9. Geographical analysis of general insurance and health
(a) Operating result
| Operating profit | Underwriting result | ||||
|---|---|---|---|---|---|
| 2007 £m |
Restated 2006 £m |
2007 £m |
Restated 2006 £m |
||
| United Kingdom1 | 433 | 1,118 | (214) | 394 | |
| France | 70 | 63 | 11 | 6 | |
| Ireland | 162 | 172 | 101 | 121 | |
| Netherlands | 169 | 139 | 75 | 50 | |
| Other | 41 | 43 | 10 | 12 | |
| Europe | 442 | 417 | 197 | 189 | |
| North America | 154 | 148 | 18 | 27 | |
| Asia Pacific | 4 | 3 | 3 | 3 | |
| Total | 1,033 | 1,686 | 4 | 613 | |
| Analysed by: | |||||
| General insurance | 1,037 | 1,658 | 47 | 645 | |
| Health | (4) | 28 | (43) | (32) | |
| Total | 1,033 | 1,686 | 4 | 613 | |
1 The United Kingdom includes the operating profit of Aviva Re, previously shown in the 'International' segment which no longer exists. Comparatives have been restated accordingly. See Basis of preparation – IFRS.
(b) Investment return information
| Actual investment return credited to income | Longer-term investment return | ||||
|---|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
||
| United Kingdom | 575 | 651 | 647 | 724 | |
| France | 42 | 35 | 59 | 57 | |
| Ireland | 52 | 41 | 61 | 51 | |
| Netherlands | 79 | 72 | 94 | 89 | |
| Other | 23 | 17 | 31 | 31 | |
| Europe | 196 | 165 | 245 | 228 | |
| North America | 120 | 98 | 136 | 121 | |
| Asia Pacific | - | 1 | 1 | - | |
| Total longer-term investment return | 1,029 | 1,073 | |||
| Total actual investment income | 891 | 915 | |||
| Realised gains | 579 | 281 | |||
| Unrealised (losses)/gains | (625) | 26 | |||
| Total actual investment return | 845 | 1,222 | |||
The total short-term adverse fluctuation in investment return of £184 million (2006: £149 million favourable) is the difference between the total actual investment return of £845 million (2006: £1,222 million) and the total longer-term investment return of £1,029 million (2006: £1,073 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 total assets supporting the general insurance and health business, which contribute towards the longer-term return, were £18,291 million (2006: £19,718 million). Total assets comprise debt securities £10,757 million (2006: £9,112 million), equity securities £1,195 million (2006: £3,417 million), properties £360 million (2006: £384 million), cash and cash equivalents £3,178 million (2006: £2,823 million) and other assets £2,801 million (2006: £3,982 million).
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 |
||||
|---|---|---|---|---|---|
| 2007 % |
2006 % |
2007 % |
2006 % |
||
| United Kingdom | 7.6% | 7.1% | 6.6% | 6.1% | |
| France | 7.0% | 6.3% | 6.0% | 5.3% | |
| Ireland | 7.0% | 6.3% | 6.0% | 5.3% | |
| Netherlands | 7.0% | 6.3% | 6.0% | 5.3% | |
| Canada | 7.1% | 7.0% | 6.1% | 6.0% | |
General insurance business only: geographical analysis
(c) Analysis of operating profit
| Operating profit | Longer-term investment return | Underwriting result | ||||||
|---|---|---|---|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
2007 £m |
2006 £m |
|||
| United Kingdom | 433 | 1,117 | 642 | 720 | (209) | 397 | ||
| France | 54 | 47 | 47 | 45 | 7 | 2 | ||
| Ireland | 162 | 172 | 61 | 51 | 101 | 121 | ||
| Netherlands | 193 | 128 | 73 | 45 | 120 | 83 | ||
| Other Europe | 41 | 43 | 31 | 31 | 10 | 12 | ||
| Europe | 450 | 390 | 212 | 172 | 238 | 218 | ||
| North America | 154 | 148 | 136 | 121 | 18 | 27 | ||
| Asia Pacific | - | 3 | - | - | - | 3 | ||
| Total | 1,037 | 1,658 | 990 | 1,013 | 47 | 645 | ||
(d) Combined operating ratio analysis – geographical basis – general insurance business only
| Claims ratio | Expense ratio | Combined operating ratio | ||||||
|---|---|---|---|---|---|---|---|---|
| 2007 % |
2006 % |
2007 % |
2006 % |
2007 % |
2006 % |
|||
| United Kingdom | 65.9% | 58.7% | 13.9% | 13.9% | 106% | 95% | ||
| France | 72.7% | 73.0% | 10.2% | 10.4% | 99% | 99% | ||
| Ireland | 54.2% | 55.8% | 14.3% | 11.2% | 80% | 77% | ||
| Netherlands | 45.1% | 51.5% | 18.8% | 17.8% | 85% | 89% | ||
| Canada | 65.9% | 66.7% | 13.6% | 12.4% | 98% | 98% | ||
| Total | 63.7% | 60.3% | 13.9% | 13.7% | 100% | 94% | ||
Ratios are measured in local currency. The total Group ratios are based on average exchange rates applying to the respective periods.
Definitions:
Claims ratio – Incurred claims expressed as a percentage of net earned premiums.
Expense ratio – Written expenses excluding commissions expressed as a percentage of net written premiums.
Commission ratio – Written commissions expressed as a percentage of net written premiums.
Combined operating ratio – Aggregate of claims ratio, expense ratio and commission ratio.
(e) General insurance business only: class of business analyses
(i) United Kingdom (excluding Group reinsurance)
| Net written premiums | Underwriting result | Combined operating ratio | ||||||
|---|---|---|---|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
2007 % |
2006 % |
|||
| Personal | ||||||||
| Motor | 1,431 | 1,631 | (25) | (39) | 102% | 104% | ||
| Homeowner | 1,223 | 1,262 | (296) | 23 | 124% | 98% | ||
| Other | 797 | 694 | 10 | 56 | 100% | 100% | ||
| 3,451 | 3,587 | (311) | 40 | 110% | 102% | |||
| Commercial | ||||||||
| Motor | 636 | 638 | 61 | 40 | 91% | 94% | ||
| Property | 807 | 826 | (175) | 194 | 124% | 79% | ||
| Other | 546 | 532 | 192 | 115 | 68% | 78% | ||
| 1,989 | 1,996 | 78 | 349 | 98% | 83% | |||
| Total | 5,440 | 5,583 | (233) | 389 | 106% | 95% | ||
During the year to 31 December 2007, annualised rating increases were as follows: personal motor 6%; homeowner 7% (including indexation); commercial motor 1% decrease; commercial property 2% decrease; commercial liability 4% decrease.
(ii) France
| Net written premiums | Underwriting result | Combined operating ratio | ||||||
|---|---|---|---|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
2007 % |
2006 % |
|||
| Motor | 254 | 256 | (2) | - | 101% | 99% | ||
| Property and other | 320 | 308 | 9 | 2 | 97% | 97% | ||
| Total | 574 | 564 | 7 | 2 | 99% | 99% | ||
(iii) Netherlands
| Net written premiums | Underwriting result | Combined operating ratio | ||||||
|---|---|---|---|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
2007 % |
2006 % |
|||
| Motor | 267 | 238 | 42 | 13 | 84% | 96% | ||
| Property | 249 | 252 | 19 | 29 | 93% | 88% | ||
| Liability | 61 | 67 | 13 | 2 | 79% | 97% | ||
| Other | 211 | 176 | 46 | 39 | 77% | 76% | ||
| Total | 788 | 733 | 120 | 83 | 85% | 89% | ||
(iv) Canada
| Net written premiums | Underwriting result | Combined operating ratio | ||||||
|---|---|---|---|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
2007 % |
2006 % |
|||
| Motor | 795 | 821 | 7 | 11 | 99% | 99% | ||
| Property | 450 | 413 | 10 | 6 | 96% | 98% | ||
| Liability | 143 | 133 | (5) | 3 | 103% | 98% | ||
| Other | 24 | 22 | 6 | 7 | 68% | 60% | ||
| Total | 1,412 | 1,389 | 18 | 27 | 98% | 98% | ||
