Part 2-MCEV Restatement of HY

RNS Number : 7559M

Aviva PLC

04 February 2009

 



Part 2 of 4

Page 15

Aviva MCEV financial statements

  Page 16 

Summarised consolidated income statement - MCEV basis

	Reviewed 6 months 2008 £m	Audited Full year 2007 £m
Operating profit before tax attributable to shareholders' profits
Life MCEV operating earnings	1,280	2,544
Fund management1	30	90
General insurance and health	528	1,021
Other:
Other operations and regional costs2	(57)	(70)
Corporate centre	(71)	(157)
Group debt costs and other interest	(201)	(363)
Operating profit before tax attributable to shareholders' profits	1,509	3,065
Adjusted for the following:
Economic variances on long-term business	(4,086)	(19)
Short-term fluctuation in return of investments backing general insurance and health business	(314)	(184)
Economic assumption changes on general insurance and health business	6	2
Impairment of goodwill	(42)	(10)
Amortisation and impairment of intangibles	(44)	(89)
Profit on the disposal of subsidiaries and associates	9	20
Integration and restructuring costs	(132)	(153)
Exceptional items	(155)	-
(Loss)/profit before tax	(3,249)	2,632
Tax on operating earnings	(453)	(924)
Tax on other activities	1,341	238
(Loss)/profit for the period	(2,361)	1,946
Attributable to:
Equity shareholders of Aviva plc	(2,401)	1,704
Minority interests	40	242
	(2,361)	1,946

All profit is from continuing operations.

1.    Excludes the proportion of the results of Aviva Investors fund management businesses and other fund management operations within the Group that arises from the provision of fund management services to our Life businesses. These results are included within the Life MCEV operating earnings consistent with Aviva's MCEV methodology.

2.    Excludes the proportion of the results of subsidiaries providing services to the Life business. These results are included within the life MCEV operating earnings. 

Earnings per share - MCEV basis

Earnings per share	Reviewed 6 months 2008	Audited Full year 2007
Operating earnings on an MCEV basis after tax, attributable to ordinary shareholders of Aviva plc
Basic (pence per share)	33.9p	70.4p
Diluted (pence per share)	33.6p	69.8p
Earnings after tax on an MCEV basis, attributable to ordinary shareholders of Aviva plc
Basic (pence per share)	(91.6)p	63.8p
Diluted (pence per share)	(91.6)p	63.2p

  Page 17 

Consolidated statement of recognised income and expense - MCEV basis

	Reviewed  6 months 2008 £m	Audited Full year 2007 £m
Fair value (losses)/gains on AFS securities, owner-occupied properties and hedging instruments	(130)	45
Fair value gains transferred to profit	(10)	(12)
Impairment losses on revalued assets	74	-
Actuarial (losses)/gains on pension schemes	(690)	648
Actuarial gains/(losses) on pension schemes transferred to unallocated divisible surplus and other movements	71	(61)
Foreign exchange rate movements	984	1,159
Aggregate tax effect - shareholder tax	11	(246)
Net income recognised directly in equity	310	1,533
(Loss)/profit for the period	(2,361)	1,946
Total recognised (expense)/income for the period	(2,051)	3,479
Attributable to:
Equity shareholders of Aviva plc	(2,274)	3,044
Minority interests	223	435
	(2,051)	3,479

Reconciliation of movements in consolidated shareholders' equity - MCEV basis

	Reviewed 6 months 2008 £m	Audited Full year 2007 £m
Balance at 1 January	23,689	20,443
Total recognised income and expense for the period	(2,051)	3,479
Dividends and appropriations	(563)	(871)
Other issues of share capital, net of transaction costs	31	48
Shares issued in lieu of dividends	170	301
Capital contribution from minority shareholders	7	-
Minority share of dividends declared in the period	(75)	(66)
Minority interest in acquired/disposed subsidiaries	59	315
Movement in shares held by employee trust	-	(10)
Changes in minority interest in existing subsidiaries	(78)	-
Reserves credit for equity compensation plans	27	50
Total equity	21,216	23,689
Minority interests	(2,637)	(2,501)
Balance at 30 June/31 December	18,579	21,188

  Page 18 

Summarised consolidated balance sheet - MCEV basis

	Reviewed 30 June 2008 £m	Audited 31 December 2007 £m	Audited 31 December 2006 £m
Assets
Goodwill	3,048	3,082	2,910
Acquired value of in-force business and intangible assets	3,170	3,197	2,728
Additional value of in-force long-term business1	6,542	7,758	6,698
Interests in, and loans to, joint ventures	2,588	2,576	2,795
Interests in, and loans to, associates	1,211	1,206	895
Property and equipment	996	942	904
Investment property	14,668	15,391	15,123
Loans	37,387	36,193	28,574
Financial investments
Debt securities	124,176	121,312	114,466
Equity securities	48,517	58,829	56,762
Other investments	38,476	36,269	33,050
Reinsurance assets	8,273	8,054	7,764
Deferred tax assets	249	590	1,199
Current tax assets	534	376	344
Receivables and other financial assets	10,750	8,619	8,098
Deferred acquisition costs and other assets	5,074	4,487	3,476
Prepayments and accrued income	3,183	2,986	2,585
Cash and cash equivalents	18,783	16,089	13,117
Assets of operations classified as held for sale	6,643	1,128	-
Total assets	334,268	329,084	301,488
Equity
Ordinary share capital	664	655	641
Capital reserves	4,516	4,494	4,460
Other reserves	1,601	1,179	530
Shares held by employee trusts	(10)	(10)	-
Retained earnings	5,244	6,338	5,195
Additional retained earnings on an MCEV basis2	5,374	7,342	6,610
Equity attributable to ordinary shareholders of Aviva plc	17,389	19,998	17,436
Preference share capital and direct capital instruments	1,190	1,190	1,190
Minority interests3	2,637	2,501	1,817
Total equity	21,216	23,689	20,443
Liabilities
Gross insurance liabilities	154,593	152,839	144,016
Gross liabilities for investment contracts	98,627	98,244	88,358
Unallocated divisible surplus	4,065	6,785	9,465
Net asset value attributable to unitholders	7,452	6,409	4,241
Provisions	2,398	1,937	2,850
Deferred tax liabilities	1,257	2,532	3,079
Current tax liabilities	1,125	1,225	1,301
Borrowings	13,373	12,657	12,137
Payables and other financial liabilities	19,720	18,060	11,364
Other liabilities	4,537	3,765	4,234
Liabilities of operations classified as held for sale	5,905	942	-
Total liabilities	313,052	305,395	281,045
Total equity and liabilities	334,268	329,084	301,488

The summarised consolidated balance sheet presented above is unaltered from the corresponding IFRS summarised consolidated balance sheet, with the exception of the following: 

1.    Adding the excess of the Life MCEV, including minority interests, over the corresponding Life IFRS net assets represented as the additional value of in-force long-term business. 

2.    Corresponding item within equity represented by the additional retained profit on an MCEV basis. 

3.    Corresponding adjustments to minority interests. 

The balance sheet has been restated for the conversion to MCEV, the change in accounting for latent claims and consolidation of funds. Details of the latter two changes are set out on page 26.

  Page 19 

Reconciliation between shareholders' equity on an IFRS basis and an MCEV basis

	Reviewed 30 June 2008
	IFRS £m	Adjustment £m	MCEV £m
Ordinary share capital	664	-	664
Capital reserves	4,516	-	4,516
Other reserves	1,211	390	1,601
Shares held by employee trusts	(10)	-	(10)
Retained earnings	5,244	-	5,244
Additional retained earnings on an MCEV basis	-	5,374	5,374
Equity attributable to ordinary shareholders of Aviva plc	11,625	5,764	17,389
Preference share capital	200	-	200
Direct capital instruments	990	-	990
Minority interests	1,859	778	2,637
Total equity	14,674	6,542	21,216

	Audited 31 December 2007
	IFRS £m	Adjustment £m	MCEV £m
Ordinary share capital	655	-	655
Capital reserves	4,494	-	4,494
Other reserves	1,469	(290)	1,179
Shares held by employee trusts	(10)	-	(10)
Retained earnings	6,338	-	6,338
Additional retained earnings on an MCEV basis	-	7,342	7,342
Equity attributable to ordinary shareholders of Aviva plc	12,946	7,052	19,998
Preference share capital	200	-	200
Direct capital instruments	990	-	990
Minority interests	1,795	706	2,501
Total equity	15,931	7,758	23,689

	Audited 31 December 2006
	IFRS £m	Adjustment £m	MCEV £m
Ordinary share capital	641	-	641
Capital reserves	4,460	-	4,460
Other reserves	992	(462)	530
Retained earnings	5,195	-	5,195
Additional retained earnings on an MCEV basis	-	6,610	6,610
Equity attributable to ordinary shareholders of Aviva plc	11,288	6,148	17,436
Preference share capital	200	-	200
Direct capital instruments	990	-	990
Minority interests	1,267	550	1,817
Total equity	13,745	6,698	20,443

  Page 20 

Group MCEV analysis of earnings 

	Reviewed 6 months 2008
	Covered business1 £m A	Non-covered but related to life business2 £m B	Total life business3£m A+B	Non-covered relating to non-life £m C	Total non- covered  business £m B+C	Total £m A+B+C
Opening Group MCEV	18,248	2,059	20,307	881	2,940	21,188
Opening adjustments	-	-	-	-	-	-
Adjusted opening Group MCEV	18,248	2,059	20,307	881	2,940	21,188
Operating MCEV earnings	774	-	774	126	126	900
Non-operating MCEV earnings	(2,836)	(19)	(2,855)	(446)	(465)	(3,301)
Total MCEV earnings	(2,062)	(19)	(2,081)	(320)	(339)	(2,401)
Other movements in IFRS net equity	-	(88)	(88)	(674)	(762)	(762)
Capital and dividend flows	(559)	-	(559)	264	264	(335)
Foreign exchange variances	800	102	902	(13)	89	889
Acquired/divested businesses	190	117	307	(307)	190	-
Closing Group MCEV	16,577	2,171	18,748	(169)	2,002	18,579
Preference share capital and direct capital instruments						(1,190)
Equity attributable to ordinary shareholders of Aviva plc on an MCEV basis						17,389

	Audited Full year 2007
	Covered business1 £m A	Non-covered but related to life business2£m B	Total life business3£m A+B	Non-covered relating to non-life £m C	Total non- covered  business £m B+C	Total £m A+B+C
Opening Group MCEV	16,506	1,594	18,100	528	2,122	18,628
Opening adjustments	-	-	-	-	-	-
Adjusted opening Group MCEV	16,506	1,594	18,100	528	2,122	18,628
Operating MCEV earnings	1,567	-	1,567	309	309	1,876
Non-operating MCEV earnings	52	(33)	19	(191)	(224)	(172)
Total MCEV earnings	1,619	(33)	1,586	118	85	1,704
Other movements in IFRS net equity	-	124	124	316	440	440
Capital and dividend flows	(829)	-	(829)	347	347	(482)
Foreign exchange variances	851	61	912	(14)	47	898
Acquired/divested businesses	101	313	414	(414)	(101)	-
Closing Group MCEV	18,248	2,059	20,307	881	2,940	21,188
Preference share capital and direct capital instruments						(1,190)
Equity attributable to ordinary shareholders of Aviva plc on an MCEV basis						19,998

1.    Covered business represents the business that the MCEV calculations cover, as detailed in the Basis of preparation note. The embedded value is presented net of minority interests and tax. 

2.    Non-covered but related to life business represents the adjustments to the MCEV, including goodwill, to calculate the long-term business net assets on an MCEV basis. An analysis of net assets on an MCEV basis gross of minority interests is provided on page 21.

3.    Net assets for the total life businesses on an MCEV basis presented net of minority interests.

   Page 21

Segmentation of summarised consolidated balance sheet

	Reviewed 30 June 2008			Audited 31 December 2007			Audited 31 December 2006
	Life and related businesses £m	General business and other £m	Group £m	Life and related businesses £m	General business and other £m	Group £m	Life and related businesses £m	General business and other £m	Group £m
Total assets before acquired value of in-force long-term business	282,765	43,155	325,920	278,128	41,500	319,628	255,113	37,871	292,984
Acquired additional value of in-force long-term business	1,806	-	1,806	1,698	-	1,698	1,806	-	1,806
Total assets included in the IFRS balance sheet	284,571	43,155	327,726	279,826	41,500	321,326	256,919	37,871	294,790
Liabilities of the long-term business	(270,179)	-	(270,179)	(265,187)	-	(265,187)	(244,021)	-	(244,021)
Liabilities of the general insurance and other businesses	-	(42,873)	(42,873)	-	(40,208)	(40,208)	-	(37,024)	(37,024)
Net assets on a statutory IFRS basis	14,392	282	14,674	14,639	1,292	15,931	12,898	847	13,745
Additional value of in-force long-term business1	6,542	-	6,542	7,758	-	7,758	6,698	-	6,698
Net assets on an MCEV basis2	20,934	282	21,216	22,397	1,292	23,689	19,596	847	20,443
Equity capital, capital reserves, shares held by employee trusts and other reserves			6,771			6,318			5,631
IFRS basis retained earnings			5,244			6,338			5,195
Additional MCEV basis retained earnings			5,374			7,342			6,610
Equity attributable to ordinary shareholders of Aviva plc on an MCEV basis			17,389			19,998			17,436
Preference share capital and direct capital instruments			1,190			1,190			1,190
Minority interests			2,637			2,501			1,817
MCEV basis total equity			21,216			23,689			20,443

1.    The analysis between the group's and minority interests' share of the additional value of in-force long-term business is as follows:

	Reviewed 30 June 2008	Audited 31 December 2007	Audited 31 December 2006
Group's share included in shareholders' funds	5,374	7,342	6,610
Minority interests' share	778	706	550
Movements in AFS securities	390	(290)	(462)
Per balance at 30 June/31 December	6,542	7,758	6,698

2.    Analysis of net assets on an MCEV basis is made up as follows:

	Reviewed 30 June 2008	Audited 31 December 2007	Audited 31 December 2006
Embedded value	16,577	18,248	16,506
RBSG goodwill	217	217	217
Goodwill and intangible assets allocated to long-term business	2,278	2,142	1,554
Minority Interests	2,002	1,848	1,498
Notional allocation of IAS19 pension fund deficit to long-term business 3,4	(140)	(58)	(179)
Long-term business net assets on an MCEV basis	20,934	22,397	19,596

3.    The value of the Aviva Staff Pension Schemes deficit has been notionally allocated between segments, based on current funding and the life proportion has been included within the long-term business  net  assets on an MCEV basis. 

4.    The pensions fund deficit notionally allocated to long-term business is net of the proportion of funding borne by the UK with-profit funds.

End of Part 2 of 4

 

END

 

 

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