Summary review

Chairman’s statement

Aviva has had a good year, with robust performance. Patient and persistent actions to improve efficiency and productivity have created higher earnings of improved quality.

The insurance sector has not offered easy opportunities to show positive results, particularly as the underlying assets – equities
and fixed income – have had a bumpy ride, although there were some improvements in 2004.

Growth has been modest in the UK, but we have consolidated our market share. Our life portfolio is yielding better returns and the general insurance business continues to deliver excellent and consistent results.

We registered higher growth in continental Europe and can see the promising development of our business model and profits. Our operations in France, Spain, the Netherlands and Italy are all doing well. In Poland and other markets in Eastern Europe we are prominent or gaining market share.

Our general insurance businesses in Canada and Ireland are making good progress with high profitability. We have sold our small general insurance portfolio in South East Asia for a good price, and are concentrating our efforts on growing our life businesses in the expanding markets of China and India.

Our exposure to the catastrophic effects of the tsunami in Asia was limited. We were obviously shocked and saddened by the suddenness and severity of this disaster and we feel deep sympathy for the victims and their families. Thankfully, none of our staff in the region lost their lives.

We have managed our capital situation with care. Our sound profits and cash flow have allowed us to increase our dividend in line with our policy. We have gone to the market twice for subordinated debt and most recently, in November 2004, we issued a direct capital instrument. We managed to achieve good terms and high demand. Consequently we are in a very good capital position.

After several years of difficult market conditions we can see the fruits of our efforts to increase efficiency and financial strength. Your company is gradually entering a phase of more aggressive growth, whether organically or through acquisitions.

The board has recommended a final dividend of 16.00 pence net per share which brings the total for the year to 25.36 pence. We have lived up to our commitment to increase dividends by around 5% a year on the condition that we have sufficient dividend cover.

Our shares did quite well last year, after a difficult period of depressed equity markets. We outperformed our peers in the insurance sector, both in the UK and in Europe at large. We are focused on continuing to outperform.

It is important to have good governance, and the board is completely supportive of this ambition. I believe we are one of the best in class in terms of compliance.

On corporate social responsibility, we are participating both in the United Nations Global Compact programme and in European activities. We wish to be the best, and we are pleased to be recognised as one of the prime movers in this field.

As regards accounting standards, we are well prepared for the adoption of the new International Financial Reporting Standards (IFRS) and are also meeting the capital and solvency requirements that have been introduced.

Aviva has a new finance director, Andrew Moss, and three new non-executive board directors: Richard Goeltz, Russell Walls and, most recently, Lord Sharman of Redlynch OBE. Each of these individuals brings wide experience from the financial services industry and from working internationally.

Market conditions have not been easy. Our staff are resilient, hard working, and show high morale in spite of tough conditions. I think they have done an excellent job.

We continue to strive for greater efficiency and excellence in our profession, and on that basis we aim to improve shareholder value.

Pehr G Gyllenhammar
Chairman

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