Interim Results - Part 3 of 3

Aviva PLC 04 August 2004 PART 3 OF 3 Statistical supplement ------------------------------------------------------------------------------------------------------------------------ PAGE 40 Segmental analysis of Group operating profit* at constant currency - achieved profit basis 6 months 2003 at 2004 6 months exchange 6 months 2004 rates 2003 £m £m £m Life achieved operating profit United Kingdom 356 339 339 France 114 90 90 Ireland 18 31 31 Italy 34 33 33 Netherlands (including Belgium and Luxembourg) 129 69 69 Poland 33 35 40 Spain 78 71 71 Other Europe 7 2 2 International 31 29 30 -------------------------------------------------------------------------------------------------------------------- 800 699 705 ==================================================================================================================== Health United Kingdom 3 4 4 France 2 3 3 Netherlands 28 20 20 -------------------------------------------------------------------------------------------------------------------- 33 27 27 -=================================================================================================================== Fund Management United Kingdom 3 5 5 France 8 6 6 Other Europe 3 - - Australia 3 (1) (1) -------------------------------------------------------------------------------------------------------------------- 17 10 10 ==================================================================================================================== General insurance United Kingdom 408 313 313 France 13 15 15 Ireland 68 43 43 Netherlands 23 12 12 Other Europe 18 16 16 Canada 59 (32) (33) Other 24 21 21 -------------------------------------------------------------------------------------------------------------------- 613 388 387 ==================================================================================================================== Non-insurance operations (15) (47) (47) Corporate costs (94) (56) (56) Unallocated interest charges - external (124) (94) (94) - intra-group (100) (104) (104) -------------------------------------------------------------------------------------------------------------------- Group operating profit before tax* 1,130 823 828 ==================================================================================================================== * Group operating profit before tax, before amortisation of goodwill and exceptional items. All operating profit is from continuing operations. Restating 2003 modified statutory life profits to account for the impact of exchange rate movements in 2004 would result in modified statutory life profits being restated from £515 million to £511 million for the six months to 30 June 2003. ------------------------------------------------------------------------------------------------------------------------ PAGE 41 Supplementary analyses (a) Non-insurance operations - operating result 6 months 6 months Full year 2004 2003 2003 £m £m £m Hill House Hammond 1 6 4 Norwich Union Equity Release* and other personal finance subsidiaries (7) (9) (16) Your Move 8 (6) 1 Norwich Union Life Services (15) (27) (54) Other (2) (11) 1 -------------------------------------------------------------------------------------------------------------------- (15) (47) (64) ==================================================================================================================== * The operating result from our equity release business in the UK is included within the non-insurance results on a statutory basis. On an achieved profit methodology new business contribution was £5 million before tax (30 June 2003: £12 million; 31 December 2003: £19 million) and operating profit before tax, including the benefits of the securitisation of our book, was £21 million (30 June 2003: £22 million; 31 December 2003: £31 million) which is excluded from our results. (b) Pension schemes The Group continues to account for its pension costs in accordance with SSAP24. The table below sets out the carrying value of the pension scheme prepayment in the Group's balance sheet under the principles of SSAP24 and the valuation of the pension schemes liabilities under the requirements of FRS17. 30 June 31 December 2004 2003 £m £m Pension scheme prepayment on SSAP24 basis 276 251 ==================================================================================================================== Valuation of the pension schemes on a FRS17 basis, after deduction of related deferred tax (521) (583) ==================================================================================================================== (c) Investments in joint ventures 30 June 30 June 31 December 2004 2003 2003 £m £m £m Share of gross assets 1,796 1,401 1,416 Share of gross liabilities (1,537) (1,306) (1,226) -------------------------------------------------------------------------------------------------------------------- 259 95 190 Loans to joint ventures 827 669 679 -------------------------------------------------------------------------------------------------------------------- 1,086 764 869 ==================================================================================================================== As part of their investment strategy, the UK long-term business policyholder funds have invested in a number of property limited partnerships (PLPs) through a mix of capital and loans. The PLPs are managed by general partners (GPs) in which the UK long-term business shareholder companies hold equity stakes, and which themselves hold nominal stakes in the PLPs. Most of the PLPs have raised external debt, secured on their respective property portfolios. The lenders are only entitled to obtain payment, of both interest and principal, to the extent that there are sufficient resources in the respective PLPs. The lenders have no recourse whatsoever to the policyholder or shareholders' funds of any company of the Aviva Group. Accounting for the PLPs depends on the shareholdings in the GPs and the terms in each partnership agreement. Where the partnership is managed by a contractual agreement such that no one party exerts control, the PLPs have been accounted for as joint ventures. In addition, the Group has invested in a joint venture life assurance company in China, which commenced operations on 1 January 2003. These shares are held by Aviva plc at a cost of £22 million (31 December 2003: £22 million) and share of net assets of £16 million (31 December 2003: £18 million). --------------------------------------------------------------------------------------------------------------------- PAGE 42 (d) Longer-term investment return The longer-term investment return is calculated separately for each principal general insurance business and certain long-term business operations. 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 year, 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 year. The principal assumptions underlying the calculation of the longer-term investment return are: Longer-term rates of return Equities Properties -------------- --------------- 2004 2003 2004 2003 % % % % United Kingdom 8.1% 8.1% 6.6% 6.6% France 7.5% 7.5% 6.5% 6.5% Ireland 8.7% 8.7% 6.7% 6.7% Netherlands 8.4% 8.4% 6.5% 6.5% Canada 9.3% 9.3% 7.3% 7.3% The table below shows the sensitivity in the changes in the longer-term rates of return on the annual operating profit: Movement in investment return By Change in By --------------- --------------------------------- ---- Equities 1% higher/lower Group operating profit before tax £31m Properties 1% higher/lower Group operating profit before tax £8m (e) General business - investment return information Actual investment return Longer-term investment return ------------------------------ ------------------------------- 6 months 6 months Full year 6 months 6 months Full year 2004 2003 2003 2004 2003 2003 £m £m £m £m £m £m United Kingdom 310 295 585 341 303 626 Europe (excluding UK) France 16 19 37 19 22 44 Ireland 29 28 58 32 29 65 Netherlands 10 28 71 24 15 40 Other 12 12 20 20 20 38 International Canada 46 44 94 55 52 110 Other 16 16 36 17 17 42 -------------------------------------------------------------------------------------------------------------------- Total longer-term investment return 508 458 965 Total actual investment income 439 442 901 Realised (losses)/gains (6) 26 47 Unrealised (losses)/gains (193) 151 136 -------------------------------------------------------------------------------------------------------------------- Total actual investment return 240 619 1,084 508 458 965 ==================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- PAGE 43 Reconciliation between general business investment return information and short-term fluctuation in investment return incorporated in the summarised consolidated profit and loss account - modified statutory basis For the six months to 30 June 2004 Short-term Actual Longer-term fluctuation investment investment in investment return return return £m £m £m General business 240 508 (268) Health business 14 31 (17) -------------------------------------------------------------------------------------------------------------------- 254 539 (285) -------------------------------------------------------------------------------------------------------------------- Life business (1) -------------------------------------------------------------------------------------------------------------------- Total short-term fluctuation in investment return (286) ==================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- PAGE 44 General insurance - geographical ratio analysis Combined operating Claims ratio Expense ratio ratio ------------------ ------------------ ------------------ 6 months 6 months 6 months 6 months 6 months 6 months 2004 2003 2004 2003 2004 2003 % % % % % % United Kingdom 65.9% 66.0% 10.0% 10.5% 98% 99% France 71.5% 71.7% 11.5% 11.9% 100% 100% Ireland 68.6% 79.6% 10.0% 8.5% 88% 97% Netherlands 58.7% 61.3% 14.5% 13.7% 94% 98% Canada 69.1% 85.4% 12.2% 12.3% 99% 115% -------------------------------------------------------------------------------------------------------------------- Group total 66.4% 69.9% 10.8% 10.9% 97% 101% ==================================================================================================================== 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. ------------------------------------------------------------------------------------------------------------------------ PAGE 45 General insurance - class of business analyses (a) United Kingdom Combined operating Net written premiums Underwriting result ratio -------------------- ------------------- ------------------ 6 months 6 months 6 months 6 months 6 months 6 months 2004 2003 2004 2003 2004 2003 £m £m £m £m % % Personal Motor 690 657 14 (5) 102% 102% Homeowner 509 467 18 21 97% 96% Creditor 310 289 9 (1) 102% 102% Other 46 41 (2) 1 99% 97% -------------------------------------------------------------------------------------------------------------------- 1,555 1,454 39 16 99% 100% -------------------------------------------------------------------------------------------------------------------- Commercial Motor 397 391 4 (2) 97% 100% Property 436 410 35 5 90% 95% Liability 210 177 (15) (17) 107% 109% Other 76 64 4 8 92% 82% -------------------------------------------------------------------------------------------------------------------- 1,119 1,042 28 (6) 96% 99% -------------------------------------------------------------------------------------------------------------------- £m 2,674 2,496 67 10 98% 99% ==================================================================================================================== During the six months to 30 June 2004, annualised rating increases were as follows: commercial liability: 15%; commercial property: 8%; commercial motor: 2%; homeowners: 2%; and personal motor: 2%. (b) France Combined operating Net written premiums Underwriting result ratio -------------------- ------------------- ------------------ 6 months 6 months 6 months 6 months 6 months 6 months 2004 2003 2004 2003 2004 2003 €m €m €m €m % % Motor 213 205 - 3 99% 97% Property and other 234 243 (9) (13) 101% 103% -------------------------------------------------------------------------------------------------------------------- €m 447 448 (9) (10) 100% 100% -------------------------------------------------------------------------------------------------------------------- £m 304 305 (6) (7) 100% 100% ==================================================================================================================== ------------------------------------------------------------------------------------------------------------------------ PAGE 46 (c) Netherlands Combined operating Net written premiums Underwriting result ratio -------------------- ------------------- ------------------ 6 months 6 months 6 months 6 months 6 months 6 months 2004 2003 2004 2003 2004 2003 €m €m €m €m % % Property 208 229 20 5 83% 93% Motor 171 130 2 6 97% 95% Liability 31 27 4 5 80% 75% Other 91 48 (28) (20) 115% 142% -------------------------------------------------------------------------------------------------------------------- €m 501 434 (2) (4) 94% 98% -------------------------------------------------------------------------------------------------------------------- £m 341 295 (1) (3) 94% 98% ==================================================================================================================== (d) Canada Combined operating Net written premiums Underwriting result ratio -------------------- ------------------- ------------------ 6 months 6 months 6 months 6 months 6 months 6 months 2004 2003 2004 2003 2004 2003 C$m C$m C$m C$m % % Automobile 929 844 (16) (202) 102% 125% Property 395 356 34 1 91% 100% Liability 117 110 (15) (3) 113% 103% Other 19 19 7 4 70% 73% -------------------------------------------------------------------------------------------------------------------- C$m 1,460 1,329 10 (200) 99% 115% -------------------------------------------------------------------------------------------------------------------- £m 601 565 4 (85) 99% 115% ==================================================================================================================== ----------------------------------------------------------------------------------------------------------------------- PAGE 47 Assets under management General Long-term business business and other Group Group 30 June 30 June 30 June 31 December 2004 2004 2004 2003 £m £m £m £m Financial investments Shares, other variable yield securities and units in unit trusts 25,903 2,348 28,251 28,294 Strategic investments 1,479 451 1,930 2,026 Debt and fixed income securities at market value 36,233 9,734 45,967 47,048 Debt and fixed income securities at amortised cost 34,962 - 34,962 34,709 Loans secured by mortgages and other loans, net of non-recourse funding 10,311 2,041 12,352 12,283 Deposits 3,158 744 3,902 2,943 Other investments 970 57 1,027 1,842 -------------------------------------------------------------------------------------------------------------------- Total financial investments 113,016 15,375 128,391 129,145 Investments in joint ventures 1,086 - 1,086 869 Investments in associated undertakings and participating interests 653 149 802 1,043 Land and buildings 8,726 607 9,333 9,106 -------------------------------------------------------------------------------------------------------------------- Total investments 123,481 16,131 139,612 140,163 Assets held to cover linked liabilities 42,921 - 42,921 40,665 Other assets included in the balance sheet 14,046 13,581 27,627 27,852 -------------------------------------------------------------------------------------------------------------------- Total MSSB assets included in the balance sheet 180,448 29,712 210,160 208,680 Additional value of in-force long-term business 4,851 - 4,851 4,744 -------------------------------------------------------------------------------------------------------------------- Total EV assets included in the balance sheet 185,299 29,712 215,011 213,424 Third party funds under management: Securitised mortgages (gross of non-recourse funding) 3,152 3,143 Unit trusts, Oeics, Peps and Isas 4,642 4,460 Segregated funds 19,607 19,355 -------------------------------------------------------------------------------------------------------------------- Total assets under management 242,412 240,382 ==================================================================================================================== Strategic investments include the market value of the Group's shareholding in Societe Generale, Munchener Ruckversicherungs-Gesellschaft, RBSG and UniCredito Italiano. General insurance and other investments mix Total United Continental 30 June Kingdom Europe International 2004 £m £m £m £m Shares, other variable yield securities and units in unit trusts and strategic investments 1,494 990 315 2,799 Debt and fixed income securities at market value 4,641 3,163 1,930 9,734 Land and buildings 264 310 33 607 Other 2,003 826 162 2,991 -------------------------------------------------------------------------------------------------------------------- Total investments 8,402 5,289 2,440 16,131 ==================================================================================================================== ----------------------------------------------------------------------------------------------------------------------- PAGE 48 Group capital structure The Group maintains an efficient structure from a combination of equity shareholders' funds, preference capital, subordinated debt and borrowings, consistent with the Group's risk profile and the regulatory and market requirements of its business. The achieved profit basis provides a more accurate reflection of the performance of the Group's life operations year on year than results under the modified statutory basis. Accordingly, the Group's capital structure is analysed on an embedded value basis. The Group's capital, from all funding sources, has been allocated such that the capital employed by trading operations is greater than the capital provided by its shareholders and its subordinated debtholders. As a result, the Group is able to enhance the returns earned on its equity capital. Capital employed by segment 30 June 31 December 2004 2003 £m £m Long-term savings 12,152 12,373 General insurance and health 4,505 4,481 Other business 581 725 Corporate 3,176 2,934 -------------------------------------------------------------------------------------------------------------------- Total capital employed 20,414 20,513 -------------------------------------------------------------------------------------------------------------------- Financed by Internal debt 3,902 3,841 External debt 1,758 1,749 Subordinated debt 2,751 2,814 Shareholders' funds and minority interests 12,003 12,109 -------------------------------------------------------------------------------------------------------------------- 20,414 20,513 ==================================================================================================================== At 30 June 2004 the Group had £20.4 billion (31 December 2003: £20.5 billion) of total capital employed in its trading operations which is efficiently financed by a combination of equity shareholders' funds, preference capital, subordinated debt and internal and external borrowings. In the first half of 2004, the total capital employed in our long-term savings operations decreased due to the positive impact of retained earnings being offset by dividends paid to holding companies and the adverse effect of the Euro foreign exchange rate movement. The total capital employed in our general insurance businesses increased due to retained earnings partially offset by dividends paid to holding companies and foreign exchange losses. In addition to its external funding sources, the Group has a number of internal debt arrangements in place. These have allowed assets supporting technical liabilities to be invested into the pool of central assets for use across the Group. They have also enabled the shareholders to deploy cash from some parts of the business to others in order to fund growth. Although intra-group loans in nature, they are counted as part of the capital base for the purpose of capital management. All internal loans satisfy arms length criteria and all interest payments have been made when due. The ratio of the Group's external debt to shareholders' funds was 12% (31 December 2003: 12%). Interest cover, which measures the extent to which external interest costs, excluding the subordinated debt interest, are covered by achieved operating profit, was 30 times (31 December 2003: 19 times). ----------------------------------------------------------------------------------------------------------------------- PAGE 49 Group Capital Structure (continued) Deployment of equity shareholders' funds 30 June 31 December 2004 2003 -------------------------------------------------- ----------- Fixed income Other Other net Equities securities investments assets Total Total £m £m £m £m £m £m Assets Long-term savings 586 3,813 799 1,434 6,632 6,923 General insurance, health, corporate and other business 2,799 3,281 1,130 - 7,210 7,035 -------------------------------------------------------------------------------------------------------------------- 3,385 7,094 1,929 1,434 13,842 13,958 Goodwill 1,263 1,323 Additional value of in-force long-term business 5,309 5,232 -------------------------------------------------------------------------------------------------------------------- Assets backing total capital employed in continuing operations 20,414 20,513 External debt (1,758) (1,749) Internal debt (3,902) (3,841) Subordinated debt (2,751) (2,814) -------------------------------------------------------------------------------------------------------------------- 12,003 12,109 Minority interests (949) (944) Preference capital (200) (200) -------------------------------------------------------------------------------------------------------------------- Equity shareholders'funds 10,854 10,965 ==================================================================================================================== Our exposure to equities has decreased from £3.6 billion at 31 December 2003 to £3.4 billion, which represents 17% of our capital employed. The Group has certain equity investments which are classified as strategic. The market values of these holdings and the percentage of issued share capital of these companies held by the Group, in both our shareholder and policyholder funds, is as follows. % of issued share Market value capital --------------------- ---------------------- 30 June 31 December 30 June 31 December 2004 2003 2004 2003 £m £m % % Societe Generale 224 233 1.1% 1.1% Munchener Ruckversicherungs-Gesellschaft 371 403 2.7% 2.6% The Royal Bank of Scotland Group 848 854 1.7% 1.8% UniCredito Italiano 487 536 2.8% 2.8% -------------------- 1,930 2,026 ==================== Return on capital employed 6 months Full year 2004 2003 ------------------------------------- --------- Normalised Opening Return on Return after-tax equity capital on return capital (annualised) capital £m £m % % Long-term savings 557 12,373 9.2% 10.4% General insurance and health 419 4,481 19.6% 16.4% Other business 1 725 0.3% (7.9%) Corporate (23) 2,934 (1.6%) (1.5%) -------------------------------------------------------------------------------------------------------------------- 954 20,513 9.5% 9.5% Borrowings (162) (8,404) 3.9% 4.3% -------------------------------------------------------------------------------------------------------------------- 792 12,109 13.5% 12.9% Minority interests (70) (944) 15.4% 17.6% Preference capital (9) (200) 8.5% 8.5% -------------------------------------------------------------------------------------------------------------------- Equity shareholders' funds 713 10,965 13.4% 12.7% ==================================================================================================================== The return on capital is calculated as the after-tax return on opening equity capital, based on operating profit, including life achieved profit, before amortisation of goodwill and exceptional items. ----------------------------------------------------------------------------------------------------------------------- PAGE 50 Group capital structure (continued) Capital management In managing its capital, the Group aims to: (i) match the profile of its assets and liabilities, taking account of the risks inherent in each business. In the case of the Group's life operations, which have long-term liabilities, the majority of capital is held in fixed income securities. A significant proportion of the capital supporting the Group's general insurance and health operations is held in equities, reflecting the relatively low risk profile of these businesses; (ii) maintain financial strength to support new business growth and satisfy the requirements of its policyholders, regulators and rating agencies; (iii) retain financial flexibility by maintaining strong liquidity, including significant unutilised committed credit lines, and access to a range of capital markets; (iv) allocate capital efficiently to support growth and repatriate excess capital where appropriate; and (v) manage exposures to movement in exchange rates by aligning the deployment of capital by currency with the Group's capital requirements by currency. An important aspect of the Group's overall capital management process is the setting of target risk-adjusted rates of return for individual business units, which are aligned to performance objectives and ensure that the Group is focused on the creation of value for shareholders. Risk based capital The Group uses risk based capital as one of several measures to assess its capital requirements for its general insurance businesses. Financial modelling techniques enhance our practice of active capital management, ensuring sufficient capital is available to protect against unforeseen events and adverse scenarios, and risk management. Our aim continues to be the optimal usage of capital through appropriate allocation to our businesses. The introduction of FSA's Prudential Source Book includes the requirement to calculate the realistic capital needed to meet adverse situations, the Internal Capital Assessment (ICA). Based on this we will agree specific risk adjusted capital requirements with our regulator for both our life and general insurance businesses. Our risk based capital model underpins our ICA modelling, and will form the basis of our discussions with the regulator in agreeing such capital requirements, along with our strong risk management processes. We continue to develop our risk based capital modelling capability for both our life and general insurance businesses as part of our longer-term development programme for more complex risk modelling techniques, and increasingly operate our business by considering economic and risk based capital requirements. Our current risk based capital methodology for general insurance business assesses insurance, market and credit risks and makes prudent allowance for diversification benefits. We look at the level of capital necessary to enable the general insurance business to meet the statutory minimum solvency margin over a five year period with 99% probability of not requiring further capital. We consider risks over a five year period allowing for planned levels of business growth. Based on our model, our risk based capital requirement may be expressed as 34% of net written premiums. Capital employed in our general insurance and health business after goodwill and adding back the claims equalisation reserve was £4.6 billion at 30 June 2004 and required capital on a risk basis was £3.3 billion, giving a surplus capital position of £1.3 billion. Sensitivity analysis The sensitivity of the Group's shareholders' funds at 30 June 2004 to a 10% fall in global equity markets or a rise of 1% in global interest rates is as follows: Interest 31 December 30 June Equities rates 2003 2004 down 10% up 1% £bn £bn £bn £bn 12.4 Long-term savings(1) 12.2 11.7 12.2 8.1 General insurance and other 8.2 8.0 7.9 (8.4) Borrowings(2) (8.4) (8.4) (8.4) -------------------------------------------------------------------------------------------------------------------- 12.1 Shareholders' funds 12.0 11.3 11.7 ==================================================================================================================== (1) Assumes achieved profit assumptions adjusted to reflect revised bond yields. (2) Comprising internal, external and subordinated debt. (3) These sensitivities assume a full tax charge/credit on market value appreciation/falls. ----------------------------------------------------------------------------------------------------------------------- PAGE 51 Group capital structure (continued) Shareholders' funds, including minority interests 30 June 2004 31 December 2003 Closing shareholders' funds Closing shareholders' funds -------------------------------- ---------------------------------- Note MSSB net Internally MSSB net Internally assets generated Embedded assets generated Embedded (note 1) AVIF value (note 1) AVIF value £m £m £m £m £m £m Life assurance United Kingdom 2,748 2,765 5,513 2,844 2,829 5,673 France 1,017 483 1,500 1,068 381 1,449 Ireland 332 204 536 338 216 554 Italy 354 74 428 386 56 442 Netherlands (including Belgium and Luxembourg) 1,520 833 2,353 1,621 777 2,398 Poland 118 229 347 146 250 396 Spain 268 210 478 266 189 455 Other Europe 168 36 204 174 26 200 International 565 17 582 568 20 588 --------------------------------------------------------------------------------------------------------------------- 7,090 4,851 11,941 7,411 4,744 12,155 Participating interests 2 211 - 211 218 - 218 --------------------------------------------------------------------------------------------------------------------- 7,301 4,851 12,152 7,629 4,744 12,373 --------------------------------------------------------------------------------------------------------------------- General insurance and health 3 United Kingdom 4 2,370 2,370 2,448 2,448 France 396 396 414 414 Ireland 380 380 333 333 Netherlands 370 370 250 250 Other Europe 110 110 112 112 Canada 585 585 631 631 Other 294 294 293 293 --------------------------------------------------------------------------------------------------------------------- 4,505 - 4,505 4,481 - 4,481 --------------------------------------------------------------------------------------------------------------------- Other business 581 581 725 725 Corporate 4 3,176 3,176 2,934 2,934 External debt 5 (1,758) (1,758) (1,749) (1,749) Internal debt (3,902) (3,902) (3,841) (3,841) Subordinated debt (2,751) (2,751) (2,814) (2,814) --------------------------------------------------------------------------------------------------------------------- (4,654) - (4,654) (4,745) - (4,745) --------------------------------------------------------------------------------------------------------------------- Shareholders' funds, including minority interests 7,152 4,851 12,003 7,365 4,744 12,109 ===================================================================================================================== Comprising Equities 3,385 3,385 3,571 3,571 Debt and fixed income securities 7,094 7,094 7,129 7,129 Property 582 582 612 612 Deposits and other investments 1,347 1,347 1,179 1,179 Intangible assets 6 1,721 4,851 6,572 1,811 4,744 6,555 Other net assets 1,434 1,434 1,467 1,467 Borrowings (8,411) (8,411) (8,404) (8,404) --------------------------------------------------------------------------------------------------------------------- 7,152 4,851 12,003 7,365 4,744 12,109 ===================================================================================================================== ----------------------------------------------------------------------------------------------------------------------- PAGE 52 Group capital structure (continued) Shareholders' funds, including minority interests (continued) Notes 1. Includes acquired additional value of in-force long-term business of £458 million (31 December 2003: £488 million). 2. The net assets represent the £211 million of goodwill on the RBSG joint venture (31 December 2003: £218 million). 3. The capital employed in the Group's general insurance operations includes £262 million of goodwill (31 December 2003: £392 million). 4. Assets available to shareholders are held by the Group's UK general insurance operations and are available to finance future growth of the Group. Accordingly, for the purposes of preparing this note, these assets have been reclassified as Corporate. 5. The external borrowings reported in the summary consolidated balance sheet of £1,769 million (31 December 2003: £1,760 million) comprise £11 million, (31 December 2003: £11 million) of general insurance borrowings (reported within the general insurance and health net assets) and £1,758 million (31 December 2003: £1,749 million) of borrowings by holding companies of the Group not allocated to operating companies (shown as external debt). 6. Comprises £458 million of acquired additional value of in-force long-term business (31 December 2003: £488 million), £1,052 million of goodwill arising on acquisitions (31 December 2003: £1,105 million) and £211 million of goodwill on the RBSG joint venture (31 December 2003: £218 million). ----------------------------------------------------------------------------------------------------------------------- PAGE 53 Group capital structure (continued) Return on capital employed Opening shareholders' funds Normalised return including minority Annualised 30 June 2004 (Note 1) interests return on capital ---------------------- ------------------- ----------------- Before tax After tax Note £m £m £m % Life assurance United Kingdom 2 356 249 5,891 8.6% France 114 74 1,449 10.5% Ireland 18 16 554 5.9% Italy 34 21 442 9.7% Netherlands (including Belgium 129 93 2,398 7.9% and Luxembourg) Poland 33 27 396 14.1% Spain 78 50 455 23.2% Other Europe 7 5 200 5.1% International 31 22 588 7.6% -------------------------------------------------------------------------------------------------------------------- 800 557 12,373 9.2% General insurance and health United Kingdom 3 345 236 2,448 20.2% France 15 11 414 5.4% Ireland 68 60 333 39.3% Netherlands 51 40 250 34.6% Other Europe 18 13 112 24.6% Canada 59 40 631 13.1% Other 24 19 293 13.4% -------------------------------------------------------------------------------------------------------------------- 580 419 4,481 19.6% Other business 2 1 725 0.3% Corporate 3, 4 (28) (23) 2,934 (1.6%) External debt (40) (33) (1,749) 3.8% Internal debt (100) (70) (3,841) 3.7% Subordinated debt (84) (59) (2,814) 4.2% -------------------------------------------------------------------------------------------------------------------- 1,130 792 12,109 13.5% ==================================================================================================================== Notes 1. The normalised return is based upon operating profit, including life achieved profit, before amortisation of goodwill and exceptional items. 2. Shareholders' funds includes £211 million of goodwill on RBSG joint venture. 3. Assets available to shareholders are held by the Group's UK general insurance operations and are available to finance future growth of the Group. Accordingly, these assets together with their associated pre-tax investment return of £66 million (post-tax £46 million) have been reclassified as Corporate. 4. The return before tax of £(28) million comprises investment return of £66 million and corporate costs of £(94) million. ----------------------------------------------------------------------------------------------------------------------- PAGE 54 Return on capital employed (continued) Opening shareholders' funds Normalised return including minority 31 December 2003 (Note 1) interests (Note 2) Return on capital ---------------------- ------------------- ----------------- Before tax After tax Note £m £m £m % Life assurance United Kingdom 3 659 461 5,243 8.8% France 220 142 1,221 11.6% Ireland 65 57 472 12.1% Italy 70 42 349 12.0% Netherlands (including Belgium 189 140 1,806 7.8% and Luxembourg) Poland 104 76 352 21.6% Spain 158 102 350 29.1% Other Europe 9 6 176 3.4% International 81 56 410 13.7% -------------------------------------------------------------------------------------------------------------------- 1,555 1,082 10,379 10.4% General insurance and health United Kingdom 4 608 416 2,052 20.3% France 44 33 481 6.9% Ireland 91 78 236 33.1% Netherlands 74 55 275 20.0% Other Europe 32 24 63 38.1% Canada 12 8 535 1.5% Other 30 27 275 9.8% -------------------------------------------------------------------------------------------------------------------- 891 641 3,917 16.4% Other business (54) (44) 554 (7.9%) Corporate 4, 5 (79) (38) 2,475 (1.5%) External debt (109) (86) (2,053) 4.2% Internal debt (196) (138) (3,671) 3.8% Subordinated debt (101) (71) (1,190) 6.0% -------------------------------------------------------------------------------------------------------------------- 1,907 1,346 10,411 12.9% ==================================================================================================================== Notes 1. The normalised return is based upon operating profit, including life achieved profit, before amortisation of goodwill and exceptional items. 2. Restated for the effect of a change in accounting policy in respect of the treatment of shares held by employee trusts as a deduction from shareholders' capital. 3. Shareholders' funds include £231 million of goodwill on RBSG joint venture. 4. Assets available to shareholders are held by the Group's UK general insurance operations and are available to finance future growth of the Group. Accordingly, these assets together with their associated pre-tax investment return of £81 million (post-tax £57 million) have been reclassified as Corporate. 5. The return before tax of £(79) million comprises investment return of £81 million and corporate costs of £(160) million. ----------------------------------------------------------------------------------------------------------------------- PAGE 55 Shareholder information Aviva Scrip Dividend Scheme The Aviva Scrip Dividend Scheme (the 'Scheme') provides shareholders with an opportunity, if they wish, to receive new ordinary shares instead of cash dividends. The Scheme therefore allows shareholders to increase their shareholdings in Aviva without incurring dealing costs or stamp duty whilst at the same time the cash, which would otherwise have been paid out in dividends, is retained by the Company for reinvestment in the business. The Scheme replaces the former Dividend Reinvestment Plan. Shareholders who wish to join the Scheme need to authorise the Company to issue shares instead of cash for all future dividends although, shareholders can at anytime cancel their instructions and revert to receiving their dividends in the form of cash. Shareholders who wish to elect to take new ordinary shares in the Company instead of cash for the 2004 interim dividend must contact Lloyds TSB Registrars at the address opposite and request a mandate form. This must be completed and returned so that it is received by Lloyds TSB Registrars no later than 5pm on 20 October 2004. Dividend payments direct to your bank account Shareholders who wish to continue to receive their dividends in cash, can have dividend payments credited directly into their bank or building society account on the dividend payment date rather than receiving a cheque. For overseas shareholders, the Company operates the Transcontinental Account Payment Service which allows shareholders in many countries to have dividends credited direct to bank accounts in local currencies. To obtain further details and a mandate form please contact the Company's registrar at the address shown. Shareview Shareview is an internet based service that allows shareholders to view their shareholding online and, if they wish, to receive shareholder communications (e.g. Notice of Meeting, Report and Accounts) via email rather than by post. To register, please go to www.shareview.co.uk to find more details of the service, practical help and extensive information on other share registration matters. Aviva website Aviva continues to develop its website as an important shareholder communication channel because it is cost efficient, timely and effective. At present via the Aviva website shareholders can view shareholdings, dividend history, share purchases and sales and download relevant shareholder forms. To access this facility, shareholders should visit www.aviva.com/shareholders where full registration details are provided. Those shareholders who have already registered with the Lloyds TSB Registrars Shareview site can use existing log-in details. Share price The current share price of Aviva ordinary shares can be found at www.aviva.com or alternatively, you can call 0906 843 2197* Share dealing facilities The Company has arranged the following services that can be used to buy or sell Aviva shares. Alternatively, for shareholders holding a share certificate any bank, building society or stockbroker offering share dealing facilities may be used. Shareholders in any doubt about buying or selling shares should seek professional financial advice. Share dealing facilities for UK shareholders and UK Share Account members • Shareview Dealing is a telephone and internet service arranged through Lloyds TSB Registrars and provides a simple and convenient way of selling Aviva shares. For telephone sales call 0870 850 0852 between 8.30am and 4.30pm, Monday to Friday and for internet sales log on to www.shareview.co.uk/dealing • To buy or sell shares over the telephone, you can contact Barclays Stockbrokers on 0870 549 3001 if you hold a share account statement, or 0870 549 3002 if you hold a share certificate. Barclays Stockbrokers Limited is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority. • Natwest Stockbrokers provide a share dealing service at certain branches for Aviva Share Account holders only. For more information contact Natwest Stockbrokers on 0845 122 0689. Share dealing facilities for overseas shareholders To sell shares over the telephone, shareholders can contact Barclays Stockbrokers on + 44 (0)141 352 3959. They will be able to sell shares and send a sterling cheque for the proceeds. ShareGift The Orr Mackintosh Foundation operates a purely voluntary charity share donation scheme for shareholders who wish to dispose of small numbers of shares whose value makes it uneconomical to sell them. Details of the scheme are available from ShareGift at www.sharegift.org or by telephoning +44 (0)20 7337 0501 or can be obtained from the Company's registrar. Amalgamating your shares Any shareholders receiving duplicate mailings, i.e. more than one copy of the report and accounts, should contact the Company's registrar. It may be that they have more than one record of shareholdings which can be amalgamated to prevent this happening in future. *Calls are currently charged at 60 pence per minute at all times. The average time to access the share price is approximately one minute. Useful contact details General shareholding administration queries and Aviva Share Account queries: Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA. Tel: 0870 600 3952 Corporate and single company Peps: Barclays Stockbrokers Limited, Tay House, 300 Bath Street, Glasgow G2 4LH. Tel: 0870 514 3263 Individual Savings Accounts ('Isas'): Lloyds TSB Registrars (Isa Manager), The Causeway, Worthing, West Sussex BN99 6DA. Tel: 0870 242 4244. Internet sites Aviva owns various internet sites, most of which interlink with each other. Aviva Group www.aviva.com UK long-term savings and general insurance www.norwichunion.com Fund management www.morleyfm.com Aviva worldwide internet sites www.aviva.com/customers/global.cfm Group financial calendar for 2004 4 August 2004 Interim dividend announcement 11 August 2004 Ordinary shares quoted 'ex dividend' 13 August 2004 Record date for the interim dividend 20 October 2004 Last date for scrip dividend mandate forms to be received in order to be effective for 2004 interim dividend 29 October 2004 Announcement of long-term savings new business for 9 months to 30 September 2004 17 November 2004 Interim dividend payment date Corporate social responsibility Aviva's CSR policy and programme continues to take firmer roots within the business and to generate support with staff, shareholders and customers. Aviva's CSR performance is also highly ranked by growing numbers of research agencies and investment houses. It provides one of the pathways by which the Company seeks to achieve its corporate resolve to be the financial services provider of choice. More details can be found on our website at www.aviva.com/csr St Helen's, 1 Undershaft, London EC3P 3DQ Telephone +44 (0)20 7283 2000 Registered in England No. 2468686 For a PDF version of this announcement please go to www.aviva.com END OF ANNOUNCEMNT This information is provided by RNS The company news service from the London Stock Exchange

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