Aviva 2006 Annual Report Download - page 140

Aviva plc
Annual Report and Accounts 2006 136
Notes to the consolidated financial statements continued
7 – Analysis of net investment return
The total investment return reflected in profit before tax comprises:
2006 2005
£m £m
Share of results after tax of joint ventures 462 326
Share of results after tax of associates 37 32
Net rental income from investment properties 730 728
Interest, dividend and similar income 8,510 8,174
Foreign exchange gains and losses on investments designated as at fair value through profit or loss 128 (207)
Realised investment gains on financial investments, loans, investment property and owner occupied property 5,380 4,657
Net impairment losses on investments designated as available for sale and on loans –(57)
Other investment income/(expenses) 8(14)
Finance costs
Allocated costs (600) (361)
Unallocated interest charges:
Subordinated debt (169) (169)
Other borrowings (61) (79)
(230) (248)
Net investment return before unrealised gains 14,425 13,030
Unrealised investment gains on financial investments and loans designated as at fair value through profit or loss 717 10,384
Total net investment return included in profit before tax 15,142 23,414
In addition to the investment return recognised above, £347 million of investment gains (2005: losses of £110 million) have been
recognised directly in equity as detailed in the statement of recognised income and expense.
8 – Longer term investment return
(a) The longer term investment return, net of expenses, attributable to the general insurance and health business result was
£1,073 million (2005: £1,046 million).
(b) The longer term investment return and short-term fluctuation are as follows:
General insurance and
health business
2006 2005
£m £m
Net investment income (note 4a(ii)) 1,299 1,603
Less: Internal charges included under other headings (77) (40)
1,222 1,563
Longer term investment return 1,073 1,046
Short-term fluctuation in investment return 149 517
1,222 1,563
(c) The longer term investment return is calculated separately for each principal general insurance and health business unit. In respect
of equities and properties, the returnis 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 returnfor other investments is the actual income receivable for the year.
(d) The principal assumptions underlying the calculation of the longer term investment return are:
Longer term rates of returnLonger term rates of return
Equities Properties
2006 2005 2006 2005
% % %%
United Kingdom 7.1 7.6 6.1 6.6
France 6.3 6.7 5.3 5.7
Ireland 6.3 6.7 5.3 5.7
Netherlands 6.3 6.7 5.3 5.7
Canada 7.0 7.4 6.0 6.4
The Group has applied the same economic assumptions for equities and properties as are used under EEV principles to calculate the
longer term investment return for its general insurance and health business.
Financial statements continued