Aviva 2001 Annual Report Download - page 64

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7 – Analysis of investment return continued
(b) Longer-term investment return
(i) The longer-term investment return, net of expenses, allocated to the general business technical account and transferred to the
long-term business technical account was £1,404 million (2000: £1,817 million) and £36 million (2000: £2 million transferred from)
respectively.
(ii) The longer-term investment return and short-term fluctuation are as follows:
Shareholders’interest in
long-term business Non-long-term business
2001 2000 2001 2000
£m £m £m £m
Total investment return before tax 76 146 30 1,713
Less: share of result of associated undertakings ––(4) (1)
Add: unallocated interest charges ––426 361
76 146 452 2,073
Longer-term investment return 112 144 1,404 1,817
Short-term fluctuation in investment return (36) 2(952) 256
76 146 452 2,073
(iii) The longer-term return is calculated separately for each principal general insurance business unit and certain long-term business
operations. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments,
adjusted for sales and purchases during the year, by the longer-term rate of investment return. The longer-term rate of investment
return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of
investment return. The allocated longer-term return for other investments is the actual income receivable for the year.
(iv) The principal assumptions underlying the calculation of the longer-term investment return are:
Longer term rates of return Longer term rates of return
Equities Properties
2001 2000 2001 2000
%%%%
United Kingdom 8.1 8.1 6.6 6.6
France 7.5 7.5 6.5 6.5
Ireland 8.7 8.7 6.7 6.7
Netherlands 8.4 8.4 6.5 6.5
Australia and New Zealand 10.0 10.0 8.0 8.0
Canada 9.3 9.3 7.3 7.3
United States 9.3 9.3 7.3 7.3
The Group intends to retain the same longer-term rates of investment return for the 2002 financial year.
(c) The actual return on investments, before deducting investment management expenses and charges, is compared below with the
aggregate longer-term return over a four year period.
1998-2001 1997-2000
£m £m
Actual return attributable to shareholders:
Long-term business* 553 642
Non-long-term business 6,693 9,001
7,246 9,643
Longer-term return credited to operating results:
Long-term business* 539 564
Non-long-term business 6,405 6,717
6,944 7,281
Excess of actual returns over longer-term returns 302 2,362
*Figures are given for non-with-profits business only, where a longer-term rate of return is used.
Four year periods have been chosen as comparable information is not available for Norwich Union prior to 1997.
(d) The table below shows the sensitivity to changes in the longer-term rates of return:
Movement in investment return By Change in By
Equities 1% higher/lower Group operating result £49m
Properties 1% higher/lower Group operating result £8m
62 CGNU plc Annual report + accounts 2001 Notes to the accounts continued