Aviva 2009 Annual Report Download - page 47

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Performance review
Aviva plc Financial and operating performance continued
Corporate responsibility
Annual Report and Accounts 2009
annuities showed an increase of 17% on 2007, with equity
release up by 3% on 2007.
Net written premiums in our UK long-term insurance and
savings business were £7,107 million in 2008, an increase of
£1,830 million, or 35%, from £5,277 million in 2007. The
increase was primarily driven by bulk purchase annuity and
pension sales.
Adjusted operating profit in our UK long-term insurance
and savings business increased by £20 million, or 3%, to £733
million in 2008 (
2007: £713 million ). This increase was driven
by the £124 million profit relating to the shareholder proportion
of the special bonus distribution announced in February 2008.
The prior year result included a £167 million benefit from the
reduction of the reserving levels permitted under new rules in
the UK. Underlying earnings were up £84 million reflecting the
cumulative benefits of the recent efficiency programmes of
£65 million and lower new business strain.
Loss before tax in our UK long-term insurance and savings
business was £149 million in 2008, a decrease of £713 million
from £564 million profit in 2007. This decrease mainly reflects
the £550 million provision for credit defaults and £97 million for
the cost of transferring the investment wrap platform to a third
party supplier offset by the increase in adjusted operating profit
explained above.
General insurance and health
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 general insurance
and health business for the years ended 31 December 2009,
2008 and 2007.
2009 2008 2007
£m £m £m
Sales/net written premiums 4,298 5,413 5,897
Adjusted operating profit 535 656 421
Profit/(loss) before tax attributable to
shareholders’ profits 434 (391) 142
Year ended 31 December 2009
UK general insurance and health net written premiums were
£4,298 million, a decrease of £1,115 million, or 21%, on 2008
(2008: 5,413 million) . The decrease reflects a combination of
the actions taken to exit unprofitable business and difficult
market conditions, most notably in creditor due to lower levels
of lending, and commercial due to more business failures,
fewer start-ups and reduced levels of exposure.
Adjusted operating profit in 2009 was £535 million, a
decrease of £121 million, or 18%
(2008: £656 million) . The
decrease in adjusted operating profit is a result of a decline
in long-term investment returns, an increase in creditor claims
resulting from the recession and a reduction in savings on prior
year claims development to £105 million
(2008: £285 million) .
Profit before tax was £434 million, an increase of £825
million from a loss of £391 million in 2008. The increase
predominately reflects the impact of investment variances
of £397 million and an exceptional charge in 2008 of £279
million relating to the discounted cost of strengthening our
latent claims.
Year ended 31 December 2008
Net written premiums in our UK general insurance and health
business decreased by £484 million, or 8%, to £5,413 million
in 2008
(2007: £5,897 million) . This decrease was across all
personal and commercial lines with personal motor and creditor
business showing the greatest fall against 2007. This reflected
the increasingly competitive market and our strategy of writing
business for profit rather than volume, as well as reflecting
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
distributor response to the issues with payment protection
insurance and the decline in lending.
Adjusted operating profit in 2008 was £656 million, an
increase of £235 million on 2007 of £421 million. The principal
factor in the improved profitability for the general insurance
business was that weather related claims were in line with
normal expectations compared with a £475 million adverse
impact in 2007. This favourable impact was partly offset by a
reduction in the benefit of prior year claims development to
£285 million (
2007: £430 million ), the decline in net written
premiums and a reduction in long-term investment returns to
£585 million (
2007: £656 million ). These factors outweighed
the earned benefits we have derived from our initiatives to
deliver cost savings and control claims inflation.
Loss before tax in our UK general insurance and health
business was £391 million in 2008, a decrease of £533 million
from a £142 million profit in 2007. This decrease reflected
the impact of investment variances and £279 million for
strengthening of latent claims provisions.
Europe
Aviva Europe operates in 12 businesses across Europe with
substantial long-term insurance and savings businesses in
France, Italy, Ireland, Poland and Spain. We also have large
general insurance businesses in France and Ireland as well as
smaller operations in Italy, Poland and Turkey. Our Europe
fund management operations are managed by Aviva Investors,
except in Poland which has transferred to Aviva Investors from
1 January 2010.
Delta Lloyd operations include long-term insurance and
savings, general insurance and fund management.
The table below presents sales and net written premiums
from our operations in Europe for the years ended 31 December
2009, 2008 and 2007.
2009 2008 2007
£m £m £m
Sales
Long-term insurance and savings business
France 4,891 3,880 3,790
Ireland 1,072 1,299 1,780
Italy 3,607 2,331 2,975
Poland (including Lithuania) 1,161 1,906 1,388
Spain 2,454 2,489 2,433
Other Europe 1,190 1,410 946
Aviva Europe 14,375 13,315 13,312
Delta Lloyd 4,329 4,401 3,944
Total long-term insurance and savings
business 18,704 17,716 17,256
General insurance and health
France 952 882 733
Ireland 474 513 474
Other Europe 457 417 308
Aviva Europe 1,883 1,812 1,515
Delta Lloyd 1,163 2,278 1,717
Total general insurance and health 3,046 4,090 3,232
Sales 21,750 21,806 20,488
Aviva Europe 12,455 9,183 8,698
Delta Lloyd 4,341 5,883 4,433
Net written premiums 16,796 15,066 13,131
Performance review