Aviva 2007 Annual Report Download - page 121
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Please find page 121 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.(G) Premiums earned
Premiums on long-term insurance contracts and
participating investment contracts are recognised as
income when receivable, except for investment-linked
premiums which are accounted for when the
corresponding liabilities are recognised. For single premium
business, this is the date from which the policy is effective.
For regular premium contracts, receivables are taken at the
date when payments are due. Premiums are shown before
deduction of commission and before any sales-based taxes
or duties. Where policies lapse due to non-receipt of
premiums, then all the related premium income accrued
but not received from the date they are deemed to have
lapsed is offset against premiums.
General insurance and health premiums written reflect
business incepted during the year, and exclude any
sales-based taxes or duties. Unearned premiums are
those proportions of the premiums written in a year that
relate to periods of risk after the balance sheet date.
Unearned premiums are calculated on either a daily
or monthly pro rata basis. Premiums collected by
intermediaries, but not yet received, are assessed based
on estimates from underwriting or past experience,
and are included in premiums written.
Deposits collected under investment contracts without
a discretionary participating feature (non-participating
contracts) are not accounted for through the income
statement, except for the fee income (covered in policy H)
and the investment income attributable to those contracts,
but are accounted for directly through the balance sheet
as an adjustment to the investment contract liability.
(H) Other investment contract
fee revenue
Investment contract policyholders are charged fees for
policy administration, investment management, surrenders
or other contract services. The fees may be for fixed
amounts or vary with the amounts being managed, and
will generally be charged as an adjustment to the
policyholder’s balance. The fees are recognised as revenue
in the period in which they are collected unless they relate
to services to be provided in future periods, in which case
they are deferred and recognised as the service is provided.
Initiation and other “front-end” fees (fees that are
assessed against the policyholder balance as consideration
for origination of the contract) are charged on some
non-participating investment and investment fund
management contracts. Where the investment contract
is recorded at amortised cost, these fees are deferred and
recognised over the expected term of the policy by an
adjustment to the effective yield. Where the investment
contract is measured at fair value, the front-end fees that
relate to the provision of investment management services
are deferred and recognised as the services are provided.
(I) Other fee and commission income
Other fee and commission income consists primarily
of fund management fees, income from the RAC’s
non-insurance activities, distribution fees from mutual
funds, commissions on reinsurance ceded, commission
revenue from the sale of mutual fund shares, and transfer
agent fees for shareholder record keeping. Reinsurance
commissions receivable are deferred in the same way
as acquisition costs, as described in policy W. All other
fee and commission income is recognised as the services
are provided.
(J) Net investment income
Investment income consists of dividends, interest and rents
receivable for the year, movements in amortised cost on
debt securities, realised gains and losses, and unrealised
gains and losses on FV investments (as defined in policy S).
Dividends on equity securities are recorded as revenue on
the ex-dividend date. Interest income is recognised as it
accrues, taking into account the effective yield on the
investment. It includes the interest rate differential on
forward foreign exchange contracts. Rental income is
recognised on an accruals basis.
The realised gain or loss on disposal of an investment
is the difference between the proceeds received, net of
transaction costs, and its original cost or amortised cost
as appropriate. Unrealised gains and losses represent the
difference between the carrying value at the year end and
the carrying value at the previous year end or purchase
value during the year, less the reversal of previously
recognised unrealised gains and losses in respect of
disposals made during the year.
(K) Insurance and participating
investment contract liabilities
Claims
Long-term business claims reflect the cost of all claims
arising during the year, including claims handling costs,
as well as policyholder bonuses accrued in anticipation
of bonus declarations.
General insurance and health claims incurred include all
losses occurring during the year, whether reported or not,
related handling costs, a reduction for the value of salvage
and other recoveries, and any adjustments to claims
outstanding from previous years.
Claims handling costs include internal and external costs
incurred in connection with the negotiation and
settlement of claims. Internal costs include all direct
expenses of the claims department and any part of the
general administrative costs directly attributable to the
claims function.
Aviva plc
Annual Report and
Accounts 2007
117
Financial
statements