabilities related to regulatory duty to treat
customers fairly
Other long-term insurance liabilities
Total (32+34+41+42+43+44+45+46+47-(33+35+36))
Realistic value of liabilities of fund (31+49+51)
Future policy
related liabilities
Past miscellaneous surplus attributed to with-profits
benefits reserve
Past miscellaneous deficit attributed to with-profits
benefits reserve
Planned enhancements to with-profits benefits
reserve
Planned deductions for the costs of guarantees, options
and smoothing from with-profits benefits reserve
Planned deductions for other costs deemed chargeable
to with-profits benefits reserve
Future costs of contractual guarantees (other than
financial options)
Future costs of non-contractual commitments
Future costs of financial options
Future costs of smoothing (possibly negative)
Value of shares in subsidiaries held in fund (realistic)
Prepayments made from the fund
Realistic value of assets of fund (11+21+22+23+24+25-(12+13))
Support arrangement assets
Assets available to the fund (26+27)
With-profits benefit reserve
Regulatory value of assets
Implicit items allocated to the fund
Value of shares in subsidiaries held in fund (regulatory)
Excess admissible assets
Present value of future profits (or losses) on non-profit insurance contracts written
in the fund
Value of derivatives and quasi-derivatives not already reflected in lines
11 to 22
17
Form 19
(Sheet 2)
Realistic balance sheet
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
With-profits fund
Long Term Insurance Business
Financial year ended
31 December 2014
Units £000
As at end of As at end of
this financial year
the previous year
1 2
Realistic excess capital and additional capital available
62
3146945 2948980
63
64
3146945 2948980
65
3084
66
(3084)
67
(3084)
68
69
Other assets potentially available if required to cover the fund's risk capital margin
81
79301 142427
82
Working capital for fund (29-59)
Working capital ratio for fund (68/29)
Additional amount potentially available for inclusion in line 62
Additional amount potentially available for inclusion in line 63
Value of relevant assets before applying the most adverse scenario
other than the present value of future profits arising from business
outside with-profits funds
Amount of present value of future profits (or losses) on long-term
insurance contracts written outside the fund included in the value
of relevant assets before applying most adverse scenario
Value of relevant assets before applying the most adverse scenario
(62+63)
Risk capital margin for fund (62-59)
Realistic excess capital for fund (26-(59+65))
Realistic excess available capital for fund (29-(59+65))
18
Form 40
Long-term insurance business : Revenue account
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund Long Term Insurance Business
Financial year ended 31 December 2014
Units £000
Financial year Previous year
1 2
Income
Earned premiums
11
(23191) (39728)
12
81554 82172
13
293715 (167863)
14
221 (511)
Other income
15
16941 19405
Total income 19
369240 (106525)
Expenditure
Claims incurred
21
109297 118322
22
24164 27192
23
16316 9324
24
2891 124
Other expenditure
25
Transfer to (from) non technical account
26
(1200) 528
Total expenditure 29
151468 155490
Business transfers - in
31
31058 49545
Business transfers - out
32
31058 54622
Increase (decrease) in fund in financial year (19-29+31-32)
39
217772 (267092)
Fund brought forward
49
2844673 3111765
Fund carried forward (39+49)
59
3062445 2844673
Investment income receivable before deduction of tax
Increase (decrease) in the value of non-linked assets brought
into account
Increase (decrease) in the value of linked assets
Expenses payable
Interest payable before the deduction of tax
Taxation
19
Form 41
Long-term insurance business : Analysis of premiums
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund Long Term Insurance Business
Financial year ended 31 December 2014
Units £000
UK Life UK Pension Overseas
Total Financial
year
Total Previous
year
1 2 3 4 5
Gross
Regular premiums
11
370 14981 15351 17166
Single premiums
12
71 43 114 1171
Reinsurance - external
Regular premiums
13
7 7 8
Single premiums
14
(770)
Reinsurance - intra-group
Regular premiums
15
4 7660 7664 8734
Single premiums
16
71 30913 30984 50093
Net of reinsurance
Regular premiums
17
359 7321 7680 8424
Single premiums
18
(0) (30870) (30870) (48152)
Total
Gross
19
441 15023 15465 18337
Reinsurance
20
82 38573 38655 58066
Net
21
359 (23549) (23191) (39728)
20
Form 42
Long-term insurance business : Analysis of claims
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund Long Term Insurance Business
Financial year ended 31 December 2014
Units £000
UK Life UK Pension Overseas
Total Financial
year
Total Previous
year
1 2 3 4 5
Gross
Death or disability lump sums 11 9584 10806 20390 21148
Disability periodic payments 12 4 4 3
Surrender or partial surrender 13 18506 153478 171984 204085
Annuity payments 14 1330 9178 10508 52450
Lump sums on maturity 15 3117 22290 25407 27336
Total 16 32540 195752 228293 305022
Reinsurance - external
Death or disability lump sums 21 2 42 43 3
Disability periodic payments 22 1 1
Surrender or partial surrender 23 5 5
Annuity payments 24 41852
Lump sums on maturity 25
Total 26 7 42 49 41855
Reinsurance - intra-group
Death or disability lump sums 31 2875 4080 6955 7267
Disability periodic payments 32
Surrender or partial surrender 33 4077 84209 88285 109897
Annuity payments 34 1171 9168 10339 10967
Lump sums on maturity 35 3 13364 13367 16713
Total 36 8125 110821 118947 144844
Net of reinsurance
Death or disability lump sums 41 6708 6684 13392 13877
Disability periodic payments 42 3 3 3
Surrender or partial surrender 43 14424 69269 83693 94188
Annuity payments 44 159 10 169 (370)
Lump sums on maturity 45 3114 8926 12040 10623
Total 46 24407 84889 109297 118322
21
Form 43
Long-term insurance business : Analysis of expenses
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund Long Term Insurance Business
Financial year ended 31 December 2014
Units £000
UK Life UK Pension Overseas
Total Financial
year
Total Previous
year
1 2 3 4 5
Gross
Commission - acquisition 11
Commission - other 12 66 231 297 370
Management - acquisition 13
Management - maintenance 14 5299 18429 23727 26822
Management - other 15 31 109 140
Total 16 5396 18768 24164 27192
Reinsurance - external
Commission - acquisition 21
Commission - other 22
Management - acquisition 23
Management - maintenance 24
Management - other 25
Total 26
Reinsurance - intra-group
Commission - acquisition 31
Commission - other 32
Management - acquisition 33
Management - maintenance 34
Management - other 35
Total 36
Net of reinsurance
Commission - acquisition 41
Commission - other 42 66 231 297 370
Management - acquisition 43
Management - maintenance 44 5299 18429 23727 26822
Management - other 45 31 109 140
Total 46 5396 18768 24164 27192
22
Form 44
Long-term insurance business : Linked funds balance sheet
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business
Financial year ended 31 December 2014
Units £000
Financial year Previous year
1 2
Internal linked funds (excluding cross investment)
11
12
13
14
Provision for tax on unrealised capital gains 15
Secured and unsecured loans 16
Other liabilities 17
Total net assets (14-15-16-17) 18
Directly held linked assets
Value of directly held linked assets 21 1735 1968
Total
31
1735 1968
Surplus units 32
Deficit units 33
Net unit liability (31-32+33) 34 1735 1968
Directly held assets (excluding collective investment
schemes)
Directly held assets in collective investment schemes of
connected companies
Directly held assets in other collective investment
schemes
Total assets (excluding cross investment) (11+12+ 13)
Value of directly held linked assets and units held (18+21)
23
Form 46
Long-term insurance business : Summary of new business
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business
Financial year ended 31 December 2014
Units £000
UK Life UK Pension Overseas
Total Financial
year
Total Previous
year
1 2 3 4 5
Regular premium business 11
Single premium business 12
Total 13
Amount of new regular
premiums
Direct insurance business 21
External reinsurance 22
Intra-group reinsurance 23
Total 24
Amount of new single
premiums
Direct insurance business 25 71 43 114 1171
External reinsurance 26
Intra-group reinsurance 27
Total 28 71 43 114 1171
Number of new policyholders/
scheme members for direct
insurance business
24
Form 47
Long-term insurance business : Analysis of new business
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business
Financial year ended
31 December 2014
Units
£000
UK Life / Direct Insurance Business
Number of
policyholders /
scheme members
Amount of premiums
Number of
policyholders /
scheme members
Amount of premiums
1 2 3 4 5 6
700
Life property linked single premium
71
25
Product
code
number
Product description
Regular premium business
Single premium business
Form 47
Long-term insurance business : Analysis of new business
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business
Financial year ended
31 December 2014
Units
£000
UK Pension / Direct Insurance Business
Number of
policyholders /
scheme members
Amount of premiums
Number of
policyholders /
scheme members
Amount of premiums
1 2 3 4 5 6
530
Individual pensions UWP - increments
33
540
Group money purchase pensions UWP - increments
7
730
Individual pensions property linked - increments
3
26
Product
code
number
Product description
Regular premium business
Single premium business
Form 48
Long-term insurance business : Assets not held to match linked liabilities
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Category of assets 10 Total long term insurance business assets
Financial year ended 31 December 2014
Units £000
Unadjusted
assets
Economic
exposure
Expected
income from
assets in
column 2
Yield before
adjustment
Return on
assets in
financial year
1 2 3 4 5
Land and buildings 11
Approved fixed interest securities 12 131774 131774 4600 2.03
Other fixed interest securities 13 106 106 9 2.27
Variable interest securities 14 854 854 6 0.50
UK listed equity shares 15
Non-UK listed equity shares 16
Unlisted equity shares 17
Other assets 18 4080 4080 33 0.82
Total 19 136814 136814 4650 1.99
Land and buildings 21 64285 4624 288 6.22 5.92
Approved fixed interest securities 22 1849395 1832608 64664 1.86 14.21
Other fixed interest securities 23 519037 539339 21768 3.34 4.20
Variable interest securities 24 38742 14695 519 3.15 4.20
UK listed equity shares 25 475 39485 1370 2.98 6.33
Non-UK listed equity shares 26
Unlisted equity shares 27 315
Other assets 28 593904 635402 3438 0.54 7.07
Total 29 3066153 3066153 92047 1.87 10.81
Overall return on with-profits assets
Post investment costs but pre-tax 31 5.33
Return allocated to non taxable 'asset shares'
32 3.48
Return allocated to taxable 'asset shares' 33 2.42
Assets backing non-profit liabilities
and non-profit capital requirements
Assets backing with-profits liabilities
and with-profits capital requirements
27
Form 49
Long-term insurance business : Fixed and variable interest assets
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Category of assets 10 Total long term insurance business assets
Financial year ended 31 December 2014
Units £000
Value of assets Mean term
Yield before
adjustment
Yield after
adjustment
1 2 3 4
11 1347917 9.32 1.62 1.62
Other approved fixed interest
securities
21 616466 11.93 2.42 2.38
Other fixed interest securities
AAA/Aaa 31 115288 8.98 2.77 2.68
AA/Aa 32 53707 11.34 2.99 2.65
A/A 33 257190 11.57 3.43 2.93
BBB/Baa 34 109059 11.54 3.91 3.02
BB/Ba 35 108 0.46 2.27 2.07
B/B 36 4094 8.22 3.08 0.19
CCC/Caa 37
Other (including unrated) 38
Total other fixed interest
securities
39 539444 10.96 3.34 2.85
Approved variable interest
securities
41 938 1.50 0.50 0.49
Other variable interest securities 51 14610 12.80 3.16 2.55
Total (11+21+39+41+51) 61 2519376 10.32 2.19 2.07
UK Government approved fixed
interest securities
28
Form 50
Long-term insurance business : Summary of mathematical reserves
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life UK Pension Overseas
Total Financial
year
Total Previous
year
1 2 3 4 5
Gross
Form 51 - with-profits 11 17196 422351 439547 390764
Form 51 - non-profit 12 17289 245389 262679 211048
Form 52 13 161694 2308595 2470289 2327804
Form 53 - linked 14 74414 1638695 1713109 1748536
Form 53 - non-linked 15 962 47977 48939 46917
Form 54 - linked 16 435 3065 3500 3035
Form 54 - non-linked 17 17 212 229 182
Total 18 272006 4666285 4938291 4728286
Reinsurance - external
Form 51 - with-profits 21
Form 51 - non-profit 22
Form 52 23
Form 53 - linked 24
Form 53 - non-linked 25
Form 54 - linked 26
Form 54 - non-linked 27
Total 28
Reinsurance - intra-group
Form 51 - with-profits 31
Form 51 - non-profit 32 172402 172402 128081
Form 52 33 9431 17857 27288 15242
Form 53 - linked 34 72680 1638695 1711374 1746568
Form 53 - non-linked 35 4 2398 2402 2152
Form 54 - linked 36 (17) 2856 2839 2317
Form 54 - non-linked 37 17 212 229 182
Total 38 82114 1834420 1916534 1894543
Net of reinsurance
Form 51 - with-profits 41 17196 422351 439547 390764
Form 51 - non-profit 42 17289 72988 90277 82966
Form 52 43 152263 2290738 2443001 2312561
Form 53 - linked 44 1735 1735 1968
Form 53 - non-linked 45 958 45579 46537 44764
Form 54 - linked 46 452 209 661 718
Form 54 - non-linked 47
Total 48 189892 2831865 3021758 2833742
29
Form 51
Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts)
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
100
Conventional whole life with-profits OB 734 12368 68 11697
120
Conventional endowment with-profits OB savings 522 4969 106 4650
165
Conventional deferred annuity with-profits 10 4 66
205
Miscellaneous conventional with-profits 3 30 3
210
Additional reserves with-profits OB 779
390
Deferred annuity non-profit 12 8 97
395
Annuity non-profit (PLA) 1115 1375 9797
435
Miscellaneous non-profit 1999 27007 153 7395
30
Form 51
Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts)
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
155
Conventional pensions endowment with-profits 6352 132397 324 416613
165
Conventional deferred annuity with-profits 11 7 118
205
Miscellaneous conventional with-profits 29 5620
390
Deferred annuity non-profit 1569 4539 68424
400
Annuity non-profit (CPA) 12039 12060 174874
435
Miscellaneous non-profit 2982 92245 295 2842
440
Additional reserves non-profit OB (750)
31
Form 51
Long-term insurance business : Valuation summary of non-linked contracts (other than accumulating with-profits contracts)
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
400
Annuity non-profit (CPA) 12056 172402
32
Form 52
Long-term insurance business : Valuation summary of accumulating with-profits contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
500
Life UWP single premium 7791 154543 153244 161006 (7328) 153678
610
Additional reserves UWP 8016 8016
33
Form 52
Long-term insurance business : Valuation summary of accumulating with-profits contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
500
Life UWP single premium 10447 10436 4902 4529 9431
34
Form 52
Long-term insurance business : Valuation summary of accumulating with-profits contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
525
Individual pensions UWP 97878 1792615 5873 1792615 2102054 (8322) 2093732
535
Group money purchase pensions UWP 6759 133150 1297 133150 149032 1926 150958
545
Individual deposit administration with-profits 279 2666 2666 2666 2250 4916
555
Group deposit administration with-profits 555 9600 64 9600 9600 7097 16697
570
Income drawdown UWP 14 1835 1835 1555 267 1822
605
Miscellaneous protection rider 1 1861 3 39 39
610
Additional reserves UWP 40432 40432
35
Form 52
Long-term insurance business : Valuation summary of accumulating with-profits contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
525
Individual pensions UWP 15849 15849
535
Group money purchase pensions UWP 2008 2008
570
Income drawdown UWP 0 0
36
Form 53
Long-term insurance business : Valuation summary of property linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
700
Life property linked single premium 4554 69155 68497 68497 921 69417
715
Life property linked endowment regular premium - savings 105 4188 4183 4183 36 4219
790
Miscellaneous protection rider 4 1 1
795
Miscellaneous property linked 57 1735 2 1735 1735 4 1739
37
Form 53
Long-term insurance business : Valuation summary of property linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
700
Life property linked single premium 69155 68497 68497 4 68500
715
Life property linked endowment regular premium - savings 4188 4183 4183 4183
38
Form 53
Long-term insurance business : Valuation summary of property linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
725
Individual pensions property linked 102710 1438628 6767 1438084 1438084 35372 1473456
735
Group money purchase pensions property linked 13576 190075 1920 190075 190075 11181 201256
750
Income drawdown property linked 157 8989 8989 8989 92 9080
790
Miscellaneous protection rider 94 8761 138 572 572
795
Miscellaneous property linked 1547 1547 1547 100 1647
800
Additional reserves property linked 660 660
39
Form 53
Long-term insurance business : Valuation summary of property linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
725
Individual pensions property linked 1438628 6075 1438084 1438084 (680) 1437404
735
Group money purchase pensions property linked 190075 1920 190075 190075 3063 193138
750
Income drawdown property linked 8989 8989 8989 15 9004
795
Miscellaneous property linked 1547 1547 1547 1547
40
Form 54
Long-term insurance business : Valuation summary of index linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
905
Index linked annuity (CPA) 19 78 435 435 17 452
41
Form 54
Long-term insurance business : Valuation summary of index linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Life / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
905
Index linked annuity (CPA) (17) (17) 17
42
Form 54
Long-term insurance business : Valuation summary of index linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Gross
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
905
Index linked annuity (CPA) 133 191 2948 2948 211 3160
910
Miscellaneous index linked 8 9 117 117 1 117
43
Form 54
Long-term insurance business : Valuation summary of index linked contracts
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund
Long Term Insurance Business
Financial year ended
31 December 2014
Units
£000
UK Pension / Reinsurance ceded intra-group
Product
code
number
Product description
Number of
policyholders /
scheme
members
Amount of
benefit
Amount of
annual office
premiums
Nominal value
of units
Discounted
value of units
Other liabilities
Amount of
mathematical
reserves
1 2 3 4 5 6 7 8 9
905
Index linked annuity (CPA) 191 2856 2856 211 3068
910
Miscellaneous index linked (1) (1) 1
44
Form 57
Long-term insurance business: Analysis of valuation interest rate
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business Long Term Insurance Business
Financial year ended 31 December 2014
Units
£000
Net mathematical
reserves
Net valuation
interest rate
Gross valuation
interest rate
Risk adjusted
yield on
matching assets
2 3 4 5
18247 2.00 2.50 2.75
172836 1.79 2.24 2.47
118566 2.50 2.50 2.75
2713089 2.24 2.24 2.47
Total 3022739
Product group
1
UK Life Non Profit
UK Life With Profit
UK Pension Non Profit
UK Pension With Profit
45
Form 58
Long-term insurance business : Distribution of surplus
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Total business / subfund Long Term Insurance Business
Financial year ended 31 December 2014
Units £000
Financial year Previous year
1 2
Valuation result
Fund carried forward 11 3062445 2844673
Bonus payments in anticipation of a surplus 12 825 974
Transfer to non-technical account
13
Transfer to other funds / parts of funds 14
Subtotal (11 to 14) 15 3063270 2845647
Mathematical reserves 21 3021758 2833742
29 41512 11905
Composition of surplus
Balance brought forward 31 7533 100
Transfer from non-technical account 32 1200 (528)
Transfer from other funds / parts of fund 33
Surplus arising since the last valuation 34 32779 12332
Total 39 41512 11905
Distribution of surplus
Bonus paid in anticipation of a surplus 41 825 974
Cash bonuses 42
Reversionary bonuses 43 3377 3397
Other bonuses 44
Premium reductions 45
Total allocated to policyholders (41 to 45) 46 4202 4371
Net transfer out of fund / part of fund 47
Total distributed surplus (46+47) 48 4202 4371
Surplus carried forward 49 37310 7533
Total (48+49) 59 41512 11905
Percentage of distributed surplus allocated to policyholders
Current year 61 100.00 100.00
Current year - 1 62 100.00 100.00
Current year - 2 63 100.00 100.00
Current year - 3 64 100.00 100.00
Surplus including contingency and other reserves held towards
the capital requirements (deficiency) (15-21)
46
Form 59A
Long-term insurance business : With-profits payouts on maturity (normal retirement)
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Original insurer
NATIONAL PROVIDENT LIFE LIMITED
Date of maturity value / open market option
01 March 2015
Category of with-profits policy
Original term
(years)
Maturity value / open market
option
Terminal bonus MVA
CWP /
UWP
MVA
permitted?
Death benefit
1 2 3 4 5 6 7 8
Endowment assurance 10 n/a n/a n/a n/a n/a n/a
Endowment assurance 15 n/a n/a n/a n/a n/a n/a
Endowment assurance 20 n/a n/a n/a n/a n/a n/a
Endowment assurance 25 19128 0 n/a CWP N 19128
Regular premium pension 5 n/a n/a n/a n/a n/a n/a
Regular premium pension 10 n/a n/a n/a n/a n/a n/a
Regular premium pension 15 n/a n/a n/a UWP N n/a
Regular premium pension 20 69988 0 0 UWP N 69988
Single premium pension 5 n/a n/a n/a n/a n/a n/a
Single premium pension 10 n/a n/a n/a n/a n/a n/a
Single premium pension 15 n/a n/a n/a UWP N n/a
Single premium pension 20 17829 2107 0 UWP N 17829
47
Form 59B
Long-term insurance business : With-profits payouts on surrender
Name of insurer
NATIONAL PROVIDENT LIFE LIMITED
Original insurer
NATIONAL PROVIDENT LIFE LIMITED
Date of surrender value
01 March 2015
Category of with-profits policy
Duration at
surrender
(years)
Surrender value Terminal bonus MVA
CWP /
UWP
MVA
permitted?
Death benefit
1 2 3 4 5 6 7 8
Endowment assurance 5 n/a n/a n/a n/a n/a n/a
Endowment assurance 10 n/a n/a n/a n/a n/a n/a
Endowment assurance 15 n/a n/a n/a n/a n/a n/a
Endowment assurance 20 n/a n/a n/a n/a n/a n/a
With-profits bond 2 n/a n/a n/a n/a n/a n/a
With-profits bond 3 n/a n/a n/a n/a n/a n/a
With-profits bond 5 n/a n/a n/a n/a n/a n/a
With-profits bond 10 n/a n/a n/a n/a n/a n/a
Single premium pension 2 n/a n/a n/a n/a n/a n/a
Single premium pension 3 n/a n/a n/a n/a n/a n/a
Single premium pension 5 n/a n/a n/a n/a n/a n/a
Single premium pension 10 n/a n/a n/a n/a n/a n/a
48
Form 60
Long-term insurance capital requirement
Name of insurer NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
Units £000
LTICR
factor
Gross
reserves /
capital at
risk
Net
reserves /
capital at
risk
Reinsurance
factor
LTICR
Financial
year
LTICR
Previous
year
1 2 3 4 5 6
Insurance death risk capital component
Life protection reinsurance
11
0.0%
Classes I (other), II and IX
12
0.1% 0 0 0 0
Classes I (other), II and IX
13
0.15% 2 2 0 0
Classes I (other), II and IX
14
0.3% 124600 123921 372 499
Classes III, VII and VIII
15
0.3% 10750 9611 0.89 29 36
Total 16
135352 133535 401 534
Insurance health risk and life protection reinsurance capital component
Class IV supplementary
classes 1 and 2 and life
protection reinsurance
21
1 1
Insurance expense risk capital component
Life protection and permanent
health reinsurance
31
0%
Classes I (other), II and IX
32
1% 3176439 2973681 0.94 29737 27865
Classes III, VII and VIII
(investment risk)
33
1% 70803 48831 0.85 602 574
Classes III, VII and VIII
(expenses fixed 5 yrs +)
34
1%
Classes III, VII and VIII
(other)
35
25% 2083 2339
Class IV (other)
36
1% 888 888 1.00 9 9
Class V
37
1%
Class VI
38
1%
Total 39
32431 30787
Insurance market risk capital component
Life protection and permanent
health reinsurance
41
0%
Classes I (other), II and IX
42
3% 3176439 2973681 0.94 89210 83596
Classes III, VII and VIII
(investment risk)
43
3% 70803 48831 0.85 1805 1722
Classes III, VII and VIII
(expenses fixed 5 yrs +)
44
0%
Classes III, VII and VIII
(other)
45
0% 1693631 1735
Class IV (other)
46
3% 888 888 1.00 27 27
Class V
47
0%
Class VI
48
3%
Total 49
4941761 3025135 91043 85345
Long term insurance capital
requirement
51 123875 116667
0.99
49
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1
50
*0000* Capital support provided to the Long-Term Fund
There is provision for the insurer’s shareholder fund (“SHF”) to provide financial assistance or
support to the insurer’s long-term fund. There are three different forms of shareholder support
funds, the Capital Funds, the Earmarked portfolio (“EMP”) and the Shareholder Equalisation Fund
(”SEF”).
The Capital Funds originate from the demutualisation scheme in 2000. Assets are held within a
ring fenced fund within the long-term fund. There is moratorium on support charges until 31
December 2014 after which charges of 1.75% per annum are payable.
The EMP consists of two elements. Original earmarked assets and new earmarked assets are
held within a ring fenced fund within the long-term fund. No support charges are payable on the
original earmarked assets but investment return rolls up within the fund. Support charges of
4.75% and investment return earned by the ring fenced assets are payable on the new earmarked
assets.
The SEF assets are held within a ring fenced fund within the long-term fund. No support charges
are payable but investment return rolls up within the fund to be included with repayment to the
SHF should repayment conditions be satisfied.
The market value of the assets provided in the support arrangements is as follows:
2014
2013
£000
£000
Capital funds
180,519
156,118
EMP
92,431
117,979
SEF
81,153
68,661
Total
354,103
342,758
Further details are disclosed in paragraph 7 of the “Abstract of Valuation Report For Realistic
Valuation” in Appendix 9.4a.
*0201* Modification to the provisions of the Accounts and Statements Rules
The Financial Services Authority (“FSA"), on the application of the firm, made a direction under
section 148 of the Financial Services and Markets Act 2000 in December 2012. The effect of the
direction is to modify the provisions of INSPRU 3.1.35R and IPRU (INS) Appendix 9.3 so that a
more appropriate rate of interest may be used for its assets taken in combination.
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
51
*0301* Reconciliation of admissible assets to capital resources after deductions
2014
2013
£000
£000
Total other than long-term insurance business assets -
Form 13 line 89
202,480
283,161
Total long-term insurance business assets - Form 13 line 89
3,205,362
3,006,270
Less: Liabilities - Form 14 line 71
(3,168,052)
(2,998,737)
Less: Liabilities - Form 15 line 69
(94,980)
(107,600)
Net admissible assets
144,809
183,094
Tier 2 Capital – Form 3 Line 52
58,367
76,000
Total capital resources after deductions – Form 3 line 79
203,176
259,094
*0308* Any other charges on future profits
In April 1998 the insurer entered into a securitised loan agreement which raised £260.0m
(£140.0m of 7.39169% Class A1 Limited Recourse Bonds due 2012 and £120.0m of 7.5873%
due 2022). The Class A1 bonds were repaid in full during 2012. The block of business
securitised consists of a portfolio of unit-linked, unitised with-profit and capital account policies.
Under the securitised loan agreement interest and principal payments are made out of surplus
emerging (as defined in the agreement).
As at the end of the financial year, the undischarged liability is £83.8m (£260.0m less £166.0m
capital repayment less a £10.2m impairment on the Class A2 Limited Recourse Bonds). Of this
amount £34.9m is reported in Form 3 Line 95 (Any other charges on future profits), which
represents a potential charge against future profits not recognised in Form 14.
Further details are disclosed in paragraph 8 of the “Abstract of Valuation Report” in Appendix 9.4
and Note 13 of the Report and Accounts.
*0310* Net negative valuation differences in Form 3
2014
2013
£000
£000
Securitised loan valuation difference
34,879
42,023
Liability valuation difference
(115,159)
(132,105)
Deferred tax
8,396
5,832
Net valuation difference
(71,884)
(84,250)
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
52
*0313* Reconciliation of profit and loss and other reserves in Form 3
2014
£000
Profit and loss account and other reserves - Form 3 line 12 column 3
229,773
Profit and loss account and other reserves - Form 3 line 12 column 4
289,143
Movement
(59,370)
Explained by:
Profit retained for the financial year - Form 16 line 59
1,939
Movement in deferred tax in the other than long term fund
(2,419)
IFRS profit retained in the long-term business fund
11,110
Repayment of capital contribution
(70,000)
(59,370)
The EMP and SEF refer to capital support held by the long-term fund, as detailed in note 0000.
The return of capital contribution consisted entirely of cash.
*1100* Calculation of long-term insurance business capital requirement – premiums amount and
brought forward amount
Form 11, calculation of long-term insurance business capital requirement – premiums amount and
brought forward amount, has not been included, as the insurer satisfies the de-minimis limit.
*1200* Calculation of long-term insurance business capital requirement – claims amount and
result
Form 12, calculation of long-term insurance business capital requirement – claims amount and
result, has not been included, as the insurer satisfies the de-minimis limit.
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
53
*1301* & *1308* Unlisted and listed investments
Included within Form 13 are the following amounts:
Long-term
2014
2013
£000
£000
Unlisted investments valued in accordance with the rules
in GENPRU 1.3
381
627
Listed investments valued in accordance with the rules in
GENPRU 1.3 and which are not readily realisable
8,871
11,785
Collective investment schemes, as specified in
instruction 5 to Form 13
4,960
564
Total
14,212
12,976
The above amounts in respect of unlisted investments and listed investments that are not readily
realisable fall within any of lines 41, 42, 46 or 48 (Other financial investments) of Form 13. Units
or other beneficial interest in collective investment schemes, as specified in instruction 5 to Form
13, are reported within Form 13 line 43 (Holdings in collective investment schemes).
*1304* & *1310* Set off
In accordance with Appendix 9.1 paragraph 8 of the Interim Prudential Sourcebook for Insurers,
amounts shown in Forms 13, 14 and 15 have been calculated by netting amounts due to any one
person against amounts due from that person, to the extent permitted by generally accepted
accounting principles.
Interfund balances, which exist between the shareholder fund and long term business fund, have
been adjusted by allocating appropriate collective investment scheme balances.
*1309* Hybrid securities
The aggregate value of these investments falling within lines 46 or 48 of Form 13 Total long-term
business insurance assets is £13.5m.
*1305* & *1319* Counterparty limits
(a) The investment guidelines, operated by the insurer, limit exposure to any one counterparty by
establishing limits for each type. These limits are set by reference to the individual and
aggregated limits set out in the market and counterparty limits in Chapter 2.1 of the Prudential
Sourcebook for Insurers.
(b) The maximum permitted exposure to a counterparty other than an approved counterparty during
the year was 5% of the business amount, calculated in accordance with Chapter 2.1 of the
Prudential Sourcebook for Insurers. The exceptions to this are for strategic investment
opportunities where, in order to achieve a target asset mix or diversification, excess exposures
may be permitted for a short duration. Where these excess exposures persist for the long-term,
modifications may be sought.
(c) There were no breaches of these limits during the financial year.
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
54
*1318* Other asset adjustments
Included in Form 13 line 101 (Other asset adjustments) for 2014, are the following amounts:
Long-term
Other than
long-term
£000
£000
EMP
(92,431)
92,431
SEF
(48,093)
48,093
(140,524)
140,524
Included in Form 13 line 101 (Other asset adjustments) for 2013, are the following amounts:
Long-term
Other than
long-term
£000
£000
EMP
(104,979)
104,979
SEF
(24,436)
24,436
Reclassification of other debtors
(1,203)
(3)
(130,618)
129,412
The EMP and SEF refer to capital support held by the long-term fund provided by the SHF.
*1321* Entity reconciliation to Statutory Accounts
2014
2013
£000
£000
Form 13 line 102 Total long-term insurance business assets
5,004,471
4,801,995
Form 13 line 102 Total other than long-term insurance
business assets
343,149
412,572
Entity adjustments in statutory accounts
(224)
(858)
Total IFRS Assets
5,347,396
5,213,709
The entity adjustment in the statutory accounts is to offset assets and liabilities when considered
at the entity level. It is not attributable to any specific fund.
*1401* & *1501* Provision for reasonably foreseeable adverse variations
The assets of the insurer are valued at fair value. Consideration is given to any assets where the
valuation requires judgement or where the asset is considered to be illiquid (with a lock up period
of greater than one year) or is valued using an internal model. These assets are subject to the
rules set out in GENPRU 1.3.30R to GENPRU 1.3.33R which are applied to all identified assets.
In assessing the need for a provision the following assumptions have been made:
The insurer, as part of its asset allocation strategy, invests in assets which are less liquid or where
judgement is required within the valuation. The asset liability management process monitors
liquidity on a monthly basis and ensures that there is sufficient liquidity at all times. A provision is
established for less liquid positions.
No additional provisions have been identified.
A provision required by INSPRU 3.2.17R is disclosed in note 1404.
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
55
*1402* & *1502* Additional liability details
(a) No charge has been made on the assets of the insurer.
(b) There is no potential liability to taxation on capital gains, which might arise if the insurer were to
dispose of its long-term insurance business assets.
(c) There are no guarantees, indemnities or other contractual commitments, other than in the
ordinary course of its insurance business, in respect of the existing or future liabilities of any
related companies.
(d) In the opinion of the Directors, there are no fundamental uncertainties affecting the position of the
insurer.
*1404* Provision for reasonably foreseeable adverse variations
Included within Form 14 Line 36 is an implicit provision of £5.5m as required by INSPRU
3.2.17R. Further details are disclosed in Appendix 9.29 (h).
*1405* Other adjustments to liabilities
Included in Form 14 line 74 (Long-term insurance business - Other adjustments to liabilities) are
the following amounts:
2014
2013
£000
£000
Valuation differences
(80,280)
(90,082)
Reclassification of other creditors
-
(1,203)
Total
(80,280)
(91,286)
*1412* Entity Reconciliation to Statutory Accounts
2014
2013
£000
£000
Form 14 line 76 Total liabilities
(5,004,471)
(4,801,995)
Form 15 line 85 Total liabilities
(343,149)
(412,572)
Entity adjustments in statutory accounts
224
858
Total IFRS liabilities
(5,347,396)
(5,213,709)
The entity adjustment in the statutory accounts is to offset assets and liabilities when considered
at the entity level. It is not attributable to any specific fund.
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
56
*1507* Other adjustments to liabilities
Included in Form 15 line 83 (Other than long-term insurance business - Other adjustments to
liabilities) are the following amounts:
2014
2013
£000
£000
Reclassification of other creditors
-
(3)
Deferred tax
8,396
5,832
8,396
5,829
*1601* Basis of conversion of foreign currency
Assets and liabilities denominated in a foreign currency are translated using the closing rate
method. Exchange differences on opening net assets are dealt with in the profit and loss
account.
*1603* Other income and charges
Other income and charges consists of professional fees of £29k (2013: £15k).
*1701* Variation margin
The practice of the insurer is to seek “variation margin” (which includes collateral on over the
counter derivatives), for derivative asset positions from counterparties to mitigate exposure to
credit risk. Variation margin on derivative positions are settled on the basis of “net” exposure from
derivative assets and liabilities with each counterparty. Variation margin is received in the form of
cash or approved fixed interest securities. The table below presents the net exposure to
derivative counterparties and total variation margin received and pledged.
Assets
Liabilities
Net
Gross Derivatives
£000
£000
£000
Other than long-term fund
2
866
(864)
Long-term fund (excluding assets held to match
linked liabilities)
17,056
35,715
(18,659)
Total
17,058
36,582
(19,524)
“Net” Exposure by counterparty
Exchange trade derivatives
-
798
(798)
Over the counter derivatives
12,790
31,516
(18,726)
Total
12,790
32,314
(19,524)
Variation Margin
On Exchange trade derivatives
-
798
On OTC derivatives
11,500
28,485
Total
11,500
29,283
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
57
*1701* Variation margin (continued)
As per the requirements of IAS 39, the insurer recognises variation margin received in the form of
cash on balance sheet, and any variation margin received in the form of securities off balance
sheet. This is due to the transfer of risk and return. In the case of cash – it is in the control of the
insurer and can be reinvested in other investment classes if considered appropriate. Securities
received as variation margin are not deemed to transfer the risk and return of the assets to the
insurer, other than in the event of counterparty default, and as such are not held on balance
sheet, but shown for disclosure purposes only.
As a result, no variation margin is included in Form 17 Line 52 to remove undue reconciling
entries between the PRA Forms and published statutory accounts.
On OTC derivatives, variation margin received in the form of cash amounting to £11.5m is
included within Form 13 Line 43 and a corresponding liability to repay this balance is included
within Form 14 Line 38 or Form 15 Line 49.
*1702* Contracts which have the effect of derivatives (long-term business)
Contracts which have the effect of derivative contracts, excluded from Form 17, but were
included in Form 14 are as follows:
Loan liabilities with a total value of £58.9m contain embedded derivatives and were included in
Form 14 Line 36 (Amounts owed to credit institutions).
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
58
*4002* Other income and other expenditure
Other income consists of annual management fee income of £16.9m (2013: £19.4m).
*4004* Business transfers
Included in business transfers is £31.1m (2013: £49.5m) of vesting annuities that have remained
within the Fund. These amounts have not been recognised as part of premiums and claims on
Form 41 and Form 42 respectively but as “business transfers - in” and “business transfers - out”.
As these amounts are not single premiums on Form 41 they have not been included in the new
business Form 46 and Form 47.
On 27 June 2012, the insurer entered into a business transfer agreement (“BTA”) with Guardian
Financial Services Limited (“Guardian”). The transfer was originally effected under a reinsurance
agreement effective from 1 July 2012. In accordance with the BTA, the business was transferred
to Guardian on 30 September 2013 using a scheme under Part VII of the Financial Services and
Markets Act 2000 approved by the High Court on 12 September 2013.
As part of the transfer, the insurer paid £5.1m consideration to Guardian during 2013 in connection
with the on-going servicing of the transferred policies. This amount is included as a business
transfer out.
*4008* Provision of management services
Pearl Group Services Limited has provided management services to the insurer.
Ignis Investment Management Limited, Ignis Asset Management Limited and Henderson Global
Investors Limited have provided investment services during the financial year to the insurer.
State Street Bank and Trust Company and HSBC Bank plc have provided custody, accounting,
transaction management and associated services for managed assets of the insurer during the
financial year.
*4009* Material connected-party transactions
Since 1
January 2000, the insurer has entered into a number of reinsurance treaties with Phoenix
Life Assurance Limited (“PLAL”) and Phoenix Life Limited (“PLL”). Details of these reinsurance
treaties are to be found in paragraph 9 of the “Abstract of Valuation Report” in Appendix 9.4,
required by rule 9.31(a).
At 31 December 2014 there were £89.0m (2013: £102.0m) in subordinated loans received from
PLAL. These loans are interest bearing and are repayable on 30 June 2016 and 2 September
2019. £13m was repaid on 25 September 2014.
During the year the insurer paid £19.0m (2013: £21.3m) to Pearl Group Services Limited. Ignis
Asset Management Limited, a fellow subsidiary until 1 July 2014, was paid £0.8m during the
period (2013: £2.3m).
During the year the insurer repaid capital contributions to its parent company, NP Life Holdings
Limited, of £70.0m (2013: the insurer received capital contributions of £85.0m).
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
59
*4009* Material connected-party transactions (continued)
On 25 September 2014, the insurer repaid £11m limited recourse bonds (2013: £11m) to Mutual
Securitisation plc, the results of which are consolidated into the accounts of Phoenix Group
Holdings, the insurer’s ultimate parent undertaking.
*4401* Basis of valuation of assets
Investments are stated at current value at the end of the financial year, calculated as follows:
- listed investments are stated at the bid market value;
- short-term deposits are included at fair value, which is considered to be equivalent to cost;
- other investments are shown at directors’ estimates of bid market value.
*4500* & *5500* Internal linked funds
The insurer’s internal linked funds are wholly reinsured to PLL and all amounts required to be
shown would be zero. These Forms have, therefore, not been included in the Return.
*4803* Assumptions regarding redemption dates
For assets that may be redeemed in full at the option of the guarantor or the issuer on specified
dates, the assumed maturity date has been at the first call date. The value of callable corporate
bonds at the valuation date was £25 million. It has been assumed the sinking bonds will be
redeemed according to schedules of planned redemptions provided by the investment manager.
The value of sinking bonds was £109 million at the valuation date.
*4806* Assets used to calculate investment returns in column 5 Form 48
The assets used in the calculation of the with profit return are all assets backing asset shares
excluding deposit administration, capital account and the estate fund.
*4807* Allocation of assets to column 2 of Form 48 (economic exposure)
A number of reallocations are made between columns 1 and 2 according to instructions 2, 3 and
4.
*4901* Credit rating agency
The credit rating agencies used to provide the split were UBS, Standard and Poor’s and Moody’s.
*5104* & *5204* & *5304* Number of policyholders / scheme members
Where a policy can have a combination of profit sharing (conventional with profit code 155),
capital account/unitised with profit (unitised with profit code 525 or 535) or unit linked (code 725 or
735) elements, it has been counted as a unit linked policy and included in column 3 for Form 53 if
there is a unit linked element. Otherwise, it has been included in column 3 for Form 51 if there is
a profit sharing element or in column 3 of Form 52 if there is only capital account/unitised with
profit.
Returns under the Accounts and Statements Rules
Supplementary Notes
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
Appendix 9.1 (continued)
60
*5600* Long-term insurance business: index-linked business
Form 56, long-term insurance business: index linked business, has not been included, as the
insurer satisfies the de-minimis limit.
*5702* Risk adjusted yield
(a) As referred to in note 0201, the FSA, on the application of the firm, made a direction under section
148 of the Financial Services and Market Act 2000 in December 2012. The effect of the direction
is to modify the provisions of INSPRU 3.1.35R and IPRU(INS) Appendix 9.3 so that a more
appropriate rate of interest may be used for assets taken in combination.
(b) The risk-adjusted yield is calculated as the arithmetic mean of the risk-adjusted yield on each
asset weighted by that asset's market value.
Risk adjusted yield
on matching assets
Adjustment
Risk adjusted yield on matching
assets using PRA Waiver
UK Life Non
Profit
2.02%
0.74%
2.75%
UK Life With
Profit
2.09%
0.38%
2.47%
UK Pension
Non Profit
2.02%
0.74%
2.75%
UK Pension
With Profit
2.09%
0.38%
2.47%
*5802* Transfer to non-technical account
During the financial year the SHF transferred £1.2m to the long-term fund to reflect a delay in
implementing a change of investment strategy within the long-term fund. This amount is shown in
Line 32 of Form 58.
*6001* Estimation of the insurance health risk capital component
The gross annual office premium of Class IV business was £5,101. The insurance health risk
capital component was estimated as 18% of this premium amount for consistency with INSPRU
1.1.85R.
Returns under the Accounts and Statements Rules
Statement of additional information on derivative contracts required by rule 9.29
National Provident Life Limited
Global Business
Financial year ended 31 December 2014
61
(a) During the financial year the insurer operated an investment policy for the use and control
of derivatives. This policy lists the approved derivative contracts and the approved uses of
derivatives, establishes procedures for introducing new contracts or uses, identifies areas
of risk, and establishes a control framework for dealing, settlement and independent
monitoring and reporting of derivatives.
The insurer uses derivatives in its portfolio management to hedge against market
movements in the values of assets in the portfolio (reduction of investment risks), and as a
means of effecting a change in exposure to different asset classes without disturbing
underlying physical holdings (efficient portfolio management). In addition, the insurer uses
derivatives to match liabilities to mitigate the effect of changes in market variables on its
capital position.
It is the insurer's policy that all obligations to transfer assets or pay monetary amounts
arising under derivative contracts are covered by cash, physical securities or other specific
commitments. Consequently the insurer does not trade derivative contracts against
uncovered positions, and portfolios may not be geared by means of derivatives.
The insurer controls market risks through the setting of exposure limits which are subject to
detailed monitoring and review. Sophisticated risk management systems are employed to
enable exposures, risks and sensitivities to be analysed on a total portfolio basis, providing
for greater control. Market and liquidity risks are reduced by requiring all futures and
options positions to be backed by cash or securities.
The insurer permits the purchase of partly paid shares, subject to the unpaid capital being
covered by cash, and also convertible bonds as alternatives to investment in the underlying
equities.
(b) Subject to the investment principles described above, the investment policy permits the
writing of contracts, under which the insurer has a right or an obligation to acquire or
dispose of assets. The portfolio manager must be satisfied that the strike price is
reasonable in terms of the current portfolio and market conditions at outset, in case the
contract is subsequently exercised.
The investment policy does not explicitly prohibit the use of contracts where any rights or
obligations were not, at the time when the contract was entered into, reasonably likely to be
exercised. However the requirement that contracts are used for the purposes of efficient
portfolio management means that such occurrences are unlikely.
The investment policy for the use and control of derivatives imposes overriding provisions
that the investment rationale for their use is clearly understood; that each contract is
admissible in terms of the Prudential Sourcebook for Insurers (INSPRU) and that
derivatives may not be used to gear a portfolio. The policy specifically excludes the use of
derivatives that cannot be sufficiently well modelled using the Investment Manager's
internal risk management systems, without the prior approval of the senior management of
the Investment Manager.
(c) The company was not a party to any such contracts of the kind described in (b) at any time
during the financial year.
Returns under the Accounts and Statements Rules
Statement of additional information on derivative contracts required by rule 9.29
National Provident Life Limited
Global Business
Financial year ended 31 December 2014
62
(continued)
(h) Amounts owed to credit institutions include a quasi derivative. This relates to a refinancing
arrangement entered into on 30 September 1999 with a wholly owned subsidiary of Abbey
National Group plc (now Santander plc). The insurer has originated a portfolio of residential
property investments subject to life tenancies (reversions) against which it has sold Extra
Income Plan annuity contracts. As part of the arrangement, the subsidiary indemnifies the
insurer against regional house price inflation in exchange for a fixed return and the insurer
has undertaken to indemnify the subsidiary against profits or losses arising from mortality
and surrender experience, which differs from the basis used to calculate the reversion
amount. The level of the mortality provision recognised at 31 December 2014 was £5.5m.
(i) The total value of fixed considerations received during the financial year in return for
granting rights under derivative contracts was £nil.
Returns under the Accounts and Statements Rules
Statement of additional information on controllers required by rule 9.30
National Provident Life Limited
Global Business
Financial year ended 31 December 2014
63
The persons who, to the knowledge of the insurer, have been controllers at any time during
the financial year were:
a) NP Life Holdings Limited
b) Phoenix Life Assurance Limited
c) Pearl Group Holdings (No. 2) Limited
d) Phoenix Life Holdings Limited
e) PGH (LCA) Limited
f) PGH (LCB) Limited
g) Phoenix Group Holdings
In relation to each such person, the information required to be dislosed pursuant to rule 9.30
(b) is as follows:
1. NP Life Holdings Limited
As at 31 December 2014, NP Life Holdings Limited held 100% of the issued share capital
of National Provident Life Limited and, to the knowledge of the insurer, was entitled at the
end of the financial year to exercise 100% of the voting power at any general meeting of
National Provident Life Limited.
2. Phoenix Life Assurance Limited
As at 31 December 2014, Phoenix Life Assurance Limited held 100% of the issued share
capital of NP Life Holdings Limited, a company of which National Provident Life Limited is
a subsidiary undertaking, and, to the knowledge of the insurer, was entitled at the end of
the financial year to exercise 100% of the voting power at any general meeting of NP Life
Holdings Limited.
3. Pearl Group Holdings (No. 2) Limited
As at 31 December 2014, Pearl Group Holdings (No. 2) Limited held 100% of the issued
share capital of Phoenix Life Assurance Limited, a company of which National Provident
Life Limited is a subsidiary undertaking and, to the knowledge of the insurer, was entitled
at the end of the financial year to exercise 100% of the voting power at any general
meeting of Phoenix Life Assurance Limited.
4. Phoenix Life Holdings Limited
As at 31 December 2014, Phoenix Life Holdings Limited held 100% of the issued share
capital of Pearl Group Holdings (No. 2) Limited, a company of which National Provident
Life Limited is a subsidiary undertaking, and, to the knowledge of the insurer, was entitled
at the end of the financial year to exercise 100% of the voting power at any general
meeting of Pearl Group Holdings (No. 2) Limited.
5. PGH (LCA) Limited
As at 31 December 2014, PGH (LCA) Limited held 50% of the issued share capital of
Phoenix Life Holdings Limited, a company of which National Provident Life Limited is a
subsidiary undertaking, and, to the knowledge of the insurer, was entitled at the end of
the financial year to exercise 50% of the voting power at any general meeting of Phoenix
Life Holdings Limited.
Returns under the Accounts and Statements Rules
Statement of additional information on controllers required by rule 9.30
National Provident Life Limited
Global Business
Financial year ended 31 December 2014
64
(continued)
6. PGH (LCB) Limited
As at 31 December 2014, PGH (LCB) Limited held 50% of the issued share capital of
Phoenix Life Holdings Limited, a company of which National Provident Life Limited is a
subsidiary undertaking, and, to the knowledge of the insurer, was entitled at the end of
the financial year to exercise 50% of the voting power at any general meeting of Phoenix
Life Holdings Limited.
7. Phoenix Group Holdings
As at 31 December 2014, Phoenix Group Holdings held 100% of the issued share capital
of PGH (LCA) Limited and PGH (LCB) Limited which between them owned 100% of the
shares of Phoenix Life Holdings Limited, a company of which National Provident Life
Limited is a subsidiary undertaking. At the end of the financial year, to the knowledge of
the insurer, Phoenix Group Holdings was not entitled to exercise, or control the exercise
of, any voting power at any general meeting of National Provident Life Limited or another
company of which National Provident Life Limited is a subsidiary undertaking.
NATIONAL PROVIDENT LIFE LIMITED
65
NATIONAL PROVIDENT LIFE LIMITED
APPENDIX 9.4
ABSTRACT OF VALUATION REPORT
1. INTRODUCTION
(1) Valuation Date
The date to which the actuarial investigation relates is 31 December 2014.
(2) Previous Valuation
The date to which the previous actuarial investigation under IPRU (INS) rule 9.4 related was
31 December 2013.
(3) Interim Valuations
Since the previous valuation date, there have been no interim valuations (for the purposes of
IPRU (INS) rule 9.4).
2. PRODUCT RANGE
There have been no significant changes to products during the financial year. The NPLL with
profits sub-fund is closed to new business except by increment.
3. DISCRETIONARY CHARGES AND BENEFITS
(1) Application of Market Value Reduction
Market value reductions (“MVR”) were applied as follows:
Product
Premium Investment
Date
Period applied
PPP, FSAVC, PRA, FIP, GMP,VGPPP,
GAPP & GIA Unitised With-profit Series 1:
Initial units
Ordinary units
Jan 1988 to Dec 2013
Jan 1988 to Dec 2013
Jan 2014 to Dec 2014
Jan 2014 to Dec 2014
PPP, FSAVC, PRA, FIP, GMP,VGPPP,
GAPP & GIA Unitised With-profit Series 2:
Initial units
Ordinary units
Jan 1994 to Dec 2013
Jan 1998 to Dec 2001
Jan 2006 to Dec 2006
Jan 2014 to Dec 2014
Jan 2014 to Dec 2014
Jan 2014 to Jun 2014
PPP, FSAVC, PRA & FIP Capital Account:
Initial units
Ordinary units
Jan 1994 to Dec 2013
Jan 2011 to Dec 2013
Jan 2014 to Dec 2014
Jan 2014 to Dec 2014
New Approach EPP Single Premium
Unitised With-Profit Account
Jan 1998 to Dec 2001
Jan 2006 to Dec 2006
Jan 2014 to Dec 2014
Jan 2014 to Jun 2014
Penfund Series 1
Jul 1990 to Dec 2013
Jan 2014 to Dec 2014
NATIONAL PROVIDENT LIFE LIMITED
66
Product
Premium Investment
Date
Period applied
Trustee With Profit Bond
Jan 1997 to Dec 2001
Jan 2014 to Dec 2014
With Profit Bond Series 1
Jun 1991 to Dec 2001
Jan 2014 to Dec 2014
With Profit Bond Series 2
Jul 1993 to Dec 1994
Jan 1995 to Mar 1995
Apr 1995 to Dec 2001
Jan 2014 to Dec 2014
Jan 2014 to Jun 2014
Jan 2014 to Dec 2014
With Profit Bond Series 3
Oct 1995 to Dec 2001
Jan 2014 to Dec 2014
With Profit Bond Series 4
Jan 1997 to Dec 2001
Jan 2014 to Dec 2014
With Profit Bond Series 5
Oct 1997 to Dec 2001
Jan 2014 to Dec 2014
With Profit Bond Series 6
Jul 1998 to Dec 2001
Jan 2014 to Dec 2014
With Profit Bond Series 7
Jan 1999 to Dec 2001
Jan 2014 to Dec 2014
GMP,VGPPP, GAPP, GIA Capital Account
Initial units
Ordinary units
Jan 1988 to Dec 2013
Jan 2011 to Dec 2013
Jan 2014 to Dec 2014
Jan 2014 to Dec 2014
EPP and PTP Capital Account
Initial units
Ordinary units
Jan 1985 to Dec 1990
Jan 1991 to Dec 1991
Jan 1992 to Dec 2001
Jan 2006 to Dec 2007
Jan 2011 to Dec 2013
Jan 2011 to Dec 2013
Jan 2014 to Dec 2014
Jan 2014 to Jun 2014
Jan 2014 to Dec 2014
Jan 2014 to Jun 2014
Jan 2014 to Dec 2014
Jan 2014 to Dec 2014
Portfolio Bond Series 1
Jul 1999 to Mar 2001
Apr 2001 to Jun 2001
Apr 2007 to Dec 2007
Jan 2014 to Dec 2014
Jan 2014 to Sep 2014
Jan 2014 to Mar 2014
New Approach PPP, FSAVC and EPP
Single and Regular Premium Unitised
Capital Account
Ordinary units
Jan 2011 to Dec 2013
Jan 2014 to Dec 2014
Note: MVRs apply by date of each investment in the fund, not by policy date.
(2) Premiums on Reviewable Protection Policies
National Provident Life Limited has not sold any reviewable protection business.
NATIONAL PROVIDENT LIFE LIMITED
67
(3) Non-profit Deposit Administration
No policies have been sold in this category.
(4) Service Charges on Linked Policies
The following table shows the changes to policy fees on linked contracts from 1 January 2014:
Product
% Increase
New Approach PPP & FSAVC, PPP Series II
3.15%
New Approach EPP
3.15%
VGMP, VGPPP, GAPP, GIA & GPMU
3.15%
VGF and Pooled Managed Fund
0.85%
CPP
0.85%
CAP
0.85%
(5) Benefit Charges on Linked Policies
During the financial year, benefit charges remained unchanged on linked policies.
(6) Accumulating With-Profits Charges
During the financial year, unit management charges for unitised accumulating with-profit and
linked business remained unchanged.
(7) Unit Pricing of Internal Linked Funds
All National Provident Life Limited’s unit-linked liabilities, other than for Unilink policies, are
reassured to Phoenix Life Limited. As a consequence, the information in the following
paragraphs relates to Phoenix Life Limited’s practices as they apply to the business reassured by
NPLL.
(a) Units are of two main types, called initial and ordinary. The following method applies to all units.
(i) The creation or cancellation of units in the internal linked funds is performed at un-rounded
bid price values. This ensures that unit prices are unaffected by the creation or cancellation
of units and that the interests of unit holders not taking part in a unit transaction are
unaffected by that transaction.
(ii) Base prices are derived from the internal fund valuations, which are adjusted for fund specific
charges. Increasing the base price by the bid-offer spread and rounding to the higher tenth
of a penny gives the “offer price”. The “bid price” is the base price rounded to the lower tenth
of a penny. Units are allocated to policies at the offer price and cancelled at the bid price.
Switches in and out of units within a policy are processed at bid prices.
(iii) The asset values of the internal linked funds are calculated on a “bid” basis, as the expected
cash flows are negative for all asset categories. The valuation includes the income since the
last valuation and allowances for tax on income and realised and unrealised capital gains.
(iv) The assets of the internal linked funds are valued at noon on each working day. If markets
move significantly between noon and 4 pm, allowance for this market movement is made.
(b) During the financial year there was no time at which different pricing bases applied to different
policies.
NATIONAL PROVIDENT LIFE LIMITED
68
(c) The funds are invested in collective investment schemes managed by Henderson. A mid- market
price applies to these collectives although this price may swing up or down if the net transactions
on any trading day exceed a set threshold. In the linked funds, these collective investment
schemes are valued on un-swung prices but subject to a deduction if the fund is priced on a bid
basis or an addition if the fund is priced on an offer basis.
The time on each working day at which the assets in the internal linked funds are valued is the
same as that at which the units in the underlying collective investment schemes are valued
(except for the Henderson Diversified Growth Fund asset, where the most recent prices of the
collective investment schemes are used.)
(8) Tax Deductions From Internal Linked Funds
Tax on income
Tax on income is calculated at the full policyholder tax rate of 20% for life funds.
Tax on loan relationships
For loan relationships both income and capital gains are taxed under the provisions for income.
Accordingly, tax is calculated on the full policyholder tax rates on both elements. Full credit is
given for actual and anticipated tax losses.
Capital Gains Tax (CGT) on other assets
Tax on realised and unrealised gains and losses is accrued daily in the internal linked Life funds.
Gains in Life equity funds are index-adjusted. There are no tax accruals in Pension funds.
As at the end of 2014, all Equity funds had accumulated losses and tax rates for both losses and
gains (realised and unrealised) were set to zero.
In the event that tax rates are non zero, the practice is that accruals for realised gains and losses
in Equity funds are cleared at the end of each month. Accruals for unrealised gains and losses
would be cleared at the end of each financial year under the “deemed disposal” regime.
(9) Tax Provisions for Internal Linked Funds
See (8) above.
(10) Discounts on Unit Purchases
The internal linked funds receive an initial charge discount and an annual management charge
rebate when purchasing, selling or holding units in collective investment funds. This ensures that
the policyholder is not subject to two sets of charges.
4. VALUATION BASIS (Other Than For Special Reserves)
(1) Valuation Methods
The general principles and methods adopted in the valuation are:
NON LINKED BUSINESS
Non-profit non-linked mathematical reserves have been determined using a gross premium
method.
NATIONAL PROVIDENT LIFE LIMITED
69
For with-profit business, mathematical reserves have been determined using an individual gross
premium method except for those mentioned below. The reserve for each policy is subject to a
minimum of any guaranteed surrender value. Where it has been considered appropriate to do
so, the mathematical reserves include additional amounts for future expenses and options and
guarantees.
Visible Growth Fund, Capital Pension Plan and Cash Accumulation Plan contracts are valued by
taking the liability as the amount in the deposit account. In addition there is an allowance for
future expenses. For Capital Pension Plan policies, the basic reserve includes an allowance for
the cost of the annuity guarantees.
Unitised with-profit and capital account policies are valued using the Discounted Value of Future
Liability Outgo method. This involves calculating the same cashflows as in the gross premium
method. The reserve for each policy is subject to a minimum of any guaranteed surrender value
at the valuation date. The reserve is increased where necessary to ensure a minimum
guaranteed surrender value is held for the full lifetime of the policy.
INDEX LINKED BUSINESS
Mathematical reserves have been determined using a gross premium method.
LINKED BUSINESS
Mathematical reserves have been determined by valuing the units allocated to policies and
adding a non-unit reserve for mortality and expenses.
Other than for Unilink policies, all National Provident Life Limited’s unit-linked liabilities are
reassured to Phoenix Life Limited on an investment basis and as a result the net liabilities are
equal to the non-unit reserves.
The non-unit reserve is calculated using a discounted cash flow approach. Where the projected
cashflows show no future shortfall in any year there is no recourse to additional finance and no
sterling reserve is required. Where the projection produces a shortfall, the discounted value of
the cashflows is calculated. This is the sterling reserve required to ensure that no recourse to
additional finance is required.
(2) Valuation Interest Rates
The following table sets out the rates of interest used for all classes of business:
Product Group
2014
2013
Product
Code
Gross premium basis
Capital account
2.24%
3.20%
525, 535, 570
Life annuities
2.50%
3.50%
390, 395
Pension annuities
2.50%
3.50%
390, 400
Life With-profit endowments
1.79%
2.56%
120, 205
Life With-profit whole of life
1.79%
2.56%
100
Life Unitised With-profit guaranteed
(Series 1)
1.79%
2.56%
500
Life Unitised With-profit non-guaranteed
1.79%
2.56%
500
Pensions Unitised With-profit
2.24%
3.20%
525, 535
NATIONAL PROVIDENT LIFE LIMITED
70
Product Group
2014
2013
Product
Code
guaranteed (Series 1)
Pensions Unitised With-profit non-
guaranteed
2.24%
3.20%
525, 535, 570
Deposit Administration
2.24%
3.20%
545, 555
Profit Sharing Account
2.24%
3.20%
155
Conventional With-profits deferred
annuity
2.24%
3.20%
165
Index linked annuities / Miscellaneous
2.50%
3.50%
905, 910
Other pensions business
2.50%
3.50%
435
Other life business
2.00%
2.80%
435
Unit-linked
Life sterling reserves
2.00%
2.80%
700, 715
Pensions sterling reserves
2.50%
3.50%
725, 735, 750
Notes:
For index linked annuities the annuity increases each year at RPI/LPI.
(3) Risk Adjustments
Yields on other fixed interest or variable yield securities were reduced to allow for the risks of
default while retaining some margin over gilt yields for reduced liquidity of corporate bonds.
The level of the reduction was assessed by reference to long-term average default rates plus an
allowance for shorter-term factors and expected deviations from the historic average. The rates
assume a doubling of historical default experience, net of an allowance for 37% recovery on
default.
For bank subordinated debt, the haircut is based on the Senior Rating of the issuing entities
(rather than the rating of the sub-debt itself) whilst using a nil recovery assumption. However, if
this results in a lower aggregate haircut compared to the standard haircut, the standard haircut is
used instead.
NATIONAL PROVIDENT LIFE LIMITED
71
(4) Mortality Basis
The following table sets out the mortality bases used for all classes of business:
Product Group
2014
2013
Product
Code
Males
Females
Males
Females
Pre-vesting
UWP Bonds
100% AM92
100% AF92
110% AM92
110% AF92
500, 535
Endowment
Assurance
100% AM92
100% AF92
100% AM92
100% AF92
120, 205,
435
Whole of Life
100% AM92
100% AF92
100% AM92
100% AF92
100, 205,
435
Term Assurance
100% AM92
100% AF92
100% AM92
100% AF92
205, 435
All other business
55% AM92
55% AF92
60% AM92
60% AF92
All others
Post-vesting/In
payment
Immediate and
deferred pension
annuities
94.8% RMV00
94.8% RFV00
97% RMV00
97% RFV00
390, 400,
905, 910
Group life annuities
94.8% RMV00
94.8% RFV00
97% RMV00
97% RFV00
395
Individual life and IRS
annuities
100%IML92
100% IFL92
100%IML92
100% IFL92
395, 905
Notes:
1. Ultimate mortality has been used in all cases.
2. At 31 December 2014 and 31 December 2013, for post-vesting mortality using the RMV00
and RFV00 tables, future mortality improvements use the CMI Working Paper 63 Mortality
Projection Model (published in February 2013) blending historic improvement data with a
long term annual improvement assumption of 2.5% up to age 75 reducing linearly to 0% at
age 120.
3. For post-vesting mortality using the IML92 and IFL92 tables, future mortality improvements in
line with CMI medium cohort and long cohort projections with a 1.5% floor for males and
1.25% floor for females have been assumed at 31 December 2014 and 31 December 2013.
Male complete life expectations for annuity contracts are as follows
Product Group
Annuities in payment
Deferred annuities: life
expectation at age 65
Age 65
Age 75
Age 45
Age 55
Pension annuities
24.4
15.1
Group GAF annuities
24.4
15.1
Life/IRS/Ind GAF annuities
23.1
14.1
Other pension deferred
annuities
27.4
25.9
NATIONAL PROVIDENT LIFE LIMITED
72
Female complete life expectations for annuity contracts are as follows:
Product Group
Annuities in payment
Deferred annuities: life
expectation at age 65
Age 65
Age 75
Age 45
Age 55
Pension annuities
27.5
17.5
Group GAF annuities
27.5
17.5
Life/IRS/Ind GAF annuities
25.7
16.0
Other pension deferred
annuities
30.3
28.9
(5) Morbidity Basis
There are no products representing a significant amount of business that use a morbidity basis.
(6) Expense Basis
The expense bases are as follows:
LINKED AND NON-LINKED BUSINESS
Per policy expenses, before allowance for tax relief, were as follows:
Premium paying
Paid up & single
premium
Product Group
2014
2013
2014
2013
Product
Code
£pa
£pa
£pa
£pa
CWP savings endowments
111.49
107.62
55.65
53.72
120
CWP pensions
68.01
65.65
27.33
26.38
165
Annuity
41.65
40.20
400
UWP bond
55.71
53.77
500
UWP regular premium pension
91.03
87.87
58.99
56.94
525
UWP single premium pension
58.99
56.94
525
UWP group regular premium pension
83.73
80.82
73.88
71.31
535
UWP group single premium pension
73.88
71.31
535
UL bond
55.71
53.77
700
UL savings endowment
149.41
144.22
119.47
115.32
715
UL regular premium pension
91.03
87.87
58.99
56.94
725
UL single premium pension
58.99
56.94
725
UL group regular premium pension
83.73
80.82
73.88
71.31
735
UL group single premium pension
73.88
71.31
735
NATIONAL PROVIDENT LIFE LIMITED
73
Notes:
All expenses above are shown as per policy rather than per benefit. The expense charges paid
to Pearl Group Services Limited are determined in accordance with Schedule 2C scheme from
the demutualisation of National Provident Institution. An expense charge per benefit is required
for some products, in which case this is derived by applying the ratio of the benefit count to the
policy count.
If there is more than one investment fund attaching to one benefit, including unit-linked, unitised
with-profit and capital account, then the per policy expenses are split in proportion to the unit
values.
Gross Investment Expenses
Investment expenses have been allowed for through a reduction to the projected unit growth
rates and valuation interest rates. The table below sets out the basis point (“bp”) reductions
applied:
Fund
2014
2013
bps
bps
Unit Linked
Non-Linked
Gilts
IL Gilts
Approved Bonds
Corporate Bonds
AAA
AA
A
BBB
BB
B
CCC
Other
Derivatives
Property
Equity
13.22
8.00
7.50
9.68
8.10
9.90
9.13
9.26
9.89
9.89
9.89
9.89
8.00
32.00
15.00
13.22
8.00
7.50
9.69
8.19
9.60
9.08
9.47
8.91
8.91
8.91
8.91
8.00
32.00
15.00
(7) Inflation Rates
Unit Growth, Expense Inflation, and Policy Fee inflation rates are:
Product Group
Gross Unit
Growth Rate
(% p.a.)
Expense
Inflation
Rate (% p.a)
Policy Fee
Inflation
Rate (% p.a.)
Product Code
2014
2013
2014
2013
2014
2013
Life business
2.45
3.70
4.20
4.60
2.30
2.70
700, 715, 795
Pensions business
2.45
3.70
4.20
4.60
2.30
2.70
725, 735, 750
NATIONAL PROVIDENT LIFE LIMITED
74
(8) Future Bonus Rates
As a realistic basis life firm, no allowance has been made in the determination of mathematical
reserves for future bonuses in accordance with INSPRU 1.2.9R except for the following:
Product Group
Reversionary bonus rate pa
Product Code
Unitised With-profit Life series 1
3.00%
500
Unitised With-profit Pensions
series 1
4.00%
525, 535
Note:
The above rates only apply where the products contain guaranteed bonus rates and are equal to
the guaranteed rates. For all other products the future bonus rate is zero.
(9) Persistency
A summary of the surrender and paid-up (PUP) assumptions is as follows:
Product
Average lapse / surrender / paid up rate
for the policy years
1-5
6-10
11-15
16-20
CWP savings endowment
surrender
0.60%
0.60%
0.60%
0.60%
CWP target cash endowment
surrender
0.60%
0.60%
0.60%
0.60%
UL savings endowment
surrender
0.00%
0.00%
0.00%
0.00%
UWP bond
surrender
4.10%
4.10%
4.10%
4.10%
UWP bond
automatic
withdrawal
100% of
current
100% of
current
100% of
current
100% of
current
UL bond
surrender
0%
0%
0%
0%
UL bond
automatic
withdrawal
100% of
current
100% of
current
100% of
current
100% of
current
CWP pension regular premium
PUP
0.00%
0.00%
0.00%
0.00%
CWP pension regular premium
surrender
0.40%
0.40%
0.40%
0.40%
CWP pension single premium
surrender
0.40%
0.40%
0.40%
0.40%
UWP ind pension regular premium
PUP
15.00%
15.00%
15.00%
15.00%
UWP ind pension regular premium
surrender
3.40%
3.40%
3.40%
3.40%
UWP ind pension single premium
surrender
1.10%
1.10%
1.10%
1.10%
UL ind pension regular premium
PUP
15.00%
15.00%
15.00%
15.00%
UL ind pension regular premium
surrender
0.00%
0.00%
0.00%
0.00%
UL group pension regular premium
PUP
33.00%
33.00%
33.00%
33.00%
UL group pension regular premium
surrender
0.00%
0.00%
0.00%
0.00%
UL ind pension single premium
surrender
0.00%
0.00%
0.00%
0.00%
Note: the “UWP ind pension regular premium” surrender rate is assumed for single and regular
premium UWP non-DSS pensions. The “UWP ind pension single premium” surrender rate is
assumed for UWP DSS pensions.
NATIONAL PROVIDENT LIFE LIMITED
75
(10) Other material basis assumptions:
Relief for tax applied to expenses is 20% for UK Life (excluding life annuities) business and 0%
for other business. Tax on investment income is set out in the following table:
Type of business
2014
2013
UK Life – dividend income
0%
0%
UK Life – income from assets backing life annuities
0%
0%
UK Life – other income
20%
20%
UK Life – unit linked gains
20%
20%
UK Pensions – all income
0%
0%
UK Pensions – all gains
0%
0%
(11) Allowance for Derivatives
The fund holds a number of swap contracts, some of which are used to determine valuation rates
of interest.
No other allowance has been made for derivative contracts in determining the amount of the
long-term liabilities.
(12) Effect on Mathematical reserves due to changes in INSPRU
There have been no changes since the previous valuation.
5. OPTIONS AND GUARANTEES
(1) Guaranteed Annuity Rate Options
(a) Capital Pension Plan
These policies have guaranteed annuity rates available for converting the cash sum available at
normal retirement age to an annuity. The reserve for this guarantee is calculated as the uplift
required based on the ratio of the value of the annuity on the valuation basis and the value of the
annuity on the guaranteed basis.
(b) Table detailing guaranteed annuity rate option reserves:
Product Code
545, 555
Product name
Capital Pension Plan
Basic reserve, £000
19,524
Spread of outstanding durations
Gradual run-off mean term to vesting date of
3.6 years. Vesting assumed at age 60 or
immediately if older.
Guarantee reserve, £000
Included in basic reserve shown above
Guaranteed annuity rate (% of cash sum
for 65 year old male
(1)
)
10%
Increments allowed
No
Form of the annuity
See note 2
Retirement ages
Normal Retirement age under the scheme is
normally between 60 and 70
NATIONAL PROVIDENT LIFE LIMITED
76
Notes:
1. The guaranteed annuity rate shown has been based on a single life, monthly in
advance, level annuity with a five-year guaranteed period. Other forms of annuity
will have different guaranteed rates.
2. Guaranteed annuity rates are available for the following forms of annuity: Single
life, monthly in advance, Level, 3%, 4% or 5% escalation, five-year guarantee
period.
(2) Guaranteed surrender and unit-linked maturity values
There are no guaranteed surrender or unit-linked maturity values.
(3) Guaranteed insurability options
Some with-profits endowment assurances contain options that permit members to effect further
policies in connection with house purchases, within certain limits, or to extend the terms of the
existing policies without further evidence of health.
Some temporary assurances contain the option to convert to an endowment, whole life
assurance, Maximum Investment Plan or Flexible Mortgage Plan up to a maximum sum assured
of that attaching to the existing policy without further evidence of health.
For Group Life assurance, continuation options are available to members aged below 60 at that
time to effect a whole life assurance or an ordinary endowment assurance without evidence of
health.
These guaranteed insurability options are in respect of smaller classes of business and are not
valued explicitly.
(4) Other Guarantees and Options
Pension Transfer Plan
These policies have a guarantee to pay the Guaranteed Minimum Pension (“GMP”) at normal
retirement age. The reserve for this guarantee is calculated as the projected shortfall (if any) in
the policies’ fund-based maturity values compared to the value of the GMP at normal retirement
age on the valuation basis.
The projection uses a closed-form stochastic method to calculate a time value in addition to the
intrinsic value of the guarantee to reflect future interest rate volatility.
NATIONAL PROVIDENT LIFE LIMITED
77
Table detailing guarantee reserves:
Product Code
155, 525, 725
Product name
Pension Transfer Plan
Basic reserve, £’000
245,136
Spread of outstanding durations
Gradual run-off mean
term of 15.4 years
Guarantee reserve, £’000
129,556
Increments allowed
No
Form of the annuity
Varies from policy to
policy
Retirement ages
Normal Retirement Age
under the policy,
usually between 60 and
70
6. EXPENSE RESERVES
(1) Aggregate Expense Loadings
The aggregate amount of expense loadings, grossed up for taxation where appropriate, expected
to arise during the 12 months from the ‘valuation date’ are as follows:
Homogeneous Risk Group
Implicit
Allowances
Explicit
Allowances
(Investment)
Explicit
Allowances
(Other)
Non-
attributable
Expenses
Total
£M
£M
£M
£M
£M
Non-unitised business
0.00
0.11
1.21
0.05
1.38
Unitised business
0.00
2.53
17.07
1.18
20.78
Total
0.00
2.64
18.28
1.23
22.15
(2) Implicit Allowances
All provisions for future expenses have been made using explicit methods.
(3) Form 43 Comparison
The difference between the allowance for maintenance expenses shown above and those shown
in Form 43 is partly in respect of annual management charges payable to Phoenix Life Limited in
respect of reassured incremental UWP policies. The remainder is due to one-off expenses
incurred during the year and run-off of business.
(4) New Business Expense Overrun
National Provident Life Limited has ceased to write new business, except for increments on
existing policies, which are reassured to Phoenix Life Limited. No new business expense
overrun reserve is held due to the management services agreement in place with Pearl Group
Services Limited.
NATIONAL PROVIDENT LIFE LIMITED
78
(5) Maintenance Expense Overrun
The company is largely closed to new business and the expense charges paid to Pearl Group
Services Limited are determined in accordance with the Schedule 2C scheme from the
demutualisation of National Provident Institution. No additional expense reserve is required in
respect of these expenses.
(6) Non-attributable expenses
The non-attributable expenses includes the reserve held to cover overhead costs (such as audit
fees) met by the long term business fund in future years. The reserve assumes costs continue
over the next 15.5 years (except the reciprocation costs which we assume run for 6 years),
annual growth of 4.20% per annum, and discounted at 2.24% per annum. The term of 15.5
years is consistent with section 33 of the Schedule 2C scheme that allows wind up of the with-
profit fund when the with-profit liabilities fall below £500 million subject to increases in RPI since
January 2000. However, this additional reserve has been reduced to allow for such costs
hypothecated to unitised business being, where possible, covered by any remaining margins in
the valuation basis.
Homogeneous Product Group
Non-attributable expenses reserve £M
Non-Unitised Business
0.9
Unitised Business
19.6
7. MISMATCHING RESERVES
(1) Analysis of Reserves by Currency
The liabilities are sterling liabilities.
The following table shows the sum of the mathematical reserves (other than liabilities for property
linked benefits), analysed by reference to the currencies in which the liabilities are expressed to
be payable, together with the value of the assets, analysed by reference to currency, which
match the liabilities:
Currency
Liabilities
Assets
£m
£m
Sterling
3,022.7
3,022.7
Total
3,022.7
3,022.7
(2) Other Currency Exposures
See table in 7(1).
(3) Currency Mismatching Reserve
No currency mismatch reserve is held.
(4) Most Onerous Scenario Under INSPRU 3.1.16(R)
National Provident Life Limited is a realistic basis reporting firm to which GENPRU 2.1.18R
applies and so does not hold a resilience capital requirement under INSPRU 3.1.10R.
(5) Most Onerous Scenario Under INSPRU 3.1.23(R)
Not applicable – see 7(4).
NATIONAL PROVIDENT LIFE LIMITED
79
(6) Resilience Capital Requirement
Not applicable – see 7(4).
(7) Additional Reserves Arising From INSPRU 1.1.34(2)(R))
No additional reserve is held.
8. OTHER SPECIAL RESERVES
Securitised loan reserve
National Provident Life Limited has a securitised loan that is secured on future profits arising on a
defined basis from specific unit-linked and unitised with-profit business within National Provident
Life Limited. This provision is equal to the discounted value of further interest and capital
payments due to bondholders under the securitisation to the extent that payments exceed the
value of surpluses that may be expected to arise from the securitised business based on the
valuation assumptions. The amount of this reserve is £48.4 million.
9. REINSURANCE
(1) Facultative Treaties
There were no reinsurance arrangements on a facultative basis in force at any time during the
period of the report with any company not authorised to carry on insurance business in the
United Kingdom.
(2) Reinsurance Treaties
(a) The following financing arrangement was in-force at the valuation date
(d) Issuer
Mutual Securitisation plc
(e) Nature and extent
£260 million of debt capital was raised in 1998, securitised
against a specified fixed block of unit-linked and unitised with-
profit business. Interest and principal payments are made from
surpluses emerging from this block of business as defined in
the securitisation agreement.
(f) Premiums paid in 2014
No premiums are payable. A repayment of interest and
principal of £18.977 million was made in 2014.
(g) Deposit back
Not applicable
(h) Open or Closed
Closed
(i) Undischarged obligations
The undischarged obligation was £94.0 million at the valuation
date.
(j) Reserves ceded £000s
Not applicable
(k) Retention for new business
Not applicable
NATIONAL PROVIDENT LIFE LIMITED
80
Mutual Securitisation plc
(l) Mutual Securitisation plc is not authorised to carry on insurance business in the United
Kingdom.
(m) Mutual Securitisation plc is not a connected company of the insurer.
(n) There are certain specified events where the bond trustee may demand immediate
repayment of the loan.
(o) Refund of reinsurance commission is not applicable to this arrangement.
(p) (i) National Provident Life is required to make interest and principal payments from
surplus emerging as defined under the agreement.
(ii) A reserve is held for the future repayments in excess of emerging surplus under this
arrangement as described in Section 8. The existence of the agreement has the
impact of improving the regulatory peak solvency position to the extent that the
additional capital exceeds the Securitised Loan Reserve.
(b) Not applicable
(c) The following treaties were in-force at the valuation date with reserves ceded exceeding the
lesser of £10 million and 1% of total mathematical reserves.
(d)Reinsurer
Phoenix Life
Assurance
Limited
Phoenix Life
Assurance
Limited
Phoenix Life
Assurance
Limited
Phoenix Life
Limited
Phoenix Life
Limited
(e) Nature
and extent
Certain
Pensions
Annuities
written prior to
1/1/2000 are
fully reassured
except for the
expense of
administration.
All annuities
written from
31/3/2012
are fully
reassured on
original
terms.
Portfolio
Bond policies
written 1 July
1999 to 31
December
1999 are fully
reassured on
original
terms.
Unit Linked funds
on policies written
prior to 1/1/2000
are ceded as
investment-only
reassurance.
Increments
written from
1/1/2000 are
fully
reassured
on original
terms.
The
expense
liability on
all unitised
with-profits
and capital
account
business
sold post-
2000 is
reassured.
(f) Premiums
paid in 2014
£000s
Nil
30,462
Nil
8,119 in aggregate to Phoenix Life
Limited
(g) Deposit
Back
Nil
Nil
Nil
Nil
Nil
(h) Open or
closed
Closed
Open
Closed
Open
Open
(i)
Undischarged
obligations
Expenses of
administration
Nil – this is
original terms
reinsurance
Nil – this is
original terms
reinsurance
This is investment-
only reinsurance
Nil – this is
original
terms
reinsurance
(j) Reserves
ceded £000s
43,151
132,318
9,519
1,417,908
313,730
(k) Retention
for new
business
Not applicable
Nil
Not
applicable
Not applicable
Not
applicable
NATIONAL PROVIDENT LIFE LIMITED
81
Phoenix Life Assurance Limited
(l) Phoenix Life Assurance Limited is authorised to carry on insurance business in the UK.
(m) Phoenix Life Assurance Limited is a connected company of the insurer.
(n) There are no material contingencies, such as credit risk or legal risk, to which the treaties
with Phoenix Life Assurance Limited are subject.
(o) There is no provision to refund any reinsurance commission, except under the reinsurance
covering new policies and increments. Any refund under that arrangement would be
matched by a reclaim of commission from the seller of the insurance.
(p) The reassurances with Phoenix Life Assurance Limited are not financing reassurance.
Phoenix Life Limited
(l) Phoenix Life Limited is authorised to carry on insurance business in the UK.
(m) Phoenix Life Limited is a connected company of the insurer.
(n) There are no material contingencies, such as credit risk or legal risk, to which the treaties
with Phoenix Life Limited are subject.
(o) There is no provision to refund any reinsurance commission, except under the reinsurance
covering new policies and increments. Any refund under that arrangement would be
matched by a reclaim of commission from the seller of the insurance.
(p) The reassurances with Phoenix Life Limited are not financing reassurance.
NATIONAL PROVIDENT LIFE LIMITED
82
10. REVERSIONARY (OR ANNUAL) BONUS
The following tables set out the annual bonus rates for each class of business:
Compound Bonus
Bonus series
31.12.2014
31.12.2014
31.12.2013
31.12.2014
Product
code
Basic
mathematical
reserve
Reversionary
bonus
Reversionary
bonus
Total
guaranteed
bonus
£000
%
%
%
Life Unitised With-
profit Series 1
79,420
3.00%
3.00%
3.00%
500
Life Unitised With-
profit Series 2 to 7
63,890
0.00%
0.00%
-
500
Portfolio Bond 1
10,367
1.00%
1.00%
-
500
Pensions Unitised
With-profit Series 1
2,089,813
0.00% (1)
4.00% (2)
0.00% (1)
4.00% (2)
0.00% (1)
4.00% (2)
525, 535
Pensions Unitised
With-profit Series 2
(PRA, FIP, PPP &
FSAVC)
72,707
0.00% (1)
0.00% (2)
0.00% (1)
0.00% (2)
-
-
525, 535,
570
Pension Capital
Accounts (EPP &
PTP)
41,019
1.50% (1)
5.00% (2)
1.50% (1)
5.00% (2)
-
-
525, 535
Pension Capital
Accounts
(GMP VGPPP,
Penfund and TTP)
12,718
0.00% (1)
5.00% (2)
0.00% (1)
5.00% (2)
-
-
535
Deposit administration
(VGF, CPP and
Plan32)
21,613
5.00%
5.00%
-
545 555
Life Conventional
With-profit
12,084
0.00%
0.00%
-
100, 120,
165, 205
Profit Sharing Account
(EPP and PTP)
287,025
0.00%
0.00%
-
155
Notes:
1. Bonus rate applies to initial units where applicable.
2. Bonus rate applies to ordinary units where applicable.
The basic mathematical reserves in the above tables are the gross mathematical reserves
calculated in accordance with paragraph 4 and exclude the special reserves and capital
requirements detailed in paragraphs 5 to 8.
NATIONAL PROVIDENT LIFE LIMITED
83
APPENDIX 9.4A
NATIONAL PROVIDENT LIFE LIMITED
1. Introduction
(1) Valuation Date
The valuation date is 31 December 2014.
(2) Previous Valuation
The previous valuation date was 31 December 2013.
(3) Interim Valuations
An interim valuation was carried out on 30 June 2014.
2. Assets
(1) Economic Assumptions For Valuing Non-Profit Business
The economic assumptions for non-profit policies are as follows:
Current valuation
Previous valuation
Gross investment return
See below
See below
Risk discount rate
See below
See below
RPI Inflation
2.80%
3.20%
Expense inflation
3.80%
4.20%
A market-consistent valuation was used to determine the value of future profits on non-
profit insurance contracts written within the National Provident Life Limited Fund. These
were based on a zero coupon gilt yield curve plus 10 basis points as at the valuation
date.
Earned rates of return were assumed to be annual forward yields derived from the
curve, net of tax and investment fees.
NATIONAL PROVIDENT LIFE LIMITED
84
The risk free yield curves (gilt yield curve plus 10 basis points) were:
Implied zero curve (gilts + 10bp) spot rates
Year
Zero curve
31 December
2014
31 December
2013
1
0.42%
0.50%
2
0.66%
0.89%
3
0.89%
1.31%
4
1.10%
1.71%
5
1.29%
2.08%
10
1.95%
3.31%
15
2.36%
3.79%
20
2.62%
3.91%
25
2.74%
3.93%
30
2.75%
3.90%
35
2.71%
3.85%
40
2.65%
3.81%
(2) Amount Determined Under INSPRU 1.3.33R(2)
Not applicable.
(3) Valuation Of Contracts Written Outside The Fund
Not applicable.
(4) Different Sets Of Assumptions
Not applicable.
NATIONAL PROVIDENT LIFE LIMITED
85
3. With-Profits Benefit Reserve Liabilities
(1) Calculation Of With-Profits Benefits Reserve
A retrospective method has been used to calculate the with-profit benefits reserves for
all significant classes of with-profit insurance contracts. This method is the calculation
of an asset share.
The following table shows the method used to calculate the with-profit benefits reserve
for each class of product and the amount of the with-profit benefits reserve and the
future policy related liabilities for each class:
Product class
With-profits
benefits reserve
£million
Future policy related
liabilities
£million
Conventional with-profit life
2
6
Conventional with-profit pensions
130
270
Accumulating with-profit with
guaranteed bonuses
1299
816
Accumulating with-profit with no
guaranteed bonuses
144
7
Capital Account/Deposit
Administration
74
3
Total
1,649
1,102
(2) Correspondence With Form 19
The future policy related liabilities shown at line 49 in Form 19 also include allowance
for financing costs of £127.2 million, £35.2 million of other long-term insurance liabilities
and £102.9 million surplus as a liability to shareholders within the other long term
liabilities.
(3) With-Profits Benefits Reserves below De Minimis Limit
Not applicable.
(4) Types Of Products
Not applicable.
NATIONAL PROVIDENT LIFE LIMITED
86
4. With-Profits Benefits Reserve – Retrospective Method
(1) Retrospective Methods
(a) 100% of the with-profit benefits reserve that has been calculated using a retrospective
method has been calculated on an individual basis.
(b) Not applicable.
(c) Not applicable.
(2) Significant Changes To Valuation Method
(a) Not applicable.
(b) Not applicable.
(3) Expense Allocation
The Schedule 2C Scheme (the “Demutualisation Scheme”) effected at the time of the
demutualisation, 1 January 2000, specifies the calculation basis for determining the
aggregate expenses to be charged to the fund in respect of administration and
investment management. The administration expenses are expressed as an amount
per policy or per benefit, with the policy and benefit counts calculated as at 1 July each
year. Investment management expenses are expressed as a percentage of funds
under management. Expenses that are not deemed to be administration or investment
management expenses can only be charged to the fund if deemed appropriate by the
National Provident Life Limited Actuarial Function Holder and With-Profits Actuary.
(a) The calculation of the administration expenses chargeable to the fund was last
performed as at 1 July 2014.
(b) The calculation of the administration expenses chargeable to the fund is performed
annually.
(c) (i) No expenses were identified as initial expenses.
(ii) A table of maintenance expenses allocated to the with-profit benefit reserves during
2014:
Maintenance
expenses,
£m
Investment
management
expenses, £m
Conventional with-profit life
0.1
0.0
Conventional with-profit pensions
0.8
0.1
Accumulating with-profit with
guaranteed bonuses
8.2
1.2
Accumulating with-profit with no
guaranteed bonuses
0.9
0.2
Capital Account/Deposit
Administration
0.5
0.1
Total
10.5
1.6
NATIONAL PROVIDENT LIFE LIMITED
87
The maintenance expenses above are in line with the Demutualisation Scheme.
(iii) For conventional with-profit policies, the expenses charged to individual with-profit
benefits reserves are the maintenance expenses expressed as per policy amounts,
together with investment management expenses expressed as a percentage of the
with-profit benefits reserves. The maintenance expenses vary by product line, as set
out in the Demutualisation Scheme.
For unitised with-profit, capital account and deposit administration policies, an
allowance for expenses is made through the annual management charge expressed as
a percentage of the with-profit benefits reserves rather than the per policy amount set
out in the Demutualisation Scheme.
(iv) Additional maintenance expenses were charged to the fund in respect of non-profit
and unit-linked business of £7.8m. Including the investment management fees of £1.6
million charges to with-profits asset share, investment management fees of £3.8 million
were charged to the fund.
The following table shows the expense amounts charged to the fund in addition to the
administration expenses and investment management fees. None of these expenses
were charged to the with-profit benefits reserves.
Additional expenses,
£m
Audit fees
0.12
Regulatory fees
0.15
Securitised loan/Bank of Ireland administration costs
0.50
Charge for AFH and WPA services
0.29
Other Expenses
0.17
Total
1.22
(4) Significant Charges
A charge of 2% was deducted from the with-profit benefits reserves during the financial
year and held in an earmarked account in accordance with the management actions
described below. Smoothing account recharges of £0.7 million were credited to the
with-profit benefits reserves during the financial year. For the previous financial year, a
similar charge of 2% was deducted from the with-profit benefits reserves and held in the
earmarked account. Smoothing recharges of £0.8 million were credited to the with-
profit benefits reserves during the previous financial year.
(5) Charges For Non-Insurance Risk
No charges were deducted from the with-profit benefits reserves in respect of non-
insurance risk.
NATIONAL PROVIDENT LIFE LIMITED
88
(6) Ratio Of Claims To Reserve
The average claim to with-profit benefit reserve payout ratio for each year is shown in
the table below:
Average Claim Payout Ratio (%)
Year
Payout Ratio
2014
123%
2013
123%
2012
120%
(7) Allocated Return
The investment return allocated to the with-profit benefits reserve for Capital Account
and Deposit Administration business in respect of the financial year was 6.36%. The
investment return in respect of Capital Account and Deposit Administration business is
calculated from the assets hypothecated to that business.
Following a change of practice in February 2014, a different asset backing now applies
for a subset of unitised with-profits business compared to the remainder of the fund.
Unitised with-profits policies that have a minimum annual bonus rate of zero are backed
with a higher proportion of equity and property than for other classes of business. The
investment return allocated to the with-profits benefits reserve for these policies in
respect of the financial year was 7.24%. The investment return allocated to the with-
profits benefits reserve for other business in respect of the financial year was 5.21%.
NATIONAL PROVIDENT LIFE LIMITED
89
5. With-Profits Benefits Reserve – Prospective Method
(1) Key Assumptions
Not applicable.
(2) Different Sets Of Assumptions
Not applicable.
6. Costs of Guarantees, Options and Smoothing
(1) De Minimis Limit
Not applicable.
(2) Valuation Methods For Guarantees etc.
(a) The following table shows the valuation methods and the type of data used to calculate
the cost of guarantees, options and smoothing for NPLL business:
Business
Method used
Proportion of contracts
valued on an individual
basis
Proportion of
contracts
valued on a
grouped basis
All business
except for
Pension Transfer
Plan (GMP
underpin)
Full stochastic model
0%
100%
Pension Transfer
Plan (GMP
underpin)
Deterministic model which
calculates time value of
Guaranteed Minimum
Pension (GMP) underpin
using a closed form solution
which is a modified Black-
Scholes formula for valuing
swaptions.
100%
0%
(b) (i) Not applicable.
(ii) 100% of the with-profits insurance contracts for which costs have been valued using
a full stochastic model have been valued on a grouped basis.
(iii) The individual policies have been grouped in a manner consistent with the methods
used in practice to determine reversionary and terminal bonuses and MVAs. There are
separate groupings for product lines that have separate bonus series or have separate
terminal bonus scales. Product lines where the terminal bonus scales are determined in
practice according to the policy year of entry are grouped accordingly.
The following table sets out the grouping criteria used for each product class:
NATIONAL PROVIDENT LIFE LIMITED
90
Product class
Grouping criteria
Conventional with-profit life
Entry year and maturity year
Conventional with-profit pensions
Entry year, maturity year, age at maturity
and premium payment type
Accumulating with-profit life
Entry year
Accumulating with-profit pensions
Maturity year and age at maturity
Capital Account
Maturity year and age at maturity
Deposit Administration
Maturity year
In total there are 242,322 individual policies and members of group schemes, which
have been grouped together into 21,538 model points.
The grouping is validated by comparing the cost of guarantees from the business using
grouped data with those obtained using the individual policy data.
(c) Not applicable.
(3) Significant Changes
No significant changes were made to the valuation method for valuing cost of
guarantee, option or smoothing since the previous valuation.
(4) Further Information on Stochastic Approach
(a) (i) The main contractual guarantee costs valued are:
Lump sum benefits, where the sum assured and attaching reversionary bonuses, plus
any guaranteed or discretionary future reversionary bonuses, is payable either at
maturity, death or at points where no MVA can be applied. The vast majority of these
guarantees are in the money.
The Pension Transfer Plan product includes, for a large proportion of cases, a
commitment to pay a pension of at least the amount of the attaching Guaranteed
Minimum Pension. These guarantees are largely in the money.
The non-contractual guarantee costs valued are:
The Mortgage Endowment Promise where National Provident Life Limited will pay an
amount at least equal to the mortgage the policy was originally taken out to cover,
subject to certain conditions on the fund’s investment performance. These guarantees
are largely in the money.
The costs of financial options relate to:
Guaranteed annuity rates applying on Deposit Administration business, where a
guaranteed annuity rate specified in the contract can be applied at retirement to convert
the cash benefits into annuity benefits. Generally, these annuity rate guarantees are in
the money.
The cost of smoothing arises due to the policy of constraining the change in payouts
from year to year. This acts as a constraint on targeting payouts to 100% of asset
share.
(ii) The asset model assumes that:
The asset model used was the Barrie & Hibbert market consistent asset model which
assumes that:
NATIONAL PROVIDENT LIFE LIMITED
91
The interest rate calibration process is as follows:
Interest rates follow an annual LIBOR market model on gilts + 10 basis points.
The initial yield curve is a direct input to the LIBOR Market Model. The model
calibration is based on the market spot rates and swaption volatilities. The
interest rate volatilities are calibrated to swaption implied volatilities. The fitting
method is weighted least squares over the swaption volatility surface.
The equity model has been calibrated to implied volatilities on at-the-money
FTSE options. As equity returns are calculated in excess of the short-term
interest rate, the stochastic interest-rate model introduces a term structure of
implied volatility (even though the excess volatility is fixed).
It is not currently possible to observe meaningful option prices for the property
market from which implied levels of property volatility can be derived. A real
world estimate of levels of volatilities has therefore been used in the market-
consistent calibration. Ideally, the volatility parameter would be set to reflect
the prices of long-term at-the-money property options. However, since this
market is in its infancy, the parameter has been set to 13.1% based on analysis
of historic volatility of property indexes. As property returns are calculated in
excess of the short-term interest rate, the stochastic interest rate model
introduces a term structure of implied volatility (even though the excess volatility
is fixed).
The corporate bond process is calibrated using real world unconditional
estimates of long term transition probabilities, spread volatilities and corporate
bond spreads at 31 December 2014. To fit the model, the fit is targeted to the
average duration of 10 years with the spread of 67 basis points which reflects
the average rating and duration on the bonds in the actual portfolio.
The following table shows the market data used to calibrate the equity process.
Implied volatility of at the money FTSE-100 put options (%)
Option Term
1 year
2 years
3 years
4 years
5 years
31 December 2014
16.70%
17.90%
18.90%
19.60%
20.30%
Source: Barrie and Hibbert
The correlation assumptions used are listed in the table below. These assumptions are
derived from Barrie & Hibbert best estimate assumptions.
Correlation factors between asset classes
Equity
Property
Government
bonds
Nominal
short-
rate
Equities
100%
36%
15%
-11%
Property
100%
10%
-10%
Source: Barrie and Hibbert
(iii) The following table shows the annualised compound equivalent of the risk free rate
assumed for each duration and values derived from the asset model of specified assets/options:
NATIONAL PROVIDENT LIFE LIMITED
92
Asset type (all UK assets)
K=0.75
K=1
K=1.5
n
5
15
25
35
5
15
25
35
5
15
25
35
r
Annualised compound equivalent of
the risk free rate assumed for the
period (to two decimal places)
1.32%
2.35%
2.71%
2.68%
x
x
x
x
x
x
x
x
1
Risk-free zero coupon bond
£936,524
£705,578
£512,041
£396,017
x
x
x
x
x
x
x
x
2
FTSE All Share Index (p=1)
£78,566
£202,617
£315,298
£399,118
£179,222
£340,744
£484,380
£583,193
£520,647
£692,282
£865,026
£987,112
3
FTSE All Share Index (p=0.8)
£75,599
£178,655
£257,770
£312,345
£172,861
£300,942
£398,242
£458,086
£504,100
£616,103
£717,115
£779,305
4
Property (p=1)
£24,680
£92,012
£171,563
£233,951
£121,712
£225,038
£330,958
£408,970
£511,490
£603,881
£726,553
£819,215
5
Property (p=0.8)
£22,604
£72,306
£122,234
£157,367
£114,674
£184,187
£246,958
£288,598
£493,451
£520,142
£571,416
£605,403
6
15 year risk free zero coupon
bonds (p=1)
£29,678
£47,819
£33,266
£36,341
£95,008
£112,696
£106,543
£146,482
£501,400
£501,242
£513,965
£552,350
7
15 year risk free zero coupon
bonds (p=0.8)
£28,171
£39,866
£23,025
£18,533
£89,780
£89,811
£56,194
£60,944
£481,956
£404,151
£343,130
£332,696
8
15 year corporate bonds (p=1)
£30,872
£54,973
£49,844
£61,544
£100,352
£134,606
£136,992
£174,756
£501,325
£504,477
£517,127
£558,455
9
15 year corporate bonds (p=0.8)
£29,293
£44,921
£33,028
£31,987
£94,958
£107,562
£84,145
£90,529
£481,881
£411,193
£353,812
£347,899
10
Portfolio of 65% FTSE All Share
and 35% property (p=1)
£44,587
£138,815
£232,722
£310,658
£134,610
£265,467
£389,421
£483,453
£506,821
£616,515
£766,521
£879,898
11
Portfolio of 65% FTSE All Share
and 35% property (p=0.8)
£42,242
£118,224
£182,365
£232,422
£128,285
£227,721
£308,587
£365,088
£488,834
£538,099
£617,155
£673,996
12
Portfolio of 65% equity and 35%
15 risk free zero coupon bonds
(p=1)
£37,970
£115,918
£189,669
£264,090
£124,929
£234,015
£335,220
£423,530
£501,182
£580,442
£700,427
£799,601
13
Portfolio of 65% equity and 35%
15 risk free zero coupon bonds
(p=0.8)
£35,853
£97,278
£144,962
£193,423
£118,767
£198,487
£258,418
£314,109
£482,431
£501,087
£555,050
£602,517
14
Portfolio of 40% equity, 15%
property, 22.5% 15 year risk free
zero coupon bonds and 22.5% 15
year corporate bonds (p=1)
£20,273
£69,971
£122,607
£180,883
£97,433
£175,785
£251,359
£327,466
£499,922
£536,549
£621,533
£702,058
15
Portfolio of 40% equity, 15%
property, 22.5% 15 year risk free
zero coupon bonds and 22.5% 15
year corporate bonds (p=0.8)
£18,781
£55,235
£86,719
£120,970
£91,330
£141,958
£181,509
£225,574
£480,651
£451,220
£470,109
£503,422
L=15
L=20
L=25
16
Receiver swaptions
26.52%
21.25%
18.84%
15.89%
31.98%
26.80%
23.65%
19.62%
37.32%
31.91%
27.81%
22.68%
The credit model used to determine the realistic balance sheet is implemented within the ALM. This model includes bonds based on the duration
of the liabilities and the average credit quality of the corporate bond portfolio; it does not have the functionality to reproduce the corporate bond
returns required for the above table (i.e. all bond holdings have a rolling duration of 15 years and all corporate bond holdings are AA-rated). The
credit model in the ALM is driven by a credit risk driver from the ESG’s credit model, and the underlying credit model behind both the ESG and
the ALM is the extended version of the Jarrow, Lando and Turnbull (JLT) model. Hence we have used output from the credit model in the ESG to
produce the results in the above table.
NATIONAL PROVIDENT LIFE LIMITED
93
(iv) The equity dividend yield has been set to 3.54% and the property rental yield has
been set to 4.30%.
(v) For the purposes of INSPRU 1.3.63R there are no significant overseas territories.
(vi) The average outstanding durations of significant guarantees by main product type
are shown in the table below:
Product type
Outstanding duration of guarantees
(years)
Endowments
3
UWP with guaranteed bonuses
9
UWP with nil guaranteed bonuses
7
Profit Sharing Account
6
Capital Account/Deposit
Administration
5
The fit of the asset model to specimen swaptions and put options is demonstrated
below:
Ratio of simulated swaption values to pseudo swaption prices
Option
maturity
Swap length
10 years
15 years
20 years
30 years
10 years
101.75%
98.35%
95.60%
92.28%
15 years
100.97%
98.46%
96.48%
94.38%
Note: The figures are based on swaptions consistent with the gilts + 10bp risk free rate
and market swaption volatilities as opposed to swap rates and swaption volatilities.
As the guarantees are most significant for the UWP business, the table above
demonstrates that the scenarios can be used to reproduce market prices of swaptions
at the average outstanding durations of significant guarantees.
(vii) It was demonstrated that the scenarios used are arbitrage free up to suitable
simulation error. In a market-consistent model, the expected value (or average
discounted value) of £1 invested in cash, gilts, property or equities equals £1 (the
“one=one” test). The observed error was small and the scenarios are considered to
have passed the no-arbitrage test. Corporate bond returns exhibit positive drift, which is
addressed by calibrating the credit model to the average spreads of the credit assets
held in the portfolio rather than using the standard Barrie & Hibbert calibration. This
significantly reduces the observed drift and an additional reserve is then held to allow
for the effect of the remaining drift.
(viii) The assets and liabilities have been computed using 2000 (1000 antithetic pairs of)
simulated scenarios.
Convergence tests were carried out to show the average cost of guarantees calculated
by the model against the number of scenarios and it was found that the NPLL fund
guarantee costs converge well within 2000 scenarios, from which we can conclude that
2000 scenarios are sufficient.
(b) Not applicable.
NATIONAL PROVIDENT LIFE LIMITED
94
(c) Not applicable.
(5) Management Actions
The terms of the Demutualisation Scheme required a Life Capital Account to be
maintained within the shareholder fund of NPLL and two Capital Funds (the Loan
Capital Fund and the Transfer Capital Fund) to be maintained within the long term fund.
The Demutualisation Scheme included the possibility of drawing down money from the
Life Capital Account to the Capital Funds, which occurred in 2002.
At 31 December 2014 the remaining capital is held in the Transfer Capital Fund.
(a) The management actions implemented within the model as at 31 December 2014
stipulate that any asset share charge in each year would be equal to any realistic basis
deficit assuming no management actions were to be applied. For the purpose of
realistic balance sheet, we have assumed an annual maximum charge of 2% of asset
shares (subject to an overall cap of 25%). No other management actions were
assumed.
Any charges to asset shares will be accumulated in a separate account, the “Asset
Share Charge Fund”, which will not be used to pay for guarantees unless the overcoat
has been exhausted. The Asset Share Charge Fund could also be used to pay for the
financing costs, but only if the cash estate is exhausted.
This treatment of charges means that the balance of the Asset Share Charge Fund
would be rebated to asset shares if it later became apparent that the prior years’
charges had been too large. The Asset Share Charge Fund is considered as a
contingent liability; effectively an amount payable to asset shares and hence to
policyholder benefit.
(b) The estimated proportions of equities (both UK and non-UK) backing the with-profit
benefits reserves are as follows:
31 December
2014
31 December
2019
31 December
2024
Proportion of equities backing
with-profit benefits reserves
5%
4%
4%
These proportions apply in each of the three scenarios.
Current reversionary bonus rates on UWP Life business are 3% on Series I units and
0% on Series II to Series VII units. Current reversionary bonus rates are 4% on
Pensions UWP Series I ordinary units and 0% on both Pensions UWP Series I initial
units and Series II ordinary units. These rates are not expected to change in the future
and the modelling assumes that this is the case.
NATIONAL PROVIDENT LIFE LIMITED
95
(6) Persistency Assumptions
The persistency assumptions used to determine the costs of guarantees, options and
smoothing are outlined in the following table.
Product
Average lapse / surrender / paid up
rate for the policy years
All Durations
CWP savings endowment
surrender
0.80%
CWP target cash
endowment
surrender
0.80%
UWP bond
surrender
5.50%
UWP bond
automatic
withdrawal
100% of current
UWP ind pension regular
premium
PUP
15.00%
UWP ind pension regular
premium
surrender
4.50%
UWP ind pension single
premium
surrender
1.40%
Note: the “UWP ind pension regular premium” surrender rate is assumed for single and
regular premium UWP non-DSS pensions. The “UWP ind pension single premium”
surrender rate is assumed for UWP DSS pensions.
100% take up rate is assumed on all guaranteed annuity options or guaranteed
conversion options.
The annuitant mortality tables used to determine the cost of guaranteed annuity options
is 102.5% of RMV00 for male lives and 102.5% of RFV00 for female lives.
Future mortality improvements use the CMI Working Paper 63 Mortality Projection
Model (published in February 2013) blending historic improvement data with a long term
annual improvement assumption of 2% up to age 75 reducing linearly to 0% at age 110.
(7) Policyholders’ Actions
There is no allowance for any actions that would be taken by policyholders in the
projection of the assets and the liabilities.
NATIONAL PROVIDENT LIFE LIMITED
96
7. Financing Costs
The future policy related liabilities also include allowance for a number of financing
arrangements:
Breakdown of financing costs in Form 19 (F19 L45)
£m
Securitised loan
109.6
Earmarked Portfolio
7.0
Shareholder equalisation fund
0
Capital funds
10.6
Financing costs
127.2
(1) Securitised loan
Future profits from a particular block of accumulating with-profit and unit linked business
have been securitised. The repayments to the bondholders follow a fixed payments
schedule until 2023 and are met from the surplus arising on the securitised block of
business. The nominal amount outstanding currently stands at £94 million and nominal
amount outstanding including interest payments currently stands at £126.4 million,
where interest payments are calculated at 7.59730% for the Class A2 bonds (the Class
A1 bonds have been repaid in full as at September 2012). The stochastic model tests
whether the surplus on the appropriate classes of business is sufficient to meet the
scheduled payment, and the cashflows are then discounted using the scenario specific
discount rates. The expected market consistent value of the amounts to be repaid is
£109.6 million.
(2) Capital funds
At the time of the demutualisation in December 2000, £800 million of capital support
was provided to National Provident Life Limited. This support was subsequently passed
to the long-term fund.
Repayments of capital and of the accumulated investment return are made according to
a formula in the Demutualisation Scheme, but only to the extent that a “deficit” has not
arisen. A deficit in this context exists when, and to the extent that, in the opinion of the
Actuarial Function Holder, the admissible value of the assets in the long-term fund falls
short of the greater of:
(a) The liabilities in the long term fund; and
(b) Amounts determined by the Actuarial Function Holder as necessary to be held in the
long-term fund to meet Policyholders Reasonable Expectations (PRE) and to manage
the fund in accordance with the Principles of Financial Management (as described in the
Demutualisation Scheme).
Support charges of up to 1.75% per annum are payable provided there is a Form 58
surplus arising or there would be a surplus arising but for the payment of the support
charge.
The balance on the Transfer Capital Fund at 31 December 2014 is £180.5 million. At 31
December 2013 the balance was £156.1 million.
Currently no repayments of capital or of accumulated investment returns are being
made.
NATIONAL PROVIDENT LIFE LIMITED
97
The stochastic model assumes that repayment occurs in accordance with the rules
governing the repayment as set out in the Demutualisation Scheme. The expected
amount to be repaid is £0.002 million: this amount excludes the support charges.
The value of the capital funds of £10.6 million shown above represents the value of the
future support charges to be paid on the capital funds and is net of tax on investment
income on the overcoat funds of £0.70 million. The tax amount is reported in line 47 of
Form 19.
(3) Shareholder Equalisation Fund
At the time of NPLL’s transfer of the SERP business to PLAL, a “Shareholder
Equalisation Fund” was established in the long term fund of NPLL by way of an
amendment to the Demutualisation Scheme. The initial value of the Shareholder
Equalisation Fund was determined on a basis defined in the Demutualisation Scheme
and will be released to shareholders over time unless it is required to meet guarantee
benefits. The releases are contingent on the solvency of the fund, and at the valuation
date no amounts were assumed to be payable.
(4) Earmarked portfolio
The earmarked portfolio is a pool of assets provided by the shareholder, which have
been placed in the long-term fund. This portfolio is not available for distribution to the
with-profit policyholders as distributable estate.
The earmarked portfolio includes a loan of £52 million which is subject to a financing
charge of 4.75% per annum plus the investment return on the assets. The value of the
financing costs in respect of this loan at the valuation date amounts to £7.0 million.
NATIONAL PROVIDENT LIFE LIMITED
98
8. Other Long-Term Insurance Liabilities
A breakdown of the other long-term insurance liabilities is set out below.
Other Long-Term Insurance Liabilities at 31
December 2014 (£m)
Liability
Value
Potential amount of future tax and investment
expenses charged to the estate and overcoat
8.1
An additional liability to shareholders as described in
paragraph 3 (2)
102.9
The reserve in respect of MVAs on Portfolio Bond 1
switches, on business reassured to Phoenix Life
Assurance Limited, where the National Provident Life
Fund cannot pass this cost onto the policyholders;
1.0
Additional Expense Reserve
21.8
Data provision
0.8
Outstanding premiums
(0.0)
Other Provisions
3.7
Total
138.1
Form 19 Line 47
138.1
No provisions have been included in respect of ‘Any other liabilities related to regulatory
duty to treat customers fairly’.
9. Realistic Current Liabilities
The regulatory current liabilities comprise of the other current liabilities as reported
within Form 14 lines 17 to 41.
The realistic current liabilities of £135.9 million shown at line 51 of Form 19 are the
same as the regulatory current liabilities except for a reduction by the accruals in
respect of the financing arrangements, to the extent that these are included in the
stochastic model.
The reconciliation of realistic to regulatory current liabilities is shown below:
£m
Regulatory current liabilities
142.9
less subordinated debt accrual
0.0
less securitised loan accrual
7.0
Realistic current liabilities
135.9
NATIONAL PROVIDENT LIFE LIMITED
99
10. Risk Capital Margin
(a) The risk capital margin for National Provident Life Limited at 31 December 2014 is £3.1
million.
The most onerous scenario for National Provident Life Limited is that which combines:
(i) The percentage changes in the market value of equities and real estate for the
purposes of the market risk scenario for UK assets were 20% and 12.5% respectively.
A fall in the market value of these assets was the more onerous in each case.
There were no significant territories for the purposes of INSPRU 1.3.62R(1)(b).
(ii) The nominal change in yields assumed for fixed interest securities for the purpose of
the market risk scenario for UK assets was 0.38%. This represented a change of
17.5% in the level of the long-term gilt yield from a level of 2.19%. A fall in the level of
yields was the more onerous change.
There were no significant territories for the purposes of INSPRU 1.3.62R(1)(b).
(iii) The average increase in spread for bonds (weighted by value) that resulted from
applying the credit risk scenario to the with-profit sub fund’s assets was 72 basis points.
(a) The change in value for the with-profit sub fund bond assets was a
1.63% decrease in asset value.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) There was no change in value for other assets in the with-profit sub
fund.
(iv) The persistency risk scenario resulted in a 2.70% increase in the realistic value of
liabilities.
(v) Not applicable.
(b)
(i) No management actions additional to those described in 6(5)(a) above were
assumed for the purposes of calculating the risk capital margin.
(ii) Not applicable.
(iii) Not applicable.
(iv) Not applicable.
(c)
(i) Assets within the long-term fund do not cover the risk capital margin. The risk capital
margin has been backed by approved fixed interest securities and other assets present
in the shareholder fund.
NATIONAL PROVIDENT LIFE LIMITED
100
(ii) The assets of the Shareholder Fund are available to support the solvency of the
long-term fund. The working capital for the financial year is zero after reflecting the
£102.9 million additional shareholder liability, and following the assumption that some
financing cost liabilities are not payable (as detailed in section 7). Shareholder assets
provide support to the long-term fund via an Earmarked Portfolio subject to an
undertaking given by National Provident Life Limited to the PRA. As at 31 December
2014 the Earmarked Portfolio stood at £92.4 million.
11. Tax
(i) For assets backing the with-profit benefits reserve, policyholder taxes are calculated on
an “I-E” tax basis applicable to BLAGAB business and deducted from the with-profit
benefit reserve. The tax rate assumed was 20% on savings income, rental income and
indexed capital gains. Tax relief on expenses has been assumed to be at 20%. No tax
is assumed on pensions business.
(ii) Allowance is made for the “I-E” tax due on assets needed to back the excess of realistic
liabilities over and above the with-profit benefits reserve and is included in the other
long term insurance liabilities shown in Form 19 line 47.
(iii) The allowance made for tax on the assets backing realistic current liabilities is similar to
that outlined in (ii) above.
12. Derivatives
Broad type of
derivative
Description
Details
Market value
(000 '£)
Nominal
value (000 '£)
Swap
UK Interest Rate Swap
Receiver
138,112
836,798
Swap
UK Interest Rate Swap
Payer
(162,320)
(813,358)
Swap
Inflation indexed swaps
Receiver of
RPI
751
98,623
Currency Forwards
Currency Forwards
Buy GBP
72
(11,286)
Total Return Swap
Total Return Swap
5,523
(43,000)
Future Gilt
Future Gilt
(798)
(34,100)
NATIONAL PROVIDENT LIFE LIMITED
101
13. Analysis of Working Capital
The following table sets out the significant movements in the working capital, shown in
Form 19 line 68, from 31 December 2013 to 31 December 2014.
£ million
Working capital at 31 December 2013
0.0
Opening zeroisation impact
103.6
Model and methodology changes
16.8
Assumption changes – Non economic
2.5
Roll forward:
Expected return and other movements
5.1
Investment returns:
Equity variance
(0.8)
Property variance
(0.1)
Impact of change in fixed interest yields
7.7
Variance due to credit spreads
(17.1)
Miscellaneous:
Actual policy movements differing from expected
0.4
Other
(9.3)
Unexplained
(5.9)
Closing zeroisation impact
102.9
Working capital at 31 December 2014
0.0
14. Optional Disclosure
Not applicable.
Returns under the Accounts and Statements Rules
Statement of information on the actuary who has been appointed to perform the with-
profits actuary function as required by rule 9.36
NATIONAL PROVIDENT LIFE LIMITED
Global Business
Financial year ended 31 December 2014
102
Throughout the year, the actuary who was appointed to perform the with-profits actuary
function was Mr K J Arnott.
1 (a) During the year, K J Arnott held up to 865 shares in Phoenix Group Holdings (“PGH”),
the ultimate holding company, under the Company’s Share Incentive Plan. He also
held options to subscribe for up to 66,072 shares in PGH granted under the
Company’s Deferred Bonus Scheme and Long Term Incentive Plan.
(b) Mr Arnott had no other pecuniary interest with the insurer during the period.
(c) The aggregate of the remuneration and value of other benefits receivable by K J
Arnott from the insurer in respect of 2014 was £457,570 including the proceeds from
the vesting of options to subscribe for shares in PGH granted under Company’s Long
Term Incentive Plan.
(d) Mr Arnott was a member of the PGL Pension Scheme throughout the year, and was
entitled to the standard benefits under the rules of the scheme.
2 The insurer has made a request of Mr Arnott to furnish to it the particulars specified in
rule 9.36(1) of IPRU(INS). The above particulars were obtained from the insurer’s
Human Resources records with the permission of Mr Arnott.
Note 1
Under rule 9.36(4) of IPRU(INS), reference to the insurer includes reference to any body
corporate which is the insurer’s subsidiary undertaking or parent undertaking and to any other
subsidiary undertakings of its parent undertaking.
Returns under the Accounts and Statements Rules
Independent auditor’s report to the directors pursuant to rule 9.35 of the Interim
Prudential Sourcebook for Insurers
NATIONAL PROVIDENT LIFE LIMITED
Global business
Financial year ended 31 December 2014
104
We have audited the following documents prepared by the insurer pursuant to the Accounts
and Statements Rules set out in Part I and Part IV of Chapter 9 to IPRU(INS) the Interim
Prudential Sourcebook for Insurers, GENPRU the General Prudential Sourcebook and INSPRU
the Prudential Sourcebook for Insurers (“the Rules”) made by the Prudential Regulation
Authority under section 137G of the Financial Services and Markets Act 2000:
Forms 2, 3, 13 to 19, 40 to 44, 48, 49, 58 and 60 (including the supplementary notes) (“the
Forms”);
the statement required by IPRU(INS) rule 9.29 (“the statement”); and
the valuation reports required by IPRU(INS) rule 9.31 (“the valuation reports”).
We are not required to audit and do not express an opinion on:
Forms 46, 47, 50 to 54, 57, 59A and 59B (including the supplementary notes);
the statements required by IPRU(INS) rules 9.30 and 9.36; and
the certificate required by IPRU(INS) rule 9.34(1).
This report is made solely to the insurer’s Directors, in accordance with IPRU(INS) rule 9.35.
Our audit work has been undertaken so that we might state to the insurer’s Directors those
matters we are required by the Rules to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the insurer for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of the insurer and its auditor
The insurer is responsible for the preparation of an annual return (including the Forms, the
statement and the valuation reports) under the provisions of the Rules. The requirements of the
Rules have been modified by the direction on 6 December 2012 made by the Prudential
Regulation Authority under section 138A of the Financial Services and Markets Act 2000 and,
referred to in supplementary note 0201. Under IPRU(INS) rule 9.11 the Forms, the statement
and the valuation reports are required to be prepared in the manner specified by the Rules and
to state fairly the information provided on the basis required by the Rules. The methods and
assumptions determined by the insurer and used to perform the actuarial investigation as set
out in the valuation reports are required to reflect appropriately the requirements of INSPRU 1.2
and 1.3.
It is our responsibility to form an independent opinion as to whether the Forms, the statement
and the valuation reports meet these requirements, and to report our opinion to you. We also
report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have
not been received from branches not visited by us; or
the Forms, the statement and the valuation reports are not in agreement with the
accounting records and returns; or
we have not received all the information we require for our audit.
