Interim results - 6 months ended 30 June 2007
Operating and financial review
Fund management operating profit
Our worldwide fund management operating profit grew to £76 million (2006: £61 million) on an IFRS basis. Assets under management at 30 June 2007 grew to £377 billion (31 December 2006: £364 billion) reflecting the impact of new business and the performance of global investment markets.
| 6 months 2007 £m | 6 months 2006 £m | |
|---|---|---|
| Morley | 41 | 31 |
| Other UK | (4) | (5) |
| United Kingdom | 37 | 26 |
| France | 16 | 16 |
| Netherlands | 11 | 13 |
| Other Europe | 1 | 2 |
| Europe | 29 | 30 |
| North America | 1 | 1 |
| Asia Pacific | 9 | 4 |
| Fund management operating profit - IFRS basis | 76 | 61 |
On an EEV basis, the total operating profit from our fund management businesses was £45 million (2006: £33 million) and represents the profit from those funds managed on behalf of third parties and the Group's non-life businesses.
United Kingdom
Our UK fund management businesses comprise our institutional business, Morley, our retail investment business trading as Norwich Union, and our collective investment joint venture business with RBSG. These businesses reported an operating profit of £37 million (2006: £26 million) in the period.
Morley
As a group, Morley reported a 34% increase in total operating profit to £43 million (2006: £32 million), including the £2 million (2006: £1 million) contribution from the pooled pension business, which is reported in the long-term savings segment.
Fund management operating profit grew strongly to £41 million (2006: £31 million) including £5 million (2006: £1 million) of performance fees relating to prior periods. Morley's cost/income ratio was 73% (full year 2006: 72%) reflecting both additional revenue streams and increasing investment in the business as part of a more focused investment style within the active equity management teams.
Our property team also continued to grow, increasing funds under management and the size of the team as property remained a key asset class for investors across Europe. The property team was recognised as Property Manager of the Year at the 2007 UK Pensions Awards and Morley also received industry recognition for its investment capabilities including the “Fixed Income Hedge Fund of the Year” award at the Eurohedge Awards for our G7 Fixed Income Fund.
We continue to build our European distribution reach, opening a new office in Frankfurt to sell the Aviva Morley range of SICAV funds and establishing the sales and client teams in Milan and Madrid. In February, we also established our first office in China and announced a number of new property investments and partnerships across Asia and Japan as part of a long-term commitment to the region.
Norwich Union's retail investment business broke even in the period (2006: £1 million loss) while our collective investment business with RBSG recorded a loss of £4 million (2006: £4 million loss) due to increased new business strain.
Europe
Our European operations consist mainly of Aviva Gestion d'Actifs (AGA) in France and Delta Lloyd Asset Management in the Netherlands. These businesses reported a slightly lower operating profit of £29 million (2006: £30 million).
Operating profit from our business in France, AGA, was stable at £16 million (2006: £16 million). This business has a strong investment performance track record, with all of AGA's funds ranked in the top half over the 5 years to 30 June 2007. We have continued to earn industry awards for the sustained performance of our funds, with the financial magazine “Mieux Vivre Votre Argent” awarding prizes to 7 of AGA's funds.
Operating profit from our fund management business in the Netherlands was £11 million (2006: £13 million). Investment performance has been strong in the period, notably Delta Lloyd's equity participation fund which headed the fund performance rankings over a 5 year period and held a top-5 ranking over six and 12 months. Three new funds are to be launched later in 2007 following the success of the Select Opportunity fund earlier in the year. On 19 June, Delta Lloyd announced its acquisition of Cyrte Investments which will add funds with distinctive technology and media profiles to our fund offering.
Asia Pacific
In Asia Pacific, our fund management and administration business consists of the successful Navigator platforms in Australia and Singapore. Operating profits more than doubled to £9 million (2006: £4 million), reflecting profitable growth in these businesses.
