15. Segmental information
(a) Segmental results – primary reporting format - business segments
The principal activity of the Group is financial services, which is managed using the following reportable segments: long-term business, fund management, general insurance and health.
Long-term business
Our long-term business comprises life insurance, long-term health and accident insurance, savings, pensions and annuity
business written by our life insurance subsidiaries including managed pension fund business and our share of the other life and
related business written in our associates and joint ventures, as well as the equity release business written in the UK.
Fund management activities
Our fund management business invests policyholders’ and shareholders’ funds, provides investment management services for
institutional pension fund mandates and manages a range of retail investment products, including investment funds, unit trusts,
OEICs and ISAs. Clients include Aviva group businesses and third-party financial institutions, pension funds, public sector
organisations, investment professionals and private investors.
General insurance and health
Our general insurance and health business provides insurance cover to individuals and to small and medium-sized businesses,
for risks associated mainly with motor vehicles, property and liability, such as employers’ liability and professional indemnity
liability, and medical expenses.
Other
Head office expenses, such as Group treasury and finance functions, and other activities not related to the core business
segments are included as “Other” in the following tables. Any segments that are not reportable segments due to their
immateriality are also included in this category, together with eliminations and any other reconciling items. Certain financing
costs and taxes are not allocated among the segments.
The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments are on normal commercial terms and market conditions.
Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet but excluding items such as tax and borrowings.
(a) Segmental results of the income statement – primary reporting format - business segments for the six months ended 30 June 2005
| Long-term business £m |
Fund management £m |
General insurance and health £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| Segment revenue from external customers: | |||||
| Net earned premiums | 7,468 | - | 4,889 | - | 12,357 |
| Fee and commission income | 286 | 114 | 15 | 121 | 536 |
| 7,754 | 114 | 4,904 | 121 | 12,893 | |
| Net Investment income | 9,311 | 4 | 688 | 76 | 10,079 |
| Other income | 25 | 1 | 73 | 434 | 533 |
| Inter segment revenue | 16 | 73 | (3) | (86) | - |
| Total income | 17,106 | 192 | 5,662 | 545 | 23,505 |
| Claims and benefits paid, net of recoveries from reinsurers | (6,490) | - | (2,870) | - | (9,360) |
| Change in insurance liabilities, net of reinsurance | (5,147) | - | (331) | - | (5,478) |
| Change in unallocated divisible surplus | (355) | - | - | - | (355) |
| Expenses attributed to investment contracts | (3,002) | - | - | - | (3,002) |
| Fee and commission expense | (683) | (33) | (1,286) | (17) | (2,019) |
| Other operating expenses | |||||
| Depreciation | (7) | (2) | (5) | (28) | (42) |
| Amortisation of acquired value of business in-force | (36) | - | - | - | (36) |
| Net impairment of acquired value of business in-force | (7) | - | - | - | (7) |
| Net impairment of other intangible assets | (8) | - | (5) | (3) | (16) |
| Impairment of goodwill | (10) | - | - | - | (10) |
| Other impairment losses recognised in the income statement | (4) | - | - | - | (4) |
| Other expenses | (528) | (123) | (295) | (566) | (1,512) |
| Finance costs | (118) | - | (22) | (137) | (277) |
| Total expenses | (16,395) | (158) | (4,814) | (751) | (22,118) |
| Segment result before share of profit/(loss) of joint ventures and associates | 711 | 34 | 848 | (206) | 1,387 |
| Share of profit/(loss) of joint ventures and associates | 23 | (3) | - | 5 | 25 |
| Segmental result before tax | 734 | 31 | 848 | (201) | 1,412 |
| Unallocated costs: | |||||
| Tax attributable to policyholders’ returns | (288) | ||||
| Tax attributable to shareholders’ profits | (307) | ||||
| Total tax expense | (595) | ||||
| Profit for the period | 817 |
(b) Segmental results of the income statement – primary reporting format - business segments continued
Reconciliation to operating profit before tax attributable to shareholders’ profits for the six months ended 30 June 2005
| Long-term business £m |
Fund management £m |
General insurance and health £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| Segment result before tax | 734 | 31 | 848 | (201) | 1,412 |
| Add: | |||||
| Impairment of goodwill | 10 | - | - | - | 10 |
| Amortisation of acquired value of in-force business | 44 | - | - | - | 44 |
| Impairment of other intangible assets | 8 | - | 5 | 3 | 16 |
| Net profit on the disposal of subsidiaries and associates | - | - | (41) | (104) | (145) |
| Integration costs | - | - | - | 14 | 14 |
| Short-term fluctuation on investment return | - | - | (120) | - | (120) |
| Corporate costs reallocation | 2 | 2 | 2 | (6) | - |
| 798 | 33 | 694 | (294) | 1,231 | |
| Less: | |||||
| Tax attributable to policyholders’ returns | (288) | - | - | - | (288) |
| Operating profit before tax attributable to shareholders’ profits | 510 | 33 | 694 | (294) | 943 |
(c) Segmental results of the income statement – primary reporting format - business segments for the year ended 31 December 2004
| Long-term business £m |
Fund management £m |
General insurance and health £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| Segment revenue from external customers | |||||
| Net earned premiums | 13,533 | - | 9,642 | - | 23,175 |
| Fee and commission income | 443 | 144 | 25 | 260 | 872 |
| 13,976 | 144 | 9,667 | 260 | 24,047 | |
| Net investment income | 14,557 | 17 | 1,216 | 260 | 16,050 |
| Inter-segment revenue | 8 | 126 | 7 | (141) | - |
| Other income | 133 | 58 | 4 | 162 | 357 |
| Total income | 28,674 | 345 | 10,894 | 541 | 40,454 |
| Claims and benefits paid, net of recoveries from reinsurers | (11,967) | - | (5,658) | - | (17,625) |
| Change in insurance liabilities, net of reinsurance | (5,393) | - | (711) | - | (6,104) |
| Change in unallocated divisible surplus | (1,330) | - | - | - | (1,330) |
| Expenses attributed to investment contracts | (5,635) | - | - | - | (5,635) |
| Fee and commission expense | (2,068) | (77) | (2,482) | (107) | (4,734) |
| Other operating expenses | |||||
| Depreciation | (14) | (4) | (19) | (60) | (97) |
| Amortisation of acquired value of business in force | (72) | - | - | - | (72) |
| Net impairment of acquired value of business in force | (12) | - | - | - | (12) |
| Net impairment of other intangible assets | (7) | - | - | - | (7) |
| Impairment of goodwill | (18) | - | (2) | (21) | (41) |
| Other impairment losses recognised in the income statement | (1) | - | - | (24) | (25) |
| Other reversal of impairment losses recognised in the income statement | - | - | - | - | - |
| Other expenses | (721) | (230) | (685) | (765) | (2,401) |
| Finance costs | (126) | - | (43) | (276) | (445) |
| Total expenses | (27,364) | (311) | (9,600) | (1,253) | (38,528) |
| Segmental result before share of profit/(loss) of joint ventures and associates | 1,310 | 34 | 1,294 | (712) | 1,926 |
| Share of profit/(loss) of joint ventures and associates | 71 | (6) | - | 34 | 99 |
| Segmental results before tax | 1,381 | 28 | 1,294 | (678) | 2,025 |
| Unallocated costs: | |||||
| Tax attributable to policyholders’ returns | (383) | ||||
| Tax attributable to shareholders’ profits | (271) | ||||
| Total tax expense | (654) | ||||
| Profit for the period | 1,371 |
(d) Segmental results of the income statement – primary reporting format - business segments
Reconciliation to operating profit before tax attributable to shareholders’ profits for the year ended 31 December 2004
| Long-term business £m |
Fund management £m |
General insurance and health £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| Segment result before tax from continuing operations | 1,381 |
28 |
1,294 |
(678) |
2,025 |
| Add: | |||||
| Impairment of goodwill | 18 | - | 2 | 21 | 41 |
| Amortisation of acquired value of in-force business | 85 | - | - | - | 85 |
| Impairment of other intangible assets | 7 | - | - | - | 7 |
| Financial Services Compensation Scheme and other levies | - | 9 | 40 | - | 49 |
| Short-term fluctuation on investment return | - | - | (161) | - | (161) |
| Net profit on the disposal of subsidiaries and associates | 4 | - | 62 | (100) | (34) |
| Exceptional costs for termination of operations | - | - | - | 40 | 40 |
| Corporate costs reallocation | 4 | 3 | 22 | (29) | - |
| 1,499 | 40 | 1,259 | (746) | 2,052 | |
| Less: | |||||
| Tax attributable to policyholders’ returns | (383) | - | - | - | (383) |
| Operating profit before tax attributable to shareholders’ profits | 1,116 | 40 | 1,259 | (746) | 1,669 |
(e) Segmental balance sheet – primary reporting format – on business segments
As at 30 June 2005
| Long-term business £m |
Fund management £m |
General insurance and health £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| Goodwill | 551 | - | 359 | 1,379 | 2,289 |
| Acquired value of in-force business and other intangible assets | 425 | - | 379 | 114 | 918 |
| Investment property | 10,662 | - | 357 | 54 | 11,073 |
| Investments in joint ventures and associates | 2,069 | 40 | 8 | 170 | 2,287 |
| Financial investments | |||||
| Debt securities | 86,818 | - | 9,320 | 2,601 | 98,739 |
| Equity securities | 44,843 | 1 | 2,460 | 601 | 47,905 |
| Other investments | 22,455 | 5 | 231 | 43 | 22,734 |
| Loans | 16,763 | - | 2,710 | 2,448 | 21,921 |
| Other assets | 26,949 | 429 | 10,137 | 2,026 | 39,541 |
| Segment assets | 211,535 | 475 | 25,961 | 9,436 | 247,407 |
| Unallocated assets – tax assets | 888 | ||||
| Total assets | 248,295 | ||||
| Insurance liabilities | 109,933 | - | 18,127 | - | 128,060 |
| Liability for investment contracts | 71,005 | - | - | - | 71,005 |
| Unallocated divisible surplus | 7,732 | - | - | - | 7,732 |
| Borrowings | |||||
| External | 3,601 | - | 2,014 | 746 | 6,361 |
| Other liabilities, including inter-segment liabilities | 6,968 | 169 | (525) | 9,214 | 15,826 |
| Net asset value attributable to unitholders | 2,469 | - | - | - | 2,469 |
| Segment liabilities | 201,708 | 169 | 19,616 | 9,960 | 231,453 |
| Unallocated liabilities |
|||||
| Central borrowings | 4,339 | ||||
| Tax liabilities | 2,732 | ||||
| Total liabilities | 238,524 |
Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies.
(f) Segmental balance sheet – primary reporting format on business segments
As at 31 December 2004
| Long-term business £m |
Fund management £m |
General insurance and health £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| Goodwill | 595 | - | 308 | 281 | 1,184 |
| Acquired value of in-force business and other intangible assets | 451 | - | 19 | 46 | 516 |
| Property and equipment | 404 | 7 | 133 | 268 | 812 |
| Investment property | 10,639 | - | 362 | 56 | 11,057 |
| Investments in joint ventures and associates | 1,995 | 40 | 13 | 80 | 2,128 |
| Financial investments | |||||
| Debt securities | 86,897 | 2 | 9,255 | 2,565 | 98,719 |
| Equity securities | 44,269 | 1 | 2,449 | 572 | 47,291 |
| Other investments | 20,067 | 6 | 224 | 49 | 20,346 |
| Loans | 17,090 | - | 2,635 | 2,330 | 22,055 |
| Other assets | 23,455 | 311 | 9,786 | 735 | 34,287 |
| Segment assets | 205,862 | 367 | 25,184 | 6,982 | 238,395 |
| Tax | 908 | ||||
| Total assets | 239,303 | ||||
| Insurance liabilities | 106,329 | - | 17,793 | - | 124,122 |
| Liability for investment contracts | 69,555 | - | - | - | 69,555 |
| Unallocated divisible surplus | 7,549 | - | - | - | 7,549 |
| Borrowings | |||||
| External | 4,082 | - | 1,439 | 270 | 5,791 |
| Other liabilities, including inter-segment liabilities | 6,250 | 191 | 474 | 7,367 | 14,282 |
| Net asset value attributable to unitholders | 2,247 | - | - | - | 2,247 |
| Segment liabilities | 196,012 | 191 | 19,706 | 7,637 | 223,546 |
| Unallocated liabilities | |||||
| Central borrowings | 4,299 | ||||
| Tax liabilities | 2,465 | ||||
| Total liabilities | 230,310 |
Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies.
(g) Goodwill allocation and impairment testing
IFRS requires formal impairment testing to be carried out annually. The Group’s policy is to perform formally this testing at year end. For impairment testing, goodwill has been allocated to cash-generating units by geographical reporting unit and business segment. In line with the Group’s policy, the last formal impairment test was carried out at 31 December 2004. The tests led to an impairment charge of £41 million which comprised £21 million on one non-insurance Dutch operation, £17 million on other small European businesses and £3 million on other operations. In the first six months of 2005, an impairment charge of £10 million was made in respect of smaller European acquisitions.
Other long lived assets such as acquired additional value of in-force, and other intangibles are not subject to formal impairment testing but are amortised on an annual basis. There have been no indications of impairment and hence no charge has been made in any period.
(h) Long-term business summary analysis by geographical segment
(i) Income statement
| Net written premiums | Fee and commission income | Profit before tax | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|||
| United Kingdom | 2,228 | 2,228 | 4,768 | 96 | 95 | 145 | 471 | 175 | 650 | ||
| France | 1,803 | 1,345 | 2,892 | 78 | 63 | 140 | 114 | 89 | 196 | ||
| Ireland | 95 | 106 | 195 | 10 | 9 | 15 | 18 | 19 | 52 | ||
| Italy | 696 | 548 | 1,084 | 31 | 17 | 44 | 14 | 16 | 28 | ||
| Netherlands | 1,227 | 966 | 1,859 | 18 | 3 | 15 | 56 | 55 | 220 | ||
| Poland | 148 | 129 | 267 | 10 | 6 | 11 | 48 | 39 | 80 | ||
| Spain | 664 | 707 | 1,206 | 16 | 14 | 29 | 33 | 21 | 61 | ||
| Other Europe | 260 | 261 | 565 | 16 | 2 | 24 | (4) | (7) | (8) | ||
| Europe excluding | |||||||||||
| United Kingdom | 4,893 | 4,062 | 8,068 | 179 | 114 | 278 | 279 | 232 | 629 | ||
| International | 347 | 252 | 697 | 11 | 11 | 20 | (16) | 55 | 102 | ||
| Total | 7,468 | 6,542 | 13,533 | 286 | 220 | 443 | 734 | 462 | 1,381 | ||
The following analysis shows the net written premiums from associates and joint ventures which are not included in the analysis above.
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| RBS | 102 | 125 | 319 |
| India | 6 | 2 | 6 |
| China | 13 | 1 | 3 |
| 121 | 128 | 328 |
(ii) Balance sheet
| Segmental total assets | Net assets | ||||
|---|---|---|---|---|---|
| 30 June 2005 £m |
31 December 2004 £m |
30 June 2005 £m |
31 December 2004 £m |
||
| United Kingdom | 112,071 | 107,495 | 2,868 | 3,162 | |
| France | 41,642 | 41,827 | 1,149 | 1,175 | |
| Ireland | 5,102 | 5,108 | 376 | 403 | |
| Italy | 9,686 | 9,492 | 606 | 478 | |
| Netherlands (including Belgium and Luxembourg) | 27,485 | 27,357 | 1,761 | 1,758 | |
| Poland | 1,546 | 1,564 | 142 | 176 | |
| Spain | 5,809 | 5,638 | 717 | 761 | |
| Other Europe | 1,283 | 1,104 | 161 | 160 | |
| Europe excluding | |||||
| United Kingdom | 92,553 | 92,090 | 4,912 | 4,911 | |
| International | 6,911 | 6,277 | 642 | 735 | |
| Total | 211,535 | 205,862 | 8,422 | 8,808 | |
(i) Geographical analysis of life and pensions and investment sales – new business and total income
For the purpose of recording life and pensions new business premiums, the Group’s policy is to include life insurance, long term health and accident insurance, savings, pensions and annuity business written by our life insurance subsidiaries, including managed pension fund business and our share of the other life and related business written in our associates and joint ventures as well as the equity release business written in the UK. This includes both insurance and investment contracts as defined under IFRS 4 “Insurance Contracts” and is consistent with the definition of covered business used for our supplementary embedded value reporting.
| New single premiums |
New regular premiums |
Total income | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 6 months 2005 £m |
6 months 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
||||
| Life and pensions: | ||||||||||
| United Kingdom | 3,056 | 2,938 | 230 | 273 | 2,228 | 2,228 | 4,768 | |||
| France | 1,607 | 1,183 | 41 | 27 | 1,803 | 1,345 | 2,892 | |||
| Ireland | 191 | 85 | 32 | 35 | 95 | 106 | 195 | |||
| Italy | 1,146 | 694 | 30 | 20 | 696 | 548 | 1,084 | |||
| Netherlands (including Belgium and Luxembourg) | 653 | 542 | 73 | 65 | 1,227 | 966 | 1,859 | |||
| Poland | 35 | 33 | 14 | 15 | 148 | 129 | 267 | |||
| Spain | 638 | 875 | 49 | 42 | 664 | 707 | 1,206 | |||
| Other Europe | 177 | 167 | 38 | 41 | 260 | 261 | 565 | |||
| Total Europe excluding | ||||||||||
| United Kingdom | 4,447 | 3,579 | 277 | 245 | 4,893 | 4,062 | 8,068 | |||
| International | 326 | 225 | 56 | 51 | 347 | 252 | 697 | |||
| Total life and pensions (including share of associates) | 7,829 | 6,742 | 563 | 569 | 7,468 | 6,542 | 13,533 | |||
| Retail sales of mutual fund type products: | ||||||||||
| United Kingdom | 504 | 437 | 9 | 14 | 513 | 451 | 859 | |||
| Netherlands | 180 | 120 | - | - | 180 | 120 | 196 | |||
| Poland | 24 | 48 | 2 | 1 | 26 | 49 | 77 | |||
| Other Europe | 237 | 91 | - | - | 237 | 91 | 254 | |||
| International | 106 | 64 | - | - | 106 | 64 | 243 | |||
| Total investment sales | 1,051 | 760 | 11 | 15 | 1,062 | 775 | 1,629 | |||
| Total long term savings (including share of associates) | 8,880 | 7,502 | 574 | 584 | 8,530 | 7,317 | 15,162 | |||
| 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. |
||||||||||
| * Included within new business sales is £2,104 million single premiums and £194 million regular premiums (six months 30 June 2004: £2,060 million single premiums and £203 million regular premiums; full year 2004: £4,338 million single premiums and £410 million regular premiums), in respect of contracts that meet the definition of “non-participating investment” contracts under IFRS 4 “Insurance Contracts”. Under IFRS, the premiums on these contracts are not included in the Group income statement under earned premiums, but are included on the balance sheet as a deposit. | ||||||||||
(j) General insurance and health business summary analysis by geographical segment
(i) Income statement
| Net written premiums | Fee and commission income | Profit before tax | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|||
| United Kingdom | 2,891 | 2,819 | 5,715 | - | - | - | 430 | 85 | 702 | ||
| France | 424 | 382 | 670 | - | 1 | 4 | 30 | 27 | 71 | ||
| Ireland | 262 | 292 | 545 | - | 1 | 1 | 93 | 60 | 144 | ||
| Netherlands | 790 | 800 | 1,286 | 14 | 10 | 18 | 123 | 53 | 145 | ||
| Other Europe | 129 | 124 | 230 | 1 | 1 | 2 | 17 | 8 | 44 | ||
| Europe excluding | |||||||||||
| United Kingdom | 1,605 | 1,598 | 2,731 | 15 | 13 | 25 | 263 | 148 | 404 | ||
| Canada | 627 | 601 | 1,202 | - | - | - | 94 | 35 | 153 | ||
| Other | 81 | 117 | 170 | - | - | - | 61 | 12 | 35 | ||
| International | 708 | 718 | 1,372 | - | - | - | 155 | 47 | 188 | ||
| Total | 5,204 | 5,135 | 9,818 | 15 | 13 | 25 | 848 | 280 | 1,294 | ||
(ii) Balance sheet
| Segmental total assets | Net assets | ||||
|---|---|---|---|---|---|
| 30 June 2005 £m |
31 December 2004 £m |
30 June 2005 £m |
31 December 2004 £m |
||
| United Kingdom | 13,073 | 12,927 | 3,006 | 2,504 | |
| France | 1,767 | 1,741 | 351 | 416 | |
| Ireland | 1,865 | 1,989 | 453 | 498 | |
| Netherlands | 4,542 | 3,677 | 510 | 461 | |
| Other Europe | 879 | 914 | 137 | 162 | |
| Europe excluding | |||||
| United Kingdom | 9,053 | 8,321 | 1,451 | 1,537 | |
| Canada | 3,291 | 3,111 | 704 | 687 | |
| Other | 544 | 825 | 324 | 277 | |
| International | 3,835 | 3,936 | 1,028 | 964 | |
| Total | 25,961 | 25,184 | 5,485 | 5,005 | |
(iii) General insurance, fund management and other investments mix at
| United Kingdom £m |
Continental Europe £m |
International £m |
Total £m |
|
|---|---|---|---|---|
| Equity securities-fair value | 1,669 | 948 | 445 | 3,062 |
| Debt and fixed income securities at market value | 5,198 | 4,973 | 1,750 | 11,921 |
| Loans secured by mortgages and other loans | 623 | 4,518 | 17 | 5,158 |
| Other investments | 23 | 256 | - | 279 |
| Investments in joint ventures and associates | 181 | 37 | - | 218 |
| Investment property | 237 | 171 | 3 | 411 |
| Total investments | 7,931 | 10,903 | 2,215 | 21,049 |