entire - Deutsche Bank Annual Report 2012

Deutsche Bank 02 – Consolidated Financial Statements 320
Financial Report 2010 Additional Notes
39 – Insurance and Investment Contracts
Interest Rates
Interest rates are used that reflect a best estimate of future investment returns taking into account the nature
and term of the assets used to support the liabilities. Suitable margins for default risk are allowed for in the
assumed interest rate.
Mortality
Mortality rates are based on published tables, adjusted appropriately to take into account changes in the
underlying population mortality since the table was published, company experience and forecast changes in
future mortality. If appropriate, a margin is added to assurance mortality rates to allow for adverse future
deviations. Annuitant mortality rates are adjusted to make allowance for future improvements in pensioner
longevity. Improvements in annuitant mortality are based on a percentage of the medium cohort projection
subject to a minimum of rate of improvement of 1.25 % per annum.
Costs
For non-linked contracts, allowance is made explicitly for future expected per policy costs.
Other Assumptions
The take-up rate of guaranteed annuity rate options on pension business is assumed to be 64 % for the year
ended December 31, 2010 and 60 % for the year ended December 31, 2009.
Key Assumptions impacting Value of Business Acquired (VOBA)
The opening VOBA arising on the purchase of Abbey Life Assurance Company Limited was determined by
capitalizing the present value of the future cash flows of the business over the reported liability at the date of
acquisition. If assumptions were required about future mortality, morbidity, persistency and expenses, they were
determined on a best estimate basis taking into account the business’s own experience. General economic
assumptions were set considering the economic indicators at the date of acquisition.
The rate of VOBA amortization is determined by considering the profile of the business acquired and the expected
depletion in future value. At the end of each accounting period, the remaining VOBA is tested against the future
net profit expected related to the business that was in force at the date of acquisition.
If there is insufficient net profit, the VOBA will be written down to its supportable value.