Aviva 2009 Annual Report Download - page 308

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Aviva plc MCEV financial statements continued
Annual Report and Accounts 2009
M16 – Analysis of fund management and service company business within embedded value
The MCEV methodology incorporates the impact of earnings arising from subsidiary undertakings providing administration, fund
management and other services where these arise in relation to covered business. The principal subsidiaries of the Aviva group
providing such services include Aviva Life Services Limited (UK) and Aviva Investors. The following table provides an analysis of the
elements within the life and other related business embedded value:
2009 2008
Fund
management
£m
Other
operations
£m
Total
£m
Fund
management
£m
Other
operations
£m
Total
£m
United Kingdom
France
167
175
(132)
62
35
237
162
164
(170)
48
(8)
212
Delta Lloyd
United States
120
228
(111)
—
9
228
131
209
(154)
—
(23)
209
Other 61 (74) (13) 55 14 69
Total 751 (255) 496 721 (262) 459
The “look-through” value attributable to fund management is based on the level of after-tax profits expected to be earned in the
future over the outstanding term of the covered business in respect of services provided to the group’s life operations. The MCEV
basis income statement excludes the actual statutory basis profits arising from the provision of fund management services to the
group’s life businesses. The MCEV income statement records the impact on new business, experience profit or loss compared to
the assumed profitability, the expected return on the in-force value and the effect on the in-force value of changes to economic
assumptions.
In the United Kingdom, Aviva Life Services Limited (UK) (ALS) is the main provider of administration services to the UK Life
business. ALS incurs substantially all of the UK businesses’ operating expenditure, comprising acquisition, maintenance and project
costs. Costs are recharged to the UK Life companies (the product companies) on the basis of predetermined Management Services
Agreements (MSAs).
M17 – Summary of minority interest in life and related businesses’ MCEV results
Share-
Aviva Delta Asia holders’
France Ireland Italy Poland Spain Europe Lloyd Europe Pacific Total interest Group
2009 £m £m £m £m £m £m £m £m £m £m £m £m
Value of new business, after tax 16 2 47 5 56 126 3 129 — 129 375 504
Life MCEV operating earnings after tax 45 14 79 53 81 272 64 336 1 336 2,178 2,515
Life MCEV (loss)/earnings after tax 51 1 64 17 57 190 (90) 100 — 100 3,393 3,493
Closing covered businesses’
embedded value 320 290 762 162 586 2,120 1,304 3,424 14 3,438 15,001 18,439
Share-
Aviva Delta Asia holders’
Restated France Ireland Italy Poland Spain Europe Lloyd Europe Pacific Total interest Group
2008 £m £m £m £m £m £m £m £m £m £m £m £m
Value of new business, after tax 9 3 27 7 73 119 12 131 — 131 416 547
Life MCEV operating earnings after tax 29 17 50 24 102 222 5 227 — 227 1,760 1,987
Life MCEV (loss)/earnings after tax 18 (21) (30) 20 (36) (49) (22) (71) — (71) (6,918) (6,989)
Closing covered businesses’
embedded value 304 323 727 177 617 2,148 204 2,352 15 2,367 14,212 16,579
The minority interest for Delta Lloyd has increased due to the IPO in 2009.