Aviva 2009 Annual Report Download - page 296

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Aviva plc MCEV financial statements continued
Annual Report and Accounts 2009
M2 – Geographical analysis of MCEV operating earnings continued
Gross of tax and
minority interests Other Aviva Delta North Asia
2008 Restated UK France Ireland Italy Poland Spain Europe Europe Lloyd Europe America Asia Australia Pacific Total
£m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m
Value of new business1 204 135 15 71 65 202 29 517 (47) 470 55 30 13 43 772
Earnings from existing
business
– expected existing business
contribution (reference
rate) 338 188 39 30 91 60 19 427 107 534 86 9 25 34 992
– expected existing business
contribution (in excess of
reference rate) 210 38 8 6 8 22 — 82 78 160 53 4 2 6 429
Experience variances
– maintenance expense 20 2 (2) (6) 6 (1) (1) (2) (35) (37) — (2) — (2) (19)
– project and other related
expenses2 (62) (10) (7) — — (6) (6) (29) (26) (55) (14) — — — (131)
– mortality/morbidity3 18 42 2 2 20 4 1 71 19 90 — 5 2 7 115
– lapses4 (23) (8) (7) (15) 26 (24) (10) (38) (11) (49) (5) (4) 3 (1) (78)
– other5 7 (45) (42) (15) (8) 2 (1) (109) 34 (75) (31) (1) (11) (12) (111)
(40) (19) (56) (34) 44 (25) (17) (107) (19) (126) (50) (2) (6) (8) (224)
Operating assumption
changes:
– maintenance expense6 (15) (12) (2) (9) 4 — (12) (31) (167) (198) (5) (3) — (3) (221)
– project and other related
expenses 13 — — — — — — — 9 9 — — — — 22
– mortality/morbidity7 54 — 25 11 4 (1) — 39 (79) (40) — 1 (1) — 14
– lapses8 (73) 108 7 (9) (10) (19) (20) 57 — 57 — (12) 1 (11) (27)
– other9 16 (1) 23 3 24 — 13 62 (28) 34 1 (10) 6 (4) 47
(5) 95 53 (4) 22 (20) (19) 127 (265) (138) (4) (24) 6 (18) (165)
Expected return on
shareholders’ net worth 166 107 34 63 13 23 8 248 204 452 61 14 8 22 701
Other operating variances10 10 148 (15) (1) (2) 24 3 157 138 295 — — — — 305
Earnings before tax
and minority interests 883 692 78 131 241 286 23 1,451 196 1,647 201 31 48 79 2,810
1. In Spain £34 million has been reclassified from value of new business to other operating variances.
2. Project and other related expenses in the UK reflect project costs associated with strategic initiatives, including developments designed to offer a wider range of products to customers, and the
simplification of systems and processes. Expenses in Delta Lloyd reflect an overrun in Belgium following the acquisition of Swiss Life Belgium, and restructuring within the intermediary division.
3. Mortality experience continues to be better than the assumptions set across a number of our businesses.
4. Lapse experience has been volatile, in part reflecting wider economic volatility. In Poland, lapse experience continued to be better than the long-term assumptions for both life and
pension products.
5. In France, other experience profits include the reduction in value arising from reductions in fees and commissions received. In Ireland, certain statutory provisions were increased following
a review. The movement in Delta Lloyd reflects changes on group pension scheme contribution. In the USA, other experience reflects the cost of enhancing policyholder crediting rates.
6. In Delta Lloyd, expense assumptions have been updated following a review of expense allocations.
7. In UK, favourable mortality assumption changes are in respect of mortality and morbidity changes across a range of products. In Delta Lloyd, mortality assumption changes reflect the impact
of using a new industry mortality basis.
8. In the UK, an additional lapse provision has been set up in anticipation of higher short-term recession related withdrawals (pre tax £50 million) and higher mortgage and income protection
claims (pre tax £20 million) to reflect rising unemployment. In France, persistency assumptions have been weakened following continual favourable experience on AFER products.
9. In the UK, other operating assumption changes include the impact of the with-profit special distribution. In Ireland, other assumption changes reflect a reduction in the assumed future tax
charges. In Poland, other assumptions reflect a change in the pattern of future mortality charging structure.
10. Other operating variances in France are mainly in respect of the impact of the mutualisation of funds following the merger of two legal entities. In Delta Lloyd, changes are mainly in respect
of aligning the profit sharing policy for existing group business in Belgium, following the acquisition of Swiss Life Belgium.