Preliminary results for the year ended 31 December 2005

2 March, 2006

• Worldwide operating profit up 29% to £2,904 million
• Final dividend increased by 9% and 5% dividend growth target removed to improve flexibility while investing for future growth
• Healthy performance in long-term savings: Life operating profit up 11% to £1,814 million; profits from new business growing ahead of sales with Group margin up to 3.6% (2004: 3.4%)
• Best general insurance result yet: General insurance and health profit up 22% to £1,551 million; worldwide general insurance combined operating ratio (COR) of 95% (2004: 97%), comfortably beating 98% COR commitment
• Fund management profit more than doubling to £92 million^ (2004: £40 million)

Richard Harvey, group chief executive, commented:
“This is another great set of results from Aviva, delivered by managing our business for value. Our composite business model combines strength and flexibility in both long-term savings and general insurance to produce sustainable returns. As a result, we’ve been able to increase our dividend, moving above the rigid 5% dividend growth target that we set in 2002, and at the same time we are announcing plans to pay £700 million into our UK pension schemes.

“We’ve delivered a strong life result as profits continue to grow faster than sales. We made real progress in continental Europe where our long-term savings businesses performed well and we’ve gained good ground in the developing markets of Asia. Our bancassurance expertise has been a major factor in our progress in the UK, continental Europe and Asia. In the UK, sales continue to build momentum while maintaining strong margins.

“Our general insurance business has delivered yet another excellent result, again demonstrating strong and resilient returns. RAC delivered a good set of results, while our cost savings are on track and the integration is largely complete.

“We are confident of delivering further growth from our businesses in 2006. We will continue to evaluate new distribution and acquisition opportunities to provide additional momentum where we can create shareholder value.”

Worldwide highlights	2005	2004	Growth in constant currency
Operating profit – EEV basis*	£2,904m	£2,224m	29%
Operating profit – IFRS basis**	£2,128m	£1,669m	25%
Life EEV operating return	£1,814m	£1,611m	11%
General insurance and health operating profit	£1,551m	£1,259m	22%
Long-term savings new business sales	£24,645m	£22,290m	10%
New business contribution – gross	£808m	£706m	14%
New business contribution – net of required capital, tax and minorities	£341m	£297m	14%
Final dividend per share	17.44p	16.00p	9%
Total dividend per share	27.27p	25.36p	7.5%
Equity shareholders’ funds***	£14,899m	£11,661m	-
Return on capital employed	15.0%	13.7%	-
Net asset value per share	622p	511p	-

All operating profit is from continuing operations.
All growth rates quoted are at constant rates of exchange.
The 2004 comparative information reflects the adoption of International Financial Reporting Standards (IFRS).
* Including life EEV operating return, before tax and exceptional items.
** Before tax and exceptional items.
*** Measured on an EEV basis, excluding preference shares, direct capital instrument and minority interests.
^ On an IFRS basis

Segmental analysis of Group operating profit*
For the year ended 31 December

Continuing operations		2005 £m	2004 at 2005 exchange rates £m	2004 £m
Life EEV operating return
United Kingdom		585	551	551
France		321	288	286
Ireland		20	40	40
Italy		96	80	79
Netherlands (including Belgium and Luxembourg)		318	279	277
Poland		128	105	93
Spain		214	181	180
Other Europe		33	22	22
International		99	83	83
		1,814	1,629	1,611
Fund Management1
United Kingdom		25	1	1
France		8	5	5
Other Europe		7	6	6
International		11	8	8
		51	20	20
General insurance and health
United Kingdom		974	797	797
France		35	33	33
Ireland		171	136	135
Netherlands		137	89	88
Other Europe		47	32	32
Canada		147	144	133
Other		40	41	41
		1,551	1,272	1,259
Non-insurance operations2		60	(41)	(41)
Corporate costs	– global finance transformation programme	(28)	(85)	(85)
	– central costs and sharesave schemes	(108)	(103)	(103)
Unallocated interest charges	– external	(248)	(246)	(246)
	– intra-group	(220)	(219)	(219)
	– net pension income	32	28	28
Group operating profit before tax*		2,904	2,255	2,224

* Group operating profit before tax. All operating profit is from continuing operations.
¹ Excludes the proportion of the results of Morley’s fund management businesses and of our French asset management operation Aviva Gestion d’Actifs (AGA) that arise from the provision of fund management services to our life businesses. These results are included within the Life EEV operating return.
² Excludes the results of Norwich Union Equity Release. Also excludes the proportion of the results of Norwich Union Life Services relating to the services provided to the UK life business. These results are included within the Life EEV operating return.

The total IFRS operating profit for the year to 31 December 2005 was £2,128 million (2004: £1,669 million; £1,696 million restated at constant exchange rates).

GROUP CHIEF EXECUTIVE’S STATEMENT

We have had another great year in 2005 with EEV³ operating profits before tax increasing 29% to £2.9 billion and return on capital employed increasing to 15% compared to 13.7% last year. On an IFRS basis operating profit before tax grew 25% to £2.1 billion. These results continue a trend of sustained growth and demonstrate our ability to develop our existing portfolio of businesses whilst also achieving excellent returns from our acquisitions and joint venture deals.

As a result of our sustained growth I am delighted to announce an increase in our final dividend of 9% to 17.44 pence per share. Our previous target to grow the dividend by 5% per annum was put in place when the dividend was cut in 2002. Naturally, at that time, the Board wanted to give a high degree of certainty to our shareholders regarding future dividend growth. The Board believes that the target growth rate has become too rigid a constraint, and, in the future, our intention is to increase the dividend on a basis judged prudent using a dividend cover in the 1.5 to 2.0 times range as a guide, while retaining capital to support future business growth.

We are also announcing today plans to make a payment of £700 million over the next two years into the Group’s UK pension schemes. We are able to do this in light of our strong capital and cash flow position and this demonstrates our ongoing commitment to our employees.

The strength of our composite model is becoming increasingly apparent as we continue to demonstrate the growth potential of our portfolio of general insurance and life businesses. I expect further growth in 2006 and we will continue to evaluate new distribution opportunities and acquisitions where we can create shareholder value.

Long-term Savings and Fund Management

With an increase in life and pensions sales of 7% to £22.2 billion alongside a 14% increase in gross new business contribution to £808 million, we continue to demonstrate our focus on profitable growth in our long-term savings business.

I am particularly pleased that total international long-term savings sales increased by 16% to £14.4 billion. Our international portfolio now contributes nearly 60% of life new business for Aviva. In continental Europe we achieved particularly strong performances with gross new business contribution increasing by 22%, comfortably ahead of the growth in life and pensions sales of 13%. I am confident that we can maintain our track record of achieving sustained profitable growth from our portfolio of businesses in Europe.

We continue to build on our competitive advantage in bancassurance with worldwide growth of 22% to £6.2 billion in 2005. Our expertise in this field is gaining recognition in the banking community and has recently resulted in three excellent deals: with Allied Irish Banks, Centurion Bank of Punjab and National Development Bank. These arrangements significantly increase our distribution capability in Ireland, India and Sri Lanka.

Our Asian operations continue to see significant development, with permission received to set up a branch in Jinan, the capital of Shandong province, in March. Shandong has a population of 92 million people and we are very excited about the growth opportunities in this area. We will then have a presence in 10 cities, including five major provinces. Sales increased five-fold in China and more than doubled in India, showing our commitment to expanding our operations in these countries. In the US, our niche business achieved strong sales growth up 32% to £527 million.

The UK business continued to build momentum and finished 2005 on a robust note. The final quarter was the strongest of the year, with £2.8 billion of new business – an increase of 7% compared to the fourth quarter in 2004. We continue to write all business comfortably above the cost of capital, once again demonstrating our commitment to profitability whilst maintaining a market leading position in the UK.

We remain focused on the development of our UK business with the development of a new SIPP product range in advance of pensions simplification and the launch of a new guaranteed with-profits bond. We have also recently announced an initiative to enter the bulk purchase annuity market within the next year.

There was a healthy increase in sales through the bancassurance joint venture with the Royal Bank of Scotland up 39% to £742 million. This follows the introduction of a full product range during the year and further alignment between the insurance sales force and the banking operations, and further growth remains a priority.

Our fund management business has shown significant growth this year with funds under management increasing £37 billion to £317 billion and profits on an IFRS basis more than doubling to £92 million.

General Insurance

With a combined operating ratio (COR) of 95%, our general insurance performance is comfortably in line with our target to meet or beat a COR of 98% for the foreseeable future. Operating profit has increased to £1.6 billion, 22% ahead of last year.

We achieved a strong performance across the general insurance portfolio with strong growth in all our major markets. This was achieved through a combination of improving underwriting disciplines, cost control and better than expected weather conditions in most markets. In the UK our personal lines premiums grew by 17% to £3.7 billion, a notable highlight being the increase in insurance sales over the internet which have overtaken telephone sales for the first time in 2005.

The RAC delivered a good performance in a year of integration with operating profit of £59 million and cost savings are on track, and we are in line to deliver operating profits of £250 million per annum on a like for like basis, demonstrating the importance of this acquisition to the Group. The integration of the RAC with our existing UK General Insurance business is now largely complete. We launched our marketing drive for motor and travel insurance to RAC customers at the end of 2005 and are encouraged by the initial response to our campaign.

Outlook

We are confident of delivering further growth from our existing portfolio of businesses in 2006. While our primary aim is to grow our existing portfolio of businesses, we will continue to evaluate new distribution arrangements and acquisition opportunities to add momentum where we see clearly identifiable opportunities to increase shareholder value.

In summary, these are another great set of results that demonstrate the sustainability which stems from the resilience and strength of our composite model.

Richard Harvey
Group chief executive

³European Embedded Value

Enquiries:

Richard Harvey	Group chief executive	+44 (0)20 7662 2286
Andrew Moss	Group finance director	+44 (0)20 7662 2679
Analysts:
Charles Barrows	Investor relations director	+44 (0)20 7662 8115
Media:
Hayley Stimpson	Director of external affairs	+44 (0)20 7662 7544
Sue Winston	Head of group media relations	+44 (0)20 7662 8221
Rob Bailhache	Financial Dynamics	+44 (0)20 7269 7200

NEWSWIRES: There will be a conference call today for wire services at 8.15am (BST) on +44 (0)20 7162 0125 Quote: Aviva, Richard Harvey.

ANALYSTS: A presentation to investors and analysts will take place at 9.30am (BST) at St Helen’s, 1 Undershaft, London, EC3P 3DQ. The investors and analysts presentation is being filmed for live webcast and can be viewed on the Group’s website www.aviva.com or on www.cantos.com. In addition a replay will be available on these websites later today. There will also be a live teleconference link to the investor and analyst meeting on +44 (0) 20 7138 0820. A replay facility will be available until 15 March 2006 on +44 (0) 20 7806 1970. The pass code is 2784971# for the whole presentation including Question & Answer session or 2780574# for Question & Answer session only.

The presentation slides will be available on the Group's website from 9.00am (BST).

The Aviva media centre includes images, company information and news release archive. High resolution images are also available for the media to view and download free of charge from www.vismedia.co.uk.

Photographs are available from the Aviva media centre.

Notes to editors

• Aviva is one of the leading providers of life and pensions to Europe with substantial positions in other markets around the world, making it the world’s sixth largest insurance group based on both gross worldwide premiums and market capitalisation at 31 December 2004.
• Aviva’s principal business activities are long-term savings, fund management and general insurance, with worldwide total sales* of £35 billion and assets under management of £317 billion at 31 December 2005.
  * Based on life and pensions PVNBP, total investment sales and general insurance and health net written premiums including share of associates’ premiums.
• Overseas currency results are translated at average exchange rates.
• The present value of new business premiums (PVNBP) is equal to total single premium sales received in the year plus the discounted value of annual premiums expected to be received over the term of the new contracts, and is expressed at the point of sale.
• All growth rates are quoted at constant currency, which excludes the impact of changes in exchange rates between periods.
• This preliminary announcement may contain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Aviva’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Aviva and its affiliates operate. As a result, Aviva’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Aviva’s forward-looking statements.
  
  Aviva undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements we may make.

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