Aviva 2007 Annual Report Download - page 262
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Please find page 262 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.Analysis of movement in life and related businesses embedded value
The following tables provide an analysis of the movement in embedded value for the life and related businesses for
2007 and 2006. The analysis is shown separately for net worth and the value of in-force covered business, and includes
amounts transferred between these categories. The transfer to life and related businesses from other segments consists
of service company profits and losses during the reported year that have emerged from the value of in-force. Since the
“look through” into service companies includes only future profits and losses, these amounts must be eliminated from the
closing embedded value. All figures are shown net of tax.
2007
Value of
Net worth in-force Total
£m £m £m
Embedded value at the beginning of the year – Free surplus 3,569
– Required capital15,314
Total 8,883 9,215 18,098
New business contribution (after the effect of required capital) (649) 1,285 636
Expected return on existing business – return on VIF – 892 892
Expected return on existing business – transfer to net worth 1,216 (1,216) –
Experience variances and operating assumption changes 342 (270) 72
Expected return on shareholders’ net worth 334 – 334
Investment return variances and economic assumption changes 539 (473) 66
Life EEV return after tax 1,782 218 2,000
Exchange rate movements 572 402 974
Embedded value from business acquired 84 26 110
Net amounts released from life and related businesses (795) – (795)
Transfer from life and related businesses to other segments (68) – (68)
Embedded value at the end of the year – Free surplus 4,127
– Required capital16,331
Total 10,458 9,861 20,319
1. Required capital is shown net of implicit items permitted by local regulators to cover minimum solvency margins.
The embedded value of business acquired in the twelve months to 31 December 2007 of £110 million represents the
embedded value of Hamilton Life Asssurance Company Limited, Area Life International Assurance Limited and Erasmus
Groep BV, Caja de Ahorros De Murcia, Aviva SA Emeklilik ve Hayat A.S, CIMB Aviva Takaful Berhad, CIMB Aviva Assurance
Berhad and First Aviva Life Assurance Co.,Ltd.
Required capital has increased in the period by £1,017 million. The movement comprises an increase of £810 million in
relation to new business written, a reduction of £372 million regarding in-force business, an increase of £197 million due
to a reduction in implicit items, £46 million additional in-force required capital relating to the acquisitions during the period
and a £336 million increase due to foreign exchange rate movements. The decrease in the in-force business required
capital includes the impact of the higher solvency margin required for certain unit linked business, following clarification by
the French regulator to the industry and the reduction in the level of required capital for UK annuities.
2006
Value of
Net worth in-force Total
£m £m £m
Embedded value at the beginning of the year – Free surplus 2,772
– Required capital14,448
Total 7,220 7,893 15,113
New business contribution (after the effect of required capital) (602) 1,071 469
Expected return on existing business – return on VIF – 710 710
Expected return on existing business – transfer to net worth 1,023 (1,023) –
Experience variances and operating assumption changes 400 (415) (15)
Expected return on shareholders’ net worth 239 – 239
Investment return variances and economic assumption changes 355 340 695
Life EEV return after tax 1,415 683 2,098
Exchange rate movements (189) (120) (309)
Embedded value of business acquired 675 759 1,434
Net amounts released from life and related businesses (253) – (253)
Transfer to life and related businesses from other segments 113 – 113
UK pension fund deficit borne by UK with-profit funds transferred to analysis of
net assets on an EEV basis2(98) – (98)
Embedded value at the end of the year – Free surplus 3,569
– Required capital15,314
Total 8,883 9,215 18,098
1. Required capital is shown net of implicit items permitted by local regulators to cover minimum solvency margins.
2. The impact of the operating assumption change reflecting the UK with-profits funds contribution to the UK pension scheme deficit funding has been
removed from the Life EEV analysis as the pension fund deficit notionally allocated to long-term business net assets on an EEV basis is net of the
proportion of funding borne by the UK with-profits funds.
Aviva plc
Annual Report and
Accounts 2007
258
Financial
statements
Alternative method of reporting long-term business profits continued