Interim Results - Part 4

Aviva PLC 09 August 2006 PART 4 OF 4 Statistical supplement -------------------------------------------------------------------------------------------------------------------- PAGE 74 Segmental analysis of the components of life EEV operating return 6 months ended 30 June 2006 £m Other Rest of UK France Ireland Italy Netherlands Poland Spain Europe the World Total New business contribution (after the effect of required capital) 135 64 8 26 17 12 80 (5) 15 352 Profit from existing business - expected return 236 69 19 14 84 26 27 6 22 503 - experience variances: Maintenance expenses* (1) 4 - (1) (12) 4 (1) - - (7) Exceptional expenses** (75) - (1) - (6) - - (1) - (83) Mortality/Morbidity*** 20 14 (2) - 20 8 - 2 6 68 Lapses^ (35) 5 (5) (2) 4 6 - (3) - (30) Other^^ 24 6 (1) 2 9 5 - (2) - 43 -------------------------------------------------------------------------------------------------------------------- (67) 29 (9) (1) 15 23 (1) (4) 6 (9) - operating assumption changes: Maintenance expenses^^^ - - (10) - - - - - - (10) Exceptional expenses - - - - - - - - - - Mortality/Morbidity - - - - - - - - - - Lapses# - - (7) - - - - - - (7) Other## - - - - 20 - - - - 20 -------------------------------------------------------------------------------------------------------------------- - - (17) - 20 - - - - 3 Expected return on shareholders' net worth 46 34 7 14 49 5 6 - 11 172 -------------------------------------------------------------------------------------------------------------------- Life EEV operating return before tax 350 196 8 53 185 66 112 (3) 54 1,021 ==================================================================================================================== * Maintenance expenses in the Netherlands reflect the impact of expense overruns in Belgium. ** Exceptional expenses in the UK reflect £18 million relating to the ongoing transformation of the life business and £57 million of other exceptional and project costs associated with strategic initiatives, regulatory change and developments designed to increase future new business volumes such as those relating to pensions simplification. *** Mortality experience continues to be better than the assumptions set across many of our businesses, notably for term and protection business in the UK and AFER in France. In addition there is a one-off reserve release associated with the review of a large group pension scheme in the Netherlands. ^ Lapse experience in the UK has been worse than assumed and primarily relates to bonds and pensions. ^^ In the UK, other experience profits include better than assumed default experience on corporate bonds and commercial mortgages. ^^^ Maintenance expenses in Ireland relate to a change in assumptions regarding the future attribution of investment income and expenses between policyholders and shareholders. # In Ireland, the lapse assumption change relates to the Celebration Bond and life linked bonds. ## In the Netherlands, the assumption changes relate to reduced asset management fees and a change in the asset mix in Belgium. -------------------------------------------------------------------------------------------------------------------- PAGE 75 Segmental analysis of the components of life EEV operating return 6 months ended 30 June 2005 £m Other Rest of UK France Ireland Italy Netherlands Poland Spain Europe the World Total New business contribution (after the effect of required capital) 106 48 8 20 18 6 70 - 10 286 Profit from existing business - expected return 206 61 16 16 72 24 23 - 16 434 - experience variances: Maintenance expenses (1) 1 - (1) (6) 3 (2) - (2) (8) Exceptional expenses* (81) 1 (2) - (6) - (1) 1 - (88) Mortality/Morbidity** 41 11 3 - 8 7 (1) - 3 72 Lapses*** (5) (2) (6) (3) (6) - (3) (3) (1) (29) Other^ 15 7 (2) 1 (3) 2 1 - 1 22 -------------------------------------------------------------------------------------------------------------------- (31) 18 (7) (3) (13) 12 (6) (2) 1 (31) - operating assumption changes: Maintenance expenses - - - - - - - - - - Exceptional expenses - - - - - - - - - - Mortality/Morbidity - - - - - - - - - - Lapses - - - - - - - - - - Other^^ - - - - 7 - - - - 7 -------------------------------------------------------------------------------------------------------------------- - - - - 7 - - - - 7 Expected return on shareholders' net worth 49 31 5 14 41 6 5 1 9 161 -------------------------------------------------------------------------------------------------------------------- Life EEV operating return before tax 330 158 22 47 125 48 92 (1) 36 857 ==================================================================================================================== Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union's Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom. * Exceptional expenses in the UK reflect £30 million relating to the ongoing transformation of the Life business and £51 million of other exceptional project costs associated with regulatory change. ** Mortality experience continues to be better than assumed across most of our businesses, and particularly for protection and annuity business in the UK and AFER in France. *** Lapse experience in the UK has been worse than assumed and mainly relates to with-profit bonds. In Ireland, the adverse persistency has mainly arisen on unit-linked pensions business. In the Netherlands the adverse persistency has mainly arisen on group business. ^ In the UK, other experience profits primarily relate to better than assumed default experience on corporate bonds and commercial mortgages. ^^ In the Netherlands, other operating assumption changes mainly relate to the reduction of the guaranteed investment return on certain products in Belgium. -------------------------------------------------------------------------------------------------------------------- PAGE 76 Segmental analysis of the components of life EEV operating return Year ended 31 December 2005 £m Other Rest of UK France Ireland Italy Netherlands Poland Spain Europe the World Total New business contribution (after the effect of required capital) 217 91 13 36 58 14 155 (4) 32 612 Profit from existing business - expected return 425 122 29 30 148 50 48 10 33 895 - experience variances: Maintenance expenses 12 3 (2) (2) 3 5 (2) 1 (4) 14 Exceptional expenses* (151) - (5) - (12) - (2) - - (170) Mortality/Morbidity** 86 29 (1) 2 16 16 5 - 5 158 Lapses*** (78) (4) (9) (4) 2 5 1 (5) 9 (83) Other^ 36 4 (4) 4 (7) 10 2 (2) (1) 42 -------------------------------------------------------------------------------------------------------------------- (95) 32 (21) - 2 36 4 (6) 9 (39) - operating assumption changes: Maintenance expenses (20) - 1 (3) 25 3 1 (6) (9) (8) Exceptional expenses (4) (3) - - (2) - - 1 - (8) Mortality/Morbidity^^ 19 1 (4) 4 (25) 8 - 1 5 9 Lapses^^^ (130) - (8) - (10) - (2) (2) 4 (148) Other# 79 16 - - 67 11 (2) (1) 2 172 -------------------------------------------------------------------------------------------------------------------- (56) 14 (11) 1 55 22 (3) (7) 2 17 Expected return on shareholders' net worth 98 62 10 29 86 10 10 1 23 329 -------------------------------------------------------------------------------------------------------------------- Life EEV operating return before tax 589 321 20 96 349 132 214 (6) 99 1,814 ==================================================================================================================== Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union's Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom. * Exceptional expenses in the UK reflect £47 million relating to ongoing transformation of the life business and £104 million of other exceptional and project costs associated with regulatory change and strategic initiatives. ** Mortality experience continues to be better than assumed across most of our businesses, and particularly for protection business in the UK, AFER and unit-linked business in France and group business in the Netherlands. *** Lapse experience in the UK has been worse than assumed and mainly relates to bonds and pension business. In Ireland, the adverse persistency has mainly arisen on unit-linked pensions business. ^ In the UK, other experience profits includes better than assumed default experience on corporate bonds and commercial mortgages. ^^ Mortality assumptions have been revised in the Netherlands following the publication of new annuitant mortality tables used for group business. ^^^ In the UK, the adverse lapse assumption change reflects a more prudent allowance for future persistency experience in the UK following recent experience. In Ireland, the lapse assumption change mainly relates to unit-linked pension business. Lapse assumption changes in the Netherlands largely relate to group business in the intermediary division. # Other operating assumption changes in the UK primarily relate to the change in annuitant required capital to 150% of required minimum margins which results in a £110 million one-off benefit. In France, other operating assumptions represent an allowance for further tax benefits arising from dividends from subsidiaries. In the Netherlands, they reflect a variety of changes including increased annual management fees on unit-linked contracts, favourable change in asset mix, and the reduction of future guaranteed returns on group pensions business in Belgium. In Poland, it was previously assumed that the introduction of new individual pension products would lead to significant conversion of existing policies. The prudent allowance made for this is no longer required. -------------------------------------------------------------------------------------------------------------------- PAGE 77 Supplementary analyses (a) Analysis of service companies and fund management businesses within embedded value The EEV methodology incorporates the impact of profits and losses arising from subsidiary undertakings providing administration, investment management and other services where these arise in relation to covered business. The principal subsidiaries of the Aviva group providing such services are NU Life Services Limited (UK), Morley Fund Management (UK) and Aviva Gestion d'Actifs (France). The following table provides an analysis of the elements within the life and other related business embedded value: 31 December 30 June 2006 2005 ------------------------------------------- -------------- Fund Management Non-Insurance Total Total £m £m £m £m United Kingdom* 75 (163) (88) (102) France 58 3 61 47 Other Europe and Rest of the World 67 (9) 58 27 -------------------------------------------------------------------------------------------------------------------- 200 (169) 31 (28) ==================================================================================================================== * Reflecting Additional Guidance on EEV Disclosures published by the CFO Forum, the pension scheme deficit is now accounted for on an IAS 19 basis. Consequently, the element that had previously been included within the embedded value of service companies, being the present value of agreed deficit funding arrangements, has been removed. The 'look-through' value attributable to fund management is based on the level of after-tax profits expected to be earned in the future over the outstanding term of the covered business in respect of services provided to the Group's life operations. The EEV basis income statement excludes the actual statutory basis profits arising from the provision of fund management services to the Group's life businesses. The EEV income statement records the experience profit or loss compared to the assumed profitability, the return on the in-force value arising from the unwind at the relevant risk discount rate and the effect on the in-force value of changes to economic assumptions. NU Life Services Limited (NULS) is the main provider of administration services to the UK Life business. NULS incurs substantially all of the UK Life businesses operating expenditure, comprising acquisition, maintenance and project costs. Costs are recharged to the UK Life companies (the product companies) on the basis of a pre-determined Management Services Agreement (MSA) which was negotiated in 1998 and will be reviewed in 2008. The EEV principles 'look-through' the contractual terms of the MSA to the underlying expenses of NULS. Accordingly the actual maintenance expenses and a 'normal' annual level of project expense allowances have been applied to the product companies. Under EEV, any further one-off project expenditure is reported as experience losses when incurred. (b) Pension scheme deficits in the consolidated balance sheet On the consolidated balance sheet, the amount described as Provisions includes the pension scheme deficits and comprises: 30 June 30 June 31 December 2006 2005 2005 £m £m £m Deficits in the staff pension schemes 784 1,220 1,471 Other obligations to staff pension schemes - Insurance policies issued by Group companies 1,057 813 875 -------------------------------------------------------------------------------------------------------------------- Total IAS 19 obligations to staff pension schemes 1,841 2,033 2,346 Other provisions 523 468 529 -------------------------------------------------------------------------------------------------------------------- Provisions 2,364 2,501 2,875 ==================================================================================================================== At 30 June 2006 the Group's overall pension deficit reduced by £687 million to £784 million (gross of tax), benefiting from actuarial gains of £473 million mostly reflecting the favourable impact on the valuation of liabilities of a 30 basis point increase in real interest rates during the period, deficit contributions paid by the company of £135 million, and other items totalling £79 million which include gains on curtailment and finance income. -------------------------------------------------------------------------------------------------------------------- PAGE 78 (c) Long-term savings new business Present value of new business premiums* Annual premium equivalent -------------------------------- ----------------------------------- 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m Life and pensions France 2,028 1,854 3,530 219 202 384 Ireland 558 349 665 80 51 100 Italy 1,583 1,333 2,294 176 145 252 Netherlands (including Belgium, Germany and Luxembourg) 1,170 1,383 2,739 135 159 323 Poland 264 137 320 36 21 47 Spain 916 965 2,013 112 113 240 Other Europe 126 129 240 26 24 51 Continental Europe 6,645 6,150 11,801 784 715 1,397 Asia 252 172 397 43 30 66 Australia 145 160 337 27 31 63 United States 289 222 526 31 28 64 Rest of the World 686 554 1,260 101 89 193 International 7,331 6,704 13,061 885 804 1,590 United Kingdom 5,816 4,312 9,185 746 542 1,156 -------------------------------------------------------------------------------------------------------------------- Total (before the effect of required capital) 13,147 11,016 22,246 1,631 1,346 2,745 ==================================================================================================================== Investment sales Netherlands 211 180 563 21 18 56 Poland 62 26 53 8 4 9 Other Europe 309 237 410 30 24 41 Continental Europe 582 443 1,026 59 46 106 Rest of the World (including Navigator sales) 819 538 1,151 82 54 115 International 1,401 981 2,177 141 100 221 United Kingdom 1,083 513 1,160 125 59 135 -------------------------------------------------------------------------------------------------------------------- Total investment sales 2,484 1,494 3,337 266 159 356 -------------------------------------------------------------------------------------------------------------------- Total long-term savings (including share of associates and joint ventures) 15,631 12,510 25,583 1,897 1,505 3,101 ==================================================================================================================== Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union's Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom. Sales from the Navigator funds administration business, previously excluded from investment sales figures, are now included in the figures above. This change has increased the total investment sales for the six months to 30 June 2006 by £723 million (six months to 30 June 2005: £432 million; full year 2005: £938 million). * Investment sales are calculated as new single premiums plus annualised value of new regular premiums. -------------------------------------------------------------------------------------------------------------------- PAGE 79 (d) Assets under management 31 December 30 June 2006 2005 ------------------------------------------- -------------- General Life and related business business and other Group Group £m £m £m £m Total IFRS assets included in the balance sheet 232,151 38,916 271,067 263,447 Additional value of in-force long-term business 6,345 - 6,345 6,454 -------------------------------------------------------------------------------------------------------------------- Total EEV assets included in the balance sheet 238,496 38,916 277,412 269,901 Third party funds under management: Unit trusts, Oeics, Peps and Isas 16,094 16,188 Segregated funds 38,479 35,427 -------------------------------------------------------------------------------------------------------------------- Total assets under management 331,985 321,516 ==================================================================================================================== Third party funds under management now include funds administered under the Navigator platform. This change has increased the total assets under management at 30 June 2006 by £4,675 million (full year 2005: £4,606 million). General insurance business only: geographical analysis (a) General insurance Operating profit Longer-term investment return Underwriting result ------------------------------ -------------------------------- -------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m £m £m £m France 23 14 26 22 22 44 1 (8) (18) Ireland 88 83 171 25 30 55 63 53 116 Netherlands 74 39 97 23 21 42 51 18 55 Canada 85 67 147 61 53 112 24 14 35 Other 31 41 85 30 32 68 1 9 17 -------------------------------------------------------------------------------------------------------------------- International 301 244 526 161 158 321 140 86 205 United Kingdom 561 431 970 328 325 668 233 106 302 -------------------------------------------------------------------------------------------------------------------- Total 862 675 1,496 489 483 989 373 192 507 ==================================================================================================================== (b) Combined operating ratio analysis - geographical basis - general insurance business only Claims ratio Expense ratio Combined operating ratio ------------------------------ -------------------------------- -------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 2006 2005 2005 % % % % % % % % % France 72.6% 72.3% 73.7% 9.5% 10.3% 12.0% 98% 100% 101% Ireland 52.6% 59.2% 56.8% 11.6% 11.1% 11.6% 74% 80% 78% Netherlands 50.2% 60.0% 60.0% 11.1% 12.9% 12.0% 82% 94% 93% Canada 65.0% 66.4% 66.0% 12.6% 12.5% 11.9% 96% 98% 97% International 62.6% 64.8% 64.3% 11.1% 11.8% 12.2% 91% 94% 94% United Kingdom 58.5% 64.3% 61.8% 11.9% 10.8% 10.9% 92% 96% 96% -------------------------------------------------------------------------------------------------------------------- Total 60.1% 64.5% 62.7% 11.6% 11.2% 11.4% 92% 95% 95% ==================================================================================================================== Ratios are measured in local currency. The total Group ratios are based on average exchange rates applying to the respective periods. Definitions: Claims ratio - Incurred claims expressed as a percentage of net earned premiums. Expense ratio - Written expenses excluding commissions expressed as a percentage of net written premiums. Commission ratio - Written commissions expressed as a percentage of net written premiums. Combined operating ratio - Aggregate of claims ratio, expense ratio and commission ratio. -------------------------------------------------------------------------------------------------------------------- PAGE 80 (c) General insurance business only: class of business analyses (i) United Kingdom Net written premiums Underwriting result Combined operating ratio ------------------------------ -------------------------------- -------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m % % % Personal Motor 889 774 1,641 (33) (14) (40) 105% 102% 102% Homeowner 629 572 1,300 88 25 69 87% 97% 97% Other 348 309 772 9 7 8 98% 96% 100% -------------------------------------------------------------------------------------------------------------------- 1,866 1,655 3,713 64 18 37 97% 99% 100% -------------------------------------------------------------------------------------------------------------------- Commercial Motor 341 364 679 19 17 55 94% 95% 94% Property 434 451 877 113 56 164 76% 85% 84% Other 257 266 563 37 15 46 86% 94% 93% -------------------------------------------------------------------------------------------------------------------- 1,032 1,081 2,119 169 88 265 84% 91% 88% -------------------------------------------------------------------------------------------------------------------- 2,898 2,736 5,832 233 106 302 92% 96% 96% ==================================================================================================================== During the six months to 30 June 2006, annualised rating increases were as follows; personal motor: 2% to 5%; homeowners: 6% (including indexation); commercial motor: 2% decrease; commercial property: 3% decrease; and commercial liability: 4% decrease. -------------------------------------------------------------------------------------------------------------------- PAGE 81 (ii) France Net written premiums Underwriting result Combined operating ratio ------------------------------ -------------------------------- -------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 2006 2005 2005 €m €m €m €m €m €m % % % Motor 211 221 378 (15) (6) (10) 104% 100% 102% Property and other 286 264 446 17 (6) (16) 93% 99% 101% -------------------------------------------------------------------------------------------------------------------- €m 497 485 824 2 (12) (26) 98% 100% 101% -------------------------------------------------------------------------------------------------------------------- £m 341 335 564 1 (8) (18) 98% 100% 101% ==================================================================================================================== (iii) Netherlands Net written premiums Underwriting result Combined operating ratio ------------------------------ -------------------------------- -------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 2006 2005 2005 €m €m €m €m €m €m % % % Property 204 207 351 31 23 44 79% 92% 88% Motor 149 178 370 25 12 (1) 82% 93% 100% Liability 84 48 83 - - 15 98% 102% 84% Other 163 189 242 19 (9) 23 77% 105% 91% -------------------------------------------------------------------------------------------------------------------- €m 600 622 1,046 75 26 81 82% 94% 93% -------------------------------------------------------------------------------------------------------------------- £m 411 429 716 51 18 55 82% 94% 93% ==================================================================================================================== (iv) Canada Net written premiums Underwriting result Combined operating ratio ------------------------------ -------------------------------- -------------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2006 2005 2005 2006 2005 2005 2006 2005 2005 C$m C$m C$m C$m C$m C$m % % % Automobile 910 863 1,756 12 11 70 98% 99% 96% Property 399 418 831 22 25 (2) 96% 93% 100% Liability 139 151 281 2 (7) (9) 98% 105% 102% Other 22 22 43 12 4 18 63% 80% 73% -------------------------------------------------------------------------------------------------------------------- C$m 1,470 1,454 2,911 48 33 77 96% 98% 97% -------------------------------------------------------------------------------------------------------------------- £m 724 627 1,324 24 14 35 96% 98% 97% ==================================================================================================================== -------------------------------------------------------------------------------------------------------------------- Appendix Group capital structure Page Capital employed by segment 82 Deployment of equity shareholders' funds 83 Return on capital employed 83 Sensitivity analysis 84 Shareholders' funds, including minority interests 85 Geographical analysis of return on capital employed 86 -------------------------------------------------------------------------------------------------------------------- PAGE 82 Group capital structure The Group maintains an efficient capital structure from a combination of equity shareholders' funds, preference capital, subordinated debt and borrowings, consistent with the Group's risk profile and the regulatory and market requirements of its business. The European Embedded Value basis provides a more accurate reflection of the performance of the Group's life operations year on year than results under IFRS. Accordingly, the Group's capital structure is analysed on this basis. The Group's capital, from all funding sources, has been allocated such that the capital employed by trading operations is greater than the capital provided by its shareholders and its subordinated debt holders. As a result, the Group is able to enhance the returns earned on its equity capital. Capital employed by segment 30 June 31 December 2006 2005 £m £m Long-term savings 16,232 15,598 General insurance and health 5,572 5,581 Other business 1,744 1,876 Corporate (26) (36) -------------------------------------------------------------------------------------------------------------------- Total capital employed 23,522 23,019 -------------------------------------------------------------------------------------------------------------------- Financed by Equity shareholders' funds and minority interests 17,275 16,356 Direct capital instrument 990 990 Preference shares 200 200 Subordinated debt 2,811 2,808 External debt 815 1,002 Net internal debt 1,431 1,663 -------------------------------------------------------------------------------------------------------------------- 23,522 23,019 ==================================================================================================================== At 30 June 2006 the Group had £23.5 billion (31 December 2005: £23.0 billion) of total capital employed in our trading operations which is efficiently financed by a combination of equity shareholders' funds, preference capital, direct capital instruments, subordinated debt and internal and external borrowings. In addition to its external funding sources, the Group has a number of internal debt arrangements in place. These have allowed the assets supporting technical liabilities to be invested into the pool of central assets for use across the Group. They have also enabled the shareholders to deploy cash from some parts of the business to others in order to fund growth. Although intra-group loans in nature, they are counted as part of the capital base for the purpose of capital management. All internal loans satisfy arms length criteria and all interest payments have been made when due. The presentation of internal debt depicts a net debt position which represents the upstream of internal loans from business operations to corporate and holding entities net of tangible assets held by these entities. The corporate net liabilities represent the element of the pension scheme deficit held centrally. The ratio of the Group's external debt plus subordinated debt to shareholders' funds was 20% (31 December 2005: 22%). Fixed charge cover on an EEV basis, which measures the extent to which external interest costs are covered by EEV operating profit, was 13.0 times (31 December 2005: 9.6 times). At 30 June 2006 the market value of the Group's external debt, subordinated debt, preference shares, including both the Aviva plc preference shares and the General Accident plc preference shares of £250 million, within minority interests, and direct capital instrument was £5,413 million (31 December 2005: £5,868 million), with a weighted average cost of 4% (31 December 2005: 3.8%). The Group WACC is 7.1% and has been calculated by reference to the cost of equity and cost of debt at the relevant date. The cost of equity at 30 June 2006 was 8.0%, based on a risk free rate of 4.7%, an equity market premium of 3% and a market beta of 1.1. -------------------------------------------------------------------------------------------------------------------- PAGE 83 Group capital structure (continued) Deployment of equity shareholders' funds 30 June 31 December 2006 2005 ---------------------------------------------------------- ------------- Fixed income Other Other net Equities securities investments assets Total Total £m £m £m £m £m £m Assets Long-term savings 863 3,888 1,309 2,356 8,416 7,874 General insurance, health, and other business 3,852 1,281 1,908 (1,837) 5,204 5,397 -------------------------------------------------------------------------------------------------------------------- 4,715 5,169 3,217 519 13,620 13,271 Goodwill 2,553 2,491 Additional and acquired value of in-force long-term business and intangible assets 7,349 7,257 -------------------------------------------------------------------------------------------------------------------- Assets backing total capital employed 23,522 23,019 External debt (815) (1,002) Net internal debt (1,431) (1,663) Subordinated debt (2,811) (2,808) -------------------------------------------------------------------------------------------------------------------- 18,465 17,546 Minority interests (1,743) (1,457) Direct capital instrument (990) (990) Preference capital (200) (200) -------------------------------------------------------------------------------------------------------------------- Equity shareholders' funds 15,532 14,899 ==================================================================================================================== Return on capital employed 30 June 31 December 2006 2005 ------------------------------------------- ------------- Normalised Opening Return Return after-tax return equity capital on capital on capital £m £m % % Long-term savings 706 15,598 9.3% 9.0% General insurance and health 571 5,581 21.5% 20.0% Other business (21) 1,876 (2.2)% 9.3% Corporate (24) (36) 177.8% 30.6% -------------------------------------------------------------------------------------------------------------------- 1,232 23,019 11.0% 11.5% Borrowings (106) (5,473) 3.9% 4.5% -------------------------------------------------------------------------------------------------------------------- 1,126 17,546 13.2% 14.1% Minority interests (106) (1,457) 15.1% 16.1% Direct capital instrument - (990) - 2.9% Preference capital (9) (200) 8.5% 8.5% -------------------------------------------------------------------------------------------------------------------- Equity shareholders' funds 1,011 14,899 14.0% 15.0% ==================================================================================================================== The return on capital is calculated as the after-tax return on opening equity capital, based on Group operating profit, including Life EEV operating return. -------------------------------------------------------------------------------------------------------------------- PAGE 84 Sensitivity analysis The sensitivity of the Group's shareholders' funds on an EEV basis at 30 June 2006 to a 10% fall in global equity markets or a rise of 1% in global interest rates is as follows: 31 December 30 June Equities Interest rates 2005 2006 down 10% up 1% 2005 £bn £bn £bn £bn 15.6 Long-term savings* 16.2 15.3 15.7 7.4 General insurance and other 7.3 6.9 7.1 (5.5) Borrowings** (5.0) (5.0) (5.0) -------------------------------------------------------------------------------------------------------------------- 17.5 Shareholders' funds 18.5 17.2 17.8 ==================================================================================================================== These sensitivities assume a full tax charge/credit on market value assumptions. * Assumes EEV assumptions adjusted to reflect revised bond yields. ** Comprising internal, external and subordinated debt, net of corporate tangible net assets. The table above incorporates the effect on the value of the pension scheme assets of a 10% decrease in equity and a 1% increase in fixed income bond yields. The latter sensitivity also assumes an equivalent movement in both inflation and discount rate (i.e. no change to real interest rates) and, therefore, incorporates the offsetting effects of these items on the pension scheme liabilities. A 1% increase in the discount rate only has the effect of reducing the pension scheme liability by £1.6 billion thereby enhancing shareholders' funds by £1.1 billion (after deducting tax). -------------------------------------------------------------------------------------------------------------------- PAGE 85 Group capital structure (continued) Shareholders' funds, including minority interests 30 June 2006 31 December 2005 Closing shareholders' funds Closing shareholders' funds -------------------------------- ----------------------------------- Internally Internally IFRS net generated Total IFRS net generated Total assets AVIF Equity assets AVIF Equity Note £m £m £m £m £m £m Life assurance * France 1,195 985 2,180 1,177 890 2,067 Ireland 993 78 1,071 410 72 482 Italy 658 118 776 639 88 727 Netherlands (including Belgium, Germany and Luxembourg) 2,359 903 3,262 2,229 826 3,055 Poland 149 450 599 193 465 658 Spain 801 455 1,256 790 438 1,228 Other Europe 58 99 157 56 102 158 Rest of the World 641 107 748 702 60 762 United Kingdom 3,033 3,150 6,183 2,948 3,513 6,461 -------------------------------------------------------------------------------------------------------------------- 9,887 6,345 16,232 9,144 6,454 15,598 --------------------------------------------------------------------------------------------------------------------- General insurance and health *,** France 308 - 308 362 - 362 Ireland 474 - 474 545 - 545 Netherlands 530 - 530 553 - 553 Other Europe 284 - 284 302 - 302 Canada 691 - 691 848 - 848 Rest of the World 244 - 244 246 - 246 United Kingdom 3,041 - 3,041 2,725 - 2,725 -------------------------------------------------------------------------------------------------------------------- 5,572 - 5,572 5,581 - 5,581 -------------------------------------------------------------------------------------------------------------------- Other business *,** 1,744 - 1,744 1,876 - 1,876 Corporate (26) - (26) (36) - (36) External debt (815) - (815) (1,002) - (1,002) Internal debt (1,431) - (1,431) (1,663) - (1,663) Subordinated debt (2,811) - (2,811) (2,808) - (2,808) -------------------------------------------------------------------------------------------------------------------- (3,339) - (3,339) (3,633) - (3,633) -------------------------------------------------------------------------------------------------------------------- Shareholders' funds, including minority interests 12,120 6,345 18,465 11,092 6,454 17,546 ==================================================================================================================== Comprising Equities 4,715 - 4,715 4,503 - 4,503 Debt and fixed income securities 5,169 - 5,169 6,130 - 6,130 Property 1,415 - 1,415 957 - 957 Deposits and other investments 1,802 - 1,802 1,190 - 1,190 Intangible assets *** 3,557 6,345 9,902 3,294 6,454 9,748 Other net assets 519 - 519 491 - 491 Borrowings (5,057) - (5,057) (5,473) - (5,473) -------------------------------------------------------------------------------------------------------------------- 12,120 6,345 18,465 11,092 6,454 17,546 ==================================================================================================================== Notes Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union's Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom. IFRS net assets shown above include the allocation of tax assets and liabilities and hence differ from segmental net assets disclosed on pages 69 and 71. * Goodwill of £2,553 million (31 December 2005: £2,491 million) has been allocated as follows: life assurance £878 million (31 December 2005: £848 million); general insurance and health £400 million (31 December 2005: £398 million) and other businesses £1,275 million (31 December 2005: £1,245 million). ** Intangibles of £414 million (31 December 2005: £379 million) have been allocated as follows: life assurance £45 million (31 December 2005: nil); general insurance and health £259 million (31 December 2005: £265 million); other businesses £110 million (31 December 2005: £114 million). -------------------------------------------------------------------------------------------------------------------- PAGE 86 Group capital structure (continued) Shareholders' funds, including minority interests (continued) Notes (continued) *** Total intangible assets of £9,902 million (31 December 2005: £9,748 million) comprise goodwill of £2,553 million (31 December 2005: £2,491 million); acquired value of in-force long-term business and intangibles of £1,004 million (31 December 2005: £803 million) and additional value of in-force long-term business of £6,345 million (31 December 2005: £6,454 million). The associated deferred tax liability on the intangibles of £118 million (31 December 2005: £123 million) is included within other net assets. ^ The post-tax pension fund deficit of £540 million (31 December 2005: £989 million) has been allocated as follows: life operations £213 million (31 December 2005: £363 million), general insurance and health: £283 million (31 December 2005: £532 million), other business £18 million (31 December 2005: £58 million) and corporate of £26 million (31 December 2005: £36 million). Geographical analysis of return on capital employed For the six months ended 30 June 2006 Opening shareholders' funds Annualised including minority return on Operating return(*) interests capital ------------------------ ------------------ ---------------- Before tax After tax Note £m £m £m % Life assurance France 196 128 2,067 12.8% Ireland 8 7 482 2.9% Italy 53 33 727 9.3% Netherlands (including Belgium, Germany and Luxembourg) 185 129 3,055 8.6% Poland 66 54 658 16.9% Spain 112 73 1,228 12.2% Other Europe (3) (2) 158 (2.8)% Rest of the World 54 39 762 10.5% United Kingdom 350 245 6,461 7.7% -------------------------------------------------------------------------------------------------------------------- 1,021 706 15,598 9.3% General insurance and health France 27 18 362 10.2% Ireland 88 77 545 30.3% Netherlands 80 56 553 21.3% Other Europe 19 13 302 8.8% Canada 85 55 848 13.4% Other Rest of the World 12 8 246 6.6% United Kingdom 492 344 2,725 26.9% -------------------------------------------------------------------------------------------------------------------- 803 571 5,581 21.5% Other business 62 (21) 1,876 (2.2)% Corporate (35) (24) (36) 177.8% External debt (25) (17) (1,002) 3.4% Net internal debt ** (43) (30) (1,663) 3.6% Subordinated debt (84) (59) (2,808) 4.2% -------------------------------------------------------------------------------------------------------------------- 1,699 1,126 17,546 13.2% ==================================================================================================================== Notes Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union's Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom. * The operating return is based upon Group operating profit, which is stated before impairment of goodwill, amortisation of additional value of in-force business, exceptional items and tax including policyholder tax, adjusted for the short-term fluctuation in investment return. ** The return before tax of £(43) million comprises investment return of £63 million and unallocated interest of £(106) million. -------------------------------------------------------------------------------------------------------------------- PAGE 87 Group capital structure (continued) Geographical analysis of return on capital employed (continued) For the year ended 31 December 2005 Opening shareholders' funds including minority Return on Operating return(*) interests Capital ------------------------ ------------------ ---------------- Before tax After tax Note £m £m £m % Life assurance France 321 209 1,819 11.5% Ireland 20 17 651 2.6% Italy 96 60 550 10.9% Netherlands (including Belgium, Germany and Luxembourg) 348 236 2,485 9.5% Poland 132 107 557 19.2% Spain 214 139 1,040 13.4% Other Europe (5) (4) 196 (2.0)% Rest of the World 99 71 646 11.0% United Kingdom 589 413 5,882 7.0% -------------------------------------------------------------------------------------------------------------------- 1,814 1,248 13,826 9.0% General insurance and health France 35 23 416 5.5% Ireland 171 150 498 30.1% Netherlands 137 94 461 20.4% Other Europe 47 32 162 19.8% Canada 147 95 687 13.8% Other Rest of the World 40 28 277 10.1% United Kingdom 827 580 2,504 23.2% -------------------------------------------------------------------------------------------------------------------- 1,404 1,002 5,005 20.0% Other business 111 78 838 9.3% Corporate (104) (114) (372) 30.6% External debt (79) (67) (1,452) 4.6% Net internal debt ** (73) (52) (987) 5.3% Subordinated debt (169) (118) (2,847) 4.1% -------------------------------------------------------------------------------------------------------------------- 2,904 1,977 14,011 14.1% ==================================================================================================================== Notes Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union's Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom. * The operating return is based upon Group operating profit, which is stated before impairment of goodwill, amortisation of additional value of in-force business, exceptional items and tax including policyholder tax, adjusted for the short-term fluctuation in investment return. ** The return before tax of £(73) million comprises investment return of £147 million and unallocated interest of £(220) million. -------------------------------------------------------------------------------------------------------------------- PAGE 88 Shareholder services Managing your shareholding Shareholders who have any queries in respect of their shareholding should contact the Company's Registrar, Lloyds TSB Registrars. Contact details can be found on the final page of this announcement. In addition to assisting with general queries, the Registrar can help with the following: Amalgamating different share accounts Shareholders receiving more than one copy of the Company's communications could have more than one record for their shareholding on the share register. To avoid duplicate mailings, the Registrar can arrange for accounts to be amalgamated. Dividend payments direct to your bank account As an alternative to having dividends paid by cheque, shareholders can, if they wish, have them credited directly into their bank or building society account on the dividend payment date. For overseas shareholders, a TAPS (Transcontinental Account Payment Service) is available, which allows shareholders in many countries to have dividends credited direct to their bank accounts in local currencies. Consolidated tax vouchers Private shareholders who currently receive dividends paid directly into their bank or building society account receive one consolidated tax voucher each year instead of a voucher with each dividend payment, unless they inform the Registrar otherwise. Scrip dividend The Aviva Scrip Dividend Scheme (the Scheme) provides shareholders with the opportunity to receive their dividends in the form of new ordinary shares instead of cash. Shareholders who have not joined the Scheme but wish to do so should contact Lloyds TSB Registrars and request a mandate form. The mandate form will need to be received by Lloyds TSB Registrars no later than 20 October 2006 in order to be effective for the 2006 interim dividend. A range of shareholder frequently asked questions is available online at www.aviva.com/shareholders Corporate nominee Shareholders can hold their shares through the Company's nominee service, Aviva Share Account Limited. Shareholders' names will not appear on the public share register but they will still have a right to receive shareholder communications and attend the Annual General Meeting. For further details, contact the Registrar. E-communications Shareholders may choose to receive their communications from the Company (for example, the Notice of Meeting and Annual Review) electronically. This enables a faster receipt of documents and has the effect of reducing the Company's printing, paper and postage costs and the associated environmental impacts. To receive communications electronically, log onto www.aviva.com/shareholders and register for shareholder e-communications. Shareholders with disabilities Alternative versions of this publication (including braille, large print and audio-tape) are available on request. Share dealing We have arranged the following services that can be used to buy or sell Aviva shares. Alternatively, if shareholders hold a share certificate they can also use any bank, building society or stockbroker offering share dealing facilities. Shareholders in any doubt about buying or selling their shares should seek professional financial advice. Share dealing facilities for UK shareholders/share account members - To buy or sell shares over the telephone or internet, shareholders can contact Shareview Dealing, arranged through the Registrar. For telephone purchases or sales call 0870 850 0852* between 8.00am and 4.30pm, Monday to Friday and for internet purchases or sales log on to www.shareview.co.uk/dealing - To buy or sell shares over the telephone, shareholders can contact Barclays Stockbrokers** on 0870 549 3002* (for shareholders with a share certificate) or 0870 549 3001* (for shareholders with a share account statement). Barclays Stockbrokers is the group name for the businesses of: Barclays Stockbrokers Limited, a member of the London Stock Exchange and OFEX. Registered No. 1986161; Barclays Sharedealing, Registered No.2092410; Barclays Bank Trust Company Limited, Registered No. 920880. All companies are registered in England and the registered address is 1 Churchill Place, London, E14 5HP. All companies are authorised and regulated by the Financial Services Authority. - NatWest Stockbrokers Limited provide a Share Dealing Service via the telephone for Aviva Share Account holders. For more information, please contact NatWest Stockbrokers Limited on 0845 122 0689. NatWest Stockbrokers Limited is a member of the London Stock Exchange and OFEX and is authorised and regulated by the Financial Services Authority, Registered No. 123495. Registered Office: Waterhouse Square, 138 - 142 Holborn, London EC1N 2TH. Registered in England, Company No. 1959479. NatWest Stockbrokers Limited is operated by a joint venture between The Royal Bank of Scotland Group plc and The Toronto-Dominion Bank. -------------------------------------------------------------------------------------------------------------------- PAGE 89 Share dealing facilities for overseas shareholders To sell Aviva shares over the telephone, shareholders can contact Barclays Stockbrokers on +44 (0)141 352 3959. Non-UK residents will need to provide documentation to use this service and details will be provided on registration. Regulations prevent this service from being offered to new shareholders who are US or Canadian residents and hold a share certificate. Settlement proceeds will be sent to either a UK sterling bank account or by sterling cheque. ShareGift The Orr Mackintosh Foundation operates a voluntary charity share donation scheme for shareholders who wish to dispose of small numbers of shares whose value makes it uneconomical to sell them. Details of the scheme are available from ShareGift at www.sharegift.org or can be obtained from the Company's Registrar. Share price Shareholders can access the current share price of Aviva ordinary shares at www.aviva.com or alternatively can call 0906 843 2197***. -------------------------------------------------------------------------------------------------------------------- Group financial calendar for 2006 Announcement of third quarter long-term savings new business figures 26 October Ordinary Shares Ex-dividend date 16 August Record date 18 August Scrip dividend price available 23 August Last date for scrip dividend forms to be received in order to be effective for 2006 interim dividend 20 October Dividend payment date 17 November Preference Shares 8 3/8% cumulative irredeemable preference shares: Ex-dividend date 30 August Record date 1 September Second payment date 30 September 8 3/4% cumulative irredeemable preference shares: Ex-dividend date 29 November Record date 1 December Second payment date 31 December -------------------------------------------------------------------------------------------------------------------- Useful contact details Detailed below are various addresses that shareholders may find useful if they have a query in respect of their shareholding. Please quote Aviva plc, as well as the name and address in which the shares are held, in all correspondence. -------------------------------------------------------------------------------------------------------------------- General shareholding queries Lloyds TSB Registrars The Causeway 0870 600 3952* Worthing West Sussex BN99 6DA -------------------------------------------------------------------------------------------------------------------- Corporate and single company Peps Barclays Stockbrokers Tay House 0870 514 3263* Limited 300 Bath Street Glasgow G2 4LH -------------------------------------------------------------------------------------------------------------------- Individual Savings Accounts ('ISAs') Lloyds TSB Registrars The Causeway 0870 242 4244* (ISA Manager) Worthing West Sussex BN99 6DA -------------------------------------------------------------------------------------------------------------------- Internet sites Aviva owns various internet sites, most of which interlink with each other. -------------------------------------------------------------------------------------------------------------------- Aviva Group www.aviva.com UK long-term savings and general insurance www.norwichunion.com Fund management www.morleyfm.com Aviva worldwide internet sites www.aviva.com/websites Aviva Corporate Social Responsibility site www.aviva.com/csr -------------------------------------------------------------------------------------------------------------------- * All 0870 numbers are charged at national rates, and are only available if you are calling from the UK. ** To check instructions and maintain high quality service standards, Barclays Stockbrokers may record and monitor calls. New Business Development hours are 8.00am to 6.00pm Monday to Friday, excluding Bank Holidays. *** Calls are currently charged at 60 pence per minute at all times. The average time to access the share price is approximately one minute. 2006 Annual General Meeting - voting results The voting results, including proxy votes and votes withheld, from Aviva's Annual General Meeting held on 10 May 2006 can be viewed on the Company's web site at www.aviva.com Aviva plc Registered Office: St Helen's, 1 Undershaft, London EC3P 3DQ Telephone +44 (0)20 7283 2000 www.aviva.com Registered in England Number: 2468686 A PDF version of this announcement can be found at www.aviva.com End of Part 4 of 4 END OF ANNOUNCEMENT This information is provided by RNS The company news service from the London Stock Exchange

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