Preliminary results year ended 31 December 2008
05 March 2009
M21 – Analysis of fund management and service company business within embedded value
Aviva's MCEV methodology incorporates the impact of earnings arising from subsidiary undertakings providing administration, fund management and other services where these arise in relation to covered business. The principal subsidiaries of the Aviva Group providing such services include NU Life Services Limited (UK) and Aviva Investors. The following table provides an analysis of the elements within the life and other related business embedded value:
| 2008 | Restated 2007 | ||||
|---|---|---|---|---|---|
| Fund management £m |
Other operations £m |
Total £m |
Total £m |
||
| United Kingdom | 162 | (170) | (8) | 2 | |
| France | 164 | 48 | 212 | 186 | |
| Netherlands | 131 | (154) | (23) | 33 | |
| United States1 | 209 | – | 209 | 84 | |
| Other | 55 | 14 | 69 | 35 | |
| Total | 721 | (262) | 459 | 340 | |
- Following the establishment of Aviva Investors the fund management portion of the US business has been separately identified.
The "look-through" value attributable to fund management is based on the level of after-tax profits expected to be earned in the future over the outstanding term of the covered business in respect of services provided to the Group’s life operations. The MCEV basis income statement excludes the actual statutory basis profits arising from the provision of fund management services to the Group's life businesses. The MCEV income statement records the experience profit or loss compared to the assumed profitability, the expected return on the in-force value and the effect on the in-force value of changes to economic assumptions.
In the United Kingdom, NU Life Services Limited (NULS) is the main provider of administration services to the UK Life business. NULS incurs substantially all of the UK businesses’ operating expenditure, comprising acquisition, maintenance and project costs. Costs are recharged to the UK Life companies (the product companies) on the basis of predetermined Management Services Agreements (MSAs).
