Aviva 2002 Annual Report Download - page 70

1 – Exchange rates
The euro rates employed in this report are an average rate of 11 = £0.63 (2001: 1 1 = £0.62) and a closing rate of 11 = £0.65
(2001: 1 1 = £0.61).
2 – Discontinued operations
”Discontinued operations“ disclosures in 2002 relate to the disposal of the general insurance businesses in Australia and New Zealand.
The 2001 comparatives include both these businesses and the general insurance business in the United States, which was sold in that
year. The results of all other operations are described as ”Continuing operations“.
The Group’s consolidated profit and loss account incorporates the following financial information in respect of the Australia,
New Zealand and US general insurance businesses:
Abridged statement of operating and investment gains
Australia and New Zealand
general insurance business US general insurance business
2002 2001 2002 2001
£m £m £m £m
Net premiums written 692 583 –1,103
Change in the provision for unearned premiums (38) (24) –102
Earned premiums, net of reinsurance 654 559 –1,205
Allocated investment return transferred from the non-technical account 71 70 –152
Claims incurred, net of reinsurance (452) (389) –(978)
Other charges (195) (171) –(400)
Balance on the general business technical account
Underwriting result 7(1) –(173)
Longer term investment return 71 70 –152
78 69 –(21)
Unallocated interest charges* –––(21)
Operating profit/(loss) 78 69 –(42)
Amortisation of goodwill (2) (1) –(1)
Short-term fluctuation in investment returns and other items (40) (6) –13
Profit/(loss) on ordinary activities before tax 36 62 –(30)
Tax on profit/(loss) on ordinary activities (6) (12) –(93)
Profit/(loss) for the financial year 30 50 –(123)
Retranslation to closing rate –––(2)
Retained profit/(loss) 30 50 –(125)
*Unallocated interest charges are eliminated on consolidation.
3 – Changes in accounting policy
(a) Provision for deferred tax
Financial Reporting Standard 19 (“FRS19”) “Deferred Tax” was published by the Accounting Standards Board in December 2000, and
replaced the existing Statement of Standard Accounting Practice (“SSAP15”) on deferred tax. FRS19 is effective for the year ended
31 December 2002. The principal impact of the change from the accounting policy applied under SSAP15 is to provide additional
deferred tax on unrealised appreciation or depreciation of investments. The additional deferred tax provision results in a reduction in the
fund for future appropriations for with-profit life business and a reduction in profit and loss account reserve for general insurance
business. In the case of non-profit life business, the establishment of an additional deferred tax provision has a neutral effect on
shareholders’ funds as the increase in deferred tax provision is offset by a corresponding decrease in the additional value of in-force long-
term business. The Group has chosen to adopt the discounting option for its deferred tax balances, to reflect the time value of money.
The effects of implementing FRS19 are as follows:
(i) An incremental provision for deferred tax was established at 31 December 2001 of £945 million and has been accounted for as a
prior year adjustment. This incremental provision has reduced to £112 million at 31 December 2002. The establishment of the
incremental provision has resulted in the following at the respective balance sheet dates:
2002 2001
£m £m
With-profit business
Reduction in fund for future appropriations 53 735
Non-profit business
Increase in additional value of in-force business 12 90
General insurance business and other
Reduction in shareholders’ funds 47 120
Incremental deferred tax provision arising from the move from SSAP 15 to FRS 19 112 945
Notes to the accounts
56 Aviva plc
Annual report + accounts 2002