Preliminary Results 12 months ended 31 December 2001

27 February, 2002

CGNU reports strong results for the year ended 31 December, the introduction of Aviva as its new global brand and a rebased dividend policy which is consistent with the high growth nature of the refocused business

• Strong results with operating profit* up 41% to £2,004 million in a challenging environment
  On a modified statutory basis, operating profit before tax was £1,533 million (2000: £1,028 million)
• Record sales of long-term savings business delivering profitable growth
  • Outperformance of long-term savings business in major markets with worldwide new business sales at £15 billion
  • New business contribution up 30% to £591 million (2000: £454 million**), with worldwide margins of 25.5% (2000: 23.9%**)
  • Worldwide life achieved operating profit up at £1,674 million (2000: £1,569 million)
• Sustainable returns from general insurance
  • Re-shaped general insurance business delivers worldwide combined operating ratio of 102%
  • General insurance operating profit, up 133% to £945 million, due to action taken to improve performance and to lower weather-related claims
• Integration successfully completed and cost savings target exceeded
• Proposed change of group name to Aviva† to reflect the international nature of the newly integrated business
  • For commercial reasons certain strong brands, such as Norwich Union in the UK, will be retained with the endorsement 'an Aviva company'
• Full year 2001 dividend unchanged at 38.0 pence net per share
• Rebased dividend policy, to support the scale and pace of profitable long-term savings growth

* From continuing operations including life achieved operating profit before amortisation of goodwill and exceptional items
** Using the application of 2001 economic assumptions
† Aviva is a trademark of the CGNU group
All growth rates quoted are at constant rates of exchange.

Richard Harvey, Group Chief Executive, commented: "This is a strong set of results. Our life businesses have outperformed in our major markets in the UK and Europe through organic development, acquisitions, partnerships and new ventures that extend our distribution capabilities. In general insurance we have delivered a significant improvement in results through lower weather-related claims and a focused approach to our realigned small commercial and personal lines portfolio. Through this action we have achieved our target combined operating ratio of 102%, which we believe is capable of being sustained through the underwriting cycle.

"With the integration successfully completed we are now looking to future growth. The introduction of the Aviva brand will create opportunities for us to harness the benefits of our size and international capabilities."

Pehr Gyllenhammar, Chairman, commented: "The Board has concluded that the realignment of the dividend policy strikes the appropriate balance between dividend payments and the retention of capital to take advantage of profitable growth opportunities. This reflects the high growth nature of our business as we continue to advance in those international markets where we can build leadership positions."R

Enquiries
Richard Harvey, Group Chief Executive, +44 (0)20 7662 2286
Mike Biggs, Group Finance Director, +44 (0)20 7662 2031

Analysts:
Steve Riley, Investor Relations Director, +44 (0)20 7662 8115
James Matthews, Head of Investor Relations, +44 (0)20 7662 2137

Media:
Hayley Stimpson, Director of External Affairs, +44 (0)20 7662 7544
Alex Child-Villiers, Financial Dynamics, +44 (0)20 7269 7107

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.cgnu-group.com, and www.cantos.com

There will be a conference call today for wire services at 8.15am on 020 8240 8245. This conference call will be hosted by Richard Harvey, Group Chief Executive.

A presentation to investors and analysts will take place at 9.30am at St Helen's, 1 Undershaft, London, EC3P 3DQ and there will also be a live teleconference on +44(0)20 8515 2321. The presentation slides will be available on the Group's website,
www.cgnu-group.com. Replay facility will be available for 2 weeks on +44 (0)20 8797 2499 and the pass code is 118402.

The investors and analysts presentation is being filmed for delayed webcast and will be available on the Group's website,
www.cgnu-group.com, later this afternoon.

Photographs are available from www.newscast.co.uk

GROUP CHIEF EXECUTIVE'S STATEMENT

In our first full year as a merged company, I am pleased to report strong operating profits up 41% to £2,004 million. The strategy we put in place at the time of the merger is delivering results. We achieved record worldwide long-term new business sales of £15 billion, at sound margins, with our major businesses outperforming their markets, and a significant improvement from our general insurance business reflecting our focused approach and lower weather-related claims.

Continued success in long-term savings
We had an excellent year for life and pension sales, which grew strongly by 21% to £13.5 billion, while retail investments were lower at £1.5 billion (2000: £2.5 billion). Total life achieved operating profit increased by 5% to £1,674 million (2000: £1,569 million).

As the market leader in the UK with a share of 11%, we saw sales grow by 8% to £8.1 billion reflecting the strength of the Norwich Union brand and our multi-distribution capability. We are the market leader for investment bonds and have established the leading position in the stakeholder pensions market, achieving our target market share of 20%. New business contribution has increased by 17% to £327 million (2000: £280 million, at 2001 economic assumptions) while overall margins were 25.8% (2000: 28.6%, at 2001 economic assumptions) reflecting the greater proportion of lower margin pension sales. Life achieved operating profit was £859 million (2000: £938 million) as a result of the increased life expectancy seen in our UK annuity portfolio.

In Continental Europe life and pension sales grew by 39% to £5.5 billion. Margins improved significantly to 27.0% (2000: 20.4%, at 2001 economic assumptions) and total life achieved operating profit grew by 25% to £779 million (2000: £602 million). Our business in France, Ireland and the Netherlands saw continued organic growth and the overall Continental European margin improved primarily as a result of our bancassurance arrangements in Spain. Continental European life achieved operating profit accounts for 47% of our group life business result (2000: 38%).

During 2001 we saw significant growth from our bancassurance partnerships in Spain and Italy. Our partnership in the UK with The Royal Bank of Scotland Group has built good momentum. Total worldwide sales from bancassurance grew to £2.1 billion (2000: £0.5 billion). In addition, we recently announced an agreement with the DBS Group to extend our bancassurance reach into Hong Kong, a new and exciting market for us, with significant growth potential. This, together with our recent agreements with Unicaja, Caixa Galicia and Caja Espańa in Spain and the DBS Group in Singapore, will further develop our bancassurance business during 2002.

Fund management
We are the second largest UK-based fund manager and one of the top ten in Europe. The past year has been difficult for our fund management operations as a result of the volatility in equity markets. Operating profit was lower at £29 million (2000: £61 million). We continued to build our business from external consultants and secured £3.5 billion of third party mandates in 2001.

Sustainable general insurance business
Our strategy of focusing on personal lines and small commercial business together with lower weather-related claims has resulted in an increase in operating profit from continuing operations of 133% to £945 million. We achieved a worldwide combined operating ratio (COR) of 102% and have built the foundations of a business capable of sustaining this through the underwriting cycle. Our strategy of moving away from commercial lines and long-tail business has limited our exposure to the tragic events of September 11 and the Group confirms that the initial prudent estimate of £35 million remains unchanged and less than half of this amount has been reported within claims to the end of 2001.

Delivered integration targets
The merger of the operations of CGU and Norwich Union was completed on target by the end of December 2001. We brought together two major groups and 64,000 people worldwide with great speed and focus and achieved £317 million of annualised cost savings. This exceeded our target of £275 million and was accomplished within the integration costs of £425 million, charged in 2000.

Brand strategy
The Board is to seek shareholder approval to change the group name to Aviva plc. The new name will create a new international financial services brand, bringing together some 50 different trading names around the world and creating further opportunities for us to harness the benefits of our size and international capabilities.

A small number of strong local brands, such as Norwich Union in the UK, will be retained and the words "an Aviva company" added to marketing materials. Most of our other trading businesses will be rebranded Aviva over time, with the cost of this change funded largely through a redirection of normal marketing spend.

The new name will make it easier for us to enter new markets, as a result of heightened awareness of Aviva in markets where we are already well-established. It will also enable us to make more effective use of our global marketing spend and create a greater sense of belonging for our 64,000 employees worldwide.

Subject to shareholder approval at the AGM on 23 April 2002, the change of name to Aviva plc will take place by 31 October 2002.

Dividend
The Board has recommended a final dividend of 23.75 net pence per ordinary share payable on 17 May 2002 to shareholders on the register at 2 April 2002, which brings the total dividend for the year to 38.0 net pence per ordinary share.

Since the new group was formed, we have seen our life and savings business grow by over 30% in only 18 months. To sustain the scale and pace of profitable growth, our long-term savings operations require continuous investment of both cash and capital. The view of the Board is that it is not possible to maintain the current level of the Group's dividend whilst pursing this strategy.

As a result, the Board proposes a re-basing of the 2002 full year dividend to 23 pence (2001: 38 pence). Given our outlook for the business, this strikes the appropriate balance between dividend payments and the retention of capital to take advantage of profitable growth opportunities. From this new base, we expect to adopt a progressive policy of growing dividends by approximately 5% per annum, whilst looking to sustain a target cover in a range of 1.5 to 2.0 times operating earnings after tax, measured on a modified statutory solvency basis.

In the past year, we have focused our businesses on the markets where we can build leadership positions and are now well placed to leverage our position in these markets and to build shareholder value.

Richard Harvey
Group Chief Executive

The full 2001 Preliminary Results in Adobe PDF (211KB)