Aviva 2007 Annual Report Download - page 22
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Please find page 22 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.Financial highlights
12 months 12 months
2007 2006
£m £m
Worldwide sales* 49,152 41,464
Life and pensions new business contribution
before required capital 1,174 892
Life and pensions new business contribution
after required capital 912 683
Life and pensions margin before required capital 3.7% 3.5%
Life and pensions margin after required capital 2.9% 2.6%
General insurance business combined
operating ratio 100% 94%
Return on equity shareholders’ funds 11.3% 13.1%
Earnings per share
Basic – EEV operating profit after tax basis 76.5p 79.2p
Basic – IFRS total profit after tax basis 49.2p 87.5p
* Based on worldwide long-term savings new business sales, plus general
insurance and health business net written premiums.
Worldwide sales
In 2007 we achieved total worldwide sales of
£49,152 million (2006: £41,464 million) reflecting strong
growth in long-term business sales offset by weaker
general insurance and health net written premiums.
Long-term new business sales were up 25% to
£38,583 million (2006: £30,762 million), comprising a
22% increase in life and pension sales of £31,600 million
(2006: £25,852 million) and 41% growth in investment
sales of £6,983 million (2006: £4,910 million).
Total UK sales were up 6% to £14,406 million
(2006: £13,601 million), within this, life and pension sales
were up 5% at £11,655 million (2006: £11,146 million)
supported by significant increases in bonds and annuities.
Investment sales of £2,751 million (2006: £2,455 million)
were up 12% as we extended and diversified our fund
offering and focused on improving the performance of
our UK equity funds. Our share of sales from the joint
venture with the Royal Bank of Scotland Group was up
36% to £1,587 million (2006: £1,169 million), benefiting
from the impact of new products and an increase in the
number of sales advisers.
Life and pension sales in Aviva Europe grew 15%
to £14,914 million (2006: £12,840 million), reflecting the
success of our multi-distribution strategy, broad product
offerings and our diversified portfolio. Investment sales
were up 74% to £1,572 million (2006: £891 million)
driven by strong inflows in the Netherlands and Poland.
Sales in our US life business were up 39% on a
pro forma basis to £3,602 million (2006: £884 million),
representing growth across all product lines. This was
mainly driven by new product launches and supported by
the impact of the recent AM Best rating upgrade to A+.
Aviva Asia Pacific continued to achieve a high rate
of growth, with total sales 60% higher at £4,089 million
(2006: £2,546 million), driven primarily by strong
Navigator (wrap administration platform) sales across
the region.
Net written premiums from our general insurance
and health business were £10,569 million (2006:
£10,702 million) reflecting price competition across
most regions.
Long-term new business contribution
and margin
Our new business contribution before the effect of
required capital increased by 30% to £1,174 million
(2006: £892 million), generating an improved group
margin of 3.7% (2006: 3.5%). The large increase in US
sales following the acquisition of AmerUs, in November
2006, has been a key driver in new business contribution
growth. Margins have also improved in the UK and
Europe reflecting efficiency savings and favourable
operating assumption changes.
After the effect of required capital, our new business
contribution increased by 33% to £912 million (2006:
£683 million) reflecting the factors above and lower cost
of capital, mainly in the UK from changes to the annuity
business and in the US from implementation of an
efficient financing solution to free up capital previously
held to support redundant reserves.
Earnings per share
Our IFRS earnings per share for 2007 was 49.2 pence
(2006: 87.5 pence). This reflects the reduction in
operating profit, mainly due to lower results in the
general insurance segment as a result of adverse weather
and increased competition, and net adverse short-term
fluctuations and economic assumption changes.
Combined operating ratio
The worldwide general insurance combined operating
ratio (COR) worsened to 100% (2006: 94%) mainly
as a result of adverse weather in the UK and increased
competitive pressures in this business segment across most
regions. Excluding the impact of weather, our COR would
have been 95%, within our meet or beat target of 98%.
The COR in our Dutch operations improved to 85%
(2006: 89%) following the favourable development of
prior year claims and the retention of premium rates
in key areas. In Ireland the COR remained strong but
deteriorated to 80% (2006: 77%) reflecting intensifying
competition and higher claims costs. In Canada and
France, CORs were held at 2006 levels.
The reserves in the group are set conservatively with
the aim to protect against adverse future claims experience
and development. Our business is predominantly short
tail in nature and loss development experience is generally
stable. As a result of the prudence applied in setting the
reserves, there are releases of £832 million (net of
reinsurance) in 2007 which reflect releases across most
of our businesses from the 2006 accident year and prior.
We continue to apply our reserving policy consistently
and our reserves remain at very strong levels. Of the total
released this year, we would expect around £440 million
to repeat, with the balance being exceptional releases.
Return on equity shareholders’ funds
Our post-tax operating return on equity shareholders’
funds was 11.3% (2006: 13.1%). The reduction against
2006 reflects higher opening shareholders’ funds, which
have increased by £2.6 billion. The return is below our
target of 12.5% due to the impact of the adverse weather
in the UK which has suppressed the return on our general
insurance operations.
Aviva plc
Annual Report and
Accounts 2007
18
Business
review
Business review continued:
Group performance continued