Aviva 2009 Annual Report Download - page 170

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Aviva plc Notes to the consolidated financial statements continued
Annual Report and Accounts 2009
8 – Long-term business economic volatility continued
The principal assumptions underlying the calculation of the expected investment return for equities and properties are:
Equities Properties
2009 2008 2009 2008
% % % %
United Kingdom 7.0 9.2 5.5 7.7
Eurozone 7.3 8.3 5.8 6.8
For fixed interest securities classified as fair value through profit or loss, the expected investment returns are based on average
prospective yields for the actual assets held. Where such securities are classified as available for sale, such as in the United States,
the expected investment return comprises the expected interest or dividend payments and amortisation of the premium or discount
at purchase.
The Group has applied the same economic assumptions for equities and properties as are used under MCEV principles to
calculate the longer-term investment return for its long-term business in 2008 and 2009.
9 – Longer-term investment return and economic assumption changes for non-long-term business
For non-long-term business, the total investment income, including realised and unrealised gains, is split between a calculated
longer-term return and short-term fluctuations from this. This note gives details of the longer-term return calculation and the
relevant assumptions, as well as the economic assumption changes on our general insurance and health business.
(a) The short-term fluctuations in investment return and economic assumption changes attributable to the non-long-term business
result and reported outside operating profit were as follows:
Non-long-term business
2009
£m
2008
£m
Short-term fluctuation in investment return (see (b) below)
Economic assumption changes (see (g) below)
95
57
(819)
(94)
152 (913)
(b) The longer-term investment return and short-term fluctuation are as follows:
Non-long-term business
2009
£m
2008
£m
Net investment income
Internal charges included under other headings
1,373
(193)
522
(73)
1,180 449
Analysed between:
Longer-term investment return, reported within operating profit 1,085 1,268
Short-term fluctuation in investment return, reported outside operating profit 95 (819)
1,180 449
(c) The longer-term investment return is calculated separately for each principal non-long-term business unit. In respect of equities
and properties, the return is 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 return for other investments is the actual
income receivable for the year.
(d) The total assets supporting the general insurance and health business, which contribute towards the longer-term return, were
£22,844 million
(2008 restated: £23,398 million) . For other operations, the longer-term return reflects interest income earned
in the Netherlands bank and retail mortgage divisions.