HY 2008 Results Part 3 of 4

RNS Number : 1658A

Aviva PLC

30 July 2008

Part 3 of 4

Page 51

IFRS Basis

Page 52

Summarised consolidated income statement -
IFRS basis

For the six months to 30 June 2008

6 months 2008 €m		6 months 2008 £m	Restated 6 months 2007 £m	Restated Full year 2007 £m
	Income
22,138	Premiums written net of reinsurance	17,046	14,505	29,333
(247)	Net change in provision for unearned premiums	(190)	(237)	(21)
21,891	Net earned premiums	16,856	14,268	29,312
1,234	Fee and commission income	950	919	1,760
(12,369)	Net investment income	(9,524)	6,945	9,890
(447)	Share of (loss)/profit after tax of joint ventures and associates	(344)	(80)	(304)
12	Profit/(loss) on the disposal of subsidiaries and associates	9	(5)	49
10,321		7,947	22,047	40,707
	Expenses
(18,358)	Claims and benefits paid, net of recoveries from reinsurers	(14,136)	(13,307)	(27,121)
4,508	Change in insurance liabilities, net of reinsurance	3,471	(638)	(3,507)
5,914	Change in investment contract provisions	4,554	(2,466)	(2,018)
3,566	Change in unallocated divisible surplus	2,746	27	2,922
(3,030)	Fee and commission expense	(2,333)	(2,277)	(4,445)
(2,901)	Other expenses	(2,234)	(1,662)	(3,473)
(915)	Finance costs	(704)	(505)	(1,208)
(11,216)		(8,636)	(20,828)	(38,850)
(895)	(Loss)/profit before tax	(689)	1,219	1,857
873	Tax attributable to policyholders' returns	672	(21)	(15)
(22)	(Loss)/profit before tax attributable to shareholders' profits	(17)	1,198	1,842
	Tax expense
830	United Kingdom tax	639	(114)	(97)
(40)	Overseas tax	(31)	(215)	(255)
790		608	(329)	(352)
(873)	Less: tax attributable to policyholders' returns	(672)	21	15
(83)	Tax attributable to shareholders' profits	(64)	(308)	(337)
(105)	(Loss)/profit for the period	(81)	890	1,505
	Attributable to:
(122)	Equity shareholders of Aviva plc	(94)	807	1,327
17	Minority interests	13	83	178
(105)		(81)	890	1,505

All (loss)/profit is from continuing operations.

Earnings per share - IFRS basis

For the six months to 30 June 2008

6 months 2008		6 months 2008	6 month 2007	Full year 2007
(5.1)c	Basic (pence per share)	(3.9)p	31.0p	49.2p
(5.1)c	Diluted (pence per share)	(3.9)p	30.7p	48.7p

Subsequent to 30 June 2008, the directors proposed an interim dividend for 2008 of 13.09p (interim 2007: 11.90p) per ordinary share, amounting to £347 million (interim 2007: £309 million) in total. The dividend will be paid on 17 November 2008 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2008.

During the six months to 30 June 2008, the directors declared a final dividend for 2007 of 21.10p per ordinary share (final 2006: 19.18p) totalling £554 million (6 months to 30 June 2007: £492 million).

Page 53

Pro forma reconciliation of Group operating profit
to profit before tax - IFRS basis

For the six months to 30 June 2008

6 months 2008 €m		6 months 2008 £m	Restated 6 months 2007 £m	Full year 2007 £m
	IFRS Operating profit before tax attributable to shareholders' profits
1,260	Long-term business (note 7)	970	834	1,634
82	Fund management (note 9)	63	76	155
699	General insurance and health (note 10)	538	560	1,033
	Other:
(87)	Other operations and regional costs (note 11)	(66)	(49)	(74)
(92)	Corporate centre (note 12)	(71)	(80)	(157)
(261)	Group debt costs and other interest (note 13)	(201)	(190)	(363)
1,601	Operating profit before tax attributable to shareholders' profits	1,233	1,151	2,228
	Adjusted for the following:
(825)	Investment return variances and economic assumption changes on long-term business (note 8)	(636)	107	15
(408)	Short-term fluctuation in return on investments backing general insurance and health business (note 10)	(314)	37	(184)
(55)	Impairment of goodwill	(42)	(3)	(10)
(66)	Amortisation and impairment of intangibles	(51)	(49)	(103)
12	Profit/(loss) on the disposal of subsidiaries and associates (note 4)	9	(5)	49
(171)	Integration and restructuring costs (note 5)	(132)	(40)	(153)
(110)	Exceptional costs for termination of operations (note 5)	(84)	-	-
(22)	(Loss)/profit before tax	(17)	1,198	1,842
(460)	Tax on operating profit	(354)	(329)	(607)
377	Tax on other activities	290	21	270
(83)		(64)	(308)	(337)
(105)	(Loss)/profit for the period	(81)	890	1,505

Six months 2007 has been restated to reflect the change in the definition of group operating profit on an International Financial Reporting Standards ('IFRS') basis. See the Basis of preparation note on page 57.

Earnings per share - IFRS operating profit basis

For the six months to 30 June 2008

6 months 2008 €m		6 months 2008 £m	Restated 6 months 2007 £m	Full year 2007 £m
39.1c	Basic (pence per share)	30.1p	28.1p	53.2p
38.8c	Diluted (pence per share)	29.9p	27.8p	52.7p

Page 54

Consolidated statement of recognised income and expense - IFRS basis

For the six months ended 30 June 2008

6 months 2008 €m		6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
(1,100)	Fair value (losses)/gains on AFS securities, owner-occupied properties and hedging instruments	(847)	346	172
(178)	Fair value gains transferred to profit	(136)	(117)	(391)
193	Impairment loss	148	-	-
(10)	Share of fair value changes in joint ventures and associates taken to equity	(8)	8	9
(896)	Actuarial (losses)/gains on pension schemes (note 19)	(690)	830	648
92	Actuarial (gains)/losses on pension schemes transferred to unallocated divisible surplus and other movements	71	(84)	(61)
761	Foreign exchange rate movements	586	(50)	739
-	Aggregate tax effect - policyholder tax	-	(1)	-
131	Aggregate tax effect - shareholder tax	101	(229)	(179)
(1,007)	Net (expense)/income recognised directly in equity	(775)	703	937
(105)	(Loss)/profit for the period	(81)	890	1,505
(1,112)	Total recognised (expense)/income for the period	(856)	1,593	2,442
	Attributable to:
(1,278)	Equity shareholders of Aviva plc	(984)	1,514	2,145
166	Minority interests	128	79	297
(1,112)		(856)	1,593	2,442

Reconciliation of movements in consolidated shareholders' equity - IFRS basis

For the six months ended 30 June 2008

6 months 2008 €m		6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
21,003	Balance at 1 January	16,592	14,064	14,064
(1,084)	Total recognised (expense)/income for the period	(856)	1,593	2,442
(713)	Dividends and appropriations (note 16)	(563)	(501)	(871)
39	Issues of share capital, net of transaction costs	31	30	48
215	Shares issued in lieu of dividends	170	152	301
139	Capital contributions from minority shareholders	110	75	307
(95)	Minority share of dividends declared in the year	(75)	(63)	(66)
75	Minority interest in acquired subsidiaries	59	142	317
(98)	Changes in minority interest in existing subsidiaries	(78)	-	-
34	Reserves credit for equity compensation plans	27	24	50
19,515	Total equity	15,417	15,516	16,592
(3,414)	Minority interests	(2,697)	(1,931)	(2,553)
16,101	Balance at 30 June/31 December	12,720	13,585	14,039

Page 55

Summarised consolidated balance sheet -
IFRS basis

As at 30 June 2008

30 June 2008 €m		30 June 2008 £m	Restated 30 June 2007 £m	Restated 31 December 2007 £m
	Assets
3,858	Goodwill	3,048	2,912	3,082
4,013	Acquired value of in-force business and intangible assets	3,170	2,836	3,197
3,276	Interests in, and loans to, joint ventures	2,588	2,557	2,576
1,533	Interests in, and loans to, associates	1,211	891	1,206
1,261	Property and equipment	996	857	942
18,567	Investment property	14,668	15,682	15,077
47,325	Loans	37,387	30,207	36,193
	Financial investments
157,184	Debt securities	124,176	111,035	119,743
61,414	Equity securities	48,517	58,924	56,018
48,704	Other investments	38,476	36,517	40,413
10,541	Reinsurance assets (note 22)	8,327	7,832	8,109
315	Deferred tax assets	249	765	590
676	Current tax assets	534	268	376
13,619	Receivables and other financial assets	10,760	10,957	8,629
6,423	Deferred acquisition costs and other assets	5,074	3,929	4,487
4,029	Prepayments and accrued income	3,183	2,773	2,986
23,776	Cash and cash equivalents	18,783	14,534	16,089
8,409	Assets of operations classified as held for sale (note 6)	6,643	1,261	1,128
414,923	Total assets	327,790	304,737	320,841
	Equity
841	Ordinary share capital	664	647	655
5,716	Capital reserves	4,516	4,484	4,494
1,532	Other reserves	1,210	1,166	1,467
6,506	Retained earnings	5,140	6,098	6,233
14,595	Equity attributable to ordinary shareholders of Aviva plc	11,530	12,395	12,849
1,506	Preference share capital and direct capital instrument	1,190	1,190	1,190
3,414	Minority interests	2,697	1,931	2,553
19,515	Total equity	15,417	15,516	16,592
	Liabilities
195,935	Gross insurance liabilities (note 20)	154,789	144,687	153,040
124,844	Gross liabilities for investment contracts (note 21)	98,627	92,101	98,244
5,146	Unallocated divisible surplus (note 24)	4,065	9,489	6,785
8,372	Net asset value attributable to unitholders	6,614	4,624	5,101
3,035	Provisions	2,398	1,930	1,937
1,587	Deferred tax liabilities	1,254	3,013	2,529
1,381	Current tax liabilities	1,091	1,157	1,189
16,928	Borrowings (note 25)	13,373	12,196	12,657
24,962	Payables and other financial liabilities	19,720	14,166	18,060
5,743	Other liabilities	4,537	4,808	3,765
7,475	Liabilities of operations classified as held for sale (note 6)	5,905	1,050	942
395,408	Total liabilities	312,373	289,221	304,249
414,923	Total equity and liabilities	327,790	304,737	320,841

Page 56

Summarised consolidated cash flow statement -
IFRS basis

For the six months to 30 June 2008

The cash flows presented in this statement cover all the Group's activities and include flows from policyholder and shareholder activities.

	6 months 2008			Restated 6 months 2007	Restated Full year 2007
	Long-term business operations £m	Non- long-term business operations £m	Group £m	Group £m	Group £m
Cash flows from operating activities
Cash generated from operations*	2,793	847	3,640	2,159	4,934
Tax paid	(358)	(76)	(434)	(300)	(801)
Net cash from operating activities	2,435	771	3,206	1,859	4,133
Cash flows from investing activities:
Acquisition of subsidiaries, joint ventures and associates, net of cash acquired	(247)	(70)	(317)	(359)	(769)
Disposal of subsidiaries, joint ventures and associates, net of cash transferred	65	-	65	272	283
Purchase of minority interest in subsidiary	(81)	-	(81)	-	-
Loans to joint ventures and associates	-	-	-	184	33
Purchases of property and equipment	(22)	(68)	(90)	(72)	(227)
Proceeds on sale of property and equipment	5	1	6	39	93
Purchases of intangible assets	-	-	-	(29)	(48)
Net cash (used in)/from investing activities	(280)	(137)	(417)	35	(635)
Cash flows from financing activities:
Proceeds from issue of ordinary shares, net of transaction costs	-	31	31	30	48
New borrowings drawn down, net of expenses	279	2,695	2,974	3,690	6,322
Repayment of borrowings	(377)	(2,516)	(2,893)	(3,483)	(6,000)
Net drawdown of borrowings	(98)	179	81	207	322
Interest paid on borrowings	(364)	(340)	(704)	(446)	(1,208)
Preference dividends paid	-	(9)	(9)	(9)	(17)
Ordinary dividends paid	-	(385)	(385)	(340)	(500)
Coupon payments on direct capital instrument	-	-	-	-	(53)
Finance lease payments	-	(1)	(1)	(1)	(7)
Capital contributions from minority shareholders	105	5	110	75	307
Dividends paid to minority interests of subsidiaries	(63)	(12)	(75)	(63)	(66)
Non-trading cash flows between operations	(623)	623	-	-	-
Net cash (used in)/from financing activities	(1,043)	91	(952)	(547)	(1,174)
Net increase in cash and cash equivalents	1,112	725	1,837	1,347	2,324
Cash and cash equivalents at 1 January	11,132	4,432	15,564	12,635	12,635
Effect of exchange rate changes on cash and cash equivalents	472	48	520	(1)	605
Cash and cash equivalents at 30 June/31 December	12,716	5,205	17,921	13,981	15,564
Cash and cash equivalents at 30 June/31 December comprised:
Cash at bank and in hand	7,546	1,286	8,832	4,817	4,004
Cash equivalents	5,567	4,795	10,362	9,790	12,181
	13,113	6,081	19,194	14,607	16,185
Bank overdrafts	(397)	(876)	(1,273)	(626)	(621)
	12,716	5,205	17,921	13,981	15,564

* Cash generated from operations is stated after net purchases/sales of investment property, loans and financial investments.

Of the total cash and cash equivalents shown above, £411 million has been classified as held for sale (30 June 2007: £73 million; 31 December 2007: £96 million).
Cash and cash equivalents in long-term business operations are primarily held for the benefit of policyholders and so are generally not available for use by the Group.

Page 57

Notes to the consolidated financial statements -
IFRS basis

1 - Basis of preparation - IFRS

(a) The results for the six months to 30 June 2008 have been prepared using International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union (EU). These include IAS 34, Interim Financial Reporting, which specifically addresses the contents of interim announcements. The results apply the accounting policies set out in Aviva plc's 2007 Annual Report and Accounts, except that segmental information is now given in accordance with the requirements of IFRS 8, Operating Segments, as described in note 1(d) below.

The results for the six months to 30 June 2008 and 2007 are unaudited but have been reviewed by the auditor, Ernst & Young LLP. The interim results do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results for the full year 2007 have been taken from the Group's 2007 Annual Report and Accounts. The auditor has reported on the 2007 financial statements and the report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The Group's 2007 Report and Accounts have been filed with the Registrar of Companies.

(b) Items included in the financial statements of each of the Group's entities are measured in the currency of the primary economic environment in which that entity operates (the 'functional currency'). The consolidated financial statements are stated in sterling, which is the Company's functional and presentational currency. Unless otherwise noted, the amounts shown in the financial statements are in millions of pounds sterling (£m). As supplementary information, consolidated financial information is also presented in euros.

(i) Change to definition of operating profit

During 2007, the Group changed its definition of IFRS operating profit. The key changes to our definition of IFRS operating profit are set out in the 2007 Report and Accounts and were presented in this manner. Results to 30 June 2007 have been restated to reflect the changes.

(ii) Gross up for cash collateral received

The Group enters into stock lending transactions and receives cash or non-cash collateral to reduce the Group's exposure to counterparty credit risk. Collateral received in the form of cash is then either lent out at market rates of interest or held as cash. During 2007, we identified that certain cash collateral transactions should have been historically recognised on the balance sheet, with a corresponding obligation to return this collateral, instead of showing a net nil position.

The cash collateral transactions were accounted for correctly in the 2007 Report and Accounts but, as a result, the figures for loan assets, cash and cash equivalents, and payables and other financial liabilities as at 30 June 2007 have been restated by increasing them by £3,396 million, £147 million and £3,543 million respectively. The equivalent adjustment at 1 January 2007, the start of the comparative period, was to increase loan assets and payable and other financial liabilities by £2,129 million.

The 30 June 2007 comparative figures in the cash flow statement for cash generated from operations, net increase in cash and cash equivalents and cash and cash equivalents at 30 June 2007 have also been restated for the increase in cash and cash equivalents of £147 million detailed above.

In addition, we identified that the interest paid on cash collateral received and the interest earned from onlending this cash had previously been offset and reported as net investment income. The 30 June 2007 comparative figures have therefore been restated in order to report this interest expense and interest income separately, by increasing both by £59 million.

Neither of these adjustments have any impact on profit for the period, operating profit or earnings per share for the six months ended 30 June 2007, nor on retained earnings, net assets or total equity at either 1 January 2007 or 30 June 2007.

(iii) Consolidation of managed fund

The Group manages a number of specialised investment vehicles around the world, in which our insurance and investment funds have invested. The Group's percentage ownership in these vehicles can fluctuate from day to day according to the Group's and third party participation in them, and control is determined based on an analysis of the guidance in IAS 27. During 2008, we identified that one such vehicle, a UK cash deposit fund, required consolidation in accordance with IAS 27 which therefore results in grossing up assets and liabilities for the effect of the third party participation.

As a result, the figures for cash and cash equivalents, financial investments (debt securities) and net asset value attributable to unitholders as at 31 December 2007 have been restated by increasing them by £315 million, £806 million and £1,121 million respectively. The equivalent figures as at 30 June 2007 have been restated by increasing them by £242 million, £392 million and £634 million respectively. The impact on the full year 2007 income statement has been to restate net investment income and fee and commission expense by increasing both by £62 million (6 months to 30 June 2007: increase both by £40 million).

None of these adjustments has any impact on profit for the period, operating profit or earnings per share in either the full year 2007 or the 6 months to 30 June 2007, nor on retained earnings, net assets or total equity at either 1 January 2007, 30 June 2007 or 31 December 2007. The effect of restating items in the cash flow statements for these periods is given in section (iv) below.

Page 58

(iv) Restatement of cash equivalents

During 2007, we reviewed the policy for cash and cash equivalents and determined that certain investments, previously classified as cash equivalents, would be more appropriately classified as financial investments.

This treatment was adopted in the 2007 Report and Accounts but the application of this review to the 30 June 2007 balances has led to a reduction of the cash equivalents balance at that date by £980 million and a corresponding increase in the debt securities total of the same amount.

This restatement has no impact on net assets or total equity. The effect of the restatements described in sections (iii) and (iv) on cash flows for the 6 months to 30 June 2007 is to reduce cash equivalents at 1 January 2007 and 30 June 2007 by £1,211 million and £738 million respectively, and to increase cash flows from operating activities by £473 million. The effect on the year to 31 December 2007 is to increase cash equivalents at 1 January 2007 and 31 December 2007 by £214 million and £315 million respectively, and to increase cash flows from operating activities by £101 million..

(d) In November 2006, the IASB issued IFRS 8, Operating Segments. Although its requirements are applicable for accounting periods beginning on or after 1 January 2009, the Group has decided to adopt IFRS 8 early and reflect its impact in the 2008 financial statements. Accordingly, the segmental information given in these interim results reflect the adoption of this standard.

The Group has determined its operating segments along regional lines and the results for the period to 30 June 2008 are presented on this basis, using NU Life and NUI within the United Kingdom, Europe, North America, Asia Pacific and Aviva Investors as the main segments.

(i) The NUI region covers the Group's UK general insurance business and includes the results of Aviva
Re, the Group's captive reinsurance business;

(ii) Europe incorporates all European operations excluding the UK as set out above;

(iii) North America is made up of our life business in the United States and general insurance business in
Canada;

(iv) Asia Pacific includes all our Asian and Australian businesses; and,

(v) Aviva Investors comprises the business of Morley, as well as the asset management businesses in
France and Canada.

2 - Exchange rates

The Group's principal overseas operations during the year were located within the Eurozone and the United States.

The results and cash flows of these operations have been translated into sterling at an average rate for the period of 1 euro = £0.77 (6 months to 30 June 2007: 1 euro = £0.68; full year 2007: 1 euro = £0.68). Assets and liabilities have been translated at the period end rate of 1 euro = £0.79 (30 June 2007: 1 euro = £0.67; 31 December 2007: 1 euro = £0.73).

The US dollar rates used for translation are an average of £1 = US$1.98 (6 months to 30 June 2007: £1 = US$1.97; full year 2007: £1 = US$2.00) and a closing rate of £1 = US$2.00 (30 June 2007: £1 = US$1.99; 31 December 2007: £1 = US$1.99).

Page 59

3 - Acquisitions

(i) Acquisition of VIVAS Health

On 15 May 2008, the Group's Irish subsidiary, Hibernian Group plc, acquired a 70% holding in VIVAS Group Ltd. (VIVAS Health), an Irish health insurance company, for £26 million. Allied Irish Banks plc (AIB) will continue to hold the remaining 30% equity, further strengthening AIB and Hibernian's existing relationship. The company has since been re-branded as Hibernian Health. Its health insurance products will be distributed through Hibernian and AIB's distribution channels, including Hibernian Health's existing direct and non-direct channels.

The acquisition of this shareholding has given rise to goodwill on acquisition of £22 million, calculated as follows:

Purchase cost:	£m
Cash paid	25
Attributable costs	1
Total consideration	26

The estimated book and fair values of the assets and liabilities at the date of acquisition were:

	Book value £m	Fair value and accounting policy adjustments £m	Fair value £m
Assets
Reinsurance assets	31	-	31
Cash and cash equivalents	28	-	28
Receivables and financial assets	33	-	33
Other assets	1	-	1
Total assets	93	-	93
Liabilities
Insurance liabilities	51	-	51
Payables and other financial liabilities	31	-	31
Other liabilities	5	-	5
Total liabilities	87	-	87
Total net assets	6	-	6
Net assets acquired (70%)			4
Goodwill arising on acquisition of this holding			22

The assets and liabilities as at the acquisition date in the table above are stated at their provisional fair values and may be amended in the Group's full year financial statements in accordance with paragraph 62 of IFRS 3, Business Combinations.

Page 60

(ii) Acquisition of UBI Vita

On 18 June 2008, the Group acquired 50% plus one share in UBI Assicurazioni Vita SpA. (UBI Vita), an Italian
life insurance company, from Unione di Banche Italiane Scpa (UBI Banca), for a consideration of £51 million.
UBI Vita distributes life insurance products through a bancassurance agreement with Banca Popolare di Ancona and other channels.

The acquisition of this shareholding has given rise to goodwill on acquisition of £6 million, calculated as follows:

Purchase cost:	£m
Cash paid	51
Attributable costs	-
Total consideration	51

The estimated book and fair values of the assets and liabilities at the date of acquisition were:

	Book value £m	Fair value and accounting policy adjustments £m	Fair value £m
Assets
Intangible assets	-	35	35
Reinsurance assets	128	-	128
Prepayment and accrued income	22	-	22
Cash and cash equivalents	50	-	50
Debt securities	1,768	(2)	1,766
Other investments	444	1	445
Property and equipment	18	1	19
Receivables and other financial assets	15	1	16
Other assets	2	(1)	1
Total assets	2,447	35	2,482
Liabilities
Insurance liabilities	2,241	-	2,241
Borrowings	30	-	30
Payables and other financial liabilities	140	(12)	128
Other liabilities	(10)	4	(6)
Total liabilities	2,401	(8)	2,393
Total net assets	46	43	89
Net assets acquired (50%)			45
Goodwill arising on acquisition of this holding			6

(iii) Acquisition of Swiss Life Belgium

On 30 June 2008, the Group acquired 100% of the shares in Swiss Life Belgium, a multi-line insurer, from SNS REAAL for £112 million. By combining Swiss Life Belgium with its Belgian insurance operation, managed through its Dutch subsidiary Delta Lloyd, the Group will further strengthen its position in the Belgian life insurance market.

The acquisition of this shareholding has given rise to goodwill on acquisition of £nil, calculated as follows:

Purchase cost:	£m
Cash paid	112
Attributable costs	-
Total consideration	112

Page 61

3 - Acquisitions continued

The estimated book and fair values of the assets and liabilities at the date of acquisition were:

	Book value £m	Fair value and accounting policy adjustments £m	Fair value £m
Assets
Acquired value of in-force business on insurance contracts	-	55	55
Prepayment and accrued income	45	-	45
Cash and cash equivalents	89	-	89
Equity securities	130	-	130
Debt securities	2,221	-	2,221
Other investments	21	-	21
Receivables and other financial assets	39	-	39
Other assets	113	-	113
Total assets	2,658	55	2,713
Liabilities
Insurance liabilities	2,195	-	2,195
Liabilities for investment contracts - gross	277	-	277
Borrowings	49	-	49
Payables and other financial liabilities	35	(3)	32
Other liabilities	48	-	48
Total liabilities	2,604	(3)	2,601
Total net assets	54	58	112
Net assets acquired (100%)			112
Goodwill arising on acquisition			-

(iv) Addition to existing shareholding in Cajamurcia Vida

As disclosed in the 2007 financial statements, on 6 June 2007 the Group acquired 5% of the share capital of Caja Murcia Vida y Pensiones, de Seguros y Reaseguros SA (Cajamurcia Vida) from the Spanish savings bank Caja de Ahorros de Murcia (Cajamurcia). Cajamurcia Vida was fully consolidated as a subsidiary from that date, as the Group has the power to govern its financial and operating policies, through having the majority vote at meetings of the company's board of directors.

On signing the shareholders' agreement, Cajamurcia granted the Group a call option over a further 45% of the shares in Cajamurcia Vida. On 27 March 2008, the Group exercised this option and acquired 45% of the shares for £81 million. The fair value of the net assets of the company at the date the option was exercised was £176 million, and the acquisition of the additional shareholding gave rise to additional goodwill of £3 million.

(v) Investment in LIG Life

On 4 April 2008, the Group acquired 40.65% of LIG Life Insurance Co. Ltd (LIG Life), a South Korean life insurance company, for £34 million. LIG Life distributes life insurance products through multiple distribution channels and focuses on the Busan metropolitan area in the south-eastern region of the country. Further shareholdings of 5.51% and 0.63 % were acquired on 7 April and 29 May 2008 respectively for a total of £4 million. This investment has been accounted for as an interest in a joint venture.

4 - Profit/(loss) on the disposal of subsidiaries and associates

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
United Kingdom	-	(7)	(7)
Turkey	-	-	71
Other small operations	9	2	(15)
Profit/(loss) on disposal before tax	9	(5)	49
Tax on profit/(loss) on disposal	-	3	3
Profit/(loss) on disposal after tax	9	(2)	52

Page 62

5 - Integration and restructuring costs

(a) Integration and restructuring costs of £132 million (six months to 30 June 2007: £40 million) comprises phase one restructuring costs of £38 million announced in October 2007, phase two restructuring costs of £83 million announced in June 2008. The balance relates mainly to the implementation of Aviva Investors.

(b) Exceptional costs for termination of operations of £84 million (six months to 30 June 2007: £nil) are due to the closure of the wrap platform in the UK and migration of the operation to a third party provider, Scottish Friendly. These costs include write-downs of goodwill and intangible assets.

6 - Operations classified as held for sale

	30 June 2008 £m	30 June 2007 £m	31 December 2007 £m
Intangible assets	260	52	-
Investments and property and equipment	5,072	-	316
Deferred acquisition costs and other assets	57	74	-
Receivables and other financial assets	587	1,062	554
Prepayments and accrued income	247	-	145
Tax assets	9	-	17
Cash and cash equivalents	411	73	96
Total assets	6,643	1,261	1,128
Gross insurance liabilities/liability for investment contracts	(5,253)	(871)	(627)
Borrowings	(13)	(11)	(12)
Payables and financial liabilities	(197)	(68)	(72)
Other liabilities	(369)	(100)	(220)
Tax liabilities and other provisions	(73)	-	(11)
Total liabilities	(5,905)	(1,050)	(942)
Net assets	738	211	186

(i) Dutch health insurance business

On 16 July 2007, the Group announced that its Dutch subsidiary, Delta Lloyd Group ('DL'), had reached an agreement to sell its health insurance business to OWM CZ Groep Zorgverkeraar UA ('CZ'), a mutual health insurer, and create a long-term alliance for the cross-selling of insurance products. Under the terms of the agreement, CZ will purchase the DL health insurance business and take on its underwriting risk and policy administration. DL will continue to market and distribute health insurance products from CZ to its existing customers and continue to provide asset management for the transferred business. DL will also have exclusive rights to market life, general insurance and income protection products to CZ's customers. The transaction is expected to take effect on 1 January 2009, subject to regulatory, competition and other relevant approvals.

The relevant assets and liabilities of the DL health insurance business have been classified as held for sale, at their carrying values, in the consolidated balance sheet as at 30 June 2008.

(ii) Dutch bancassurance business with ABN AMRO

On 20 May 2008, the Group announced that its Dutch subsidiary, Delta Lloyd Group, had received notice from
ABN AMRO that, in accordance with its contractual entitlement, as a consequence of a change of control of
ABN AMRO, it wished to end their 30-year bancassurance agreement signed in 2003, covering life and general
insurance, and intended to buy out Delta Lloyd's 51% shareholding in Delta Lloyd ABN AMRO Verzekeringen
Holding BV. The transaction is expected to complete in 2009.

The relevant assets and liabilities of the Dutch bancassurance business with ABN AMRO have been classified as held for sale, at their carrying values, in the consolidated balance sheet as at 30 June 2008. Gross assets were £4,716 million and net assets were £338 million.

(iii) UK non-core businesses

In the current period, the Group commenced a strategic review of certain UK non-core operations. As a consequence, certain assets and liabilities have been classified as held for sale at their carrying values in the consolidated balance sheet at 30 June 2008.

(iv) Non-adjusting post-balance sheet event

On 10 July 2008 we announced the sale of our offshore operations, known as Aviva Global Services ('AGS') to WNS. As part of this agreement, we have also entered into a master services contract with WNS, who will provide offshoring services to Aviva's UK, Irish and Canadian businesses for the next eight years and four months. Aviva will receive total cash consideration of £115 million.

Page 63

7 - Analysis of long-term business IFRS operating profit

	6 months 2008 £m	Restated 6 months 20071 £m	Full year 2007 £m
With-profit	202	85	178
Non-profit	226	272	545
United Kingdom	428	357	723
France	145	136	243
Ireland	28	31	73
Italy	37	38	78
Netherlands (including Belgium and Germany)	134	94	181
Poland	76	53	110
Spain	74	57	119
Other Europe	(8)	(14)	(27)
Europe	486	395	777
North America	42	58	103
Asia	(7)	3	(6)
Australia	21	21	37
Asia Pacific	14	24	31
Total	970	834	1,634

1. See page 57 for details of the change in long-term business operating profit definition.

8 - Long-term business economic volatility

(a) Definitions

Operating profit for long-term business is based on expected investment returns on financial investments backing shareholder and policyholder funds over the period, with consistent allowance for the corresponding expected movements in liabilities. Operating profit includes the effect of variance in experience for non-economic items, such as mortality, persistency and expenses, and the effect of changes in non-economic assumptions. Changes due to economic items, such as market value movement 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 operating profit.

(b) Economic volatility

The investment variances and economic assumption changes excluded from the long-term business operating profit are as follows:

	Long-term business
	6 months 2008 £m	Restated 6 months 2007 £m	Full year 2007 £m
Investment variances and economic assumption changes	(636)	107	15

Economic items had a significantly negative impact on profit in the six months to 30 June 2008. This was driven primarily by increases in market risk free rates and widening credit spreads on debt securities, partly mitigated by higher liability valuation interest rates, and by the impact of falling equity and property market values.

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

Where assets are classified as fair value through profit or loss, the Group has applied the same 'real-world' economic assumptions for fixed interest securities, equities and properties as are used under EEV principles. The principal assumptions underlying the calculation of the expected investment return are:

	Expected return fixed interest		Expected return equities		Expected return properties
	2008 %	2007 %	2008 %	2007 %	2008 %	2007 %
United Kingdom	4.6%	4.6%	7.6%	7.6%	6.6%	6.6%
Eurozone	4.4%	4.0%	7.4%	7.0%	6.4%	6.0%

Where fixed interest 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 64

9 - Analysis of fund management operating profit

	6 months 2008 £m	6 months 20071 £m	Full year 20071 £m
United Kingdom	28	33	70
France	16	16	33
Canada	1	1	3
Other	4	8	17
Aviva Investors	49	58	123
United Kingdom	(8)	(4)	(10)
Netherlands	10	11	23
Other Europe	3	2	4
Europe	13	13	27
Asia Pacific	9	9	15
Total	63	76	155

1. Prior periods have been restated to reflect the new management structure to include France and Canada. Norwich Union's retail investment business and the collective investment business with RBSG do not form part of Aviva Investors UK operations.

On 28 February, as part of the 'one Aviva, twice the value' vision, we announced our plans to combine the asset management companies within Aviva to create a single, globally integrated asset manager to be known as Aviva Investors.

10 - Analysis of general insurance and health

(a) Operating result

	Operating profit			Underwriting result
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m
United Kingdom	326	284	433	37	(46)	(214)
France	30	31	70	1	-	11
Ireland	41	80	162	8	53	101
Netherlands	44	70	169	(7)	29	75
Other	22	22	41	5	6	10
Europe	137	203	442	7	88	197
North America	76	70	154	15	5	18
Asia Pacific	(1)	3	4	(1)	2	3
Total	538	560	1,033	58	49	4
Analysed by:
General insurance	543	574	1,037	84	92	47
Health	(5)	(14)	(4)	(26)	(43)	(43)
Total	538	560	1,033	58	49	4

Page 65

10 - Analysis of general insurance and health continued

(b) Investment return information

	Actual investment return credited to income			Longer-term investment return
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m
United Kingdom	301	302	575	289	330	647
France	27	17	42	29	31	59
Ireland	32	23	52	33	27	61
Netherlands	47	37	79	51	41	94
Other	18	10	23	17	16	31
Europe	124	87	196	130	115	245
North America	60	55	120	61	65	136
Asia Pacific	-	-	-	-	1	1
Total longer-term investment return				480	511	1,029
Total actual investment income	485	444	891
Realised gains	24	160	579
Unrealised losses	(343)	(56)	(625)
Total actual investment return	166	548	845

The total short-term adverse fluctuation in investment return of £314 million (30 June 2007: £37 million favourable; 31 December 2007: £184 million adverse) is the difference between the total actual investment return of £166 million (30 June 2007: £548 million; 31 December 2007: £845 million) and the total longer-term investment return of £480 million (30 June 2007: £511 million; 31 December 2007: £1,029 million).

Actual income and longer-term investment return both contain the amortisation of the discount/premium arising on the acquisition of fixed income securities.

The longer-term investment return is calculated separately for each principal general insurance and health business unit. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the period, by the longer-term rate of investment return. The longer-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 longer-term return for other investments is the actual income receivable for the period.

The Group has calculated the longer-term investment return for its general insurance and health business using the same start of year economic assumptions for equities and properties as those used for EEV reporting as shown on page 44 of this announcement.

The total assets supporting the general insurance and health business, which contribute towards the longer-term return, were £18,379 million (30 June 2007: £18,957 million; 31 December 2007: £18,291 million). Total assets comprise debt securities £10,578 million (30 June 2007: £8,724 million; 31 December 2007: £10,757 million), equity securities £1,130 million (30 June 2007: £3,389 million; 31 December 2007: £1,195 million), properties £294 million (30 June 2007: £340 million; 31 December 2007: £360 million), cash and cash equivalents £3,354 million (30 June 2007: £3,261 million; 31 December 2007: £3,178 million) and other assets £3,023 million (30 June 2007: £3,242 million; 31 December 2007: £2,801 million).

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

	Longer-term rates of return Equities		Longer-term rates of return Properties
	2008 %	2007 %	2008 %	2007 %
United Kingdom	7.6%	7.6%	6.6%	6.6%
France	7.4%	7.0%	6.4%	6.0%
Ireland	7.4%	7.0%	6.4%	6.0%
Netherlands	7.4%	7.0%	6.4%	6.0%
Canada	7.6%	7.1%	6.6%	6.1%

Page 66

10 - Analysis of general insurance and health continued

	Operating profit			Longer-term investment return			Underwriting result
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m
United Kingdom	324	286	433	286	327	642	38	(41)	(209)
France	25	27	54	23	25	47	2	2	7
Ireland	41	80	162	33	27	61	8	53	101
Netherlands	57	86	193	39	21	73	18	65	120
Other Europe	22	22	41	17	16	31	5	6	10
Europe	145	215	450	112	89	212	33	126	238
North America	76	70	154	61	65	136	15	5	18
Asia Pacific	(2)	3	-	-	1	-	(2)	2	-
Total	543	574	1,037	459	482	990	84	92	47

(d) Combined operating profit ratio analysis - general insurance business only

	Claims ratio			Expense ratio			Combined operating ratio
	6 months 2008 %	6 months 2007 %	Full Year 2007 %	6 months 2008 %	6 months 2007 %	Full Year 2007 %	6 months 2008 %	6 months 2007 %	Full Year 2007 %
United Kingdom	60.0%	64.5%	65.9%	12.8%	13.6%	13.9%	98%	102%	106%
France	70.0%	73.4%	72.7%	8.7%	8.9%	10.2%	96%	97%	99%
Ireland	71.2%	54.5%	54.2%	15.2%	12.5%	14.3%	98%	78%	80%
Netherlands	60.3%	41.8%	45.1%	14.7%	14.1%	18.8%	92%	76%	85%
Canada	64.7%	67.2%	65.9%	14.2%	13.2%	13.6%	98%	99%	98%
Total	62.4%	63.1%	63.7%	12.7%	12.9%	13.9%	97%	97%	100%

Ratios are measured in local currency. The total Group ratios are based on average exchange rates applying to the respective periods.

Definitions:

Claims ratio - Incurred claims expressed as a percentage of net earned premiums.

Expense ratio - Written expenses excluding commissions expressed as a percentage of net written premiums.

Commission ratio - Written commissions expressed as a percentage of net written premiums.

Combined operating ratio - Aggregate of claims ratio, expense ratio and commission ratio.

(e) Combined operating profit ratio analysis - class of business analysis

(i) United Kingdom (excluding Group reinsurance)

	Net written premiums			Underwriting result			Combined operating ratio
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 %	6 months 2007 %	Full Year 2007 %
Personal
Motor	693	706	1,431	(18)	(12)	(25)	102%	103%	102%
Homeowner	585	625	1,223	(27)	(177)	(296)	105%	126%	124%
Other	301	355	797	(8)	18	10	107%	101%	100%
	1,579	1,686	3,451	(53)	(171)	(311)	103%	111%	110%
Commercial
Motor	330	338	636	22	43	61	92%	85%	91%
Property	418	403	807	(9)	2	(175)	99%	100%	124%
Other	262	272	546	72	79	192	74%	70%	68%
	1,010	1,013	1,989	85	124	78	90%	86%	98%
Total	2,589	2,699	5,440	32	(47)	(233)	98%	102%	106%

During the six month period to 30 June 2008, annualised rating increases were as follows: personal motor 5%; homeowner 10% (including indexation); commercial motor 3%; commercial property 2%; commercial liability 2%.

Page 67

10 - Analysis of general insurance and health continued

(ii) France

	Net written premiums			Underwriting result			Combined operating ratio
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 %	6 months 2007 %	Full Year 2007 %
Motor	164	147	254	(3)	(2)	(2)	100%	99%	101%
Property and other	222	189	320	5	4	9	93%	96%	97%
Total	386	336	574	2	2	7	96%	97%	99%

(iii) Netherlands

	Net written premiums			Underwriting result			Combined operating ratio
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 %	6 months 2007 %	Full Year 2007 %
Motor	150	131	267	(7)	19	42	105%	83%	84%
Property	174	138	249	(5)	7	19	98%	89%	93%
Liability	50	34	61	(2)	3	13	97%	82%	79%
Other	188	142	211	32	36	46	73%	52%	77%
Total	562	445	788	18	65	120	92%	76%	85%

(iv) Canada

	Net written premiums			Underwriting result			Combined operating ratio
	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 £m	6 months 2007 £m	Full Year 2007 £m	6 months 2008 %	6 months 2007 %	Full Year 2007 %
Motor	450	376	795	37	1	7	91%	100%	99%
Property	229	204	450	(25)	3	10	112%	98%	96%
Liability	79	73	143	(2)	(2)	(5)	101%	97%	103%
Other	13	12	24	5	3	6	58%	68%	68%
Total	771	665	1,412	15	5	18	98%	99%	98%

11 - Analysis of other operations and regional costs

	6 months 2008 £m	Restated 6 months 2007 £m	Full year 2007 £m
Europe	(12)	-	(11)
North America	(5)	-	(2)
Asia Pacific	(9)	-	(3)
Regional costs	(26)	-	(16)
United Kingdom	(33)	(23)	(8)
Europe	(10)	(22)	(38)
North America	1	-	(2)
Asia Pacific	2	(4)	(10)
Other operations	(40)	(49)	(58)
Total	(66)	(49)	(74)

The 30 June 2007 results have been restated to remove the covered business element of the NULS result (previously included in the UK line) to the life segment.

Page 68

12 - Corporate Centre

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
Project spend	(20)	(13)	(26)
Share awards and other incentive schemes	(8)	(12)	(17)
Central spend	(43)	(55)	(114)
Total	(71)	(80)	(157)

13 - Group debt costs and other interest

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
External
Subordinated debt	(94)	(88)	(179)
Other	(34)	(41)	(80)
Internal	(95)	(93)	(179)
Net finance income on pension schemes	22	32	75
Total	(201)	(190)	(363)

14 - Tax

(a) Tax (credited)/charged to the income statement

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
Current tax:
For the period	286	329	888
Prior year adjustments	(67)	(77)	(94)
Total current tax	219	252	794
Deferred tax:
Origination and reversal of temporary differences	(827)	145	(348)
Changes in tax rates or tax laws	-	(99)	(88)
Write down of deferred tax assets	-	31	(6)
Total deferred tax	(827)	77	(442)
Total tax (credited)/charged to income statement	(608)	329	352
Analysed between:
Tax (credit)/charge attributable to policyholders' returns	(672)	21	15
Tax charge on IFRS operating profit before tax attributable to shareholders' profits from continuing operations	354	329	607
Tax credit on profit on other activities	(290)	(21)	(270)
	(608)	329	352

The Group, as a proxy for policyholders in the UK, Ireland and Australia, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish and Australian life insurance policyholder returns is included in the tax charge.

Page 69

14 - Tax continued

(b) Tax (credited)/charged to equity

(i) Total tax (credit)/charge comprises:

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
Current tax credit	-	(1)	(19)
Deferred tax (credit)/charge	(101)	231	198
Total tax (credited)/charged to equity	(101)	230	179

(ii) The tax expense attributable to policyholders' returns included in the charge above is £nil (six months to 30 June 2007: £1 million charge; full year 2007: £nil).

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
(Loss)/Profit before tax	(689)	1,219	1,857
Tax calculated at standard UK corporation tax rate of 28.5% (2007: 30%)	(196)	366	557
Different basis of tax for UK life insurance	(465)	-	5
Adjustment to tax charge in respect of prior years	(55)	(3)	(49)
Non-assessable dividends	(19)	(61)	(124)
Non-taxable profit on sale of subsidiaries and associates	(3)	(2)	(18)
Disallowable expenses	26	17	7
Different local basis of tax on overseas profits	95	53	56
Reduction in future UK tax rate (net of movement in unallocated divisible surplus)	-	(69)	(64)
Deferred tax valuation difference	17	28	1
Other	(8)	(6)	(19)
Tax (credited)/charged to the income statement	(608)	329	352

Page 70

15 - Earnings per share

(a) Basic earnings per share

(i) The profit attributable to ordinary shareholders is:

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
(Loss)/profit for the period	(81)	890	1,505
Amount attributable to minority interests	(13)	(83)	(178)
Cumulative preference dividends for the year	(9)	(9)	(17)
Coupon payments in respect of direct capital instruments (net of tax)	-	-	(37)
(Loss)/profit attributable to ordinary shareholders	(103)	798	1,273

(ii) Basic earnings per share is calculated as follows:

	6 months 2008			Restated 6 months 2007			Full year 2007
	Before tax £m	Net of tax, minorities and preference dividends and DCI appropriation £m	Per Share p	Before tax £m	Net of tax, minorities and preference dividends and DCI appropriation £m	Per Share p	Before tax £m	Net of tax, minorities and preference dividends and DCI appropriation £m	Per Share p
Operating profit attributable to ordinary shareholders	1,233	792	30.1	1,151	723	28.1	2,228	1,376	53.2
Adjusted for the following:
- Investment return variances and economic assumption changes on long-term business	(636)	(490)	(18.6)	107	89	3.5	15	79	3.1
- Impairment of goodwill	(42)	(38)	(1.4)	(3)	(3)	(0.1)	(10)	(10)	(0.4)
- Amortisation and impairment of intangibles	(51)	(36)	(1.4)	(49)	(35)	(1.4)	(103)	(72)	(2.8)
- Short-term fluctuation in return on investments backing general insurance and health business	(314)	(171)	(6.5)	37	53	2.1	(184)	(38)	(1.5)
- Profit on the disposal of subsidiaries and associates	9	9	0.3	(5)	(2)	(0.1)	49	52	2.0
- Integration and restructuring costs	(132)	(105)	(4.0)	(40)	(27)	(1.1)	(153)	(114)	(4.4)
- Exceptional items	(84)	(64)	(2.4)	-	-	-	-	-	-
(Loss)/profit attributable to ordinary shareholders	(17)	(103)	(3.9)	1,198	798	31.0	1,842	1,273	49.2

Earnings per share has been calculated based on the operating profit before impairment of goodwill and other
non-operating items, after tax, attributable to ordinary shareholders, as well as on the profit attributable to
ordinary shareholders. The directors believe the former earnings per share figures provide a better indication
of operating performance.

The calculation of basic earnings per share uses a weighted average of 2,632 million (six months 30 June 2007: 2,571 million; full year 2007: 2,588 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 30 June 2008 was 2,658 million (30 June 2007: 2,595 million; 31 December 2007: 2,622 million).

Page 71

15 - Earnings per share continued

(b) Diluted earnings per share

(i) Diluted earnings per share is calculated as follows:

	6 months 2008			6 months 2007			Full year 2007
	Total £m	Weighted average number of shares m	Per Share p	Total £m	Weighted average number of shares m	Per Share p	Total £m	Weighted average number of shares m	Per Share p
(Loss)/profit attributable to ordinary shareholders	(103)	2,632	(3.9)	798	2,571	31.0	1,273	2,588	49.2
Dilutive effect of share awards and options	-	21	-	-	27	(0.3)	-	24	(0.5)
Diluted earnings per share	(103)	2,653	(3.9)	798	2,598	30.7	1,273	2,612	48.7

(ii) Diluted earnings per share on operating profit attributable to ordinary shareholders is calculated as follows:

	6 months 2008			Restated 6 months 2007			Full year 2007
	Total £m	Weighted average number of shares m	Per Share p	Total £m	Weighted average number of shares m	Per Share p	Total £m	Weighted average number of shares m	Per Share p
Operating profit attributable to ordinary shareholders	792	2,632	30.1	723	2,571	28.1	1,376	2,588	53.2
Dilutive effect of share awards and options	-	21	(0.2)	-	27	(0.3)	-	24	(0.5)
Diluted earnings per share	792	2,653	29.9	723	2,598	27.8	1,376	2,612	52.7

16 - Dividends and appropriations

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
Ordinary dividends declared and charged to equity in the year
Final 2006 - 19.18 pence per share, paid on 18 May 2007	-	492	492
Interim 2007 - 11.90 pence per share, paid on 16 November 2007	-	-	309
Final 2007 - 21.10 pence per share, paid on 16 May 2008	554	-	-
	554	492	801
Preference dividends declared and charged to equity in the year	9	9	17
Coupon payments on direct capital instrument - gross of tax	-	-	53
	563	501	871

Subsequent to 30 June 2008, the directors proposed an interim dividend for 2008 of 13.09 pence per ordinary share (six months 2007: 11.90 pence), amounting to £347 million (six months 2007: £309 million) in total. The dividend will be paid on 17 November 2008 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2008.

Interest on the direct capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. Tax relief will be obtained at a rate of 30%.

Irish shareholders who are due to be paid a dividend denominated in euros will receive a payment at the exchange rate prevailing on 29 July 2008.

Page 72

17 - Segmental information

(a) Operating segments

As explained in note 1(d), the Group has determined its operating segments along regional lines. These reflect the management structure whereby a member of the Executive Management team is accountable to the Group Chief Executive for the operating segment for which he is responsible. The activities of each operating segment are described below:

United Kingdom

The United Kingdom comprises two operating segments - Norwich Union Life (NU Life) and Norwich Union Insurance (NUI). The principal activities of NU Life are life insurance, long-term health and accident insurance, savings, pensions and annuity business, whilst NUI provides insurance cover to individuals and to small and medium-sized businesses, for risks associated mainly with motor vehicles, property and liability, such as employers' liability and professional indemnity liability, and medical expenses. NUI also includes the RAC motor recovery business and the group reinsurance result.

Europe

Activities reported in the Europe operating segment, exclude operations in the UK and include those in Russia and Turkey. Principal activities are long - term business in France, the Netherlands, Ireland, Italy, Poland and Spain, and general insurance in France, the Netherlands and Ireland.

North America

Our activities in North America principally comprise our long-term business operations in the USA and general insurance business operation in Canada.

Asia Pacific

Our activities in Asia Pacific principally comprise our long-term business operations in Australia, China, India, Singapore, Hong Kong, Sri Lanka, Taiwan, Malaysia, and South Korea.

Aviva Investors

Aviva Investors operates in most of the regions in which the Group operates, in particular the UK, France and Canada, managing policyholders' and shareholders' invested funds, providing investment management services for institutional pension fund mandates and managing a range of retail investment products, including investment funds, unit trusts, OEICs and ISAs. Fund management activities in the Netherlands are included in the Europe operating segment.

Other

Investment return on centrally held assets head office expenses, such as Group treasury and finance functions, together with certain taxes and financing costs arising on central borrowings are included in 'Other'.

Similarly central core structural borrowings and certain tax balances are included in 'Other' in the segmental
balance sheet. Also included are small run-off businesses not managed directly by regions.

Measurement basis

The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments are on normal commercial terms and market conditions. The Group evaluates performance of operating segments on the basis of:

(i) profit or loss from operations before tax attributable to shareholders.

(ii) profit or loss from operations before tax attributable to shareholders, adjusted for non-operating items outside the segment management's control, including investment market performance and fiscal policy changes.

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(b) Segmental results of the income statement for the six months ended 30 June 2008

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Total £m
	NU Life £m	NUI £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Total £m
Gross written premiums	3,801	2,867	8,272	2,662	326	-	-	17,928
Premiums ceded to reinsurers	(252)	(265)	(229)	(101)	(35)	-	-	(882)
Internal reinsurance revenue	-	26	(21)	(4)	(1)	-	-	-
Net written premiums	3,549	2,628	8,022	2,557	290	-	-	17,046
Net change in provision for unearned premiums	(3)	75	(244)	(17)	(1)	-	-	(190)
Net earned premiums	3,546	2,703	7,778	2,540	289	-	-	16,856
Fee and commission income	158	178	349	19	90	158	(2)	950
	3,704	2,881	8,127	2,559	379	158	(2)	17,806
Net investment income	(5,969)	243	(3,823)	380	(134)	(88)	(133)	(9,524)
Inter-segment revenue	-	-	-	-	-	68	-	68
Share of loss of joint ventures and associates	(326)	-	(3)	-	(15)	-	-	(344)
Profit on the disposal of subsidiaries and associates	-	-	9	-	-	-	-	9
Segmental income1	(2,591)	3,124	4,310	2,939	230	138	(135)	8,015
Insurance claims and benefits paid and change in insurance liabilities (net)	(367)	(1,621)	(3,708)	(2,476)	66	-	(1)	(8,107)
Investment contract claims and benefits paid and change in liabilities	2,493	-	(402)	(50)	(154)	109	-	1,996
Change in unallocated divisible surplus	883	-	1,863	-	-	-	-	2,746
Amortisation of deferred acquisition costs and acquired value of in-force business	-	-	(18)	(74)	(2)	-	-	(94)
Depreciation and other amortisation expense	(60)	(43)	(70)	(22)	(2)	(2)	-	(199)
Other operating expenses	(677)	(1,412)	(1,391)	(262)	(145)	(206)	(10)	(4,103)
Impairment losses2	-	-	(155)	(16)	-	-	-	(171)
Inter-segment expenses	(55)	(2)	(9)	-	(2)	-	-	(68)
Finance costs	(233)	(1)	(320)	(9)	-	-	(141)	(704)
Segmental expenses	1,984	(3,079)	(4,210)	(2,909)	(239)	(99)	(152)	(8,704)
(Loss)/profit before tax	(607)	45	100	30	(9)	39	(287)	(689)
Tax attributable to policyholders' returns	651	-	14	-	7	-	-	672
(Loss)/profit before tax attributable to shareholders	44	45	114	30	(2)	39	(287)	(17)
Adjusted for non-operating items
Investment return variances and economic assumption changes	264	-	288	68	16	-	-	636
Short-term fluctuation in return on investments backing general insurance and health business	-	115	157	(4)	-	-	46	314
Impairment of goodwill	-	-	42	-	-	-	-	42
Amortisation and impairment of intangibles	1	13	14	21	1	1	-	51
Profit on the disposal of subsidiaries and associates	-	-	(9)	-	-	-	-	(9)
Exceptional item	84	-	-	-	-	-	-	84
Integration and restructuring costs	7	107	9	-	-	9	-	132
Operating profit before tax attributable to shareholders	400	280	615	115	15	49	(241)	1,233

1. Total reported income, excluding inter-segment revenue, is split United Kingdom £533 million, France £106 million, Netherlands £3,808 million, USA £2,106 million and Rest of the World £1,394 million. Income is attributed on the basis of geographical origin which does not materially differ from revenue by geographical destination, as most risks are located in the countries where the contracts were written.

2. Impairment losses, and reversal of such losses, recognised directly in equity were £148 million and £nil

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	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors3 £m	Other £m	Restated Total £m
	NU Life £m	NUI £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors3 £m	Other £m	Restated Total £m
Gross written premiums	2,888	2,982	6,905	2,235	319	-	-	15,329
Premiums ceded to reinsurers	(253)	(259)	(192)	(92)	(28)	-	-	(824)
Internal reinsurance revenue	-	20	(13)	(6)	(1)	-	-	-
Net written premiums	2,635	2,743	6,700	2,137	290	-	-	14,505
Net change in provision for unearned premiums	(18)	15	(216)	(16)	(2)	-	-	(237)
Net earned premiums	2,617	2,758	6,484	2,121	288	-	-	14,268
Fee and commission income	187	203	341	18	75	95	-	919
	2,804	2,961	6,825	2,139	363	95	-	15,187
Net investment income	2,669	437	2,856	577	222	151	33	6,945
Inter-segment revenue	-	-	-	-	-	81	-	81
Share of profit/(loss) of joint ventures and associates	(83)	3	1	-	(1)	-	-	(80)
Profit/(loss) on the disposal of subsidiaries and associates	-	(8)	-	-	-	-	3	(5)
Segmental income1	5,390	3,393	9,682	2,716	584	327	36	22,128
Insurance claims and benefits paid and change in insurance liabilities (net)	(1,722)	(1,781)	(5,231)	(2,184)	(176)	-	(1)	(11,095)
Investment contract claims and benefits paid and change in liabilities	(2,179)	-	(2,718)	(57)	(256)	(106)	-	(5,316)
Change in unallocated divisible surplus	(382)	-	409	-	-	-	-	27
Amortisation of deferred acquisition costs and acquired value of in-force business	-	-	(25)	(90)	(2)	-	8	(109)
Depreciation and other amortisation expense	(9)	(44)	(22)	(23)	(2)	(6)	-	(106)
Other operating expenses	(637)	(1,356)	(1,102)	(260)	(106)	(161)	(81)	(3,703)
Impairment losses2	-	-	(23)	2	-	-	-	(21)
Inter-segment expenses	(69)	-	(8)	-	(1)	-	(3)	(81)
Finance costs	(147)	-	(216)	(5)	-	-	(137)	(505)
Segmental expenses	(5,145)	(3,181)	(8,936)	(2,617)	(543)	(273)	(214)	(20,909)
Profit before tax	245	212	746	99	41	54	(178)	1,219
Tax attributable to policyholders' returns	3	-	(17)	-	(6)	(1)	-	(21)
Profit/(loss) before tax attributable to shareholders	248	212	729	99	35	53	(178)	1,198
Adjusted for non-operating items
Investment return variances and economic assumption changes	82	-	(167)	(17)	(5)	-	-	(107)
Short-term fluctuation in return on investments backing general insurance and health business	-	(45)	14	23	-	-	(29)	(37)
Impairment of goodwill	-	-	-	-	-	3	-	3
Amortisation and impairment of intangibles	3	14	8	21	1	2	-	49
Profit/(loss) on the disposal of subsidiaries and associates	-	8	-	-	-	-	(3)	5
Integration and restructuring costs	2	30	5	3	-	-	-	40
Operating profit before tax attributable to shareholders	335	219	589	129	31	58	(210)	1,151

1. Total reported income, excluding inter-segment revenue, is split United Kingdom £8,783 million, France £3,463 million, Netherlands £2,836 million,
USA £2,014 million and Rest of the World £4,951 million. Income is attributed on the basis of geographical origin which does not materially differ from revenue by geographical destination, as most risks are located in the countries where the contracts were written.

2. Impairment losses, and reversal of such losses, recognised directly in equity were £nil and £nil.

3. Aviva Investors comprises the Morley UK, France, Canada and International fund management businesses.

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(d) Segmental results of the income statement for the year ended 31 December 2007

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors3 £m	Other £m	Restated Total £m
	NU Life £m	NUI £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors3 £m	Other £m	Restated Total £m
Gross written premiums	6,128	6,039	13,538	4,628	658	-	-	30,991
Premiums ceded to reinsurers	(444)	(577)	(388)	(195)	(54)	-	-	(1,658)
Internal reinsurance revenue	-	28	(19)	(7)	(2)	-	-	-
Net written premiums	5,684	5,490	13,131	4,426	602	-	-	29,333
Net change in provision for unearned premiums	(18)	60	(22)	(40)	(1)	-	-	(21)
Net earned premiums	5,666	5,550	13,109	4,386	601	-	-	29,312
Fee and commission income	246	385	638	37	168	292	(6)	1,760
	5,912	5,935	13,747	4,423	769	292	(6)	31,072
Net investment income	5,186	708	2,786	896	286	44	(16)	9,890
Inter-segment revenue	-	-	-	-	-	168	-	168
Share of profit/(loss) of joint ventures and associates	(304)	3	6	-	(9)	-	-	(304)
Profit/(loss) on the disposal of subsidiaries and associates	-	(7)	(5)	-	-	-	61	49
Segmental income1	10,794	6,639	16,534	5,319	1,046	504	39	40,875
Insurance claims and benefits paid and change in insurance liabilities (net)	(7,199)	(3,647)	(9,348)	(4,408)	(375)	-	2	(24,975)
Investment contract claims and benefits paid and change in liabilities	(3,224)	-	(3,885)	(153)	(364)	(45)	-	(7,671)
Change in unallocated divisible surplus	1,882	-	1,040	-	-	-	-	2,922
Amortisation of deferred acquisition costs and acquired value of in-force business	-	-	(35)	(122)	(3)	-	-	(160)
Depreciation and other amortisation expense	(24)	(104)	(53)	(45)	(6)	(17)	-	(249)
Other operating expenses	(1,116)	(2,784)	(2,328)	(561)	(249)	(332)	(82)	(7,452)
Impairment losses2	-	-	(50)	(7)	-	-	-	(57)
Inter-segment expenses	(141)	(4)	(18)	(1)	(3)	-	(1)	(168)
Finance costs	(405)	(3)	(509)	(17)	-	-	(274)	(1,208)
Segmental expenses	(10,227)	(6,542)	(15,186)	(5,314)	(1,000)	(394)	(355)	(39,018)
Profit before tax	567	97	1,348	5	46	110	(316)	1,857
Tax attributable to policyholders' returns	(9)	-	6	-	(9)	(3)	-	(15)
Profit/(loss) before tax attributable to shareholders	558	97	1,354	5	37	107	(316)	1,842
Adjusted for non-operating items
Investment return variances and economic assumption changes	112	-	(309)	183	(1)	-	-	(15)
Short-term fluctuation in return on investments backing general insurance and health business	-	82	112	9	-	-	(19)	184
Impairment of goodwill	-	-	1	-	-	9	-	10
Amortisation and impairment of intangibles	4	28	21	40	3	7	-	103
(Loss)/profit on the disposal of subsidiaries and associates	-	7	5	-	-	-	(61)	(49)
Integration and restructuring costs	8	114	12	19	-	-	-	153
Operating profit before tax attributable to shareholders	682	328	1,196	256	39	123	(396)	2,228

1. Total reported income, excluding inter-segment revenue, is split United Kingdom £17,433 million, France £5,753 million, Netherlands £5,984 million,
USA £3,793 million and Rest of the World £7,744 million. Income is attributed on the basis of geographical origin which does not materially differ from revenue by geographical destination, as most risks are located in the countries where the contracts were written.

2. Impairment losses, and reversal of such losses, recognised directly in equity were £nil and £1 million.

3. Aviva Investors comprises the Morley UK, France, Canada and International fund management businesses.

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(e) Segmental balance sheet as at 30 June 2008

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Total £m
	NU Life £m	NUI £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Total £m
Goodwill	51	1,166	1,121	668	42	-	-	3,048
Acquired value of in-force business and intangible assets	53	284	1,174	1,621	25	13	-	3,170
Interests in, and loans to, joint ventures and associates	2,888	-	645	1	265	-	-	3,799
Property and equipment	167	318	424	39	39	7	2	996
Investment property	10,299	181	3,315	5	27	841	-	14,668
Loans	19,881	899	15,172	1,392	43	-	-	37,387
Financial investments	76,744	3,353	105,828	18,468	3,951	1,950	875	211,169
Deferred acquisition costs	1,488	1,158	1,092	1,280	42	3	11	5,074
Other assets	11,654	4,955	24,176	2,644	572	2,233	2,245	48,479
Total assets	123,225	12,314	152,947	26,118	5,006	5,047	3,133	327,790
Insurance liabilities
Long-term business and outstanding claims provisions	61,957	6,094	57,885	18,836	1,833	-	28	146,633
Unearned premiums	182	3,356	1,280	823	19	-	-	5,660
Other insurance liabilities	-	91	2,325	80	-	-	-	2,496
Liability for investment contracts	39,114	-	52,692	2,110	1,966	2,745	-	98,627
Unallocated divisible surplus	3,994	-	68	-	3	-	-	4,065
Net asset value attributable to unitholders	1,049	-	3,450	-	210	1,905	-	6,614
External borrowings	2,171	11	6,612	115	-	-	4,464	13,373
Other liabilities, including inter-segment liabilities	10,113	(352)	19,352	1,585	188	247	3,772	34,905
Total liabilities	118,580	9,200	143,664	23,549	4,219	4,897	8,264	312,373
Total equity								15,417
Total equity and liabilities								327,790
Capital expenditure (excluding business combinations)	27	48	8	115	2	1	-	201

Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies are included in 'Other'.

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(f) Segmental balance sheet as at 30 June 2007

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Restated Total £m
	NU Life £m	NUI £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Restated Total £m
Goodwill	50	1,273	895	640	36	6	12	2,912
Acquired value of in-force business and intangible assets	60	363	699	1,669	29	16	-	2,836
Interests in, and loans to, joint ventures and associates	3,192	-	156	1	99	-	-	3,448
Property and equipment	184	289	332	22	24	6	-	857
Investment property	11,759	259	2,528	-	15	1,121	-	15,682
Loans	16,218	690	12,221	1,044	34	-	-	30,207
Financial investments	83,015	3,960	95,161	16,577	3,729	2,156	1,878	206,476
Deferred acquisition costs	1,268	1,143	856	602	36	3	21	3,929
Other assets	11,435	5,958	15,643	2,791	447	944	1,172	38,390
Total assets	127,181	13,935	128,491	23,346	4,449	4,252	3,083	304,737
Insurance liabilities
Long-term business and outstanding claims provisions	62,370	6,826	51,773	16,229	1,567	-	31	138,796
Unearned premiums	179	3,496	1,119	727	17	-	-	5,538
Other insurance liabilities	-	92	189	72	-	-	-	353
Liability for investment contracts	40,762	-	44,694	1,455	1,960	3,230	-	92,101
Unallocated divisible surplus	7,215	-	2,271	-	3	-	-	9,489
Net asset value attributable to unitholders	1,420	-	2,398	-	167	639	-	4,624
External borrowings	2,208	12	5,824	82	-	-	4,070	12,196
Other liabilities, including inter-segment liabilities	8,736	(297)	11,669	2,070	186	233	3,527	26,124
Total liabilities	122,890	10,129	119,937	20,635	3,900	4,102	7,628	289,221
Total equity								15,516
Total equity and liabilities								304,737
Capital expenditure (excluding business combinations)	4	63	49	42	2	3	-	163

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(g) Segmental balance sheet as at 31 December 2007

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Restated Total £m
	NU Life £m	NUI £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors £m	Other £m	Restated Total £m
Goodwill	71	1,276	1,053	642	40	-	-	3,082
Acquired value of in-force business and intangible assets	65	349	1,164	1,579	28	12	-	3,197
Interests in, and loans to, joint ventures and associates	2,972	-	594	1	215	-	-	3,782
Property and equipment	177	317	374	28	37	7	2	942
Investment property	10,773	252	3,061	-	25	966	-	15,077
Loans	20,153	900	13,895	1,206	39	-	-	36,193
Financial investments	84,244	3,634	103,430	17,252	3,934	2,205	1,475	216,174
Deferred acquisition costs	1,477	1,212	914	830	45	4	5	4,487
Other assets	10,535	5,033	16,086	2,834	500	1,522	1,397	37,907
Total assets	130,467	12,973	140,571	24,372	4,863	4,716	2,879	320,841
Insurance liabilities
Long-term business and outstanding claims provisions	65,017	6,580	56,517	17,345	1,820	-	28	147,307
Unearned premiums	179	3,468	973	815	15	-	-	5,450
Other insurance liabilities	-	92	113	78	-	-	-	283
Liability for investment contracts	41,845	-	49,551	1,756	1,952	3,140	-	98,244
Unallocated divisible surplus	4,944	-	1,838	-	3	-	-	6,785
Net asset value attributable to unitholders	1,111	-	2,680	-	189	1,121	-	5,101
External borrowings	2,184	12	6,153	139	-	-	4,169	12,657
Other liabilities, including inter-segment liabilities	10,474	(366)	13,129	1,627	160	279	3,119	28,422
Total liabilities	125,754	9,786	131,954	21,760	4,139	4,540	7,316	304,249
Total equity								16,592
Total equity and liabilities								320,841
Capital expenditure (excluding business combinations)	30	140	113	10	7	6	2	308

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(h) Segmental results of the income statement - products and services for the six months ended 30 June 2008

	Long-term business £m	Fund management £m	General insurance and health2 £m	Non- insurance3 £m	Total £m
Gross written premiums1	11,735	-	6,193	-	17,928
Premiums ceded to reinsurers	(489)	-	(393)	-	(882)
Net written premiums	11,246	-	5,800	-	17,046
Net change in provision for unearned premiums	(2)	-	(188)	-	(190)
Net earned premiums	11,244	-	5,612	-	16,856
Fee and commission income	415	260	61	214	950
	11,659	260	5,673	214	17,806
Net investment (expense)/income	(10,018)	65	157	272	(9,524)
Inter-segment revenue	-	61	-	-	61
Share of loss of joint ventures and associates	(329)	(6)	(2)	(7)	(344)
Profit on the disposal of subsidiaries and associates	-	-	-	9	9
Segmental income	1,312	380	5,828	488	8,008
Segmental expenses	(1,696)	(327)	(5,707)	(967)	(8,697)
Tax attributable to policyholder returns	672	-	-	-	672
Profit/(loss) before tax attributable to shareholders	288	53	121	(479)	(17)
Adjusted for non-operating items	682	10	417	141	1,250
Operating profit before tax attributable to shareholders' profits	970	63	538	(338)	1,233

1. Gross written premiums includes inward reinsurance premiums assumed from other companies amounting £105 million, of which £97 million relates to property and liability insurance and the remainder health business.

2. General insurance and health business segment includes gross written premiums of £991 million and premiums ceded to other companies of £8 million relating to health business. The remaining business relates to property and liability insurance.

3. Non-insurance includes the RAC non-insurance operations, our banking businesses, service companies, head office expenses, such as Group treasury and finance functions, and certain financing costs and taxes not allocated to business segments.

(i) Segmental results of the income statement - products and services for the six months ended 30 June 2007

	Long-term business £m	Fund management £m	General insurance and health £m	Non- insurance £m	Restated Total £m
Gross written premiums	9,461	-	5,868	-	15,329
Premiums ceded to reinsurers	(454)	-	(370)	-	(824)
Net written premiums	9,007	-	5,498	-	14,505
Net change in provision for unearned premiums	-	-	(237)	-	(237)
Net earned premiums	9,007	-	5,261	-	14,268
Fee and commission income	382	228	89	220	919
	9,389	228	5,350	220	15,187
Net investment income	6,157	51	538	199	6,945
Inter-segment revenue	-	74	-	-	74
Share of (loss)/profit of joint ventures and associates	(78)	(4)	3	(1)	(80)
(Loss)/profit on the disposal of subsidiaries and associates	-	-	(7)	2	(5)
Segmental income	15,468	349	5,884	420	22,121
Segmental expenses	(14,519)	(278)	(5,333)	(772)	(20,902)
Tax attributable to policyholder returns	(21)	-	-	-	(21)
Profit before tax attributable to shareholders	928	71	551	(352)	1,198
Adjusted for non-operating items	(94)	5	9	33	(47)
Operating profit before tax attributable to shareholders' profits	834	76	560	(319)	1,151

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(j) Segmental results of the income statement - products and services for the year ended 31 December 2007

	Long-term business £m	Fund management £m	General insurance and health £m	Non- insurance £m	Restated Total £m
Gross written premiums	19,622	-	11,369	-	30,991
Premiums ceded to reinsurers	(858)	-	(800)	-	(1,658)
Net written premiums	18,764	-	10,569	-	29,333
Net change in provision for unearned premiums	-	-	(21)	-	(21)
Net earned premiums	18,764	-	10,548	-	29,312
Fee and commission income	698	488	179	395	1,760
	19,462	488	10,727	395	31,072
Net investment income	8,529	107	827	427	9,890
Inter-segment revenue	-	152	-	-	152
Share of (loss)/profit of joint ventures and associates	(297)	(9)	3	(1)	(304)
Profit/(loss) on the disposal of subsidiaries and associates	-	-	(7)	56	49
Segmental income	27,694	738	11,550	877	40,859
Segmental expenses	(26,123)	(599)	(10,833)	(1,447)	(39,002)
Tax attributable to policyholder returns	(15)	-	-	-	(15)
Profit before tax attributable to shareholders	1,556	139	717	(570)	1,842
Adjusted for non-operating items	78	16	316	24	386
Operating profit before tax attributable to shareholders' profits	1,634	155	1,033	(594)	2,228

(k) Segmental balance sheet - products and services as at 30 June 2008

	Long-term business £m	Fund management £m	General insurance and health £m	Non-insurance £m	Total £m
Segment assets	284,411	2,525	24,239	16,615	327,790
Segment liabilities	(269,341)	(2,213)	(18,850)	(21,969)	(312,373)
Net assets	15,070	312	5,389	(5,354)	15,417

(l) Segmental balance sheet - products and services as at 30 June 2007

	Long-term business £m	Fund management £m	General insurance and health £m	Non- insurance £m	Restated Total £m
Segment assets	265,134	1,270	24,296	14,037	304,737
Segment liabilities	(251,372)	(963)	(18,664)	(18,222)	(289,221)
Net assets	13,762	307	5,632	(4,185)	15,516

(m) Segmental balance sheet - products and services as at 31 December 2007

	Long-term business £m	Fund management £m	General insurance and health £m	Non- insurance £m	Restated Total £m
Segment assets	279,718	1,871	24,406	14,846	320,841
Segment liabilities	(264,428)	(1,517)	(18,743)	(19,561)	(304,249)
Net assets	15,290	354	5,663	(4,715)	16,592

Page 81

18 - Assets under management

	30 June 2008			Restated 31 December 2007
	Life and related business £m	General business and other £m	Total £m	Total £m
Total IFRS assets included in the balance sheet	284,411	43,379	327,790	320,841
Third party funds under management:
Unit trusts, OEICs, PEPs and ISAs			23,929	24,747
Segregated funds			52,223	54,422
			403,942	400,010
Non-managed assets			(44,627)	(36,092)
Funds under management			359,315	363,918
Funds not managed by Aviva fund managers			(51,839)	(48,017)
Funds under management by Aviva fund managers			307,476	315,901

19 - Pension schemes

(a) Pension scheme deficits in consolidated balance sheet

On the consolidated balance sheet, the amount described as Provisions includes the pension scheme deficits
and comprises:

	30 June 2008 £m	30 June 2007 £m	31 December 2007 £m
Deficits in the staff pension schemes	543	131	205
Other obligations to staff pension schemes - Insurance policies issued by Group companies1	1,109	1,117	1,025
Total IAS 19 obligations to staff pension schemes	1,652	1,248	1,230
Restructuring provisions	182	172	136
Other provisions	578	510	571
Less: Amounts classified as held for sale	(14)	-	-
Total provisions	2,398	1,930	1,937

1. Pension assets in our Dutch pension schemes include insurance policies which are non-transferable under the terms of IAS19 so have been treated as other obligations to staff pension scheme within provisions above.

(b) Movements in the pension schemes' deficits and surpluses comprise:

	6 months 2008 £m	Full year 2007 £m
Surplus in the Irish scheme	27	56
Deficit in all other schemes	(205)	(1,029)
Net deficits in the schemes at 1 January	(178)	(973)
Employer contributions	487	297
Charge to net operating expenses (see (c) below)	(84)	(188)
Credit to investment income	27	99
Actuarial (losses)/gains	(768)	612
Acquisitions	-	(19)
Buy-outs and other transfers	-	-
Exchange rate movements in foreign plans	1	(6)
Net deficits in the schemes at 30 June/31 December	(515)	(178)
Surplus in the Irish scheme	28	27
Deficit in all other schemes	(543)	(205)

The current period surplus in the Irish schemes of £28 million (31 December 2007: £27 million surplus) is included in other assets whilst the deficits in the other schemes of £543 million (31 December 2007: £205 million) are included in provisions.

Page 82

19 - Pension Schemes continued

	6 months 2008 £m	6 months 2007 £m	Full year 2007 £m
Current service cost	(83)	(87)	(173)
Past service cost	-	(3)	-
Loss on curtailments	(1)	(17)	(15)
Total pension cost	(84)	(107)	(188)
Expected return on scheme assets	315	300	614
Less: income on insurance policy assets accounted for elsewhere	(30)	(24)	(49)
	285	276	565
Interest charge on scheme liabilities	(288)	(256)	(515)
(Charge)/credit to investment income	(3)	20	50
Total charge to income	(87)	(87)	(138)
Expected return on scheme assets	(315)	(300)	(614)
Actual (negative)/positive return on these assets	(683)	319	404
Actuarial (losses)/gains on scheme assets	(998)	19	(210)
Less: losses on insurance policy assets accounted for elsewhere	78	15	72
Actuarial (losses)/gains on admissible assets	(920)	34	(138)
Experience gains/(losses) arising on scheme liabilities	66	(8)	(80)
Changes in assumptions underlying the present value of the scheme liabilities	164	813	902
Loss on acquisitions	-	(9)	(36)
Actuarial (losses)/gains recognised in the statement of recognised income and expense	(690)	830	648

The cumulative amount of actuarial gains and losses on the pension schemes recognised in the statement of recognised income and expenses since 1 January 2004 (the date of transition to IFRS) is a loss of £851 million at 30 June 2008 (30 June 2007: £21 million gain; 31 December 2007: £161 million loss).

Page 83

20 - Insurance liabilities

(a) Carrying amount

	30 June 2008			30 June 2007	31 December 2007
	Long-term business £m	General Insurance and health £m	Total £m	Total £m	Total £m
Long-term business provisions
Participating	64,563	-	64,563	63,161	66,093
Unit-linked non-participating	21,948	-	21,948	20,835	20,601
Other non-participating	52,266	-	52,266	43,522	48,618
	138,777	-	138,777	127,518	135,312
Outstanding claims provisions	916	10,778	11,694	10,908	11,569
Provision for claims incurred but not reported	-	2,239	2,239	2,643	2,300
	916	13,017	13,933	13,551	13,869
Provision for unearned premiums	-	5,760	5,760	5,536	5,484
Provision arising from liability adequacy tests	-	33	33	48	24
Other technical provisions	2,195	8	2,203	22	3
Total	141,888	18,818	160,706	146,675	154,692
Less: Obligations to staff pension schemes transferred to provisions	(1,109)	-	(1,109)	(1,117)	(1,025)
Less: amounts classified as held for sale	(3,854)	(954)	(4,808)	(871)	(627)
	136,925	17,864	154,789	144,687	153,040

Other long-term technical provisions of £2,195 million relate to the acquisition of Swiss Life Belgium (see note 3 (iii)). Due to the timing of completion of this acquisition the provisions have not yet been analysed into their correct categories, this will be done in advance of the year end.

(b) Movements in long-term business provisions

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	135,312	126,614
Provisions in respect of new business	6,288	10,470
Expected change in existing business provisions	(2,920)	(6,280)
Impact of assumption changes	(1,584)	(874)
Effect of special bonus to with-profit policyholders	-	1,728
Variance between actual and expected experience, and other movements	(5,075)	(1,201)
Change in liability recognised as an expense	(3,291)	3,843
Effect of portfolio transfers, acquisitions and disposals	2,129	571
Foreign exchange rate movements	4,627	4,284
Carrying amount at 30 June/31 December	138,777	135,312

Page 84

20 - Insurance liabilities continued

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	13,142	12,718
Impact of changes in assumptions	4	1
Claim losses and expenses incurred in the current year	4,188	8,273
Decrease in estimated claim losses and expenses incurred in prior years	(468)	(937)
Incurred claims losses and expenses	3,724	7,337
Less:
Payments made on claims incurred in the current year	(1,684)	(4,408)
Payments made on claims incurred in prior years	(2,627)	(3,686)
Recoveries on claim payments	163	315
Claims payments made in the year, net of recoveries	(4,148)	(7,779)
Other movements in the claims provisions	-	36
Changes in claims reserve recognised as an expense	(424)	(406)
Effect of portfolio transfers, acquisitions and disposals	16	175
Foreign exchange rate movements	283	655
Carrying amount at 30 June/31 December	13,017	13,142

21 - Liability for investment contracts

(a) Carrying amount

	30 June 2008 £m	30 June 2007 £m	31 December 2007 £m
Long-term business
Participating contracts	54,979	49,924	53,609
Non-participating contracts at fair value	42,480	41,609	43,608
Non-participating contracts at amortised cost	1,614	568	1,027
	44,094	42,177	44,635
Less: Amounts classified as held for sale	(446)	-	-
Total	98,627	92,101	98,244

(b) Movements in participating investment contracts

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	53,609	49,400
Provisions in respect of new business	1,801	3,009
Expected change in existing business provisions	(946)	(1,978)
Impact of assumption changes	(88)	175
Effect of special bonus to with-profit policyholders	-	399
Variance between actual and expected experience, and other movements	(2,272)	(580)
Change in liability recognised as an expense	(1,505)	1,025
Foreign exchange rate movements	2,875	3,184
Carrying amount at 30 June/31 December	54,979	53,609

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	44,635	38,958
Provisions in respect of new business	2,987	8,575
Expected change in existing business provisions	(835)	(1,094)
Impact of assumption changes	(120)	18
Variance between actual and expected experience, and other movements	(3,946)	(3,170)
Change in liability recognised as an expense	(1,914)	4,329
Effect of portfolio transfers, acquisitions and disposals	277	254
Foreign exchange rate movements	1,096	1,094
Carrying amount at 30 June/31 December	44,094	44,635

Page 85

22 - Reinsurance assets

(a) Carrying amount

	30 June 2008 £m	30 June 2007 £m	31 December 2007 £m
Long-term business
Insurance contracts	4,622	4,099	4,298
Participating investment contracts	23	-	22
Non-participating investment contracts	1,400	1,429	1,461
	6,045	5,528	5,781
Outstanding claims provisions	117	85	94
Less: Amounts classified as held for sale	(4)	-	-
	6,158	5,613	5,875
General insurance and health
Outstanding claims provisions	1,607	1,630	1,634
Provisions for claims incurred but not reported	-	62	84
	1,607	1,692	1,718
Provision for unearned premiums	556	520	511
Other technical provisions	19	7	5
Less: Amounts classified as held for sale	(13)	-	-
	2,169	2,219	2,234
Total	8,327	7,832	8,109

(b) Movements in respect of long-term business provisions

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	5,781	5,534
Asset in respect of new business	143	216
Expected change in existing business asset	52	(124)
Impact of assumption changes	(169)	(108)
Variance between actual and expected experience, and other movements	(112)	12
Change in reinsurance asset recognised as income	(86)	(4)
Effect of portfolio transfers, acquisitions and disposals	123	24
Foreign exchange rate movements	227	227
Carrying amount at 30 June/31 December	6,045	5,781

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	1,718	1,738
Impact of changes in assumptions	-	-
Reinsurers' share of incurred claim losses and expenses	(16)	201
Reinsurance recoveries received in the year	(118)	(298)
Other movements	-	-
Change in reinsurance asset recognised as income	(134)	(97)
Effect of portfolio transfers, acquisitions and disposals	8	39
Foreign exchange rate and other movements	15	38
Carrying amount at 30 June/31 December	1,607	1,718

Page 86

23 - Effect of changes in assumptions and estimates during the period

This disclosure only allows for the impact on liabilities and related assets, such as reinsurance, deferred acquisition costs and acquired value of in-force business, and does not allow for offsetting movements in the value of backing financial assets.

	30 June 2008 £m	31 December 2007 £m
Assumptions
Long-term insurance business
Interest rates	1,136	850
Expenses	-	(13)
Persistency rates	-	(2)
Mortality for assurance contracts	-	16
Mortality for annuity contracts	-	11
Tax and other assumptions	(58)	60
Investment contracts
Interest rates	(1)	12
Expenses	-	5
Persistency rates	-	-
Tax and other assumptions	-	7
General insurance and health business
Change in loss ratio assumptions	(2)	-
Change in discount rate assumptions	-	3
Change in expense ratio assumptions	(1)	(4)
Total	1,074	945

The impact of interest rates for long-term business relates primarily to the UK and the Netherlands. This results from the use of higher valuation interest rates for UK and Dutch traditional business, reflecting the rise in market interest rates over the year. Other assumption changes in the UK relate to the recapture of reinsured business and expense inflation.

24 - Unallocated divisible surplus

The following movements have occurred in the period:

	6 months 2008 £m	Full year 2007 £m
Carrying amount at 1 January	6,785	9,465
Change in participating contract assets	(6,935)	2,463
Change in participating contract liabilities	4,245	(3,244)
Effect of special bonus to with-profit policyholders	-	(2,127)
Other movements	(56)	(14)
Change in liability recognised as an expense	(2,746)	(2,922)
Effect of portfolio transfers, acquisitions and disposals	-	3
Movement in respect of change in pension scheme deficit	13	61
Foreign exchange rate and other movements	13	178
Carrying amount at 30 June/31 December	4,065	6,785

25 - Borrowings

Movements in borrowings during the period were:

	30 June 2008 £m	30 June 2007 £m	31 December 2007 £m
New borrowings drawn down, net of expenses	2,974	3,690	6,322
Repayment of borrowings	(2,893)	(3,483)	(6,000)
Net cash inflow	81	207	322
Foreign exchange rate movements	628	(10)	632
Acquisitions	79	-	18
Borrowings reclassified to other liabilities	-	-	(174)
Fair value movements	(49)	(128)	(268)
Amortisation of discounts and other non-cash items	(22)	1	2
Movements in the year	717	70	532
Balance at 1 January	12,669	12,137	12,137
	13,386	12,207	12,669
Less: Amounts classified as held for sale (note 6)	(13)	(11)	(12)
Balance at 30 June/31 December	13,373	12,196	12,657

Page 87

26 - Sensitivity analysis

The Group uses a number of sensitivity test-based risk management tools to understand the volatility of earnings, the volatility of its capital requirements, and to manage its capital more efficiently. Primarily EEV, Financial Condition Reporting (a medium term projection of the financial health of the business under a variety of economic and operating scenarios), and increasingly Individual Capital Assessment (ICA) are used. Sensitivities to economic and operating experience are regularly produced on all of the Group's financial performance measurements as part of the Group's decision making and planning process, and as part of the framework for identifying and quantifying the risks that each of its business units, and the Group as a whole are exposed to.

For long-term business in particular, sensitivities of EEV performance indicators to changes in both economic and non-economic experience are continually used to manage the business and to inform the decision making process. More information on EEV sensitivities can be found in the presentation of results in the EEV section of this announcement.

Life insurance and investment contracts

The nature of long-term business is such that a number of assumptions are made in compiling the financial statements. Assumptions are made about investment returns, expenses, mortality rates, and persistency in connection with the in-force policies for each business unit. Assumptions are best estimates based on historic and expected experience of the business.

General insurance and health business

General insurance and health claim liabilities are estimated by using standard actuarial claims projection techniques. These methods extrapolate the claims development for each accident year based on the observed development of earlier years. In most cases, no explicit assumptions are made as projections are based on assumptions implicit in the historic claims development on which the projections are based. As such, in the analysis below, the sensitivity of general insurance claim liabilities is primarily based on the financial impact of changes to the reported loss ratio.

Some results of sensitivity testing for long-term business and general insurance and health business are set out below. For each sensitivity test the impact of a change in a single factor is shown, with other assumptions left unchanged.

Sensitivity Factor	Description of sensitivity factor applied
Interest rate & investment return	The impact of a change in market interest rates by ± 1% (e.g. if a current interest rate is 5%, the impact of an immediate change to 4% and 6%). The test allows consistently for similar changes to investment returns and movements in the market value of backing fixed interest securities.
Equity/property market values	The impact of a change in equity/property market values by ± 10%
Expenses	The impact of an increase in maintenance expenses by 10%
Assurance mortality/morbidity (life insurance only)	The impact of an increase in mortality/morbidity rates for assurance contracts by 5%
Annuitant mortality (life insurance only)	The impact of a reduction in mortality rates for annuity contracts by 5%
Gross loss ratios (non-life insurance only)	The impact of an increase in gross loss ratios for general insurance and health business by 5%

The above sensitivity factors are applied using actuarial and statistical models, with the following pre-tax impacts on profit and shareholders' equity at 30 June 2008:

Long-term business
Sensitivities as at 30 June 2008
Impact on profit before tax (£m)

	Interest rates +1%	Interest rates -1%	Equity/ property +10%	Equity/ property -10%	Expenses +10%	Assurance mortality +5%	Annuitant mortality -5%
Insurance participating	(65)	(20)	-	(50)	-	-	-
Insurance non-participating	(240)	250	30	(5)	(10)	(15)	(285)
Investment participating	(65)	(30)	10	(25)	(10)	-	-
Investment non-participating	(5)	-	65	(70)	-	-	-
Assets backing life shareholders' funds	(160)	190	195	(195)	-	-	-
Total	(535)	390	300	(345)	(20)	(15)	(285)

Page 88

26 - Sensitivity analysis continued

Sensitivities as at 30 June 2008
Impact before tax on shareholders equity (£m)

	Interest rates +1%	Interest rates -1%	Equity/ property +10%	Equity/ property -10%	Expenses +10%	Assurance mortality +5%	Annuitant mortality -5%
Insurance participating	(90)	5	-	(50)	-	-	-
Insurance non-participating	(425)	445	215	(190)	(10)	(15)	(285)
Investment participating	(65)	(30)	10	(25)	(10)	-	-
Investment non-participating	(135)	150	65	(70)	-	-	-
Assets backing life shareholders' funds	(205)	240	290	(290)	-	-	-
Total	(920)	810	580	(625)	(20)	(15)	(285)

General insurance and health
Sensitivities as at 30 June 2008
Impact on profit before tax (£m)

	Interest rates +1%	Interest rates -1%	Equity/ property +10%	Equity/ property -10%	Expenses +10%	Gross loss ratios +5%
Net of reinsurance	(325)	350	90	(90)	(90)	(180)

Impact before tax on shareholders equity (£m)

	Interest rates +1%	Interest rates -1%	Equity/ property +10%	Equity/ property -10%	Expenses +10%	Gross loss ratios +5%
Net of reinsurance	(325)	350	90	(90)	(35)	(180)

Fund management and non-insurance business

Sensitivities as at 30 June 2008

Impact on profit before tax (£m)

	Interest rates +1%	Interest rates -1%	Equity/ property +10%	Equity/ property -10%
Total	(20)	20	55	(55)

Impact before tax on shareholders equity (£m)

	Interest rates +1%	Interest rates -1%	Equity/ property +10%	Equity/ property -10%
Total	(20)	20	55	(55)

Limitations of sensitivity analysis

The above tables demonstrate the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is 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 analyses do not take into consideration that the Group's assets and liabilities are actively managed. Additionally, the financial 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 allocation, adjusting bonuses credited to policyholders, and taking other protective action.

A number of the business units use passive assumptions to calculate their long-term business liabilities. Consequently, the actual impact of a change in the assumptions may not have any impact on the liabilities, whereas assets are held at market value on the balance sheet. In these circumstances, the different measurement bases for liabilities and assets may lead to volatility in shareholder equity. Similarly, for general insurance liabilities, the interest rate sensitivities only affect profit and equity where explicit assumptions are made regarding interest (discount) rates or future inflation.

Other limitations in the above sensitivity analyses 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

End of Part 3 of 4

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