Aviva plc FY19 results - part 2 of 5

RNS Number : 0606F

Aviva PLC

05 March 2020

START PART 2 of 5

Page 1

Contents

Overview	Page
Key financial metrics	02
1 Solvency II return on equity	03
2 Solvency II capital and cash	04
i Operating capital generation: Solvency II basis	04
ii Solvency II future surplus emergence	05
iii Cash remittances	06
iv Centre liquidity	06
3 Solvency II position	07
i Solvency II position (shareholder view)	07
ii Movement in Solvency II surplus	08
iii Diversified SCR analysis	09
iv Solvency II sensitivities	10
v Solvency II net asset value	11
vi Solvency II regulatory own funds and debt leverage	11
4 Controllable costs	12
5 Profit and earnings per share	13
6 Divisional performance	14
i UK Life and Investments, Savings & Retirement	14
ii General Insurance	18
iii Europe Life	23
iv Asia Life	25
7 Life business profit drivers	27
Financial supplement	28
A Income & expenses and IFRS capital	29
B IFRS financial statements and notes	38
C Analysis of assets	93
Other information	110
Alternative Performance Measures	111

As a reminder

Throughout this report we use a range of financial metrics to measure our performance and financial strength. These metrics include Alternative Performance Measures (APMs), which are non-GAAP measures that are not bound by the requirements of IFRS and Solvency II. Further guidance in respect of the APM's used by the Group, including a reconciliation to the financial statements (where possible), can be found within the Other Information section.

At our capital markets day in November 2019 we announced robust financial targets focussed on economic value and that we have simplified our operating model into five new business divisions (Investments, Savings & Retirement; UK Life; General Insurance; Europe Life; and Asia Life) from 2020.

Investments, Savings & Retirement will bring together Aviva Investors and the UK Savings & Retirement business which is currently reported within UK Life. General Insurance will include our Europe and Asia general insurance operations as well as UK General Insurance and our Canadian general insurance business. Europe Life and Asia Life will only include our Europe and Asia life and health businesses.

In the Overview section of this report, our 2019 performance against our new targets has been presented having regard to the new divisions. In section 6.i, UK Life and Investments, Savings & Retirement have been presented together for both the Solvency II operating capital generation and Solvency II return on capital metrics. This is consistent with the targets presented at the capital markets day. Other key performance indicators (KPIs) have been presented separately for UK Life and Aviva Investors within section 6.i. Sections 6.ii to 6.iv set out the performance of General Insurance, Europe Life and Asia Life respectively.

In the 2019 Annual Report and Accounts (including IFRS financial statements), we continue to report the results of our businesses by market (UK Life; Aviva Investors; UK General Insurance; Canada; Europe and Asia) on the basis they were managed in 2019. Section A of the financial supplement in this report includes a reconciliation between Group adjusted operating profit as presented in the Overview (section 6 - Divisional performance) to Group adjusted operating profit as presented in B6(a) Segmental information.

All references to 'Operating profit' represent 'Group adjusted operating profit'.

# symbol denotes key financial performance indicators used as a base to determine or modify remuneration.

‡ denotes APMs which are key performance indicators. Following a review of the Group's APMs in 2019, we have made certain changes to ensure that they remain relevant and useful to shareholders. These changes are outlined within the Other Information section.

All percentages, including currency movements, are calculated on unrounded numbers so minor rounding differences may exist.

A glossary explaining key terms used in this report is available on www.aviva.com/glossary

Page 2

Profit

	2019 £m	Restated¹ 2018 £m	Sterling % change
Operating profit^2,‡#	3,184	3,004	6%
Operating earnings per share^2,3‡#	60.5p	56.2p	8%
IFRS profit before tax attributable to shareholders' profits	3,374	2,129	58%
Basic earnings per share	63.8p	38.2p	67%

Capital Position

	31 December 2019	31 December 2018	Change
Estimated shareholder Solvency II cover ratio^4,‡#	206%	204%	2pp
Estimated Solvency II surplus⁴	£12.6bn	£12.0bn	5%
Solvency II net asset value per share⁴	423p	392p	8%
Solvency II debt leverage^‡	31%	33%	(2)pp

Dividend

	2019	2018	Sterling % change
Final dividend per share	21.40p	20.75p	3%
Total dividend per share	30.90p	30.00p	3%

Solvency II basis: Operating capital generation (OCG)^‡# and Cash remittances^‡#

	Solvency II Operating capital generation			Cash remittances
	2019 £m	2018 £m	Sterling % change	2019 £m	2018 £m	Change
Group	2,259	3,198	(29)%	2,597	3,137	(17)%

Solvency II basis: Operating own funds generation and Return on capital/equity^‡

	Solvency II Operating own funds generation			Solvency II Return on capital/equity
	2019 £m	2018 £m	Sterling % change	2019 %	2018 %	Change
UK Life and Investments, Savings & Retirement	1,314	1,663	(21)%	9.5%	11.3%	(1.8)pp
General Insurance	628	532	18%	14.0%	11.7%	2.3pp
Europe Life	574	384	50%	10.3%	6.9%	3.4pp
Asia Life	187	144	30%	12.7%	9.7%	3.0pp

Group⁵	2,257	2,022	12%	14.3%	12.5%	1.8pp

Expenses

2019
£m

Restated¹

2018
£m

Sterling % change

Operating expenses^‡

4,119

4,138

Controllable costs^‡

3,939

3,968

(1)%

Value of new business: Adjusted Solvency II basis (VNB)^‡ and Present value of new business
premiums (PVNBP)

			VNB			PVNBP
	2019 £m	2018 £m	Sterling % change	2019 £m	2018 £m	Sterling % change
UK Life	592	481	23%	27,570	23,946	15%
Europe Life	414	517	(20)%	13,772	12,641	9%
Asia Life	206	189	9%	3,057	2,656	15%
Other	12	15	(19)%	1,266	1,520	(17)%
Total	1,224	1,202	2%	45,665	40,763	12%

General insurance combined operating ratio (COR)^‡ and Net written premiums (NWP)

			COR			NWP
	2019	Restated¹ 2018	Change	2019	2018	Change
United Kingdom	97.9%	94.6%	3.3pp	4,218	4,193	1%
Canada	97.8%	103.1%	(5.3)pp	3,061	2,928	5%
Europe	95.7%	93.5%	2.2pp	2,017	1,985	2%
Group⁶	97.5%	97.2%	0.3pp	9,309	9,114	2%

‡ Denotes Alternative Performance Measures (APMs) which are key performance indicators of the Group. Further details of this measure are included in the 'Other information' section of the Analyst Pack.

# Denotes key performance indicators which are used by the Group to determine or modify remuneration. Further details of this measure are included in the 'Other information' section of the Analyst Pack.

1 During 2019 the Group adjusted operating profit APM has been revised and now includes the amortisation and impairment of internally generated intangible assets to better reflect the operational nature of these assets (see note B2(b)). Group adjusted operating profit continues to exclude amortisation and impairment of intangible assets acquired in business combinations. Comparative amounts have been restated resulting in a reduction in the prior period Group adjusted operating profit of £112 million. There is no impact on profit before tax attributable to shareholders' profit. Following the change in the definition of Group adjusted operating profit, COR, operating expenses and operating earnings per share have also been restated to include the amortisation and impairment of internally generated intangible assets. Comparative amounts have been restated resulting in an increase in prior period COR of 0.6%, an increase in prior period operating expenses of £112 million and a reduction in prior period operating earnings per share of 2.2 pence.

2 Group adjusted operating profit is a non-GAAP APM which is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section of the Analyst Pack.

3 This measure is derived from the Group adjusted operating profit APM. Further details of this measure are included in the 'Other information' section of the Analyst Pack.

4 The estimated Solvency II position represents the shareholder view only. See section 3 for more details.

5 Includes Group centre, debt costs and other items not allocated to the markets.

6 Group includes Asia & Other net written premiums of £13 million (2018: £8 million)

Page 3

1 - Solvency II return on capital/equity^‡

At our Capital Markets Day in November 2019, we announced robust financial targets focused on economic value, to measure our progress in meeting our key strategic initiatives. Solvency II return on capital / equity was introduced to measure return generated on shareholder capital at business division and Group level and is used by the Group to assess performance and growth, as we look to deliver long-term value for our shareholders.

	Operating own funds generation
2019	New business (life) £m	Existing business (life) £m	Non-life capital generation £m	Other¹ £m	Total £m	Opening own funds £m	Return on capital/equity %
UK Life and Investments, Savings & Retirement	381	194	70	669	1,314	13,835	9.5%
General Insurance	-	-	548	80	628	4,498	14.0%
Europe Life	167	240	-	167	574	5,548	10.3%
Asia Life	111	57	-	19	187	1,470	12.7%
Group centre costs and Other	-	16	(187)	9	(162)	(1,800)	n/a
Solvency II return on capital (unlevered) at 31 December	659	507	431	944	2,541	23,551	10.8%
Less: Senior debt					(12)	-	-
Subordinated debt					(272)	(6,979)	-
Solvency II operating own funds generation at 31 December					2,257
Direct capital instrument and Tier 1 notes					(34)	(731)	-
Preference shares²					(38)	(450)	-
Net deferred tax assets					-	(95)	-
Solvency II return on equity^‡ at 31 December					2,185	15,296	14.3%
Less: Management actions and other¹					(944)	-	(6.2)%
Solvency II return on equity (excl. management actions)					1,241	15,296	8.1%

1 Other includes the impact of capital actions and non-economic assumption changes.

2 Preference shares includes £21 million of dividends and £250 million of capital in respect of General Accident plc.

	Operating own funds generation
2018	New business (life) £m	Existing business (life) £m	Non-life capital generation £m	Other¹ £m	Total £m	Opening own funds £m	Return on capital/equity %
UK Life and Investments, Savings & Retirement	347	472	111	733	1,663	14,689	11.3%
General Insurance	-	-	532	-	532	4,535	11.7%
Europe Life	253	256	-	(125)	384	5,539	6.9%
Asia Life	89	76	-	(21)	144	1,477	9.7%
Group centre costs and Other	-	31	(344)	(90)	(403)	(1,503)	n/a
Solvency II return on capital (unlevered) at 31 December	689	835	299	497	2,320	24,737	9.4%
Less: Senior debt					(3)	-	-
Subordinated debt					(295)	(7,922)	-
Solvency II operating own funds generation at 31 December					2,022
Direct capital instrument and Tier 1 notes					(36)	(731)	-
Preference shares²					(38)	(450)	-
Net deferred tax assets					-	(84)	-
Solvency II return on equity^‡ at 31 December					1,948	15,550	12.5%
Less: Management actions and other¹					(497)	-	(3.2)%
Solvency II return on equity (excl. management actions)					1,451	15,550	9.3%

1 Other includes the impact of capital actions and non-economic assumption changes.

2 Preference shares includes £21 million of dividends and £250 million of capital in respect of General Accident plc.

In line with targets presented at Capital Markets Day, we have presented a combined Solvency II return on capital for the UK Life and Investments, Savings & Retirement business divisions.

Solvency II return on equity has increased by 1.8pp to 14.3% over 2019 (2018: 12.5%) mainly driven by:

· In UK Life and Investments, Savings & Retirement, overall return on capital has reduced by 1.8pp to 9.5% largely due to adverse experience on protection business and no benefit from transitional relief on new business. In 2018, new business written contributed to the calculation of transitional measures (in line with clarification issued by the PRA since 2017) but it is no longer applicable to the Group in 2019.

· In the General Insurance business division, return on capital increased by 2.3pp to 14.0% driven by Canada, where benefits from the extensive profit remediation plan put in place towards the end of 2017 are materialising.

· In the Europe Life business division, return on capital has increased by 3.4pp to 10.3%. This was primarily driven by modelling and assumption changes in Italy which are partly offset by a reduction from new business in France and Italy due to the impact of lower interest rates.

Page 4

2 - Solvency II capital and cash

2.i - Operating capital generation: Solvency II basis^‡#

Solvency II operating capital generation (OCG) measures the amount of Solvency II capital the Group generates from operating activities. Capital generated enhances Solvency II surplus which can be used to support sustainable cash remittances from our business, which in turn, supports the Group's progressive dividend as well as funding investments that provide sustainable growth.

	Operating capital generation ^‡#					Of which:
2019 £m	Impact of new business (life)	Earnings from existing business (life)	Non-life capital generation	Other OCG¹	Total OCG	Own funds OCG	SCR OCG
UK Life and Investments, Savings & Retirement	(45)	814	90	401	1,260	1,245	15
General Insurance	-	-	615	(41)	574	628	(54)
Europe Life	(189)	515	-	428	754	574	180
Asia Life	(7)	64	-	3	60	187	(127)
Total market Solvency II operating capital generation	(241)	1,393	705	791	2,648	2,634	14
Group centre, debt costs and Other	-	(5)	(419)	35	(389)	(377)	(12)
Total Group Solvency II operating capital generation	(241)	1,388	286	826	2,259	2,257	2

1 Other includes the impact of capital actions and non-economic assumption changes.

	Operating capital generation ^‡#					Of which:
2018 £m	Impact of new business (life)	Earnings from existing business (life)	Non-life capital generation	Other OCG¹	Total OCG	Own funds OCG	SCR OCG
UK Life and Investments, Savings & Retirement	(116)	1,096	126	841	1,947	1,606	341
General Insurance	-	-	647	-	647	532	115
Europe Life	(69)	446	-	347	724	384	340
Asia Life	2	64	-	(11)	55	144	(89)
Total market Solvency II operating capital generation	( 183 )	1,606	773	1,177	3,373	2,666	707
Group centre, debt costs and Other	-	(14)	(717)	556	(175)	(644)	469
Total Group Solvency II operating capital generation	(183)	1,592	56	1,733	3,198	2,022	1,176

1 Other includes the impact of capital actions and non-economic assumption changes.

Solvency II OCG was £2,259 million for 2019 (2018: £3,198 million).

The UK Life and Investments, Savings & Retirement OCG has reduced by £687 million to £1,260 million. This is mainly due to adverse experience on the protection business, no benefit from the loss of transitional relief of new business and a reduction in Other OCG, partially offset by new business strain which has reduced over the year due to reinsurance actions taken even though volumes increased. In 2019, Other OCG includes the beneficial impact of longevity assumption changes which is partially offset by other non-economic assumption changes while 2018 primarily included the beneficial impact of both longevity assumption and other non-economic assumption changes.

The General Insurance OCG reduced by £73 million to £574 million. In Canada, there was an increase of £118 million as benefits from the extensive profit remediation plan put in place towards the end of 2017 are materialising. This is more than offset in the UK, where there has been a reduction of £151 million, primarily due to the alignment of UK digital business costs within the UK General Insurance business and continued investment in our IT infrastructure. Alignment of the UK digital business costs has resulted in an increase in the Solvency Capital Requirement (SCR) due to differential capital treatment for insurance and non-insurance entities.

The Europe Life OCG has increased by £30 million to £754 million as increases in Other OCG and returns on existing business have been partially offset by the increase in new business strain as a result of the low interest rate environment. In 2019, Other OCG includes the beneficial impact of modelling and assumption changes in Italy as well as increased hedging in France, while other OCG during 2018 was due to assumption changes and a benefit arising from the transfer of pensions business into a supplementary occupational pension fund (FRPS) in France.

Group centre, debt costs and Other has reduced by £214 million to £(389) million. There has been an increase in OCG due to the reduction of costs as a result of the alignment of UK digital business in UK General Insurance and UK Life and a reduction in programme spend at Group Centre. This has been offset by a reduction in Other OCG as 2018 included the benefit of a model change to vary the volatility adjustment (VA) on France business in the Group SCR.

Page 5

2.ii - Solvency II future surplus emergence

Emergence of future profits and release of Solvency II capital requirements - life business (undiscounted)	Total 2019 bn	Total 2018 bn
Year 1	1.5	1.4
Year 2	1.4	1.3
Year 3	1.3	1.1
Year 4	1.2	1.0
Year 5	1.1	1.0
Year 6	1.0	0.9
Year 7	0.9	0.8
Year 8	0.8	0.8
Year 9	0.7	0.7
Year 10	0.7	0.7
Year 11-15	3.5	3.4
Year 16-20	2.9	3.3
Year 20+	7.2	8.2
Total net of non-controlling interests	24.2	24.6

The table above shows the expected future emergence of Solvency II surplus from the existing long-term in-force life business. It has been determined in line with previous periods.

For business subject to short contract boundaries under Solvency II, allowance has been made for the impact of renewal premiums as and when they are expected to occur. The cash flows have been split annually for the first ten years followed by five-year tranches thereafter.

The projected surplus, which is primarily expected to arise from the release of risk margin (net of transitional measures) and solvency capital requirement as the business runs off over time, is expected to emerge through OCG in future years.

The projection is a static analysis as at a point in time and hence it does not include future new business or the potential impact of active management of the business (for example, active management of market, demographic and expense risk through investment, hedging, risk transfer, operational risk and expense management), which may affect the actual amount of OCG earned from existing business in future periods.

Total cash flows have reduced by £0.4 billion to £24.2 billion over 2019 (2018: £24.6 billion). The reduction is primarily driven by the strengthening of Sterling against the Euro over 2019.

Page 6

2.iii - Cash remittances^‡#

Sustainable cash remittances to the Group from our businesses are a key financial priority. The table below reflects actual remittances received by the Group from our businesses, comprising dividends and interest on internal loans. Cash remittances are eliminated on consolidation and hence are not directly reconcilable to the Group's IFRS statement of cash flows. Details of cash remittances are disclosed within the respective business division performance disclosures in sections 6.i to 6.iv.

	2019 £m	2018 £m
UK Life and Investments, Savings & Retirement
UK Life (Including Savings & Retirement) ¹	1,387	2,152
Aviva Investors	86	92
General Insurance^1,2	584	536
Europe Life	414	336
Asia Life	51	6
Other	75	15
Total	2,597	3,137

1 We use a wholly-owned, UK domiciled reinsurance subsidiary for internal capital and cash management purposes. Some remittances otherwise attributable to the operating businesses arise from this internal reinsurance vehicle.

2 2019 General Insurance cash remittances include £83 million (2018: £331 million) received from UK General Insurance, £nil (2018: £17 million) received from Ireland and £141 million (2018: £nil) received from Canada in February 2020 in respect of 2019 activity.

UK Life includes a special remittance of £500 million (2018: £1,250 million), and in 2019 General Insurance and Europe Life include special remittances from Italy of £65 million (2018: £nil) and £107 million (2018: £nil) respectively following the disposal of Avipop in 2018. 2019 remittances from Europe Life include remittances from France of £141 million (2018: £176 million), which are shown after adjusting for a capital injection of £139 million (2018: £nil), as the net amount more appropriately reflects the overall remittances received from France during the year. Other includes excess cash remitted to Group on the winding down of Aviva Re.

2.iv - Centre liquidity

Centre liquidity comprises cash and liquid assets. Excess centre cash flow represents cash remitted by our business divisions to the Group centre less central operating expenses and debt financing costs. It is an important measure of the cash that is available to pay dividends, reduce debt or invest back into our business divisions.

	2019 £m	2018 £m
Cash remitted to Group	2,597	3,137
External interest paid	(456)	(507)
Internal interest paid	(58)	(47)
Central spend	(115)	(258)
Other operating cash flows¹	236	112
Excess centre cash flow	2,204	2,437
Ordinary dividend	(1,184)	(1,128)
Share buy back	-	(600)
Net reduction in borrowings	(191)	(948)
Other non-operating cash flows²	(35)	(217)
Movement in centre liquidity	794	(456)

Centre liquidity as at end of February	2,368	1,574

1 Other operating cash flows include central investment income and one-off group tax relief payments.

2 Other non-operating cash flows include capital injections, advances and repayments of internal debt and other investment cash flows. Capital injections do not include the capital injection to France Life of £139 million in 2019 (2018: £nil), which is included within cash remitted to Group as it more appropriately reflects the overall remittances received from France Life during the year.

The increase of £ 794 million in centre liquidity is primarily driven by lower debt repayments and no share buy back in 2019, offset by lower cash remitted to Group.

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3 - Solvency II position

3.i - Solvency II position (shareholder view)

Shareholder view	2019 £m	2018 £m
Own funds	24,548	23,551
Solvency capital requirement	(11,910)	(11,569)
Estimated Solvency II surplus at 31 December	12,638	11,982
Estimated Solvency II shareholder cover ratio^‡#	206%	204%

The estimated Solvency II shareholder cover ratio is 206% at 31 December 2019. The Solvency II position disclosed is based on a 'shareholder view'. The shareholder view is considered by management to be more representative of the shareholders' risk exposure and the Group's ability to cover the solvency capital requirement with eligible own funds and aligns with management's approach to dynamically manage its capital position. In arriving at the shareholder position, the following adjustments are typically made to the regulatory Solvency II position:

· The contribution to the Group's SCR and own funds of the most material fully ring fenced with-profits funds of £2.5 billion at 31 December 2019 (2018: £2.6 billion) and staff pension schemes in surplus of £1.2 billion at 31 December 2019 (2018: £1.1 billion) are excluded. These exclusions have no impact on Solvency II surplus as these funds are self-supporting on a Solvency II capital basis with any surplus capital above SCR not recognised.

· A notional reset of the transitional measure on technical provisions (TMTP), calculated using the same method as used for formal TMTP resets. This presentation avoids step changes to the Solvency II position that arise only when the formal TMTP reset points are triggered. The 31 December 2019 position is based on a formal reset of the TMTP, in line with the requirement to reset the TMTP at least every two years and hence no adjustment is required. The 31 December 2018 Solvency II position includes a notional reset (£0.1 billion decrease in surplus). The TMTP is amortised on a straight-line basis over 16 years from 1 January 2016 in line with the Solvency II rules.

· The 31 December 2019 Solvency II position includes three pro forma adjustments. These relate to the disposal of Friends Provident International Limited (FPI) (£nil impact on surplus), the disposal of Hong Kong (£nil impact on surplus) and the potential impact of an expected change to Solvency II regulations on the treatment of equity release mortgages (£0.2 billion decrease in surplus as a result of an increase in SCR). The 31 December 2018 Solvency II position includes the pro forma impact of the disposals of FPI (£0.1 billion increase in surplus) and the potential impact of an expected change to Solvency II regulations on the treatment of equity release mortgages (£0.2 billion reduction in surplus as a result of an increase in SCR).

	Own funds 2019 £m	SCR 2019 £m	Surplus 2019 £m	Own funds 2018 £m	SCR 2018 £m	Surplus 2018 £m
Estimated Solvency II regulatory surplus as at 31 December	28,347	(15,517)	12,830	27,567	(15,339)	12,228
Adjustments for:
Fully ring-fenced with-profit funds	(2,501)	2,501	-	(2,634)	2,634	-
Staff pension schemes in surplus	(1,181)	1,181	-	(1,142)	1,142	-
Notional reset of TMTP	-	-	-	(127)	-	(127)
Pro forma adjustments	(117)	(75)	(192)	(113)	(6)	(119)
Estimated Solvency II shareholder surplus at 31 December	24,548	(11,910)	12,638	23,551	(11,569)	11,982

Page 8

3.ii - Movement in Solvency II surplus

Shareholder view	Own funds 2019 £m	SCR 2019 £m	Surplus 2019 £m	Own funds 2018 £m	SCR 2018 £m	Surplus 2018 £m
Group Solvency II surplus at 1 January	23,551	(11,569)	11,982	24,737	(12,506)	12,231
Operating capital generation	2,257	2	2,259	2,022	1,176	3,198
Non-operating capital generation	178	(362)	(184)	(777)	(231)	(1,008)
Dividends¹	(1,222)	-	(1,222)	(1,166)	-	(1,166)
Share buy-back	-	-	-	(600)	-	(600)
Hybrid debt repayments	(210)	-	(210)	(875)	-	(875)
Acquired/divested business	(6)	19	13	210	(8)	202
Estimated Solvency II surplus at 31 December	24,548	(11,910)	12,638	23,551	(11,569)	11,982

1 Dividends includes £17 million (2018: £17 million) of Aviva plc preference dividends and £21 million (2018: £21 million) of General Accident plc preference dividends.

The estimated Solvency II surplus is £12.6 billion at 31 December 2019 (2018: £12.0 billion), with a shareholder cover ratio of 206% (2018: 204%). The increase since 31 December 2018 is mainly due to the beneficial impact from capital generation partially offset by the payment of the Aviva plc dividend and the redemption of the hybrid debt in November 2019.

Non-operating capital generation is primarily due to the impact of a fall in interest rates, strengthening of Sterling against the Euro, employer contributions to the staff pension scheme and the impact of the transfer of the Ireland branch of the UK business to Ireland following the decision of the UK to leave the European Union partially offset by the narrowing of credit spreads and strong equity market performance in 2019.

Page 9

3.iii - Diversified SCR analysis

	31 December 2019 £bn	31 December 2018 bn
Credit risk	2.7	3.0
Equity risk	1.4	1.2
Interest rate risk	0.4	1.0
Other market risk	1.7	1.4
Life insurance risk	3.1	2.5
General insurance risk	0.8	0.8
Operational risk	1.1	1.1
Other risk	0.7	0.6
Total	11.9	11.6

The SCR has increased by £0.3 billion to £11.9 billion since 31 December 2018. The change in risk profile is predominantly driven by economic movements during 2019. Credit risk decreased by £0.3 billion due to the narrowing of sovereign bond spreads in Italy. Life insurance risk increased by 0.6 billion primarily due to increased longevity risk in the UK as a consequence of lower interest rates and narrowing of credit spreads reducing the impact of discounting. Interest rate risk has decreased by £0.6 billion primarily due to the re-assessment of the SCR interest rate stress.

Page 10

3.iv - Solvency II sensitivities

Sensitivity analysis of Solvency II surplus

The following sensitivity analysis of Solvency II surplus allows for any consequential impact on the assets and liability valuations. All other assumptions remain unchanged for each sensitivity, except where these are directly affected by the revised economic conditions or where a management action that is allowed for in the SCR calculation is applicable for that sensitivity. For example, future bonus rates are automatically adjusted to reflect sensitivity changes to future investment returns.

TMTP are assumed to be recalculated in all sensitivities where its impact would be material.

The table below shows the absolute change in cover ratio under each sensitivity, e.g. a 2% positive impact would result in a cover ratio of 208%.

Sensitivities		2019 Impact on cover ratio %
Changes in economic assumptions	25 bps increase in interest rate	4%
	50 bps increase in interest rate	6%
	100 bps increase in interest rate	11%
	25 bps decrease in interest rate	(5%)
	50 bps decrease in interest rate	(11%)
	50 bps increase in corporate bond spread¹	(4%)
	100 bps increase in corporate bond spread¹	(10%)
	50 bps decrease in corporate bond spread¹	3%
	Credit downgrade on annuity portfolio²	(4%)
	10% increase in market value of equity	2%
	25% increase in market value of equity	5%
	10% decrease in market value of equity	(2%)
	25% decrease in market value of equity	(7%)
	20% increase in value of commercial property	7%
	20% decrease in value of commercial property	(9%)
	20% increase in value of residential property	4%
	20% decrease in value of residential property	(6%)
Changes in non-economic assumptions	10% increase in maintenance and investment expenses	(9%)
	10% increase in lapse rates	(3%)
	5% increase in mortality/morbidity rates - life assurance	(2%)
	5% decrease in mortality rates - annuity business	(13%)
	5% increase in gross loss ratios	(3%)

1 Credit spread movement for corporate bonds with credit rating A at a 10 year duration, with the other ratings and durations stressed by the same proportion relative to the stressed capital requirement.

2 An immediate full letter downgrade on 20% of the annuity portfolio bonds (e.g. from AAA to AA, from AA to A).

The Group continues to keep under review the allowance in our assumptions for future property prices and rental income in relation to our commercial and equity release mortgages, for the possible adverse impact including but not limited to the ultimate arrangements regarding the UK's exit from the European Union. At 31 December 2019, this allowance has been determined in line with previous periods and is estimated at £0.4 billion (2018: £0.4 billion). As more clarity is provided on the terms of the UK's exit from the European Union, the Group will look to establish core property assumptions without an explicit allowance for Brexit uncertainty.

Limitations of sensitivity analysis

The table above demonstrates the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be noted that these sensitivities are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results.

The sensitivity analysis does not take into consideration that the Group's assets and liabilities are actively managed. Additionally, the Solvency II position of the Group may vary at the time that any actual market movement occurs. For example, the Group's financial risk management strategy aims to manage the exposure to market fluctuations.

As investment markets move past various trigger levels, management actions could include selling investments, changing investment portfolio allocations, adjusting bonuses credited to policyholders and taking other protective action.

Other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential risk that only represent the Group's view of possible near-term market changes that cannot be predicted with any certainty and the assumption that all interest rates move in an identical fashion.

Page 11

3.v - Solvency II net asset value

	2019 £m	pence per share¹	2018 £m	pence per share¹
Solvency II shareholder unrestricted Tier 1 own funds at 1 January	15,296	392p	15,550	387p
Operating capital generation	2,257	57p	2,022	50p
Non-operating capital generation	178	4p	(777)	(19)p
Dividends²	(1,222)	(31)p	(1,166)	(29)p
Share buy-back	-	-	(600)	(4)p
Acquired/divested business	(6)	-	210	5p
Impact of changes to the value of subordinated liabilities	59	1p	68	2p
Impact of changes to the value of net deferred tax assets	17	-	(11)	-
Estimated Solvency II shareholder unrestricted Tier 1 own funds at 31 December	16,579	423p	15,296	392p

1 Number of shares in issue as at 31 December 2019 was 3,921 million (2018: 3,902 million).

2 Dividends includes £17 million (2018: £17 million) of Aviva plc preference dividends and £21 million (2018: £21 million) of General Accident plc preference dividends.

Solvency II net asset value per share increased by 31 pence to 423 pence per share (2018: 392 pence) mainly as a result of operating capital generation partly offset by the payment of the external dividend.

3.vi - Solvency II regulatory own funds and debt leverage^‡

Regulatory view	2019 £m	2018 m
Solvency II regulatory debt¹	7,892	8,160
Senior notes	1,052	1,113
Commercial paper	238	251
Total debt	9,182	9,524
Unrestricted Tier 1	20,377	19,312
Restricted Tier 1	1,839	2,096
Tier 2	5,794	5,811
Tier 3²	337	348
Estimated total regulatory own funds³	28,347	27,567
Solvency II debt leverage⁴	31%	33%

1 Solvency II regulatory debt consists of Restricted Tier 1 and Tier 2 regulatory own funds, and Tier 3 subordinated debt.

2 Tier 3 regulatory own funds at 31 December 2019 consists of £259 million subordinated debt (2018: £253 million) plus £78 million net deferred tax assets (2018: £95 million).

3 Regulation was introduced in France that allows French insurers to place the Provision pour Participation aux Excedents (PPE) into Solvency II own funds. The PPE has been included in the France local regulatory own funds in 2019 but it is not included in the Group regulatory own funds.

4 Solvency II debt leverage is calculated as the total debt as a proportion of total regulatory own funds plus commercial paper and senior notes.

Solvency II debt leverage has reduced by 2pp to 31% (2018: 33%). This was due to a reduction in debt and an increase in Unrestricted Tier 1 own funds over 2019. The reduction in debt was driven by redemption of the Group's 6.875% £210 million Tier 1 notes in November 2019. These instruments were classified as Restricted Tier 1 own funds.

Page 12

4 - Controllable costs ^‡

	2019 £m	Restated¹ 2018 £m
UK Life and Investments, Savings & Retirement
UK Life (including Savings & Retirement)	1,045	1,013
Aviva Investors	446	450
General Insurance	1,420	1,268
Europe Life	548	568
Asia Life	198	183
Other Group activities	282	486
Controllable costs²	3,939	3,968
Levies & premium taxes³	180	170
Operating expenses	4,119	4,138

1 Following the change in the definition of Group adjusted operating profit (see note B2(b)), operating expenses now include the amortisation and impairment of internally generated intangible assets to better reflect the operational nature of these assets. Comparative amounts have been restated resulting in an increase in the prior period operating expenses of £112 million.

2 The controllable costs APM is a new APM based on operating expenses adjusted to exclude premium taxes, fees and levies that vary directly with premium volumes. The controllable costs APM provides more relevant information by excluding costs which management cannot actively control other than by controlling premium volume.

3 Premium taxes, fees and levies that vary directly with premium volumes are excluded from controllable costs.

Controllable costs have decreased by 1% to £3,939 million (2018: £3,968 million) reflecting our focus on efficiency, partially offset by targeted spend on growth initiatives and IT simplification. The increase in controllable costs in UK Life and General Insurance partly reflects the alignment of the UK digital business with the UK Life and UK General Insurance businesses during the year, which is offset in other Group activities.

Page 13

5 - Profit and earnings per share

	2019 £m	Restated¹ 2018 £m
Operating profit before tax
UK Life and Investments, Savings & Retirement
UK Life (including Savings & Retirement)	1,855	1,886
Aviva Investors	96	147
General Insurance	594	609
Europe Life	827	807
Asia Life	276	263
Other Group operations (note A1)	(26)	(212)
Market operating profit	3,622	3,500
Corporate centre (note A2)	(183)	(216)
Group debt costs and other interest (note A3)	(255)	(280)
Operating profit before tax^‡#	3,184	3,004
Tax attributable to shareholders' profit	(668)	(625)
Non-controlling interests	(98)	(100)
Preference dividends and other²	(51)	(53)
Operating profit attributable to ordinary shareholders	2,367	2,226
Operating earnings per share^‡#	60.5p	56.2p

1 During 2019 the Group adjusted operating profit APM has been revised and now includes the amortisation and impairment of internally generated intangible assets to better reflect the operational nature of these assets (see note B2(b)). Group adjusted operating profit continues to exclude amortisation and impairment of intangible assets acquired in business combinations. Comparative amounts have been restated resulting in a reduction in the prior period Group adjusted operating profit of £112 million. There is no impact on profit before tax. Following the change in the definition of Group adjusted operating profit, operating earnings per share have also been restated to include the amortisation and impairment of internally generated intangible assets. Comparative amounts have been restated resulting in a reduction in prior period of 2.2 pence.

2 Other includes coupon payments in respect of the direct capital instrument (DCI) and tier 1 notes (net of tax).

IFRS profit after tax	2,663	1,687
Basic earnings per share	63.8p	38.2p

Operating profit increased by 6% to £3,184 million (2018: £3,004 million). During 2019, as part of our strategy to simplify our business, we aligned our UK digital business with our UK Life and UK General Insurance businesses. Whilst the effect of this is broadly neutral at Group level, it has had an impact on UK Life and UK General Insurance's operating profit this year which is explained below.

UK Life operating profit decreased by 2% to £1,855 million, which includes the adverse impact of the UK digital alignment. Excluding this, operating profit was up 1% which includes higher profit in annuities and equity release and further benefits from changes in longevity assumptions, partly offset by lower profit in protection and the legacy book.

Aviva Investors operating profit decreased by £51 million, mainly driven by lower operating revenue in 2019.

In our General Insurance businesses, operating profit decreased to £594 million (2018: £609 million). In the UK, general insurance operating profit was down 35% to £250 million (2018: £383 million), which includes the adverse impact of the UK digital alignment of £113 million. Excluding this, operating profit was down 5% due to higher expenses reflecting continued investment in IT infrastructure and less favourable prior year reserve releases, partly offset by lower weather costs compared to 2018. In Canada, operating profit improved by £164 million as the benefits from the extensive profit remediation plans that were put in place from late 2017 earned through, as well as more favourable prior year development and weather costs compared to 2018. Excluding disposals, Europe general insurance operating profit reduced by 23% to £154 million (2018: £199 million) mainly driven by higher large losses and less favourable prior year development in France and the impact of a new motor levy in Ireland.

Europe Life operating profit increased by 2% to £827 million (2018: £807 million), mainly driven by higher positive inflows from our hybrid savings product in Italy and improved profit in Ireland, partly offset by lower protection profit in France and lower fee income on assets under management in Poland.

In our Asia Life businesses, operating profit has increased by 5% to £276 million (2018: £263 million). Excluding FPI and Hong Kong, operating profit increased by 32% to £157 million (2018: £119 million) driven by growth in Singapore and China.

Other Group operations include investment return on centrally held assets, the results of our internal reinsurance business and the results of other operations. Total net loss in relation to non-insurance activities was lower at £26 million (2018: net loss of £212 million) mainly reflecting the alignment of the UK digital business to UK Life and UK General Insurance and lower Group head office costs.

Operating earnings per share increased by 4.3p to 60.5p (2018: 56.2p) due mainly to the increase in operating profit.

Page 14

6 - Divisional performance

6.i - UK Life and Investments, Savings & Retirement

In November 2019 we announced the creation of the Investments, Savings & Retirement (IS&R) business division, effective from 1 January 2020, which brings together Aviva Investors and the modern UK Savings and Retirement business to create a wealth and asset management business with a larger customer base, scale of assets and strong advisor relationships; this division is well positioned for growth. The division will be a leading provider of mass market savings and retirement solutions in the UK and the owner of a strong international asset management brand.

From 2020, our UK Life division incorporates three lines of business: annuities & equity release, protection & health, and heritage. This division is key in generating sustainable cash flows. This section summarises the performance of UK Life and Aviva Investors during 2019 on the basis on which they were managed during the year.

£m (unless otherwise stated)	2019	2018	Sterling % change	Constant currency %	2019	Restated 2018	Sterling % change	Constant currency %
UK Life and Investments, Savings & Retirement
Solvency II operating own funds generation and return on capital^‡	Solvency II operating own funds generation				Solvency II return on capital
UK Life (including UK Savings & Retirement)	1,244	1,552	(20)%	(20)%	9.3%	10.9%	(1.6)pp	(1.6)pp
Aviva Investors	70	111	(37)%	(37)%	13.7%	22.7%	(9.0)pp	(9.0)pp
	1,314	1,663	(21)%	(21)%	9.5%	11.3%	(1.8)pp	(1.8)pp

Solvency II operating capital generation^‡# and cash remittances^‡#	Solvency II operating capital generation				Cash remittances
UK Life (including UK Savings & Retirement)	1,170	1,821	(36)%	(36)%	1,387	2,152	(36)%	(36)%
Aviva Investors	90	126	(29)%	(29)%	86	92	(7)%	(7)%
	1,260	1,947	(35)%	(35)%	1,473	2,244	(34)%	(34)%

UK Life (including UK Savings & Retirement)
Operating profit^1,‡#					1,855	1,886	(2)%	(2)%
Controllable costs^‡					1,045	1,013	3%	3%
New business
PVNBP					27,570	23,946	15%	15%
VNB^‡					592	481	23%	23%

Aviva Investors
Revenue					542	597	(9)%	(9)%
Controllable costs^‡					446	450	(1)%	(1)%
Operating profit^1,‡#					96	147	(35)%	(35)%
Assets under management					£346bn	£331bn	5%	5%

UK Life (including UK Savings & Retirement) overview

During 2019, UK Life operating capital generation and operating profit both decreased due to a reduction in management actions and the alignment of UK digital business costs to UK Life, which is broadly neutral at Group level. Excluding the impact of these, growth in the bulk purchase annuities (BPA) business has offset the impact of expected outflows of the legacy book and reduced protection profits.

Operating and financial performance

Solvency II operating own funds generation and return on capital^‡

UK Life (including UK Savings & Retirement) Solvency II return on capital reduced by 1.6pp to 9.3% (2018: 10.9%) and Solvency II own funds generation decreased to £1,244 million (2018: 1,552 million). This is largely due to no benefit from transitional relief on new business together with adverse experience on protection business. In 2018, new business written contributed to the calculation of transitional measures (in line with clarification issued by the PRA since 2017) but it is no longer applicable to the Group in 2019. 2018 own funds generation included £218 million of transitional benefits.

Operating capital generation^‡#

UK Life Solvency II operating capital generation (OCG) has reduced to £1,170 million (2018: 1,821 million). This is mainly due to the absence of transitional benefits on new business together with adverse experience variances and a reduction in assumption changes and management actions. These have been partially offset by lower new business strain which has significantly reduced due to reinsurance actions. The impacts of longevity assumption changes are broadly comparable in 2018 and 2019, but 2019 includes adverse impacts from persistency and other non-economic assumption changes. 2018 also included positive impacts from modelling changes and additional equity volatility hedging that did not re-occur in 2019.

Cash^‡#

Cash remitted to Group by UK Life was £1,387 million (2018: 2,152 million), including a £500 million special remittance following recent longevity developments. 2018 included £1,250 million of special remittances, £750 million due to positive longevity developments and management actions and the final Friends Life integration remittance of £500 million.

# Symbol denotes key financial performance indicators used as a base to determine or modify remuneration.

‡ denotes APMs which are key performance indicators. There have been no changes to the APMs used by the Group during the period under review.

Page 15

6.i - UK Life and Investments, Savings & Retirement continued

Operating profit^1,‡#, new business and net flows

Operating profit^‡#	2019 £m	Restated¹ 2018 £m	Sterling % change
Long-term savings²	211	187	13%
Annuities and equity release	866	777	11%
Protection	166	221	(25)%
Legacy³	274	316	(13)%
Health	35	38	(8)%
Other⁴	303	347	(13)%
Total UK Life operating profit^‡#	1,855	1,886	(2)%

2 Includes workplace, platform, individual personal pensions and heritage pensions.

3 Legacy represents products no longer actively marketed, including with-profits and bonds.

4 Other life represents changes in assumptions and modelling, non-recurring items and non-product specific overheads.

UK Life & Health operating profit decreased by 2% to £1,855 million (2018: 1,886 million). Within this, lower profit in protection and our legacy book were offset by higher profit in annuities & equity release. There was a lower contribution from other items mainly due to the alignment of UK digital business costs within UK Life (which is neutral at Group level). More details are set out below.

			PVNBP			VNB^‡	New Business Margin
Gross of tax and non controlling interests	2019 £m	2018 £m	Sterling % change	2019 £m	2018 £m	Sterling % change	2019 %	2018 %
Long-term savings	18,884	16,829	12%	141	111	27%	0.7%	0.7%
Annuities and equity release	6,182	4,784	29%	284	196	45%	4.6%	4.1%
Protection	1,875	1,799	4%	126	140	(10)%	6.7%	7.8%
Health and Other	629	534	18%	41	34	21%	6.5%	6.4%
Total	27,570	23,946	15%	592	481	23%	2.1%	2.0%

PVNBP increased 15% to £27,570 million (2018: 23,946 million) as strong growth in BPA, workplace pensions, group protection and equity release was partly offset by lower platform and individual annuity volumes. VNB increased by 23% to £592 million (2018: 481 million), mainly reflecting growth in volumes and higher margins in annuities & equity release.

Managed assets and net flows	Platform £m	Pensions and other long-term savings £m	Total long- term savings £m	Annuities and equity release £m	Other UK non-profit £m	Total UK Life (excluding UK with-profits) £m	With profits and other £m	Total UK Life £m
Managed assets at 1 January 2019	22,643	93,060	115,703	61,554	22,814	200,071	48,167	248,238
Premiums and deposits, net of reinsurance	5,662	9,555	15,217	4,038	1,376	20,631	293	20,924
Claims and redemptions, net of reinsurance	(2,206)	(7,584)	(9,790)	(2,802)	(2,559)	(15,151)	(4,232)	(19,383)
Net flows	3,456	1,971	5,427	1,236	(1,183)	5,480	(3,939)	1,541
Market and other movements	2,986	13,842	16,828	4,353	2,074	23,255	3,243	26,498
Managed assets at 31 December 2019	29,085	108,873	137,958	67,143	23,705	228,806	47,471	276,277

Managed assets increased 11% to £276 billion (2018: 248 billion). Overall net flows were positive at £1.5 billion mainly due to new business growth in long-term savings and annuities & equity release.

Long-term savings

Long-term savings managed assets increased 19% to £138 billion (2018: 116 billion), with net fund inflows improving to £5.4 billion (2018: 5.0 billion). Within this, heritage pensions net outflows were £2.1 billion (2018: £1.9 billion). These were more than offset by workplace pension net fund flows which grew to £4.8 billion (2018: £3.7 billion), driven by new scheme wins with large corporates, the benefits of higher auto enrolment contributions and improved retention. Positive net fund flows of £3.5 billion (2018: 3.9 billion) along with market movements have resulted in platform managed assets growing 28% to £29.1 billion (2018: 22.6 billion).

Operating profit has increased by 13% to £211 million (2018: 187 million).

Long-term savings VNB increased 27% to £141 million (2018: 111 million) as a result of growth in workplace pensions VNB. Platform VNB has been impacted by lower volumes driven by uncertain investment markets.

Page 16

6.i - UK Life and Investments, Savings & Retirement continued

Annuities & equity release

Annuities & equity release operating profit increased to £866 million (2018: 777 million). Within this, new business profit increased to £506 million (2018: 363 million) as BPA volumes increased 55% to £4.0 billion (2018: 2.6 billion), including the partial buy-in of the Aviva staff pension scheme (£1.7 billion). Volumes in Individual annuities were 5% lower as we took a selective approach to trading to focus on margins. Existing business operating profit fell by £54 million to £360 million (2018: 414 million) as there has been no repeat of either the in-year favourable longevity experience in 2018 or the £24 million benefit seen in 2018 from asset mix optimisation.

Annuities & equity release VNB increased 45% to £284 million (2018: 196 million) despite the absence of new business transitional benefits in 2019. Growth has mainly been driven by higher BPA volumes written on a higher average margin due to pricing discipline, improved reinsurance rates and securing higher quality assets.

Protection

Protection operating profit decreased by 25% to £166 million (2018: 221 million) reflecting continued competitive trading conditions in the market, including the impact of hardening reinsurance rates and adverse claims experiences in group protection.

Overall protection VNB decreased by 10% to £126 million (2018: 140 million) mainly due to hardening reinsurance rates with PVNBP up 4% to £1,875 million (2018: 1,799 million). Group protection volumes grew strongly driven by large corporates growth. Individual protection volumes were stable despite competitive trading pressures.

Legacy

Legacy contributed operating profit of £274 million (2018: £316 million). 2019 fee income was impacted by lower asset values at the start of the year following weak investment markets towards the end of 2018. The fall in profit was broadly in line with the impact of expected net outflows.

Health

UK Health operating profit decreased by 8% to £35 million (2018: 38 million). Health and Other VNB improved to £41 million (2018: 34 million), due to growth in health volumes.

Other

Other operating profit is £303 million. During 2019, there was a net benefit from assumption changes of £574 million. Within this, continued net positive longevity and mortality developments, including adopting CMI 2018, gave a benefit of £751 million which was partly offset by updates to persistency (£126 million charge) and other assumptions. A benefit to reflect changes to our unitised with profit reserving approach (£167 million) was largely offset by a number of other modelling changes. We have recognised a £175 million provision to allow for certain pension policyholders that may not have been adequately informed of switching options available to them.

In 2018, Other of £347 million mainly included the benefit of continued positive longevity developments which led to a positive change to base mortality for individual annuities of £345 million. Updates to the rate of mortality improvements, including CMI 2017, had a benefit of £251 million and a refinement to BPA modelling together with changes to base mortality and improvements had a benefit of £132 million. Longevity benefits were partly offset by the recognition of an additional £175 million provision relating to potential redress for advised sales by Friends Provident (of which over 90% of cases relate to pre-2002) and a £119 million adverse impact in respect of the settlement of certain legacy reinsurance arrangements.

Controllable costs^‡

Controllable costs increased 3% to £1,045 million (2018: 1,013 million), including the effect of realigning £52 million of UK digital business costs to UK Life. Excluding these costs, controllable costs reduced by 2%. We have benefited from a continued focus on efficiency while continuing to invest in growth and simplification initiatives, including improvements to customer experience.

Aviva Investors overview

This was a challenging year for Aviva Investors leading to a reduction in revenue for the year. However, having invested in our investment capability and distribution in 2018, we have started to see the benefits of this investment in 2019, with net positive external clients flows in the year and a significant improvement in investment performance demonstrating the incremental value that we have achieved for our investors.

Cash^‡#

Cash remitted to Group was £86 million (2018: 92 million).

Controllable costs^‡

Aviva Investors controllable costs decreased to £446 million (2018: 450 million). The decrease in expenses includes £11 million cost savings partly offset by £7 million non-recurring restructuring costs.

Operating profit^‡#

Fund management operating profit decreased by £51 million to £96 million (2018: 147 million). Revenue decreased by £55 million to £542 million (2018: 597 million) driven by high margin external outflows, the effect of the 2018 disposals of an indirect real estate multi-manager business and our interest in the management of a pan-European commercial property fund, reduced internal client demand for originating assets and lower fee income due to run-off of the legacy internal client book of business. Cost control by the business helped mitigate the impact on profitability.

Page 17

6.i - UK Life and Investments, Savings & Retirement continued

Net flows and assets under management and under administration

Assets under management represent all assets managed by Aviva Investors. These comprise assets which are included within the Group's statement of financial position and those belonging to external clients outside the Group which are not included in the statement of financial position. Internal legacy relates to assets managed by Aviva Investors on behalf of the Group relating to products that are no longer actively marketed.

	Internal legacy £m	Internal core £m	External £m	Total £m
Aviva Investors
Assets under management at 1 January 2019	83,615	183,011	64,080	330,706
Total inflows	10,328	42,605	10,590	63,523
Total outflows	(18,143)	(41,216)	(8,250)	(67,609)
Net flows	(7,815)	1,389	2,340	(4,086)
Net flows into liquidity funds and cash	845	266	188	1,299
Transfers out to external managers	-	-	(3,223)	(3,223)
Market and foreign exchange movements	8,282	10,027	3,127	21,436
Assets under management at 31 December 2019	84,927	194,693	66,512	346,132
Externally managed assets under administration at 1 January 2019				29,104
Externally managed assets under administration net flows and other movements				7,188
Externally managed assets under administration at 31 December 2019				36,292
Assets under management and administration at 1 January 2019				359,810
Assets under management and administration at 31 December 2019				382,424

Assets under management increased by £15.4 billion to £346.1 billion (2018: 330.7 billion). This is due to £21.4 billion of favourable market and foreign exchange movements, external net inflows of £2.3 billion and £1.3 billion net flows into liquidity funds and cash, partly offset by outflows on our Aviva client of £6.4 billion and £3.2 billion of assets transferred to an external manager, which were previously managed by Aviva Investors under a legacy distribution agreement. Assets under management and administration at 31 December 2019 were £382.4 billion (2018: 359.8 billion).

Page 18

6.ii - General Insurance

£m (unless otherwise stated)	2019	Restated¹ 2018	Sterling % change	Constant currency %	2019	Restated¹ 2018	Sterling % change	Constant currency %
Operating profit^‡# and controllable costs^‡			Operating profit¹				Controllable costs²
UK	250	383	(35)%	(35)%	726	600	21%	21%
Canada	191	27	603%	591%	402	391	3%	1%
Europe (exc. Avipop)	154	199	(23)%	(22)%	288	271	7%	8%
Asia	(1)	(2)	41%	43%	4	4	(4)%	(7)%
	594	607	(2)%	(2)%	1,420	1,266	12%	12%
Disposals (Avipop)	-	2	(100)%	(100)%	-	2	(100)%	(100)%
	594	609	(3)%	(3)%	1,420	1,268	12%	12%

NWP and COR^‡				NWP				COR
UK	4,218	4,193	1%	1%	97.9%	94.6%	3.3pp
Canada	3,061	2,928	5%	3%	97.8%	103.1%	(5.3)pp
Europe (exc. Avipop)	2,017	1,971	2%	3%	95.7%	93.5%	2.2pp
Asia	13	13	-	(3)%	n/a	n/a	n/a
	9,309	9,105	2%	2%	97.5%	97.2%	0.3pp
Disposals (Avipop)	-	14	(100)%	(100)%	-	87.8%	n/a
	9,309	9,119	2%	2%	97.5%	97.2%	0.3pp

Solvency II operating own funds generation					628	532	18%	18%
Solvency II return on capital ^‡					14.0%	11.7%	2.3pp	2.2pp

Solvency II operating capital generation^‡#					574	647	(11)%	(13)%
Cash remittances^‡#					584	536	9%	9%

2 Comparatives have been reclassified to reallocate non-insurance operations of Europe and Asia to their respective market segments to better reflect the management of the underlying businesses.

Overview

Aviva's General Insurance business operates at scale in the UK and Canada and we have a European business that operates in France, Ireland, Poland and Italy.

During 2019, as part of our strategy to simplify our business, we aligned our UK digital business with UK General Insurance and UK Life. It has had a significant impact on a number of UK GI's headline metrics this year which is explained in the analysis below.

Overall, General Insurance net written premiums were up 2% to £9,309 million (2018: £9,119 million) driven by growth in commercial lines. Operating profit was slightly lower at £594 million (2018: £609 million), and the COR was 97.5% (2018: 97.2%). Excluding the adverse impact of £113 million from the alignment of UK digital, operating profit increased 16% to £707 million (2018: £609 million), and the COR improved 0.9pp to 96.3% (2018: 97.2%). Within this, significantly improved profitability in Canada was offset by lower profits in the UK and from our European businesses.

All percentage movements below are quoted in constant currency unless otherwise stated.

Operating and financial performance

UK General Insurance

As noted above, the alignment of the UK digital business with UK General Insurance during the year has had a significant impact on UK GI's headline metrics in 2019.

Operating profit ^‡#

Overall, operating profit was down 35% at £250 million (2018: £383 million). Excluding an adverse impact of £113 million from alignment of UK digital, operating profit was down 5% at £363 million (2018: £383 million). Within this, there was a 10% fall in the underwriting result to £199 million (2018: £221 million) which included higher expenses reflecting continued investment in our IT infrastructure and less favourable prior year reserve releases but lower weather costs compared to 2018. Long-term investment return was up 3% at £166 million (2018: 161 million).

Following the announcement by the Lord Chancellor on 15 July 2019 to increase the Ogden discount rate from the -0.75% set in 2017 to
-0.25%, balance sheet reserves in the UK were calculated using a discount rate of -0.25% at 31 December 2019. This compares to the Ogden discount rate¹ applied at 31 December 2018 of 0.00%. This has resulted in a strengthening of claims reserves of £45 million. The negative impact of this reserve change has been excluded from operating profit in line with previous periods. See note A11. The Ogden discount rate is expected to be reviewed again by the Lord Chancellor within five years.

1 The Ogden discount rate in Scotland is still at -0.75%.

Page 19

6.ii - General Insurance continued

UK General Insurance continued

NWP and COR ^‡

NWP increased by 1% to £4,218 million (2018: £4,193 million). UK Personal lines NWP reduced 4% to £2,399 million (2018: £2,494 million) as we maintained our pricing discipline in Motor and targeted reductions in poor performing segments, combined with the continued run-off of the Creditor book. Home premiums were broadly stable. UK Commercial lines NWP increased 7% to £1,819 million (2018: £1,699 million) driven by a combination of volume and above inflation rate increases. There was an 8% increase in Commercial non-motor NWP to £1,264 million (2018: £1,167 million) with solid growth in SME and Global Corporate Specialty (GCS), while Commercial motor NWP increased 4% to £555 million (2018: £532 million).

Overall, UK GI COR was 97.9% (2018: 94.6%). Excluding the 2.7pp effect of the alignment of UK digital, COR was 0.6pp higher at 95.2% (2018: 94.6%) for the reasons described in relation to operating profit above.

Personal lines COR of 99.3% (2018: 92.9%) was 6.4pp higher year-on-year, of which 4.6pp reflects the UK digital alignment. Excluding this, Personal lines COR was 1.8pp higher reflecting higher expenses and lower prior year reserve releases, partly offset by lower weather costs. Commercial lines COR of 96.0% (2018: 97.3%) was 1.3pp better year-on-year, reflecting higher prior year reserve releases and lower weather costs.

Controllable costs^‡

Controllable costs increased to £726 million (2018: £600 million). Excluding the impact from the alignment of UK digital, controllable costs were up 3% to £619 million (2018: £600 million) reflecting continued investment in our IT infrastructure, partly offset by savings in the underlying costs of running the business.

Canada

Operating profit ^‡#

During 2019, operating profit of £191 million (2018: £27 million) improved due to the extensive profit remediation plan put in place towards the end of 2017 with actions around pricing, indemnity management and risk selection.

In 2019, the underwriting result was a profit of £65 million (2018: loss of £90 million), mainly driven by premium rate increases, lower claims frequency and severity in our personal lines business, better weather conditions compared to the long-term average and favourable prior year reserve development, partly offset by higher commission. Long-term investment return improved 11% due to higher yields on short-duration securities and actions to optimise returns within our fixed income portfolio.

NWP and COR^‡

Net written premiums were £3,061 million (2018: £2,928 million), up 3% on a constant currency basis. In personal lines, NWP was broadly stable at £2,100 million (2018: £2,107 million). Commercial lines NWP increased to £961 million (2018: £821 million) due to growth in Global Corporate and Specialty new business and rate increases put through during renewals.

The COR improved to 97.8% (2018: 103.1%) due to the improvement in the underwriting result described above.

Controllable costs^‡

Controllable costs were 1% higher in constant currency at £402 million (2018: 391 million), reflecting increased investment in claims personnel and processes, investment in our pricing capabilities and the Global Corporate and Specialty business and continued investment in our IT infrastructure, mostly offset by lower real estate and other operating expenses.

Europe

Operating profit ^‡#

Excluding disposals, Europe general insurance operating profit reduced by 22% to £154 million (2018: £199 million). Dealing with each of the markets in turn:

· In France, operating profit was £65 million (2018: 92 million), with growth in net earned premiums of 6%, particularly in commercial lines, more than offset by higher large losses and less favourable prior year reserve development than 2018.

· In Poland, operating profit was £20 million (2018: 21 million) with net earned premiums in line with 2018.

· In Italy, excluding disposals, operating profit was down 23% to £22 million (2018: 30 million). Within this net earned premiums were down 3% as underwriting actions taken on the personal motor book during 2018 earned through and there were higher large losses in commercial lines and higher expenses.

· In Ireland, operating profit reduced to £47 million (2018: £56 million) driven by a soft market in personal lines with earned premiums 2% lower than 2018, and higher expenses (driven largely by the impact of the new motor levy of 2% applied to all motor policies since December 2018), partly offset by lower large losses and more benign weather than 2018.

NWP and COR ^‡

Excluding the disposal of Avipop, NWP increased by 3% to £2,017 million (2018: £1,971 million) with growth in France, Italy and Poland (particularly in commercial lines) partly offset by lower premiums in Ireland as we maintained strong underwriting discipline in a soft personal motor market.

COR has increased by 2.2pp to 95.7% (2018: 93.5%) for the reasons described in the operating profit section above.

Controllable costs ^‡

Controllable costs were up 8% to £288 million (2018: 271 million) excluding the disposal of Avipop, which includes investment in underwriting platforms in Italy.

Page 20

6.ii - General Insurance continued

Solvency II and cash remittances

Solvency II operating own funds generation and return on capital^‡

General Insurance Solvency II return on capital increased by 2.3pp to 14.0% (2018: 11.7%) and Solvency II own funds generation increased to £628 million (2018: 532 million). The increase is driven by Canada, where benefits from the extensive profit remediation plan put in place towards the end of 2017 are materialising. In the UK, own funds generation was broadly stable as the impacts of the alignment of UK digital business costs and continued investment in our IT infrastructure were offset by favourable weather experience and assumption changes. In Europe, there is a reduction due to large losses and less favourable prior year development releases in France and higher expenses in Ireland and Italy.

Operating capital generation^‡#

General Insurance Solvency II operating capital generation has reduced by £73 million to £574 million (2018: 647 million). In Canada, there was an increase of £122 million as benefits from the extensive profit remediation plan put in place towards the end of 2017 is materialising. This is offset in the UK, where there has been a reduction of £151 million, primarily due to the alignment of UK digital business costs within the UK General Insurance business, continued investment in our IT infrastructure and an increase in capital requirements due to volume growth in Commercial lines. Alignment of the UK digital business costs has resulted in an increase in the solvency capital requirement due to differential capital treatment for insurance and non-insurance entities. In Europe, there is a reduction is due to large losses and less favourable prior year development releases in France and higher expenses in Ireland and Italy.

Cash^‡#

Cash remitted to Group increased by £48 million to £584 million (2018: £536 million). In Canada, cash remitted increased to £156 million (2018: 28 million), reflecting improved underwriting performance. This was offset by a reduction in cash remitted from UK General Insurance which reduced to £248 million (2018: £361 million), reflecting lower Solvency II operating capital generation primarily due to the alignment of UK digital. Cash remitted from Europe was £180 million (2018: £147 million), which includes a £65 million special remittance following the disposal of Avipop in Italy in 2018.

Page 21

6.ii - General Insurance continued

2019	UK Personal £m	UK Commercial £m	Total UK £m	Canada Personal £m	Canada Commercial £m	Total Canada £m	Europe £m	Asia £m	Total £m
General insurance
Gross written premiums	2,470	2,154	4,624	2,134	1,070	3,204	2,121	15	9,964
Net written premiums	2,399	1,819	4,218	2,100	961	3,061	2,017	13	9,309
Net earned premiums	2,440	1,721	4,161	2,078	884	2,962	1,982	15	9,120
Net claims incurred	(1,545)	(1,049)	(2,594)	(1,421)	(531)	(1,952)	(1,306)	(12)	(5,864)
Of which claims handling costs			(155)			(116)	(64)	-	(335)
Earned commission	(599)	(364)	(963)	(378)	(194)	(572)	(365)	(2)	(1,902)
Earned expenses	(279)	(239)	(518)	(233)	(140)	(373)	(225)	(3)	(1,119)
Underwriting result	17	69	86	46	19	65	86	(2)	235
Long-term investment return (LTIR)			166			133	76	1	376
Other¹			(2)			(7)	(8)	-	(17)
Operating profit (GI)			250			191	154	(1)	594
General insurance combined operating ratio
Claims ratio	63.3%	60.9%	62.3%	68.4%	60.0%	65.9%	65.9%		64.4%
Of which:
Prior year reserve development (%)			(2.6)%			(0.6)%	(1.8)%		(1.7)%
Weather claims (under)/over long-term average (%)			(2.4)%			(0.7)%	1.2%		(1.0)%
Commission ratio	24.6%	21.2%	23.1%	18.2%	22.0%	19.3%	18.4%		20.8%
Expense ratio	11.4%	13.9%	12.5%	11.2%	15.8%	12.6%	11.4%		12.3%
Combined operating ratio	99.3%	96.0%	97.9%	97.8%	97.8%	97.8%	95.7%		97.5%
Assets supporting general insurance business
Debt securities			2,323			4,633	2,209	81	9,246
Equity securities			744			231	161	-	1,136
Investment property			414			-	170	-	584
Cash and cash equivalents			609			158	160	23	950
Other²			1,882			150	387	-	2,419
Assets at 31 December 2019			5,972			5,172	3,087	104	14,335
Debt securities			2,367			4,445	2,179	72	9,063
Equity securities			568			208	90	-	866
Investment property			380			-	148	-	528
Cash and cash equivalents			700			130	371	15	1,216
Other²			1,776			207	615	-	2,598
Assets at 31 December 2018			5,791			4,990	3,403	87	14,271
Average assets			5,882			5,081	3,245	96	14,304
LTIR as % of average assets			2.8%			2.6%	2.3%	1.0%	2.6%

1 Includes the result of non-insurance operations, unwind of discount rate, pension scheme net finance costs and IFRS 16 leases expense interest.

2 Includes loans and other financial investments.

Page 22

6.ii - General insurance continued

Restated¹ 2018	UK Personal £m	UK Commercial £m	Total UK £m	Canada Personal £m	Canada Commercial £m	Total Canada £m	Europe £m	Asia⁶ £m	Total £m
General insurance
Gross written premiums	2,562	1,942	4,504	2,143	904	3,047	2,075	14	9,640
Net written premiums	2,494	1,699	4,193	2,107	821	2,928	1,985	13	9,119
Net earned premiums	2,493	1,613	4,106	2,116	839	2,955	1,963	11	9,035
Net claims incurred	(1,546)	(1,019)	(2,565)	(1,609)	(513)	(2,122)	(1,264)	(7)	(5,958)
Of which claims handling costs			(159)			(110)	(60)	-	(329)
Earned commission	(601)	(336)	(937)	(377)	(172)	(549)	(368)	(1)	(1,855)
Earned expenses	(168)	(215)	(383)	(234)	(140)	(374)	(204)	(5)	(966)
Underwriting result	178	43	221	(104)	14	(90)	127	(2)	256
Long-term investment return (LTIR)			161			120	82	-	363
Other²			1			(3)	(8)	-	(10)
Operating profit (GI)^3,4			383			27	201	(2)	609
General insurance combined operating ratio
Claims ratio	62.0%	63.2%	62.5%	76.1%	61.1%	71.8%	64.4%		66.0%
Of which:
Prior year reserve development (%)			(2.5)%			(1.3)%	(2.8)%		(2.3)%
Weather claims (under)/over long-term average (%)			(0.7)%			0.3%	1.7%		0.1%
Commission ratio	24.1%	20.8%	22.8%	17.8%	20.5%	18.6%	18.7%		20.5%
Expense ratio	6.8%	13.3%	9.3%	11.1%	16.7%	12.7%	10.4%		10.7%
Combined operating ratio^3,4	92.9%	97.3%	94.6%	105.0%	98.3%	103.1%	93.5%		97.2%
Assets supporting general insurance business
Debt securities			2,367			4,445	2,179	72	9,063
Equity securities			568			208	90	-	866
Investment property			380			-	148	-	528
Cash and cash equivalents			700			130	371	15	1,216
Other⁵			1,776			207	615	-	2,598
Assets at 31 December 2018			5,791			4,990	3,403	87	14,271
Debt securities			3,020			4,273	2,423	75	9,791
Equity securities			492			247	33	-	772
Investment property			323			-	176	-	499
Cash and cash equivalents			546			140	399	14	1,099
Other⁵			1,763			252	650	1	2,666
Assets at 31 December 2017			6,144			4,912	3,681	90	14,827
Average assets			5,968			4,951	3,542	89	14,550
LTIR as % of average assets			2.7%			2.4%	2.3%	-	2.5%

1 Following a review of the Group's presentation of consolidated investment funds, comparative amounts have been restated from those previously reported. The restatement has had no impact on the profit for the year or equity. See note B1 for further information.

2 Includes the result of non-insurance operations, unwind of discount rate, pension scheme net finance costs and IFRS 16 leases expense interest.

3 During 2019 the Group adjusted operating profit APM has been revised and now includes the amortisation and impairment of internally generated intangible assets to better reflect the operational nature of these assets (see note B2(b)). Group adjusted operating profit continues to exclude amortisation and impairment of intangible assets acquired in business combinations. There is no impact on profit before tax. Following the change in the definition of Group adjusted operating profit, COR has also been restated to include the amortisation and impairment of internally generated intangible assets. Comparative amounts have been restated.

4 Comparatives have been reclassified to reallocate non-insurance operations for Europe and Asia to their respective market segments to better reflect the management of the underlying businesses.

5 Includes loans and other financial investments.

6 Aviva Re is no longer included and comparative amounts have been restated from those previously reported.

Page 23

6.iii - Europe Life

£m (unless otherwise stated)	2019	2018	Sterling % change	Constant currency %	2019	Restated^1,2 2018	Sterling % change	Constant currency %
Solvency II operating own funds generation					574	384	50%	53%
Solvency II return on capital^‡					10.3%	6.9%	3.4pp	3.6pp

Solvency II operating capital generation^‡#					754	724	4%	6%
Cash remittances^‡#					414	336	23%	24%

Operating profit^‡#
France					408	418	(2)%	(2)%
Poland					174	177	(2)%	-
Italy (exc. Avipop)					173	147	17%	18%
Other Europe (exc. Spain)					72	50	47%	51%
					827	792	4%	6%
Disposals (Avipop, Spain)					-	15	(100)%	(100)%
					827	807	2%	4%

Controllable costs^‡					548	568	(4)%	(2)%

New business				PVNBP				VNB^‡
France	5,702	4,335	32%	33%	168	210	(20)%	(19)%
Poland	624	486	28%	30%	64	58	10%	13%
Italy (exc. Avipop)	5,537	6,263	(12)%	(11)%	147	222	(34)%	(33)%
Other Europe	1,909	1,541	24%	28%	35	24	46%	56%
	13,772	12,625	9%	10%	414	514	(19)%	(18)%
Disposals (Avipop)	-	16	(100)%	(100)%	-	3	(100)%	(100)%
	13,772	12,641	9%	10%	414	517	(20)%	(19)%

2 Comparatives have also been reclassified to reallocate non-insurance operations to their respective market segments to better reflect the management of the underlying businesses.

Overview

Aviva operates in a number of markets in Europe with insurance operations in France, Italy, Poland, Ireland and Turkey. During 2019 we have focused on the development and implementation of our market strategies for organic growth and the integration of Friends First in Ireland. In 2019, excluding disposals, operating profit increased by 4% to £827 million (2018: £792 million) with growth in Italy and higher profit in Ireland, partly offset by lower profits in France and Poland.

All percentage movements below are quoted in constant currency unless otherwise stated.

Operating and financial performance

Solvency II operating own funds generation and return on capital^‡

Europe Life Solvency II return on capital has increased by 3.4pp to 10.3% (2018: 6.9%) and Solvency II operating own funds generation increased to £574 million (2018: £384 million). This was primarily driven by modelling and assumption changes in Italy which are partly offset by a reduction in own funds generation from new business in France and Italy due to the impact of lower interest rates. 2018 included the adverse impact on own funds arising from the transfer of pensions business into a supplementary occupational pension fund (FRPS) in France (note the overall impact on capital generation was beneficial due to a significant reduction in solvency capital requirement).

Operating capital generation (OCG) ^‡#

Europe Life Solvency II operating capital generation has increased by £30 million to £754 million (2018: £724 million). Increases in management actions and higher returns on existing business have been partially offset by the increase in new business strain as a result of the low interest rate environment. In 2019, management actions included the beneficial impact of modelling and assumption changes in Italy as well as increased market risk hedging in France, while 2018 included the beneficial assumption changes and a benefit arising from the transfer of pensions business into a supplementary occupational pension fund (FRPS) in France.

Cash^‡#

Cash remitted to Group was £414 million (2018: £336 million). This includes a special remittance of £107 million following the disposal of Avipop in Italy in 2018. 2019 remittances from France are £141 million (2018: £176 million), which are shown after adjusting for a capital injection of £139 million (2018: £nil), as the net amount more appropriately reflects the overall remittances received from France during the year.

Operating profit^‡#

Excluding the impact of disposals, the operating profit of our life and health businesses grew by 6% to £827 million (2018: 792 million). Dealing with each of the markets in turn:

· In France, operating profit reduced by 2% to £408 million (2018: £418 million). Within this, the life result was down 5% to £387 million (2018: 408 million), mainly due to lower protection profit (including adverse claims experience in 2019), partly offset by an increase in savings business profit. The health result was £21 million (2018: 10 million) following actions to improve profitability.

· In Poland, operating profit was flat in constant currency terms at £174 million (2018: 177 million), with lower fee income on assets under management as a result of weak equity markets towards the end of 2018 offset by a more favourable mix of new business, and an improved result on protection business.

Page 24

6.iii - Europe Life continued

Operating profit^‡# continued

· In Italy, operating profit was £173 million (2018: 147 million), an increase of 18% with significant net inflows to our hybrid product in 2017 and 2018 driving higher revenue on assets under management and an increase in profit from existing business.

· In Ireland, operating profit increased to £59 million (2018: £40 million), an increase of 49% mainly driven by a one-off benefit from methodology and assumption changes and the inclusion of a full year of Friends First in 2019.

· In Turkey, operating profit was £13 million (2018: £10 million), mainly driven by strong growth in our protection business.

Managed assets and net flows

	2019 £m	2018 £m
Managed assets at 1 January	118,502	114,068
Premiums and deposits, net of reinsurance	12,474	11,746
Claims and redemptions, net of reinsurance	(7,992)	(7,547)
Net flows	4,482	4,199
Market and other movements	2,596	235
Managed assets at 31 December	125,580	118,502

Net inflows in Europe of £4.5 billion (2018: £4.2 billion) include the growth in sales of our hybrid savings product in Italy and strong inflows into savings products in France. Favourable market and other movements in Europe were £2.6 billion (2018: £0.2 billion).

Controllable costs^‡

Controllable costs for Europe Life reduced by 2% to £548 million (2018: £568 million). Excluding disposals, controllable costs were down 3% to £548 million (2018: £562 million) mainly due to a reduction in project spend in France partly offset by increased marketing and IT spend in Italy.

New business

Excluding disposals, PVNBP was up 10% to £13,772 million (2018: £12,625 million). VNB decreased by 18% to £414 million (2018: 514 million).

In France, PVNBP was up 33% reflecting growth in sales of with-profits savings products and the acquisition of a significant collective pension scheme with EDF. VNB was down 19% primarily due to an adverse margin impact from lower interest rates. In Poland PVNBP increased by 30% driven by the performance of our new protection product and pensions transfers. In Italy, PVNBP was down by 11% due to a reduction in standalone with-profits and unit-linked volumes, partially offset by further growth in our hybrid product whilst VNB margins were adversely impacted by lower interest rates.

Page 25

6.iv - Asia Life

£m (unless otherwise stated)	2019	2018	Sterling % change	Constant currency %	2019	Restated^1,2 2018	Sterling % change	Constant currency %
Solvency II operating own funds generation					187	144	30%	27%
Solvency II return on capital^‡					12.7%	9.7%	3.0pp	3.0pp

Solvency II operating capital generation^‡#					60	55	9%	7%
Cash remittances^‡#					51	6	-	-

Operating profit^‡#
Singapore					145	123	17%	14%
China					25	22	18%	18%
Other Asia (exc.FPI & Hong Kong)					(13)	(26)	52%	54%
					157	119	33%	29%
FPI					128	151	(16)%	(16)%
Hong Kong					(9)	(7)	(26)%	(21)%
					276	263	5%	4%

Controllable costs^‡					198	183	9%	6%

New business				PVNBP				VNB^‡
Singapore	1,580	1,279	24%	19%	159	152	5%	2%
China	718	650	10%	10%	43	42	1%	1%
Other Asia (exc.FPI & Hong Kong)	406	279	45%	41%	8	-	-	-
	2,704	2,208	22%	20%	210	194	9%	6%
FPI	351	448	(22)%	(22)%	(1)	(2)	7%	7%
Hong Kong	2	-	-	-	(3)	(3)	-	-
	3,057	2,656	15%	13%	206	189	9%	6%

2 C omparatives have also been reclassified to reallocate non-insurance operations to their respective market segments to better reflect the management of the underlying.

Overview

We are focused on high potential markets in Singapore and China. All of our markets provide access to a combined population of over 3 billion people, with relatively low insurance penetration compared to Western markets. We currently provide life and health insurance solutions to over 5 million individuals across our markets in Asia.

During 2019, Asia Life delivered growth in VNB and operating profit whilst continuing to expand and strengthen its multi-channel platform. Singapore grew its distribution network with a total of 1,819 advisers as of 31 December 2019. Aviva-COFCO, our joint venture in China, continued to focus on its core agency channel, made a positive recovery from regulatory tightening in 2018 and paid its first dividend to Group.

Our FPI business and our business in Hong Kong are classified as held for sale at 31 December 2019.

All percentage movements below are quoted in constant currency unless otherwise stated .

Operating and financial performance

Operating own funds generation, return on capital and operating capital generation^‡

Asia Life Solvency II return on capital has increased by 3.0pp to 12.7% (2018: 9.7%), Solvency II own funds generation increased by £43 million to £187 million (2018: £144 million) and Solvency II operating capital generation has increased by £5 million to £60 million (2018: £55 million). The increase is primarily due to growth and beneficial non-economic assumption changes in Singapore.

Cash^‡#

Cash remitted to Group in 2019 has increased to £51 million (2018: £6 million), mainly attributable to improved performance in Singapore. China paid its first dividend to Group of £5 million (2018: £nil) in 2019.

Operating profit^‡#

Operating profit from our life and health businesses was £276 million (2018: £263 million). Excluding FPI and Hong Kong, operating profit increased by 29% to £157 million (2018: £119 million). Within this, Singapore's result improved 14% to £145 million (2018: 123 million), with continued growth in our financial advisory channel, increasing new business volumes and improved profitability in health insurance. China's profit improved by 18% to £25 million (2018: 22 million). Due to run-off of its existing business, operating profit for FPI was £128 million
(2018: £151 million).

Page 26

6.iv - Asia Life continued

Managed assets and net flows

	2019 £m	2018 £m
Managed assets at 1 January	14,775	14,526
Premiums and deposits, net of reinsurance	927	898
Claims and redemptions, net of reinsurance	(838)	(431)
Net flows	89	467
Market and other movements	274	(218)
Managed assets at 31 December	15,138	14,775

Singapore is the major contributor to Asia's managed assets, which overall increased to £15,138 million (2018: £14,775 million) in 2019. Net inflows were £89 million (2018: £467 million) with higher sales and higher net claims and redemptions compared to 2018, mainly driven by Singapore. Following increased sales through the financial advisers distribution channel, Singapore also paid out more claims, mostly from product maturities during the year.

Controllable costs^‡

Total controllable costs for Asia Life subsidiaries was £198 million (2018: £183 million). Excluding Hong Kong and FPI, controllable costs were £155 million (2018: £140 million). The increase was mainly to support Singapore's financial adviser development initiative and organic channel growth across Asia.

New business

Excluding Hong Kong and FPI, PVNBP increased by 20% to £2,704 million (2018: £2,208 million), and VNB increased by 6% to £210 million (2018: £194 million). The increases were led by double digit PVNBP growth in Singapore and China.

Page 27

7 - Life business profit drivers

		UK Life		Europe Life		Asia Life		Total
	2019 £m	Restated¹ 2018 £m	2019 £m	Restated¹ 2018 £m	2019 £m	Restated¹ 2018 £m	2019 £m	Restated¹ 2018 £m
New business income	919	772	299	309	317	300	1,535	1,381
Underwriting margin	287	382	250	196	97	103	634	681
Investment return	1,321	1,406	1,231	1,131	251	233	2,803	2,770
Total income	2,527	2,560	1,780	1,636	665	636	4,972	4,832
Acquisition expenses	(407)	(425)	(302)	(335)	(250)	(217)	(959)	(977)
Administration expenses¹	(797)	(821)	(588)	(525)	(115)	(101)	(1,500)	(1,447)
Total expenses	(1,204)	(1,246)	(890)	(860)	(365)	(318)	(2,459)	(2,424)
Other²	497	534	(84)	21	(17)	(41)	396	514
Life business operating profit	1,820	1,848	806	797	283	277	2,909	2,922
Health business operating profit	35	38	21	10	(7)	(14)	49	34
Total divisional operating profit	1,855	1,886	827	807	276	263	2,958	2,956

2 Other represents DAC, changes in assumptions and modelling, non-recurring items and non-product specific items and excludes the total profit of £27 million (2018: loss of £3 million) for Aviva Investors' Pooled Pensions and Aviva Life Reinsurance. Additionally, comparatives have been reclassified to reallocate non-insurance operations for Europe and Asia to their respective market segments to better reflect the management of the underlying businesses.

Income: New business income and underwriting margin

		UK Life		Europe Life		Asia Life		Total
	2019 £m	2018 £m	2019 £m	2018 £m	2019 £m	2018 £m	2019 £m	2018 £m
New business income	919	772	299	309	317	300	1,535	1,381
Acquisition expenses	(407)	(425)	(302)	(335)	(250)	(217)	(959)	(977)
Net contribution	512	347	(3)	(26)	67	83	576	404
APE (£m)¹	4,056	3,444	1,495	1,381	429	359	5,980	5,184
As margin on APE (%)	13%	10%	-	(2)%	16%	23%	10%	8%
Underwriting margin (£m)	287	382	250	196	97	103	634	681
Analysed by:
Expenses	62	63	64	67	77	75	203	205
Mortality and longevity	225	319	157	122	34	30	416	471
Persistency	-	-	29	7	(14)	(2)	15	5

1 APE excludes Retail Fund Management and Health business in Asia.

Income: Investment return

		UK Life		Europe Life		Asia Life		Total
	2019 £m	2018 £m	2019 £m	2018 £m	2019 £m	2018 £m	2019 £m	2018 £m
Unit-linked margin (£m)	835	903	592	581	213	204	1,640	1,688
As annual management charge on average reserves (bps)	57	66	136	136	245	217	83	89
Average reserves (£bn)¹	146.1	137.6	43.6	42.8	8.7	9.4	198.4	189.8
Participating business (£m)²	132	165	549	461	4	4	685	630
As bonus on average reserves (bps)	33	39	77	68	9	10	59	55
Average reserves (£bn)¹	40.4	42.4	71.3	67.5	4.3	4.1	116.0	114.0
Spread margin (£m)	286	266	2	2	7	7	295	275
As spread margin on average reserves (bps)	42	40	4	4	33	37	39	38
Average reserves (£bn)¹	67.7	65.8	4.9	4.5	2.1	1.9	74.7	72.2
Expected return on shareholder assets (£m)³	68	72	88	87	27	18	183	177
Total (£m)	1,321	1,406	1,231	1,131	251	233	2,803	2,770
Total average reserves (£bn)¹	254.2	245.8	119.8	114.8	15.1	15.4	389.1	376.0

1 An average of the insurance or investment contract liabilities over the reporting period, including managed pension business which is not consolidated within the statement of financial position.

2 The shareholders' share of the return on with- profits and other participating business.

3 The expected investment return based on opening economic assumptions applied to expected surplus assets over the reporting period that are not backing policyholder liabilities.

Expenses

		UK Life		Europe Life		Asia Life		Total
	2019 £m	Restated¹ 2018 £m	2019 £m	Restated¹ 2018 £m	2019 £m	Restated¹ 2018 £m	2019 £m	Restated¹ 2018 £m
Acquisition expenses (£m)	(407)	(425)	(302)	(335)	(250)	(217)	(959)	(977)
APE (£m)²	4,056	3,444	1,495	1,381	429	359	5,980	5,184
As acquisition expense ratio on APE (%)	10%	12%	20%	24%	58%	60%	16%	19%
Administration expenses (£m)	(797)	(821)	(588)	(525)	(115)	(101)	(1,500)	(1,447)
As existing business expense ratio on average reserves (bps)	31	33	49	46	76	66	39	38
Total average reserves (£bn)³	254.2	245.8	119.8	114.8	15.1	15.4	389.1	376.0

2 APE excludes Retail Fund Management and Health business in Asia.

3 An average of the insurance or investment contract liabilities over the reporting period, including managed pension business which is not consolidated within the statement of financial position.

Page 28

Financial supplement

		Page
A	Income & expenses and IFRS capital	29
B	IFRS financial statements and notes	38
C	Analysis of assets	93

	In this section
A	Income & expenses and IFRS capital
Group adjusted operating profit Reconciliation of Group adjusted operating profit to profit for the year		29 29
A1	Other operations	30
A2	Corporate centre	30
A3	Group debt costs and other interest	30
A4	Life business: Investment variances and economic assumption changes	31
A5	Non-life business: Short-term fluctuation in return on investments	33
A6	General insurance and health business: Economic assumption changes	34
A7	Impairment of goodwill, joint ventures , associates and other amounts expensed	34
A8	Amortisation and impairment of intangibles acquired in business combinations	34
A9	Amortisation and impairment of acquired value of in-force business	34
A10	Profit/loss on the disposal and remeasurement of subsidiaries, joint ventures and associates	34
A11	Other	34
A12	Net asset value	35
A13	Analysis of return on equity	36
A14	Group capital under IFRS basis	37

Page 29

Group adjusted operating profit^‡#

For the year ended 31 December 2019

The table below reconciles Group adjusted operating profit as presented in Overview section 6 Divisional performance to Group adjusted operating profit as presented in note B6(a) Segmental information.

	United Kingdom			Europe
	UK Life £m	UK GI £m	Canada £m	France £m	Poland £m	Italy, Ireland & Other £m	Asia £m	Aviva Investors £m	Other Group Activities £m	Total 2019 £m
Group adjusted operating profit before tax attributable to shareholders' profits
UK Life and Investments, Savings & Retirement	1,855	-	-	-	-	-	-	96	-	1,951
General Insurance	-	250	191	65	20	69	(1)	-	-	594
Europe Life	-	-	-	408	174	245	-	-	-	827
Asia Life	-	-	-	-	-	-	276	-	-	276
Other Group operations (note A1)	-	-	-	-	-	-	-	-	(26)	(26)
	1,855	250	191	473	194	314	275	96	(26)	3,622
Corporate centre (note A2)										(183)
Group debt costs and other interest (note A3)										(255)
Group adjusted operating profit before tax attributable to shareholders' profits										3,184

For the year ended 31 December 2018 - restated^1,2

	United Kingdom			Europe
	UK Life £m	UK GI £m	Canada £m	France £m	Poland £m	Italy, Ireland, Spain & Other £m	Asia £m	Aviva Investors £m	Other Group Activities £m	Total 2018 £m
Group adjusted operating profit before tax attributable to shareholders' profits
UK Life and Investments, Savings & Retirement	1,886	-	-	-	-	-	-	147	-	2,033
General Insurance	-	383	27	92	21	88	(2)	-	-	609
Europe Life	-	-	-	418	177	212	-	-	-	807
Asia Life	-	-	-	-	-	-	263	-	-	263
Other Group operations (note A1)	-	-	-	-	-	-	-	1	(213)	(212)
	1,886	383	27	510	198	300	261	148	(213)	3,500
Corporate centre (note A2)										(216)
Group debt costs and other interest (note A3)										(280)
Group adjusted operating profit before tax attributable to shareholders' profits										3,004

2 Comparatives have been reclassified to reallocate non-insurance operations of Europe and Asia to their respective market segments to better reflect the management of the underlying businesses consistent with the segmental analysis shown in note B6(a).

Reconciliation of Group adjusted operating profit^‡# to profit for the year

	2019 £m	Restated¹ 2018 £m
Group adjusted operating profit before tax attributable to shareholders' profits	3,184	3,004
Adjusted for the following:
Life business: Investment variances and economic assumption changes (note A4)	654	(197)
Non-life business: Short-term fluctuation in return on investments (note A5)	167	(476)
General insurance and health business: Economic assumption changes (note A6)	(54)	1
Impairment of goodwill, joint ventures, associates and other amounts expensed (note A7)	(15)	(13)
Amortisation and impairment of intangibles acquired in business combinations (note A8)	(87)	(97)
Amortisation and impairment of acquired value of in-force business (note A9)	(406)	(426)
(Loss)/profit on the disposal and remeasurement of subsidiaries, joint ventures and associates (note A10)	(22)	102
Other (note A11)	(47)	231
Adjusting items before tax	190	(875)
Profit before tax attributable to shareholders' profits	3,374	2,129
Tax on Group adjusted operating profit	(668)	(625)
Tax on other activities	(43)	183
	(711)	(442)
Profit for the year	2,663	1,687

Page 30

Other Group adjusted operating profit items

A1 - Other operations

2019
£m

Restated^1,2

2018
£m

Other Group operations

(26)

(212)

Total

(26)

(212)

2 Non-insurance operations relating to Europe and Asia have been reclassified to Europe Life, Asia Life and General Insurance to better reflect the management of the underlying businesses.

Other Group operations includes investment return on centrally held assets , the results of our internal reinsurance businesses and the results of other operations. Total loss in relation to other operations was £26 million (2018: £212 million).

Other Group operations includes net expenses of £15 million (2018 restated: £180 million) in relation to the Group's UK digital business. The reduction of £165 million from 2018 reflects the alignment of the UK digital business with the UK Life and UK General Insurance businesses during the year.

A2 - Corporate centre

	2019 £m	2018 £m
Project spend	(30)	(80)
Central spend and share award costs	(153)	(136)
Total	(183)	(216)

Corporate centre costs of £183 million (2018: £216 million) decreased by £33 million mainly due to lower Group led project costs partly offset by an increase in central spend and share award costs.

A3 - Group debt costs and other interest

	2019 £m	2018 £m
External debt
Subordinated debt	(336)	(364)
Other	(15)	(4)
Total external debt	(351)	(368)
Internal lending arrangements	16	13
Net finance income on main UK pension scheme	80	75
Total	(255)	(280)

The reduction in subordinated debt costs is due to the redemption of two subordinated debt instruments in full at their first call date in 2018. The increase in other external debt costs is due to the issuance of new senior notes in the last quarter of 2018.

Page 31

Non- operating profit items

A4 - Life business: Investment variances and economic assumption changes

(a) Definitions

Group adjusted operating profit for life business is based on expected long-term investment returns on financial investments backing shareholder funds over the period, with consistent allowance for the corresponding expected movements in liabilities. Group adjusted operating profit includes the effect of variance in experience for operating items, such as mortality, persistency and expenses, and the effect of changes in operating assumptions. Changes due to economic items, such as market value movements and interest rate changes, which give rise to variances between actual and expected investment returns, and the impact of changes in economic assumptions on liabilities, are disclosed separately outside Group adjusted operating profit, in investment variances and economic assumption changes.

(b) Methodology

The expected investment returns and corresponding expected movements in life business liabilities are calculated separately for each principal life business unit.

The expected return on investments for both policyholders' and shareholders' funds is based on opening economic assumptions applied to the expected funds under management over the reporting period. Expected investment return assumptions are derived actively, based on market yields on risk-free fixed interest assets at the end of each financial year. The same margins are applied on a consistent basis across the Group to gross risk-free yields, to obtain investment return assumptions for equity and property. Expected funds under management are equal to the opening value of funds under management, adjusted for sales and purchases during the period arising from expected operating experience.

The actual investment return is affected by differences between the actual and expected funds under management and changes in asset mix, as well as movements in interest rates. To the extent that these differences arise from the operating experience of the life business, or management decisions to change asset mix, the effect is included in the Group adjusted operating profit. The residual difference between actual and expected investment return is included in investment variances, outside Group adjusted operating profit but included in profit before tax.

The movement in liabilities included in Group adjusted operating profit reflects both the change in liabilities due to the expected return on investments and the impact of experience variances and assumption changes for non-economic items. This would include movements in liabilities due to changes in the discount rate arising from discretionary management decisions that impact on product profitability over the lifetime of products.

The effect of differences between actual and expected economic experience on liabilities, and changes to economic assumptions used to value liabilities, are taken outside Group adjusted operating profit. For many types of life business, including unit-linked and with-profits funds, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit. The profit impact of economic volatility on other life business depends on the degree of matching of assets and liabilities, and exposure to financial options and guarantees.

The expected rate of investment return is determined using consistent assumptions at the start of the period between operations, having regard to local economic and market forecasts of investment return and asset classification under IFRS.

The principal assumptions underlying the calculation of the expected investment return for equity and property are:

		Equity		Property
	2019	2018	2019	2018
United Kingdom	4.9%	4.8%	3.4%	3.3%
Eurozone	4.3%	4.4%	2.8%	2.9%

The expected return on equity and property has been calculated by reference to the ten-year mid-price swap rate for an AA rated bank in the relevant currency plus a risk premium. The use of risk premium reflects management's long-term expectations of asset return in excess of the swap yield from investing in different asset classes. The asset risk premiums are set out in the table below:

All territories	2019	2018
Equity risk premium	3.5%	3.5%
Property risk premium	2.0%	2.0%

The ten-year mid-price swap rates at the start of the period are set out in the table below:

Territories	2019	2018
United Kingdom	1.4%	1.3%
Eurozone	0.8%	0.9%

For fixed interest securities classified as fair value through profit or loss, the expected investment returns are based on average prospective yields for the actual assets held less an adjustment for credit risk (assessed on a best estimate basis). This includes an adjustment for credit risk on all eurozone sovereign debt. Where such securities are classified as available for sale, the expected investment return comprises the expected interest or dividend payments and amortisation of the premium or discount at purchase.

Page 32

Non- operating profit items continued

(d) Investment variances and economic assumption changes

The investment variances and economic assumption changes excluded from the life adjusted operating profit are as follows:

Life business	2019 £m	2018 £m
Investment variances and economic assumptions	654	(197)

Investment variances and economic assumption changes were £654 million (2018: £197 million negative). This is primarily due to the UK where there was a positive variance as a result of a reduction in yields, a narrowing of fixed income spreads and a consequent impact from economic assumption changes, including an alignment of methodology across the UK, partially offset by the impact of increases in equities. The impact of yields and equities reflect the fact that we hedge on an economic rather than on an IFRS basis.

The Group continues to keep under review the allowance in our assumptions for future property prices and rental income in relation to our commercial and equity release mortgages, and for the possible adverse impact including but not limited to the ultimate arrangements regarding the UK's exit from the European Union. At 31 December 2019 this allowance has been determined in line with previous periods and is estimated at £0.4 billion. As more clarity is provided on the terms of the UK's exit from the European Union, the Group will look to establish core property assumptions without an explicit allowance for Brexit uncertainty.

The variance in 2018 was primarily due to negative variances in the UK and Italy. In the UK, these variances were mainly due to an increase in yields, the widening of corporate bond spreads and an increase in the allowance for the possible adverse impact of the decision for the UK to leave the European Union, partially offset by the beneficial impact of our equity hedges. The negative variance in Italy was primarily driven by a widening of sovereign credit spreads and a fall in equity markets.

Page 33

A5 - Non-life business: Short -term fluctuation in return on investments

(a) Definitions

Group adjusted operating profit for non-life business is based on an expected long-term investment return over the period. Any variance between the total investment return (including realised and unrealised gains) and the expected return over the period is disclosed separately outside Group adjusted operating profit, in short-term fluctuations.

(b) Methodology

The long-term investment return is calculated separately for each principal non-life market. In respect of equities and investment properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the long-term rate of investment return.

The long-term rate of investment return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return. The allocated long-term return for other investments (including debt securities) is the actual income receivable for the year. Actual income and long-term investment return both contain the amortisation of the discounts/premium arising on the acquisition of fixed income securities. For other operations, the long-term return reflects assets backing non-life business held in Group centre investments.

Market value movements which give rise to variances between actual and long-term investment returns are disclosed separately in short-term fluctuations outside Group adjusted operating profit.

The impact of realised and unrealised gains and losses on Group centre investments, including the centre hedging programme which is designed to economically protect the total Group's capital against adverse equity and foreign exchange movements, is included in short-term fluctuations on other operations.

The principal assumptions underlying the calculation of the long-term investment return are:

	Long-term rate of return on equities		Long-term rate of return on property
	2019	2018	2019	2018
United Kingdom	4.9%	4.8%	3.4%	3.3%
Eurozone	4.3%	4.4%	2.8%	2.9%
Canada	6.0%	5.9%	4.5%	4.4%

The long-term rates of return on equities and properties have been calculated by reference to the ten-year mid-price swap rate for an AA rated bank in the relevant currency plus a risk premium. The underlying reference rates and risk premiums for the United Kingdom and Eurozone are shown in note A4(c).

(d) Analysis of investment return

The total investment income on our non-life business, including short-term fluctuations, are as follows:

General Insurance and health	2019 £m	2018 £m
Analysis of investment income:
- Net investment income	622	63
- Foreign exchange gains/(losses) and other charges	55	(8)
	677	55
Analysed between:
- Long-term investment return, reported within Group adjusted operating profit	381	370
- Short-term fluctuations in investment return, reported outside Group adjusted operating profit	296	(315)
	677	55
Short-term fluctuations:
- General insurance and health	296	(315)
- Other operations¹	(129)	(161)
Total short-term fluctuations	167	(476)

1 Other operations represents short-term fluctuations on assets backing non-life business in Group centre investments, including the centre hedging programme.

The short-term fluctuations during 2019 of £167 million favourable is primarily due to strong market conditions across all our major markets. This resulted in significant gains on equities plus gains on fixed income securities driven by interest rates falling and a narrowing of credit spreads. These gains are partly offset by losses on hedges held by the Group, including the Group centre hedging programme, and other adverse movements on centre holdings.

The short-term fluctuations during 2018 of £476 million adverse were primarily due to adverse market conditions across most of our major markets. This resulted in losses on fixed income securities driven by interest rate increases and widening credit spreads plus significant falls in equities and other adverse market movements on Group centre holdings.

Page 34

A6 - General insurance and health business: Economic assumption changes

In the general insurance and health business, there is a negative impact of £54 million (2018: £1 million positive) primarily as a result of a decrease in interest rates used to discount claims reserves for both periodic payment orders and latent claims.

A7 - Impairment of goodwill, joint ventures, associates and other amounts expensed

Impairment of goodwill, associates and joint ventures and other amounts expensed in the year is a charge of £15 million (2018: £13 million charge). This includes a £9 million impairment charge relating to the Group's associate in India.

A8 - Amortisation and impairment of intangibles acquired in business combinations

Following a change in the definition of the Group adjusted operating profit APM, Group adjusted operating profit now excludes only the amortisation and impairment of intangible assets acquired in business combinations. The amortisation and impairment of intangible assets acquired in business combinations decreased to a charge of £87 million (2018: £97 million charge) due to intangible assets which were amortised in full in 2018.

A9 - Amortisation and impairment of acquired value of in-force business

Amortisation of acquired value of in-force business (AVIF) is a charge of £406 million (2018: £426 million charge), which relates solely to amortisation in respect of the Group's subsidiaries and joint ventures. Impairment charges of £28 million in relation to Friends Provident International Limited (FPI) remeasurement losses are recorded within profit/loss on disposal and remeasurement of subsidiaries, joint ventures and associates. See note A10.

A10 - Profit/loss on the disposal and remeasurement of subsidiaries, joint ventures and associates

The total Group loss on disposal and remeasurement of subsidiaries, joint ventures and associates is £22 million (2018: £102 million profit). This consists of £6 million gains on small disposals, and a £28 million remeasurement loss in relation to FPI. Further details of these items are provided in note B5.

A11 - Other

Other items are those items that, in the directors' view, are required to be separately disclosed by virtue of their nature or incidence to enable a full understanding of the Group's financial performance. At 31 December 2019, other items is a charge of £47 million (2018: £231 million gain), which comprises the following:

· A charge of £45 million in relation to a change in the discount rate used for estimating lump sum payments in settlement of bodily injury claims. Following the announcement by the Lord Chancellor on 15 July 2019 to increase the Ogden discount rate from the -0.75% set in 2017 to -0.25% (rate retained at -0.75% in Scotland), balance sheet reserves in the UK have been calculated using a discount rate of -0.25% at 31 December 2019. At 31 December 2018, balance sheet reserves were calculated using a rate of 0.00%. See note B11; and

· A charge of £2 million relating to the negative goodwill which arose on the acquisition of Friends First on 1 June 2018. An adjustment to the acquisition balance sheet of £2 million has been made in 2019, resulting in a corresponding decrease in the negative goodwill previously recognised.

Page 35

IFRS capital
A12 - Net asset value

	2019 £m	pence per share²	Restated 2018 £m	Restated pence per share²
Equity attributable to shareholders of Aviva plc at 1 January¹	16,558	424p	16,969	423p
Adjustment at 1 January for adoption of IFRS 16³	(110)	(3)p	-	-
Equity attributable to shareholders of Aviva plc at 1 January restated¹	16,448	421p	16,969	423p
Group adjusted operating profit	3,184	80p	3,004	77p
Investment return variances and economic assumption changes on life and non-life business	767	19p	(672)	(17)p
Profit on the disposal and remeasurements of subsidiaries, joint ventures and associates	(22)	(1)p	102	2p
Goodwill impairment and amortisation of intangibles	(102)	(3)p	(110)	(3)p
Amortisation and impairment of acquired value of in-force business	(406)	(10)p	(426)	(11)p
Other⁴	(47)	(1)p	231	6p
Tax on operating profit and on other activities	(711)	(18)p	(442)	(11)p
Non-controlling interests	(115)	(3)p	(119)	(3)p
Profit after tax attributable to shareholders of Aviva plc	2,548	63p	1,568	40p
AFS securities fair value and other reserve movements	41	1p	(24)	(1)p
Ordinary dividends	(1,184)	(30)p	(1,128)	(29)p
Direct capital instrument and tier 1 notes interest and preference share dividend	(51)	(1)p	(53)	(1)p
Foreign exchange rate movements	(170)	(4)p	(2)	-
Remeasurements of pension schemes	(763)	(19)p	(236)	(6)p
Shares purchased in buy-back	-	-	(600)	(15)p
Other net equity movements	139	3p	64	13p
Equity attributable to shareholders of Aviva plc at 31 December¹	17,008	434p	16,558	424p

1 Excluding preference shares of £200 million (2018: £200 million).

2 Number of shares as at 31 December 2019: 3,921 million (2018: 3,902 million).

3 The Group has adopted IFRS 16 Leases from 1 January 2019. In line with the transition options available, prior period comparatives have not been restated and the impact of the adoption has been shown as an adjustment to opening retained earnings. See note B1 for further information.

4 Other in 2019 relates to a charge of £45 million in relation to a change in the discount rate used for estimating lump sum payments in settlement of bodily injury claims (see note B11) and a charge of £2 million relating to negative goodwill which arose on the acquisition of Friends First (see note A11). Other in 2018 includes a movement in the discount rate used for estimating lump sum payments in the settlement of bodily injury claims which resulted in a gain of £190 million, a provision release of £78 million relating to the sale of Aviva USA in 2013, a gain of £36 million relating to negative goodwill on the acquisition of Friends First, a charge of £63 million relating to the UK defined benefit pension scheme as a result of the requirements to equalise members' benefits of the effects of Guaranteed Minimum Pension and a charge of £10 million relating to goodwill payments to preference shareholders, which was announced on the 30 April 2018, and associated administration costs.

At 31 December 2019, IFRS net asset value per share was 434 pence (2018: 424 pence). The increase was mainly due to operating profit and favourable investment return variances (see notes A4 and A5), partly offset by dividend payments to shareholders and higher pension scheme remeasurements (see note B18).

Page 36

A13 - Analysis of return on equity

	Operating profit
2019	Before tax £m	After tax £m	Weighted average shareholders' funds including non-controlling interests £m	Return on equity %
UK Life and Investments, Savings & Retirement
UK Life (including Savings & Retirement)	1,855	1,553	10,318	15.1%
Aviva Investors	96	66	514	12.8%
General Insurance	594	447	3,674	12.2%
Europe Life	827	568	3,698	15.4%
Asia Life	276	245	1,769	13.8%
Other Group activities¹	(113)	(79)	6,386	N/A
Return on total capital employed	3,535	2,800	26,359	10.6%
Subordinated debt	(336)	(272)	(6,303)	4.3%
Senior debt	(15)	(12)	(1,345)	0.9%
Return on total equity	3,184	2,516	18,711	13.4%
Less: Non-controlling interests		(98)	(975)	10.1%
Direct capital instrument and tier 1 notes		(34)	(674)	5.0%
Preference shares		(17)	(200)	8.5%
Return on equity shareholders' funds		2,367	16,862	14.0%

1 The other Group activities operating loss before tax of £113 million comprises corporate costs of £183 million and other business operating loss of £26 million, partly offset by interest on internal lending arrangements of £16 million and finance income on the main UK pension scheme of £80 million.

	Operating profit
Restated 2018	Before tax £m	After tax £m	Weighted average shareholders' funds including non-controlling interests £m	Return on equity %
UK Life and Investments, Savings & Retirement
UK Life (including Savings & Retirement)	1,886	1,544	10,687	14.4%
Aviva Investors	147	102	527	19.4%
General Insurance	609	473	3,834	12.3%
Europe Life	807	568	3,658	15.5%
Asia Life	263	239	1,645	14.5%
Other Group activities¹	(340)	(249)	6,386	N/A
Return on total capital employed	3,372	2,677	26,737	10.0%
Subordinated debt	(364)	(295)	(6,767)	4.4%
Senior debt	(4)	(3)	(1,403)	0.2%
Return on total equity	3,004	2,379	18,567	12.8%
Less: Non-controlling interests		(100)	(1,074)	9.3%
Direct capital instrument and tier 1 notes		(36)	(730)	4.9%
Preference shares		(17)	(200)	8.5%
Return on equity shareholders' funds		2,226	16,563	13.4%

1 The other Group activities operating loss before tax of £340 million comprises corporate costs of £216 million and other business operating loss of £212 million, partly offset by interest on internal lending arrangements of £13 million and finance income on the main UK pension scheme of £75 million.

Page 37

A14 - Group capital under IFRS basis

The table below shows how our capital is deployed by market and how that capital is funded.

	31 December 2019 Capital employed £m	31 December 2018 Capital employed £m
UK Life and Investments, Savings & Retirement
UK Life (including Savings & Retirement)	10,751	10,388
Aviva Investors	512	541
General Insurance¹	3,603	3,754
Europe Life	3,663	3,665
Asia Life	1,749	1,702
Other Group activities^1,2	5,903	6,104
Total capital employed	26,181	26,154
Financed by
Equity shareholders' funds	17,008	16,558
Non-controlling interests	977	966
Direct capital instrument and tier 1 notes	500	731
Preference shares	200	200
Subordinated debt³	6,206	6,335
Senior debt	1,290	1,364
Total capital employed⁴	26,181	26,154

1 Capital employed for United Kingdom General Insurance excludes c.£0.9 billion (2018: c.£0.9 billion) of goodwill which does not support the general insurance business for capital purposes and is included in other Group activities.

2 Other Group activities include centrally held tangible net assets, the main UK staff pension scheme surplus and also reflect internal lending arrangements. These internal lending arrangements, which net out on consolidation, include the formal loan arrangement between Aviva Group Holdings Limited and Aviva Insurance Limited.

3 Subordinated debt excludes amounts held by Group companies of £nil (2018: £5 million).

4 Goodwill, AVIF and other intangibles are maintained within the capital base. Goodwill includes goodwill in subsidiaries of £1,855 million (2018: £1,872 million) and goodwill in joint ventures of £11 million (2018: £13 million). AVIF and other intangibles comprise £2,800 million (2018: £3,201 million) of intangibles in subsidiaries and £27 million (2018: £33 million) of intangibles in joint ventures, net of deferred tax liabilities of £(413) million (2018: (475) million) and the non-controlling interest share of intangibles of £(28) million (2018: £(31) million).

Total capital employed is financed by a combination of equity shareholders' funds, preference capital, subordinated debt and other borrowings.

On 21 November 2019, the Group redeemed its £210 million 6.875% Step-up Tier One Capital Securities (STICS) in full at the first call date.

At 31 December 2019 the market value of our external debt (subordinated debt and senior debt), preference shares (including both Aviva plc preference shares of £200 million and General Accident plc preference shares, within non-controlling interests, of £250 million), and direct capital instrument and Tier 1 notes was £9,764 million (2018: £9,278 million).

END PART 2 of 5

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