Aviva 2006 Annual Report Download - page 235

Overview Business review Governance Financial statements Other information
Aviva plc
Annual Report and Accounts 2006 231
Geographical analysis of life EEV operating return
2006 2005
£m£m
France 402 321
Ireland (40) 20
Italy 110 96
Netherlands (including Belgium, Germany and Luxembourg) 329 349
Poland 162 132
Spain 221 214
Other Europe (13) (6)
Continental Europe 1,171 1,126
Asia 37 30
Australia 49 44
United States 32 25
Rest of the World 118 99
International 1,289 1,225
United Kingdom 744 589
Total 2,033 1,814
Germany has been reclassified from Other Europe to the Netherlands, Lithuania has been reclassified from Other Europe to Poland and Norw ich Union’s Dublin-based
offshore life and savings business has been reclassified from Other Europe to the United Kingdom.
Life EEV operating return includes minority interests in 2006 of £247 million (2005: £216 million).This comprises minority interests in
France of £33 million (2005: £24 million),Ireland £(11) million (2005: £nil),Italy £60 million (2005: £52 million), Netherlands £30 million
(2005: £17 million),Poland £25 million (2005: £18 million),Spain £108 million (2005: £103 million),Other Europe £nil (2005: £2 million)
and Asia £2 million (2005: £nil).
Analysis of movement in life and related businesses embedded value
The following tables provide an analysis of the movement in embedded value for the life and related businesses for 2006 and 2005.
The analysis is shown separately for net worth and the value of in-force covered business, and includes amounts transferred between
these categories. The transfer to life and related businesses from other segments consists of service company profits and losses during
the reported period that have emerged from the value of in-force. Since the “ look through” into service companies includes only future
profits and losses, these amounts must be eliminated from the closing embedded value. All figures are shown net of tax.
2006
Value of
Net worth in-force Total
£m £m £m
Embedded value at the beginning of the year –Free surplus 2,772
–Required capital14,448
Total 7,220 7,893 15,113
New business contribution (after the effect of required capital) (602) 1,071 469
Expected returnon existing business – return on VIF –710 710
Expected return on existing business – transfer to net worth 1,023 (1,023) –
Experience variances and operating assumption changes 400 (415) (15)
Expected returnon shareholders’ net worth 239 –239
Investment return variances and economic assumption changes 355 340 695
Life EEV return after tax 1,415 683 2,098
Exchange rate movements (189) (120) (309)
Embedded value from business acquired 675 759 1,434
Amounts injected into life and related businesses 393 – 393
Amounts released from life and related businesses (646) – (646)
Transfer to life and related businesses from other segments 113 – 113
UK pension fund deficit borne by UK with-profit funds transferred to analysis of net assets on an EEV basis2(98) – (98)
Embedded value at the end of the year –Free surplus 3,569
–Required capital15,314
Total 8,883 9,215 18,098
1. Required capital is shown net of implicit items permitted by local regulators to cover minimum solvency margins.
2. The impact of the operating assumption change reflecting the UK with-profits funds contribution to the UK pension scheme deficit funding has been removed from the
Life EEV analysis as the pension fund deficit notionally allocated to long-term business net assets on an EEV basis is net of the proportion of funding borne by the UK with-
profits funds.