Basis of preparation
The results for the six months to 30 June 2008 have been prepared using International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union (EU). These include IAS 34, Interim Financial Reporting, which specifically addresses the contents of half year announcements. The results apply the accounting policies set out in Aviva plc’s 2007 Annual Report and Accounts except that segmental information is now given in accordance with the requirements of IFRS 8, Operating segments. The results for the six months to 30 June 2008 and 2007 are unaudited but have been reviewed by the external auditor, Ernst & Young LLP. The half year financial statements do not constitute financial statements as defined in Section 240 of the Companies Act 1985. The results for the full year 2007 have been taken from the group’s 2007 Annual Report and Accounts. The external auditor has reported on the 2007 financial statements and the report was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. Additionally, the group’s 2007 Report and Accounts have been filed with the Registrar of Companies.
Items included in the financial statements of each of the group’s entities are measured in the currency of the primary economic environment in which that entity operates (the “functional currency”). The consolidated financial statements are stated in sterling, which is the company’s functional and presentational currency. Unless otherwise noted, the amounts shown in the financial statements are in millions of pounds sterling (£m). As supplementary information, consolidated financial information is also presented in euros.
In addition to presenting our results and financial position on an International Financial Reporting Standards (IFRS) basis, we also use European Embedded Value (EEV) as an alternative performance measure. We continue to focus on the EEV basis in this period’s report, as the directors believe life EEV operating return is a better measure of the performance of our life business than the IFRS basis. The EEV methodology is in accordance with the EEV principles introduced by the CFO Forum in May 2004 and the additional guidance issued in October 2005.
In producing this review, we aim to present a view that is balanced and comprehensive and that is consistent with the size and complexity of our business. The review is written in the context of the risks and uncertainties facing our business. We anticipate that the format and content of the review will evolve over time, along with developments in our business and the external environment.
Key performance indicators
The Companies Act requires that a fair review of the business contains financial and, where applicable, non-financial key performance indicators (KPIs). We consider that our financial KPIs are those that communicate to the members the financial performance and strength of the group as a whole. Read more about the KPIs.
Forward-looking statements
This review contains “forward-looking statements” about:
- Our future plans
- Our current goals
- Expectations of our future financial condition, performance and results
By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events that are beyond Aviva’s control. For example, certain insurance risk disclosures are dependent on our choices about assumptions and models and, by their nature, are only estimates. As a result, actual future gains and losses could differ materially from those that have been estimated. Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements include, but are not limited to:
- Global economic business conditions
- Monetary and interest rate policies
- Foreign currency exchange rates
- Equity and property prices
- The impact of competition, inflation and deflation
- Changes to regulations, taxes or UK and foreign legislation
- The timing and impact of acquisitions or business combinations in relevant industries
- Natural and other disasters
- Changes to consumer saving or spending habits
- Our success in managing the above factors
Consequently, our actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in our forward-looking statements. We undertake no obligation to update the forward-looking statements contained in this review or any other forward-looking statements we make.
Market consistent embedded value (MCEV)
While adoption of the MCEV principles will only become mandatory in 2009, the group intends to adopt early and report the results of its long-term business on this basis in the full year 2008 announcement. Restated comparative data will be published in advance of our full year 2008 results announcement.