Aviva 2002 Annual Report Download - page 76

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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 £1,182 million (2001: £1,404 million) and £59 million (2001: £36 million) respectively.
(ii) The longer term investment return and short-term fluctuation are as follows:
Shareholders’ interest in
long-term business Non-long-term business
2002 2001 2002 2001
£m £m £m £m
Total investment return before tax 28 76 (420) 30
Less: share of result of associated undertakings ––(16) (4)
Add: unallocated interest charges ––434 426
28 76 (2) 452
Longer term investment return 87 112 1,182 1,404
Short-term fluctuation in investment return (59) (36) (1,184) (952)
28 76 (2) 452
(iii) The longer term investment 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
2002 2001 2002 2001
%%%%
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
Canada 9.3 9.3 7.3 7.3
(c) The actual return on investments, before deducting investment management expenses and charges, is compared below with the
aggregate longer term return over a five year period.
1998-2002 1997-2001
£m £m
Actual return attributable to shareholders:
Long-term business* 581 718
Non-long-term business 6,692 9,453
7,273 10,171
Longer term return credited to operating results:
Long-term business* 626 678
Non-long-term business 7,587 8,120
8,213 8,798
(Shortfall)/excess of actual returns over longer term returns (940) 1,373
*Figures represent non-with-profits business only, where a longer term rate of return is used.
(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 profit before tax £40m
Properties 1% higher/lower Group operating profit before tax £13m
Notes to the accounts continued
62 Aviva plc
Annual report + accounts 2002