Aviva to adopt EEV principles

Aviva PLC
06 January 2005



6 January 2005


Aviva announces early adoption of European Embedded Value principles


Aviva plc ('Aviva') announces that it will adopt the European Embedded Value1 
('EEV') principles, developed by the CFO Forum2, as the basis for its
supplementary life reporting in its 2004 preliminary results to be published on
9 March 2005.


In addition to statutory disclosures, Aviva's 2004 preliminary results will
include supplementary reporting for life operating results and embedded value on
an EEV basis in place of reporting on the previously reported achieved profits
basis.

The adoption of the EEV principles will not affect the basis of reporting the
statutory results, the regulatory capital position or the dividend paying
capacity of the Group.

Impact of changes on the operating result:

No material impact on group operating profit as reported at the full year 2003
and interim 2004 results is expected as a result of the adoption of the EEV
principles by the Group. In addition there is not expected to be any material
impact on the level of life new business contribution, either before or after
the cost of capital, other than for the inclusion of Norwich Union Equity
Release3 ('NUER') in the life EEV operating result as described below.

Impact of changes on the embedded value:

The overall impact on life embedded value, as reported at 31 December 2003 and
30 June 2004, is expected to be a reduction of less than 5% at each reporting
date. In accordance with EEV principles this incorporates the cost of funding
the life element of the pension fund deficit which accounts for approximately a
quarter of this expected reduction.

Andrew Moss, Aviva's group finance director, said: 'The adoption of European
Embedded Value principles across the European insurance sector will, over time,
lead to greater transparency and comparability for investors, which we fully
support. We are committed to improving clarity of financial reporting and are
pleased that our Global Finance Transformation Programme has put us in a
position to adopt this improved basis of value reporting early. The enhanced
disclosure will assist the market in areas where we believe discounts have been
applied to our reported embedded value.'


Analyst / Investor meeting:

Aviva will host an analyst / investor meeting at 9.30am (GMT) on 13 January 2005
to provide further information on the changes arising from the introduction of
EEV and will publish a number of restatements to its supplementary life
reporting for the following periods:

-         2003 full year results

-         2004 interim results

-         quarterly life new business sales and margins commencing from the
          first quarter 2003

Details of the meeting, which will be held in London, and which will include a
teleconference facility, will be notified shortly. -We will provide an abridged
analyst pack with extensive disclosures at 7.00am (GMT) on 13 January 2005.

Key changes in methodology

In adopting the EEV principles, Aviva will make a number of key changes from the
previously reported achieved profits basis:

-     an explicit allowance will be made for the cost of financial options and
      guarantees using stochastic modelling techniques;

-     the required solvency capital for EEV purposes will be established at
      levels in excess of the EU minimum;

-     taking into account the explicit allowance for the risks described above
      and the existing prudence in life technical reserving Aviva has reviewed 
      and amended its economic assumptions;

-     a significant proportion of the results in the life service companies, in
      particular the reported losses in Norwich Union Life Services4 ('NULS') in
      the UK, that are currently reported under 'non-insurance', will be 
      included in the life EEV operating result and embedded value;

-     profits made in the Group's asset management businesses that relate to
      managing internal life funds, particularly for Morley in the UK and Aviva
      Gestion d'Actifs in France, that are currently reported under 'fund 
      management', will be included in the life EEV operating result and 
      embedded value;

-     the results of NUER in the UK, that are currently reported under '
      non-insurance', will be included in the life EEV operating result and 
      embedded value;

-     the element of the pension fund deficit that relates to UK life and other
      related businesses will be incorporated into the life embedded value at a 
      cost equivalent to the discounted value of expected future post-tax 
      contributions.


Life new business sales and margins:

The main industry measure of life new business sales under EEV will be the
present value of new business premiums ('PVNBP'), which is equal to total single
premiums plus the discounted value of new regular premiums.

In addition to reporting PVNBP, Aviva will continue to report new business on an
annual premium equivalent or APE basis (10% of single premiums plus new
annualised regular premiums) in 2005, to assist in comparisons as the rest of
the life insurance industry transitions to EEV reporting.

Aviva's full year 2004 new business announcement, to be made on 25 January 2005,
will be disclosed as total sales (single premiums plus regular premiums) and as
sales on an APE basis. Full year new business sales on a PVNBP basis will be
provided as part of the 2004 preliminary results announcement, together with
full year new business contribution.

New business margins will be calculated as new business contribution divided by
new business sales on a PVNBP basis from the 2004 preliminary results onwards.

Enquiries:

Investors and analysts:

Steve Riley, investor relations director              Tel: [phone]

James Matthews, head of investor relations            Tel: [phone]



Media:

Hayley Stimpson, director of external affairs         Tel: [phone]

Sue Winston, head of group media relations            Tel: [phone]

Robert Bailhache, Financial Dynamics                  Tel: [phone]

Notes to Editors:


1. Embedded Value is a method of reporting the economic value of life
insurance business. This information helps investors to value life insurance
companies. Until now, the basis for preparation for this supplementary
information has varied by country and in some cases by company within a country.
This has made it difficult for investors and analysts to compare relative
performance.

2. The CFO Forum www.cfoforum.nl is a high-level group formed by the Chief
Financial Officers of 19 major European listed and non-listed insurance
companies. Its aim is to discuss issues relating to proposed new accounting
regulations for their businesses and how they can create greater
transparency for investors. The Forum was created in 2002 and launched a set
of embedded value principles in May 2004 ('European Embedded Value') that
its members across Europe have agreed to adopt for their 2005 published
accounts, with early adoption encouraged.

3. Norwich Union Equity Release is the leading provider of equity release
products to homeowners in the UK.

4. Norwich Union Life Services is the administration company for Aviva's life
business in the UK.


                      This information is provided by RNS
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