Aviva 2005 Annual Report Download - page 43
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41
Business review
Aviva plc 2005
General insurance
Regulatory basis
Our principal UK regulated general insurance subsidiaries are CGU
International Insurance Group (CGUII) and Norwich Union Insurance
(NUI). The combined businesses of the CGUII group and the NUI
group have strong solvency positions. The table below sets out the
regulatory basis of the general insurance groups at 31 December
2005 and 31 December 2004:
2005
NUI and
CGUII Group
NUI plc CGUII Group pro forma
Regulated asset value (£bn) 1.0 8.7 9.7
Required minimum margin (£bn) 0.4 3.9 4.3
Excess solvency margin (£bn) 0.6 4.8 5.4
Cover (times) 2.8 2.2 2.3
2004
NUI and
CGUII Group
NUI plc CGUII Group pro forma
Regulated asset value (£bn) 1.0 8.8 9.8
Required minimum margin (£bn) 0.4 3.7 4.1
Excess solvency margin (£bn) 0.6 5.1 5.7
Cover (times) 2.6 2.4 2.4
On an aggregate basis, the estimated excess solvency margin
(representing the regulatory value of excess available assets over the
required minimum margin) was £5.4 billion (31 December 2004:
£5.7 billion) after covering the minimum capital base of £4.3 billion
(31 December 2004: £4.1 billion).
Economic bases
We use a number of measures of risk based capital to assess the capital
requirements for our general insurance businesses. Financial modelling
techniques enhance our practice of active capital management,
verifying that sufficient capital is available to protect against unforeseen
events and adverse scenarios, and to manage risk. Our aim continues
to be an optimal use of capital.
Our traditional risk-based capital methodology for general insurance
business assesses insurance, market and credit risks and makes
prudent allowance for diversification benefits. The capital assessed
under this methodology is that necessary to enable the general
insurance business to meet regulatory solvency margins over a five
year period with a 99% probability of not requiring further capital.
We consider risks over the five year period, allowing for planned
levels of business growth. Based on the model, our risk-based
capital requirement may be expressed as 34% of net written
premiums, which is equivalent to £3.5 billion (2004: £3.3 billion) of
capital. This compares with a total of £5.6 billion (2004: £5.0 billion)
of shareholders’ capital deployed in the general insurance business.
1.8 times
Group solvency cover on IGD basis