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Interim results for 6 months ended 30 June 2006

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1. Basis of preparation – IFRS basis

(a)	The results for the six months to 30 June 2006 have been prepared on the basis of the accounting policies set out in Aviva plc’s 2005 Annual Report and Accounts. The results for the six months to 30 June 2006 and 2005 are unaudited but have been reviewed by the auditor, Ernst & Young LLP. The interim accounts do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results for the full year 2005 have been taken from the Group’s 2005 Annual Report and Accounts. The auditor has reported on the 2005 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 2005 Report and Accounts have been filed with the Registrar of Companies.
(b)	Items included in the financial statements of each of the Group’s entities are measured in the currency of the primary economic environment in which that entity operates (the “functional currency”). The consolidated financial statements are stated in sterling, which is the Company’s functional and presentation currency. Unless otherwise noted, the amounts shown in the financial statements are in millions of pounds sterling (£m). As supplementary information, consolidated financial information is also presented in Euros.
(c)	The result of the Group’s fund management business in the Netherlands was previously reported within the results of our other operations but is now shown as part of our fund management operations. The result reclassified in the six months to 30 June 2006 is £13 million (six months to 30 June 2005: £8 million; full year 2005: £32 million). The related assets and liabilities reclassified at 30 June 2006 are £47 million (30 June 2005: £95 million; 31 December 2005: £54 million) and £18 million (30 June 2005: £8 million; 31 December 2005: £15 million) respectively.

2. Exchange rates

The euro rates employed in this announcement are an average rate of 1 euro = £0.68 (six months to 30 June 2005: 1 euro = £0.69; full year 2005: 1 euro = £0.68) and a closing rate of 1 euro = £0.69 (30 June 2005: 1 euro = £0.68; 31 December 2005: 1 euro = £0.69).

3. Acquisitions

(a)  Ark Life Assurance Company Limited

On 27 January 2006, Hibernian Life Holdings Limited (HLH), the parent company of Hibernian Life & Pensions Limited, acquired all the shares of Ark Life Assurance Company Limited (Ark Life) from Allied Irish Banks plc (AIB) in exchange for a 24.99% stake in the enlarged HLH and a balancing cash payment of €196 million (£134 million) which also reflects the transfer of the management of Ark Life funds to Hibernian Investment Managers Limited, part of the Group’s fund management business. A further deferred cash payment of up to €10 million (£7 million) is payable, subject to the fulfilment of certain performance criteria. The results of Ark Life have been included in the consolidated financial statements of the Group with effect from 27 January 2006, and contributed £5 million to the consolidated EEV profit before tax and £11 million to the IFRS profit before tax.

The transaction has been accounted for as the acquisition of 75.01% of Ark Life and the disposal of 24.99% of HLH. The realised gain on disposal of the Group’s 24.99% interest in HLH was £26 million on an EEV basis and £87 million on an IFRS basis.

The Ark Life acquisition has given rise to goodwill on acquisition of £45 million, calculated as follows:

	£m
Purchase cost:
Fair value of shares in Hibernian Life Holdings Limited	184
Cash paid	134
Attributable costs	4
Total consideration	322

The assets and liabilities at the date of acquisition were:

	Book value £m	Fair value and accounting policy adjustments £m	Fair value £m
Assets
Acquired value of in-force business on insurance and investment contracts	–	163	163
Other intangible assets	1	44	45
Investments	2,939	(74)	2,865
Other assets	1,225	(11)	1,214
Total assets	4,165	122	4,287
Liabilities
Gross insurance liabilities	(1,767)	(46)	(1,813)
Gross liability for investment contracts	(2,066)	1	(2,065)
Other liabilities	(154)	111	(43)
Total liabilities	(3,987)	66	(3,921)
Total net assets	178	188	366
Net assets acquired (Group share)			277
Goodwill arising on acquisition			45

Ark Life calculates embedded value and technical insurance assets and liabilities using a bespoke system, which employs different methodologies to those used by the Group. The assets and liabilities as at the acquisition date in the table above are stated as provisional values, calculated using AIB’s systems, and may be amended in the Group’s full year financial statements in accordance with paragraph 62 of IFRS 3, Business Combinations.

The value of the agreement to distribute through AIB’s networks has been identified as a separate intangible asset and valued by an independent third party at £45 million, using estimated post-tax cash flows and discount rates. It has been assessed as having a life of 25 years and is being amortised over that period, with a corresponding release of the applicable deferred tax provision.

The residual goodwill of £45 million represents future synergies expected to arise in the combined life operations.

(b) Eagle Insurance Company Limited

On 1 February 2006, the Group acquired a 51% interest in Eagle Insurance Limited (Eagle), the third largest insurer in Sri Lanka, by buying a majority shareholding in Eagle’s immediate holding company, NDB Finance Lanka (Pvt) Limited. At the same time, Eagle entered into a 10-year bancassurance agreement with National Development Bank Limited (NDB), Sri Lanka’s biggest development bank and Eagle’s other major shareholder. The cash consideration, including purchase costs, was £15 million. The fair value of the Group’s share of net assets acquired was £12 million, giving rise to £3 million of goodwill on acquisition.

(c) Non-adjusting post-balance sheet event

On 13 July 2006, the Group announced that it had agreed to acquire 100% of the common stock of AmerUs Group Co. (AmerUs) in a transaction recommended by the Board of AmerUs, for US$69 in cash per common share of AmerUs. AmerUs is a leading provider of equity-indexed life and annuity products to the United States retirement and savings markets and the acquisition will establish a leading presence for the Group in these selected high-growth segments.

The total purchase price of approximately US$2.9 billion (£1.6 billion) in cash will be partly financed by a £900 million placing of the Company’s ordinary shares of £0.25 nominal value each, with the balance of funding being provided by internal resources and external debt. The placing was completed on 13 July 2006, with 129 million shares issued on 18 July at £7 per share.

The acquisition, which will be effected through a statutory merger in the United States, remains subject to approval by a majority of AmerUs’ common shareholders and certain conditions, including customary insurance and other regulatory consents. The approval process is progressing in line with the Group’s expectations and the acquisition is expected to complete during the fourth quarter of 2006.

4. Other income - profit on the disposal of subsidiaries and associates

The profit on the disposal of subsidiaries and associates comprises:

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
United Kingdom (see below)	66	–	10
Ireland (see note 3(a))	87	–	–
France	–	1	–
Asia	–	145	165
Other small operations	(6)	(1)	(22)
Profit on disposal before tax	147	145	153
Tax on profit on disposal	(11)	(43)	(43)
Profit on disposal after tax	136	102	110

On an EEV basis, the profit on disposal before tax for the first six months of 2006 falls to £86 million because, on that basis, the gain on disposal in Ireland was £26 million (see note 3(a)). The EEV profit on disposal after tax for the same period was £75 million. There is no difference between IFRS and EEV figures for the comparative periods.

Sale of RAC non-core businesses
During the first six months of 2006, the Group completed the disposal of the Manufacturer Support Services (MSS) and Lex Vehicle Leasing (LVL) divisions, which had been acquired with the RAC. The decision to sell was part of the Group’s wider strategy to integrate RAC and exit non-core operations.

	6 months 2006 £m
Proceeds from sale	354
Net assets disposed of	(310)
Transaction costs	(14)
Profit before tax and pension curtailment gain	30
Pension curtailment gain	36
Profit on disposal before tax	66
Tax attributable to profit on disposal	(11)
Profit on disposal after tax	55

The net assets disposed of, which total £310 million, comprised investment in joint ventures of £239 million, tangible assets of £102 million, other assets of £95 million and other liabilities of £126 million. The pension curtailment gain arose from the remeasurement of pension liabilities in the RAC plc defined benefit pension scheme, following the MSS and LVL disposals.

(a) Sale of MSS
The MSS disposal was completed in three stages during the first six months of 2006, following the disposals of certain operational assets and liabilities of Hyundai Cars (UK) and the commercial fleet business of Lex Transfleet in 2005. On 10 January 2006, the Group sold Hyundai Car Finance Limited, which provides vehicle instalment finance and leasing, to Lloyds TSB. On 14 February 2006, the Group sold Lex Autologistics Limited, Lex Commercials Limited and associated properties to Imperial Holdings. On 27 April 2006, the Group completed the sale of the remaining vehicle solutions businesses, comprising Lex Transfleet Limited, Lex Defence Limited, Lex Defence Management Limited and RAC Software Solutions Limited, to VT Group plc. Receipts from the completion of the disposal of the MSS division totalled £111 million, resulting in a profit of £12 million before tax.

In 2005, the Group sold certain operational assets and liabilities of Hyundai Cars (UK) and the commercial fleet business of Lex Transfleet for total consideration of £139 million. The sale resulted in a profit of £5 million which is included in the 2005 figures above.

Of the total consideration of £250 million received for MSS disposals in 2005 and 2006, £73 million was in respect of liabilities to be settled by the Group.

(b) Sale of LVL
On 31 May 2006, the sale of Aviva’s 50% stake in Lex Vehicle Leasing (Holdings) Limited to HBOS plc was completed. Under the terms of the joint venture agreement, the change of control of RAC provided HBOS with the right to acquire Aviva’s interest in LVL which HBOS chose to exercise. The proceeds consisted of a net cash receipt of £227 million, from which Aviva’s estimated contribution of £16 million to the statutory debt funding of the RAC plc defined benefit pension scheme had been deducted. The gross consideration was therefore £243 million. In addition to the disposal of the investment in the joint venture of £239 million, HBOS will make an equivalent contribution to the statutory debt funding of the defined benefit pension scheme estimated at £16 million. The sale resulted in a profit of £18 million before tax.

No other disposal is considered material for further disclosure.

5. Integration costs

£24 million of integration costs have been included in the results to 30 June 2006. £21 million related to the continued restructuring of the combined Norwich Union Insurance and RAC businesses. £3 million relates to the integration of Ark Life into the Hibernian business.

6. Operations classified as held for sale

The assets and liabilities of operations held for sale as at 30 June 2006 were as follows:

	30 June 2006 £m	30 June 2005 £m	31 December 2005 £m
Intangible assets	–	–	9
Investments and property and equipment	354	5	320
Receivables and other financial assets	506	8	68
Deferred acquisition costs and other assets	31	98	40
Cash and cash equivalents	117	–	25
Total assets	1,008	111	462
Payables and financial liabilities	(48)	(8)	(96)
Other liabilities	(780)	(25)	(49)
Total liabilities	(828)	(33)	(145)
Net assets	180	78	317

(i) Dutch healthcare operations
On 8 June 2006, the Group's Dutch subsidiary, Delta Lloyd NV (“DL”), announced that it intends to merge its health insurance activities with those of two other companies, Agis Zorgverzekeringen and Menzis Zorg & Inkomen, to form a new operation aiming to ensure good, accessible healthcare at competitive prices. Subject to regulatory approval and due diligence, the three parties will start the integration process in October 2006 and complete the transaction during 2007.

The percentage stake of each company in the new operation will be determined by the fair values of the net assets each one contributes, as well as its contribution to any future capital requirements. It is currently too early to determine either the value or percentage holding of the DL stake but, on the assumption that its health operations will in future cease to be treated as subsidiaries, their relevant assets and liabilities have been reclassified as held for sale, at their carrying values, in the consolidated balance sheet.

(ii) RAC non-core businesses
As described in note 4 above, those businesses that were treated as held for sale as at 31 December 2005 have been sold during the first half of 2006. Those that were held for sale at 30 June 2005 were disposed of during the second half of that year.

7. Geographical analysis of life IFRS operating profit

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
France	116	131	258
Ireland	31	14	28
Italy	28	24	53
Netherlands (including Belgium, Germany and Luxembourg)	225	62	172
Poland	56	48	91
Spain	48	39	89
Other	(7)	(1)	(6)
Continental Europe	497	317	685
Rest of the World	–	(16)	(2)
International	497	301	683
With-profit	68	33	99
Non-profit	145	176	283
United Kingdom	213	209	382
Total	710	510	1,065

8. Geographical analysis of fund management operating profit

(a) IFRS basis

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
UK business	23	11	36
International business	8	7	13
Morley	31	18	49
France	16	10	26
Netherlands	13	8	32
Other Europe	1	1	2
Rest of the World	5	4	7
International	35	23	67
Royal Bank of Scotland	(4)	(3)	(1)
Norwich Union investment funds	(1)	3	9
United Kingdom	(5)	–	8
Total	61	41	124

(b) EEV basis

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
UK business	11	5	17
International business	6	6	9
Morley	17	11	26
France	5	2	8
Netherlands	10	8	32
Other Europe	1	1	2
Rest of the World	5	4	7
International	21	15	49
Royal Bank of Scotland	(4)	(3)	(1)
Norwich Union investment funds	(1)	3	9
United Kingdom	(5)	–	8
Total	33	26	83

9. Geographical analysis of general insurance and health

(a) Operating result

	Operating profit			Underwriting result
	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
France	27	17	35	(1)	(12)	(21)
Ireland	88	83	171	63	53	116
Netherlands	80	55	137	34	14	54
Other	19	19	47	3	2	15
Continental Europe	214	174	390	99	57	164
Canada	85	67	147	24	14	35
Other	12	22	40	(2)	7	3
Rest of the World	97	89	187	22	21	38
International	311	263	577	121	78	202
United Kingdom	555	431	974	225	104	303
Total	866	694	1,551	346	182	505
Analysed by:
General insurance	862	675	1,496	373	192	507
Health	4	19	55	(27)	(10)	(2)
Total	866	694	1,551	346	182	505

(b) Investment return information

	Actual investment return credited to income			Longer-term investment return
	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
France	17	23	54	28	29	56
Ireland	22	24	43	25	30	55
Netherlands	37	53	88	46	41	83
Other	9	14	17	16	17	32
Continental Europe	85	114	202	115	117	226
Canada	50	44	95	61	53	112
Other	13	15	27	14	15	37
Rest of the World	63	59	122	75	68	149
International	148	173	324	190	185	375
United Kingdom	281	280	646	330	327	671
Total longer-term investment return				520	512	1,046
Total actual investment income	429	453	970
Realised gains	110	55	216
Unrealised (losses)/gains	(224)	124	377
Total actual investment return	315	632	1,563

The total short-term adverse fluctuation in investment return of £205 million (six months 30 June 2005: £120 million favourable fluctuation; full year 2005: £517 million favourable fluctuation) is the difference between the total actual investment return of £315 million (six months 30 June 2005: £632 million; full year 2005: £1,563 million) and the total longer-term investment return of £520 million (six months 30 June 2005: £512 million; full year 2005: £1,046 million).

Actual income and longer-term investment return both contain the amortisation of the discount/premium arising on the acquisition of fixed income securities.

The longer-term investment return is calculated separately for each principal general insurance and health business unit. 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 period, 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 period.

The Group has calculated the longer-term investment return for its general insurance and health business using the same start of year economic assumptions for equities and properties as those used for EEV reporting.

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

	Longer-term rates of return Equities		Longer-term rates of return Properties
	2006 %	2005 %	2006 %	2005 %
United Kingdom	7.1%	7.6%	6.1%	6.6%
France	6.3%	6.7%	5.3%	5.7%
Ireland	6.3%	6.7%	5.3%	5.7%
Netherlands	6.3%	6.7%	5.3%	5.7%
Canada	7.0%	7.4%	6.0%	6.4%

The table below shows the sensitivity of the Group’s general insurance and health operating profit before tax to changes in the longer-term rates of return:

			6 months 2006 £m	6 months 2005 £m
Movement in investment return for	By	Change in	By	By
Equities	1% higher/lower	Group operating profit	31	27
Properties	1% higher/lower	Group operating profit	3	4

10. Analysis of other operations’ operating profit

(a) IFRS basis

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
RAC	20	11	30
UK Life
- Personal finance subsidiaries	–	1	4
- Norwich Union Life Services	(42)	(38)	(66)
- Lifetime	(6)	–	(14)
Other	17	20	6
	(11)	(6)	(40)

(b) EEV basis

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
RAC	20	11	30
UK Life
- Personal finance subsidiaries	–	1	4
- Norwich Union Life Services	2	(4)	3
- Lifetime	(6)	–	(14)
Other	13	29	5
	29	37	28

11. Corporate costs

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Central costs and sharesave schemes	(73)	(55)	(108)
Global finance transformation programme	–	(28)	(28)
	(73)	(83)	(136)

12. Unallocated interest charges

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
External
Subordinated debt	(84)	(85)	(169)
Other	(25)	(45)	(79)
Internal	(106)	(101)	(220)
Net finance income on staff pension schemes	38	18	32
	(177)	(213)	(436)

13. Tax

(a) Tax charged to the income statement

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Current tax:
For the period	417	492	799
Prior year adjustments	(118)	21	(212)
Total current tax	299	513	587
Deferred tax:
Origination and reversal of timing differences	132	66	881
Changes in tax rates or tax laws	–	–	(5)
Write down of deferred tax assets	–	16	89
Total deferred tax	132	82	965
Total tax charged to income statement	431	595	1,552

Tax charge analysed between
	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Tax charge attributable to policyholders’ returns	112	288	922
Tax charge on IFRS operating profit before tax attributable to shareholders’ profits from continuing operations	370	256	536
Tax (credit)/charge on profit on other activities	(51)	51	94
Total tax charged to income statement	431	595	1,552

(b) Tax charged/(credited) to equity

(i) The total tax charge/(credit) comprises:

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Current tax credit	–	–	(13)
Deferred tax charge/(credit)	104	(18)	(262)
Total tax charged/(credited) to equity	104	(18)	(275)

(ii) The tax credit attributable to policyholders’ returns included in the total above is £2 million (6 months 2005: nil, full year 2005: tax credit £3 million).

(c) Tax reconciliation

The tax on the Group's net profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Profit before tax	1,360	1,412	3,450
Tax calculated at standard UK corporation tax rate of 30% (2005: 30%)	408	424	1,035
Different basis of tax for UK life insurance	78	164	616
Adjustment to tax charge in respect of prior years	(125)	20	(253)
Non-assessable dividends	(26)	(59)	(26)
Non-taxable (profit)/loss on sale of subsidiaries and associates	(33)	–	(4)
Disallowable expenses	24	21	55
Different local basis of tax on overseas profits	204	34	168
Deferred tax assets not recognised	(91)	7	(25)
Other	(8)	(16)	(14)
Tax charge for the period	431	595	1,552

14. Earnings per share

(a) Basic earnings per share

(i) The profit attributable to ordinary shareholders is:

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Profit for the period	929	817	1,898
Amount attributable to minority interests	(73)	(61)	(131)
Cumulative preference dividends for the period	(9)	(9)	(17)
Coupon payments on direct capital instrument, net of tax	–	–	(29)
Profit attributable to ordinary shareholders	847	747	1,721

(ii) Basic earnings per share is calculated as follows:

	6 months 2006			6 months 2005			Full year 2005
	Before tax £m	Net of tax, minorities and preference dividends and DCI appropriation £m	Per share p	Before tax £m	Net of tax, minorities and preference dividends and DCI appropriation £m	Per share p	Before tax £m	Net of tax, minorities and preference dividends and DCI appropriation £m	Per share p
Operating profit attributable to ordinary shareholders	1,376	924	38.5	943	623	27.1	2,128	1,415	60.5
Adjusted for the following:
–Impairment of goodwill	–	–	–	(10)	(10)	(0.4)	(43)	(43)	(1.8)
–Amortisation and net impairment of acquired value of in-force business	(33)	(33)	(1.4)	(44)	(44)	(1.9)	(73)	(73)	(3.1)
–Amortisation and net impairment of intangibles	(19)	(16)	(0.7)	(16)	(14)	(0.6)	(45)	(42)	(1.8)
–Financial Services Compensation Scheme and other levies	6	4	0.2	–	–	–	–	–	–
–Short-term fluctuation on return on investments backing general insurance and health business	(205)	(147)	(6.1)	120	100	4.3	517	430	18.2
–Profit on the disposal of subsidiaries and associates	147	136	5.7	145	102	4.4	153	110	4.7
–Integration costs	(24)	(21)	(0.9)	(14)	(10)	(0.4)	(109)	(76)	(3.2)
Profit attributable to ordinary shareholders	1,248	847	35.3	1,124	747	32.5	2,528	1,721	73.5

Earnings per share has been calculated based on the operating profit before impairment of goodwill and other non-operating items, after tax, attributable to ordinary shareholders, as well as on the profit attributable to ordinary shareholders. The directors believe the former earnings per share figures provide a better indication of operating performance. The calculation of basic earnings per share uses a weighted average of 2,401 million (six months 30 June 2005: 2,300 million; full year 2005: 2,340 million) ordinary shares in issue, after deducting shares owned by the employee share trusts.

The actual number of shares in issue at 30 June 2006 was 2,415 million (30 June 2005: 2,371 million; 31 December 2005: 2,396 million). As described in note 3(c) the Group issued 129 million shares on 18 July 2006. This issue does not impact on the earnings per share calculations as it is a post balance sheet event.

(b) Diluted earnings per share:

Diluted earnings per share is calculated as follows:

	30 June 2006			30 June 2005			Full year 2005
	Total £m	Weighted average number of shares m	Per share p	Total £m	Weighted average number of shares m	Per share p	Total £m	Weighted average number of shares m	Per share p
Profit attributable to ordinary shareholders	847	2,401	35.3	747	2,300	32.5	1,721	2,340	73.5
Dilutive effect of share awards and options	–	22	(0.3)	–	26	(0.4)	–	20	(0.6)
Diluted earnings per share	847	2,423	35.0	747	2,326	32.1	1,721	2,360	72.9

Diluted earnings per share on operating profit attributable to ordinary shareholders is 38.1p (30 June 2005: 26.8p; 31 December 2005: 60.0p).

15. Dividends and appropriations

	6 months 2006 £m	6 months 2005 £m	Full year 2005 £m
Ordinary dividends declared and charged to equity in the period
Final 2004 – 16.00p per share, paid on 17 May 2005	–	364	364
Interim 2005 – 9.83p per share, paid on 17 November 2005	–	–	234
Final 2005 – 17.44p per share, paid on 17 May 2006	418	–	–
	418	364	598
Preference dividends declared and charged to equity in the period	9	9	17
Coupon payments on direct capital instrument	–	–	42
	427	373	657

Subsequent to 30 June 2006, the directors proposed an interim dividend for 2006 of 10.82p per ordinary share, amounting to £275 million in total (based on shares in issue at 30 June 2006 and new shares issued on 18 July 2006 as referred to in note 3(c)). The dividend will be paid on 17 November 2006 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2006.

Interest on the direct capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. Tax relief will be obtained at a rate of 30%.

Irish shareholders who are due to be paid a dividend denominated in euros will receive a payment at the exchange rate prevailing on 8 August 2006.

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