16. Segmental information

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(a) Segmental results – primary reporting format – business segments

The principal activity of the Group is financial services, which is managed using the following reportable segments: long-term business, fund management, general insurance and health.

Long-term business

Our long-term business comprises life insurance, long-term health and accident insurance, savings, pensions and annuity business written by our life insurance subsidiaries including managed pension fund business and our share of the other life and related business written in our associates and joint ventures, as well as the lifetime mortgage business written in the United Kingdom.

Fund management activities

Our fund management business invests policyholders' and shareholders' funds, provides investment management services for institutional pension fund mandates and manages a range of retail investment products, including investment funds, unit trusts, OEICs and ISAs. Clients include Aviva Group businesses and third-party financial institutions, pension funds, public sector organisations, investment professionals and private investors.

General insurance and health

Our general insurance and health business provides insurance cover to individuals and mostly to small and medium-sized businesses, for risks associated mainly with motor vehicles, property and liability, such as employers' liability and professional indemnity liability, and medical expenses.

Other

Other activities not related to the core business segments or which are not reportable segments due to their immateriality, such as the RAC non-insurance operations, our banking businesses and service companies are included as "Other" in the following tables. Head office expenses, such as Group treasury and finance functions are also reported as "Other", together with eliminations and any other reconciling items. This also includes certain financing costs and taxes which are not allocated among the segments.

The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments are on normal commercial terms and market conditions.

Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet but excluding items such as tax and certain borrowings.

(b) Segmental results of the income statement – primary reporting format – business segments for the year ended 31 December 2007

	Long-term business £m	Fund management £m	General insurance and health £m	Other £m	Total £m
Segment income from external customers:
Net written premiums	18,764	-	10,569	-	29,333
Net change in provision for unearned premiums	-	-	(21)	-	(21)
Net earned premiums	18,764	-	10,548	-	29,312
Fee and commission income	698	488	179	395	1,760
	19,462	488	10,727	395	31,072
Net investment income	8,529	45	827	427	9,828
Inter-segment revenue	-	152	-	-	152
(Loss)/profit on the disposal of subsidiaries and associates	-	-	(7)	56	49
Segment income	27,991	685	11,547	878	41,101
Claims and benefits paid, net of recoveries from reinsurers	(19,640)	-	(7,481)	-	(27,121)
Change in insurance liabilities, net of reinsurance	(3,900)	-	393	-	(3,507)
Change in investment contract provisions	(2,018)	-	-	-	(2,018)
Change in unallocated divisible surplus	2,922	-	-	-	2,922
Fee and commission expense	(1,281)	(135)	(2,907)	(60)	(4,383)
Other operating expenses
Depreciation	(31)	(2)	(7)	(89)	(129)
Amortisation of acquired value of in-force business	(160)	-	-	-	(160)
Amortisation and net impairment of intangible assets	(62)	(6)	(25)	(17)	(110)
Impairment of goodwill	(1)	(9)	-	-	(10)
Other impairment losses recognised in the income statement	(45)	-	(10)	(2)	(57)
Inter-segment expense	(140)	-	(11)	(1)	(152)
Other expenses	(1,230)	(361)	(788)	(628)	(3,007)
Finance costs	(537)	(24)	3	(391)	(949)
Segment expenses	(26,123)	(537)	(10,833)	(1,188)	(38,681)
Segment result before share of profit/(loss) of joint ventures and associates	1,868	148	714	(310)	2,420
Share of profit/(loss) of joint ventures and associates	(297)	(9)	3	(1)	(304)
Segmental result before tax	1,571	139	717	(311)	2,116
Unallocated costs:
Finance costs on central borrowings					(259)
Tax attributable to policyholders' returns					(15)
Tax attributable to shareholders' profits					(337)
Total unallocated expenses					(611)
Profit for the year					1,505

Finance costs on central borrowings comprise interest payable on borrowings by holding companies within the Group which are not allocated to operating companies.

Pro forma reconciliation to operating profit before tax attributable to shareholders' profits

	Long-term business £m	Fund management £m	General insurance and health £m	Other £m	Total £m
Segment result before tax	1,571	139	717	(311)	2,116
Finance costs on central borrowings	-	-	-	(259)	(259)
Adjusted for the following:
Investment return variances and economic assumption changes on long-term business	(15)	-	-	-	(15)
Impairment of goodwill	1	9	-	-	10
Amortisation and impairment of intangibles	55	6	25	17	103
Short-term fluctuation in return on investments backing general insurance and health business	-	-	184	-	184
Profit on the disposal of subsidiaries and associates	-	-	7	(56)	(49)
Integration and restructuring costs	37	1	100	15	153
	1,649	155	1,033	(594)	2,243
Less:
Tax attributable to policyholders' returns	(15)	-	-	-	(15)
Operating profit before tax attributable to shareholders' profits	1,634	155	1,033	(594)	2,228

(c) Segmental results of the income statement – primary reporting format – business segments for the year ended 31 December 2006

	Restated Long-term business £m	Fund management £m	General insurance and health £m	Other £m	Restated Total £m
Segment income from external customers:
Net written premiums	16,532	-	10,702	-	27,234
Net change in provision for unearned premiums	-	-	93	-	93
Net earned premiums	16,532	-	10,795	-	27,327
Fee and commission income	704	452	172	542	1,870
	17,236	452	10,967	542	29,197
Net investment income	13,947	17	1,299	227	15,490
Inter-segment revenue	-	199	-	-	199
Profit on the disposal of subsidiaries and associates	11	-	88	123	222
Segment income	31,194	668	12,354	892	45,108
Claims and benefits paid, net of recoveries from reinsurers	(16,523)	-	(6,921)	-	(23,444)
Change in insurance liabilities, net of reinsurance	(2,594)	-	(26)	-	(2,620)
Change in investment contract provisions	(6,002)	-	-	-	(6,002)
Change in unallocated divisible surplus	(558)	-	-	-	(558)
Fee and commission expense	(2,125)	(111)	(2,742)	(65)	(5,043)
Other operating expenses
Depreciation	(22)	(3)	(19)	(79)	(123)
Amortisation of acquired value of in-force business	(58)	-	-	-	(58)
Net impairment of acquired value of in-force business	(28)	-	-	-	(28)
Amortisation and net impairment of intangible assets	(32)	(1)	(18)	(19)	(70)
Impairment of goodwill	-	-	-	(94)	(94)
Other impairment losses recognised in the income statement	6	-	(5)	(1)	-
Inter-segment expense	(191)	-	(8)	-	(199)
Other expenses	(1,109)	(392)	(806)	(877)	(3,184)
Finance costs	(384)	-	(3)	(230)	(617)
Segment expenses	(29,620)	(507)	(10,548)	(1,365)	(42,040)
Segment result before share of profit/(loss) of joint ventures and associates	1,574	161	1,806	(473)	3,068
Share of profit/(loss) of joint ventures and associates	471	(7)	5	16	485
Segmental result before tax	2,045	154	1,811	(457)	3,553
Unallocated costs:
Finance costs on central borrowings					(230)
Tax attributable to policyholders' returns					(346)
Tax attributable to shareholders' profits					(588)
Total unallocated costs					(1,164)
Profit for the year					2,389

Finance costs on central borrowings comprise interest payable on borrowings by holding companies within the Group which are not allocated to operating companies.

Pro forma reconciliation to operating profit before tax attributable to shareholders' profits

	Restated Long-term business £m	Fund management £m	General insurance and health £m	Restated Other £m	Restated Total £m
Segment result before tax	2,045	154	1,811	(457)	3,553
Finance costs on central borrowings	-	-	(2)	(228)	(230)
Adjusted for the following items:
Investment return variances and economic assumption changes on long-term business	(401)	-	-	-	(401)
Impairment of goodwill	-	-	-	94	94
Amortisation and impairment of intangibles	26	1	18	19	64
Short-term fluctuation in return on investments backing general insurance and health business	-	-	(149)	-	(149)
Profit on the disposal of subsidiaries and associates	(12)	-	(88)	(122)	(222)
Integration and restructuring costs	21	-	95	130	246
Other interest and cost reallocation	1	-	1	(2)	-
	1,680	155	1,686	(566)	2,955
Less:
Tax attributable to policyholders' returns	(346)	-	-	-	(346)
Operating profit before tax attributable to shareholders' profits	1,334	155	1,686	(566)	2,609

(d) Segmental balance sheet – primary reporting format – business segments as at 31 December 2007

	Long-term business £m	Fund management £m	General insurance and health £m	Other £m	Total £m
Goodwill	1,414	3	418	1,247	3,082
Acquired value of in-force business and intangible assets	2,628	12	424	133	3,197
Interests in, and loans to, joint ventures and associates	3,509	47	4	222	3,782
Property and equipment	435	9	70	428	942
Investment property	14,701	-	360	16	15,077
Loans	26,600	-	960	8,633	36,193
Financial investments	201,455	32	10,420	3,461	215,368
Other assets	28,202	630	11,688	593	41,113
Segment assets	278,944	733	24,344	14,733	318,754
Unallocated assets – tax assets					966
Total assets					319,720
Insurance liabilities	135,014	-	18,026	-	153,040
Liability for investment contracts	98,244	-	-	-	98,244
Unallocated divisible surplus	6,785	-	-	-	6,785
Net asset value attributable to unitholders	3,934	-	46	-	3,980
External borrowings	3,947	-	-	4,399	8,346
Other liabilities, including inter-segment liabilities	13,714	348	212	10,430	24,704
Segment liabilities	261,638	348	18,284	14,829	295,099
Unallocated liabilities
Central borrowings					4,311
Tax liabilities					3,718
Total liabilities					303,128
Total equity					16,592
Total equity and liabilities					319,720

Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies.

(e) Segmental balance sheet – primary reporting format – business segments as at 31 December 2006

	Restated Long-term business £m	Fund management £m	General insurance and health £m	Restated Other £m	Restated Total £m
Goodwill	1,317	9	390	1,194	2,910
Acquired value of in-force business and intangible assets	2,301	18	287	122	2,728
Interests in, and loans to, joint ventures and associates	3,526	44	39	81	3,690
Property and equipment	460	4	94	346	904
Investment property	14,714	-	384	25	15,123
Loans	20,934	-	735	6,905	28,574
Financial investments	189,082	30	11,400	3,766	204,278
Other assets	23,558	534	9,603	1,406	35,101
Segment assets	255,892	639	22,932	13,845	293,308
Unallocated assets – tax assets					1,543
Total assets					294,851
Insurance liabilities	126,224	-	18,006	-	144,230
Liability for investment contracts	88,358	-	-	-	88,358
Unallocated divisible surplus	9,465	-	-	-	9,465
Net asset value attributable to unitholders	3,786	1	23	-	3,810
External borrowings	3,894	-	11	4,037	7,942
Other liabilities, including inter-segment liabilities	8,904	313	(712)	9,943	18,448
Segment liabilities	240,631	314	17,328	13,980	272,253
Unallocated liabilities
Central borrowings Tax liabilities					4,195 4,339
Total liabilities					280,787
Total equity					14,064
Total equity and liabilities					294,851

Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies.

(f) Assets under management

	Life and related business 2007 £m	General business and other 2007 £m	2007 £m	2006 £m
Total IFRS assets included in the balance sheet	279,719	40,001	319,720	294,851
Additional value of in-force long-term business			7,982	6,794
Total EEV assets included in the balance sheet			327,702	301,645
Third party funds under management:
Unit trusts, OEICs, PEPs and ISAs			25,868	20,574
Segregated funds			54,422	43,672
			407,992	365,891
Non-managed assets			(44,074)	(39,010)
Funds under management			363,918	326,881
Funds not managed by Aviva fund managers			(48,017)	(39,711)
Funds under management by Aviva fund managers			315,901	287,170

The Group this year has redefined its assets under management to reflect customer funds managed by Aviva entities and, separately, funds managed by Aviva fund management subsidiaries.

(g) Goodwill allocation and impairment testing

IFRS requires formal impairment testing to be carried out annually. For impairment testing, goodwill and intangibles with indefinite useful lives have been allocated to cash-generating units by geographical reporting unit and business segment. The carrying amount of goodwill and intangible assets with indefinite useful lives is reviewed at least annually or when circumstances or events indicate there may be uncertainty over this value. An impairment charge of £10 million (2006: £94 million) was booked in the year.

(h) Long-term business summary analysis by geographical segment

(i) Income statement

	Net written premiums			Fee and commission income			Profit before tax
	2007 £m	2006 £m		2007 £m	Restated 2006 £m		2007 £m	Restated 2006 £m
United Kingdom	5,277	5,300		169	214		616	915
France	3,674	3,573		201	179		325	259
Ireland	371	397		72	64		45	52
Italy	966	1,919		84	69		79	76
Netherlands (including Belgium and Germany)	2,716	2,079		37	21		407	453
Poland	447	395		14	55		117	108
Spain	1,501	1,266		60	56		106	113
Other Europe	223	159		7	3		(27)	(16)
Europe	9,898	9,788		475	447		1,052	1,045
North America	3,015	932		12	4		(137)	17
Asia Pacific	574	512		42	39		40	68
Total	18,764	16,532		698	704		1,571	2,045

The following analysis shows the net written premiums from associates and joint ventures on insurance and participating investment contracts which are not included in the analysis above.

	2007 £m	2006 £m
RBSG	274	236
India	51	31
China	116	38
Turkey	5	-
Malaysia	53	-
	499	305

(ii) Balance sheet

	Segmental total assets			Segmental net assets
	2007 £m	Restated 2006 £m		2007 £m	Restated 2006 £m
United Kingdom	132,794	126,355		5,887	5,285
France	53,000	46,547		1,584	1,355
Ireland	11,611	10,951		972	1,040
Italy	13,520	11,828		1,032	613
Netherlands (including Belgium and Germany)	31,797	28,340		3,157	2,922
Poland	2,995	2,232		282	216
Spain	7,624	6,641		1,203	862
Other Europe	577	483		344	65
Europe	121,124	107,022		8,574	7,073
North America	20,436	18,828		2,291	2,470
Asia Pacific	4,590	3,687		554	433
Total	278,944	255,892		17,306	15,261

(i) General insurance and health business summary analysis by geographical segment

(i) Income statement

	Net written premiums			Fee and commission income			Profit before tax
	2007 £m	2006 £m		2007 £m	2006 £m		2007 £m	2006 £m
United Kingdom	5,896	6,000		147	157		241	1,130
France	733	735		1	-		53	77
Ireland	474	519		1	1		151	297
Netherlands	1,717	1,755		11	-		105	107
Other Europe	309	278		8	3		16	26
Europe	3,233	3,287		21	4		325	507
North America	1,412	1,389		9	10		147	169
Asia Pacific	28	26		2	1		4	5
Total	10,569	10,702		179	172		717	1,811

(ii) Balance sheet

	Segmental total assets			Segmental net assets
	2007 £m	2006 £m		2007 £m	2006 £m
United Kingdom	12,544	12,548		3,386	3,216
France	1,856	1,731		339	376
Ireland	1,812	1,765		430	444
Netherlands	3,174	2,775		760	630
Other Europe	1,102	803		459	266
Europe	7,944	7,074		1,988	1,716
North America	3,802	3,250		659	647
Asia Pacific	54	60		27	25
Total	24,344	22,932		6,060	5,604

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