Aviva 2009 Annual Report Download - page 46

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Aviva plc Financial and operating performance continued
Annual Report and Accounts 2009
Year ended 31 December 2008
The long-term insurance and savings business investment
variances and economic assumption changes on long-term
insurance business were a charge of £1,631 million in 2008
(
2007: £15 million credit ). The change is attributable to a
provision for credit defaults of £550 million in the UK, with the
balance primarily driven by investment losses across Europe.
The short-term fluctuations and economic assumption
changes on the non-life business in 2008 were £913 million
unfavourable (
2007: £182 million unfavourable ). These were
due to lower investment market returns compared to our
longer-term investment return assumptions and £94 million
for the impact of changes in discount rates for latent
claims provisions.
Impairment of goodwill was £66 million in 2008 (
2007:
£10 million
). This was mainly driven by impairments in the
Netherlands and on an Italian associate company.
Amortisation of intangibles increased by £14 million
to £117 million in 2008 (
2007: £103 million ). This increase
reflected the higher level of bancassurance and other
distribution agreements held within the Group following
new agreements entered into during 2007.
Profit on disposal of subsidiaries and associates was
£7 million in 2008. The profit comprises £14 million from the
sale of the Group’s offshore operations to WNS (Holdings)
Limited and £31 million from other small operations, offset
by £38 million loss on the disposal of HPI Limited to Solera
Holdings Inc., and RAC Autowindscreens Limited to Arques
Management GmbH.
Integration and restructuring costs were £326 million in
2008 (
2007: £153 million ). This includes £287 million for the
cost savings initiatives in the UK life and general insurance
businesses and Europe, which have delivered £340 million
annualised cost savings in the year. Also included were
integration costs of £39 million which mainly relate to the
work to set up our global asset management operation,
Aviva Investors.
Exceptional items for 2008 were £551 million. These
included £142 million for the cost of transferring the lifetime
wrap platform to a third-party supplier, write-down in
preparation for sale of the British School of Motoring in the
UK and closure of the structured settlement business in the US.
The costs also included £304 million after reinsurance for the
discounted cost of strengthening our latent claims provisions,
mainly in the UK, and £126 million for the settlement agreed
by our Netherlands life business for its unit-linked policyholders,
following an industry-wide challenge on the level of fees.
The remaining balance relates to brand migration costs of
£37 million offset by £58 million benefit from settlement of
a disputed Australian tax liability and the consequent release
of a provision for interest charges.
Adjusted operating profit
Year ended 31 December 2009
Adjusted operating profit decreased by £275 million, or 12%,
to £2,022 million (
2008: £2,297 million ) for the reasons set
forth above.
Year ended 31 December 2008
Adjusted operating profit before tax in 2008 increased by
£81 million, or 4%, to £2,297 million (
2007: £2,216 million )
for the reasons set forth above.
Regional performance
United Kingdom
Our operations in the UK consist of long-term insurance and
savings business, which provides products such as bonds and
savings, pensions, protection, annuities, equity release and
investment products, including both with-profits and non-profit
business, and our general insurance and health business, which
provides a range of general and health insurance products
focused on personal and business customers, such as
household, motor and liability insurance.
The table below presents sales, net written premiums,
adjusted operating profit and profit/(loss) before tax attributable
to shareholders’ profits under IFRS from our UK long-term
business for the years ended 31 December 2009, 2008 and
2007.
Long-term and savings business
2009 2008 2007
£m £m £m
Protection 965 1,126 1,241
Pensions 3,752 4,753 4,156
Annuities 1,897 2,433 1,965
Bonds 2,024 3,296 4,192
Equity release 276 250 243
Investment sales 1,049 1,485 2,751
Sales 9,963 13,343 14,548
Net written premiums 4,389 7,107 5,277
Adjusted operating profit 658 733 713
Profit/(loss) before tax attributable to
shareholders’ profits 611 (149) 564
Year ended 31 December 2009
Sales in our UK long-term insurance and savings business
decreased by £3,380 million, or 25%, to £9,963 million (
2008:
£13,343 million
). Protection sales have decreased by 14% as
a result of regulatory changes affecting creditor sales volumes.
Pension sales decreased by 21% due to the reduced number of
large schemes written in the year. Annuities decreased by 22%
due to lower bulk purchase annuity volumes, bonds decreased
39% and investment sales decreased by 29%. Equity release
showed an increase of 10%.
Net written premiums in our UK long-term insurance and
savings business were £4,389 million, a decrease of £2,718
million, or 38%, from £7,107 million in 2008. The decrease is
primarily due to lower bulk purchase annuity and bond sales.
Adjusted operating profit in our UK long-term insurance
and savings business decreased by 10% to £658 million (
2008:
£733 million
) reflecting lower asset values on bonuses declared
in our with-profits funds and on the level of the with-profit
special distribution bonus. The non-profit result increased to
£495 million
(2008: £462 million) including the benefit of
the reattribution but was partly offset by lower annual
management charges.
Profit before tax was £611 million for 2009 (
2008:
£149 million loss
). The loss for 2008 included an additional
£550 million provision for credit defaults over and above the
long-term provisions, which has been retained in 2009, and
£97 million for the cost of transferring the investment wrap
platform to a third-party supplier, which were one off events
in that year.
Year ended 31 December 2008
Sales in our UK long-term insurance and savings business
decreased by £1,205 million, or 8%, to £13,343 million (
2007:
£14,548 million
). The decrease was driven by sales in bonds
down 21% and investment sales down 46% compared to 2007
due to investment market turbulence, with protection down
9% due to the decline in mortgage approvals. Pensions and