Aviva 2009 Annual Report Download - page 45

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Performance review
Aviva plc Financial and operating performance continued
Corporate responsibility
Annual Report and Accounts 2009
Other income
Year ended 31 December 2009
Other income (which consists of fee and commission income,
share of (loss)/profit after tax of joint ventures and associates,
and profit/(loss) on disposal of subsidiaries and associates)
increased by £674 million to £1,438 million in 2009 (
2008:
£764 million
). Profit/(loss) on disposal of subsidiaries and
associates includes the sale of our Dutch health business
and our Australian long-term insurance and savings business
resulting in a profit of £153 million. The loss after tax of joint
ventures and associates was £504 million, an increase on
2008 of £624 million from increasing property values from
our property partnerships.
Year ended 31 December 2008
Other income decreased by £741 million to £764 million in
2008 (
2007: £1,505 million ). The decrease was mainly due to
the share of losses in joint ventures and associates in the UK,
where reduced property market values led to lower property
partnership results.
Expenses
Year ended 31 December 2009
Claims and benefits paid in 2009 were £27,549 million,
a decrease of £1,804 million (
2008: £29,353 million ). The
decrease in claims and benefits paid are a result of a fall in
surrenders during the year and our Dutch healthcare business
being sold as of 1 January 2009.
Changes in insurance liabilities in 2009 were a charge
of £5,682 million, an increase of £9,567 million (
2008:
£3,885 million credit
). The unfavourable movement is a result
of new business provision and the impact of the euro
against sterling.
The change in investment contract provisions of
£11,185 million charge (
2008: £10,629 million credit ) is a result
of improved investment markets across our regions resulting
in increases in our contract liabilities the impact of the euro
against sterling.
Unallocated divisible surplus charge of £1,547 million
(
2008: £4,482 million credit ) reflects the narrowing of
investment spread on participating assets and related liabilities.
In 2008, a negative balance in Spain created a charge of
£203 million of which £159 million was reversed in 2009 with
the remaining balance expected to be recovered in 2010.
Fee and commission expense, other expenses and finance
costs of £11,098 million decreased by £276 million or 2% from
£11,374 million in 2008. Lower staff costs and impairment
charges were offset by higher exceptional costs following the
reattribution of the inherited estate in the UK – see “Financial
Statements – Note 6 – Details of expenses”.
Year ended 31 December 2008
Claims and benefits paid in 2008 were £2,232 million higher at
£29,353 million (
2007: £27,121 million ). The increase occurred
across all regions, with the exception of the UK, due to
unfavourable foreign exchange movement.
Changes in insurance liabilities in 2008 were £7,393 million
lower resulting in a £3,885 million credit (
2007: charge of
£3,508 million
). The favourable movement was primarily a result
of investment variances across the world and greater lapses
than expected in France.
The change in investment contract provisions in 2008 was
a credit of £10,629 million (
2007: charge of £2,018 million ).
The variance of £12,647 million from the prior year reflects the
reduction in investment contract provisions as a result of lower
new business and unrealised losses on investments.
The change in the unallocated divisible surplus in 2008 was
£1,560 million more than the prior year with a credit of
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
£4,482 million ( 2007: credit of £2,922 million ) mainly reflecting
the impact of falling market values on participating assets and
related liabilities. These were partly offset by a write-down of
the negative balance in Spain which created a charge in the
income statement of £203 million.
Fees and commission expense, other expenses and finance
costs in 2008 were £2,440 million higher at £11,374 million
(
2007: £8,934 million ). The increase was driven by corporate
restructuring and brand expense across the group and
£1,040 million of impairments of financial assets mainly in the
Netherlands and the US.
Profit/(loss) before tax attributable to shareholders’ profits
Year ended 31 December 2009
Profit attributable to shareholders in 2009 was £1,805 million
against a loss of £1,300 million in 2008. The increase is primarily
due to favourable investment performance in 2009 which more
than offset the decrease in premiums and increase in expenses
as discussed above.
Year ended 31 December 2008
Loss before tax attributable to shareholders in 2008 was
£1,300 million, a reduction of £3,132 million against the
previous year (
2007: £1,832 million profit ). This decrease
reflected the 52% reduction in income mainly due to
investment performance, which was partly offset by lower
expenses, discussed above, and a policyholder tax credit of
£1,068 million (
2007: tax charge of £15 million ).
Adjusting items
Year ended 31 December 2009
The long-term insurance and savings business investment
variances and economic assumption changes on long-term
insurance business was a charge of £75 million (
2008:
£1,631 million charge
). The favourable change is driven by
positive market movements across our regions and the inclusion
in 2008 of a £550 million provision for credit defaults in the UK.
The short-term fluctuations and economic assumption
changes on the non-life business were a £152 million credit
(
2008: £913 million charge ). Favourable market movements
across our regions were the primary driver for the change in
the current year result.
Impairment of goodwill was £62 million in 2009 (
2008:
£66 million
) driven by impairments in our UK life business and
on an Italian associate.
Amortisation of intangibles increased by £27 million to
£144 million in 2009 (
2008: £117 million ) on higher levels of
bancassurance and other distribution agreements held within
the Group.
Profit on disposal of subsidiaries and associates were
£153 million. The profit comprises £31 million from the sale
of our Dutch Health Insurance business and £122 million from
the sale of our Australian life and pensions business.
Integration and restructuring costs for 2009 were
£286 million (
2008: £326 million ). This includes £210 million for
the cost savings initiatives in the UK life and general insurance
businesses and Europe, which have delivered £170 million
annualised cost savings in the year.
Exceptional items for 2009 amounted to £45 million
favourable
(2008: £551 million adverse) . This includes an
exceptional gain resulting from the reattribution of the inherited
estate offset by strengthening of reserves in respect of several
specific discontinued commercial liability risks written in Canada
a significant number of years ago and the migration of all
remaining local brands, except Delta Lloyd and RAC, to the
single global Aviva brand, which has been implemented over
the two-year period 2008 to 2009.
Performance review