Aviva plc: Adoption of Aviva Market Consistent Embedded Value (MCEV) methodology and impact on results
MCEV notes to the financial statements
6 – Maturity profile of business
This note sets out how the VIF generated by the in-force and new business is modelled as emerging into free surplus over future years. Cashflows are projected on a certainty equivalent basis and are discounted at risk-free rates.
As this new disclosure will be included within the 2008 preliminary results announcement, 2007 comparatives are presented below.
(a) Total in-force business
To show the profile of the VIF emergence, the value of VIF in the consolidated balance sheet has been split into five-year tranches depending on the date when the profit is expected to emerge.
| Audited Full year 2007 | |||||||
|---|---|---|---|---|---|---|---|
| £m | 0–5 | 6–10 | 11–15 | 16–20 | 20+ | Total gross of minority interest | Total net of minority interest |
| United Kingdom | 1,574 | 1,209 | 615 | 345 | 524 | 4,267 | 4,267 |
| Europe | 2,200 | 1,170 | 736 | 412 | 332 | 4,850 | 3,946 |
| North America | 168 | 129 | 41 | 16 | (24) | 330 | 330 |
| Asia Pacific | 130 | 105 | 15 | 8 | 11 | 269 | 261 |
| Total | 4,072 | 2,613 | 1,407 | 781 | 843 | 9,716 | 8,804 |
(b) New business
To show the profile of the VIF emergence, the value of new business per the presentation of analysis of earnings has been split into five-year tranches depending on the date when the profit is expected to emerge.
| Audited Full year 2007 | |||||||
|---|---|---|---|---|---|---|---|
| £m | 0–5 | 6–10 | 11–15 | 16–20 | 20+ | Total gross of minority interest | Total net of minority interest |
| United Kingdom | 192 | 114 | 55 | 31 | 48 | 440 | 440 |
| Europe | 283 | 140 | 91 | 56 | 29 | 599 | 450 |
| North America | 85 | 61 | 6 | (1) | (11) | 140 | 140 |
| Asia Pacific | 46 | 41 | 5 | 3 | 4 | 99 | 98 |
| Total | 606 | 356 | 157 | 89 | 70 | 1,278 | 1,128 |
