The table below reports the breakdown of VIF for 2012 and 2011 into its components.

Breakdown of Value in-force as at 31 December 2012 and 2011 (€ mln)
  2012 2011
PVFP before Time Value of FG&O 15,605
Time Value of FG&O -3,224
PVFP after Time Value of FG&O   12,381 11,191
Cost of capital -1,253
Cost of NHR -1,775
Value in-force 9,352

Compared with 2011, the significant increase in the present value of future profits (PVFP) after Time Value of FG&O is mainly explained by the strong recovery in Italy, due to the positive impact on future projected returns following the recovery of the market value of Italian government bonds.

After the allowance for the cost of required capital (impacted by lower risk free reference rates) and  the cost of non hedgeable risks (where the increase is driven by higher risk capital for underwriting risks), the VIF increases to 9,352mln (+24.7% on comparable basis).

The following table shows the expected run-off pattern of VIF emergence across future projection years, grouping discounted distributable profits into 5 year buckets. In particular, the table reports the contribution of each time-bucket’s profits to the total VIF at year-end 2012. The calculation has been performed considering distributable profits (i.e. including the release of required capital) generated by the value in-force and calculated according to a deterministic projection based on “real-world” best estimate assumptions.

Contribution of future years to VIF as at 31 December 2012
  Percentage of VIF Cumulated distribution
Years 1-5 36% 36%
Years 6-10 28%63%
Years 11-15 16%79%
Years 16-20 8%88%
Years 21-25 5%92%
Years 26-30 3%95%
Years 31-onwards 5%100%

The profits emerging within the first 20 years of projection account for 88% of the overall VIF.