2 - Long-term savings

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Total long-term business sales for the first six months of the year were up 2% to £19,700 million (six months to 30 June 2007: £19,294 million). This performance is driven by 11% growth in life and pensions sales of £17,283 million (six months to 30 June 2007: £15,543 million), up 4% on a local currency basis. This was offset by a decrease of 36% in investment sales to £2,417 million (six months to 30 June 2007: £3,751 million) which have been impacted across all our regions by the current economic climate and volatile market conditions. Before the impact of exchange rate movements total sales were down 5%.

	30 June 2008				Sterling growth
	Life and pensions £m	Retail investments £m	Total £m		Life and pensions %	Retail investments %	Total %
Long-term savings sales
United Kingdom	5,863	840	6,703		1%	(47)%	(10)%
Europe	8,431	526	8,957		15%	(32)%	10%
North America	2,205	-	2,205		28%	-	28%
Asia Pacific	784	1,051	1,835		20%	(24)%	(10)%
Total new business sales on a present value of new business premium (PVNBP) basis	17,283	2,417	19,700		11%	(36)%	2%

In the United Kingdom total sales were down 10% to £6,703 million (2007: £7,415 million). Life and pensions sales were up 1% at £5,863 million (2007: £5,820 million) with growth in annuities and individual pensions sales offsetting a decrease in the sales of bonds. Investments sales were £840 million (2007: £1,595 million).

Aviva Europe delivered long-term business sales of £8,957 million (2007: £8,131 million), up 10%. Within this, life and pension sales were up 15% to £8,431 million (2007: £7,353 million). Removing the impact of the strong euro, sales were flat on a local currency basis, due to large decreases in Italy and Ireland, principally driven by the uncertain financial markets, offset by strong growth in the Netherlands and central and eastern Europe. Investment sales were down 32% to £526 million (2007: £778 million).

Sales in North America were up 28% to £2,205 million (2007: £1,716 million), reflecting higher funding agreement sales which increased by 147% to £375 million (2007: £152 million) and annuity sales of £1,579 million (2007: £1,293 million), up 22%.

Total long-term savings sales for Asia Pacific were £1,835 million (2007: £2,032 million). Within this, life and pension sales for the first half of the year grew by 20% to £784 million (2007: £654 million). This performance reflects the growth seen in China and India as well as the impact of the new businesses in Taiwan and Malaysia, together with favourable movements in exchange rates. Investment product sales fell 24% to £1,051 million (2007: £1,378 million).

Geographical analysis of life, pensions and investment sales

	Present value of new business premiums1
	6 months 2008 £m	6 months 2007 £m	Growth Sterling %	Growth Local Currency %
All references to sales in this announcement refer to the present value of new business premiums (PVNBP) unless otherwise stated. PVNBP is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine new business contribution. Investment sales are calculated as new single premium plus the annualised value of new regular premiums.
Life and pensions business
United Kingdom	5,863	5,820	1%	1%
France	2,010	1,832	10%	(4)%
Ireland	648	889	(27)%	(36)%
Italy	1,275	1,818	(30)%	(38)%
Netherlands (including Germany and Belgium)	1,991	1,146	74%	53%
Poland	739	379	95%	57%
Spain	1,259	1,114	13%	(1)%
Other Europe	509	175	191%	174%
Europe	8,431	7,353	15%	-
North America	2,205	1,716	28%	29%
Australia	204	240	(15)%	(25)%
China	126	48	163%	142%
Hong Kong	138	162	(15)%	(15)%
India	95	57	67%	59%
Singapore	149	138	8%	(1)%
Other Asia	72	9	700%	691%
Asia Pacific	784	654	20%	11%
Total life and pensions	17,283	15,543	11%	4%
Investment sales2
United Kingdom	840	1,595	(47)%	(47)%
Netherlands	221	365	(39)%	(47)%
Poland	46	141	(67)%	(74)%
Other Europe	259	272	(5)%	(16)%
Europe	526	778	(32)%	(42)%
Australia	840	1,030	(18)%	(28)%
Singapore	211	348	(39)%	(45)%
Asia Pacific	1,051	1,378	(24)%	(32)%
Total investment sales	2,417	3,751	(36)%	(40)%
Total long term savings	19,700	19,294	2%	(5)%
Navigator sales (included above)	978	1,298	(25)%	(33)%

United Kingdom

Against a backdrop of difficult market conditions UK life increased life and pensions sales by 1% in a declining market, consolidating the 39% sales growth delivered over the last two financial years. First quarter market share grew to 11.4% (full year 2007: 10.5%). This has been achieved through the focused execution of our strategy, leveraging our broad product offering and distribution reach.

Life and pensions sales were £5,863 million (2007: £5,820 million). Investments sales were £840 million (2007: £1,595 million), as current economic conditions continue to impact consumer attitudes to saving for the future.

Total sales included another strong half year from our bancassurance partnership with the Royal Bank of Scotland Group. Sales were up 12% on the same period of 2007 reflecting the commitment of both partners to the ongoing development of this successful relationship.

Total pensions sales were broadly in line with the equivalent period last year. Pensions sold directly to individuals performed particularly strongly, up 22%, supported by sales of our new SIPP-Lite product. Annuities were up 39% to £1,286 million which includes BPA sales of £418 million. Individual annuities sold through the open market option increased 70% on the same period last year.

In a market which has been adversely impacted by a steep reduction in mortgage applications, we held the level of our protection sales, benefiting from the strength of our joint venture with RBSG and other partnerships. Bond sales fell 16% as the market re-aligned to the new tax regime. Falls in unit-linked bonds were offset by strong performances elsewhere, with 55% growth in with-profits bonds to £885 million and 65% growth in offshore unit-linked bonds to £149 million.

We have a programme of new product initiatives and we continue to focus on further strengthening our distribution footprint. To date we have made our successful Simplified Life protection product available through IFAs; expanded our enhanced annuity proposition, making it available to a wider range of customers; realigned our stakeholder pensions pricing to reflect the more price competitive proposition that this segment requires; launched our SIPP-Lite product, as part of our retirement solutions strategy; launched our Capital Protected Plan, responding to increasing customer demand for more certainty from their investments, and most recently enhanced our pricing capabilities for annuity business, increasing the number of factors we consider during quotation to optimise rates for over 70% of customers.

The market has remained volatile during the first half of the year and we expect this to continue throughout 2008. Product categories most susceptible to the economic situation, in particular protection and single premium savings, will face low or negative growth compared to the same period last year, leading to an overall flat or slightly falling market for the full year. Our ongoing investment in propositions and the development of our distribution footprint will enable us to deliver sales at least in line with the market whilst maintaining margins.

Europe

Overall sales in Europe were up 10% to £8,957 million (2007: £8,131 million) supported by the strength of the euro. On a local currency basis sales were down 4%, following growth of 14% in the first six months of 2007, reflecting difficult market conditions for life and pensions business and investment sales in a number of countries within the region. This is a resilient performance, achieved through the strength of our geographical diversity and a multi-channel distribution strategy.

We have had strong growth in the Netherlands, where three group pension schemes contributed £758 million, and growth has also been strong across central and eastern Europe. However, a number of countries have experienced lower consumer demand for long-term savings products and the performance of the bancassurance distribution channel has been significantly affected by banks prioritising their savings products following reduced liquidity in the banking sector. Trading conditions in Ireland, Italy and Spain were particularly challenging, although Spain benefited from sales of £180 million, including one-off transfers amounting to £151 million, through Cajamurcia, our most recent Spanish bancassurance partnership.

In Ireland, overall life and pension sales were down 27% against the same period last year. This reflects the slowdown in economic growth, a falling property market and the one-off impact of maturing Special Savings Incentive Account (SSIA) contracts in 2007. In Italy, sales were down 30% reflecting difficult market conditions and the timing of marketing campaigns.

The life and pensions business in France increased by 10% against the same period last year, reflecting the strength of the euro. On a local currency basis sales declined by 4% as sales through the bank and broker channels decreased due to lower demand for unit-linked products. However, we out-performed the overall market, which declined by 7%¹ mainly due to growth in sales through our partnership with AFER, France’s largest savings association, following last year’s successful product modernisation.

¹ In GWP terms, the Fédération Française des Sociétés d’Assurance (FFSA) states that the French market for life individual products has declined 7% as at 30 June 2008.

Our businesses in central and eastern Europe grew life and pension sales 125% to £1,248 million (2007: £554 million). In Poland sales increased by 95%. This reflects a strong performance by Aviva’s direct sales force in the pensions market, the success of our new regular premium product, Nowa Perspectywa, sold through the broker channel and a limited-period promotion of a savings product in the first quarter of the year in the bank channel. Significant growth was experienced in Romania, where sales were boosted by an initial surge of pension contracts written as a result of government reforms to the provision of compulsory pensions. While we expect some additional sales resulting from this reform in the third quarter, these sales are one-off in nature and boosted our sales by £252 million in the first half of the year. In Turkey, sales increased by 50% reflecting the commencement of our bancassurance arrangement with Akbank and success in the pensions market.

We have a strong portfolio of businesses across Europe and while 2008 is expected to continue to present challenging conditions in a number of countries across the region we remain confident in achieving our medium term growth target to deliver average long-term savings new business growth of 10% over the period 2007 to 2010, while growing new business profit at least as fast.

North America

In the United States, we have built upon the impressive growth achieved in 2007 with a further increase of 28% in new business sales to £2,205 million (2007: £1,716 million). This strong growth was accomplished despite a volatile economic environment in the US and we remain fully confident in our target to double the sales in our US business while maintaining margins within three years of the acquisition of the former AmerUs business.

In the first quarter of 2008, we became the number one seller in both the indexed annuity market and the indexed life insurance market. In the indexed annuity market we now have a 21% market share with three of our products appearing in the top 10. In the first half of 2008 we contracted with nearly as many Independent Marketing Organisations (IMOs) as we did in the past two years combined and we added more than 2,300 new agents to our annuity distribution network.

Sales of annuities increased by 22% to £1,579 million (2007: £1,293 million), a significant accomplishment given a challenging economic environment that was highlighted by increasing competitive pressures, volatile equity markets and changing interest rates. Our continued growth demonstrates a consumer demand for products with guarantees, particularly in light of the current investment climate. While competitive pressures have increased, current and future product launches, combined with marketing programmes and expanding distribution, support our ongoing confidence for future growth.

On 25 June, the U.S. Securities & Exchange Commission held an open meeting and one of the topics covered was a proposed new rule that would have the effect of classifying equity indexed annuities as securities for regulatory purposes. Indexed annuities are valuable products that fill an important financial need for many consumers and we expect indexed products to be an important part of our product offering for years to come.

Life sales totalled £251 million (2007: £271 million), a decrease of 7% from prior year reflecting our product rationalisation programme, implemented during late 2007, to focus on higher margin life products. We expect higher new sales in the second half of this year through a combination of new product launches, marketing programmes and growth in the indexed life insurance market.

Funding agreement sales were very strong at £375 million (2007: £152 million), an increase of 147% over the prior period as we took advantage of favourable market circumstances. Funding agreement sales, an integral part of our product portfolio, are large corporate transactions and will continue to grow as market opportunities arise.

Asia Pacific

Total long-term savings sales for Asia Pacific were £1,835 million (2007: £2,032 million). Within this, life and pension sales for the first half of the year grew by 20% to £784 million (2007: £654 million). This performance reflects both the growth seen in China and India as well as the impact of the new businesses in Taiwan and Malaysia, together with favourable movements in exchange rates.

In China, sales through the joint venture life business Aviva-COFCO increased by 163% reflecting ongoing distribution expansion. We have increased our presence in the country to eight provinces, with a total of 32 city branches (2007: seven provinces, 17 city branches). In India our share of total sales from Aviva’s joint venture with the Dabur Group increased 67% reflecting the on-going expansion of the direct sales force and development of bancassurance partnerships.

In Australia, sales were down 15%. However, 2007 included the benefit of a one-off transfer of group pensions business of £64 million as well as the £21 million impact of a favourable change to superannuation legislation. Excluding the one-offs and the impact of exchange rate movements, underlying sales grew by 16% against the prior year, driven by higher sales of protection and retail products.

Life and pension sales in Singapore increased by 8%, mainly due to the favourable effect of exchange rate movements. On a local currency basis sales were 1% down on the prior year following the withdrawal of the ‘Big-e’ product, which contributed £70 million of sales in half year 2007, partly offset by the impact of new product initiatives. In Hong Kong, our products are mainly investment related and aggressive competition together with the volatile market contributed to a 15% decrease in sales.

Investment sales in the period under review fell by 24% to £1,051 million (2007: £1,378 million), affected by the current volatile market conditions. Further to this, investment sales in Singapore were adversely impacted by a change to local pension laws which restricts external contributions from the government pension fund. Prior year investment sales were boosted by a one-off impact of £227 million due to the favourable changes in Australian superannuation legislation.

Looking forward, the second half of the year will remain challenging if the markets continue to be volatile. However, given our plans to continue to expand our distribution network and develop our relationships with our business partners, we remain confident in achieving our medium-term sales target to grow long-term savings new business sales by an average of at least 20% a year to 2010.

Present value of life new business premiums

The present value of new business premiums (PVNBP) is derived from the single and regular premiums of the products sold during the financial period and are expressed at the point of sale. The PVNBP calculation is equal to total single premium sales received in the year plus the discounted value of regular premiums expected to be received over the term of the new contracts. The projection assumptions used to calculate PVNBP for each product are the same as those used to calculate new business contribution. The discounted value of regular premiums is also expressed as annualised regular premiums multiplied by a Weighted Average Capitalisation Factor (WACF). The WACF will vary over time depending on the mix of new products sold, the average outstanding term of the new contracts and the projection assumptions. The table below sets out the factors required to derive PVNBP by business units.

					6 months 2008		6 months 2007
	Regular premiums £m	WACF	Present value of regular premiums £m	Single premiums £m	PVNBP £m		PVNBP £m
Euro funds are savings that receive an annual bonus declaration, based on the investment performance of the underlying funds.
United Kingdom
Individual pensions	218	4.3	929	1,068	1,997		1,819
Group pensions	40	5.6	225	202	427		582
Annuities	–	–	–	1,286	1,286		927
Bonds	–	–	–	1,628	1,628		1,939
Protection	80	4.8	384	61	445		443
Equity release	–	–	–	80	80		110
United Kingdom	338	4.6	1,538	4,325	5,863		5,820
France
Euro funds1	13	5.6	73	1,291	1,364		979
Unit-linked funds	23	5.2	120	435	555		780
Protection business	14	6.4	89	2	91		73
Total life and pensions	50	5.6	282	1,728	2,010		1,832
Ireland
Life and savings	19	5.0	95	201	296		459
Pensions	46	3.7	169	183	352		430
Total life and pensions	65	4.1	264	384	648		889
Italy	58	5.4	316	959	1,275		1,818
Netherlands (including Belgium and Germany)
Life	34	6.6	225	255	480		420
Pensions	45	8.3	372	1,139	1,511		726
Total life and pensions	79	7.6	597	1,394	1,991		1,146
Poland
Life and savings	23	5.2	120	323	443		205
Pensions	26	8.3	215	81	296		174
Total life and pensions	49	6.8	335	404	739		379
Spain
Life and savings	61	5.4	331	541	872		898
Pensions	36	5.4	193	194	387		216
Total life and pensions	97	5.4	524	735	1,259		1,114
Other Europe	64	6.9	440	69	509		175
Europe	462	6.0	2,758	5,673	8,431		7,353
United States
Life	30	8.0	239	12	251		271
Annuity	–	–	–	1,579	1,579		1,293
Funding agreements	–	–	–	375	375		152
North America	30	8.0	239	1,966	2,205		1,716
Asia	69	4.8	330	250	580		414
Australia	32	3.2	103	101	204		240
Asia Pacific	101	4.3	433	351	784		654
Total life and pensions	931	5.3	4,968	12,315	17,283		15,543

Analysis of sales via bancassurance channels

	Present value of new business premiums1
	6 months 2008 £m	6 months 2007 £m	Growth local currency2 %
Present value of new business premiums (PVNBP) is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine new business contribution. Growth rates are calculated based on constant rates of exchange. Investment sales are calculated as new single premium plus annualised value of new regular premiums.
Life and pensions
United Kingdom	628	575	9%
France	487	417	3%
Ireland	349	435	(30)%
Italy
Unicredit Group	575	1,106	(54)%
Banca Popolare Italiana group	127	175	(36)%
Banca delle Marche	13	39	(71)%
Banca Popolari Unite	526	479	(4)%
	1,241	1,799	(39)%
Netherlands	227	199	–
Poland	291	46	409%
Spain
Bancaja	312	405	(32)%
Caixa Galicia	137	201	(40)%
Unicaja	330	258	12%
Caja España	114	89	13%
Caja de Granada	54	59	(20)%
Cajamurcia	180	–	–
	1,127	1,012	(2)%
Other Europe	27	–	–
Europe	3,749	3,908	(16)%
North America	6	27	(78)%
Asia Pacific	312	166	79%
Total life and pension sales	4,695	4,676	(9)%
Investment sales3
United Kingdom	242	202	20%
Total bancassurance sales	4,937	4,878	(8)%

Detailed worldwide life and pension new business

	Single				Regular				PVNBP
	6 months 2008 £m	6 months 2007 £m	Local currency growth1		6 months 2008 £m	6 months 2007 £m	Local currency growth1		Local currency growth1
Growth rates calculated based on constant rates of exchange. Euro funds are savings that receive an annual bonus declaration based on the investment performance of the underlying funds.
United Kingdom
Individual pensions	1,068	959	11%		218	211	3%		10%
Group pensions	202	367	(45)%		40	42	(5)%		(27)%
Annuities	1,286	927	39%		–	–	–		39%
Bonds	1,628	1,939	(16)%		–	–	–		(16)%
Protection	61	107	(43)%		80	63	27%		–
Equity release	80	110	(27)%		–	–	–		(27)%
United Kingdom	4,325	4,409	(2)%		338	316	7%		1%
France
Euro funds2	1,291	925	23%		13	9	30%		22%
Unit-linked funds	435	631	(39)%		23	28	(28)%		(38)%
Protection business	2	1	100%		14	12	–		10%
Total life and pensions	1,728	1,557	(2)%		50	49	(11)%		(4)%
Ireland
Life and savings	201	337	(48)%		19	26	(37)%		(43)%
Pensions	183	257	(38)%		46	46	(12)%		(28)%
Total life and pensions	384	594	(43)%		65	72	(21)%		(36)%
Italy
Life and savings	959	1,456	(42)%		58	72	(29)%		(38)%
Netherlands (including Belgium and Germany)
Life	255	219	2%		34	32	(6)%		–
Pensions	1,139	394	154%		45	40	(2)%		83%
Total life and pensions	1,394	613	100%		79	72	(4)%		53%
Poland
Life and savings	323	130	98%		23	14	35%		74%
Pensions	81	64	1%		26	16	30%		36%
Total life and pensions	404	194	66%		49	30	32%		57%
Spain
Life and savings	541	669	(29)%		61	43	24%		(15)%
Pensions	194	126	36%		36	16	100%		57%
Total life and pensions	735	795	(19)%		97	59	45%		(1)%
Other Europe	69	51	19%		64	31	92%		174%
Europe	5,673	5,260	(6)%		462	385	5%		–
United States
Life	12	26	(54)%		30	35	(14)%		(7)%
Annuity	1,579	1,290	23%		–	1	(100)%		23%
Funding agreements	375	152	148%		–	–	–		148%
North America	1,966	1,468	35%		30	36	(17)%		29%
Asia	250	184	28%		69	48	38%		34%
Australia	101	146	(39)%		32	29	(3)%		(25)%
Asia Pacific	351	330	(3)%		101	77	22%		11%
Total life and pensions	12,315	11,467	1%		931	814	7%		4%

Detailed worldwide investment sales analysis

	Single				Regular				PVNBP
	6 months 2008 £m	6 months 2007 £m	Local currency growth1		6 months 2008 £m	6 months 2007 £m	Local currency growth1		Local currency growth1
Growth rates are calculated based on constant rates of exchange. UK regular premium investment sales include SIPP products. These are similar in nature to pension products and their payment pattern is stable and predictable and accordingly they have been capitalised. Regular premium SIPP sales for the 6 months to 30 June 2008 totalled £16 million (2007: £19 million) and have been multiplied using a weighted average capitalisation factor of 5.0 (2007: 5.0). As such, regular premium SIPP sales have produced an overall contribution to investment sales of £80 million (2007: £95 million) out of the total UK investment sales of £840 million (2007: £1,595 million).
United Kingdom
Peps/ISAs/Unit Trusts/OIECS/SIPPs	732	1,475	(50)%		442	442	–		(47)%
United Kingdom	732	1,475	(50)%		44	44	–		(47)%
Netherlands (including Belgium and Germany)
Unit Trusts	221	365	(47)%		–	–	–		(47)%
Poland
Mutual Funds	43	139	(75)%		3	2	–		(74)%
Other Europe
UCITS	259	272	(16)%		–	–	–		(16)%
Europe	523	776	(42)%		3	2	–		(42)%
Asia Pacific
Unit Trusts	73	80	(20)%		–	–	–		(20)%
Navigator	978	1,298	(33)%		–	–	–		(33)%
Asia Pacific	1,051	1,378	(32)%		–	–	–		(32)%
Total investment sales	2,306	3,629	(41)%		47	46	–		(40)%