Aviva 2006 Annual Report Download - page 59

Overview Business review Governance Financial statements Other information
Aviva plc
Annual Report and Accounts 2006 55
The aggregate investment mix of assets in the three main
with-profit funds at 31 December 2006 was:
31 December 31 December
2006 2005
% %
Equity 42 42
Property 16 15
Fixed interest 36 37
Other 66
Total 100 100
The equity backing ratios, including property, supporting with-profit
asset shares are 74% in CGNU Life, 74% in CULAC and 65% in
NUL&P. With-profit business is mainly written through CGNU Life.
Possible reattribution of the inherited estate
We continue to investigate the possibility of a reattribution of the
inherited estate of two of our with-profit funds: CGNU Life and
CULAC. In February 2006, we announced the nomination of Clare
Spottiswoode as policyholder advocate, a consumer led role created
to represent policyholders, under new Financial Services Authority
(FSA) rule governing reattribution.
In November,we agreed terms of reference with
ClareSpottiswoode, and she has agreed to accept the role of
independent policyholder advocate. The appointment has been
approved by the FSA. Weare confident that Clare Spottiswoode’s
experience as both a regulator,and as a company director,
makes her qualified to represent independently the with-profit
policyholders’ interests and negotiate on their behalf. During
her nomination period, ClareSpottiswoode has:
–Established an independent office
–Set up a technical team, including actuarial and legal support
–Familiarised herself with a reattribution scheme under FSA rules
–Prepared plans for extensive consultation with policyholders
–Agreed her terms of reference for any reattribution with Aviva,
in consultation with the FSA.
At this stage, no decision has been taken to proceed with the
reattribution, which will only take place if thereis agreement on a
fair outcome for policyholders and shareholders. This will include
agreement by us and the independent policyholder advocate on
any incentive payments to eligible with-profit policyholders.
General insurance
Economic basis
Weuse 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.
UK regulatory basis
Our main UK regulated general insurance subsidiaries are Aviva
International Insurance Group (AII) and Norwich Union Insurance
(NUI). The combined businesses of AII and NUI have strong solvency
positions. The table below sets out the regulatory capital position of
the general insurance groups at 31 December 2006:
2006 2005
NUI and AII NUI and AII
group group
NUI AII group pro forma pro forma
restated
Capital resources (£bn) 1.1 7.4 8.5 7.5
Capital resources requirements (£bn) 0.4 4.1 4.5 4.0
Solvency surplus (£bn) 0.7 3.3 4.0 3.5
Cover (times) 3.1 1.8 1.9 1.9
In aggregate, the estimated excess solvency surplus, representing
the capital resources assets over the capital resources requirement,
was £4.0 billion (31 December 2005 restated: £3.5 billion) after
covering a minimum capital base of £4.5 billion (31 December
2005 restated: £4.0 billion).
The 2005 figures for AII group, and consequently the NUI and
All group pro forma, have been restated to reflect admissibility
and counterparty restrictions relating to intercompany balances
following a revised application of the technical rules. There is no
economic impact on the All group or on our capital adequacy
(IGD) calculation.