Interim Results - Part 3

Aviva PLC 11 August 2005 PART 3 OF 4 --------------------------------------------------------------------------------------------------------------------- Page 45 IFRS basis Summarised consolidated income statement - IFRS basis For the six months ended 30 June 2005 Page 6 months 6 months 6 months Full year 2005 2005 2004 2004 €m £m £m £m Income 64,66 18,365 Premiums written net of reinsurance 12,672 11,677 23,351 --------------------------------------------------------------------------------------------------------------------- 17,909 Net premiums earned 12,357 11,380 23,175 777 Fee and commission income 536 379 872 14,607 Net investment income 10,079 2,934 16,050 36 Share of profit after tax of joint ventures and associates 25 36 99 772 Other operating income 533 258 357 --------------------------------------------------------------------------------------------------------------------- 34,101 23,530 14,987 40,553 Expenses (7,939) Change in insurance liabilities, net of reinsurance (5,478) (1,508) (6,104) (13,566) Claims and benefits paid, net of recoveries from reinsurers (9,360) (8,811) (17,625) (4,351) Expenses attributed to investment contracts (3,002) (1,715) (5,635) (514) Change in unallocated divisible surplus (355) 890 (1,330) (2,926) Fee and commission expense (2,019) (1,868) (4,734) (2,358) Other operating expenses (1,627) (1,338) (2,655) (401) Finance costs (277) (209) (445) ---------------------------------------------------------------------------------------------------------------------- 2,046 Profit before tax 1,412 428 2,025 (417) Tax attributable to policyholders' returns (288) 21 (383) --------------------------------------------------------------------------------------------------------------------- 1,629 Profit before tax attributable to shareholders' profits 1,124 449 1,642 Tax expense (642) United Kingdom tax (443) (44) (280) (220) Overseas tax (152) (115) (374) --------------------------------------------------------------------------------------------------------------------- (862) (595) (159) (654) 417 Less: tax attributable to policyholders' returns 288 (21) 383 --------------------------------------------------------------------------------------------------------------------- (445) Tax attributable to shareholders' profits (307) (180) (271) --------------------------------------------------------------------------------------------------------------------- 1,184 Profit for the period 817 269 1,371 ===================================================================================================================== Attributable to: 1,096 Equity shareholders of Aviva plc 756 234 1,275 88 Minority interests 61 35 96 --------------------------------------------------------------------------------------------------------------------- 1,184 817 269 1,371 ===================================================================================================================== All profit is from continuing operations. 6 months 6 months 6 months Full year 2005 2005 2004 2004 Earnings per share - IFRS basis 47.1c Basic (pence per share) 32.5p 10.0p 55.8p 46.5c Diluted (pence per share) 32.1p 9.9p 55.3p Subsequent to 30 June 2005, the directors proposed an interim dividend for 2005 of 9.83p (interim 2004: 9.36p) per ordinary share, £233 million (interim 2004: £211 million) in total. This will be accounted for as an appropriation of retained earnings in the full year ending 31 December 2005. --------------------------------------------------------------------------------------------------------------------- Page 46 Reconciliation of Group operating profit to retained profit for the period - IFRS basis For the six months ended 30 June 2005 Page 6 months 6 months 6 months Full year 2005 2005 2004 2004 €m £m £m £m IFRS operating profit before tax attributable to shareholders' profits 53 739 Long term business 510 520 1,116 53 48 Fund management 33 17 40 53 1,006 General insurance and health 694 583 1,259 55 3 Other: 55 (120) Other operations 2 (35) (121) Corporate costs (83) (99) (188) 55 (309) Unallocated interest charges (213) (205) (437) --------------------------------------------------------------------------------------------------------------------- 1,367 IFRS operating profit before tax attributable to shareholders' profits 943 781 1,669 (14) Impairment of goodwill (10) - (41) (65) Amortisation and impairment of acquired value of in-force business (44) (35) (85) (23) Amortisation and impairment of other intangibles (16) (2) (7) - Financial Services Compensation Scheme and other levies - (25) (49) 54 174 Short term fluctuation in return on investments backing general insurance and health business 120 (238) 161 52 210 Profit on the disposal of subsidiaries and associates 145 8 34 52 (20) Integration costs (14) - - 52 - Exceptional costs for termination of operations - (40) (40) --------------------------------------------------------------------------------------------------------------------- 1,629 Profit before tax attributable to shareholders' profits 1,124 449 1,642 Tax attributable to shareholders' profits 56 (371) Operating profit (256) (245) (319) 56 (74) Other activities (51) 65 48 --------------------------------------------------------------------------------------------------------------------- 1,184 Profit after tax attributable to shareholders 817 269 1,371 --------------------------------------------------------------------------------------------------------------------- 6 months 6 months 6 months Full year 2005 2005 2004 2004 Earnings per share - IFRS operating profit basis 39.3c Basic (pence per share) 27.1p 21.8p 54.1p ---------------------------------------------------------------------------------------------------------------------- Page 47 Summarised consolidated balance sheet - IFRS basis As at 30 June 2005 30 June 30 June 30 June* 31 December 2005 2005 2004 2004 €m £m £m £m Assets Intangible assets 3,366 Goodwill 2,289 1,137 1,184 1,350 Acquired value of in-force business and other intangible assets 918 466 516 1,287 Property and equipment 875 895 812 16,284 Investment property 11,073 10,267 11,057 2,050 Investments in joint ventures 1,394 1,115 1,242 1,313 Investments in associates 893 841 886 Financial investments 145,204 Debt securities 98,739 90,348 98,719 70,449 Equity securities 47,905 42,214 47,291 33,432 Other investments 22,734 17,603 20,346 32,237 Loans 21,921 19,098 22,055 12,912 Reinsurance assets 8,780 7,520 8,503 72 Current tax assets 49 8 - 1,234 Deferred tax assets 839 704 908 14,081 Receivables and other financial assets 9,575 6,901 7,509 4,728 Deferred acquisition costs and other assets 3,215 3,645 3,189 3,794 Prepayments and accrued income 2,580 2,285 2,307 21,184 Cash and cash equivalents 14,405 10,002 12,779 163 Assets of operations classified as held for sale 111 - - -------------------------------------------------------------------------------------------------------------------- 365,140 Total assets 248,295 215,049 239,303 ==================================================================================================================== Equity 874 Share capital 594 566 570 6,487 Capital reserves 4,411 3,839 3,878 749 Other reserves 509 237 736 3,056 Retained earnings 2,079 1,107 1,709 -------------------------------------------------------------------------------------------------------------------- 11,166 Equity attributable to shareholders of Aviva plc 7,593 5,749 6,893 1,750 Preference share capital and direct capital instrument 1,190 200 1,190 1,453 Minority interests 988 767 910 -------------------------------------------------------------------------------------------------------------------- 14,369 Total equity 9,771 6,716 8,993 ==================================================================================================================== Liabilities 188,324 Gross insurance liabilities 128,060 113,222 124,122 104,419 Gross liability for investment contracts 71,005 58,932 69,555 11,371 Unallocated divisible surplus 7,732 9,128 7,549 3,678 Provisions 2,501 1,872 2,125 1,584 Current tax liabilities 1,077 871 922 2,434 Deferred tax liabilities 1,655 979 1,543 15,735 Borrowings 10,700 8,817 10,090 10,362 Payables and other financial liabilities 7,047 8,639 7,240 9,184 Other liabilities 6,245 3,820 4,917 3,631 Net asset value attributable to unitholders 2,469 2,053 2,247 49 Liabilities of operations classified as held for sale 33 - - -------------------------------------------------------------------------------------------------------------------- 350,771 Total liabilities 238,524 208,333 230,310 -------------------------------------------------------------------------------------------------------------------- 365,140 Total equity and liabilities 248,295 215,049 239,303 ==================================================================================================================== * Balance sheet at 30 June 2004 has not been restated for FRS 27 Life Assurance as the Group considers this is impracticable, as a consequence of the need for hindsight. --------------------------------------------------------------------------------------------------------------------- Page 48 Summarised consolidated statement of recognised income and expense - IFRS basis For the six months ended 30 June 2005 6 months 6 months Full year 2005 2004 2004 £m £m £m Fair value gains/(losses), net of transfers to the income statement 1 (38) 151 Actuarial (losses)/gains on pension schemes (46) 18 (145) Foreign exchange rate movements (265) (230) 59 Aggregate tax effect - shareholder tax 18 41 (15) --------------------------------------------------------------------------------------------------------------------- Net (expense)/income recognised directly in equity (292) (209) 50 Profit for the period* 817 269 1,371 --------------------------------------------------------------------------------------------------------------------- Total recognised income and expense for the period 525 60 1,421 ===================================================================================================================== * Stated before the effect of foreign exchange rate movements, which are reported within the foreign exchange rate movements line. Summarised consolidated statement of changes in equity - IFRS basis For the six months ended 30 June 2005 6 months 6 months Full year 2005 2004 2004 £m £m £m Balance at 1 January 8,993 7,024 7,024 Total recognised income and expense for the period 525 60 1,421 Dividends and appropriations (note 14) (373) (351) (570) Movement in shares held by employee trusts - 1 1 Issue of share capital for the acquisition of RAC 530 - - Other issue of share capital 27 23 25 Shares issued in lieu of dividends 12 - 103 Issue of direct capital instrument, net of transaction costs of £9 million - - 981 Capital contributions from minority shareholders 93 - 4 Minority share of dividends declared in the period (36) (41) (41) Minority interest in acquired subsidiaries - - 45 --------------------------------------------------------------------------------------------------------------------- Total equity 9,771 6,716 8,993 Minority interests (988) (767) (910) --------------------------------------------------------------------------------------------------------------------- Balance at 30 June/31 December 8,783 5,949 8,083 ===================================================================================================================== --------------------------------------------------------------------------------------------------------------------- Page 49 Summarised consolidated cash flow statement - IFRS basis For the six months ended 30 June 2005 The cash flows presented in this statement cover all the Group's activities and include flows from policyholder and shareholder activities. 6 months 2005 ---------------------------------- Non-long- Long-term term Total Total Total business business 6 months 6 months Full year operations operations 2005 2004 2004 £m £m £m £m £m Cash flows from operating activities Cash generated from operations 3,586 1,630 5,216 4,670 14,568 Tax (paid)/received (155) 138 (17) (48) (290) --------------------------------------------------------------------------------------------------------------------- Net cash from operating activities 3,431 1,768 5,199 4,622 14,278 --------------------------------------------------------------------------------------------------------------------- Cash flow from investing activities: Acquisition of subsidiaries, joint ventures and associates, net of cash acquired (77) (623) (700) - (294) Disposal of subsidiaries, joint ventures and associates, net of cash transferred - 192 192 174 308 Net purchases of property and equipment (10) (34) (44) (99) (61) Net purchases of other financial investments (1,814) (544) (2,358) (4,474) (12,806) Net loans granted to joint ventures and associates - - - - (129) Dividends received from associates and joint ventures 16 - 16 41 52 --------------------------------------------------------------------------------------------------------------------- Net cash from investing activities (1,885) (1,009) (2,894) (4,358) (12,930) ===================================================================================================================== Cash flow from financing activities: Proceeds from issue of shares, net of transaction costs - 27 27 3 3 Proceeds from issue of Direct Capital Instrument, net of transaction costs - - - - 981 Dividends and appropriations paid to group equity - (373) (373) (351) (467) capital holders Dividends paid to minority interests of subsidiaries (20) (16) (36) (41) (41) Movement in shares held by employee trusts - - - 1 1 Interest paid on borrowings (118) (159) (277) (209) (445) Net drawdown/(repayment) of borrowings (365) 420 55 714 1,713 Finance lease payments - (5) (5) (6) (26) Non-trading cash flows between operations (58) 58 - - - Capital contributions from minority shareholders 93 - 93 - 4 --------------------------------------------------------------------------------------------------------------------- Net cash from financing activities (468) (48) (516) 111 1,723 --------------------------------------------------------------------------------------------------------------------- Total cash flow 1,078 711 1,789 375 3,071 --------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 1,078 711 1,789 375 3,071 Cash and cash equivalents at 1 January 9,086 3,040 12,126 9,023 9,023 Effect of exchange rate changes on cash and cash equivalents (214) (118) (332) (87) 32 --------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at 30 June/31 December 9,950 3,633 13,583 9,311 12,126 -==================================================================================================================== Cash and cash equivalents at 30 June/31 December comprised: Cash at bank and in hand 2,709 1,388 4,097 1,626 1,631 Cash equivalents 7,623 2,685 10,308 8,376 11,148 --------------------------------------------------------------------------------------------------------------------- 10,332 4,073 14,405 10,002 12,779 Bank overdrafts (382) (440) (822) (691) (653) --------------------------------------------------------------------------------------------------------------------- 9,950 3,633 13,583 9,311 12,126 ===================================================================================================================== -------------------------------------------------------------------------------------------------------------------- Page 50 1. Basis of preparation - IFRS basis (a) From 2005, all European Union listed companies are required to prepare consolidated financial statements using International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). The FSA listing rules in the UK require that the 2005 interim results must also be presented on a basis consistent with IFRS. Accordingly, the results for the six months to 30 June 2005 have been prepared using the Group's accounting policies under IFRS published in the market release on 5 July 2005, 'Impact of International Financial Reporting Standards on the results for 31 December 2004'. This is the Group's first set of financial results prepared in accordance with IFRS accounting policies and its previously reported 2004 consolidated financial statements have accordingly been restated to comply with IFRS, with the date of transition to IFRSs being 1 January 2004. The Group's accounting policies are in accordance with IFRS issued by the IASB. The European Union has endorsed all relevant IFRS with the exception of the amendment to IAS19 Employee Benefits (2004), the amendments to IAS39 The Fair Value Option published by the IASB in June 2005 and Interpretation 4 of the International Financial Reporting Interpretations Committee Determining whether an Arrangement contains a Lease (IFRIC4). These amendments and IFRIC4 are expected to be endorsed by the European Commission during 2005 and, although they are not mandatory until 2006, the Group has decided to adopt them early and reflect their impact within this interim announcement. The Group's full year financial statements at 31 December 2005 will be prepared in accordance with these endorsed IFRSs and this announcement reflects the accounting policies expected to apply at the year end. The IFRSs themselves are subject to possible amendment by interpretative guidance from the IASB or external bodies and are therefore subject to change prior to publication of the Group's full year financial statements for the year ended 31 December 2005. (b) In line with the requirements of International Financial Reporting Standard 1, First-Time Adoption of International Financial Reporting Standards (IFRS1), Aviva has applied the Group's accounting policies under IFRS retrospectively at the date of transition being 1 January 2004, with exception of a number of permitted exemptions. These are detailed in the market release of 5 July 2005, 'Impact of International Financial Reporting Standards on the results for 31 December 2004'. (c) Aviva has chosen to revisit its longer term investment return ('LTIR') methodology from 2005 as part of a discretionary change not required by IFRS. This change in accounting policy was adopted and detailed in the market release of 5 July 'Impact of International Financial Reporting Standards on the results for 31 December 2004. (d) The requirements of International Financial Reporting Standard 5, Non-current Assets Held for Sale and Discontinued Operations have been applied prospectively from 1 January 2005. (e) Financial Reporting Standard 27, Life Assurance (FRS27) was issued by the UK's Accounting Standards Board (ASB) on 13 December 2004, following the Penrose inquiry. Aviva, along with other major insurance companies and the Association of British Insurers (ABI), has signed a Memorandum of Understanding (MoU) with the ASB relating to FRS27. Under this MoU, Aviva has agreed to adopt voluntarily in full the standard from 2005 within the Group's IFRS financial statements. Within FRS27, the ASB acknowledged the difficulty of applying the requirements retrospectively and indeed it is the Group's view that it would be impractical to do so. Hence, in accordance with IAS8 and FRS 27, only the balance sheet at 31 December 2004 has been restated for the impact of FRS27. No adjustments have been made, nor are any required, to the 2004 income statement, the opening balance sheet at 1 January 2004 or the balance sheet at 30 June 2004. (f) In accordance with Phase 1 of International Financial Reporting Standard 4, Insurance Contracts (IFRS 4), the Group has applied existing accounting practices for insurance and participating investment contracts, modified as appropriate to comply with the IFRS framework and applicable standards. (g) 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 presentation currency. As supplementary information, consolidated financial information is also presented in Euros. (h) The results for the six months to 30 June 2005 and the results for the six months to 30 June 2004 are unaudited but have been reviewed by the auditor, Ernst & Young LLP. The interim accounts do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The results on an IFRS basis for the full year 2004 have been audited by Ernst & Young LLP. The Group's 2004 Annual Report and Accounts have been filed with the Registrar of Companies. The auditors have reported on the 2004 accounts and their report was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. 2. Exchange rates The euro rates employed in this announcement are an average rate of 1 euro = £0.69 (6 months to 30 June 2004: 1 euro = £0.68; full year 2004: 1 euro = £0.68) and a closing rate of 1 euro = £0.68 (30 June 2004: 1 euro = £0.67; 31 December 2004: 1 euro = £0.71). -------------------------------------------------------------------------------------------------------------------- Page 51 3. Acquisitions (a) RAC plc On 4 May 2005, the Group acquired 100% of the share capital of RAC plc. The results of RAC plc's operations have been included in the consolidated financial statements of the Group with effect from 4 May 2005, and contributed £17 million to the consolidated profit before tax. £m Purchase cost Cash paid 566 Fair value of 88 million shares issued, based on their published price at date of exchange (average of £6.03 per share) 530 Costs attributable 17 -------------------------------------------------------------------------------------------------------------------- Total 1,113 ==================================================================================================================== The assets and liabilities at the date of acquisition were: Fair value Goodwill and reversal and Pension accounting Book intangible scheme policy Fair value revaluation valuation adjustments value £m £m £m £m £m Assets Goodwill 510 (510) - - - Intangible assets 59 333 - - 392 Tax assets 58 - - (58) - Other assets 608 - - 52 660 ------------------------------------------------------------------------------------------------------------------- Total assets 1,235 (177) - (6) 1,052 =================================================================================================================== Liabilities Provisions Pension deficit (257) - (56) - (313) Other (8) - - (4) (12) Tax liabilities - (118) 17 47 (54) Other liabilities (708) - - (5) (713) ------------------------------------------------------------------------------------------------------------------- Total liabilities (973) (118) (39) 38 (1,092) =================================================================================================================== Shareholders' funds acquired 262 (295) (39) 32 (40) ------------------------------------------------------------------------------------------------------------------- Goodwill (including £118 million arising from the creation of the deferred tax liability on intangibles) 1,153 ------------------------------------------------------------------------------------------------------------------- Intangible assets 392 ------------------------------------------------------------------------------------------------------------------- Total goodwill and intangible assets 1,545 Less: deferred tax liability (118) ------------------------------------------------------------------------------------------------------------------- Total value of goodwill and intangible assets net of associated tax included on balance sheet 1,427 ================================================================================================================== Separable intangible assets have been identified and valued by an independent third party at £392 million, using estimated post-tax cash flows and post-tax discount rates. These comprise the RAC, BSM and Lex brands and contractual customer relationships. Of this £260 million has been assessed as having an indefinite life with the remaining £132 million being amortised over 9 to 22 years. A deferred tax liability of £118 million has been provided against these intangible assets, resulting in an increase in residual goodwill by this amount. Although this liability has been recognised in accordance with IAS12, and a proportion will be amortised to the income statement as the related intangible asset is amortised, this liability is only payable if the intangible asset is sold separately and this is not expected to happen. The pension scheme valuation adjustment and associated deferred taxation represents the effect of aligning the assumptions of the RAC plc schemes to those of Aviva. The fair value of the RAC pension deficit at the date of acquisition amounted to £313 million (£219 million after deferred tax). The residual goodwill of £1,153 million essentially represents synergies, both in increased revenues and in reduced costs, expected to arise in RAC plc and our UK general insurance business as a result of the acquisition. £14 million of integration costs for the restructuring of the combined Norwich Union Insurance and RAC businesses has been included in the results to 30 June 2005. --------------------------------------------------------------------------------------------------------------------- Page 52 In July 2005, the Group completed the transfer of ownership of Hyundai Cars (UK) to motor manufacturer Hyundai Motor UK Limited. Accordingly, the assets and liabilities of this business have been presented as held for sale on the balance sheet. (b) Gresham Insurance Company Limited On 31 March 2005, the Group acquired 100% of the share capital of Gresham Insurance Company Limited. The cash consideration including purchase costs was £75 million. The fair value of the net assets acquired, including intangibles of £14 million, was £75 million, giving rise to no goodwill on acquisition. (c) Solus Automotive Limited On 11 May 2005, the Group acquired 100% of the share capital of Solus Automotive Limited. The cash consideration including purchase costs was £20 million, including £12 million of cash and £8 million of deferred consideration. The fair value of the net assets acquired was nil, giving rise to £20 million of goodwill on acquisition. (d) Unaudited proforma combined revenues and profit Shown below are unaudited pro forma figures for combined revenues and profit as though the acquisition date for all business combinations effected during the period had been 1 January 2005, after giving effect to purchase accounting adjustments and the elimination of intercompany transactions. The pro forma financial information is not necessarily indicative of the combined results that would have been attained had the acquisitions taken place at 1 January 2005, nor is it necessarily indicative of future results. 6 months 2005 £m Revenues (premiums and fee income) 13,636 IFRS profit before tax attributable to shareholders 1,138 ==================================================================================================================== 4. Exceptional costs for termination of operations In February 2004, the Group announced the closure of its UK national broker subsidiary, Hill House Hammond (HHH) together with the sale of its commercial business. The associated pre-tax costs of the closure of HHH were £40 million and relate to termination activities, including redundancy costs and closure provisions. 5. Profit on the disposal of subsidiaries and associates The net profit on the disposal of subsidiary and associated undertakings comprises: 6 months 6 months Full year 2005 2004 2004 £m £m £m General insurance businesses United Kingdom - - 28 France 1 7 6 Asia (a) 145 - - Other small operations (1) 1 - --------------------------------------------------------------------------------------------------------------------- 145 8 34 ===================================================================================================================== (a) Sale of Asian general insurance businesses On 7 September 2004, the Group announced the disposal of its Asian general insurance businesses to Mitsui Sumitomo Insurance (MSI) for a total of US$450 million in cash. The sale was subject to obtaining regulatory clearance and approval from other shareholders in the Asian businesses. Under the terms of the agreement, MSI will acquire all of Aviva's general insurance businesses in Asia. These comprise the general insurance business of Aviva Limited and the general insurance assets of Aviva Asia Pte Limited in Singapore; Aviva Insurance Berhad in Malaysia (including its branch in Brunei); Aviva Insurance (Thai) Company Limited in Thailand; PT Aviva Insurance in Indonesia; Dah Sing General Insurance Co Limited in Hong Kong; and Aviva's branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan. The transaction will be achieved through share purchase of Aviva's interests in joint venture operations, business purchase and asset purchase in Singapore, and transfer of Aviva's general insurance branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan. The transaction is expected to complete in phases. Phase I completed on 28 February 2005 and included all businesses above except for Malaysia, Indonesia, Macau, Marianas, Taiwan, Dah Sing and the Philippines. The businesses in Macau and Dah Sing were then sold prior to 30 June 2005. The sale of Indonesia completed in July 2005 and the remaining businesses will be included as part of the completion of Phase II, expected in the second half of 2005. The assets and liabilities of these businesses are included in the totals held for sale on the balance sheet. Subject to the receipt of regulatory approval, the total proceeds for the sale of these businesses were fixed by reference to the net assets of the businesses as at 31 December 2003 and are not adjusted to reflect the results in the period from 1 January 2004 to completion. The Group does not bear any continuing operating risk from 31 December 2003. The results of the Asian general insurance business have been consolidated with those of the Group's ongoing operations until the completion of each transaction. Although the Group has retained no economic interest in the operations of this business beyond 31 December 2003, the post-tax operating profits are incorporated in the Group's consolidated income statement from 1 January 2004 to the date of completion. This will be offset by a corresponding change to the final profit on sale. Total profit on sale on the first tranche of the disposal was £145 million and £102 million after tax. --------------------------------------------------------------------------------------------------------------------- Page 53 6. Geographical analysis of life IFRS operating profit 6 months 6 months Full year 2005 2004 2004 £m £m £m United Kingdom With-profit 33 49 97 Non-profit 178 179 256 Europe (excluding UK) France 131 89 213 Ireland 14 14 31 Italy 24 19 49 Netherlands (including Belgium and Luxembourg) 58 54 214 Poland 48 39 80 Spain 39 24 72 Other 1 (4) 5 International (16) 57 99 --------------------------------------------------------------------------------------------------------------------- Total 510 520 1,116 ===================================================================================================================== 7. Geographical analysis of fund management IFRS operating profit 6 months 6 months Full year 2005 2004 2004 £m £m £m Morley - UK business 11 4 10 - European and International business 7 3 8 Other fund management operations UK - Royal Bank of Scotland (3) (6) (6) - Norwich Union investment funds 3 5 4 France 10 8 15 Other Europe 1 - 2 International 4 3 7 --------------------------------------------------------------------------------------------------------------------- Total 33 17 40 ===================================================================================================================== 8. Geographical analysis of general insurance and health (a) Operating result Operating profit Underwriting result ----------------------------- ------------------------------ 6 months 6 months Full year 6 months 6 months Full year 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m United Kingdom 431 364 797 104 52 146 Europe (excluding UK) France 17 20 33 (12) (9) (16) Ireland 83 60 135 53 38 82 Netherlands 55 53 88 14 2 10 Other 19 12 32 2 (4) 6 International Canada 67 52 133 14 5 37 Other 22 22 41 7 8 6 -------------------------------------------------------------------------------------------------------------------- Total 694 583 1,259 182 92 271 ==================================================================================================================== ------------------------------------------------------------------------------------------------------------------- Page 54 (b) Investment return information Actual investment return credited to income Longer-term investment return ----------------------------- ----------------------------- 6 months 6 months Full year 6 months 6 months Full year 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m United Kingdom 280 301 569 327 312 651 Europe (excluding UK) France 23 24 48 29 29 49 Ireland 24 18 39 30 22 53 Netherlands 53 19 83 41 51 78 Other 14 12 20 17 16 26 International Canada 44 39 83 53 47 96 Other 15 15 33 15 14 35 -------------------------------------------------------------------------------------------------------------------- Total longer-term investment return 512 491 988 =========================== Total actual investment income 453 428 875 Realised gains/(losses) 55 (6) 47 Unrealised gains/(losses) 124 (169) 227 ---------------------------------------------------------------------------------- Total actual investment return 632 253 1,149 ================================================================================== The total short-term fluctuation in investment return of £120 million (six months 30 June 2004: £(238) million; full year 2004: £161 million) is the difference between the total actual investment return of £632 million (six months 30 June 2004: £253 million; full year 2004: £1,149 million) and the total longer-term investment return of £512 million (six months 30 June 2004: £491 million; full year 2004: £988 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 year. The principal assumptions underlying the calculation of the longer-term investment return are: Longer-term rates of return Longer-term rates of return Equities Properties --------------------------- --------------------------- 2005 2004 2005 2004 % % % % United Kingdom 7.6% 7.8% 6.6% 6.8% France 6.7% 7.3% 5.7% 6.3% Ireland 6.7% 7.3% 5.7% 6.3% Netherlands 6.7% 7.3% 5.7% 6.3% Canada 7.4% 7.7% 6.4% 6.7% ------------------------------------------------------------------------------------------------------------------ The table below shows the sensitivity of Group operating profit before tax to changes in the longer-term rates of return: 6 months 6 months 2005 2004 £m £m Movement in investment return for By Change in By By Equities 1% higher/lower Group operating profit 27 25 Properties 1% higher/lower Group operating profit 4 3 ------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- Page 55 9. Other operations 6 months 6 months Full year 2005 2004 2004 £m £m £m RAC 11 - - Hill House Hammond - (9) (8) Personal finance subsidiaries 1 - (1) Your Move - 8 9 Norwich Union Life Services (38) (15) (80) Other 28 (19) (41) --------------------------------------------------------------------------------------------------------------------- 2 (35) (121) ===================================================================================================================== 10. Corporate costs 6 months 6 months Full year 2005 2004 2004 £m £m £m Global finance transformation programme (28) (45) (85) Central costs and sharesave schemes (55) (54) (103) --------------------------------------------------------------------------------------------------------------------- (83) (99) (188) ===================================================================================================================== 11. Unallocated interest charges 6 months 6 months Full year 2005 2004 2004 £m £m £m External subordinated debt (85) (84) (169) other (45) (40) (77) Internal (101) (100) (219) Net finance income on pension schemes 18 19 28 --------------------------------------------------------------------------------------------------------------------- (213) (205) (437) ===================================================================================================================== 12. Tax (a) Tax charged to the income statement 6 months 6 months Full year 2005 2004 2004 £m £m £m Current tax: For the year 492 214 475 Prior year adjustments 21 (48) (92) --------------------------------------------------------------------------------------------------------------------- Total current tax 513 166 383 ===================================================================================================================== Deferred tax: Origination and reversal of timing differences 66 (6) 272 Changes in tax rates or tax laws - (1) (1) Write down of deferred tax assets 16 - - --------------------------------------------------------------------------------------------------------------------- Total deferred tax 82 (7) 271 --------------------------------------------------------------------------------------------------------------------- Total tax charged to income statement 595 159 654 ===================================================================================================================== --------------------------------------------------------------------------------------------------------------------- Page 56 12. Tax (continued) (a) Tax charged to the income statement (continued) The tax expense attributable to policyholders' returns in the UK, Ireland and Australia included in the tax charge is as follows: 6 months 6 months Full year 2005 2004 2004 £m £m £m Current tax 198 49 195 Deferred tax 90 (70) 188 --------------------------------------------------------------------------------------------------------------------- Total tax attributable to policyholders' returns charged to income statement 288 (21) 383 ===================================================================================================================== Tax charge analysed between 6 months 6 months Full year 2005 2004 2004 £m £m £m Tax charge/(credit) attributable to policyholders' returns 288 (21) 383 Tax charge on IFRS operating profit before tax attributable to shareholders' profits from continuing operations 256 245 319 Tax charge/(credit) on profit on other activities 51 (65) (48) --------------------------------------------------------------------------------------------------------------------- Total tax charged to income statement 595 159 654 ===================================================================================================================== (b) Tax charged to equity 6 months 6 months Full year 2005 2004 2004 £m £m £m Deferred tax (18) (41) 15 --------------------------------------------------------------------------------------------------------------------- Total tax charged to equity (18) (41) 15 ===================================================================================================================== (c) Tax reconciliation The tax on the Group's net 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 6 months Full year 2005 2004 2004 £m £m £m Net profit before tax 1,412 428 2,025 ===================================================================================================================== Tax calculated at standard UK corporation tax rate of 30% (2004: 30%) 424 128 608 Different basis of tax for UK life insurance 164 29 217 Adjustment to tax charge in respect of prior years 20 (34) (88) Non-assessable dividends (59) (41) (30) Non-taxable profit on sale of subsidiaries and associates - 20 12 Disallowable expenses 21 26 65 Different local basis of tax on overseas profits/(losses) 34 5 (13) Deferred tax assets not recognised 7 15 (120) Other (16) 11 3 --------------------------------------------------------------------------------------------------------------------- Tax charge for the period 595 159 654 ===================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- Page 57 13. Earnings per share (a) Basic earnings per share 6 months 2005 6 months 2004 Full year 2004 ----------------------------- ---------------------------- ----------------------------- Net of tax, Net of tax, Net of tax, minorities minorities minorities and and and Before preference Per Before preference Per Before preference Per tax dividends share tax dividends share tax dividends share £m £m p £m £m p £m £m p Operating profit attributable to ordinary shareholders from continuing operations 943 623 27.1 781 492 21.8 1,669 1,221 54.1 Adjusted for the following items: - Impairment of goodwill (10) (10) (0.4) - - - (41) (41) (1.8) - Amortisation and net impairment of acquired value of in-force business (44) (44) (1.9) (35) (35) (1.6) (85) (85) (3.8) - Amortisation and net impairment of other intangibles (16) (14) (0.6) (2) (2) (0.1) (7) (7) (0.3) - Financial Services Compensation Scheme and other levies - - - (25) (18) (0.8) (49) (29) (1.3) - Short term fluctuation on return on investments backing general insurance and health business 120 100 4.3 (238) (190) (8.4) 161 195 8.7 - Profit on the disposal of subsidiaries and 145 102 4.4 8 8 0.4 34 34 1.5 associates - Integration costs (14) (10) (0.4) - - - - - - - Exceptional costs for termination of operations - - - (40) (30) (1.3) (40) (30) (1.3) --------------------------------------------------------------------------------------------------------------------- Profit attributable to ordinary shareholders 1,124 747 32.5 449 225 10.0 1,642 1,258 55.8 ===================================================================================================================== Earnings per share has been calculated based on the operating profit before impairment of goodwill, amortisation and impairment of acquired additional value of in-force long-term business and other intangibles and exceptional items, after tax, attributable to ordinary shareholders, for continuing operations, 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 2,300 million (six months 30 June 2004: 2,252 million; full year 2004: 2,256 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 30 June 2005 was 2,371 million (30 June 2004: 2,262 million; full year 2004: 2,282 million). (b) Diluted earnings per share: 6 months 2005 6 months 2004 Full year 2004 ------------------------- -------------------------- -------------------------- Weighted Weighted Weighted average average average number of Per number of Per number of Per Total shares share Total shares share Total shares share £m m p £m m p £m m p Profit attributable to equity shareholders 747 2,300 32.5 225 2,252 10.0 1,258 2,256 55.8 Dilutive effect of share awards and options - 26 (0.4) - 22 (0.1) - 18 (0.5) --------------------------------------------------------------------------------------------------------------------- Diluted earnings per share 747 2,326 32.1 225 2,274 9.9 1,258 2,274 55.3 ===================================================================================================================== --------------------------------------------------------------------------------------------------------------------- Page 58 14. Dividends and appropriations 6 months 6 months Full year 2005 2004 2004 £m £m £m Ordinary dividends declared and charged to equity in the period Final 2003 - 15.15p per share, paid on 17 May 2004 - 342 342 Interim 2004 - 9.36p per share, paid on 17 November 2004 - - 211 Final 2004 -16.00p per share, paid on 17 May 2005 364 - - -------------------------- 364 342 553 Preference dividends declared and charged to equity in the period 9 9 17 -------------------------- 373 351 570 ========================== Subsequent to 30 June 2005, the directors proposed an interim dividend for 2005 of 9.83p per ordinary share, £233 million in total. This will be accounted for as an appropriation of retained earnings in the full year ending 31 December 2005. Interest payable on the deferred capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. No interest has been paid since the deferred capital instrument was issued last year, and the first and subsequent payments will be made in the second half of each accounting period. The pre-tax accumulated interest payable at 30 June 2005 amounted to £31 million (31 December 2004: £6 million). 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 11 August 2005. 15. Segmental information (a) Segmental results - primary reporting format - business segments The principal activity of the Group is financial services, which is managed using the following reportable segments: long-term business, fund management, general insurance and health. Long-term business Our long-term business comprises life insurance, long-term health and accident insurance, savings, pensions and annuity business written by our life insurance subsidiaries including managed pension fund business and our share of the other life and related business written in our associates and joint ventures, as well as the equity release business written in the UK. Fund management activities Our fund management business invests policyholders' and shareholders' funds, provides investment management services for institutional pension fund mandates and manages a range of retail investment products, including investment funds, unit trusts, OEICs and ISAs. Clients include Aviva group businesses and third-party financial institutions, pension funds, public sector organisations, investment professionals and private investors. General insurance and health Our general insurance and health business 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. Other Head office expenses, such as Group treasury and finance functions, and other activities not related to the core business segments are included as 'Other' in the following tables. Any segments that are not reportable segments due to their immateriality are also included in this category, together with eliminations and any other reconciling items. Certain financing costs and taxes are not allocated among the segments. 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. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet but excluding items such as tax and borrowings. --------------------------------------------------------------------------------------------------------------------- Page 59 15. Segmental information (continued) (a) Segmental results of the income statement - primary reporting format - business segments for the six months ended 30 June 2005 General Long-term Fund insurance business management and health Other Total £m £m £m £m £m Segment revenue from external customers: Net earned premiums 7,468 - 4,889 - 12,357 Fee and commission income 286 114 15 121 536 -------------------------------------------------------------------------------------------------------------------- 7,754 114 4,904 121 12,893 Net Investment income 9,311 4 688 76 10,079 Other income 25 1 73 434 533 Inter segment revenue 16 73 (3) (86) - -------------------------------------------------------------------------------------------------------------------- Total income 17,106 192 5,662 545 23,505 ==================================================================================================================== Claims and benefits paid, net of recoveries from reinsurers (6,490) - (2,870) - (9,360) Change in insurance liabilities, net of reinsurance (5,147) - (331) - (5,478) Change in unallocated divisible surplus (355) - - - (355) Expenses attributed to investment contracts (3,002) - - - (3,002) Fee and commission expense (683) (33) (1,286) (17) (2,019) Other operating expenses Depreciation (7) (2) (5) (28) (42) Amortisation of acquired value of business in-force (36) - - - (36) Net impairment of acquired value of business in-force (7) - - - (7) Net impairment of other intangible assets (8) - (5) (3) (16) Impairment of goodwill (10) - - - (10) Other impairment losses recognised in the income statement (4) - - - (4) Other expenses (528) (123) (295) (566) (1,512) Finance costs (118) - (22) (137) (277) -------------------------------------------------------------------------------------------------------------------- Total expenses (16,395) (158) (4,814) (751) (22,118) ==================================================================================================================== Segment result before share of profit/(loss) of joint ventures and associates 711 34 848 (206) 1,387 Share of profit/(loss) of joint ventures and associates 23 (3) - 5 25 -------------------------------------------------------------------------------------------------------------------- Segmental result before tax 734 31 848 (201) 1,412 -------------------------------------------------------------------------------------------------------------------- Unallocated costs: Tax attributable to policyholders' returns (288) Tax attributable to shareholders' profits (307) -------------------------------------------------------------------------------------------------------------------- Total tax expense (595) -------------------------------------------------------------------------------------------------------------------- Profit for the period 817 ==================================================================================================================== -------------------------------------------------------------------------------------------------------------------- Page 60 15. Segmental information (continued) (b) Segmental results of the income statement - primary reporting format - business segments continued Reconciliation to operating profit before tax attributable to shareholders' profits for the six months ended 30 June 2005 General Long-term Fund insurance business management and health Other Total £m £m £m £m £m Segment result before tax 734 31 848 (201) 1,412 Add: Impairment of goodwill 10 - - - 10 Amortisation of acquired value of in-force business 44 - - - 44 Impairment of other intangible assets 8 - 5 3 16 Net profit on the disposal of subsidiaries and associates - - (41) (104) (145) Integration costs - - - 14 14 Short-term fluctuation on investment return - - (120) - (120) Corporate costs reallocation 2 2 2 (6) - -------------------------------------------------------------------------------------------------------------------- 798 33 694 (294) 1,231 Less: Tax attributable to policyholders' returns (288) - - - (288) -------------------------------------------------------------------------------------------------------------------- Operating profit before tax attributable to shareholders' profits 510 33 694 (294) 943 ==================================================================================================================== -------------------------------------------------------------------------------------------------------------------- Page 61 15. Segmental information (continued) (c) Segmental results of the income statement - primary reporting format - business segments for the year ended 31 December 2004 General Long-term Fund insurance business management and health Other Total £m £m £m £m £m Segment revenue from external customers Net earned premiums 13,533 - 9,642 - 23,175 Fee and commission income 443 144 25 260 872 --------------------------------------------------------------------------------------------------------------------- 13,976 144 9,667 260 24,047 Net investment income 14,557 17 1,216 260 16,050 Inter-segment revenue 8 126 7 (141) - Other income 133 58 4 162 357 --------------------------------------------------------------------------------------------------------------------- Total income 28,674 345 10,894 541 40,454 ===================================================================================================================== Claims and benefits paid, net of recoveries from reinsurers (11,967) - (5,658) - (17,625) Change in insurance liabilities, net of reinsurance (5,393) - (711) - (6,104) Change in unallocated divisible surplus (1,330) - - - (1,330) Expenses attributed to investment contracts (5,635) - - - (5,635) Fee and commission expense (2,068) (77) (2,482) (107) (4,734) Other operating expenses Depreciation (14) (4) (19) (60) (97) Amortisation of acquired value of business in force (72) - - - (72) Net impairment of acquired value of business in force (12) - - - (12) Net impairment of other intangible assets (7) - - - (7) Impairment of goodwill (18) - (2) (21) (41) Other impairment losses recognised in the income statement (1) - - (24) (25) Other reversal of impairment losses recognised in the income statement - - - - - Other expenses (721) (230) (685) (765) (2,401) Finance costs (126) - (43) (276) (445) --------------------------------------------------------------------------------------------------------------------- Total expenses (27,364) (311) (9,600) (1,253) (38,528) ===================================================================================================================== Segmental result before share of profit/(loss) of joint ventures and associates 1,310 34 1,294 (712) 1,926 Share of profit/(loss) of joint ventures and associates 71 (6) - 34 99 --------------------------------------------------------------------------------------------------------------------- Segmental results before tax 1,381 28 1,294 (678) 2,025 --------------------------------------------------------------------------------------------------------------------- Unallocated costs: Tax attributable to policyholders' returns (383) Tax attributable to shareholders' profits (271) --------------------------------------------------------------------------------------------------------------------- Total tax expense (654) --------------------------------------------------------------------------------------------------------------------- Profit for the period 1,371 ===================================================================================================================== --------------------------------------------------------------------------------------------------------------------- Page 62 15. Segmental information (continued) (d) Segmental results of the income statement - primary reporting format - business segments Reconciliation to operating profit before tax attributable to shareholders' profits for the year ended 31 December 2004 General Long-term Fund insurance business management and health Other Total £m £m £m £m £m Segment result before tax from continuing operations 1,381 28 1,294 (678) 2,025 Add: Impairment of goodwill 18 - 2 21 41 Amortisation of acquired value of in-force business 85 - - - 85 Impairment of other intangible assets 7 - - - 7 Financial Services Compensation Scheme and other levies - 9 40 - 49 Short-term fluctuation on investment return - - (161) - (161) Net profit on the disposal of subsidiaries and associates 4 - 62 (100) (34) Exceptional costs for termination of operations - - - 40 40 Corporate costs reallocation 4 3 22 (29) - --------------------------------------------------------------------------------------------------------------------- 1,499 40 1,259 (746) 2,052 Less: Tax attributable to policyholders' returns (383) - - - (383) --------------------------------------------------------------------------------------------------------------------- Operating profit before tax attributable to shareholders' profits 1,116 40 1,259 (746) 1,669 ===================================================================================================================== (e) Segmental balance sheet - primary reporting format - on business segments As at 30 June 2005 General Long-term Fund insurance business management and health Other Total £m £m £m £m £m Goodwill 551 - 359 1,379 2,289 Acquired value of in-force business and other intangible assets 425 - 379 114 918 Investment property 10,662 - 357 54 11,073 Investments in joint ventures and associates 2,069 40 8 170 2,287 Financial investments Debt securities 86,818 - 9,320 2,601 98,739 Equity securities 44,843 1 2,460 601 47,905 Other investments 22,455 5 231 43 22,734 Loans 16,763 - 2,710 2,448 21,921 Other assets 26,949 429 10,137 2,026 39,541 --------------------------------------------------------------------------------------------------------------------- Segment assets 211,535 475 25,961 9,436 247,407 ----------------------------------------------------------------------------------------------------------- Unallocated assets - tax assets 888 --------------------------------------------------------------------------------------------------------------------- Total assets 248,295 ===================================================================================================================== Insurance liabilities 109,933 - 18,127 - 128,060 Liability for investment contracts 71,005 - - - 71,005 Unallocated divisible surplus 7,732 - - - 7,732 Borrowings External 3,601 - 2,014 746 6,361 Other liabilities, including inter-segment liabilities 6,968 169 (525) 9,214 15,826 Net asset value attributable to unitholders 2,469 - - - 2,469 --------------------------------------------------------------------------------------------------------------------- Segment liabilities 201,708 169 19,616 9,960 231,453 ----------------------------------------------------------------------------------------------------------- Unallocated liabilities Central borrowings 4,339 Tax liabilities 2,732 --------------------------------------------------------------------------------------------------------------------- Total liabilities 238,524 ===================================================================================================================== Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies. --------------------------------------------------------------------------------------------------------------------- Page 63 15. Segmental information (continued) (f) Segmental balance sheet - primary reporting format on business segments As at 31 December 2004 General Long-term Fund insurance business management and health Other Total £m £m £m £m £m Goodwill 595 - 308 281 1,184 Acquired value of in-force business and other intangible assets 451 - 19 46 516 Property and equipment 404 7 133 268 812 Investment property 10,639 - 362 56 11,057 Investments in joint ventures and associates 1,995 40 13 80 2,128 Financial investments Debt securities 86,897 2 9,255 2,565 98,719 Equity securities 44,269 1 2,449 572 47,291 Other investments 20,067 6 224 49 20,346 Loans 17,090 - 2,635 2,330 22,055 Other assets 23,455 311 9,786 735 34,287 --------------------------------------------------------------------------------------------------------------------- Segment assets 205,862 367 25,184 6,982 238,395 ----------------------------------------------------------------------------------------------------------- Tax 908 --------------------------------------------------------------------------------------------------------------------- Total assets 239,303 ===================================================================================================================== Insurance liabilities 106,329 - 17,793 - 124,122 Liability for investment contracts 69,555 - - - 69,555 Unallocated divisible surplus 7,549 - - - 7,549 Borrowings External 4,082 - 1,439 270 5,791 Other liabilities, including inter-segment liabilities 6,250 191 474 7,367 14,282 Net asset value attributable to unitholders 2,247 - - - 2,247 --------------------------------------------------------------------------------------------------------------------- Segment liabilities 196,012 191 19,706 7,637 223,546 ----------------------------------------------------------------------------------------------------------- Unallocated liabilities Central borrowings 4,299 Tax liabilities 2,465 --------------------------------------------------------------------------------------------------------------------- Total liabilities 230,310 ===================================================================================================================== Central borrowings are borrowings by holding companies within the Group which are not allocated to operating companies. (g) Goodwill allocation and impairment testing IFRS requires formal impairment testing to be carried out annually. The Group's policy is to perform formally this testing at year end. For impairment testing, goodwill has been allocated to cash-generating units by geographical reporting unit and business segment. In line with the Group's policy, the last formal impairment test was carried out at 31 December 2004. The tests led to an impairment charge of £41 million which comprised £21 million on one non-insurance Dutch operation, £17 million on other small European businesses and £3 million on other operations. In the first six months of 2005, an impairment charge of £10 million was made in respect of smaller European acquisitions. Other long lived assets such as acquired additional value of in-force, and other intangibles are not subject to formal impairment testing but are amortised on an annual basis. There have been no indications of impairment and hence no charge has been made in any period. --------------------------------------------------------------------------------------------------------------------- Page 64 15. Segmental information (continued) (h) Long-term business summary analysis by geographical segment (i) Income statement Net written premiums Fee and commission income Profit before tax ---------------------------- ---------------------------- ---------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2005 2004 2004 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m £m £m £m United Kingdom 2,228 2,228 4,768 96 95 145 471 175 650 France 1,803 1,345 2,892 78 63 140 114 89 196 Ireland 95 106 195 10 9 15 18 19 52 Italy 696 548 1,084 31 17 44 14 16 28 Netherlands 1,227 966 1,859 18 3 15 56 55 220 Poland 148 129 267 10 6 11 48 39 80 Spain 664 707 1,206 16 14 29 33 21 61 Other Europe 260 261 565 16 2 24 (4) (7) (8) ---------------------------------------------------------------------------------------------------------------------- Europe excluding United Kingdom 4,893 4,062 8,068 179 114 278 279 232 629 International 347 252 697 11 11 20 (16) 55 102 ---------------------------------------------------------------------------------------------------------------------- Total 7,468 6,542 13,533 286 220 443 734 462 1,381 ====================================================================================================================== The following analysis shows the net written premiums from associates and joint ventures which are not included in the analysis above. 6 months 6 months Full year 2005 2004 2004 £m £m £m RBS 102 125 319 India 6 2 6 China 13 1 3 --------------------------------------------------------------------------------------------------------------------- 121 128 328 ===================================================================================================================== (ii) Balance sheet Segmental total assets Net assets ---------------------- -------------------- 30 June 31 December 30 June 31 December 2005 2004 2005 2004 £m £m £m £m United Kingdom 112,071 107,495 2,868 3,162 France 41,642 41,827 1,149 1,175 Ireland 5,102 5,108 376 403 Italy 9,686 9,492 606 478 Netherlands (including Belgium and Luxembourg) 27,485 27,357 1,761 1,758 Poland 1,546 1,564 142 176 Spain 5,809 5,638 717 761 Other Europe 1,283 1,104 161 160 ---------------------------------------------------------------------------------------------------------------------- Europe excluding United Kingdom 92,553 92,090 4,912 4,911 International 6,911 6,277 642 735 ---------------------------------------------------------------------------------------------------------------------- Total 211,535 205,862 8,422 8,808 ====================================================================================================================== --------------------------------------------------------------------------------------------------------------------- Page 65 15. Segmental information (continued) (i) Geographical analysis of life and pensions and investment sales - new business and total income For the purpose of recording life and pensions new business premiums, the Group's policy is to include life insurance, long term health and accident insurance, savings, pensions and annuity business written by our life insurance subsidiaries, including managed pension fund business and our share of the other life and related business written in our associates and joint ventures as well as the equity release business written in the UK. This includes both insurance and investment contracts as defined under IFRS 4 'Insurance Contracts' and is consistent with the definition of covered business used for our supplementary embedded value reporting. New single premiums New regular premiums Total income ------------------- -------------------- -------------------------------- 6 months 6 months 6 months 6 months 6 months 6 months Full year 2005 2004 2005 2004 2005 2004 2004 £m £m £m £m £m £m £m Life and pensions: United Kingdom 3,056 2,938 230 273 2,228 2,228 4,768 France 1,607 1,183 41 27 1,803 1,345 2,892 Ireland 191 85 32 35 95 106 195 Italy 1,146 694 30 20 696 548 1,084 Netherlands (including Belgium and Luxembourg) 653 542 73 65 1,227 966 1,859 Poland 35 33 14 15 148 129 267 Spain 638 875 49 42 664 707 1,206 Other Europe 177 167 38 41 260 261 565 ---------------------------------------------------------------------------------------------------------------------- Total Europe excluding United Kingdom 4,447 3,579 277 245 4,893 4,062 8,068 International 326 225 56 51 347 252 697 ---------------------------------------------------------------------------------------------------------------------- Total life and pensions (including share of associates) 7,829 6,742 563 569 7,468 6,542 13,533 Retail sales of mutual fund type products: United Kingdom 504 437 9 14 513 451 859 Netherlands 180 120 - - 180 120 196 Poland 24 48 2 1 26 49 77 Other Europe 237 91 - - 237 91 254 International 106 64 - - 106 64 243 ---------------------------------------------------------------------------------------------------------------------- Total investment sales 1,051 760 11 15 1,062 775 1,629 ---------------------------------------------------------------------------------------------------------------------- Total long term savings (including share of associates) 8,880 7,502 574 584 8,530 7,317 15,162 ====================================================================================================================== Single premiums are those relating to products issued by the Group, which provide for the payment of one premium only. Regular premiums are those where there is a contractual obligation to pay on an ongoing basis. * Included within new business sales is £2,104 million single premiums and £194 million regular premiums (six months 30 June 2004: £2,060 million single premiums and £203 million regular premiums; full year 2004: £4,338 million single premiums and £410 million regular premiums), in respect of contracts that meet the definition of 'non-participating investment' contracts under IFRS 4 'Insurance Contracts'. Under IFRS, the premiums on these contracts are not included in the Group income statement under earned premiums, but are included on the balance sheet as a deposit. --------------------------------------------------------------------------------------------------------------------- Page 66 15. Segmental information (continued) (j) General insurance and health business summary analysis by geographical segment (i) Income statement Net written premiums Fee and commission income Profit before tax ---------------------------- ---------------------------- ---------------------------- 6 months 6 months Full year 6 months 6 months Full year 6 months 6 months Full year 2005 2004 2004 2005 2004 2004 2005 2004 2004 £m £m £m £m £m £m £m £m £m United Kingdom 2,891 2,819 5,715 - - - 430 85 702 France 424 382 670 - 1 4 30 27 71 Ireland 262 292 545 - 1 1 93 60 144 Netherlands 790 800 1,286 14 10 18 123 53 145 Other Europe 129 124 230 1 1 2 17 8 44 ---------------------------------------------------------------------------------------------------------------------- Europe excluding United Kingdom 1,605 1,598 2,731 15 13 25 263 148 404 Canada 627 601 1,202 - - - 94 35 153 Other 81 117 170 - - - 61 12 35 ---------------------------------------------------------------------------------------------------------------------- International 708 718 1,372 - - - 155 47 188 ---------------------------------------------------------------------------------------------------------------------- Total 5,204 5,135 9,818 15 13 25 848 280 1,294 ====================================================================================================================== (ii) Balance sheet Segmental total assets Net assets ---------------------- -------------------- 30 June 31 December 30 June 31 December 2005 2004 2005 2004 £m £m £m £m United Kingdom 13,073 12,927 3,006 2,504 France 1,767 1,741 351 416 Ireland 1,865 1,989 453 498 Netherlands 4,542 3,677 510 461 Other Europe 879 914 137 162 ---------------------------------------------------------------------------------------------------------------------- Europe excluding United Kingdom 9,053 8,321 1,451 1,537 Canada 3,291 3,111 704 687 Other 544 825 324 277 ---------------------------------------------------------------------------------------------------------------------- International 3,835 3,936 1,028 964 ---------------------------------------------------------------------------------------------------------------------- Total 25,961 25,184 5,485 5,005 ====================================================================================================================== (iii) General insurance, fund management and other investments mix at 30 June 2005 United Continental Kingdom Europe International Total £m £m £m £m Equity securities-fair value 1,669 948 445 3,062 Debt and fixed income securities at market value 5,198 4,973 1,750 11,921 Loans secured by mortgages and other loans 623 4,518 17 5,158 Other investments 23 256 - 279 Investments in joint ventures and associates 181 37 - 218 Investment property 237 171 3 411 --------------------------------------------------------------------------------------------------------------------- Total investments 7,931 10,903 2,215 21,049 ===================================================================================================================== END OF PART 3 OF 4 This information is provided by RNS The company news service from the London Stock Exchange

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