Interim results for 6 months ended 30 June 2006
Other assumptions
Taxation
Current tax legislation and rates have been assumed to continue unaltered,
except where changes in future tax rates have been announced.
Demographic assumptions
Assumed future mortality, morbidity and lapse rates have been derived from
an analysis of Aviva’s recent operating experience. Where appropriate,
surrender and option take up rate assumptions that vary according to the investment
scenario under consideration have been used in the calculation of the time
value of options and guarantees, based on our assessment of likely policyholder
behaviour in different investment scenarios.
Expense assumptions
Management expenses and operating expenses of holding companies attributed
to life and related businesses have been included in the EEV calculations and
split between expenses relating to the acquisition of new business, the maintenance
of business in-force and project expenses. Future expense assumptions include
an allowance for maintenance expenses and a proportion of recurring project
expenses. Certain expenses of an exceptional nature, when they occur, are identified
separately and are generally charged as incurred. No future productivity gains
have been anticipated.
Where subsidiary companies provide administration, investment management or other services to businesses included in the European Embedded Value calculations, the value of profits or losses arising from these services have been included in the embedded value and new business contribution.
Valuation of debt
Borrowings in the EEV consolidated balance sheet are valued on an IFRS basis,
consistent with the primary financial statements. At 30 June 2006 the market
value of the Group’s external debt, subordinated debt, preference shares
including General Accident plc preference shares of £250 million (classified
as minority interests) and direct capital instrument was £5,407 million
(31 December 2005: £5,868 million).
| 30 June 2006 £m |
30 June 2005 £m |
31 December 2005 £m |
|
|---|---|---|---|
| Borrowings per summarised consolidated balance sheet – EEV basis | 11,070 | 10,700 | 11,013 |
| Less: Securitised mortgage funding | (6,689) | (5,481) | (6,303) |
| Borrowings excluding non-recourse funding - EEV basis | 4,381 | 5,219 | 4,710 |
| Less: Operational financing by businesses | (762) | (881) | (900) |
| External debt and subordinated debt – EEV basis | 3,619 | 4,338 | 3,810 |
| Add: Preference shares (including General Accident plc) and direct capital instrument | 1,440 | 1,440 | 1,440 |
| External debt, subordinated debt, preference shares and direct capital instrument – | |||
| EEV basis | 5,059 | 5,778 | 5,250 |
| Effect of marking these instruments to market | 354 | 605 | 618 |
| Market value of external debt, subordinated debt, preference shares and direct capital instrument | 5,413 | 6,383 | 5,868 |
