Prelim Announcement 2002 pt 2
Aviva PLC
26 February 2003
PART 2 OF 2
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Statistical supplement
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Page 30
Segmental analysis of Group operating profit* at constant currency - achieved profit basis
Continuing operations 2001
at 2002
exchange
2002 rates 2001
£m £m £m
Life achieved operating profit**
United Kingdom 699 850 850
France 228 230 227
Ireland 75 80 79
Italy 52 56 55
Netherlands (including Belgium and Luxembourg) 200 223 221
Poland life and pensions 111 96 99
Spain 83 81 80
Other Europe (2) 19 18
International 78 36 36
------ ------ ------
1,524 1,671 1,665
====== ====== ======
Health
United Kingdom 9 8 8
France 10 9 9
Netherlands 42 54 53
------ ------ ------
61 71 70
====== ====== ======
Fund Management
United Kingdom (12) (4) (4)
France 11 13 12
Netherlands 4 8 8
Other Europe 2 2 2
Australia and New Zealand (1) 7 7
International 1 4 4
------ ------ ------
5 30 29
====== ====== ======
General insurance
United Kingdom 611 590 590
France 47 59 58
Ireland 44 49 48
Netherlands 13 19 19
Other Europe 49 40 41
Canada 80 68 72
Other 37 50 48
------ ------ ------
881 875 876
====== ====== ======
Non-insurance operations** (69) 7 7
Corporate costs (218) (187) (187)
Unallocated interest charges
- external (206) (180) (179)
- intra-group (228) (247) (247)
Wealth management (30) (99) (99)
------ ------ ------
Group operating profit before tax* - continuing operations
1,720 1,941 1,935
====== ====== ======
Discontinued operations
Australia and New Zealand general insurance operations 78 71 69
US general insurance operations - (20) (21)
------ ------ ------
Group operating profit before tax* 1,798 1,992 1,983
====== ====== ======
* Group operating profit before tax from continuing operations, before amortisation of goodwill and exceptional
items.
** Includes the reclassification of other life and savings business from 'Life' to 'Non-insurance operations'.
Restating 2001 modified statutory life profits to account for the impact of exchange rate movements in 2002 would result
in modified statutory life profits being restated from £1,194 million to £1,201 million for the year to 31 December
2001.
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Page 31
Supplementary analyses
(a) New business contribution - after the effect of solvency margin
2002 2001
£m £m
United Kingdom 269 315
Europe (excluding UK)
France 35 44
Ireland 26 29
Italy 27 21
Netherlands (including Belgium and Luxembourg) 1 11
Poland 7 7
Spain 69 50
Other (8) (4)
International 26 6
------ ------
452 479
====== ======
(b) Experience variances - 31 December 2002
Experience variances include the impact of the difference between expense, demographic and persistency assumptions, and
actual experience incurred in the period. Also included are variances arising from tax, where such variances are due to
management action. The source of profit is included in the table below.
Exceptional Mortality/
expenses (1) morbidity (2) Lapses (3) Other (3) Total
£m £m £m £m £m
UK (45) 35 (8) 15 (3)
France - 8 6 9 23
Netherlands (including Belgium
and Luxembourg) (55) 6 (19) (45) (113)
Europe (2) 10 (12) 2 (2)
International (23) 2 2 4 (15)
------ ------ ------ ------ ------
Total (125) 61 (31) (15) (110)
====== ====== ====== ====== ======
(1) Exceptional expenses in the UK reflect one-off project costs including those associated with the pace of
regulatory change. In the Netherlands, they relate to the cost of developing the direct operations and start up
costs in Belgium. In International they primarily relate to the costs of building infrastructure in the US life
operations.
(2) Actual mortality and morbidity profits in the UK relate to better experience than anticipated by our start of year
assumptions.
(3) In the Netherlands, fiscal changes introduced last year have reduced the levels of personal tax relief available
to policyholders investing in basic life annuity products and in group savings schemes. This has led to one-off
premium reductions and adverse lapse experience on existing contracts.
(c) Operating assumptions - 31 December 2002
Changes in operating assumptions are made when the assumed future levels of expenses, mortality or other operating
assumptions are expected to change permanently. An analysis of operating assumptions is as follows:
Maintenance Mortality/
expenses (1) morbidity (2) Lapses (3) Other (4) Total
£m £m £m £m £m
UK 5 (123) (15) 5 (128)
France 7 - 24 (20) 11
Netherlands (including Belgium and
Luxembourg) 86 (6) (3) 37 114
Europe 33 54 (60) (35) (8)
International 5 - - 15 20
------ ------ ------ ------ ------
Total 136 (75) (54) 2 9
====== ====== ====== ====== ======
(1) In the Netherlands, profits arise partly from a reduction in unit costs secured from cost savings initiatives and
partly from changes to the basis of allocation of expenses to life and savings products. In Europe, profits arise
from reductions in the unit costs in Poland.
(2) In the UK, the loss reflects the impact of strengthening annuitant mortality assumptions net of offsetting
changes. In Europe, profits arise in Poland following alignment of assumptions with current experience.
(3) In Europe, the adverse lapse assumption charge arises primarily in Poland where more conservative rates are now
adopted reflecting the current economic environment.
(4) In the Netherlands, increases to annual management fees were effected at the end of 2001. In Europe, reductions in
the Polish policy charges have an adverse effect while in the US the reduction in the risk margin assumptions has
given rise to profits.
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Page 32
(d) Non-insurance operations - operating result
2002 2001
£m £m
Hill House Hammond 4 4
Norwich Union Equity Release and other personal finance subsidiaries
(6) (3)
Your Move (9) (17)
Norwich Union Life Services (54) 9
Other (4) 14
------ ------
(69) 7
====== ======
The operating result from our equity release business in the UK is included within the non-insurance results on a
statutory basis. On an achieved profit methodology new business contribution was £27 million before tax (2001: £12
million) and operating profit before tax, including the benefits of the securitisation of our book, was £47 million
(2001: £15 million) which is excluded from our results.
(e) Corporate costs
2002 2001
£m £m
Groupwide staff profit share and other incentive plans (86) (78)
Global finance improvement programme (26) (6)
Other corporate costs (106) (103)
------ ------
(218) (187)
====== ======
(f) Wealth Management - operating result
2002 2001
£m £m
United Kingdom
assertahome (3) (18)
Other wealth management (27) (81)
------ ------
(30) (99)
====== ======
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Page 33
Supplementary analyses (continued)
(g) General business - investment return information
Actual Longer-term
investment return investment return
2002 2001 2002 2001
£m £m £m £m
United Kingdom 534 512 663 671
Europe (excluding UK)
France 56 62 61 91
Ireland 53 49 59 55
Netherlands 30 34 34 33
Other 34 50 59 66
International
Canada 91 105 108 128
Other 35 48 42 55
------ ------ ------ ------
Total longer-term investment return -
continuing operations
1,026 1,099
Total actual investment income
833 860
Realised gains 99 281
Unrealised losses (992) (904)
------ ------
Total actual investment return -
continuing operations
(60) 237
Australia and New Zealand 33 74 71 70
United States (1) 165 - 152
------ ------ ------ ------
Discontinued operations 32 239 71 222
------ ------ ------ ------
(28) 476 1,097 1,321
====== ====== ====== ======
Reconciliation between general business investment return information and short-term fluctuation in investment return
incorporated in the summarised consolidated profit and loss account - modified statutory basis
For the year to 31 December 2002
Short-term
Actual Longer-term fluctuation
investment investment in investment
return return return
£m £m £m
General business (28) 1,097 (1,125)
Health business 26 85 (59)
------ ------ ------
(2) 1,182 (1,184)
------ ------
Life business (59)
------
Total short-term fluctuation in investment return (1,243)
======
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Page 34
Supplementary analyses (continued)
(h) Pension schemes
The effect on the Group net assets and retained profits at 31 December 2002 of substituting the FRS17 figures for the
corresponding SSAP24 balance sheet entries would be as follows:
Profit and
loss
account
Net assets reserve
restated* restated*
2002 2001 2002 2001
£m £m £m £m
Total included in the Group accounts 10,412 12,403 1,126 1,662
Less: pension asset on a SSAP24 basis (175) (143) (175) (143)
------ ------ ------ ------
Total excluding pension asset 10,237 12,260 951 1,519
Less/add: pension (liability)/asset on FRS17 basis (456) 233 (456) 233
------ ------ ------ ------
Totals including pension liabilty/asset on FRS17 basis
9,781 12,493 495 1,752
====== ====== ====== ======
* Restated for the effect of Financial Reporting Standard 19.
(i) Investments in joint ventures
2002 2001
£m £m
Share of gross assets 1,242 -
Share of gross liabilities (1,126) -
------ ------
116 -
Loans to joint ventures 665 -
------ ------
781 -
====== ======
As part of their investment strategy, the UK long-term business policyholder funds have invested in a number of property
limited partnerships ('PLPs') during the year, through a mix of capital and loans. The PLPs are managed by general
partners ('GPs') in which the UK long-term business shareholder companies hold equity stakes, and which themselves hold
nominal stakes in the PLPs. Most of the PLPs have raised external debt, secured on the respective property portfolios.
The lenders are only entitled to obtain payment, of both interest and principal, to the extent that there are sufficient
resources in their respective PLPs. The lenders have no recourse whatsoever to the policyholder or shareholders' funds
of any company of the Aviva Group. Accounting for the PLPs depends on the shareholdings in the GPs and the terms in each
partnership agreement. Where the partnership is managed by a contractual agreement such that no one party exerts
control, the PLPs have been accounted for as joint ventures.
In addition, the Group has invested in a joint venture life assurance company in China which had not commenced
operations at 31 December 2002.
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Page 35
General insurance - geographical ratio analysis
Claims ratio Expense ratio Combined operating ratio
2002 2001 2002 2001 2002 2001
% % % % % %
United Kingdom 70.0% 71.7% 10.4% 10.5% 101% 102%
France 71.1% 71.5% 13.9% 13.1% 102% 104%
Ireland 85.4% 81.3% 13.0% 9.9% 100% 101%
Netherlands 64.6% 65.7% 19.6% 19.0% 105% 104%
Canada 74.1% 78.1% 11.3% 12.9% 102% 107%
------ ------ ------ ------ ------ ------
Continuing operations 71.2% 72.4% 11.3% 11.9% 102% 103%
Discontinued operations
Australia and New Zealand 69.1% 69.7% 13.2% 14.2% 98% 99%
------ ------ ------ ------ ------ ------
71.0% 72.3% 11.5% 12.0% 101% 102%
====== ====== ====== ====== ====== ======
The Group withdrew from the US general insurance market in 2000 and the disposal of the operations was completed in
2001. In 2001, the COR for the discontinued US general insurance operations was 115%. Including this item produces a COR
in respect of 2001 from continuing and discontinued operations of 104%.
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.
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Page 36
General insurance - class of business analyses
(a) United Kingdom - continuing operations
Net written premiums Underwriting result Combined operating ratio
2002 2001 2002 2001 2002 2001
£m £m £m £m % %
Personal
Motor 1,255 1,442 (44) (40) 103% 103%
Homeowner 1,005 1,037 5 72 99% 94%
Creditor 465 508 19 21 100% 94%
Other 86 89 5 (2) 98% 100%
------ ------ ------ ------ ------ ------
2,811 3,076 (15) 51 101% 98%
------ ------ ------ ------ ------ ------
Commercial
Motor 727 680 (11) (44) 102% 105%
Property 692 579 1 (26) 100% 104%
Liability 314 242 (42) (64) 114% 126%
Other 196 200 15 2 90% 100%
------ ------ ------ ------ ------ ------
1,929 1,701 (37) (132) 102% 108%
------ ------ ------ ------ ------ ------
£m 4,740 4,777 (52) (81) 101% 102%
====== ====== ====== ====== ====== ======
During the year to 31 December 2002, annualised rating increases were as follows: commercial liability: 35%; commercial
property: 19%; commercial motor: 6%; homeowners: 4%; and personal motor: 2%.
(b) France
Net written premiums Underwriting result Combined operating ratio
2002 2001 2002 2001 2002 2001
€m €m €m €m % %
Motor 342 409 (11) (26) 103% 106%
Property and other 417 720 (11) (27) 102% 103%
------ ------ ------ ------ ------ ------
€m 759 1,129 (22) (53) 102% 104%
------ ------ ------ ------ ------ ------
£m 478 700 (14) (33) 102% 104%
====== ====== ====== ====== ====== ======
The figures for 2001 include the results for CGU Courtage which was disposed in May 2002. In 2002, the figures exclude
CGU Courtage reflecting the structure of the sale whereby the Group had no economic interest in the operating result
after 31 December 2001.
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Page 37
General insurance - class of business analyses (continued)
(c) Netherlands
Net written premiums Underwriting result Combined operating ratio
2002 2001 2002 2001 2002 2001
€m €m €m €m % %
Property 256 248 6 17 99% 95%
Motor 258 264 (22) (34) 109% 113%
Liability 59 47 (11) (8) 120% 119%
Other 81 65 (6) 2 107% 93%
------ ------ ------ ------ ------ ------
€m 654 624 (33) (23) 105% 104%
------ ------ ------ ------ ------ ------
£m 412 387 (21) (14) 105% 104%
====== ====== ====== ====== ====== ======
(d) Canada
Net written premiums Underwriting result Combined operating ratio
2002 2001 2002 2001 2002 2001
C$m C$m C$m C$m % %
Automobile 1,475 1,175 (69) (43) 105% 104%
Property 702 591 11 (28) 98% 105%
Liability 182 163 (15) (60) 108% 137%
Other 32 28 7 7 72% 72%
------ ------ ------ ------ ------ ------
C$m 2,391 1,957 (66) (124) 102% 107%
------ ------ ------ ------ ------ ------
£m 1,009 878 (28) (56) 102% 107%
====== ====== ====== ====== ====== ======
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Page 38
Assets under management
General
Long-term business Restated*
business and other Group Group
2002 2002 2002 2001
£m £m £m £m
Financial investments
Shares, other variable yield securities and units in unit trusts
20,788 2,157 22,945 37,738
Strategic investments 1,477 446 1,923 3,849
Debt and fixed income securities at market value
23,084 7,737 30,821 29,641
Debt and fixed income securities at amortised cost
42,721 - 42,721 34,129
Loans secured by mortgages and other loans, net of non-recourse
funding 11,707 1,201 12,908 12,527
Deposits 2,270 550 2,820 2,149
------ ------ ------ ------
Total financial investments 102,047 12,091 114,138 120,033
Investments in joint ventures 781 - 781 -
Investments in associated undertakings and participating
interests 763 287 1,050 1,077
Land and buildings 8,748 668 9,416 9,041
------ ------ ------ ------
Total investments 112,339 13,046 125,385 130,151
Assets held to cover linked liabilities 29,538 - 29,538 28,704
Other assets included in the balance sheet 11,010 18,990 30,000 29,469
------ ------ ------ ------
Total assets included in the balance sheet 152,887 32,036 184,923 188,324
====== ====== ====== ======
Third party funds under management:
Securitised mortgages (gross of non-recourse funding) 2,099 1,149
Unit trusts, Oeics, Peps and Isas 3,636 4,677
Segregated funds 16,955 14,849
------ ------
Total assets under management 207,613 208,999
====== ======
* Restated for the effect of Financial Reporting Standard 19.
Strategic investments include the market value of the Group's shareholding in Societe Generale, Munchener
Ruckversicherungs-Gesellschaft and The Royal Bank of Scotland Group.
General insurance and other investments mix
United Continental International Total
Kingdom Europe £m 2002
£m £m £m
Shares, other variable yield securities and units in unit
trusts and strategic investments
1,435 888 280 2,603
Debt and fixed income securities at market value
3,617 2,569 1,551 7,737
Land and buildings 299 332 37 668
Other 1,166 552 320 2,038
------ ------ ------ ------
Total investments 6,517 4,341 2,188 13,046
====== ====== ====== ======
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Page 39
Group capital structure
The Group maintains an efficient 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 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 debtholders. As a result, the Group is
able to enhance the returns earned on its equity capital.
Capital employed by segment
Restated*
2002 2001
£m £m
Long-term savings 10,379 11,307
General insurance and health 3,917 4,560
Other business 554 324
Corporate 2,476 2,947
------ ------
17,326 19,138
Discontinued operations - Australia and New Zealand - 357
------ ------
Total capital employed 17,326 19,495
------ ------
Financed by
Internal debt 3,671 3,284
External debt 2,053 2,651
Subordinated debt 1,190 1,157
Shareholders' funds and minority interests 10,412 12,403
------ ------
17,326 19,495
====== ======
* Restated for the effect of Financial Reporting Standard 19.
At 31 December 2002 we had £17.3 billion (31 December 2001: £19.5 billion, restated) of total capital employed in our
trading operations which is efficiently financed by a combination of equity shareholders' funds, preference capital,
subordinated debt and internal and external borrowings.
In 2002, the total capital employed in our long-term savings operations fell as a result of the reduction in the future
value of inforce business. The disposals of a number of general insurance businesses, including Australia and New
Zealand, CGU Courtage and Plus Ultra, and the impact of falling equity markets on the asset base reduced the total
capital employed in our general insurance businesses.
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 capital 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 have been negotiated at market rates and are appropriately serviced.
The reduction in external debt of £0.6 billion is as a result of the repayment of commercial paper and the early
redemption of debenture loans.
Internal debt has increased during 2002 reflecting the impact of two offsetting items. In the early part of 2002
corporate assets were used to pay the third instalment of the Berkshire Hathaway premium, thereby reducing internal
debt. During the latter part of the year we formalised a number of intra group arrangements which increased internal
debt. On 2 January 2003 we paid the final instalment of the Berkshire Hathaway premium of approximately £0.5 billion
which will reduce internal debt by the same amount after the year end.
The ratio of the Group's external debt to shareholders' funds was 18% (2001 restated: 20%). Interest cover, which
measures the extent to which external interest costs are covered by achieved operating profit, was 14 times (2001: 12
times).
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Page 40
Group capital structure (continued)
Deployment of equity shareholders' funds
Restated*
2002 2001
Fixed income Other
Equities securities investments Other net
£m £m £m assets Total Total
£m £m £m
Assets
Long-term savings 523 3,552 674 977 5,726 5,115
General insurance, health, corporate
and other business
2,603 2,481 1,115 (292) 5,907 6,734
------ ------ ------ ------ ------ ------
3,126 6,033 1,789 685 11,633 11,849
Goodwill 1,271 1,341
Additional value of
in-force long-term 4,422 5,948
business
------ ------
Assets backing total capital employed
in continuing operations 17,326 19,138
External debt (2,053) (2,651)
Internal debt (3,671) (3,284)
Subordinated debt (1,190) (1,157)
------ ------
10,412 12,046
Minority interests (743) (651)
Preference capital (200) (200)
------ ------
Total continuing operations 9,469 11,195
Discontinued operations -
Australia and New Zealand - 357
------ ------
Equity shareholders' funds 9,469 11,552
====== ======
* Restated for the effect of Financial Reporting Standard 19.
Our exposure to equities has reduced from £4.9 billion at 31 December 2001 to £3.1 billion, which represents 18% of our
total capital employed. This reduction reflects the divestment of businesses during the year, the impact of falling
markets and the reduction of equity holdings. During the course of the year, as part of the ongoing portfolio management
process, the Group reduced its strategic stakes in Societe Generale, Munich Re and The Royal Bank of Scotland Group. The
market values of these holdings at the end of 2002 were £595 million, £372 million and £956 million respectively (2001:
£1,100 million, £1,203 million and £1,546 million respectively) and represented 3.8%, 2.8% and 2.2% (2001: 6.6%, 3.6%
and 3.2%) of the respective issued share capital of these companies.
Return on capital employed
2002 2001
Opening
Normalised equity Return on Return on
after-tax capital capital capital
return restated* (annualised) restated*
£m £m % %
Long-term savings 1,064 11,307 9.4% 10.0%
General insurance and health 569 4,560 12.5% 12.0%
Other business (67) 324 (20.7%) (27.0%)
Corporate (63) 2,947 (2.1%) (3.2%)
------ ------ ------ ------
1,503 19,138 7.9% 8.8%
Borrowings (314) (7,092) 4.4% 4.4%
------ ------ ------ ------
1,189 12,046 9.9% 11.3%
Minority interests (83) (651) 12.7% 15.9%
Preference capital (17) (200) 8.5% 8.5%
------ ------ ------ ------
1,089 11,195 9.7% 11.1%
Discontinued operations
72 357 20.2% 11.1%
- Australia and New Zealand
- United States - - - -
------ ------ ------ ------
Equity shareholders' funds 1,161 11,552 10.1% 9.7%
====== ====== ====== ======
* Restated for the effect of Financial Reporting Standard 19.
The return on capital is calculated as the after-tax return on opening equity capital, based on operating profit,
including life achieved profit, before amortisation of goodwill and exceptional items.
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Page 41
Group capital structure (continued)
Capital management
In managing its capital, the Group aims to:
(i) match the profile of its assets and liabilities, taking account of the risks inherent in each business. In the
case of the Group's life operations, which have long-term liabilities, the majority of capital is held in fixed
income securities. A significant proportion of the capital supporting the Group's general insurance and health
operations is held in equities, reflecting the relatively low risk profile of these businesses;
(ii) maintain financial strength to support new business growth and satisfy the requirements of its policyholders,
regulators and rating agencies;
(iii) retain financial flexibility by maintaining strong liquidity, including significant unutilised committed credit
lines, and access to a range of capital markets; and
(iv) allocate capital efficiently to support growth and repatriate excess capital where appropriate.
An important aspect of the Group's overall capital management process is the setting of target risk-adjusted rates of
return for individual business units, which are aligned to performance objectives and ensure that the Group is focused
on the creation of value for shareholders.
Risk based capital
The Group uses risk based capital as one of several measures to assess its capital requirements for its general
insurance businesses. Financial modelling techniques enhance our practice of active capital management, ensuring
sufficient capital is available to protect against unforeseen events and adverse scenarios, and risk management. Our aim
continues to be the optimal usage of capital through appropriate allocation to our businesses.
Our risk based capital model is part of a longer term development programme for more complex risk monitoring techniques
in part to meet future industry standards. Within a few years we expect to agree capital requirements with the regulator
on the basis of our risk based capital models. This represents the level of capital necessary to enable the general
insurance business to meet the statutory minimum solvency margin over a five year period with 99% probability of not
requiring further capital.
Our current risk based capital methodology for general insurance business assesses insurance, market and credit risks
and makes prudent allowance for diversification benefits. We consider risks over a five year period allowing for planned
levels of business growth. Based on our model, our risk based capital requirement may be expressed as 36% of net written
premiums.
Capital employed in our general insurance business after goodwill and adding back the claims equalisation reserve was £4
billion at 31 December 2002 and required capital on a risk basis was £3.1 billion, giving a surplus capital position of
£0.9 billion.
Sensitivity analysis
The sensitivity of the Group's shareholders' funds at 31 December 2002 to a 10% fall in global equity markets or a rise
of 1% in global interest rates is as follows:
Interest
Equities rates
2001 2002 down 10% up 1%
£bn £bn £bn £bn
5.9 Additional value of in-force(1) 4.4 4.1 4.7
13.6 Other net assets 12.9 12.6 12.5
(7.1) Borrowings(2) (6.9) (6.9) (6.9)
------ ------ ------ ------
12.4 Shareholders' funds 10.4 9.8 10.3
====== ====== ====== ======
(1) Assumes achieved profit assumptions adjusted to reflect revised bond yields.
(2) Comprising internal, external and subordinated debt.
(3) These sensitivities assume a full tax charge/credit on market value appreciation/falls.
Post-tax internal rate of return on life and pensions new business
The total internal rate of return on life and pensions new business for the Group was 16% (2001: 16%). The return is the
discount rate at which the present value of the post-tax cash flows expected to be earned over the life time of the
business written is equal to the initial capital required to support the writing of the business. The capital includes
the statutory minimum solvency margin and amounts to £1,000 million (2001: £800 million). This includes £300 million
(2001: £200 million) of solvency requirements.
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Page 42
Group capital structure (continued)
Shareholders' funds, including minority interests
Normalised return
Closing shareholders' funds (note 1)
MSSB net Internally
assets generated Embedded After
(note 2) AVIF value Before tax tax
31 December 2002 Note £m £m £m £m £m
Life assurance
United Kingdom 2,514 2,498 5,012 699 488
France 924 297 1,221 228 145
Ireland 296 176 472 75 66
Italy 295 54 349 52 31
Netherlands (including Belgium
and Luxembourg) 1,270 536 1,806 200 147
Poland 130 222 352 111 80
Spain 239 111 350 83 54
Other Europe 157 19 176 (2) (1)
International 406 4 410 78 54
------ ------ ------ ------ ------
6,231 3,917 10,148 1,524 1,064
Participating interests 3 231 - 231 - -
------ ------ ------ ------ ------
6,462 3,917 10,379 1,524 1,064
------ ------ ------ ------ ------
General insurance and health
4
United Kingdom 5 2,052 2,052 491 330
France 481 481 57 41
Ireland 236 236 44 37
Netherlands 275 275 55 41
Other Europe 63 63 49 36
Canada 535 535 80 54
Other 275 275 37 30
------ ------ ------ ------ ------
3,917 - 3,917 813 569
------ ------ ------ ------ ------
Other business 5, 6 554 554 (94) (67)
Corporate 2,476 2,476 (89) (63)
External debt 7 (2,053) (2,053) (133) (102)
Internal debt (3,671) (3,671) (228) (161)
Subordinated debt (1,190) (1,190) (73) (51)
------ ------ ------ ------ ------
(3,884) - (3,884) (617) (444)
------ ------ ------ ------ ------
6,495 3,917 10,412 1,720 1,189
- - - 78 72
Australia and New Zealand
------ ------ ------ ------ ------
Shareholders' funds, including
minority interests
6,495 3,917 10,412 1,798 1,261
====== ====== ====== ====== ======
Comprising
Equities 3,126 3,126
Debt and fixed income securities
6,033 6,033
Property 496 496
Deposits and other investments 1,293 1,293
Intangible assets 8 1,776 3,917 5,693
Other net assets 685 685
Borrowings (6,914) (6,914)
------ ------ ------
6,495 3,917 10,412
====== ====== ======
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Page 43
Group capital structure (continued)
Shareholders' funds, including minority interests (continued)
Notes
1. The normalised return is based upon operating profit from continuing operations, including life achieved profit,
before amortisation of goodwill and exceptional items.
2. Includes acquired additional value of in-force long-term business of £505 million.
3. The net assets represent the £231 million of goodwill on the RBSG joint venture.
4. The capital employed in the Group's general insurance operations includes £282 million of goodwill.
5. Assets available to shareholders are held by the Group's UK general insurance operations and are available to
finance future growth of the Group. Accordingly, for the purposes of preparing this note, these assets together
with their associated pre-tax investment return of £129 million (post-tax £90 million) have been reclassified as
Corporate.
6. The return before tax of £(89) million comprises investment return £129 million and corporate costs £(218)
million.
7. The external borrowings reported in the summary consolidated balance sheet of £2,064 million comprises £11 million
of general insurance borrowings (reported within the general insurance and health net assets) and £2,053 million
of borrowings by holding companies of the Group not allocated to operating companies (shown as external debt).
8. Comprises acquired additional value of in-force long-term business (£505 million), goodwill arising on
acquisitions (£1,040 million) and goodwill on the RBSG joint venture (£231 million).
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Page 44
Group capital structure (continued)
Shareholders' funds, including minority interests (continued)
Closing shareholders' funds*
MSSB net Internally
assets generated Embedded
(note 1) AVIF value
31 December 2001 Note £m £m £m
Life assurance
United Kingdom 2,586 3,444 6,030
France 889 354 1,243
Ireland 256 211 467
Italy 218 60 278
Netherlands (including Belgium
and Luxembourg) 983 883 1,866
Poland 117 254 371
Spain 179 130 309
Other Europe 101 6 107
International 385 7 392
------ ------ ------
5,714 5,349 11,063
Participating interests 2 244 - 244
------ ------ ------
5,958 5,349 11,307
------ ------ ------
3
General insurance and health
United Kingdom 4 2,043 2,043
France 619 619
Ireland 200 200
Netherlands 430 430
Other Europe 276 276
Canada 590 590
Other 402 402
------ ------ ------
4,560 - 4,560
------ ------ ------
Other business 324 324
Corporate 4, 5 2,947 2,947
External debt 6 (2,651) (2,651)
Internal debt (3,284) (3,284)
Subordinated debt (1,157) (1,157)
------ ------ ------
(3,821) - (3,821)
------ ------ ------
6,697 5,349 12,046
Australia and New Zealand 7 357 357
------ ------ ------
Shareholders' funds including
minority interests 7,054 5,349 12,403
====== ====== ======
Comprising
Equities 4,947 4,947
Debt and fixed income securities 5,063 5,063
Property 825 825
Deposits and other investments 1,417 1,417
Intangible assets 8 1,984 5,349 7,333
Other net liabilities (90) (90)
Borrowings (7,092) (7,092)
------ ------ ------
7,054 5,349 12,403
====== ====== ======
* Restated for the effect of Financial Reporting Standard 19.
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Page 45
Group capital structure (continued)
Shareholders' funds, including minority interests (continued)
Notes
1. Includes acquired additional value of in-force long-term business of £599 million.
2. The net assets represent the £244 million of goodwill on the RBSG joint venture.
3. The capital employed in the Group's general insurance operations includes £272 million of goodwill.
4. Assets available to shareholders are held by the Group's UK general insurance operations and are available to
finance future growth of the Group. Accordingly, for the purposes of preparing this note, these assets together
with their associated pre-tax investment return of £107 million (post-tax £72 million) have been reclassified as
Corporate.
5. The return before tax of £(80) million comprises investment return £107 million and corporate costs £(187)
million.
6. The external borrowings reported in the summary consolidated balance sheet of £2,662 million comprises £11 million
of general insurance borrowings (reported within the general insurance and health net assets) and £2,651 million
of borrowings by holding companies of the Group not allocated to operating companies (shown as external debt).
7. Included within the net assets of the disposed Australian and New Zealand general insurance business is £44
million of goodwill acquired.
8. Comprises acquired additional value of in-force long-term business (£599 million), goodwill arising on
acquisitions (£1,141 million) and goodwill on the RBSG joint venture (£244 million).
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Page 46
Shareholder information
Dividend reinvestment plan
Aviva's Dividend Reinvestment Plan (the 'Plan') enables cash dividends to be reinvested in the Company's shares at
reduced dealing costs. Shareholders who have not already joined the Plan and wish to do so should contact the Company's
Registrar, at the address below, in order to obtain full details and a mandate form. Shareholders who have previously
elected to join the Plan need take no further action.
Shareholder enquiries
Shareholders who have any administrative enquiries about their shareholding in Aviva plc should contact the Company's
Registrar:
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex
BN99 6DA
0870 600 3952
Internet addresses
There are various internet sites within the Group, most of which inter-link to enable quick reference direct to specific
sites. Principal UK internet sites are as follows:
Aviva www.aviva.com
UK long-term savings and general insurance www.norwichunion.co.uk
Fund management www.morleyfm.com
Buying a home www.your-move.co.uk
Aviva plc
Registered in England no: 2468686
Registered Office: St Helen's, 1 Undershaft, London EC3P 3DQ
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