Aviva 2013 Annual Report Download - page 261

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
259
Financial and operating performance continued
combination of improved retention levels and rate increases
across both personal and commercial lines.
Adjusted operating profit improved by £21 million, or 8%,
to £277 million (2011: £256 million) mainly due to favourable
underwriting results partially offset by lower long-term
investment returns.
Profit before tax attributable to shareholders’ profits
decreased by £54 million, or 18%, to £245 million (2011: £299
million restated).
Asia
The table below presents the sales, net written premiums,
adjusted operating profit and profit before tax attributable to
shareholders’ profits under IFRS for the three years ended
31 December 2013, 2012 and 2011.
2013
£m
2012
£m
2011
£m
Sales
Long-term insurance and savings business
Singapore 818 688 538
Other Asia 826 1,077 1,244
Total long-term savings sales 1,644 1,765 1,782
General insurance and health
Singapore 81 88 76
Other Asia 19 32 32
Total general insurance and health sales 100 120 108
Investment sales 152 129 186
Total sales 1,896 2,014 2,076
IFRS net written premiums 532 636 583
Adjusted operating profit before tax
Long-term insurance and savings business
Singapore 83 64 52
Other Asia 13 5 56
General insurance and health
Singapore (3) (4) (5)
Other Asia 4 (1) (4)
Other operations (10) (11) (29)
Total adjusted operating profit before tax 87 53 70
Profit before tax attributable to
shareholders' profits 98 62 33
Year ended 31 December 2013
Long term insurance and savings sales in Asia decreased by 7%
to £1,644 million (2012: £1,765 million). Excluding Malaysia
and Sri Lanka, which were sold in April 2013 and December
2012 respectively, sales were 3% lower at £1,628 million (2012:
£1,673 million) with higher sales in Singapore more than offset
by lower sales in other Asian markets due to changes in
business mix. General insurance and health net written
premiums were £100 million (2012: £120 million), down 17%,
with the decrease reflecting the withdrawal of some
unprofitable health products in Singapore and the disposal of
our Sri Lankan business in 2012. Total net written premiums
were £532 million (2012: £636 million), down £104 million or
16%, for the same reasons.
Adjusted operating profits increased by 64% to £87 million
(2012: £53 million), mainly due to higher life profits of £96
million (2012: £69 million) driven by higher earnings on the in-
force portfolio and favourable experience in China.
Profit before tax attributable to shareholders was £98 million
(2012: £62 million).
Year ended 31 December 2012
Long-term insurance and savings sales in Asia decreased by £17
million, or 1%, to £1,765 million (2011: £1,782 million) with
higher sales in Singapore more than offset by lower sales in
other markets.
Net written premiums in the general insurance and health
business rose to £120 million (2011: £108 million) due to
growth in Singapore.
Adjusted operating profit decreased by £17 million, or 24%, to
£53 million (2011: £70 million). The change mainly reflects the
non-recurrence of a Hong Kong reserving change which
benefited the results by £25 million in 2011. Profit before tax
attributable to shareholders increased by £29 million, or 88%,
to £62 million (2011: £33 million), reflecting a £12 million profit
in 2012 on the disposal of our Sri Lankan business, and negative
life investment variances and impairment charges of £35 million
in 2011.
Aviva Investors
The table below presents the investment sales, adjusted
operating profit, profit before tax attributable to shareholders’
profits under IFRS and assets under management of Aviva
Investors for the three years ended 31 December 2013, 2012
and 2011. As set out in ‘IFRS Financial Statements – note 4 –
Subsidiaries’, the internal asset management operations of Aviva
Investors North America were sold with the US life business and
have been classified within discontinued operations.
2013
£m
2012
£m
2011
£m
Sales1 2,741 2,819 1,659
Adjusted operating profit before tax
Fund management 68 39 50
Long-term insurance and savings business –
Pooled Pensions operating profit1 2 3 3
Other operations – client compensation costs (96) — —
Total adjusted operating (loss)/profit before
tax (26) 42 53
(Loss)/profit before tax attributable to
shareholders’ profits (89) 2 36
Assets under management
(
continuing
operations) 240,507 236,336 225,396
1 Includes the Aviva Investors Pooled Pension business.
Year ended 31 December 2013
Fund management operating profits were £68 million (2012:
£39 million) driven by higher revenues, reflecting positive
market movements and performance fees, and lower costs.
Assets under management were up £4.2 billion to £240.5
billion, driven by capital appreciation which more than offset
negative net flows. Loss before tax was £89 million (2012: £2
million profit), mainly due to the reasons set out below.
In 2013 we found evidence of improper allocation of trades
in fixed income securities in Aviva Investors. This occurred
between 2006 – 2012. These breaches of our dealing policy
involved late allocation of trades which favoured external hedge
funds to the detriment of certain Aviva UK Life funds. The
relevant regulatory authorities were notified at an early stage
and have been kept fully apprised of the issue. A thorough
review of internal control processes relating to the dealing policy
has been carried out by management and reviewed by PwC.
Measures to improve controls have been implemented.
There is a total adverse impact on Group adjusted operating
profit from this activity of £132 million. This reflects the
compensation of £126 million expected to be claimed in respect
of these breaches and other associated costs of £6 million. Of
this total, £96 million reflects compensation expected to be
claimed from, and other associated costs within, Aviva Investors.
Compensation of £36 million relating to this matter is expected
to be claimed from a group holding company. These amounts
are shown in operating profit in ‘Other operations’.
Year ended 31 December 2012
Aviva Investors’ adjusted operating profit for fund management
from continuing operations decreased by £11 million, or 22%,
to £39 million (2011: £50 million). The reduction in profits was
as a result of lower performance fees, partially offset by lower
operating expenditure driven by cost savings.
Profit before tax attributable to shareholders from
continuing operations decreased by £34 million, or 94%, to