News

Unaudited Results 6 Months Ended 30 June 2002

01 August, 2002

AVIVA REPORTS OPERATING PROFIT* OF £979 MILLION (2001: £977 MILLION) FOR THE SIX MONTHS TO 30 JUNE 2002. On a modified statutory basis, operating profit was £757 million (2001: £728 million)

DELIVERING PROFITABLE NEW BUSINESS GROWTH

• Worldwide new business sales of £7.3 billion (2001: £7.1 billion)
• Worldwide life and pension sales on an APE basis of £1.2 billion (2001: £1.1 billion), up 11%
• New business contribution up 6% to £289 million with margins at 24.0%; margins in the discrete second quarter were 25.2% due to business mix
• Bancassurance sales doubled with total sales of £1.3 billion (2001: £0.6 billion)

EXCELLENT GENERAL INSURANCE RESULT

• Worldwide general insurance business delivers combined operating ratio of 101% (2001: 103%)
• General insurance operating profit up 13% to £480 million (2001: £427 million)

STRONG CAPITAL POSITION

• Equity shareholders’ funds of £11.3 billion (31 December 2001: £11.6 billion, restated)
• Net asset value at 511 pence per share (31 December 2001: 524 pence, restated)
• Orphan estate stands at £4.7 billion and the free asset ratio*** of the UK Life funds is 14.1%, at 30 June 2002
• Interim dividend of 8.75 pence net per share

Richard Harvey, Group Chief Executive, commented:

“This is a solid set of results in the current market environment. Although investment markets continue to be turbulent, these results reflect the fact that Aviva is a financially strong company, with resilient and well-diversified businesses.

“The combination of our strong long-term savings operations and robust general insurance business distinguishes us. The current environment presents a challenge to many of our businesses in the short term. However the longer-term dynamics for our business remain unaltered. We have built our long-term savings businesses so that they are well-placed with their multi-distribution channels and broad range of products to meet the needs of our customers.”

• An interview with Richard Harvey, Group Chief Executive, in video, audio and text will be available after the results have been released today on the Group’s website, www.aviva.com, and www.cantos.com
• There will be a conference call today for wire services at 8.15 am on +44 (0) 20 8240 8241. Quote: Aviva, Richard Harvey. The transcript will be available for 1 week on the replay facility on the same telephone number. Quote: 436899
• A presentation to investors and analysts will take place at 9.30 am at St Helen’s, 1 Undershaft, London, EC3P 3DQ and there will also be a live teleconference on +44(0)20 8515 2341. The presentation slides will be available on the Group's website, www.aviva.com. Replay facility will be available for 2 weeks on +44 (0)20 8797 2499. The pass code is 114464# for the whole presentation including Question & Answer session or 114465# for Question & Answer session only.
• The investors and analysts presentation is being filmed for delayed webcast and will be available on the Group’s website, www.aviva.com, later this afternoon.
• Photographs are available from www.newscast.co.uk and the media centre on www.aviva.com

* Restated for the impact of Financial Reporting Standard 19 “Deferred Tax”.
** Reclassification of other life and savings business from “Life” to “Non-insurance operations”.
† As at 31 December 2001.

GROUP CHIEF EXECUTIVE’S STATEMENT

I am pleased to report that the Group continues to make progress in line with its stated strategy. In the face of difficult conditions for long-term savings, Aviva has delivered a solid operating profit before tax, including life achieved profit, of £979 million (2001: £977 million) demonstrating the financial and operational strength of our business.

Long-term savings

Our life and pension sales increased to £6.7 billion (2001: £6.3 billion), up by 11% when measured on an APE basis. In the UK, where we have a market share of over 12%, we saw strong life and pension sales growth of 12% to £676 million (2001: £606 million) on an APE basis. This continues to build on our strong performance in 2001 and re-affirms the strength of the Norwich Union brand, broad product offerings and strong distribution capability. Life achieved operating profit was lower at £424 million (2001: £465 million) as the effect of lower equity markets impacted the returns from the in-force business. Favourable business mix in the second quarter lifted new business margins to 24.3% (full year 2001: 25.8%).

Recent reports setting out proposals on the regulatory environment are likely to change the future of long-term savings provision in the UK market place. The reviews are aimed at closing the ‘savings gap’ in the UK which is estimated at some £27 billion per annum. A combination of increased levels of consumer education, transparency and simplification should provide an added impetus to the growth prospects of the UK long-term savings market. The Sandler Review principles favour providers with scale, multi-distribution expertise and strong product offerings. However we believe it is important to assess how shareholder value may be maximised by operating under these principles.

In Continental Europe, life and pension sales on an APE basis increased to £443 million (2001: £421 million) with total margins improving relative to the first quarter of 2002 to 25.5% (full year 2001: 27.0%). Continental European life achieved operating profit was £350 million (2001: £367 million) and represents 44% of our total life business result. In July we announced that our French business is in discussions with Mederic to establish a partnership, which will offer CGU France's range of life insurance products to Mederic's client base through a new joint venture life insurance company.

Sales from our bancassurance partnerships continue to gain momentum from the distribution agreements we put in place during 2001 and total worldwide sales from this channel were £1.3 billion (2001: £0.6 billion). We continue to seek opportunities to further extend our reach across the important long-term savings markets of Europe and we have recently announced an agreement with Banca Popolare Commercio e Industria in Italy.

Continued investor caution about equity-backed products resulted in lower retail investment sales at £622 million (2001: £763 million).

Fund management

Ongoing instability in worldwide investment markets has continued to impact the results of our fund management business as lower investment markets depressed profits. Operating profit fell to £3 million (2001: £24 million). Worldwide assets under management increased to £214 billion (2001: £209 billion), reflecting the impact of new business flows in the period which more than offset the effects of the fall in global investment markets.

General insurance

Total operating profit from our general insurance business was up 13% to £480 million (2001: £427 million). This is an excellent result and demonstrates the success of our strategy of focusing on personal lines and small commercial businesses. Our worldwide combined operating ratio (COR) of 101% (2001: 103%) reinforces our view that we have built businesses that are capable of sustaining a COR of 102% through the underwriting cycle.

Shareholders’ capital employed and financial strength

In a market that increasingly looks for quality and financial strength, our strong capital position is fundamental to our business. The Group achieved a profitable performance at the operating level which when offset by the fall in the equity markets saw shareholders’ funds marginally down at £11.3 billion (31 December 2001: £11.6 billion, restated) equivalent to 511 pence per ordinary share. The solvency position of our main trading operations remains strong despite market falls. At 30 June 2002 the average free asset ratio of our main UK life companies is 14.1% (10.1% excluding implicit items) and the orphan estate was £4.7 billion. Furthermore, the solvency capital of our combined general insurance operations is unchanged from the year end levels and is resilient to further falls. Overall, the Group’s position remains strong, with sufficient capital to withstand a further deterioration in the market.

Outlook

As we move into the second half of 2002, market conditions for long-term savings sales are becoming increasingly difficult as investors are discouraged by the ongoing uncertainty in worldwide investment markets and changes in the macroeconomic environment. Over the short term, this environment presents a challenge to many of our businesses. However, there remains a need for long-term savings provision and we believe that the longer-term dynamics for our business remain unaltered. We have built our businesses so that they are well-placed with their multi-distribution channels and broad range of products to continue to meet the needs of our customers.

Richard Harvey
Group Chief Executive

Download the full results announcement in Adobe PDF 301KB.

View the 2002 interim results presentation

View webcast of 2002 results presentation