Aviva 2007 Annual Report Download - page 265
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Please find page 265 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.Summary of minority interest in life and related businesses’ EEV results1
Share-
Nether- Asia holder
France Ireland Italy lands Poland Spain Europe Pacific Total interest Group
2007 £m £m £m £m £m £m £m £m £m £m £m
Minority interest
New business contribution before
effect of required capital 25 6 48 6 4 103 192 1 193 981 1,174
Effect of required capital (11) (1) (13) (3) – (9) (37) – (37) (225) (262)
New business contribution after
effect of required capital 14 5 35 3 4 94 155 1 156 756 912
Life EEV operating return before tax 43 20 75 21 25 124 308 3 311 2,442 2,753
Life EEV return after tax 23 15 76 8 23 75 220 2 222 1,778 2,000
Closing life and related businesses’
embedded value 214 243 532 127 119 473 1,708 11 1,719 18,600 20,319
Share-
Nether- Asia holder
France Ireland Italy lands Poland Spain Europe Pacific Total interest Group
2006 £m £m £m £m £m £m £m £m £m £m £m
Minority interest
New business contribution before
effect of required capital 24 3 41 9 4 93 174 1 175 717 892
Effect of required capital (9) (2) (12) (2) (1) (7) (33) – (33) (176) (209)
New business contribution after
effect of required capital 15 1 29 7 3 86 141 1 142 541 683
Life EEV operating return
before tax 33 (11) 60 30 25 108 245 2 247 1,786 2,033
Life EEV return after tax 16 (7) 46 22 24 79 180 4 184 1,914 2,098
Closing life and related businesses’
embedded value 162 216 413 102 118 366 1,377 10 1,387 16,711 18,098
1. There are no minorities in the United Kingdom or North America.
Principal economic assumptions
Deterministic calculations
Economic assumptions are derived actively, based on market yields on risk-free fixed interest assets at the end of each
reporting year. The same margins are applied on a consistent basis across the Group to gross risk-free yields to obtain
investment return assumptions for ordinary shares and property and to produce risk discount rates. Additional country-
specific risk margins are applied to smaller businesses to reflect additional economic, political and business-specific risk,
which result in the application of risk margins ranging from 3.7% to 8.7% in our eastern European and Asian business
operations. Expense inflation is derived as a fixed margin above a local measure of long-term price inflation. Risk free rates
and price inflation have been harmonised across territories within the Euro currency zone, except for expense inflation in
Ireland where significant differences remain. Required capital is shown as a multiple of the EU statutory minimum solvency
margin or equivalent.
Investment return assumptions are generally derived by major product class, based on hypothecating the assets at the
valuation date. Future assumed reinvestment rates are consistent with implied market returns at 31 December 2007.
Rates have been derived using rates from the current yield curve at a duration based on the term of the liabilities, or
directly from forward yield curves where considered appropriate. Assumptions about future investment mix are consistent
with long-term plans. In most cases, the investment mix is assumed to continue unchanged throughout the projection
period. The changes in assumptions between reporting dates reflect the actual movements in risk free yields in the
United Kingdom, the Eurozone and other territories. The principal economic assumptions used are as follows:
United Kingdom France
2007 2006 2005 2007 2006 2005
Risk discount rate 7.3% 7.3% 6.8% 7.1% 6.7% 6.0%
Pre-tax investment returns:
Base government fixed interest 4.6% 4.6% 4.1% 4.4% 4.0% 3.3%
Ordinary shares 7.6% 7.6% 7.1% 7.4% 7.0% 6.3%
Property 6.6% 6.6% 6.1% 6.4% 6.0% 5.3%
Future expense inflation 3.5% 3.4% 3.2% 2.5% 2.5% 2.5%
Tax rate 28.0% 30.0% 30.0% 34.4% 34.4% 34.4%
Required Capital (% EU minimum) 100% 150%/ 150%/ 115% 115% 115%
100% 100%
Aviva plc
Annual Report and
Accounts 2007
261
Financial
statements