Notes to the consolidated financial statements 11-20

11 – Directors

Information concerning individual directors’ emoluments, interests and transactions is given in the Directors’ remuneration report.

12 – Auditors’ remuneration

This note shows the total remuneration payable by the Group to our principal auditors, Ernst & Young.

The total remuneration payable by the Group, excluding VAT and any overseas equivalent thereof, to its principal auditors, Ernst & Young LLP, and its associates in respect of the audit of these financial statements is shown below, together with fees payable in respect of other work.

	2007 £000	2006 £000
Fees payable to Ernst & Young LLP for the statutory audit of the Aviva Group and Company financial statements	1,364	1,452
Fees payable to Ernst & Young LLP and its associates for other services to Group companies:
Audit of Group subsidiaries pursuant to legislation	8,388	7,731
Additional fees related to the prior year audit of Group subsidiaries pursuant to legislation	372	–
Other services pursuant to legislation	2,124	2,326
Tax services	201	187
Services relating to information technology	173	40
Services relating to corporate finance transactions	736	1,432
All other services
– Supplementary reporting (see below)	931	885
– Other supplementary services	4,749	1,660
Fees payable to Ernst & Young LLP for services to Group pension schemes
Audit of Group pension scheme	67	70
	19,105	15,783

In addition to the above amounts payable to the principal auditors, fees for audit services of £3.8 million (2006: £2.1 million) were payable to other firms. The total fees payable for audit services were therefore £14.0 million (2006: £11.3 million).

Fees for supplementary reporting are in respect of the audit of the Group’s EEV figures. Although EEV is the Group’s primary management reporting basis and our disclosures require a full audit, the relevant fees are not classified as being for statutory audit.

13 – Tax

This note analyses the tax charge for the year and explains the factors that affect it.

(a) Tax charged to the income statement

(i) The total tax charge comprises:

	2007 £m	2006 £m
Current tax
For this year	888	1,022
Prior year adjustments	(94)	(287)
Total current tax	794	735
Deferred tax
Origination and reversal of temporary differences	(348)	221
Changes in tax rates or tax laws	(88)	(7)
Write-down of deferred tax assets	(6)	(15)
Total deferred tax	(442)	199
Total tax charged to income statement (note 13c)	352	934

(ii) The Group, as a proxy for policyholders in the UK, Ireland and Australia, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish and Australian life insurance policyholder returns is included in the tax charge. The tax expense attributable to policyholders’ returns included in the charge above is £15 million (2006: £346 million).

(iii) The tax charge can be analysed as follows:

	2007 £m	2006 £m
UK tax	97	479
Overseas tax	255	455
	352	934

(iv) Unrecognised tax losses and temporary differences of previous years were used to reduce current tax expense and deferred tax expense by £51 million and £6 million, respectively (2006: £73 million and £24 million, respectively).

(v) Deferred tax (credited)/charged to the income statement represents movements on the following items:

	2007 £m	2006 £m
Long-term business technical provisions and other insurance items	315	364
Deferred acquisition costs	34	(47)
Unrealised gains on investments	(793)	(144)
Pensions and other post-retirement obligations	40	166
Unused losses and tax credits	(272)	(247)
Subsidiaries, associates and joint ventures	(33)	135
Intangibles and additional value of in-force long-term business	(75)	(73)
Provisions and other temporary differences	342	45
Total deferred tax (credited)/charged to income statement	(442)	199

(b) Tax charged to equity

(i) The total tax charge/(credit) comprises:

	2007 £m	2006 £m
Current tax	(19)	(9)
Deferred tax
In respect of pensions and other post-retirement obligations	269	(29)
In respect of unrealised (gains)/losses on investments	(71)	43
	198	14
Total tax charged to equity	179	5

(ii) The tax credit attributable to policyholders’ returns included above is £nil (2006: £nil).

(c) Tax reconciliation

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:

	2007 £m	2006 £m
Profit before tax	1,857	3,323
Tax calculated at standard UK corporation tax rate of 30% (2006: 30%)	557	997
Different basis of tax for UK life insurance	5	209
Adjustment to tax charge in respect of prior years	(49)	(287)
Non-assessable dividends	(124)	(55)
Non-taxable profit on sale of subsidiaries and associates	(18)	(80)
Disallowable expenses	7	46
Different local basis of tax on overseas profits	56	201
Reduction in future UK tax rate (net of movements in unallocated divisible surplus)	(64)	–
Deferred tax valuation difference	1	(60)
Other	(19)	(37)
Total tax charged to income statement (note 13a)	352	934

14 – Earnings per share

This note shows how we calculate earnings per share, based both on the present shares in issue (the basic earnings per share) and the potential future shares in issue, including conversion of share options granted to employees (the diluted earnings per share). We have also shown the same calculations based on our operating profit as we believe this gives a better indication of operating performance.

(a) Basic earnings per share

(i) The profit attributable to ordinary shareholders is:

	2007				2006
	Operating profit £m	Adjusting items £m	Total £m		Operating profit £m	Adjusting items £m	Restated Total £m
Profit before tax	2,228	(386)	1,842		2,609	368	2,977
Tax attributable to shareholders’ profits	(607)	270	(337)		(645)	57	(588)
Profit for the year	1,621	(116)	1,505		1,964	425	2,389
Minority interests	(191)	13	(178)		(179)	5	(174)
Preference dividends	(17)	–	(17)		(17)	–	(17)
Coupon payments in respect of direct capital instruments (net of tax)	(37)	–	(37)		(37)	–	(37)
Profit attributable to ordinary shareholders	1,376	(103)	1,273		1,731	430	2,161

(ii) Basic earnings per share is calculated as follows:

	2007				2006
	Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Per share p		Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Restated per share p
Operating profit attributable to ordinary shareholders	2,228	1,376	53.2		2,609	1,731	70.1
Non-operating items:
Investment return variances and economic assumption changes on long-term business (note 8)	15	79	3.1		401	336	13.6
Impairment of goodwill (note 16a)	(10)	(10)	(0.4)		(94)	(94)	(3.8)
Amortisation and net impairment of intangibles (note 17)	(103)	(72)	(2.8)		(64)	(48)	(1.9)
Short-term fluctuation in return on investments backing general insurance and health business (note 9b)	(184)	(38)	(1.5)		149	189	7.7
Profit on the disposal of subsidiaries and associates (note 3b)	49	52	2.0		222	235	9.5
Integration and restructuring costs (note 3c)	(153)	(114)	(4.4)		(246)	(188)	(7.7)
Profit attributable to ordinary shareholders	1,842	1,273	49.2		2,977	2,161	87.5

(iii) The calculation of basic earnings per share uses a weighted average of 2,588 million (2006: 2,469 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 31 December 2007 was 2,622 million (2006: 2,566 million).

(b) Diluted earnings per share

(i) Diluted earnings per share is calculated as follows:

	2007				2006
	Total £m	Weighted average number of shares m	Per share p		Total £m	Weighted average number of shares m	Per share p
Profit attributable to ordinary shareholders	1,273	2,588	49.2		2,161	2,469	87.5
Dilutive effect of share awards and options	–	24	(0.5)		–	27	(0.9)
Diluted earnings per share	1,273	2,612	48.7		2,161	2,496	86.6

(ii) Diluted earnings per share on operating profit attributable to ordinary shareholders is calculated as follows:

	2007				2006
	Total £m	Weighted average number of shares m	Per share p		Total £m	Weighted average number of shares m	Restated Per share p
Operating profit attributable to ordinary shareholders	1,376	2,588	53.2		1,731	2,469	70.1
Dilutive effect of share awards and options	–	24	(0.5)		–	27	(0.7)
Diluted earnings per share	1,376	2,612	52.7		1,731	2,496	69.4

15 – Dividends and appropriations

This note analyses the total dividends and other appropriations we have paid during the year. The table below does not include the final dividend proposed after the year end because this is not accrued in these financial statements. The impact of scrip dividends is shown separately in note 35.

	2007 £m	2006 £m
Ordinary dividends declared and charged to equity in the year
Final 2006 – 19.18 pence per share, paid on 18 May 2007 (Final 2005 – 17.44 pence per share, paid on 17 May 2006)	492	418
Interim 2007 – 11.90 pence per share, paid on 16 November 2007 (Interim 2006 – 10.82 pence per share, paid on 17 November 2006)	309	275
	801	693
Preference dividends declared and charged to equity in the year	17	17
Coupon payments on direct capital instrument	53	52
	871	762

Subsequent to 31 December 2007, the directors proposed a final dividend for 2007 of 21.10 pence per ordinary share (2006: 19.18 pence), amounting to £553 million (2006: £492 million) in total. Subject to approval by shareholders at the AGM, the dividend will be paid on 16 May 2008 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2008.

Interest on the direct capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. Tax relief is obtained at a rate of 30%.

Irish shareholders who are due to be paid a dividend denominated in euros will receive a payment at the exchange rate prevailing on 27 February 2008.

16 – Goodwill

This note analyses the changes to the carrying amount of goodwill during the year, and details the results of our impairment testing on both goodwill and intangible assets with indefinite lives.

(a) Carrying amount

	2007 £m	2006 £m
Gross amount
At 1 January	3,086	2,359
Acquisitions	115	761
Movements in contingent consideration	(5)	32
Disposals	(16)	(8)
Foreign exchange rate movements	93	(58)
At 31 December	3,273	3,086
Accumulated impairment
At 1 January	(176)	(85)
Impairment losses	(10)	(94)
Disposals	9	–
Foreign exchange rate movements	(14)	3
At 31 December	(191)	(176)
Carrying amount at 31 December	3,082	2,910

Movements in contingent consideration relate to contingent consideration paid/received in respect of past acquisitions of subsidiaries. Goodwill arising on acquisitions completed before 1 January 1998 was charged directly to reserves. Goodwill arising on the Group’s acquisition of joint ventures and associates is included within the carrying value of those investments (see notes 18 and 19).

(b) Goodwill allocation and impairment testing

A summary of the goodwill and intangibles with indefinite useful lives allocated to cash-generating units is presented below.

	Carrying amount of goodwill			Carrying amount of intangibles with indefinite useful lives (detailed in note 17)			Total
	2007 £m	2006 £m		2007 £m	2006 £m		2007 £m	2006 £m
United Kingdom
Long-term business	71	50		–	–		71	50
General insurance and health (see (i) below)	316	314		185	185		501	499
RAC non-insurance operations (see (ii) below)	892	892		36	36		928	928
Other	68	77		–	–		68	77
Europe
France (long-term business) (see (iii) below)	–	–		45	42		45	42
Ireland
Long-term business (see (iv) below)	101	91		–	–		101	91
General insurance and health (see (v) below)	81	74		–	–		81	74
Italy
Long-term business (see (vi) below)	46	11		254	–		300	11
General insurance and health (see (vi) below)	42	22		132	–		174	22
Netherlands (see (vii) below)	212	163		–	–		212	163
Spain (long-term business) (see (viii) below)	552	518		–	–		552	518
Other	19	11		–	–		19	11
North America
United States (long-term business) (see (ix) below)	624	635		–	–		624	635
Canada	17	15		–	–		17	15
Asia Pacific
Various	41	37		–	–		41	37
	3,082	2,910		652	263		3,734	3,173

As explained in accounting policy N, the carrying amount of goodwill and intangible assets with indefinite useful lives is reviewed at least annually or when circumstances or events indicate there may be uncertainty over this value. The tests led to impairment of goodwill of £10 million.

Goodwill and intangibles with indefinite useful lives have been tested for impairment in these businesses as follows:

(i) UK (general insurance and health)

The recoverable amount of the UK general insurance and health unit has been determined based on a value in use calculation. The calculation uses cash flow projections based on business plans approved by management covering a three year period and a risk adjusted discount rate of 10.17% (2006: 10.45%). Cash flows beyond that three year period have been extrapolated using a steady 0% growth rate (2006: 3%). The recoverable amount significantly exceeds the carrying value of the cash-generating unit including goodwill and intangible assets with indefinite useful lives and a reasonably possible change in a key assumption will not cause the carrying value of the cash-generating unit to exceed its recoverable amount.

Key assumptions used for the calculation were:

• Budgeted operating profit represents the operating profit in the business plans, approved by management and as such reflects the best estimate of future profits based on both historical experience and expected growth rates for the UK general insurance industry.
• Some of the assumptions that underline the budgeted operating profit include market share, premium rate changes, claims inflation and commission rates.
• Growth rate represents the rate used to extrapolate future cash flows beyond the business plan period and has been based upon latest information available regarding future and past growth rates. The growth rate is considered to be consistent with both past experience and external sources of data (ABI Annual Market Statistics).

(ii) RAC (non-insurance operations)

The recoverable amount of the RAC (non-insurance operations) has also been determined based on a value in use calculation. The calculation uses cash flow projections based on business plans approved by management covering a three year period and a risk adjusted discount rate of 9.98% (2006: 10.32%). Cash flows beyond that three year period have been extrapolated using a steady 2% growth rate. The recoverable amount significantly exceeds the carrying value of the cash generating unit including goodwill and intangible assets with indefinite useful lives and a reasonably possible change in a key assumption will not cause the carrying value of the cash-generating unit to exceed its recoverable amount.

Key assumptions used for the calculation were:

• Budgeted operating profit represents the operating profit in the business plans, approved by management and as such reflects the best estimate of future profits based on both historical experience and expected growth. Some of the assumptions that underline the budgeted operating profit include market share, fee income and customer numbers.

(iii) France (long-term business)

The recoverable amount of the indefinite life intangible asset has been assessed as part of the recoverable amount of the French long-term business cash generating unit and has been determined based on a fair value less costs to sell calculation. The first step of the test was to compare the carrying value of the business, including indefinite life intangible assets, to the European Embedded Value (EEV). If the EEV is less than the carrying value of the business, the present value of profits from expected new business is considered.

The EEV of the French long term business was significantly greater than its carrying value, including indefinite life intangible assets. A reasonably possible change in a key assumption will not cause the carrying value of the cash generating unit to exceed its recoverable amount. Key assumptions used for the calculation were:

• Embedded value represents the shareholder interest in the life business and is calculated in accordance with the European Embedded Value (EEV) principles. The embedded value is the total of the net worth of the life business and the value of the in-force business. The underlying methodology and assumptions have been reviewed by the Group’s auditors.

(iv) Ireland (long-term business)

The recoverable amount of the Irish long-term business has been determined based on a fair value less costs to sell calculation. The first step of the test was to compare the carrying value of the business, including goodwill, to the European Embedded Value (EEV). If the EEV is less than the carrying value of the business the present value of profits from expected new business is considered.

The EEV of the Irish long-term business is greater than its carrying value so the recoverable value will be significantly in excess of its carrying value, including goodwill. A reasonably possible change in a key assumption will not cause the carrying value of the cash generating unit to exceed its recoverable amount. Key assumptions used for the calculation were:

• Embedded value represents the shareholder interest in the life business and is calculated in accordance with the European Embedded Value (EEV) principles. The embedded value is the total of the net worth of the life business and the value of the in-force business. The underlying methodology and assumptions have been reviewed by the Group’s auditors.

(v) Ireland (general insurance and health)

The recoverable amount of the Irish general insurance and health unit has been determined based on a value in use calculation. The calculation uses cash flow projections based on business plans approved by management covering a three year period and a risk adjusted discount rate of 8.07% (2006: 8.07%). Cash flows beyond that three year period have been extrapolated using a steady 4.6% growth rate (2006: 4.6%). The recoverable amount significantly exceeds the carrying value of the cash generating unit including goodwill and a reasonably possible change in a key assumption will not cause the carrying value of the cash generating unit to exceed its recoverable amount.

Key assumptions used for the calculation were:

• Budgeted operating profit represents the operating profit in the business plans, approved by management and as such reflects the best estimate of future profits based on both historical experience and expected growth rates for the Irish economy. Some of the assumptions that underline the budgeted operating profit include market share, premium rate changes, claims inflation and commission rates.
• Growth rate represents the rate used to extrapolate future cash flows beyond the business plan period. Prices are assumed to remain static in the foreseeable future and volumes are assumed to increase in line with real GDP. These are consistent with external sources of data (ESRI and PwC European Economic Outlook).

(vi) Italy (long-term, general insurance and health)

The majority of the goodwill and the intangible asset with an indefinite useful life allocated to the Italian business arises from the acquisitions described in note 3(a), which occurred in the second half of 2007. Since the acquisition dates, the assets and liabilities of the acquired companies have not changed significantly, and there have been no other events that might have materially affected the recoverable amount of the unit.

(vii) Netherlands (long-term, general insurance and health)

The recoverable amount of the Netherlands life and general insurance and health cash generating units have been determined on the basis of a value in use calculation. This calculation is an appraisal value and is based on the discounted expected future cash flows from the operations over a 25-year period. Expected cash flows for future periods have been obtained from the plan figures for a three year period. Expected cash flows for later periods have been extrapolated, taking into account the growth rate.

Key assumptions used for the calculation were:

• Growth rate represents the rate applied to extrapolate new business contributions beyond the business plan period, and is based on management's best estimate of future growth. The rate is in line with industry expectations of 2.5%.
• Risk-adjusted discount rate represents the rate used to discount expected profits from future new business. The discount rate is a combination of a risk-free rate and a risk margin to make prudent allowance for the risk that experiences in future years may differ from those assumed. The rate is fixed at 6.7%.

(viii) Spain (long-term business)

The recoverable amount of the Spanish unit has been determined based on a fair value less costs to sell calculation. This calculation is an actuarially-determined appraisal value and is based on the embedded value of the business together with the present value of expected profits from future new business. The recoverable amount significantly exceeds the carrying value of the cash generating unit including goodwill and a reasonably possible change in a key assumption will not cause the carrying value of the cash generating unit to exceed its recoverable amount.

Key assumptions used for the calculation were:

• Embedded value represents the shareholder interest in the life business and is calculated in accordance with the European Embedded Value (EEV) principles. The embedded value is the total of the net worth of the life business and the value of the in-force business. The underlying methodology and assumptions have been reviewed by a firm of actuarial consultants and by the Group’s auditors;
• New business contribution represents the present value of projected future distributable profits generated from business written in a period. This is based on business plans approved by management;
• Growth rate represents the rate used to extrapolate new business contributions beyond the business plan period, and is based on management’s best estimate of future growth. The rate is in line with industry expectations; and
• Risk adjusted discount rate represents the rate used to discount expected profits from future new business. The discount rate is a combination of a risk-free rate and a risk margin to make prudent allowance for the risk that experience in future years may differ from that assumed.

(ix) United States (long-term business)

The recoverable amount of the United States unit has been determined based on a fair value less costs to sell calculation. This calculation is an actuarially-determined appraisal value and is based on the embedded value of the business together with the present value of expected profits from future new business. The recoverable amount significantly exceeds the carrying value of the cash generating unit including goodwill and a reasonably possible change in a key assumption will not cause the carrying value of the cash generating unit to exceed its recoverable amount.

Key assumptions used for the calculation were:

• Embedded value represents the shareholder interest in the life business and is calculated in accordance with the European Embedded Value (EEV) principles. The embedded value is the total of the net worth of the life business and the value of the in-force business. The underlying methodology and assumptions have been reviewed by a firm of actuarial consultants and by the Group’s auditors;
• New business contribution represents the present value of projected future distributable profits generated from business written in a period. This is based on business plans approved by management;
• Growth rate represents the rate used to extrapolate new business contributions beyond the business plan period, and is based on management’s best estimate of future growth. The rate is in line with industry expectations; and
• Risk adjusted discount rate represents the rate used to discount expected profits from future new business. The discount rate is a combination of a risk-free rate and a risk margin to make prudent allowance for the risk that experience in future years may differ from that assumed.

17 – Acquired value of in-force business
(AVIF) and intangible assets

This note shows the movements in cost and amortisation of the in-force business and intangible assets acquired when we have purchased subsidiaries.

	AVIF on insurance contracts* £m	AVIF on investment contracts** £m	Other intangible assets with finite useful lives £m	Intangible assets with indefinite useful lives £m	Total £m
* On insurance and participating investment contracts. ** On non-participating investment contracts.
Gross amount
At 1 January 2006	614	11	312	302	1,239
Additions	22	–	58	–	80
Acquisition of subsidiaries	1,642	90	380	–	2,112
Disposals	–	–	(14)	–	(14)
Transfers	–	–	39	(39)	–
Foreign exchange rate movements	(93)	–	(23)	–	(116)
At 31 December 2006	2,185	101	752	263	3,301
Additions	24	–	48	–	72
Acquisition of subsidiaries	29	–	205	386	620
Disposals	–	–	(8)	–	(8)
Transfers	–	–	(54)	54	–
Foreign exchange rate movements	35	9	62	6	112
At 31 December 2007	2,273	110	1,005	709	4,097
Accumulated amortisation
At 1 January 2006	(299)	(3)	(125)	–	(427)
Amortisation for the year	(58)	(6)	(66)	–	(130)
Disposals	–	–	1	–	1
Impairment losses recognised	(28)	–	2	–	(26)
Foreign exchange rate movements	6	–	3	–	9
At 31 December 2006	(379)	(9)	(185)	–	(573)
Amortisation for the year	(160)	(7)	(99)	–	(266)
Transfers	–	–	54	(54)	–
Impairment losses recognised	–	–	(4)	–	(4)
Foreign exchange rate movements	(36)	(2)	(16)	(3)	(57)
At 31 December 2007	(575)	(18)	(250)	(57)	(900)
Carrying amount
At 31 December 2006	1,806	92	567	263	2,728
At 31 December 2007	1,698	92	755	652	3,197

Intangible assets with indefinite useful lives comprise:

(i) the RAC and BSM brands, and the value of the Union Financière de France Banque distribution channel, where the existing lives of the assets and their competitive position in, and the stability of, their respective markets support this classification; and

(ii) the bancassurance distribution agreement with Banco Popolare, signed during the year, described in note 3(a)(iii)(c).

Impairment testing of these intangibles is covered in note 16(b).

Other intangible assets with finite useful lives consist primarily of the value of bancassurance and other distribution agreements.

18 – Interests in, and loans to, joint ventures

In several business units, Group companies and other parties jointly control certain entities. This note analyses these interests and describes the principal joint ventures in which we are involved.

(a) Carrying amount

(i) The movements in the carrying amount comprised:

	Goodwill and intangibles £m	Equity interests £m	Loans £m	Total £m
At 1 January 2006	–	2,001	128	2,129
Share of results before tax	–	465	–	465
Share of tax	–	(3)	–	(3)
Share of profit after tax	–	462	–	462
Acquisitions and additions	–	372	113	485
Disposals and reduction in Group interests	–	(127)	–	(127)
Reclassification to subsidiaries	–	(93)	–	(93)
Dividends received	–	(59)	–	(59)
Foreign exchange rate movements	–	(2)	–	(2)
At 31 December 2006	–	2,554	241	2,795
Share of results before tax	–	(337)	–	(337)
Share of tax	–	(2)	–	(2)
Share of profit after tax	–	(339)	–	(339)
Acquisitions and additions	196	453	126	775
Disposals and reduction in Group interests	–	(267)	–	(267)
Reclassification to financial investments	–	(208)	(42)	(250)
Fair value gains taken to equity	–	9	–	9
Loans repaid	–	–	(159)	(159)
Foreign exchange rate movements	1	10	1	12
At 31 December 2007	197	2,212	167	2,576

(ii) The balances at 31 December comprised:

2007	Goodwill and intangibles £m	Equity interests £m	Loans £m	2007 Total £m
Property management undertakings	–	2,124	167	2,291
Long-term business undertakings	197	88	–	285
Total	197	2,212	167	2,576

2006	Goodwill and intangibles £m	Equity interests £m	Loans £m	2006 Total £m
Property management undertakings	–	2,519	241	2,760
Long-term business undertakings	–	35	–	35
Total	–	2,554	241	2,795

The loans are not secured and no guarantees were received in respect thereof. They are interest-bearing and are repayable on termination of the relevant partnership.

(b) Property management undertakings

The principal joint ventures are as follows:

Company	GP proportion held	PLP proportion held
Airport Property Partnership	50.0%	50.0%
Apia Regional Office Fund Limited Partnership	50.0%	58.8%
Ashtenne Industrial Fund Limited Partnership	66.7%	38.0%
The Junction Limited Partnership	50.0%	46.0%
The Mall Limited Partnership	50.0%	33.5%
Queensgate Limited Partnership	50.0%	50.0%
Quercus Healthcare Property Partnership Limited	50.0%	53.3%

All the above entities perform property ownership and management activities, and are incorporated and operate in Great Britain. All these investments are held by subsidiary entities.

(c) Long-term business undertakings

The principal joint ventures are as follows:

Company	Class of share	Proportion held	Country of incorporation and operation
Aviva-COFCO Life Insurance Co. Limited	Ordinary shares of RMB1 each	50.0%	China
AvivaSA Emeklilik ve Hayat A.Ş.	Ordinary shares of YTL1 each	49.7%	Turkey
CIMB Aviva Assurance Berhad	Ordinary shares of RM1 each	49.0%	Malaysia
CIMB Aviva Takaful Berhad	Ordinary shares of RM1 each	49.0%	Malaysia
First-Aviva Life Insurance Co., Ltd.	Ordinary shares of NT$10 each	49.0%	Taiwan

All investments in the above companies are unlisted. The shares in the Chinese company are held by the Company but all the other investments are held by subsidiaries.

Details of these investments are as follows:

(i) China

The Group has a 50% holding in Aviva-COFCO Life Insurance Company Limited, a life assurance company incorporated and operating in China. These shares are held by the Company, with a share of net assets of £44 million (2006: £18 million) and a fair value of £52 million (2006: £35 million).

(ii) Turkey

On 31 October 2007, the Group entered into a joint venture agreement with Aksigorta AŞ (“Aksigorta”), the insurance company of the Sabanci Holding Group, to form a new Turkish life and pensions joint venture. Under the terms of the agreement, the Group’s Turkish life and pensions business, Aviva Hayat ve Emeklilik A.Ş. (“Aviva HE”) merged with Ak Emeklilik A.Ş. (“Ak E”), Aksigorta’s life and pensions business. The joint venture entered into an exclusive long-term bancassurance agreement with Akbank TAŞ, Turkey’s second-largest privately-owned bank.

The Group and Sabanci jointly control the joint venture through equal shareholdings of 49.7%, with the remaining 0.6% being held by individual shareholders. The new company, AvivaSA Emeklilik ve Hayat A.S, began trading on 1 November 2007.

As consideration for its shareholding, the Group contributed the business of Aviva HE to the joint venture and paid £49 million to Aksigorta. The transaction has been accounted for as an acquisition of a 49.7% joint venture and the disposal of 50.3% of Aviva HE. Goodwill arising of £45 million, included in the carrying value of the joint venture, has been calculated as follows:

(a) Acquisition of shareholding in joint venture

Purchase cost:

	£m
Fair value of 50.3% of Aviva HE (see below)	85
Cash paid	49
Attributable costs	2
Total consideration	136
Fair value of 49.7% of Ak E’s identifiable net assets	91
Goodwill	45

Included in the fair value of Ak E's net assets were acquired value of in-force business of £34 million and a distribution contract intangible asset, valued by an independent third party at £49 million, using post-tax cash flows and discount rates. The intangible asset has been assessed as having a life of 15 years and is being amortised over that period. The residual goodwill represents the value of the direct sales force and expected synergies.

The carrying value of the joint venture at the date of acquisition was as follows:

	£m
Carrying value of 49.7% of Aviva HE’s net assets*	8
* Calculated as 49.7% of the total net assets of £17 million given in the table below.
Fair value of 49.7% of Ak E’s net assets	91
Goodwill	45
Total carrying value	144

(b) Disposal of shareholding in subsidiary

The profit on disposal of 50.3% of Aviva HE was £74 million, calculated as follows:

Carrying value of the assets and liabilities at the date of disposal:

	£m
Assets
Investments	153
Other assets	14
Total assets	167
Liabilities
Gross insurance liabilities	(136)
Deferred tax liability	(14)
Total liabilities	(150)
Total net assets	17
Net assets disposed of (50.3%)	9
Consideration
Fair value of 50.3% of Aviva HE	85
Less transaction costs	(2)
	83
Profit on disposal before reserve release	74
Release of balance on currency translation reserve (note 34)	(3)
Profit on disposal (note 3b)	71

(iii) Malaysia

On 2 July 2007, the Group entered the Malaysian long-term savings market through a joint venture with the CIMB Group, listed on Malaysia’s stock exchange as Bumiputra-Commerce Holdings Berhad. Under an agreement signed on that date and completed the same day, the Group acquired a 49% interest in two of CIMB Group’s subsidiaries, Commerce Life Assurance Berhad (Commerce Life) and Commerce Takaful Berhad (Commerce Takaful), for a total cash consideration of £72 million, representing the value of our share of net assets and expected contribution from new business. In addition, Commerce Life and Commerce Takaful will enter into exclusive bancassurance agreements with CIMB Group’s subsidiary, CIMB Bank, for the distribution of life and Takaful insurance products through the bank’s branches.

(iv) Taiwan

On 27 April 2007, the Group signed an agreement with First Financial Holding Co., Ltd (FFHC) to form a joint venture, First-Aviva Life Assurance Co., Ltd (First-Aviva). This gives Aviva access to one of Asia’s most attractive markets and enables us to participate in the island’s pension reform. The Group holds 49% of First-Aviva, whose total capital is £34 million. Regulatory approval of an insurance licence was received on 31 December 2007 and operations commenced on 2 January 2008. First-Aviva will manufacture long-term savings and pension products in Taiwan, and distribute them through an exclusive bancassurance agreement with First Commercial Bank, a subsidiary of FFHC.

(d) Additional information

Summarised aggregate financial information on the Group’s interests in its joint ventures is as follows:

	2007 £m	2006 £m
Income	242	510
Expenses	(579)	(45)
Share of results before tax	(337)	465
Long-term assets	4,317	4,273
Current assets	395	126
Share of total assets	4,712	4,399
Long-term liabilities	(1,684)	(1,695)
Current liabilities	(762)	(150)
Share of total liabilities	(2,446)	(1,845)
Share of net assets	2,266	2,554

The joint ventures have no significant contingent liabilities to which the Group is exposed, nor has the Group any significant contingent liabilities in relation to its interests in them.

19 – Interests in, and loans to, associates

This note analyses our interests in entities which we do not control but where we have significant influence.

(a) Carrying amount

	Goodwill £m	Equity interests £m	Loans £m	Total £m
At 1 January 2006	252	622	11	885
Share of results before tax	–	48	–	48
Share of tax	–	(11)	–	(11)
Share of results after tax	–	37	–	37
Amortisation of acquired value of in-force business	–	(14)	–	(14)
Share of profit after tax	–	23	–	23
Acquisitions and additions	28	10	–	38
Disposals	–	(26)	–	(26)
Dividends received	–	(12)	–	(12)
Foreign exchange rate movements	–	(4)	–	(4)
Other movements and reclassifications as held for sale	–	–	(9)	(9)
Movements in carrying amount	28	(9)	(9)	10
At 31 December 2006	280	613	2	895
Share of results before tax	–	51	–	51
Share of tax	–	(4)	–	(4)
Share of results after tax	–	47	–	47
Amortisation of acquired value of in-force business	–	(12)	–	(12)
Share of profit after tax	–	35	–	35
Acquisitions and additions (see below)	26	270	–	296
Disposals	–	(25)	–	(25)
Dividends received	–	(32)	–	(32)
Foreign exchange rate movements	4	33	–	37
Movements in carrying amount	30	281	–	311
At 31 December 2007	310	894	2	1,206

The loans are interest-bearing but are not secured, and no guarantees were received in respect thereof.

Acquisitions in 2007 comprise 49.75% of Banca Network Investimenti SpA (see note 3(a)(iii)) and interests in three investment funds managed by Cyrte Investments BV (see note 3(a)(iv)).

(b) Principal associates

The principal associates included above are: