Supplementary analyses

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(a) Non-insurance operations – operating result

	6 months 2004 £m	6 months 2003 £m	Full year 2003 £m
Hill House Hammond	1	6	4
Norwich Union Equity Release* and other personal finance subsidiaries	(7)	(9)	(16)
Your Move	8	(6)	1
Norwich Union Life Services	(15)	(27)	(54)
Other	(2)	(11)	1
	(15)	(47)	(64)
* 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 £5 million before tax (30 June 2003: £12 million; 31 December 2003: £19 million) and operating profit before tax, including the benefits of the securitisation of our book, was £21 million (30 June 2003: £22 million; 31 December 2003: £31 million) which is excluded from our results.

(b) Pension schemes

The Group continues to account for its pension costs in accordance with SSAP24. The table below sets out the carrying value of the pension scheme prepayment in the Group’s balance sheet under the principles of SSAP24 and the valuation of the pension schemes liabilities under the requirements of FRS17.

	30 June 2004 £m	31 December 2003 £m
Pension scheme prepayment on SSAP24 basis	276	251
Valuation of the pension schemes on a FRS17 basis, after deduction of related deferred tax	(521)	(583)

(c) Investments in joint ventures

	30 June 2004 £m	30 June 2003 £m	31 December 2003 £m
Share of gross assets	1,796	1,401	1,416
Share of gross liabilities	(1,537)	(1,306)	(1,226)
	259	95	190
Loans to joint ventures	827	669	679
	1,086	764	869

As part of their investment strategy, the UK long-term business policyholder funds have invested in a number of property limited partnerships (PLPs) 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 their 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 the 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 commenced operations on 1 January 2003. These shares are held by Aviva plc at a cost of £22 million (31 December 2003: £22 million) and share of net assets of £16 million (31 December 2003: £18 million).

(d) Longer-term investment return

The longer-term investment return is calculated separately for each principal general insurance business and certain long-term business operations. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the longer-term rate of investment return. The longer-term rate of investment return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return. The allocated longer-term return for other investments is the actual income receivable for the year.

The principal assumptions underlying the calculation of the longer-term investment return are:

	Longer-term rates of return
	Equities		Properties
	2004	2003	2004	2003
	%	%	%	%
United Kingdom	8.1%	8.1%	6.6%	6.6%
France	7.5%	7.5%	6.5%	6.5%
Ireland	8.7%	8.7%	6.7%	6.7%
Netherlands	8.4%	8.4%	6.5%	6.5%
Canada	9.3%	9.3%	7.3%	7.3%

 

The table below shows the sensitivity in the changes in the longer-term rates of return on the annual operating profit:

Movement in investment return	By	Change in	By
Equities	1% higher/lower	Group operating profit before tax	£31 m
Properties	1% higher/lower	Group operating profit before tax	£8 m

(e) General business – investment return information

	Actual investment return			Longer-term investment return
	6 months 2004 £m	6 months 2003 £m	Full year 2003 £m	6 months 2004 £m	6 months 2003 £m	Full year 2003 £m
United Kingdom	310	295	585	341	303	626
Europe (excluding UK)
France	16	19	37	19	22	44
Ireland	29	28	58	32	29	65
Netherlands	10	28	71	24	15	40
Other	12	12	20	20	20	38
International
Canada	46	44	94	55	52	110
Other	16	16	36	17	17	42
Total longer-term investment return				508	458	965
Total actual investment income	439	442	901
Realised (losses)/gains	(6)	26	47
Unrealised (losses)/gains	(193)	151	136
Total actual investment return	240	619	1,084	508	458	965

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 six months to 30 June 2004

	Actual investment return £m	Longer-term investment return £m	Short-term fluctuation in investment return £m
General business	240	508	(268)
Health business	14	31	(17)
	254	539	(285)
Life business			(1)
Total short-term fluctuation in investment return			(286)

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