1. Geographical analysis of long-term business IFRS operating profit

1 – Geographical analysis of long-term business IFRS operating profit

	2009 £m	2008 £m
With-profit	177	289
Non-profit	495	462
United Kingdom	672	751
France	272	275
Ireland	50	61
Italy	128	48
Poland	152	162
Spain	160	155
Other Europe	(1)	(16)
Aviva Europe	761	685
Delta Lloyd	277	196
Europe	1,038	881
North America	85	16
Asia Pacific	92	46
Total	1,887	1,694

IFRS long-term business operating profit before shareholder tax was £1,887 million (2008: £1,694 million), an increase of 11% on the prior period.

Swap rates, which are used as the basis for the calculation of LTIR, have fallen significantly compared with the previous year and, as a result, the benefit from moving to the 10 year rate has been offset by the overall reduction in swap rates. The net impact of these factors was to reduce profit by around £200 million on an IFRS basis.

United Kingdom

IFRS operating profit was 11% lower at £672 million (2008: £751 million). The decline in operating profit reflects the impact of lower asset values on bonuses declared in our with-profits funds and on the level of the with-profit special distribution bonus. The non-profit result increased to £495 million (2008: £462 million) including the benefit of the reattribution but was partly offset by lower annual management charges.

The reattribution of the inherited estate on the 1 October 2009 resulted in an operating loss of £5 million (being the net impact of the value of the estate, less project costs, tax and the 'Policyholder Incentive Payment'). In addition to this, investment earnings on reattributed assets and the surplus generated from the 'New With-Profits Sub-Fund' during the period 1 October to 31 December 2009 contributed operating profits of £79 million. We would not expect ongoing profits to continue at this level. On an ongoing basis, profits will arise from earnings on the re-attributed estate (estimated at £45 million per year on an IFRS basis), the financial unwind of guarantee costs, the movement in value in any un-hedged assets backing the guarantees, and any demographic profits / losses (e.g. lapses) resulting from policyholder action.

Europe

In Europe, operating profit was £1,038 million (2008: £881 million), an 18% increase on the prior period reflecting stronger existing business profits and the benefit of euro strengthening.

Aviva Europe

Aviva Europe’s life operating profit increased by 11% to £761 million (2008: £685 million) mainly reflecting a significant increase in profits from existing business in Italy and France and the benefit of currency strengthening, offset by reduced expected returns due to lower opening asset values. In Italy, prior year operating profit included a structured bond default provision which was not repeated in 2009. In France, existing business profits increased following favourable experience in claims and surrenders in the year. This was partly offset in both countries by increased new business strain, principally due to strong new business growth in Italy and France, where sales grew by 40% and 14% respectively on a local currency basis.

Delta Lloyd

The operating profit increased by 41% to £277 million (2008: £196 million) with the benefits of lower new business strain, driven by a decrease in corporate pension sales, and expense savings, and strengthening of the Euro.

North America

In the US, operating profit increased to £85 million (2008: £16 million). The significant improvement follows actions taken by management to improve the investment margin earned on existing equity indexed annuity business and lower new business commissions and the growth in the existing book of business. Review of deferred acquisition cost assumptions and amortization led to a £52 million improvement in the operating result.

Asia Pacific

Operating profit increased to £92 million (2008: £46 million), benefiting from a one-off release of reserves in Singapore of £68 million following an actuarial review of risk margins. Excluding this benefit the underlying decrease is mainly a result of the sale of the Australian life business on 1 October 2009.