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Notes 1-8

1. Basis of preparation – modified statutory solvency basis

1. The preliminary announcement for the year to 31 December 2004 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results on the modified statutory basis for 2004 have been taken from the Group’s 2004 Annual Report and Accounts. The auditor has reported on the 2004 accounts and the report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The Group’s 2003 Annual Report and Accounts have been filed with the Registrar of Companies.
2. The contribution from the Group’s share of the partnership with The Royal Bank of Scotland Group (RBSG) is incorporated within the modified statutory life profit. Goodwill amortised in the year in respect of the Group’s holding in the associated company, RBS Life Investments Limited, is included within ‘Amortisation of goodwill’
3. In November 2000, the Accounting Standards Board issued Financial Reporting Standard 17 (FRS17) “Retirement Benefits”, the accounting provisions, which are not required to be adopted by the Group until
   1 January 2005. FRS17 requires certain transitional disclosures to be made in the statutory accounts and the table shown in the supplementary analyses shows the balance sheet effect of these memorandum disclosures. The Group has continued to account for pension costs in accordance with SSAP24.

4. Changes in accounting policy

   Presentational changes

   The results of our UK equity release business have been reclassified from non-insurance operations to the life insurance operations. This has resulted in assets, liabilities and operating profits being reclassified out of non-insurance segments and into life segments. 2003 comparatives have been restated accordingly and the result on consolidated shareholders’ funds and consolidated profit for the 2003 financial year is nil.

5. FRS27 “Life Assurance”

   In December 2004, the UK Accounting Standards Board (ASB) issued FRS27 “Life Assurance”, which requires certain disclosure to be made in relation to with-profit funds, capital and guarantees and options. Preparation of accounts in accordance with the standard is mandatory for accounting periods ending on or after 23 December 2005, and the Group will make these disclosures in its 2005 financial statements, produced under International Financial Reporting Standards. In accordance with the Memorandum of Understanding signed by Aviva, along with the ASB and other major insurance companies in relation to this standard’s application to insurers’ 2004 Report and Accounts, the required disclosures are made from International Financial Reporting Standards to Life operations of this document.

2. Exchange rates

The euro rates employed in this announcement are an average rate of 1 euro = £0.68 (2003: 1 euro = £0.69) and a closing rate of 1 euro = £0.71 (31 December 2003: 1 euro = £0.70)

3. Acquisitions

1. Life businesses: France

   On 1 October 2004, as part of its bancassurance partnership with Crédit du Nord, the Group acquired 50% of the issued share capital and one share of Antarius, the life insurance company of Crédit du Nord, for an estimated cash consideration of £62 million. The Group’s share of Antarius’ estimated embedded value and net assets acquired was £51 million, giving rise to provisional goodwill of £11 million. The acquisition is still subject to the completion accounts process during the next 12 months, upon which goodwill estimates will be finalised.

2. Non-insurance businesses: UK

   On 16 August 2004, the Group’s general insurance subsidiary, Norwich Union Insurance (NUI) acquired the entire share capital of HPI Holdings Limited (HPI). Total cash consideration including purchase costs was £122 million, comprising £118 million cash and £2 million of loan notes and £2 million of acquisition costs. The net assets acquired were £8 million, giving rise to goodwill of £114 million.

4. Exceptional costs for termination of operations

In February 2004, the Group announced the closure of its UK national broker subsidiary, Hill House Hammond (HHH) by the end of 2004 together with the sale of its commercial business. The associated pre-tax costs of the closure of HHH were £50 million and the exceptional costs relate to termination activities, including redundancy costs and closure provisions.

During 2003, the Group incurred costs on the closure of its general insurance operations in Belgium. These exceptional costs relate to termination activities, including redundancy costs and closure provisions.

5. Disposals

The reported net loss on the disposal of subsidiary and associated undertakings comprises:

	Note	2004 £m	2003 £m
UK	(a)	(141)	-
France	(b)	5	-
Other minor operations		-	(6)
		(136)	(6)

1. Non-insurance businesses: UK

   In July 2004, the Group completed the disposal of its Your Move estate agency and e.surveying business. Total consideration was £42 million and the net assets at the disposal date were £12 million. The loss on disposal was £141 million after deducting the associate costs of disposal and after writing back goodwill of £167 million, previously written off to reserves, as required by FRS10 “Goodwill and Intangible Assets”. The same goodwill amount is also credited directly to the profit and loss account reserve and therefore has a neutral effect on shareholders’ funds.

2. Non-insurance businesses: France

   In June 2004, our French operations, Aviva France, sold its 31.4% holding in Société Foncière Lyonnaise (SFL) a French listed property company for €427 million (£285 million) and after sale expenses recorded a gain of £5 million. These shares were owned by both our French life and non-life operations. Cumulative investment gains in the life company of £22 million have been transferred to a French GAAP statutory provision forming part of the fund for future appropriations under UK GAAP, and will be attributed to policyholders and shareholders as bonuses are declared to policyholders within the next eight years.

3. Non-adjusting post balance sheet event: Sale of general insurance businesses in Asia

   On 7 September 2004, the Group announced the disposal of its Asian general insurance businesses to Mitsui Sumitomo Insurance (MSI) for a total of US$450 million in cash. The sale was subject to obtaining regulatory clearance and approval from other shareholders in the Asian businesses.

   Under the terms of the agreement, MSI will acquire all of Aviva’s general insurance businesses in Asia. These comprise the general insurance business of Aviva Limited and the general insurance assets of Aviva Asia Pte Limited in Singapore; Aviva Insurance Berhad in Malaysia (including its branch in Brunei); Aviva Insurance (Thai) Company Limited in Thailand; PT Aviva Insurance in Indonesia; Dah Sing General Insurance Co Limited in Hong Kong; and Aviva’s branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan. The transaction will be achieved through share purchase of Aviva’s interests in joint venture operations, business purchase and asset purchase in Singapore, and transfer of Aviva’s general insurance branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan.

   The transaction is expected to complete in two phases. Phase I completed on 28 February 2005 and included all businesses above except for Malaysia, Indonesia, Macau, Marianas, Taiwan, Dah Sing and the Philippines which will be included as part of the completion of Phase II, expected in the second half of 2005.

   Subject to the receipt of regulatory approval, the total proceeds for the sale of these businesses were fixed by reference to the net assets of the businesses as at 31 December 2003 and are not adjusted to reflect the results in the period from 1 January 2004 to completion. The Group does not bear any continuing operating risk from 31 December 2003.

   Financial Reporting Standard 2 ‘Accounting for subsidiary undertakings’ requires the results of the Asian general insurance business to be consolidated with those of the Group’s ongoing operations until the completion of the transaction. Although the Group has retained no economic interest in the operations of this business beyond 31 December 2003, the post-tax operating profits are incorporated in the Group’s consolidated profit and loss account from 1 January 2004 to the date of completion. This will be offset by a corresponding change to the final profit on sale. Consequently, had the transaction been completed on 31 December 2004, the post-tax profit on sale would have been £129 million and is summarised below:

	£m	US$m
Net assets at 31 December 2003	60	108
Post-tax operating profit to 31 December 2004	13	24
Net assets as at 31 December 2004	73	132
Proceeds	250	450
Less: Net assets	(73)	(132)
Transaction costs	(8)	(14)
Pre-tax profit on sale	169	304
Tax attributable to profit on sale	(40)	(72)
Post-tax profit on sale	129	232

The Group has hedged its exposure to the sale proceeds of US$450 million through the purchase of foreign currency forward contracts.

Operating profit before tax, amortisation of goodwill and exceptional items for the Asian general insurance businesses included in these results is £21 million comprising of £15 million underwriting profit and £6 million of long-term investment return.

6. Geographical analysis of life and pensions and investment sales – new business and total income

			New business sales			Premium income (after reinsurance) and investment sales
		New single premiums		New regular premiums
		2004 £m	Restated* 2003 £m	2004 £m	2003 £m	2004 £m	2003 £m
Life and pensions sales
United Kingdom	– group**	6,297	5,685	499	511	8,530	8,688
	– associates	205	152	17	23	297	254
		6,502	5,837	516	534	8,827	8,942
Europe (excluding UK)
France		2,454	1,950	62	46	2,892	2,300
Ireland		203	188	66	62	454	442
Italy		1,529	1,399	45	54	1,806	1,662
Netherlands (including Belgium and Luxembourg)		1,131	850	148	139	1,990	1,722
Poland	– Life	40	24	15	17	263	263
	– Pensions	20	8	16	15	500	440
Spain		1,566	1,353	91	111	1,795	1,641
Other		336	280	90	73	724	616
International		660	740	105	113	954	1,007
Total life and pension sales (including share of associates)		14,441	12,629	1,154	1,164	20,205	19,035
Investment sales
United Kingdom		840	664	19	16	859	680
Netherlands		196	204	-	-	196	204
Poland		75	109	2	1	77	110
Other Europe		254	49	-	-	254	49
International		243	98	-	-	243	98
Total investment sales		1,608	1,124	21	17	1,629	1,141
Total long-term savings (including share of associates)		16,049	13,753	1,175	1,181	21,834	20,176
Single premiums are those relating to products issued by the Group, which provide for the payment of one premium only.
Regular premiums are those where there is a contractual obligation to pay on an ongoing basis.
* United Kingdom new business sales shown in the table have been restated to include new business sales through Norwich Union Equity Release. Total new single premium mortgage completion sales amounted to £478 million (2003: £501 million).
** Included within premium income (after reinsurance) and investment sales of £8,530 million (2003: £8,688 million) are transfers of institutional business into Morley Pooled Pensions of £334 million (2003: £1,247 million) which, since they are institutional in nature, are excluded from new business sales.

7. Geographical analysis of modified statutory life operating profit

	2004 £m	2003 £m
United Kingdom
With-profit	107	145
Non-profit*	478	433
Europe (excluding UK)
France	182	179
Ireland	35	41
Italy	43	30
Netherlands (including Belgium and Luxembourg)	166	107
Poland	84	103
Spain	61	50
Other	(5)	(4)
International	34	38
Total modified statutory life operating profit	1,185	1,122
* Included within non profit result is the operating profit of the equity release business, NUER, which is now being classified as a life business. Operating profit for 2004 was nil (2003: £16 million loss) on a modified statutory solvency basis.

8. Geographical analysis of health premiums after reinsurance and operating result

1. Premiums after reinsurance:

	2004 £m	2003 £m
United Kingdom	280	270
France	147	134
Netherlands	567	662
	994	1,066

2. Operating result:

	Operating profit			Underwriting result
	2004 £m	2003 £m		2004 £m	2003 £m
United Kingdom	12	13		8	9
France	8	9		(2)	(2)
Netherlands	38	39		(8)	(20)
	58	61		(2)	(13)

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