Interim results for 6 months ended 30 June 2006
Supplementary analyses
(a) Analysis of service companies and fund management businesses within embedded value
The EEV methodology incorporates the impact of profits and losses arising from subsidiary undertakings providing administration, investment management and other services where these arise in relation to covered business. The principal subsidiaries of the Aviva group providing such services are NU Life Services Limited (UK), Morley Fund Management (UK) and Aviva Gestion d’Actifs (France). The following table provides an analysis of the elements within the life and other related business embedded value:
| 30 June 2006 |
31 December 2005 | ||||
|---|---|---|---|---|---|
| Fund Management £m |
Non-Insurance £m |
Total £m |
Total £m |
||
| United Kingdom1 | 75 | (163) | (88) | (102) | |
| France | 58 | 3 | 61 | 47 | |
| Other Europe and Rest of the World | 67 | (9) | 58 | 27 | |
| 200 | (169) | 31 | (28) | ||
- Reflecting Additional Guidance on EEV Disclosures published by the CFO Forum, the pension scheme deficit is now accounted for on an IAS 19 basis. Consequently, the element that had previously been included within the embedded value of service companies, being the present value of agreed deficit funding arrangements, has been removed.
The “look-through” value attributable to fund management is based on the level of after-tax profits expected to be earned in the future over the outstanding term of the covered business in respect of services provided to the Group’s life operations. The EEV basis profit and loss account excludes the actual statutory basis profits arising from the provision of fund management services to the Group’s life businesses. The EEV income statement records the experience profit or loss compared to the assumed profitability, the return on the in-force value arising from the unwind at the relevant risk discount rate and the effect on the in-force value of changes to economic assumptions.
NU Life Services Ltd (NULS) is the main provider of administration services to the UK Life business. NULS incurs substantially all of the UK Life businesses operating expenditure, comprising acquisition, maintenance and project costs. Costs are recharged to the UK Life companies (the product companies) on the basis of pre-determined Management Services Agreement (MSA) which was negotiated in 1998 and will be reviewed in 2008.
The EEV principles “look-through” the contractual terms of the MSA to the underlying expenses of NULS. Accordingly the actual maintenance expenses and a “normal” annual level of project expense allowances have been applied to the product companies. Under EEV, any further one-off project expenditure is reported as experience losses when incurred.
(b) Pension scheme deficits in the consolidated balance sheet
On the consolidated balance sheet, the amount described as Provisions includes the pension scheme deficits and comprises:
| 30 June 2006 £m |
30 June 2005 £m |
31 December 2005 £m |
|
|---|---|---|---|
| Deficits in the staff pension schemes | 784 | 1,220 | 1,471 |
| Other obligations to staff pension schemes – Insurance policies issued by |
|||
| Group companies | 1,057 | 813 | 875 |
| Total IAS 19 obligations to staff pension schemes | 1,841 | 2,033 | 2,346 |
| Other provisions | 523 | 468 | 529 |
| Provisions | 2,364 | 2,501 | 2,875 |
At 30 June 2006 the Group’s overall pension deficit reduced by £687 million to £784 million (gross of tax), benefiting from actuarial gains of £473 million mostly reflecting the favourable impact on the valuation of liabilities of a 30 basis point increase in real interest rates during the period, deficit contributions paid by the company of £135 million, and other items totalling £79 million which include gains on curtailment and finance income.
(c) Long-term savings new business
| Present value of new business premiums 1 | Annual premium equivalent | ||||||
|---|---|---|---|---|---|---|---|
| 6 months 2006 £m |
6 months 2005 £m |
Full year 2005 £m |
6 months 2006 £m |
6 months 2005 £m |
Full year 2005 £m |
||
| Life and pensions | |||||||
| France | 2,028 | 1,854 | 3,530 | 219 | 202 | 384 | |
| Ireland | 558 | 349 | 665 | 80 | 51 | 100 | |
| Italy | 1,583 | 1,333 | 2,294 | 176 | 145 | 252 | |
| Netherlands (including Belgium, Germany and Luxembourg) | 1,170 | 1,383 | 2,739 | 135 | 159 | 323 | |
| Poland | 264 | 137 | 320 | 36 | 21 | 47 | |
| Spain | 916 | 965 | 2,013 | 112 | 113 | 240 | |
| Other Europe | 126 | 129 | 240 | 26 | 24 | 51 | |
| Continental Europe | 6,645 | 6,150 | 11,801 | 784 | 715 | 1,397 | |
| Asia | 252 | 172 | 397 | 43 | 30 | 66 | |
| Australia | 145 | 160 | 337 | 27 | 31 | 63 | |
| United States | 289 | 222 | 526 | 31 | 28 | 64 | |
| Rest of the World | 686 | 554 | 1,260 | 101 | 89 | 193 | |
| International | 7,331 | 6,704 | 13,061 | 885 | 804 | 1,590 | |
| United Kingdom | 5,816 | 4,312 | 9,185 | 746 | 542 | 1,156 | |
| Total (before the effect of required capital) | 13,147 | 11,016 | 22,246 | 1,631 | 1,346 | 2,745 | |
| Investment sales | |||||||
| Netherlands | 211 | 180 | 563 | 21 | 18 | 56 | |
| Poland | 62 | 26 | 53 | 8 | 4 | 9 | |
| Other Europe | 309 | 237 | 410 | 30 | 24 | 41 | |
| Continental Europe | 582 | 443 | 1,026 | 59 | 46 | 106 | |
| Rest of the World (including Navigator sales) | 819 | 538 | 1,151 | 82 | 54 | 115 | |
| International | 1,401 | 981 | 2,177 | 141 | 100 | 221 | |
| United Kingdom | 1,083 | 513 | 1,160 | 125 | 59 | 135 | |
| Total investment sales | 2,484 | 1,494 | 3,337 | 266 | 159 | 356 | |
| Total long-term savings (including share of associates and joint ventures) | 15,631 | 12,510 | 25,583 | 1,897 | 1,505 | 3,101 | |
- Investment sales are calculated as new single premiums plus annualised value of new regular premiums.
Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norwich Union’s Dublin-based offshore life and savings business has been reclassified from Other Europe to the United Kingdom.
Sales from the Navigator funds administration business, previously excluded from investment sales figures, are now included in the figures above. This change has increased the total investment sales for the six months to 30 June 2006 by £723 million (six months to 30 June 2005: £432 million; full year 2005: £938 million).
d) Assets under management
| 30 June 2006 | 31 December 2005 |
|||
|---|---|---|---|---|
| Life and related business £m |
General business and other £m |
Group £m |
Group £m |
|
| Total IFRS assets included in the balance sheet | 232,151 | 38,916 | 271,067 | 263,447 |
| Additional value of in-force long-term business | 6,345 | - | 6,345 | 6,454 |
| Total EEV assets included in the balance sheet | 238,496 | 38,916 | 277,412 | 269,901 |
| Third party funds under management: | ||||
| Unit trusts, Oeics, Peps and Isas | 16,094 | 16,188 | ||
| Segregated funds | 38,479 | 35,427 | ||
| Total assets under management | 331,985 | 321,516 | ||
Third party funds under management now include funds administered under the Navigator platform. This change has increased the total assets under management at 30 June 2006 by £4,675 million (full year 2005: £4,606 million).
