Aviva 2013 Annual Report Download - page 256

Aviva plc
Annual report and accounts 2013
254
Financial and operating performance continued
Adjusted operating profit before tax (from continuing
operations)
Year ended 31 December 2013
Adjusted operating profit before tax increased by 1% to
£2,049 million (2012: £2,038 million) for the reasons set out
in the market performance section below.
Year ended 31 December 2012
Adjusted operating profit before tax decreased by £148 million or
7% to £2,038 million (2011: £2,186 million) for the reasons set
out in the market performance section below.
Adjusting items (from continuing operations)
Year ended 31 December 2013
Life investment return variances and economic assumption
changes were £49 million negative (2012: £620 million
negative). Negative variances in the UK resulting mainly from
increasing the allowance for credit defaults on commercial
mortgages were partly offset by narrowing spreads on
government and corporate bonds in Italy and Spain.
Short term fluctuations on non-long term business of £336
million negative (2012: £7 million positive) mainly reflect lower
fixed income security market values.
Goodwill impairment charges of £48 million have been
recognised as expenses. Together with impairment charges of
£29 million on joint ventures and associates, the total charge for
impairment of goodwill, joint ventures and associates for the
year was £77 million (2012: £60 million).
Profit on disposal and remeasurement of subsidiaries, joint
ventures and associates was £115 million (2012: £164 million
loss). See ‘IFRS Financial Statements – note 4 – Subsidiaries’ for
further details.
Integration and restructuring costs from continuing
operations were £363 million (2012: £461 million) and mainly
include expenses associated with the Group’s transformation
programme. Compared with 2012, integration and
restructuring costs reduced by 21% as the level of
transformation activity in UK and Ireland’s general insurance
business in 2012 was not repeated and Solvency II
implementation costs reduced to £79 million (2012:
£117 million).
Year ended 31 December 2012
The negative investment return variances and economic
assumption changes of £620 million (2011: £897 million
negative) mainly related to the UK, where the allowance for
credit defaults on UK commercial mortgages increased to reflect
uncertainty in the macroeconomic environment and the cost of
de-risking activity. Elsewhere, positive variances in Spain and
France were offset by a negative variance in Italy.
Short term fluctuations on non-long term business of
£7 million positive (2011: £266 million negative) reflected
favourable market movements.
The impairment of goodwill, associates and joint ventures
was £60 million in 2012 (2011: £392 million). This included an
impairment of £147 million in respect of the Group’s Indian
associate, an impairment of £76 million in relation to goodwill
on the Spanish business, an impairment of £33 million in
relation to the Italian business and a small write down of £9
million in respect of the Group’s Korean joint venture. These
impairments were partly offset by a reversal of the impairment
recognised in 2011 in respect of our associate investment in
Delta Lloyd of £205 million.
Loss on disposal of subsidiaries and associates was £164
million (2011: £565 million profit). This includes a loss of
£129 million relating to the disposal of our associate stake
in Delta Lloyd.
Integration and restructuring costs were £461 million (2011:
£261 million). This included costs relating to restructuring and
transformation activity that was taken to align our business
operations with our strategy, including the Group’s Simplify
programme (£165 million), £130 million in Ireland which includes
expenses associated with the merging of the UK and Irish business,
£24 million for restructuring in Aviva Investors, £25 million in
respect of restructuring activities and £117 million relating to
preparing the businesses for the implementation of Solvency II.
Continuin
g
operations
2013
£m
Restated1
2012
£m
Restated1
2011
£m
Income
Gross written premiums 22,035 22,744 26,255
Premiums ceded to reinsurers (1,546) (1,571) (1,548)
Premiums written net of reinsurance 20,489 21,173 24,707
Net change in provision for
unearned premiums 134 (16) (236)
Net earned premiums 20,623 21,157 24,471
Fee and commission income 1,279 1,273 1,465
Net investment income 12,509 21,135 4,373
Share of profit/(loss) of joint ventures
and associates 120 (255) (123)
Profit/(loss) on the disposal and
re-measurement of
subsidiaries and associates 115 (164) 565
34,646 43,146 30,751
Expenses
Claims and benefits paid, net of recoveries
from reinsurers (22,093) (23,601) (24,380)
Change in insurance liabilities, net of
reinsurance 2,493 (430) (2,284)
Change in investment contract provisions (7,050) (4,450) 1,478
Change in unallocated divisible surplus 280 (6,316) 2,721
Fee and commission expense (3,975) (4,457) (4,326)
Other expenses (2,220) (2,843) (2,779)
Finance costs (609) (653) (711)
(33,174) (42,750) (30,281)
Profit before tax 1,472 396 470
Tax attributable to policyholders' returns (191) (221) 178
Profit before tax attributable to
shareholders' profits 1,281 175 648
1 Following the adoption of IAS 19 'Employee benefits' the Group has retrospectively applied the changes to the
comparative periods in these financial statements. This has led to an increase in profit before tax of £150m for
2012, and £97m in 2011. For further detail of the impact of the restatement please see note 1 to the IFRS
financial statements.
Following the adoption of IFRS 10 'Consolidated financial statements' the Group has retrospectively applied the
change to the 2012 comparatives in these financial statements. There is no impact on the result for 2012 as a
result of this restatement. For further details of the impact of the restatement please see note 1 to the IFRS
financial statements.
Income (from continuing operations)
Year ended 31 December 2013
Net written premiums for continuing operations decreased by
£684 million, or 3%, to £20,489 million (2012: £21,173
million). Long-term insurance and savings decreased by £510
million, or 4%, to £11,769 million (2012: £12,279 million) with
lower sales in the UK, Ireland, Spain and Asia partly offset by
higher sales in France, Poland and Italy. General insurance and
health premiums decreased by £174 million, or 2%, to £8,720
million (2012: £8,894 million) mainly reflecting lower sales in
the UK and Ireland, partly offset by higher sales in Canada
and Europe.
Year ended 31 December 2012
Net written premiums for continuing operations decreased by
£3,534 million, or 14%, to £21,173 million (2011: £24,707
million). Long-term insurance and savings decreased by £3,266
million, or 21%, to £12,279 million (2011: £15,545 million)
mainly reflecting lower sales in the UK and continental Europe.
General and health insurance decreased by £268 million, or 3%,
to £8,894 million (2011: £9,162 million). Excluding RAC in
2011, sales were broadly in line.
Net investment income (from continuing operations)
Year ended 31 December 2013
Net investment income from continuing operations was
£12,509 million (2012: £21,135 million). Compared to the prior
year, unrealised gains were lower in 2013 primarily as a result of