Aviva 2013 Annual Report Download - page 258

Aviva plc
Annual report and accounts 2013
256
Financial and operating performance continued
Sales of annuities were down 28% to £2,327 million (2012:
£3,211 million), and protection sales were down 19% to £992
million (2012: £1,228 million), reflecting our focus on improving
value and capital efficiency. Bond sales were down 52% to
£183 million (2012: £379 million). Equity release sales were 8%
lower at £401 million (2012: £434 million) due to increased
competition in this market segment. Investment sales increased
18% to £2,040 million (2012: £1,730 million), with higher sales
on our Wrap platform.
In Ireland, sales fell 26% to £469 million (2012: £632
million). Ark Life, which was sold in April 2013, closed to new
business a year earlier in April 2012. Excluding Ark Life sales of
£102 million in 2012, the fall in 2013 was mainly due to our
focus on sales of more profitable products.
IFRS net written premiums were down 25% to £4,228
million (2012: £5,623 million) for the reasons set out above.
Life business adjusted operating profit before tax increased
by 7% to £952 million (2012: £892 million). Within this, UK
adjusted operating profit increased by 5% to £930 million
(2012: £887 million), mainly reflecting cost reductions and
pricing discipline. Ireland adjusted operating profit was up to
£22 million (2012: £5 million) as we continue to make progress
in turning the business around.
Adjusted operating profit from other operations of £131
million (2012: £14 million loss) includes a £145 million one-off
gain from plan amendments to the Ireland pension scheme.
IFRS profit before tax has increased to £717 million (2012:
£107 million). This includes adjusted operating profits of £1,124
million (2012: £903 million), which have increased for the
reasons set out above. It also includes negative investment
variances of £414 million, which arose mainly due to an increase
in the allowance for credit defaults on commercial mortgages;
lower integration and restructuring costs of £59 million (2012:
£71 million); and an £87 million profit arising on the sale of
Ark Life.
Year ended 31 December 2012
On a PVNBP basis, sales in the UK long-term insurance and
savings business decreased by £844 million, or 7%, to £10,410
million (2011: £11,254 million). Protection sales were up 20%
to £1,228 million (2011: £1,025 million), benefiting from a full
year’s sales from the distribution deal with Santander. Sales of
annuities were down 16% to £3,211 million (2011: £3,832
million) following the decision to withdraw from the large scale
bulk purchase annuity market. However, sales of individual
annuities were up 10% to £3,024 million despite price increases
to manage capital usage. Sales of Equity Release were up 37%
to £434 million (2011: £317 million) as Aviva deployed risk
based pricing expertise, developed in the annuities market, to
this product. Pensions sales were down 2% to £5,158 million
(2011: £5,279 million). Within this, Group Personal Pensions
sales were up 9% to £3,231 million (2011: £2,961 million) as
benefits were seen from increased levels of activity in the run
up to Retail Distribution Review (“RDR”) and Auto-Enrolment.
Individual Pensions (including SIPP (self invested pension plan))
were down 4% to £1,803 million (2011: £1,876 million) as a
disciplined approach to pricing was maintained. Sales of Bonds
were down 53% to £379 million (2011: £801 million), impacted
by changes in distribution channels in advance of RDR.
Ireland sales were down 31% to £632 million (2011: £917
million) due to the closure to new business of the joint venture
with Allied Irish Bank (“AIB”) from April 2012. Non AIB business
sales were £530 million (2011: £485 million), with the increase
driven by sales of fixed rate deposit funds and the re-launch of
protection business in the second half of 2012.
Net written premiums in our UK & Ireland long-term insurance
and savings businesses decreased by £1,200 million, or 18%, to
£5,623 million (2011: £6,823 million). The decrease is primarily
due the reduction in BPA (bulk purchase annuities) premiums.
Adjusted operating profit before tax decreased by £67 million,
or 7%, to £903 million (2011: £970 million). This mainly reflects
lower profits in Ireland where the Life operations result fell to £5
million from £47 million in 2011, as the closure to new business
of our joint venture with AIB became effective. The UK Life
business saw profits fall by £30 million or 3% to £887 million,
mainly due to a lower level of one-off items in 2012 (2011
included one-off benefits of £93 million relating to the Part VII
transfers of the former RBS JV entities and £30 million relating
to the release of tax provisions associated with the reattribution
of the inherited estate). Profit before tax decreased by £27
million, or 20%, to £107 million for 2012 (2011: £134 million).
UK & Ireland general insurance and health
The table below presents sales, net written premiums,
adjusted operating profit and profit before tax attributable to
shareholders’ profits under IFRS from our UK and Ireland
general insurance and health businesses for the three years
ended 31 December 2013, 2012 and 2011.
2013
£m
2012
£m
2011
£m
Sales/IFRS net written premiums
United Kingdom 3,823 4,062 4,371
Ireland 377 428 471
4,200 4,490 4,842
Adjusted operating profit before tax
United Kingdom 431 459 478
Ireland 40 29 44
General insurance and health business 471 488 522
Other operations (6) (8) 2
Total adjusted operating profit before tax 465 480 524
Profit before tax attributable to
shareholders' profits 387 248 843
Year end 31 December 2013
UK & Ireland general insurance and health NWP decreased by
6% to £4,200 million (2012: £4,490 million). Within this, UK
general insurance sales fell 6% to £3,823 million (2012: £4,062
million): personal lines NWP was down 5% to £2,276 million
(2012: £2,397 million) reflecting underwriting discipline in a soft
market, and commercial lines NWP was down 7% to £1,547
million (2012: £1,665 million) reflecting management actions to
focus on profitability. Ireland general insurance and health NWP
was £377 million (2012: £428 million).
Adjusted operating profit before tax from general insurance
and health business was down 3% to £471 million (2012: £488
million). An improvement in the underwriting result to £123
million (2012: £42 million), which benefited from benign
weather, favourable large loss experience and lower expenses,
was more than offset by lower longer-term investment returns
due mainly to the revised terms of an internal loan (the impact
of this is neutral at an overall Group level).
IFRS profit before tax has increased to £387 million (2012:
£248 million). This includes adjusted operating profits of £465
million (2012: £480 million), which have decreased for the
reasons set out above. The increase in IFRS profit before tax is
mainly due to lower integration and restructuring costs of £24
million (2012: £170 million). The impact of negative short-term
fluctuations in investments was £74 million (2012: £17 million
positive) and in 2013 this arose mainly due to an increase in risk
free rates reducing fixed income security market values. This has
been partly offset by a favourable impact from an increase in
the swap rate used to discount latent claims.
Year end 31 December 2012
UK and Ireland general insurance and health NWP decreased by
£352 million, or 7%, to £4,490 million (2011: £4,842 million),
mainly as a result of the disposal of RAC. Excluding RAC, NWP
decreased by £48 million, or 1%, to £4,062 million (2011:
£4,110 million). The UK has seen growth in personal motor,
corporate and speciality risks and personal speciality lines. This