Aviva 2001 Annual Report Download - page 28

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26 CGNU plc Annual report + accounts 2001 Financial review continued
Long-term savings: new business margin1, 2
2001 20003
Year ended 31 December % %
UK 25.8 28.6
France 33.9 25.7
Ireland 28.5 24.0
Italy 22.2 34.3
Netherlands (including
Belgium and Luxembourg) 22.3 6.9
Poland 18.4 21.4
Spain 46.5 38.9
Other Europe –2.1
International 12.1 6.0
Total 25.5 23.9
1. The ratio of long-term savings new business contribution to sales measured on
an annual premium equivalent basis.
2. Excludes retail investment sales and is stated before the effects of solvency margin.
3. Stated using 2001 assumptions.
The new business margins in Spain continue to strengthen, as we
expand the business and secure incremental economies of scale.
This market is likely to continue to prove profitable as we consolidate
our position, with continued competitive advantage provided by our
efficient administration platform.
Our UK operation has seen a change of mix, towards products with
a much tighter pricing structure, most notably in the pensions sector.
As a more developed marketplace, we cannot expect returns on
capital in the UK to match the growing markets elsewhere in Europe.
Long-term savings1: life achieved operating profit
2001 2000
Year ended 31 December £m £m
New business contribution 479 392
Profit from existing business
Expected return 848 839
Experience variances (18) 10
Operating assumption changes 17 (7)
Development costs –(20)
Expected return on shareholders’net worth 339 319
1,665 1,533
Other life and savings activities 936
Life achieved operating profit 1,674 1,569
1. Excludes retail investment business.
The increase in life achieved operating profit is largely attributable to
higher new business volumes, with expected returns on existing
business and shareholders net worth broadly unchanged.
The most significant element of the operating assumption change is
the £78 million adverse impact of improved life expectancy on our
UK annuity portfolio.This has been offset by the favourable effect of
higher management fees and profit attribution in the Netherlands
and Germany respectively. In addition, reduction in the risk margins
in Poland and the Netherlands has contributed a profit of £45 million.
On a modified statutory basis, the profit from long-term business
operations before tax was £1,126 million (2000: £1,053 million).
+30%
new business
contribution
+5%
life achieved
operating profit