Aviva 2014 Annual Report Download - page 259

Aviva plc Annual report and accounts 2014
255
Expenses (from continuing operations)
Year ended 31 December 2014
Claims and benefits paid net of reinsurance in 2014 decreased
by £2,619 million, or 12% to £19,474 million (2013: £22,093
million) mainly due to lower claims payments in our life
businesses and the strengthening of sterling during 2014. In
particular there were lower bond and pensions claims in the UK
compared with prior year.
Change in insurance liabilities in 2014 was a charge of
£5,570 million (2013: £2,493 million credit), resulting from
changes in economic and non-economic assumptions.
The change in investment contract provisions was a charge
of £6,518 million (2013: £7,050 million charge) as a result of
improved investment market conditions causing an increase in
contract liabilities.
The change in unallocated divisible surplus (“UDS”) was a
charge of £3,364 million (2013: £280 million credit) primarily
driven by Italy and France as a result of lower corporate and
government bond yields during 2014.
Fee and commission expense, other expenses and finance
costs decreased by £896 million to £5,908 million (2013:
£6,804 million) mainly as a result of the Group’s cost savings
programme, lower fee and commission expenses primarily in the
UK and lower finance costs due to the repayment of debt
during the year. See ‘IFRS Financial Statements – note 7 –
Details of expenses’ for further details.
Year ended 31 December 2013
Claims and benefits paid net of reinsurance in 2013 decreased
by £1,508 million, or 6%, to £22,093 million (2012: £23,601
million) mainly reflecting lower claims payments in our life
businesses.
Change in insurance liabilities in 2013 was a credit of
£2,493 million (2012: £430 million charge), resulting from
changes in economic and non-economic assumptions.
The change in investment contract provisions was a charge
of £7,050 million (2012: £4,450 million charge) as a result of
improved investment market conditions causing an increase in
contract liabilities.
The change in unallocated divisible surplus (“UDS”) was a
credit of £280 million (2012: £6,316 million charge).
Fee and commission expense, other expenses and finance costs
decreased by £1,149 million to £6,804 million (2012: £7,953
million) mainly as a result of the Group’s cost savings
programme. See ‘IFRS Financial Statements – note 7 – Details of
expenses’ for further details.
Profit/(loss) before tax attributable to shareholders’ profits
(from continuing operations)
Year ended 31 December 2014
Profit before tax attributable to shareholders was £2,281 million
(2013: £1,281 million). The increase was primarily due to lower
expenses and positive investment variances.
Year ended 31 December 2013
Profit before tax attributable to shareholders was £1,281 million
(2012: £175 million). The increase was primarily lower expenses
and positive investment variances.
Market performance
United Kingdom and Ireland
UK & Ireland life
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 long-
term businesses for the three years ended 31 December 2014,
2013 and 2012.
2014
£m
Restated1
2013
£m
Restated1
2012
£m
Pensions 5,803 5,476 5,158
Annuities 1,948 2,327 3,211
Bonds 174 183 379
Protection 1,103 992 1,228
Equity release 696 401 434
Other 2,285 2,545 2,648
United Kingdom 12,009 11,924 13,058
Ireland 435 469 632
Long-term insurance, savings and health
sales 12,444 12,393 13,690
IFRS net written premiums 3,515 4,228 5,623
Adjusted operating profit before tax
United Kingdom 1,016 930 887
Ireland 23 22 5
Life business 1,039 952 892
General insurance and health – UK
health 11 18 14
Fund management 6 23 11
Other operations (4) 131 (14)
Total adjusted operating profit before
tax 1,052 1,124 903
Profit before tax attributable to
shareholders' profits 980 717 107
1 Comparative has been restated to reflect changes in MCEV liquidity premium and an extension of the MCEV
covered business.
Year ended 31 December 2014
On a PVNBP basis, sales in the UK long-term insurance and
savings business increased by £85 million, or 1%, to £12,009
million (2013: £11,924 million). Volumes in the UK remained
broadly flat year on year. There has been a significant decrease
in individual annuities. This is primarily as a result of the changes
announced by the UK Chancellor of the Exchequer in the
Budget in March 2014 which are intended to give increased
flexibility as to how customers can access their pension from
April 2015. These changes are having a significant impact across
the market and have seen many customers defer their decision
regarding their pension, exacerbating the general market
decline for individual annuities. This decrease has been partly
offset by increases in bulk purchase annuities and equity release
sales.
Pension sales were up 6% to £5,803 million (2013: £5,476
million). Within this, sales of group pensions decreased to
£3,679 million (2013: £3,809 million) whilst sales of individual
pensions were £2,124 million (2013: £1,667 million) with
growth in our platform (self-invested personal pension) business
more than offset by lower sales of other individual pensions
products.
Sales of annuities were down 16% to £1,948 million (2013:
£2,327 million) due to the reasons outlined above. Protection
sales were up 11% to £1,103 million (2013: £992 million),
reflecting higher sales of individual group business. Bond sales
were down 5% to £174 million (2013: £183 million). Equity
release sales were 74% higher at £696 million (2013: £401
million) due to higher sales as a result of a strong market. Other
sales (which include investment sales) decreased 10% to £2,285
million (2013: £2,545 million), mainly as a result of the UK Retail
Fund Management business being transferred from UK Life to
Aviva Investors in May 2014. This was partly offset by an
increase in the UK Platform business driven by new business
volumes.
In Ireland, sales fell 7% to £435 million (2013: £469 million).
IFRS net written premiums were down 17% to £3,515
million (2013: £4,228 million) primarily due to the impact of
lower individual annuities sales.
Life business adjusted operating profit before tax increased
by 9% to £1,039 million (2013: £952 million). Within this, UK
adjusted operating profit increased by 9% to £1,016 million
(2013: £930 million). 2014 results saw a net additional benefit
to profit from non-recurring items of £282 million (FY13: £116
Other information
Aviva plc Annual report and accounts 2014 |255