12 - (Loss)/profit before tax
| EEV basis | IFRS basis | ||||
|---|---|---|---|---|---|
| 6 months 2008 £m |
6 months 2007 £m |
6 months 2008 £m |
6 months 2007 £m |
||
| Operating profit before tax | 1,719 | 1,541 | 1,233 | 1,151 | |
| Investment return variances and economic assumption changes on long-term business | (2,783) | 542 | (636) | 107 | |
| Short-term fluctuation in return on investments backing general insurance and health business | (314) | 37 | (314) | 37 | |
| Impairment of goodwill | (42) | (3) | (42) | (3) | |
| Amortisation and impairment of intangibles | (44) | (41) | (51) | (49) | |
| Profit/(loss) on the disposal of subsidiaries and associates | 9 | (5) | 9 | (5) | |
| Integration and restructuring costs | (132) | (40) | (132) | (40) | |
| Exceptional costs for termination of operations | (84) | – | (84) | – | |
| (Loss)/profit before tax / (Loss)/profit before tax attributable to shareholders' profits | (1,671) | 2,031 | (17) | 1,198 | |
Loss before tax on an EEV basis was £1,671 million (six months to 30 June 2007: £2,031 million profit), and includes unfavourable investment variance and economic assumption changes on long-term business of £2,783 million (six months to 30 June 2007: £542 million favourable). These variances reflect the impact of the worsening economic conditions prevailing during the period and volatile investment markets.
The IFRS long-term business unfavourable investment variance of £636 million (six months to 30 June 2007: £107 million favourable) was driven by increasing risk free rates, widening credit spreads and poor equity performance across all regions. The effect of these together with non-life investment market movements and integration costs are included in the IFRS loss before tax attributable to shareholders’ of £17 million (six months to 30 June 2007: £1,198 million profit).
The adverse short-term fluctuation in return on investments backing general insurance and health business of £314 million (six months to 30 June 2007: £37 million positive) is due to lower market returns compared to our longer-term investment return assumptions. The group reduced its exposure to equities through an active sell off of part of our equity book in the second half of 2007.
Impairment of goodwill of £42 million (six months to 30 June 2007: £3 million) is mainly driven by £39 million impairment of goodwill balances in the Netherlands.
Amortisation and impairment of intangibles on an IFRS basis was £51 million (2007: £49 million). This mainly reflects the amortisation of the intangible benefit from acquired distribution channels in North America and Europe and the amortisation of capitalised development costs and exclusivity rights in the United Kingdom.
Integration and restructuring costs of £132 million (six months to 30 June 2007: £40 million) comprises phase one restructuring costs of £38 million announced in October 2007 and phase two restructuring costs of £83 million announced in June 2008. The balance mainly related to the implementation of Aviva Investors.
Exceptional costs for termination of operations of £84 million (six months to 30 June 2007: £nil) are due to the migration of the wrap platform in the UK to a third party provider, Scottish Friendly. These costs include write-downs of goodwill and intangible assets.
