Half-year Report Part 1 of 4

RNS Number : 9643M

Aviva PLC

03 August 2017

 

Part 1 of 4

3 August 2017

AVIVA PLC 2017 INTERIM RESULTS ANNOUNCEMENT

Mark Wilson, Group Chief Executive Officer, said:

"Aviva is delivering. For the fourth year in a row we have grown operating profit, up 11%, reflecting positive performances across Aviva's businesses world-wide. As a result, we are increasing the interim dividend per share by 13% to 8.4p.
"The benefits of our geographic and product diversity are clear and Aviva has numerous sources of growth. In the first half of 2017 we increased sales right across the group and delivered strong growth in operating profit in the UK, Europe and Aviva Investors.
"We are growing and investing in the UK. We have grown top line sales and bottom line profit in UK general insurance, pensions, annuities and protection. Our digital business continues to make progress, making insurance simpler and more convenient for customers. "We are getting the basics right. Serving customers well, keeping a tight control on costs and investing in our businesses."
Profit	·  Operating profit up 11% to £1,465 million (HY16: £1,325 million) ·  Operating EPS up 15% to 25.8p (HY16: 22.4p) ·  IFRS profit after tax £716 million (HY16: £201 million)
Capital	·  Solvency II coverage ratio of 193%1 (FY16: 189%) ·  Capital surplus £11.4 billion1 (FY16: £11.3 billion) ·  Operating capital generation £1.1 billion (HY16: £1.2 billion) ·  IFRS net asset value per share 412p (FY16: 414p)
Cash	·  Interim dividend up 13% to 8.4p (HY16: 7.42p) ·  Cash remittances up 56% to £1,170 million (HY16: £752 million) ·  UK Life special remittance of £315 million, on track towards £1 billion target by end 2018 with £565 million total special to date ·  Holding company liquidity £1.7 billion2 (February 2017: £1.8 billion)
Growth	·  General insurance net written premiums up 11%3 to £4,688 million (HY16: £3,991 million) ·  Value of new business up 27%3 to £596 million (HY16: £448 million) ·  Aviva Investors fund management operating profit up 45% to £71 million (HY16: £49 million) ·  UK Life platform funds up 27% to £16.5 billion (FY16: £13.0 billion) ·  Total group assets under management £475 billion (FY16: £450 billion)
Combined ratio	·  General insurance combined operating ratio 94.5%4 (HY16: 95.7%)

1    Represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion). Includes an estimated adverse impact of a notional reset of the transitional measure on technical provisions (TMTP) to reflect interest rates at 30 June 2017 £0.5 billion decrease to surplus (FY16: £0.4 billion). Also included are the pro forma impacts of the disposal of the Spanish joint ventures and retail life insurance business (£0.1 billion increase to surplus), the disposal of Friends Provident International Limited (£0.1 billion increase to surplus), and the buy-back of the remaining £0.2 billion share capital out of the £0.3 billion announced on 25 May 2017. The 31 December 2016 Solvency II position includes the pro forma impacts of the disposal of Aviva's 50% shareholding in Antarius (£0.2 billion increase to surplus) and an anticipated future change to UK tax rules restricting tax relief (£0.4 billion decrease to surplus).

2    As at end of July 2017. It excludes amounts set aside to meet our £300 million share repurchase programme.

3    In constant currency.

4    The combined operating ratio is now reported on an earned basis. Comparatives have been realigned to reflect this change.

Key financial metrics

Operating profit

	6 months 2017 £m	6 months 2016 £m	Sterling% change	Full year 20163  £m
Life business	1,319	1,226	8%	2,642
General insurance and health	417	334	25%	833
Fund management	69	49	41%	138
Other1	(340)	(284)	(20)%	(603)
Total2	1,465	1,325	11%	3,010

Operating earnings per share2,4

25.8p

22.4p

15%

51.1p

Cash remittances and Operating capital generation: Solvency II basis

	6 months 2017		6 months 2016		Full year 2016
	Cash Remittances £m	Operating Capital Generation £bn	Cash Remittances £m	Operating Capital Generation £bn	Cash Remittances £m	Operating Capital Generation  £bn
United Kingdom & Ireland Life	922	0.6	577	0.7	1,096	2.5
United Kingdom & Ireland General Insurance and Health	8	0.2	-	0.1	91	0.3
Canada	13	0.1	4	0.1	130	0.3
Europe	190	0.4	169	0.6	449	1.0
Asia, Aviva Investors & Other	37	(0.2)	2	(0.3)	39	(0.6)
Total	1,170	1.1	752	1.2	1,805	3.5

Expenses

	6 months  2017 £m	6 months 2016 £m	Sterling% change	Full year 2016  £m
Operating expenses	1,851	1,696	9%	3,408
Integration & restructuring costs	52	105	(50)%	212
Expense Base	1,903	1,801	6%	3,620

Operating expense ratio

53.3%

53.4%

(0.1)pp

50.5%

Value of new business: Adjusted SII basis

	6 months 2017 £m	6 months 2016  £m	Sterling % change	Full Year 2016  £m
United Kingdom & Ireland	270	205	32%	441
Europe	243	188	29%	417
Asia & Aviva Investors	83	55	51%	134
Total	596	448	33%	992

General insurance combined operating ratio⁵

	6 months 2017	6 months  2016	Change	Full year 2016
United Kingdom & Ireland6	92.5%	93.8%	(1.3)pp	105.2%
Canada	98.9%	95.9%	3.0pp	93.0%
Europe	92.7%	98.9%	(6.2)pp	95.8%
Combined operating ratio	94.5%	95.7%	(1.2)pp	100.1%

Profit after tax

	6 months 2017 £m	6 months  2016 £m	Sterling% change	Full year 2016 £m
Profit after tax2	716	201	256%	859
Basic earnings per share2	14.9p	2.5p	496%	15.3p

Interim dividend

	6 months  2017	6 months  2016	Sterling% change
Interim dividend per share	8.40p	7.42p	13%

Capital position

	30 June  2017	31 December 2016	Sterling change	30 June  2016
Estimated Solvency II cover ratio7,8,9	193%	189%	4.0pp	174%
Estimated Solvency II surplus8,9	£11.4bn	£11.3bn	1%	£9.5bn
Net asset value per share	412p	414p	(0)%	412p

1    Other includes other operations, corporate centre costs and group debt and other interest costs.

2    Operating profit is a non-GAAP measure used by management. Refer to the 'Financial supplement' for the reconciliation of Group operating profit to profit after tax and refer to note B7 - Earnings per share for a reconciliation of operating earnings per share to basic earnings per share.

3    FY16 excludes the impact from an outward quota share reinsurance agreement written in 2015 and completed in 2016 in Aviva Insurance Limited (AIL) and the impact of the exceptional Ogden charge.

4    Operating EPS is shown net of tax, non-controlling interests, preference dividends, and coupon payments in respect of the direct capital instrument (DCI) and tier 1 notes (net of tax).

5    The combined operating ratio is now reported on an earned basis. Comparatives have been realigned to reflect this change. See note 5 for details.

6    FY16 includes the impact of the change in the Ogden discount rate, which had an impact of 5.9pp, and excludes the impact from an outward quota share reinsurance agreement written in 2015 and completed in 2016 in Aviva Insurance Limited (AIL).

7    The estimated Solvency II position represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion; HY16: £2.7 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion; HY16: £0.9 billion) - these exclusions have no impact on Solvency II surplus.

8    The estimated Solvency II position includes an estimated adverse impact of a notional reset of the transitional measure on technical provisions ('TMTP') to reflect interest rates at 30 June 2017, £0.5 billion decrease to surplus (FY16: £0.4 billion; HY16: £nil). Also included are the pro forma impacts of the disposal of the Spanish joint ventures Unicorp Vida and Caja Espana Vida and its retail life insurance business Aviva Vida y Pensiones (£0.1 billion increase to surplus), the disposal of Friends Provident International Limited (£0.1 billion increase to surplus), and the remaining £0.2 billion of the share buy-back announced on 25 May 2017.

9    The 31 December 2016 Solvency II position includes the pro forma impacts of the disposal of Aviva's 50% shareholding in Antarius to Sogecap which completed on 5 April 2017 (£0.2 billion increase to surplus) and an anticipated future change to UK tax rules restricting the tax relief that can be claimed in respect of tax losses (£0.4 billion decrease to surplus). However, under the amended tax rules published on 13 July 2017, this restriction will not be material, and as a result no corresponding pro forma impact is included in the estimated 30 June 2017 Solvency II position.

Group Chief Executive Officer's report

Overview	In the first half of 2017, Aviva has grown operating profit, maintained capital strength and delivered on its strategic agenda. Operating profit increased 11% to £1,465 million (HY16: £1,325 million), underlining the quality of our franchises and the benefits of our product and geographic diversity. Operating earnings per share (EPS) increased 15% to 25.8p (HY16: 22.4p). Our Solvency II coverage ratio increased to 193%1 (FY16: 189%) and remains above our 150% to 180% working range. Operating capital generation was £1.1 billion (HY16: £1.2 billion) and cash remittances rose 56% to £1,170 million (HY16: £752 million). We have increased our interim dividend by 13% to 8.4p per share (HY16: 7.42p). Capital reallocation initiatives continued in the first half of 2017. We announced the withdrawal of capital from Spain and the sale of the Friends Provident International business and acquired a 100% interest in our Vietnamese venture with VietinBank. We also commenced a £300 million share buy-back programme. We have extended our track record of growth while maintaining a disciplined approach to capital allocation. Our performance in the first half of 2017 reflects the foundations built over recent years and we continue to invest in our businesses to secure consistent growth in the future.
Operating profit	Operating profit increased 11% to £1,465 million (HY16: £1,325 million) and operating EPS rose 15% to 25.8p (HY16: 22.4p). Life insurance operating profit grew 8% to £1,319 million (HY16: £1,226 million). In UK life, each of the core product segments of long-term savings, protection and annuities and equity release delivered double digit growth in operating profit. In our European life businesses, improved performances in France and Poland plus positive foreign exchange effects more than offset a lower contribution from the disposed Antarius business in France. In Asia, our life businesses delivered modest growth in operating profits, primarily driven by a strong performance from our joint venture in China. Operating profit from general insurance and health increased 25% to £417 million (HY16: £334 million). General insurance net written premiums grew 17% to £4,688 million (HY16: £3,991 million) reflecting a combination of underlying growth, the acquisition of RBC Insurance in Canada in July 2016 and foreign exchange benefits. The general insurance underwriting result increased 50% to £244 million (HY16: £163 million) as improved normalised accident year combined ratios across all regions and benign weather in the UK and Europe more than offset heightened catastrophe costs and modest levels of adverse prior year development in our Canadian business. Aviva Investors fund management operating profit increased 45% to £71 million. Revenues increased 13% to £273 million (HY16: £241 million) due to higher average assets under management, income from asset origination and continued expansion of the AIMS range of funds to £12 billion (FY16: £9 billion). Operating expenses increased 5%, leading to an improvement in the cost to income ratio to 74% (HY16: 80%).
Capital	At 30 June 2017, our Solvency II capital ratio was 193%1 (FY16: 189%) with a surplus of £11.41 billion (FY16: £11.3 billion). We have maintained a prudent approach to capital management, with our solvency ratio having modest sensitivity to movements in interest rates and equity markets. In May 2017, we announced the commencement of a £300 million share buy-back. At the end of July, we had completed over one third of the programme, with the remainder to be completed by the end of 2017. As highlighted in our 2016 results, we have the option to reduce hybrid debt during 2017.

1    Represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion). Includes an estimated adverse impact of a notional reset of the transitional measure on technical provisions ('TMTP') to reflect interest rates at 30 June 2017 £0.5 billion decrease to surplus (FY16: £0.4 billion). Also included are the pro forma impacts of the disposal of the Spanish joint ventures and retail life insurance business (£0.1 billion increase to surplus), the disposal of Friends Provident International Limited (£0.1 billion increase to surplus), and the buy-back of the remaining £0.2 billion share capital out of the £0.3 billion announced 25 May 2017. The 31 December 2016 Solvency II position includes the pro forma impacts of the disposal of Aviva's 50% shareholding in Antarius (£0.2 billion increase to surplus) and an anticipated future change to UK tax rules restricting tax relief (£0.4 billion decrease to surplus).

Group Chief Executive Officer's report continued

Oaks, acorns and apple-trees	During the first half of 2017, Aviva announced a number of initiatives that improve focus, support future growth and facilitate capital reallocation. Oaks are businesses that provide consistent, sustainable growth in profits and cash. Our oak markets have delivered on both of these metrics in the first half of 2017. Today, we have announced a 10 year extension  of our distribution relationship with HSBC, which will deliver significant further growth in our UK business. We also continue to work on our plans to combine the management of the UK business under the leadership of Andy Briggs to unlock the potential of our unique position as a large scale composite. In France, we installed new leadership in late 2016 and progress to date has been encouraging. In our acorn markets, we continue to invest to secure long-term growth. In Vietnam, we acquired 100% ownership of the insurance operations and have secured a long-term distribution partnership with VietinBank. Our investment in the growth strategy for Aviva Investors is bearing fruit. An enhanced range of outcome orientated solutions and an expanded distribution capability is leading to us winning a growing number of external asset management clients. In Singapore, we have further developed our Aviva Financial Advisors network, which now exceeds 500. Meanwhile, in Hong Kong, we are seeking regulatory approval of our new joint digital venture with Tencent and Hillhouse. Apple tree businesses are those requiring simplification and restructuring. In the first half of 2017, we took decisions to withdraw capital from a number of these markets. We announced the sale of the majority of our Spanish business for €475 million. We also recently announced the sale of Friends Provident International Limited (FPIL) for £340 million. These transactions simplify our portfolio of businesses and provide capital that can be invested to grow our core businesses or used for debt reduction and other capital returns.
Digital	In digital, the first half is all about development of our intellectual property. Our "ask it never" proposition will allow us to price products without asking any questions, making it possible for customers to buy insurance, just as they would any other product. A key part of our business model is rewarding customer loyalty and there will be greater emphasis on this as we develop new propositions in the digital channel. Our UK digital business has made further progress in the first half of 2017. We have seen encouraging trends in trading results in the UK, with general insurance premium growth of 13% and an increase in new business sales being made to existing customers in the digital channel. We remain focused on encouraging our existing customers to take advantage of the simplicity, convenience and good value offered by MyAviva. Digital registrations have increased to 6 million (FY16: 4.7 million) and we are targeting further growth as we engage with our 4 million Friends Life customers in conjunction with the Part VII transfer that merge the legal entities in our UK Life business.
Outlook	We have made a good start to 2017, delivering growth in operating profit and dividends, maintaining capital strength and reallocating capital towards our businesses with the greatest potential. As a group, Aviva is getting leaner and stronger and we are confident in our ability to sustain growth in the coming years.

Mark Wilson

Group Chief Executive Officer

Chief Financial Officer's report

Overview	Results in the first six months of 2017 demonstrate the strength of our franchises and our focus on delivering cash flow and earnings growth. Operating profit grew 11% to £1,465 million, operating EPS increased 15% to 25.8p and cash remittances were 56% higher at £1,170 million. In light of these results, the interim dividend has increased 13% to 8.4 pence per share. Operating profit was £1,465 million (HY16: £1,325 million), up 6% in constant currency, with strong performances from UK and Ireland General Insurance, Aviva Investors and Europe while UK Life delivered double-digit growth across its three core product lines of long-term savings, protection and annuities and equity release. Operating EPS increased 15% to 25.8p (HY16: 22.4p) helped by favourable foreign exchange movements while operating EPS after integration and restructuring costs grew 22% to 24.8p (HY16: 20.3p) as restructure costs were halved over the period. IFRS profit after tax rose to £716 million (HY16: £201 million), benefiting from profits on disposals, a reduction in adverse investment variances and lower restructuring costs. Net asset value per share was broadly stable at 412p (FY16: 414p) as the contribution from IFRS profit after tax was offset by the payment of 2016 final dividend. The Solvency II cover ratio increased to 193%1 (FY16: 189%). Operating capital generation remained broadly stable at £1.1 billion (HY16: £1.2 billion) and included a modest increase in underlying generation to £0.9 billion (HY16: £0.8 billion). Cash remittances increased to £1,170 million (HY16: £752 million) and included £315 million of special dividends from the UK life business. In total, UK Life has paid £565 million of special dividends over the past 12 months, putting it comfortably on track to achieve its target of £1 billion of special dividends by the end of 2018. In line with our "Not Everywhere" strategy, we have continued to reallocate capital to focus and strengthen Aviva. We completed the sale of Antarius in France and recently announced the disposals of the majority of our Spanish business as well as Friends Provident International Limited (FPIL). Meanwhile, we have invested in Vietnam, increasing our ownership of the business to 100% and improving alignment with our long-term partner, VietinBank. We also announced a £300 million share buyback programme and a reduction in hybrid debt balances later this year remains an option. Aviva has made a strong start to 2017, once again highlighting both the quality of our franchises and the benefits of our diversity. We continue to target mid-single digit growth in operating EPS over the medium term and remain on track to increase our dividend payout ratio to 50% for 2017.
Business unit performance	Our UK and Ireland Life business grew life operating profit 6%, value of new business (VNB) 32% and paid a £922 million interim remittance to Group, including a further £315 million of special remittance. In the UK, life operating profit increased 7% to £750 million (HY16: £699 million) with double-digit growth across our three core product segments more than offsetting a reduction in other actions to £32 million (HY16: £83 million) and a modest runoff in profit from our Legacy book. In our annuities and equity release business, operating profit increased 26% to £309 million (HY16: £246 million) due to higher sales volumes across both product lines and back book asset mix optimisation. Operating profit from Protection grew 17% to £133 million (HY16: £114 million) reflecting strong sales in individual protection together with expense efficiencies. Long-term savings achieved operating profit of £89 million (HY16: £64 million), the 39% increase driven by higher assets under administration, which grew to £109 billion (HY16: £95 billion; FY16: £105 billion) as a result of net inflows in our platform and workplace businesses together with favourable market movements. Aviva Investors increased fund management operating profit by 45% to £71 million (HY16: £49 million) with 13% growth in revenues and a 5% increase in operating expenses. Revenue in the period was £273 million (HY16: £241 million) with increased income from the origination of infrastructure assets, the benefits of the Friends Life assets on-boarded in the second half of 2016 and a higher contribution from external clients at 35% of total revenue (HY16: 30%). Assets under management increased to £351 billion (FY16: £345 billion) due to favourable market movements and net inflows while Aviva Investors Multi-Strategy (AIMS) assets under management reached £12 billion (FY16: £9 billion). Our UK and Ireland general insurance and health business delivered 17% growth in operating profit to £259 million (HY16: £222 million)2 and improved its combined ratio (COR) to 92.5%3 (HY16: 93.8%). Revenue growth, improved performance as well as sustained benign weather were only partly offset by lower reserve releases compared with the prior period. General insurance net written premiums increased 7% to £2,326 million (HY16: £2,180 million), reflecting growth across the majority of our product lines, including a 13% increase in our UK Digital channel.

1    Represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion). Includes an estimated adverse impact of a notional reset of the transitional measure on technical provisions ('TMTP') to reflect interest rates at 30 June 2017 £0.5 billion decrease to surplus (FY16: £0.4 billion). Also included are the pro forma impacts of the disposal of the Spanish joint ventures and retail life insurance business (£0.1 billion increase to surplus), the disposal of Friends Provident International Limited (£0.1 billion increase to surplus), and the buy-back of the remaining £0.2 billion share capital out of the £0.3 billion announced 25 May 2017. The 31 December 2016 Solvency II position includes the pro forma impacts of the disposal of Aviva's 50% shareholding in Antarius (£0.2 billion increase to surplus) and an anticipated future change to UK tax rules restricting tax relief (£0.4 billion decrease to surplus).

2    HY16 comparatives have been rebased for the reduction in the internal loan.

3    The combined operating ratio is now reported on an earned basis. Comparatives have been realigned to reflect this change.

Chief Financial Officer's report continued

Business unit performance continued	In Canada, general insurance operating profit was £71 million (HY16: £88 million). This was a disappointing result as continued adverse weather experience and unfavourable prior year development more than offset favourable foreign exchange movements, the benefit of a six month contribution from the RBCI business acquired on 1 July 2016 and improvement in the normalised accident year COR to 96.9%3 (HY16: 98.8%). The movement of prior year reserves reflects the absence in HY17 of the large releases that benefited the prior year (much of which were due to Ontario motor insurance) coupled with revisions in case estimates for a modest number of large claims. Net written premiums were £1,477 million (HY16: £1,049 million), a 25% increase in local currency mainly as a result of the RBCI acquisition. Excluding RBCI and FX, net written premiums gained 3%. Our European insurance businesses grew operating profit 9% in constant currency to £518 million (HY16: £430 million), VNB 18% to £243 million (HY16: £188 million), while COR improved to 92.7%3 (HY16: 98.9%). Excluding the benefit from foreign exchange and the adverse impact from the disposal of Antarius in France, life operating profit increased 5% mostly driven by growth in unit-linked and protection businesses in France, Poland and Italy, together with favourable equity market movements. Our general insurance and health operating profit grew to £85 million (HY16: £35 million) primarily due to improved weather experience and favourable prior year development in France as well as a benefit from foreign exchange. In our Asian insurance businesses, operating profit remained broadly stable in constant currency at £115 million (HY16: £112 million) with new business growth generated from our financial advisory channel in Singapore and our agency and broker channels in China partly offset by investment in disruptive strategies across the region.
Capital management	At 30 June 2017, our Solvency II capital surplus was £11.4 billion1 (FY16: £11.3 billion), representing a cover ratio of 193%1 (FY16: 189%). The first half of 2017 included a £1.1 billion contribution from operating capital (HY16: £1.2 billion) and a further £0.2 billion benefit from disposals. This was offset by payment of the 2016 final dividend and the impact from our 2017 share buyback programme. Centre liquidity currently stands at £1.7 billion4 (February 2017: £1.8 billion), in excess of the £1 billion minimum balance that we generally intend to maintain. It excludes amounts set aside to meet our £300 million share repurchase programme. We have announced the following disposals to date: in France, we completed the sale of Antarius for €500 million in April and the sale of the small individual health brokerage portfolio AMIS is expected to complete later this year; in July, we announced the disposals of our joint ventures with Unicorp Vida, Caja Espana Vida as well as our retail life insurance business in Spain for €475 million and of Friends Provident International Limited (FPIL) for £340 million. These actions are in line with our strategy to focus on businesses where we can make a difference. Consistent with our message at our 2016 result, our priorities for capital deployment remain organic growth, bolt-on acquisitions in our existing markets, and capital returns to both debtholders and shareholders. These priorities are not mutually exclusive and we expect to pursue all of these options. To date in 2017, we have continued to invest in our businesses, prioritising capital in areas where we can deliver superior returns and growth over the medium term. We increased our focus on Vietnam, acquiring the full ownership of VietinBank Aviva Life Insurance Limited and signing a new distribution agreement with VietinBank in April 2017. Today, we also have announced a new distribution partnership with HSBC in the UK which should further strengthen our leading position in the UK general insurance market. We have also progressed our capital return plans over the period with the start of a £300 million share repurchase programme in May 2017. As at the end of July 2017, 25 million shares have been repurchased for £132 million, an average price per share of 531p. Reducing hybrid debt during 2017 remains an option.
Outlook	We remain committed to the three financial targets set in July 2016: (1) to deliver mid-single digit percentage growth in operating EPS over the medium term, (2) for our business units to remit £7 billion of cash to group centre in 2016 to 2018 inclusive and (3) to increase our dividend payout ratio to 50% by the end of 2017.

Thomas D. Stoddard

Chief Financial Officer

1    Represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion). Includes an estimated adverse impact of a notional reset of the transitional measure on technical provisions ('TMTP') to reflect interest rates at 30 June 2017 £0.5 billion decrease to surplus (FY16: £0.4 billion). Also included are the pro forma impacts of the disposal of the Spanish joint ventures and retail life insurance business (£0.1 billion increase to surplus), the disposal of Friends Provident International Limited (£0.1 billion increase to surplus), and the buy-back of the remaining £0.2 billion share capital out of the £0.3 billion announced 25 May 2017. The 31 December 2016 Solvency II position includes the pro forma impacts of the disposal of Aviva's 50% shareholding in Antarius (£0.2 billion increase to surplus) and an anticipated future change to UK tax rules restricting tax relief (£0.4 billion decrease to surplus).

3    The combined operating ratio is now reported on an earned basis. Comparatives have been realigned to reflect this change.

4    As at end of July 2017. It excludes amounts set aside to meet our £300 million share repurchase programme.

Notes to editors

All comparators are for the half year 2016 position unless otherwise stated.

Income and expenses of foreign entities are translated at average exchange rates while their assets and liabilities are translated at the closing rates on 30 June 2017. The average rates employed in this announcement are 1 euro = £0.86 (6 months to 30 June 2016: 1 euro = £0.78) and CAD$1 = £0.59 (6 months to 30 June 2016: CAD$1 = £0.53).

Growth rates in the press release have been provided in sterling terms unless stated otherwise. The following supplement presents this information on both a sterling and constant currency basis.

Cautionary statements:

This should be read in conjunction with the documents distributed by Aviva plc (the "Company" or "Aviva") through the Regulatory News Service (RNS). This announcement contains, and we may make other verbal or written "forward-looking statements" with respect to certain of Aviva's plans and current goals and expectations relating to future financial condition, performance, results, strategic initiatives and objectives. Statements containing the words "believes", "intends", "expects", "projects", "plans", "will," "seeks", "aims", "may", "could", "outlook", "likely", "target", "goal", "guidance", "trends", "future", "estimates", "potential" and "anticipates", and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aviva believes factors that could cause actual results to differ materially from those indicated in forward-looking statements in the announcement include, but are not limited to: the impact of ongoing difficult conditions in the global financial markets and the economy generally; the impact of simplifying our operating structure and activities; the impact of various local and international political, regulatory and economic conditions; market developments and government actions (including those arising from the referendum on UK membership of the European Union); the effect of credit spread volatility on the net unrealised value of the investment portfolio; the effect of losses due to defaults by counterparties, including potential sovereign debt defaults or restructurings, on the value of our investments; changes in interest rates that may cause policyholders to surrender their contracts, reduce the value of our portfolio and impact our asset and liability matching; the impact of changes in short or long-term inflation; the impact of changes in equity or property prices on our investment portfolio; fluctuations in currency exchange rates; the effect of market fluctuations on the value of options and guarantees embedded in some of our life insurance products and the value of the assets backing their reserves; the amount of allowances and impairments taken on our investments; the effect of adverse capital and credit market conditions on our ability to meet liquidity needs and our access to capital; changes in, or restrictions on, our ability to initiate capital management initiatives; changes in or inaccuracy of assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; a cyclical downturn of the insurance industry; the impact of natural and man-made catastrophic events on our business activities and results of operations; our reliance on information and technology and third-party service providers for our operations and systems; the inability of reinsurers to meet obligations or unavailability of reinsurance coverage; increased competition in the UK and in other countries where we have significant operations; regulatory approval of extension of use of the Group's internal model for calculation of regulatory capital under the European Union's Solvency II rules; the impact of actual experience differing from estimates used in valuing and amortising deferred acquisition costs ("DAC") and acquired value of in-force business ("AVIF"); the impact of recognising an impairment of our goodwill or intangibles with indefinite lives; changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect of legal proceedings and regulatory investigations; the impact of operational risks, including inadequate or failed internal and external processes, systems and human error or from external events (including cyber attack); risks associated with arrangements with third parties, including joint ventures; our reliance on third-party distribution channels to deliver our products; funding risks associated with our participation in defined benefit staff pension schemes; the failure to attract or retain the necessary key personnel; the effect of systems errors or regulatory changes on the calculation of unit prices or deduction of charges for our unit-linked products that may require retrospective compensation to our customers; the effect of fluctuations in share price as a result of general market conditions or otherwise; the effect of simplifying our operating structure and activities; the effect of a decline in any of our ratings by rating agencies on our standing among customers, broker-dealers, agents, wholesalers and other distributors of our products and services; changes to our brand and reputation; changes in government regulations or tax laws in jurisdictions where we conduct business, including decreased demand for annuities in the UK due to changes in UK law; the inability to protect our intellectual property; the effect of undisclosed liabilities, integration issues and other risks associated with our acquisitions; and the timing/regulatory approval impact, integration risk and other uncertainties, such as non-realisation of expected benefits or diversion of management attention and other resources, relating to announced acquisitions and pending disposals and relating to future acquisitions, combinations or disposals within relevant industries; the policies, decisions and actions of government or regulatory authorities in the UK, the EU, the US or elsewhere, including the implementation of key legislation and regulation. For a more detailed description of these risks, uncertainties and other factors, please see 'Other information - Shareholder Information - Risks relating to our business' in Aviva's most recent Annual Report. Aviva undertakes no obligation to update the forward looking statements in this announcement or any other forward-looking statements we may make. Forward-looking statements in this presentation are current only as of the date on which such statements are made.

Aviva plc is a company registered in England No. 2468686.

Registered office

St Helen's

1 Undershaft

London

EC3P 3DQ

Contacts

Investor contacts	Media contacts	Timings
Chris Esson [phone] Diane Michelberger [phone]	Nigel Prideaux [phone] Andrew Reid [phone]	Presentation slides: 07:00 hrs BST www.aviva.com Real time media conference call: 07:45 hrs BST Analyst presentation: 09:00 hrs BST Live webcast: 09:00 hrs BST http://www.avivawebcast.com/interim2017/

 

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