Operational cost base
The Aviva operating cost base is calculated from reported IFRS expenses as set out in the table below:
| 6 months 2009 £m |
Restated 6 months 2008 £m |
|
|---|---|---|
| Other expenses (as reported) | 2,245 | 2,234 |
| Less: | ||
| Non operating items included above (amortisation and impairments) | (730) | (596) |
| Add: | ||
| Claims handling costs¹ | 340 | 370 |
| Non commission acquisition costs² | 638 | 614 |
| Operating cost base | 2,493 | 2,622 |
- As reported within Claims and benefits paid of £14,142 million (2008: £14,136 million)
- As reported within Fee and commissions expense of £1,909 million (2008: £ 2,276 million)
During H1 2009, the operating cost base decreased 5% to £2,493 million (six months to 30 June 2008: £2,622 million). The table and notes below set out and explain the methodology and inherent assumptions used for the calculation of the like-for-like adjustments and different components which have driven the decrease in the operating cost base. These adjustments account for the impact of foreign exchange, impact of businesses acquired/disposed of during the year and adjustments to eliminate the impact of one-off restructuring and integration spend from the cost base in both years. After adjustments, the operating cost base decreased by 9% to £2,345 million compared with a 30 June 2008 like-for-like cost base of £2,584 million.
| Movement in operating costs base | |||
|---|---|---|---|
| £m | |||
| Total operating cost base 30 June 2008 | 2,622 | ||
| Less: restructuring and integration spend for the six months to 30 June 2008 | (132) | ||
| Impact of acquisitions and disposals¹ | (92) | ||
| Foreign exchange | 186 | ||
| 30 June 2008 like-for-like operating cost base | 2,584 | ||
| Inflation² | 72 | ||
| UK life³ | (80) | ||
| UK General Insurance³ | (118) | ||
| Europe³ | (75) | ||
| Other business(including group)³ | (38) | ||
| 30 June 2009 like-for-like operating cost base | 2,345 | ||
| Restructuring and integration spend 30 June 2009 | 148 | ||
| Total operating cost base 30 June 2009 | 2,493 | ||
- Impact of acquisitions & disposals - Represents the disposal of Autowindscreens, BSM and HPI in the UK and healthcare business in the Netherlands.
- Inflation - Notional level of Inflation that would have impacted the operating cost base during the period. This is calculated using the Consumer Price Index for individual countries, applied to operating expenditure ie excluding restructuring & integration costs (but including adjustments for acquisitions & disposals). The overall weighted average is calculated at 2.8%
- Regional operating costs reduction - Includes realised savings from cost initiatives (cost savings achieved during H1 2009 as well as cost savings achieved during the second half of 2008 which represent a decrease on the H1 2009 versus H1 2008 position) and productivity and other savings (decrease in the cost base driven by the revenue fall in the business as well as by saving initiatives not attributable to the specific initiatives linked to the cost savings committed externally).
