Aviva 2014 Annual Report Download - page 256

Aviva plc Annual report and accounts 2014
Financial and operating performance continued
252
General insurance and health sales
General insurance and health (excluding long-term health
business) sales are defined as IFRS net written premiums, which
are premiums written during the year net of amounts reinsured
with third parties. For sales reporting, we use the GAAP
measure for this business.
The table below presents our consolidated sales for the
three years ended 31 December 2014, 2013 and 2012 for our
continuing operations, as well as the reconciliation of sales to
net written premiums in IFRS.
Continuin
g
operations
2014
£m
Restated1
2013
£m
Restated1
2012
£m
Long-term insurance, savings and health new
business sales 27,099 26,012 26,150
General insurance and health sales (excluding long-
term health) 7,760 8,173 8,366
Total sales 34,859 34,185 34,516
Less: Effect of capitalisation factor on regular
premium long-term business (7,314) (6,807) (6,738)
Share of long-term new business sales from JVs and
associates (473) (660) (592)
Annualisation impact of regular premium long-term
business (214) (203) (239)
Deposits taken on non-participating investment
contracts and equity release contracts (5,641) (4,389) (4,607)
Retail sales of mutual fund type products (investment
sales) (4,977) (4,875) (4,586)
Add: IFRS gross written premiums from existing long-
term business 4,786 4,143 4,349
Less: long-term insurance and savings business
premiums ceded to reinsurers (970) (905) (930)
Total IFRS net written premiums 20,056 20,489 21,173
Analysed as:
Long-term insurance and savings net written
premiums 11,756 11,769 12,279
General insurance and health net written premiums 8,300 8,720 8,894
20,056 20,489 21,173
1 Comparative has been restated to reflect changes in MCEV liquidity premium and an extension of the MCEV
covered business.
• Effect of capitalisation factor on regular premium long-
term business
PVNBP is derived from the single and regular premiums of
the products sold during the financial period and is
expressed at the point of sale. The PVNBP calculation is
equal to total single premium sales received in the year plus
the discounted value of regular premiums expected to be
received over the term of the new contracts. The discounted
value of regular premiums is calculated using the market
consistent embedded value methodology proposed by the
CFO Forum Principles.
The discounted value reflects the expected income
streams over the life of the contract, adjusted for expected
levels of persistency, discounted back to present value. The
discounted value can also be expressed as annualised regular
premiums multiplied by a weighted average capitalisation
factor (WACF). The WACF varies over time depending on
the mix of new products sold, the average outstanding term
of the new contracts and the projection assumptions.
• Share of long-term new business sales from joint
ventures and associates
Total long-term new business sales include our share of sales
from joint ventures and associates. Under IFRS reporting,
premiums from these sales are excluded from our
consolidated accounts, with only our share of profits or
losses from such businesses being brought into the income
statement separately.
• Annualisation impact of regular premium
long-term business
As noted above, the calculation of PVNBP includes annualised
regular premiums. The impact of this annualisation is removed
in order to reconcile the non-GAAP new business sales to IFRS
premiums and will vary depending on the volume of regular
premium sales during the year.
• Deposits taken on non-participating investment
contracts and equity release contracts
Under IFRS, non-participating investment contracts are
recognised in the Statement of Financial Position by
recording the cash received as a deposit and an associated
liability and are not recorded as premiums received in the
IFRS income statement. Only the margin earned is
recognised in the IFRS income statement.
• Retail sales of mutual fund type products
(investment sales)
Investment sales included in the total sales number represent
the cash inflows received from customers to invest in mutual
fund type products such as unit trusts and OEICs. We earn
fees on the investment and management of these funds
which are recorded separately in the IFRS income statement
as 'fees and commissions received' and are not included in
statutory premiums.
• IFRS gross written premiums from existing
long-term business
The non-GAAP measure of long-term and savings sales
focuses on new business written in the year under review
whilst the IFRS income statement includes premiums
received from all business, both new and existing.
Consolidated results of operations
The table below presents our consolidated sales from continuing
operations for the three years ended 31 December 2014, 2013
and 2012.
Continuin
g
operations
2014
£m
Restated1
2013
£m
Restated1
2012
£m
United Kingdom & Ireland Life 12,444 12,393 13,690
United Kingdom & Ireland GI 4,028 4,200 4,490
France 5,739 5,603 4,640
Poland 630 555 438
Italy, Spain and Other 4,639 4,430 4,182
Canada 2,104 2,250 2,176
Asia 2,162 1,980 2,014
Aviva Investors 3,106 2,741 2,819
Other group activities 7 33 67
Total sales 34,859 34,185 34,516
1 Comparative has been restated to reflect changes in MCEV liquidity premium and an extension of the MCEV
covered business.
Sales (from continuing operations)
Year ended 31 December 2014
Total sales from continuing operations increased to £34,859
million (2013: £34,185 million) for the reasons set out in the
market performance sections below.
Year ended 31 December 20131
Total sales from continuing operations were stable at £34,185
million (2012: £34,516 million) for the reasons set out in the
market performance sections below.
Adjusted operating profit
We report to our chief operating decision makers in the
businesses the results of our operating segments using a non-
GAAP financial performance measure we refer to as ‘adjusted
operating profit’. We define our segment adjusted operating
profit as profit before income taxes and non-controlling
interests in earnings, excluding the following items: investment
return variances and economic assumption changes on long-
term and non-long-term business, impairment of goodwill, joint
ventures and associates, amortisation and impairment of other
intangibles (excluding the acquired value of in-force business),
profit or loss on the disposal and remeasurement of subsidiaries,
252 | Aviva plc Annual report and accounts 2014