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Segmental analysis of Group operating profit*

The total IFRS operating profit for the six months to 30 June 2005 was £943 million (2004: £781 million; £794 million restated at constant exchange rates).

Group chief executive’s statement

Aviva’s strategy of managing for value has resulted in another very good result for the first six months of 2005. The Group has seen robust operational performance across all major businesses. Operating profit before tax is up 21% on an EEV basis to £1,318 million (2004: £1,076 million), representing an annualised return on capital employed of 14.6% (2004: annualised of 12.8%). On an IFRS basis, operating profit before tax reached £943 million (2004: £781 million), an increase of 19%.

The Board is announcing a dividend increase of 5% to 9.83 pence net per share. The dividend is strongly covered and is in line with our stated policy of growing the dividend by approximately 5% per annum, while looking to maintain a target cover in a range of 1.5 to 2.0 times operating earnings after tax.

Long-term savings

With over 50% of Aviva’s life new business sales and contribution on both a headline and a post minorities basis coming from outside the UK, during the first half of 2005 we benefited from our growing position in continental Europe. Focusing on disciplined growth, our long-term savings businesses delivered a groupwide IRR of 13% (2004: 12%) and operating profit before tax grew 5% to £857 million on an EEV basis.

We delivered groupwide sales growth of 12% to £11,016 million on a PVNBP basis (2004: £9,753 million). With new business contribution up 15% to £393 million (2004: £338 million), Aviva is clearly demonstrating its focus on profitable growth. On a post-minorities basis, both new business sales and new business contribution rose by 7%.

Sales in continental Europe grew strongly by 21% to £6,218 million driven by our increasing presence in bancassurance across most of our businesses. New business contribution on a gross basis increased 21% to £240 million and on a net basis increased by 16% to £76 million. In particular, we demonstrated a particularly strong increase in value in our French business where new business contribution increased 52% to £71 million compared to sales volume growth of 36% to £1,854 million. Our Crédit du Nord bancassurance arrangement is showing impressive performance with sales of £411 million in the first half. Aviva France is managing its business mix towards a greater proportion of unit-linked products and this in turn is delivering increased margins of 3.8%, compared to 3.4% for the same period last year.

The market for long-term savings business in the UK has been very competitive during the first six months of the year. Our strategic focus on managing our business for value continues. Sales were lower at £4,244 million (2004: £4,299 million), while new business contribution rose 6% to £135 million (2004: £127 million) increasing new business margins to 3.2% from 3.0%. We aim to retain significant presence across the product portfolio whilst selling all our product ranges comfortably above the cost of capital. We expect some margin pressure in the short term but remain confident in the medium-term growth prospects for the UK life market.

Our Asian operations have seen significant developments this year. We continue to increase the rate of growth in new business sales, in line with our longer-term strategic ambitions in the region. In India, we continue to develop our bancassurance relationships and direct sales force. In China we have received regulatory approval to open new sales offices in Nauchong and Mianyang in Sichuan province, and Zhongshan in Guangdong province, which further extend our reach in this growing market, and we have applied for further licences.

Fund management

Our fund management operations continue to deliver improved performance. Worldwide investment sales increased 35% to £1,062 million (2004: £775 million). On an IFRS basis, operating profit before tax almost doubled to £33 million from £17 million and assets under management at 30 June 2005 grew to over £290 billion (31 December 2004: £280 billion). New business flows, tight management of our cost base, an increase in fee income and the performance of world investment markets have all contributed to this improved result.

General Insurance

With a COR of 95%, our general insurance performance is comfortably ahead of our stated target of 100%. Aviva’s general insurance operations continue to outperform with operating profit of £694 million (2004: £583 million) demonstrating the continued resilience of the returns.

In the UK we have since continued to produce excellent results with an operating profit of £431 million, up 19% from £361 million. The COR of 96% demonstrates the value of disciplined underwriting, an efficient supply chain, and positive claims experience. Investment in innovative technology has been possible due to strict cost management. We believe digital flood mapping, for example, provides Norwich Union Insurance with a competitive advantage.

The acquisition of RAC was completed on 4 May and the integration has commenced and is firmly on track. We are excited by the opportunities now available to us and we are confident of achieving our stated 2006 target of £80 million of cost savings. The pro-forma six months operating profit before tax for the RAC business was ahead of plan at £51 million (2004: £45 million), achieved during a period of uncertainty for the business. A profit of £17 million has been included in the Group results relating to the post acquisition period.

Outlook

We believe that Aviva has a strong platform for organic growth in long-term savings across continental Europe, the UK and Asia. In general insurance we continue to generate high returns for shareholders and will continue to maximise the opportunities our scale advantage brings. We continue to review value-driven inorganic growth opportunities and new market entries.

In summary, these are a very good set of results. Our balanced portfolio of international life and general insurance businesses has enabled Aviva to sustain real growth momentum, generating value for both shareholders and customers.

Richard Harvey
Group chief executive

Enquiries:

NEWSWIRES: There will be a conference call today for wire services at 8.15am (BST) on +44 (0)20 7365 1854 Quote: Aviva, Richard Harvey.

ANALYSTS: A presentation to investors and analysts will take place at 9:00am (BST) at St Helen’s, 1 Undershaft, London, EC3P 3DQ. The investors and analysts presentation is being filmed for live webcast and can be viewed on this website or on www.cantos.com. In addition a replay will be available on these websites later today. There will also be a live teleconference link to the investor and analyst meeting on +44 (0) 20 7365 1854. A replay facility will be available until 25 August 2005 on +44 (0) 20 7784 1024. The pass code is 4063138# for the whole presentation including Question & Answer session or 3104645# for Question & Answer session only.

The presentation slides will be available on this website from 8.30am (BST).

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Notes to editors

• Aviva is one of the leading providers of life and pensions to Europe with substantial positions in other markets around the world, making it the world’s sixth largest insurance group based on both gross worldwide premiums and market capitalisation at 31 December 2004.
• Aviva’s principal business activities are long-term savings, fund management and general insurance, with worldwide total income of Ł40 billion and assets under management of Ł280 billion at 31 December 2004.
• Overseas currency results are translated at average exchange rates.
• The present value of new business premiums (PVNBP) is equal to total single premium sales received in the year plus the discounted value of annual premiums expected to be received over the term of the new contracts, and is expressed at the point of sale.
• All growth rates are quoted at constant currency, which excludes the impact of changes in exchange rates between periods.
• This interim announcement may contain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Aviva’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Aviva and its affiliates operate. As a result, Aviva’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Aviva’s forward-looking statements.
  
  Aviva undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements we may make.

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