ANNUAL REPORT AND FINANCIAL STATEMENTS 2011 | 113
37. The extent of risks arising from financial instruments continued
(iv) Interest rate risk The following tables set out the carrying amount and maturity profile of the Group’s financial instruments that are exposed to interest rate risk: Within
Within As at 31 December 2011
Fixed rate: Fixed/Floating Rate Subordinated Notes 2016/2026 Guaranteed Fixed Rate Loan Notes 2016 Financial investments – corporate bonds Financial investments – NIC hedge
Floating rates: Financial investments – NIC hedge Financial investments – mutual funds Cash and cash equivalents – shareholder
As at 31 December 2010
Fixed rate: Fixed/Floating Rate Subordinated Notes 2016/2026 Guaranteed Fixed Rate Loan Notes 2016 Financial investments – corporate bonds Financial investments – NIC hedge
Floating rates: Financial investments – NIC hedge
Cash and cash equivalents – shareholder
––– (125.0) ––– (149.7) –– 0.3 –– 0.1
– –
1.5 –––
178.8 ––– 180.3
– 0.4 (274.7)
(v) Sensitivity analysis The Group has quantified the impact of specific changes in its significant market risk variables. This analysis measures the change in fair value of the Group’s financial instruments.
The sensitivity analysis, which is for illustrative purposes only, is prepared based on financial instruments at the reporting dates. The sensitivity assumes changes in certain market conditions. These assumptions may differ materially from the actual outturn due to the inherent uncertainties in global financial markets. In practice, market risks rarely change in isolation and are likely to be interdependent. The methods and assumptions used are the same for both reporting periods.
The sensitivity analysis has been prepared based on the impact that a set percentage increase or decrease in the market conditions would have on the profit or loss and on total equity.
Changes in exchange rates assume an instantaneous increase or decrease of 10.0% in foreign currency to Sterling rates at the reporting date, with all other variables remaining constant.
The estimated changes in fair values of investments assume a 10.0% increase or decrease in the fair values of investments at the reporting date, with all other variables remaining constant.
Changes in market interest rates assume an increase or decrease of 1.0% in the rate applied to average cash balances in the year.
1 year £m
1-2 years £m
2-5 years £m
Within More than 5 years £m
–– (125.0) –– (149.7) –– 0.3
– – –
0.1 –––
1.2 ––– 0.3 –––
196.9 ––– 198.5
– (274.4) –
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