Part 3 of 5 HY09 Report

RNS Number : 9697W

Aviva PLC

06 August 2009

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Part 3 of 5

Page 47

Financial Supplement

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Page 48

Contents

IFRS condensed financial statements 49

Consolidated income statement 49

Condensed statement of comprehensive income 50

Condensed statement of changes in equity 50

Condensed consolidated statement of financial position 51

Condensed consolidated statement of cash flows 52

A1 - Basis of preparation 53

A2 - Exchange rates 54

A3 - Subsidiaries 54

A4 - Segmental information 57

A5 - Tax 71

A6 - Earnings per share 73

A7 - Dividends and appropriations 74

A8 - Insurance liabilities 75

A9 - Liability for investment contracts 76

A10 - Reinsurance assets 78

A11 - Effect of changes in assumptions and estimates during the period 80

A12 - Borrowings 80

A13 - Unallocated divisible surplus 81

A14 - Pension Schemes 81

A15 - Cash and cash equivalents in the statement of cash flows 82

A16 - Related parties 83

A17 - Risk management 83

A18 - Subsequent events 84

A19 - Analysis of general insurance and health 85

A20 - Margin on assets 87

A21 - Cost savings commitments for targets announced since October 2007 88

Directors' responsibility statement pursuant to the Disclosure and Transparency Rule 4 89

Independent review report for the six months ended 30 June 2009 90

Aviva MCEV condensed financial statements 91

Condensed consolidated income statement - MCEV basis 91

Condensed statement of comprehensive income - MCEV basis 92

Condensed statement of changes in equity - MCEV basis 92

Condensed consolidated statement of financial position - MCEV basis 93

Reconciliation of shareholders' equity on an IFRS and MCEV bases 94

Reconciliation of IFRS total equity to MCEV net worth for life and related businesses 95

Group MCEV analysis of earnings 95

B1 - Basis of preparation 97

B2 - Geographical analysis of MCEV operating earnings 101

B3 - Geographical analysis of fund management operating earnings 107

B4 - Analysis of other operations and regional costs 107

B5 - Segmentation of condensed consolidated statement of financial position 108

B6 - Free surplus emergence 109

B7 - Segmental analysis of life and related business embedded value 110

B8 - Risk allowance within present value of in-force (PVIF) 111

B9 - Implied discount rates (IDR) 113

B10 - Analysis of fund management and service company business within embedded value 113

B11 - Summary of minority interest in life and related businesses' MCEV results 114

B12 - Principal economic assumptions 114

B13 - Sensitivity analysis 119

Statement of directors' responsibilities in respect of Market Consistent Embedded Value (MCEV) basis 124

Independent review report for the six months ended 30 June 2009 125

Glossary 126

Long-term savings new business 128

C1 - Analysis of regular and single premiums 128

C2 - Detailed worldwide investment sales 129

C3 - Trend analysis of PVNBP - Cumulative 130

C4 - Trend analysis of PVNBP - Discrete 131

Capital management 132

D1 - Group capital structure 132

D2 - Analysis of return on capital employed 133

D3 - Sensitivity analysis 135

Shareholder services 139

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Page 49

IFRS condensed financial statements

Consolidated income statement

For the six month period ended 30 June 2009

6 months 2009 €m		6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
	Income
21,191	Gross written premiums	18,860	17,928	36,206
(1,070)	Premiums ceded to reinsurers	(952)	(882)	(1,841)
20,121	Premiums written net of reinsurance	17,908	17,046	34,365
37	Net change in provision for unearned premiums	33	(190)	277
20,158	Net earned premiums	17,941	16,856	34,642
900	Fee and commission income	801	950	1,885
3,056	Net investment income/(expense)	2,720	(9,581)	(16,043)
(614)	Share of loss of joint ventures and associates	(547)	(344)	(1,128)
22	Profit on the disposal of subsidiaries and associates	20	9	7
23,522		20,935	7,890	19,363
	Expenses
(15,890)	Claims and benefits paid, net of recoveries from reinsurers	(14,142)	(14,136)	(29,353)
(213)	Change in insurance liabilities, net of reinsurance	(190)	3,471	3,885
(1,089)	Change in investment contract provisions	(969)	4,554	10,629
(100)	Change in unallocated divisible surplus	(89)	2,746	4,482
(2,145)	Fee and commission expense	(1,909)	(2,276)	(4,411)
(2,522)	Other expenses	(2,245)	(2,234)	(5,416)
(803)	Finance costs	(715)	(708)	(1,547)
(22,762)		(20,259)	(8,583)	(21,731)
760	Profit/(loss) before tax	676	(693)	(2,368)
296	Tax attributable to policyholders' returns	264	672	1,068
1,056	Profit/(loss) before tax attributable to shareholders' profits	940	(21)	(1,300)
	Tax expense
530	United Kingdom tax	472	640	1,482
(451)	Overseas tax	(401)	(31)	1
79		71	609	1,483
(296)	Less: tax attributable to policyholders' returns	(264)	(672)	(1,068)
(217)	Tax attributable to shareholders' profits	(193)	(63)	415
839	Profit/(loss) for the period	747	(84)	(885)
	Attributable to:
758	Equity shareholders of Aviva plc	675	(97)	(915)
81	Minority interests	72	13	30
839		747	(84)	(885)
	Earnings per share
28.0c	Basic (pence per share)	24.9p	(4.0)p	(36.8)p
27.9c	Diluted (pence per share)	24.8p	(4.0)p	(36.8)p

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IFRS condensed financial statements continued

Condensed statement of comprehensive income

For the six month period ended 30 June 2009

6 months 2009 €m		6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
839	Profit/(loss) for the period	747	(84)	(885)
	Other comprehensive income
397	Fair value gains/(losses) on AFS securities, owner-occupied properties and hedging instruments	352	(847)	(2,381)
(15)	Fair value gains transferred to profit	(13)	(136)	(126)
428	Impairment losses on revalued assets	381	148	830
48	Share of fair value changes in joint ventures and associates taken to equity	43	(8)	(93)
(1,551)	Actuarial losses on pension schemes	(1,380)	(690)	(929)
166	Actuarial losses on pension schemes transferred to unallocated divisible surplus	148	71	78
(1,658)	Foreign exchange rate movements	(1,476)	610	2,653
(163)	Aggregate tax effect - shareholder tax	(145)	101	235
(2,348)	Other comprehensive income for the period, net of tax	(2,090)	(751)	267
(1,509)	Total comprehensive income for the period	(1,343)	(835)	(618)
	Attributable to:
(1,316)	Equity shareholders of Aviva plc	(1,171)	(986)	(1,119)
(193)	Minority interests	(172)	151	501
(1,509)		(1,343)	(835)	(618)

Condensed statement of changes in equity

For the six month period ended 30 June 2009

6 months 2009 €m		6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
16,995	Balance at 1 January as published	14,446	16,592	15,931
-	Prior year adjustment	-	(661)	-
16,995	Balance at 1 January restated	14,446	15,931	15,931
(1,581)	Total comprehensive income for the period	(1,343)	(835)	(618)
(631)	Dividends and appropriations	(536)	(563)	(975)
-	Issues of share capital	-	31	20
216	Shares issued in lieu of dividends	184	170	170
7	Capital contributions from minority shareholders	6	7	36
(42)	Minority share of dividends declared in the period	(36)	(75)	(106)
(2)	Minority interest in (disposed)/ acquired subsidiaries	(2)	59	43
-	Changes in minority interest in existing subsidiaries	-	(78)	(65)
-	Shares acquired by employee trusts	-	-	(29)
24	Reserves credit for equity compensation plans	20	27	39
14,986	Balance at 30 June/31 December	12,739	14,674	14,446

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Condensed consolidated statement of financial position

As at 30 June 2009

30 June 2009 €m		30 June 2009 £m	Restated 30 June 2008 £m	31 December 2008 £m
	Assets
3,954	Goodwill	3,361	3,048	3,578
3,846	Acquired value of in-force business and intangible assets	3,269	3,170	4,038
1,612	Interests in, and loans to, joint ventures	1,370	2,588	1,737
1,282	Interests in, and loans to, associates	1,090	1,211	1,246
947	Property and equipment	805	996	964
14,374	Investment property	12,218	15,048	14,426
46,727	Loans	39,718	37,387	42,237
	Financial investments
171,727	Debt securities	145,968	125,661	150,255
42,500	Equity securities	36,125	51,027	43,351
34,041	Other investments	28,935	34,510	36,116
248,268		211,028	211,198	229,722
8,241	Reinsurance assets	7,005	8,273	7,894
2,944	Deferred tax assets	2,502	249	2,642
522	Current tax assets	444	534	622
12,666	Receivables and other financial assets	10,765	10,750	9,816
7,346	Deferred acquisition costs and other assets	6,244	5,074	6,147
4,322	Prepayments and accrued income	3,674	3,183	3,762
30,056	Cash and cash equivalents	25,548	18,783	24,181
2,884	Assets of operations classified as held for sale	2,451	6,643	1,550
389,991	Total assets	331,492	328,135	354,562
	Equity
806	Ordinary share capital	685	664	664
5,275	Capital reserves	4,484	4,516	4,505
(39)	Shares held by employee trusts	(33)	(10)	(33)
1,750	Other reserves	1,487	1,211	2,110
3,442	Retained earnings	2,926	5,244	3,806
11,234	Equity attributable to ordinary shareholders of Aviva plc	9,549	11,625	11,052
1,400	Preference share capital and direct capital instrument	1,190	1,190	1,190
2,353	Minority interests	2,000	1,859	2,204
14,987	Total equity	12,739	14,674	14,446
	Liabilities
190,324	Gross insurance liabilities	161,775	154,593	174,850
114,754	Gross liabilities for investment contracts	97,541	98,627	107,559
2,686	Unallocated divisible surplus	2,283	4,065	2,325
9,380	Net asset value attributable to unit holders	7,973	7,861	6,918
4,653	Provisions	3,955	2,398	2,984
3,236	Deferred tax liabilities	2,751	1,257	3,020
445	Current tax liabilities	378	1,125	642
16,853	Borrowings	14,325	13,373	15,201
24,834	Payables and other financial liabilities	21,109	19,720	20,840
5,504	Other liabilities	4,678	4,537	4,556
2,335	Liabilities of operations classified as held for sale	1,985	5,905	1,221
375,004	Total liabilities	318,753	313,461	340,116
389,991	Total equity and liabilities	331,492	328,135	354,562

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IFRS condensed financial statements continued

Condensed consolidated statement of cash flows

For the six month period ended 30 June 2009

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

			6 months 2009	Restated 6 months 2008	Full year 2008
	Long-term business operations £m	Non- long-term business operations £m	Group total £m	Group total £m	Group total £m
Cash flows from operating activities
Cash-generated from operations*	4,199	(241)	3,958	3,743	8,795
Tax paid	(280)	59	(221)	(434)	(642)
Net cash from operating activities	3,919	(182)	3,737	3,309	8,153
Cash flows from investing activities
Acquisitions of subsidiaries, joint ventures and associates, net of cash acquired	(193)	(30)	(223)	(317)	(336)
Disposals of subsidiaries, joint ventures and associates, net of cash transferred	-	(239)	(239)	65	353
Purchase of minority interest in subsidiary	-	-	-	(81)	(65)
New loans to joint ventures and associates	(3)	-	(3)	-	(182)
Repayment of loans to joint ventures and associates	3	-	3	-	52
Net repayment of loans to joint ventures and associates	-	-	-	-	(130)
Purchases of property and equipment	(39)	(34)	(73)	(90)	(216)
Proceeds on sale of property and equipment	25	1	26	6	59
Purchases of intangible assets	(6)	(1)	(7)	-	(60)
Net cash used in investing activities	(213)	(303)	(516)	(417)	(395)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of transaction costs	-	-	-	31	20
Treasury shares purchased for employee trusts	-	-	-	-	(29)
New borrowings drawn down, net expenses	413	252	665	2,974	5,515
Repayment of borrowings	(330)	(223)	(553)	(2,893)	(5,217)
Net drawdown of borrowings	83	29	112	81	298
Interest paid on borrowings	(232)	(473)	(705)	(704)	(1,537)
Preference dividends paid	-	(9)	(9)	(9)	(17)
Ordinary dividends paid	-	(343)	(343)	(385)	(732)
Coupon payments on direct capital instrument	-	-	-	-	(56)
Finance lease payments	-	-	-	(1)	(14)
Capital contributions from minority shareholders	5	1	6	7	36
Dividends paid to minority interests of subsidiaries	(24)	(12)	(36)	(75)	(106)
Non-trading cash flows between operations	(261)	261	-	-	-
Net cash used in financing activities	(429)	(546)	(975)	(1,055)	(2,137)
Net increase/(decrease) in cash and cash equivalents	3,277	(1,031)	2,246	1,837	5,621
Cash and cash equivalents at 1 January	20,141	3,928	24,069	15,564	15,564
Effect of exchange rate changes on cash and cash equivalents	(1,511)	(209)	(1,720)	520	2,884
Cash and cash equivalents at 30 June/31 December	21,907	2,688	24,595	17,921	24,069

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

Of the total cash and cash equivalents, £192 million (30 June 2008: £411 million; 31 December 2008: £493 million) was classified as held for sale (see note A3 c (ii)).

Cash and cash equivalents in long-term business operations of £21,907 million (30 June 2008: £12,716 million; 31 December 2008: £20,141 million) are primarily held for the benefit of policyholders and so are generally not available for use by the group.

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A1 - Basis of preparation

(a) The condensed financial statements for the six months to 30 June 2009 have been prepared using International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union (EU). These include IAS 34, Interim Financial Reporting, which specifically addresses the contents of interim condensed financial statements. The results apply the accounting policies set out in Aviva plc's 2008 Annual Report and Accounts, except as below.

During 2007 and 2008, the IASB issued IAS 1, Presentation of Financial Statements : A Revised Presentation, and amendments to IFRS 1, First Time Adoption of IFRS, IFRS 2, Share-Based Payment, IAS 23, Borrowing Costs, IAS 27, Consolidated and Separate Financial Statements, and IAS 32, Financial Instruments : Presentation, and the results of its annual improvements project. IFRIC interpretation 13, Customer Loyalty Programmes, and IFRIC interpretation 16, Hedges of a Net Investment in a Foreign Operation have also been endorsed by the EU. These are all applicable for the current accounting period and are now reflected in the group's financial reporting, with no material impact.

The results for the six months to 30 June 2009 and 2008 are unaudited but have been reviewed by the auditor, Ernst & Young LLP. The interim results do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The results for the full year 2008 have been taken from the group's 2008 Annual Report and Accounts and do not in themselves constitute statutory accounts. The auditor has reported on the 2008 financial statements and the report was unqualified and did not contain a Statement under section 237(2) or (3) of the Companies Act 1985. The group's 2008 Report and Accounts have been filed with the Registrar of Companies.

After making enquiries, the directors have a reasonable expectation that the company and the group as a whole have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

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

The following restatements were actioned in the group's 2008 financial statements. As these restatements took place in the second half of the year, the comparative figures for the six months to 30 June 2008 are now restated in this report.

Consolidation of managed funds

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

The impact on the income statement for the six month period to 30 June 2008 has been to restate net investment income and fee and commission expense, reducing both by £57 million. None of these adjustments has any impact on profit for the period, operating profit, earnings per share or retained earnings for the six month period to 30 June 2008.

In addition, certain property investment vehicles, which were consolidated in accordance with IAS 27, required restatement in the period ended 30 June 2008 to reanalyse amounts previously classified as minority interests to net asset value attributable to unit holders. This change recognises that the property investment vehicles are unit trusts and, as a result, the third party holding should have been recognised as a liability rather than as a non-controlling interest. Prior period comparatives have been restated with a reduction in minority interests and an increase in amounts due to unit holders of £838 million at 30 June 2008.

Restatement for the change in accounting policy for latent reserves

As part of the Company's aim to continuously improve the relevance and reliability of its external financial reporting, Aviva undertook a review of the group's General Insurance Reserving Policy in 2008.

As part of this review, the group concluded that estimating our latent claim provisions on an undiscounted basis, and discounting back to current values, represented an improvement to the existing estimation technique. This approach is in line with best practice for long-term liabilities and moves the measurement of latent claims onto a more economic basis, consistent with our internal model for economic capital and the measurement model being proposed for both IFRS Phase II and Solvency II. This approach also improves consistency with the reporting of other long-tail classes of business which are already being discounted, namely certain London Market latent claims and our Dutch Permanent Health and Injury Business.

The application of discounting to our latent claims reserves represents a change in accounting policy and has therefore been applied retrospectively. The cumulative impact of discounting on our opening reserves as at 1 January 2008 is to reduce insurance liabilities by £201 million and reinsurance assets by £55 million, and to increase retained earnings by £105 million. These have been treated as prior year adjustments in these financial statements.

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IFRS condensed financial statements continued

A1 - Basis of preparation continued

Treatment of shares held by employee trusts

Employee share trusts have purchased the Company's shares in the market to satisfy awards under various share plans. At 30 June 2008, these trusts held shares with a cost of £10 million which, on materiality grounds, were included within other financial assets rather than being shown as a deduction from total shareholders' equity in the consolidated statement of financial position. In view of the Company's current policy of purchasing shares in the market rather than issuing new shares, which will lead to larger balances on this account, we have restated the 30 June 2008 figures accordingly.

A2 - Exchange rates

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

The results and cash flows of these operations have been translated at the average rates for the period and the assets and liabilities have been translated at the period end rates as follows:

	6 months 2009	6 months 2008	Full year 2008
Eurozone
- Average rate (€1 equals)	£0.89	£0.77	£0.80
- Period end rate (€1 equals)	£0.85	£0.79	£0.97
United States
- Average rate ($US1 equals)	£0.67	£0.51	£0.54
- Period end rate ($US1 equals)	£0.61	£0.50	£0.69

A3 - Subsidiaries

(a) Acquisitions

There were no material acquisitions in the six months ended 30 June 2009.

(i) Other goodwill arising

As disclosed in the 2008 financial statements, on 30 June 2008 the Group acquired Swiss Life Belgium ('SLB'). At 30 June 2009, the fair values of the assets and liabilities have been updated from their provisional values to reflect a decrease in the value of acquired inforce (AVIF). This has given rise to an increase of goodwill of €72 million (£64 million) to €132 million (£118 million).

(b) Disposal of subsidiaries, joint ventures and associates

(i) The profit/(loss) on the disposal of subsidiaries, joint ventures and associates comprises:

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
United Kingdom	-	-	(38)
Netherlands (see (ii) below)	20	-	15
Offshore operations	-	-	14
Other small operations	-	9	16
Profit on disposal before tax	20	9	7
Tax on profit on disposal	-	-	-
Profit on disposal after tax	20	9	7

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A3 - Subsidiaries continued

(ii) Assets and liabilities of operations sold in the six month period ended 30 June 2009

The operations sold in the period relate to our Dutch health insurance business. The profit on disposal was £20 million, calculated as follows:

	£m
Assets
Investments and property and equipment	396
Receivables and other financial assets	390
Deferred acquisition costs and other assets	1
Prepayments and accrued income	158
Cash and cash equivalents	486
Total assets	1,431
Liabilities
Gross insurance liabilities	(709)
Payables and financial liabilities	(15)
Pension obligations and other provisions	(13)
Other liabilities	(481)
Total liabilities	(1,218)
Net assets disposed of	213
Cash consideration	235
Less: transaction costs	(2)
Total consideration	233
Profit on disposal	20

(iii) Dutch health insurance business

On 1 January 2009, the group's Dutch subsidiary, Delta Lloyd Group ('DL'), sold its health insurance business to OWM CZ Groep Zorgverkeraar UA ('CZ'), a mutual health insurer, for £231 million, realising a profit of £20 million. Under the terms of the agreement, CZ purchased the DL health insurance business and took on its underwriting risk and policy administration. DL continues to market and distribute health insurance products from CZ to its existing customers and continues to provide asset management for the transferred business. DL also has exclusive rights to market life, general insurance and income protection products to CZ's customers.

(iv) UK non-core operations

On 11 February 2009, the group sold The British School of Motoring Limited and its subsidiaries to Arques Consulting GmbH for a consideration of £4 million. The resultant loss on disposal of £9 million was provided for in the 2008 financial statements.

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IFRS condensed financial statements continued

A3 - Subsidiaries continued

Assets held for sale as at 30 June 2009 comprise:

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Property and equipment held for sale (see (i) below)	106	-	102
Assets of operations classified as held for sale (see (ii) below)	2,345	6,643	1,448
Total assets classified as held for sale	2,451	6,643	1,550

(i) Property and equipment held for sale

As part of the restructuring of the UK businesses, the UK data centres, which were owned and managed by Aviva Central Services UK Limited, were classified as held for sale at 31 December 2008 at their fair value of £102 million. In remeasuring the data centres at their fair value at 30 June 2009, a reversal of an impairment charge of £4 million has been recognised in the income statement. The sale was completed on 1 July 2009 at the fair value above.

(ii) Assets of operations classified as held for sale

On 21 June 2009, the group announced the sale of its Australian life and pensions business and wealth management platform to National Australia Bank for cash of A$825 million (£403 million), plus an adjustment to reflect the performance of the businesses from 31 December 2008 to the date of completion forecast to be A$60 million (£30 million). In addition, the group will receive dividends of A$40 million (£20 million). The sale is subject to regulatory approval and is expected to complete later in 2009. The relevant assets and liabilities of these businesses have been classified as held for sale, at their carrying values, in the consolidated statement of financial position as at 30 June 2009 and are as follows:

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Assets
Goodwill and intangible assets	1	260	14
Investments and property and equipment	2,058	5,072	396
Receivables and other financial assets	36	587	386
Deferred acquisition costs and other assets	18	57	1
Prepayments and accrued income	40	247	158
Tax assets	-	9	-
Cash and cash equivalents	192	411	493
Total assets	2,345	6,643	1,448
Liabilities
Gross insurance liabilities and liabilities for investment contracts	1,718	5,253	709
Borrowings	-	13	-
Payables and financial liabilities	26	197	22
Other liabilities	21	369	478
Tax liabilities and other provisions	220	73	12
Total liabilities	1,985	5,905	1,221
Net assets	360	738	227

The group has hedged its exposure to A$822 million of the sale proceeds through the purchase of foreign currency forward contracts.

The operations disclosed as held for sale at 31 December 2008 comprised the Dutch health insurance business and certain UK non-core operations, both of which were sold in the six month period ended 30 June 2009. Details are given in section (b) above. Operations disclosed as held for sale at 30 June 2008 comprised these same businesses, certain other UK non-core operations which were sold in the second half of 2008, and the Dutch bancassurance business with ABN AMRO. Following the change in control of ABN AMRO Bank Netherlands, we considered at that time that the existing agreement would be terminated but, in December 2008, both parties agreed that continuation of the partnership was the preferred and most sustainable option.

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A4 - Segmental information

(a) Operating segments

The group has determined its operating segments along regional lines. These reflect the management structure whereby a member of the Executive Management team is accountable to the Group Chief Executive for the operating segment for which they are responsible. The activities of each operating segment are described below:

United Kingdom

The United Kingdom comprises two operating segments - UK Life and UK General Insurance (UK GI). The principal activities of UK Life are life insurance, long-term health and accident insurance, savings, pensions and annuity business, whilst UK GI 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. UK GI also includes the RAC motor recovery business, the group reinsurance result and the results of run off business.

Europe

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

North America

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

Asia Pacific

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

Aviva Investors

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

Other group activities

Investment return on centrally held assets and head office expenses, such as group treasury and finance functions, together with certain taxes and financing costs arising on central borrowings are included in 'Other group activities'. Similarly, central core structural borrowings and certain tax balances are included in 'Other group activities' in the segmental balance sheet. Also included here are consolidation and elimination adjustments.

Measurement basis

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

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

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

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A4 - Segmental information continued

(i) Segmental income statement for the six month period ended 30 June 2009

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
Gross written premiums	2,898	2,247	9,165	4,272	278	-	-	18,860
Premiums ceded to reinsurers	(330)	(184)	(275)	(120)	(43)	-	-	(952)
Internal reinsurance revenue	-	28	(21)	(6)	(1)	-	-	-
Net written premiums	2,568	2,091	8,869	4,146	234	-	-	17,908
Net change in provision for unearned premiums	(12)	252	(180)	(24)	(3)	-	-	33
Net earned premiums	2,556	2,343	8,689	4,122	231	-	-	17,941
Fee and commission income	119	117	349	27	72	117	-	801
	2,675	2,460	9,038	4,149	303	117	-	18,742
Net investment income	(2,027)	178	3,586	916	172	(88)	(17)	2,720
Inter-segment revenue	-	-	-	-	-	93	-	93
Share of loss of joint ventures and associates	(537)	-	(10)	-	-	-	-	(547)
Profit on the disposal of subsidiaries and associates	-	-	20	-	-	-	-	20
Segmental income*	111	2,638	12,634	5,065	475	122	(17)	21,028
Claims and benefits paid, net of recoveries from reinsurers	(3,689)	(1,700)	(6,351)	(2,256)	(146)	-	-	(14,142)
Change in insurance liabilities, net of reinsurance	2,701	229	(635)	(2,462)	(23)	-	-	(190)
Change in investment contract provisions	1,169	-	(2,116)	(76)	(7)	61	-	(969)
Change in unallocated divisible surplus	312	-	(370)	-	(31)	-	-	(89)
Amortisation of deferred acquisition costs and acquired value of in-force business	-	-	(24)	(27)	(2)	-	-	(53)
Depreciation and other amortisation expense	(6)	(39)	(36)	(35)	(4)	(3)	-	(123)
Other operating expenses	(527)	(942)	(1,520)	(33)	(149)	(152)	(191)	(3,514)
Impairment losses**	-	(42)	(366)	(56)	-	-	-	(464)
Inter-segment expenses	(54)	(2)	(7)	(30)	(1)	1	-	(93)
Finance costs	(144)	(9)	(377)	(12)	-	-	(173)	(715)
Segmental expenses	(238)	(2,505)	(11,802)	(4,987)	(363)	(93)	(364)	(20,352)
Profit/(loss) before tax	(127)	133	832	78	112	29	(381)	676
Tax attributable to policyholders' returns	301	-	(34)	-	(3)	-	-	264
Profit/(loss) before tax attributable to shareholders	174	133	798	78	109	29	(381)	940

* Total reported income, excluding inter-segment revenue, is split United Kingdom £2,749 million, France £5,030 million, Netherlands £2,733 million, USA £4,074 million and Rest of the World £6,349 million. Income is attributed on the basis of geographical origin which does not materially differ from revenue by geographical destination, as most risks are located in the countries where the contracts were written.

** Impairment losses recognised directly in equity were £422 million.

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

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A4 - Segmental information continued

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
Profit/(loss) before tax attributable to shareholders	174	133	798	78	109	29	(381)	940
Adjusted for non-operating items:
Reclassification of corporate costs and unallocated interest	-	9	27	8	-	1	(45)	-
Investment return variances and economic assumption changes on long-term business	124	-	(261)	30	(48)	-	-	(155)
Short-term fluctuation in return on investments backing non-long-term business	-	90	28	(41)	-	-	48	125
Economic assumption changes on general insurance and health business	-	(54)	2	-	-	-	-	(52)
Impairment of goodwill	5	-	-	-	-	-	-	5
Amortisation and impairment of intangibles	1	9	17	28	2	1	-	58
Profit on the disposal of subsidiaries and associates	-	-	(20)	-	-	-	-	(20)
Integration and restructuring costs	46	76	16	-	-	5	5	148
Operating profit/(loss) before tax attributable to shareholders	350	263	607	103	63	36	(373)	1,049

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

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IFRS condensed financial statements continued

A4 - Segmental information continued

(ii) Segmental income statement for the six month period ended 30 June 2008 restated

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Restated Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Restated Total £m
Gross written premiums	3,801	2,867	8,272	2,662	326	-	-	17,928
Premiums ceded to reinsurers	(252)	(265)	(229)	(101)	(35)	-	-	(882)
Internal reinsurance revenue	-	26	(21)	(4)	(1)	-	-	-
Net written premiums	3,549	2,628	8,022	2,557	290	-	-	17,046
Net change in provision for unearned premiums	(3)	75	(244)	(17)	(1)	-	-	(190)
Net earned premiums	3,546	2,703	7,778	2,540	289	-	-	16,856
Fee and commission income	158	178	349	17	90	160	(2)	950
	3,704	2,881	8,127	2,557	379	160	(2)	17,806
Net investment income	(5,886)	246	(3,841)	370	(134)	(142)	(194)	(9,581)
Inter-segment revenue	-	-	-	(20)	-	88	-	68
Share of loss of joint ventures and associates	(326)	-	(3)	-	(15)	-	-	(344)
Profit on the disposal of subsidiaries and associates	-	-	9	-	-	-	-	9
Segmental income*	(2,508)	3,127	4,292	2,907	230	106	(196)	7,958
Claims and benefits paid, net of recoveries from reinsurers	(4,263)	(1,971)	(6,292)	(1,306)	(304)	-	-	(14,136)
Change in insurance liabilities, net of reinsurance	3,035	348	1,165	(1,170)	93	-	-	3,471
Change in investment contract provisions	3,354	-	1,018	(50)	123	109	-	4,554
Change in unallocated divisible surplus	883	-	1,863	-	-	-	-	2,746
Amortisation of deferred acquisition costs and acquired value of in-force business	-	-	(18)	(74)	(2)	-	-	(94)
Depreciation and other amortisation expense	(60)	(43)	(70)	(22)	(2)	(2)	-	(199)
Other operating expenses	(768)	(1,422)	(1,392)	(251)	(145)	(162)	94	(4,046)
Impairment losses**	-	-	(155)	(16)	-	-	-	(171)
Inter-segment expenses	(55)	(2)	(9)	-	(2)	-	-	(68)
Finance costs	(233)	(4)	(329)	(9)	-	-	(133)	(708)
Segmental expenses	1,893	(3,094)	(4,219)	(2,898)	(239)	(55)	(39)	(8,651)
(Loss)/profit before tax	(615)	33	73	9	(9)	51	(235)	(693)
Tax attributable to policyholders' returns	651	-	14	-	7	-	-	672
(Loss)/profit before tax attributable to shareholders	36	33	87	9	(2)	51	(235)	(21)

* Total reported income, excluding inter-segment revenue, is split United Kingdom £619 million, France £99 million, Netherlands £3,802 million, USA £2,096 million and Rest of the World £1,274 million. Income is attributed on the basis of geographical origin which does not materially differ from revenue by geographical destination, as most risks are located in the countries where the contracts were written.

** Impairment losses, and reversal of such losses, recognised directly in equity were £148 million and £1 million.

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC

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A4 - Segmental information continued

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Restated Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Restated Total £m
(Loss)/profit before tax attributable to shareholders	36	33	87	9	(2)	51	(235)	(21)
Adjusted for non-operating items:
Reclassification of corporate costs and unallocated interest	8	8	26	8	-	-	(50)	-
Investment return variances and economic assumption changes on long-term business	264	-	288	68	16	-	-	636
Short-term fluctuation in return on investments backing non-long-term business	-	115	157	(4)	-	-	46	314
Economic assumption changes on general insurance and health business	-	(6)	-	-	-	-	-	(6)
Impairment of goodwill	-	-	42	-	-	-	-	42
Amortisation and impairment of intangibles	1	13	14	21	1	1	-	51
Profit on the disposal of subsidiaries and associates	-	-	(9)	-	-	-	-	(9)
Exceptional items	84	-	-	-	-	-	-	84
Integration and restructuring costs	7	107	9	-	-	9	-	132
Operating profit/(loss) before tax attributable to shareholders	400	270	614	102	15	61	(239)	1,223

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC

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IFRS condensed financial statements continued

A4 - Segmental information continued

(iii) Segmental income statement for the year ended 31 December 2008

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
Gross written premiums	8,108	5,496	15,529	6,486	587	-	-	36,206
Premiums ceded to reinsurers	(612)	(498)	(442)	(214)	(75)	-	-	(1,841)
Internal reinsurance revenue	-	26	(21)	(4)	(1)	-	-	-
Net written premiums	7,496	5,024	15,066	6,268	511	-	-	34,365
Net change in provision for unearned premiums	6	344	(21)	(50)	(2)	-	-	277
Net earned premiums	7,502	5,368	15,045	6,218	509	-	-	34,642
Fee and commission income	310	362	711	40	168	294	-	1,885
	7,812	5,730	15,756	6,258	677	294	-	36,527
Net investment income	(8,844)	222	(6,168)	444	(626)	(407)	(664)	(16,043)
Inter-segment revenue	-	-	-	-	-	203	-	203
Share of loss of joint ventures and associates	(1,058)	-	(38)	-	(32)	-	-	(1,128)
Profit/(loss) on the disposal of subsidiaries and associates	-	(38)	24	-	-	-	21	7
Segmental income*	(2,090)	5,914	9,574	6,702	19	90	(643)	19,566
Claims and benefits paid, net of recoveries from reinsurers	(8,620)	(3,944)	(13,411)	(2,912)	(464)	-	(2)	(29,353)
Change in insurance liabilities, net of reinsurance	2,674	280	3,409	(2,774)	296	-	-	3,885
Change in investment contract provisions	7,240	-	2,765	(126)	401	349	-	10,629
Change in unallocated divisible surplus	2,151	-	2,331	-	-	-	-	4,482
Amortisation of deferred acquisition costs and acquired value of in-force business	-	-	(44)	(285)	(4)	-	-	(333)
Depreciation and other amortisation expense	(70)	(108)	(120)	(51)	(5)	(5)	-	(359)
Other operating expenses	(1,787)	(2,599)	(2,970)	(633)	(296)	(362)	552	(8,095)
Impairment losses**	-	(26)	(814)	(200)	-	-	-	(1,040)
Inter-segment expenses	(137)	(2)	(18)	(42)	(3)	-	(1)	(203)
Finance costs	(541)	(10)	(703)	(17)	-	-	(276)	(1,547)
Segmental expenses	910	(6,409)	(9,575)	(7,040)	(75)	(18)	273	(21,934)
(Loss)/profit before tax	(1,180)	(495)	(1)	(338)	(56)	72	(370)	(2,368)
Tax attributable to policyholders' returns	1,031	-	49	-	(12)	-	-	1,068
(Loss)/profit before tax attributable to shareholders	(149)	(495)	48	(338)	(68)	72	(370)	(1,300)

* Total reported income, excluding inter-segment revenue, is split United Kingdom £3,928 million, France £1,005 million, Netherlands £6,759 million, USA £4,954 million and Rest of the World £2,717 million. Income is attributed on the basis of geographical origin which does not materially differ from revenue by geographical destination, as most risks are located in the countries where the contracts were written.

** Impairment losses, and reversal of such losses, recognised directly in equity were £830 million and £nil.

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

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A4 - Segmental information continued

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
(Loss)/profit before tax attributable to shareholders	(149)	(495)	48	(338)	(68)	72	(370)	(1,300)
Adjusted for non-operating items:
Reclassification of corporate costs and unallocated interest	7	33	54	15	-	-	(109)	-
Investment return variances and economic assumption changes on long-term business	694	-	400	433	104	-	-	1,631
Short-term fluctuation in return on investments backing non-long-term business	-	334	389	(47)	-	-	143	819
Economic assumption changes on general insurance and health business	-	91	3	-	-	-	-	94
Impairment of goodwill	-	-	66	-	-	-	-	66
Amortisation and impairment of intangibles	3	33	34	44	-	3	-	117
(Profit)/loss on the disposal of subsidiaries and associates	-	38	(24)	-	-	-	(21)	(7)
Exceptional items	108	312	133	42	-	6	(50)	551
Integration and restructuring costs	60	195	38	-	-	33	-	326
Operating profit/(loss) before tax attributable to shareholders	723	541	1,141	149	36	114	(407)	2,297

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

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IFRS condensed financial statements continued

A4 - Segmental information continued

(iv) Segmental statement of financial position as at 30 June 2009

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
Goodwill	52	1,209	1,246	804	48	2	-	3,361
Acquired value of in-force business and intangible assets	63	256	1,225	1,692	21	12	-	3,269
Interests in, and loans to, joint ventures and associates	1,634	-	552	1	258	15	-	2,460
Property and equipment	99	152	408	110	25	10	1	805
Investment property	7,416	128	3,397	6	18	571	682	12,218
Loans	19,433	770	17,564	1,916	33	2	-	39,718
Financial investments	65,080	2,491	111,859	24,789	1,810	1,390	3,609	211,028
Deferred acquisition costs	1,255	916	915	2,794	12	-	-	5,892
Other assets	17,143	4,671	22,854	4,775	2,670	609	19	52,741
Total assets	112,175	10,593	160,020	36,887	4,895	2,611	4,311	331,492
Gross insurance liabilities	59,570	8,598	64,627	27,175	1,805	-	-	161,775
Gross liabilities for investment contracts	34,072	-	58,383	2,963	-	2,123	-	97,541
Unallocated divisible surplus	2,269	-	(23)	-	37	-	-	2,283
Net asset value attributable to unit holders	833	-	4,469	-	-	-	2,671	7,973
Borrowings	2,485	10	6,409	183	-	-	5,238	14,325
Other liabilities, including inter-segment liabilities	9,616	352	16,297	3,745	2,110	345	2,391	34,856
Total liabilities	108,845	8,960	150,162	34,066	3,952	2,468	10,300	318,753
Total equity								12,739
Total equity and liabilities								331,492
Capital expenditure (excluding business combinations)	-	13	22	41	3	2	-	81

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

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

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A4 - Segmental information continued

(v) Segmental statement of financial position as at 30 June 2008 restated

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Restated Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Restated Total £m
Goodwill	51	1,166	1,121	668	42	-	-	3,048
Acquired value of in-force business and intangible assets	53	284	1,174	1,621	25	13	-	3,170
Interests in, and loans to, joint ventures and associates	2,888	-	645	1	265	-	-	3,799
Property and equipment	167	318	424	39	39	7	2	996
Investment property	9,868	181	3,315	5	27	841	811	15,048
Loans	19,881	899	15,172	1,392	43	-	-	37,387
Financial investments	76,125	3,389	105,828	18,442	3,951	1,644	1,819	211,198
Deferred acquisition costs	1,488	1,152	839	1,278	40	3	(1)	4,799
Other assets	11,654	5,098	24,429	2,632	574	673	3,630	48,690
Total assets	122,175	12,487	152,947	26,078	5,006	3,181	6,261	328,135
Gross insurance liabilities	62,139	9,396	61,477	19,729	1,852	-	-	154,593
Gross liabilities for investment contracts	39,114	-	52,692	2,110	1,966	2,745	-	98,627
Unallocated divisible surplus	3,994	-	68	-	3	-	-	4,065
Net asset value attributable to unit holders	837	-	3,450	-	210	-	3,364	7,861
Borrowings	2,171	11	6,612	109	-	6	4,464	13,373
Other liabilities, including inter-segment liabilities	10,113	(297)	19,352	1,567	188	268	3,751	34,942
Total liabilities	118,368	9,110	143,651	23,515	4,219	3,019	11,579	313,461
Total equity								14,674
Total equity and liabilities								328,135
Capital expenditure (excluding business combinations)	27	48	18	15	2	1	-	111

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

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

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IFRS condensed financial statements continued

A4 - Segmental information continued

(vi) Segmental statement of financial position as at 31 December 2008

	United Kingdom		Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
	Life £m	GI# £m	Europe £m	North America £m	Asia Pacific £m	Aviva Investors† £m	Other Group activities £m	Total £m
Goodwill	52	1,208	1,357	903	55	3	-	3,578
Acquired value of in-force business and intangible assets	65	265	1,470	2,196	28	14	-	4,038
Interests in, and loans to, joint ventures and associates	2,080	-	604	2	296	-	1	2,983
Property and equipment	123	173	519	106	32	10	1	964
Investment property	8,872	148	3,920	7	21	655	803	14,426
Loans	20,156	833	19,061	2,130	56	1	-	42,237
Financial investments	69,052	2,482	125,329	24,621	3,865	1,454	2,919	229,722
Deferred acquisition costs	1,221	994	1,080	2,626	40	3	1	5,965
Other assets	13,933	4,975	24,041	5,538	630	661	871	50,649
Total assets	115,554	11,078	177,381	38,129	5,023	2,801	4,596	354,562
Gross insurance liabilities	62,243	9,160	73,316	27,990	2,141	-	-	174,850
Gross liabilities for investment contracts	35,109	-	65,106	3,403	1,643	2,298	-	107,559
Unallocated divisible surplus	2,727	-	(405)	-	3	-	-	2,325
Net asset value attributable to unit holders	986	-	3,304	-	175	-	2,453	6,918
Borrowings	2,716	11	6,970	163	-	-	5,341	15,201
Other liabilities, including inter-segment liabilities	8,164	(972)	18,635	4,041	190	324	2,881	33,263
Total liabilities	111,945	8,199	166,926	35,597	4,152	2,622	10,675	340,116
Total equity								14,446
Total equity and liabilities								354,562
Capital expenditure (excluding business combinations)	36	93	72	70	4	5	-	280

External borrowings by holding companies within the group which are not allocated to operating companies are included in 'Other group activities'.

† Aviva Investors comprises the Aviva Investors UK, France, the United States, Canada and International fund management businesses.

# United Kingdom GI includes the group reinsurance business, agency run off business and the non-insurance business for the RAC.

(b) Further analysis by products and services

The group's results can be further analysed by products and services which comprise long-term business, general insurance and health, fund management and non-insurance activities.

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 Lifetime mortgage business written in the UK.

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.

Fund management

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.

Other

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

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(i) Segmental income statement - products and services for the six month period ended 30 June 2009

	Long-term business £m	General Insurance and health** £m	Fund management £m	Other† £m	Total £m
Gross written premiums*	13,540	5,320	-	-	18,860
Premiums ceded to reinsurers	(579)	(373)	-	-	(952)
Net written premiums	12,961	4,947	-	-	17,908
Net change in provision for unearned premiums	-	33	-	-	33
Net earned premiums	12,961	4,980	-	-	17,941
Fee and commission income	314	78	238	171	801
	13,275	5,058	238	171	18,742
Net investment income	1,956	498	1	265	2,720
Inter-segment revenue	-	-	86	-	86
Share of (loss)/profit of joint ventures and associates	(534)	1	(12)	(2)	(547)
Profit on the disposal of subsidiaries and associates	-	-	-	20	20
Segmental income	14,697	5,557	313	454	21,021
Claims and benefits paid, net of recoveries from reinsurers	(10,641)	(3,501)	-	-	(14,142)
Change in insurance liabilities, net of reinsurance	(454)	264	-	-	(190)
Change in investment contract provisions	(969)	-	-	-	(969)
Change in unallocated divisible surplus	(89)	-	-	-	(89)
Amortisation of deferred acquisition costs and acquired value of in-force business	(53)	-	-	-	(53)
Depreciation and other amortisation expense	(58)	(21)	(3)	(41)	(123)
Other operating expenses	(1,066)	(1,760)	(257)	(431)	(3,514)
Impairment losses	(365)	(83)	-	(16)	(464)
Inter-segment expenses	(81)	(5)	-	-	(86)
Finance costs	(183)	(11)	(26)	(495)	(715)
Segmental expenses	(13,959)	(5,117)	(286)	(983)	(20,345)
Tax attributable to policyholder returns	264	-	-	-	264
Profit/(loss) before tax attributable to shareholders	1,002	440	27	(529)	940
Adjusted for non-operating items	(62)	105	8	58	109
Operating profit/(loss) before tax attributable to shareholders' profits	940	545	35	(471)	1,049

* Gross written premiums includes inward reinsurance premiums assumed from other companies amounting to £91 million, of which £16 million relates to property and liability insurance £75 million to long-term business.

** General insurance and health business segment includes gross written premiums of £441 million relating to health business. The remaining business relates to property and liability insurance.

† Other includes the RAC non-insurance operations, our banking business, head office expenses, such as group treasury and finance functions, and certain financing costs and taxes not allocated to business segments.

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IFRS condensed financial statements continued

A4 - Segmental information continued

(ii) Segmental income statement - products and services for the six month period ended 30 June 2008 restated

	Long-term business £m	General Insurance and health** £m	Fund management £m	Other† £m	Restated Total £m
Gross written premiums*	11,735	6,193	-	-	17,928
Premiums ceded to reinsurers	(489)	(393)	-	-	(882)
Net written premiums	11,246	5,800	-	-	17,046
Net change in provision for unearned premiums	(2)	(188)	-	-	(190)
Net earned premiums	11,244	5,612	-	-	16,856
Fee and commission income	413	61	262	214	950
	11,657	5,673	262	214	17,806
Net investment income	(10,018)	157	65	215	(9,581)
Inter-segment revenue	-	-	61	-	61
Share of loss of joint ventures and associates	(329)	(2)	(6)	(7)	(344)
Profit on the disposal of subsidiaries and associates	-	-	-	9	9
Segmental income	1,310	5,828	382	431	7,951
Claims and benefits paid, net of recoveries from reinsurers	(10,097)	(4,039)	-	-	(14,136)
Change in insurance liabilities, net of reinsurance	3,192	279	-	-	3,471
Change in investment contract provisions	4,554	-	-	-	4,554
Change in unallocated divisible surplus	2,746	-	-	-	2,746
Amortisation of deferred acquisition costs and acquired value of in-force business	(94)	-	-	-	(94)
Depreciation and other amortisation expense	(49)	(17)	(2)	(131)	(199)
Other operating expenses	(1,455)	(1,927)	(315)	(349)	(4,046)
Impairment losses	(168)	(1)	-	(2)	(171)
Inter-segment expenses	(56)	(5)	-	-	(61)
Finance costs	(279)	(1)	-	(428)	(708)
Segmental expenses	(1,706)	(5,711)	(317)	(910)	(8,644)
Tax attributable to policyholder returns	672	-	-	-	672
(Loss)/profit before tax attributable to shareholders	276	117	65	(479)	(21)
Adjusted for non-operating items	682	411	10	141	1,244
Operating profit/(loss) before tax attributable to shareholders' profits	958	528	75	(338)	1,223

* Gross written premiums includes inward reinsurance premiums assumed from other companies amounting to £105 million, of which £97 million relates to property and liability insurance £8 million to long-term business.

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

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A4 - Segmental information continued

(iii) Segmental income statement - products and services for the year ended 31 December 2008

	Long-term business £m	General Insurance and health** £m	Fund management £m	Other† £m	Total £m
Gross written premiums*	24,272	11,934	-	-	36,206
Premiums ceded to reinsurers	(1,044)	(797)	-	-	(1,841)
Net written premiums	23,228	11,137	-	-	34,365
Net change in provision for unearned premiums	-	277	-	-	277
Net earned premiums	23,228	11,414	-	-	34,642
Fee and commission income	753	160	567	405	1,885
	23,981	11,574	567	405	36,527
Net investment (expense)/income	(16,671)	425	3	200	(16,043)
Inter-segment revenue	-	-	185	-	185
Share of loss of joint ventures and associates	(1,089)	(5)	(12)	(22)	(1,128)
Profit on the disposal of subsidiaries and associates	-	-	-	7	7
Segmental income	6,221	11,994	743	590	19,548
Claims and benefits paid, net of recoveries from reinsurers	(21,024)	(8,329)	-	-	(29,353)
Change in insurance liabilities, net of reinsurance	3,560	325	-	-	3,885
Change in investment contract provisions	10,629	-	-	-	10,629
Change in unallocated divisible surplus	4,482	-	-	-	4,482
Amortisation of deferred acquisition costs and acquired value of in-force business	(333)	-	-	-	(333)
Depreciation and other amortisation expense	(159)	(49)	(6)	(145)	(359)
Other operating expenses	(3,194)	(3,914)	(599)	(388)	(8,095)
Impairment losses	(796)	(123)	-	(121)	(1,040)
Inter-segment expenses	(167)	(8)	-	(10)	(185)
Finance costs	(530)	(2)	(57)	(958)	(1,547)
Segmental expenses	(7,532)	(12,100)	(662)	(1,622)	(21,916)
Tax attributable to policyholder returns	1,068	-	-	-	1,068
(Loss)/profit before tax attributable to shareholders	(243)	(106)	81	(1,032)	(1,300)
Adjusted for non-operating items	1,937	1,304	42	314	3,597
Operating profit/(loss) before tax attributable to shareholders' profits	1,694	1,198	123	(718)	2,297

* Gross written premiums includes inward reinsurance premiums assumed from other companies amounting to £225 million, of which £189million relates to property and liability insurance £131 million to long-term business.

** General insurance and health business segment includes gross written premiums of £1,945 million and premiums ceded to other companies of £35 million relating to health business. The remaining business relates to property and liability insurance.

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IFRS condensed financial statements continued

A4 - Segmental information continued

(iv) Segmental statement of financial position - products and services as at 30 June 2009

	Long-term business £m	General insurance and health £m	Fund management £m	Other £m	Total £m
Goodwill	1,602	458	2	1,299	3,361
Acquired value of in-force business and intangible assets	2,806	366	12	85	3,269
Interests in, and loans to, joint ventures and associates	2,333	4	46	77	2,460
Property and equipment	403	111	12	279	805
Investment property	10,957	234	-	1,027	12,218
Loans	27,362	932	2	11,422	39,718
Financial investments	194,783	10,656	75	5,514	211,028
Deferred acquisition costs	4,478	1,394	16	4	5,892
Other assets	43,933	8,386	508	(86)	52,741
Total assets	288,657	22,541	673	19,621	331,492
Gross insurance liabilities	143,886	17,889	-	-	161,775
Gross liabilities for investment contracts	97,541	-	-	-	97,541
Unallocated divisible surplus	2,283	-	-	-	2,283
Net asset value attributable to unit holders	5,290	12	-	2,671	7,973
Borrowings	4,148	85	-	10,092	14,325
Other liabilities, including inter-segment liabilities	19,605	113	412	14,726	34,856
Total liabilities	272,753	18,099	412	27,488	318,753
Total equity					12,739
Total equity and liabilities					331,492

(v) Segmental statement of financial position - products and services as at 30 June 2008 restated

	Long-term business £m	General insurance and health £m	Fund management £m	Other £m	Total £m
Goodwill	1,485	448	3	1,112	3,048
Acquired value of in-force business and intangible assets	2,726	370	12	62	3,170
Interests in, and loans to, joint ventures and associates	3,639	7	45	108	3,799
Property and equipment	479	81	9	427	996
Investment property	14,132	294	-	622	15,048
Loans	26,785	979	-	9,623	37,387
Financial investments	196,593	10,371	29	4,205	211,198
Deferred acquisition costs	3,183	1,592	21	3	4,799
Other assets	35,549	10,045	501	2,595	48,690
Total assets	284,571	24,187	620	18,757	328,135
Gross insurance liabilities	136,925	17,668	-	-	154,593
Gross liabilities for investment contracts	98,627	-	-	-	98,627
Unallocated divisible surplus	4,065	-	-	-	4,065
Net asset value attributable to unit holders	5,501	45	-	2,315	7,861
Borrowings	4,065	-	-	9,308	13,373
Other liabilities, including inter-segment liabilities	20,996	978	308	12,660	34,942
Total liabilities	270,179	18,691	308	24,283	313,461
Total equity					14,674
Total equity and liabilities					328,135

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A4 - Segmental information continued

(vi) Segmental statement of financial position - products and services as at 31 December 2008

	Long-term business £m	General insurance and health £m	Fund management £m	Other £m	Total £m
Goodwill	1,827	477	3	1,271	3,578
Acquired value of in-force business and intangible assets	3,542	402	14	80	4,038
Interests in, and loans to, joint ventures and associates	2,810	4	44	125	2,983
Property and equipment	507	118	13	326	964
Investment property	12,953	278	-	1,195	14,426
Loans	28,916	914	1	12,406	42,237
Financial investments	212,985	11,604	73	5,060	229,722
Deferred acquisition costs	4,455	1,489	21	-	5,965
Other assets	39,933	9,904	563	249	50,649
Total assets	307,928	25,190	732	20,712	354,562
Gross insurance liabilities	155,693	19,157	-	-	174,850
Gross liabilities for investment contracts	107,559	-	-	-	107,559
Unallocated divisible surplus	2,325	-	-	-	2,325
Net asset value attributable to unit holders	4,449	16	-	2,453	6,918
Borrowings	4,368	-	-	10,833	15,201
Other liabilities, including inter-segment liabilities	16,953	379	392	15,539	33,263
Total liabilities	291,347	19,552	392	28,825	340,116
Total equity					14,446
Total equity and liabilities					354,562

A5 - Tax

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

(i) The total tax credit comprises:

	6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
Current tax
For this period	157	285	527
Prior year adjustments	(88)	(67)	(284)
Total current tax	69	218	243
Deferred tax
Origination and reversal of temporary differences	(153)	(827)	(1,814)
Changes in tax rates or tax laws	1	-	(7)
Write-down of deferred tax assets	12	-	95
Total deferred tax	(140)	(827)	(1,726)
Total tax credited to income statement	(71)	(609)	(1,483)

(ii) The group, as a proxy for policyholders in the UK, Ireland, Singapore and Australia, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish, Singapore and Australian life insurance policyholder returns is included in the tax charge. The tax credit attributable to policyholders' returns included in the credit above is £264 million (30 June 2008: £672 million credit; 31 December 2008: £1,068 million credit).

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IFRS condensed financial statements continued

A5 - Tax continued

(b) Tax charged/(credited) to equity

(i) The total tax charge/(credit) comprises:

	6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
Current tax	-	-	(16)
Deferred tax
In respect of pensions and other post-retirement obligations	(13)	-	(15)
In respect of unrealised gains/(losses) on investments	158	(101)	(204)
	145	(101)	(219)
Total tax charged/(credited) to equity	145	(101)	(235)

(ii) The tax credit attributable to policyholders' returns included above is £nil (30 June 2008: £nil; 31 December 2008: £nil).

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

	6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
Profit/(loss) before tax	676	(693)	(2,368)
Tax calculated at standard UK corporation tax rate of 28.0% (2008: 28.5%)	189	(198)	(675)
Different basis of tax - policyholders	(214)	(465)	(767)
Adjustment to tax charge in respect of prior years	(42)	(55)	(283)
Non-assessable income	(30)	(19)	(94)
Non-taxable profit on sale of subsidiaries and associates	(6)	(3)	(2)
Disallowable expenses	24	26	95
Different local basis of tax on overseas profits	6	95	(61)
Impact of increase in statutory local rates	3	-	-
(Recognition)/non-recognition of deferred tax	14	17	292
Other	(15)	(7)	12
Total tax credited to income statement	(71)	(609)	(1,483)

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A6 - Earnings per share

(a) Basic earnings per share

(i) The profit attributable to ordinary shareholders is:

	6 months 2009			Restated 6 months 2008			Full year 2008
	Operating profit £m	Adjusting items £m	Total £m	Operating profit £m	Adjusting items £m	Total £m	Operating profit £m	Adjusting items £m	Total £m


Profit/(loss) before tax attributable to shareholders' profits	1,049	(109)	940	1,223	(1,244)	(21)	2,297	(3,597)	(1,300)
Tax attributable to shareholders' profit/(loss)	(235)	42	(193)	(351)	288	(63)	(487)	902	415
Profit/(loss) for the year	814	(67)	747	872	(956)	(84)	1,810	(2,695)	(885)
Amount attributable to minority interests	(87)	15	(72)	(78)	65	(13)	(91)	61	(30)
Cumulative preference dividends for the year	(9)	-	(9)	(9)	-	(9)	(17)	-	(17)
Coupon payments in respect of direct capital instruments (DCI) (net of tax)	-	-	-	-	-	-	(40)	-	(40)
Profit/(loss) attributable to ordinary shareholders	718	(52)	666	785	(891)	(106)	1,662	(2,634)	(972)

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

	6 months 2009			Restated 6 months 2008			Full year 2008
	Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Per share p	Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Per share p	Before tax £m	Net of tax, minorities, preference dividends and DCI £m	Per share p
Operating profit attributable to ordinary shareholders	1,049	718	26.9	1,223	785	29.9	2,297	1,662	62.9
Non-operating items:
Investment return variances and economic assumption changes on long-term business	155	36	1.3	(636)	(426)	(16.2)	(1,631)	(1,280)	(48.4)
Short-term fluctuation in return on investments non-long-term business	(125)	(34)	(1.3)	(314)	(235)	(9.0)	(819)	(553)	(20.9)
Economic assumption changes on general insurance and health business	52	37	1.4	6	4	0.2	(94)	(67)	(2.5)
Impairment of goodwill	(5)	(5)	(0.2)	(42)	(38)	(1.4)	(66)	(66)	(2.5)
Amortisation and net impairment of intangibles	(58)	11	0.4	(51)	(36)	(1.4)	(117)	(89)	(3.4)
Profit on the disposal of subsidiaries and associates	20	20	0.7	9	9	0.3	7	7	0.3
Integration and restructuring costs and exceptional items	(148)	(117)	(4.3)	(216)	(169)	(6.4)	(877)	(586)	(22.3)
Profit/(loss) attributable to ordinary shareholders	940	666	24.9	(21)	(106)	(4.0)	(1,300)	(972)	(36.8)

(iii) The calculation of basic earnings per share uses a weighted average of 2,672 million (30 June 2008: 2,632 million; 31 December 2008: 2,643 million) ordinary shares in issue, after deducting shares owned by the employee share trusts. The actual number of shares in issue at 30 June 2009 was 2,739 million (30 June 2008: 2,658 million; 31 December 2008: 2,658 million).

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IFRS condensed financial statements continued

A6 - Earnings per share continued

(b) Diluted earnings per share

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

	6 months 2009			Restated 6 months 2008			Full year 2008
	Total £m	Weighted average number of shares m	Per share p	Total £m	Weighted average number of shares m	Per share p	Total £m	Weighted average number of shares m	Per share p
Profit/(loss) attributable to ordinary shareholders	666	2,672	24.9	(106)	2,632	(4.0)	(972)	2,643	(36.8)
Dilutive effect of share awards and options	-	14	(0.1)	-	21	-	-	24	-
Diluted earnings/(loss) per share	666	2,686	24.8	(106)	2,653	(4.0)	(972)	2,667	(36.8)

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

	6 months 2009			Restated 6 months 2008			Full year 2008
	Total £m	Weighted average number of shares m	Per share p	Total £m	Weighted average number of shares m	Per share p	Total £m	Weighted average number of shares m	Per share p
Operating profit attributable to ordinary shareholders	718	2,672	26.9	785	2,632	29.9	1,662	2,643	62.9
Dilutive effect of share awards and options	-	14	(0.2)	-	21	(0.3)	-	24	(0.6)
Diluted earnings per share	718	2,686	26.7	785	2,653	29.6	1,662	2,667	62.3

A7 - Dividends and appropriations

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Ordinary dividends declared and charged to equity in the year
Final 2007 - 21.10 pence per share, paid on 16 May 2008	-	554	554
Interim 2008 - 13.09 pence per share, paid on 17 November 2008	-	-	348
Final 2008 - 19.91 pence per share, paid on 15 May 2009	527	-	-
	527	554	902
Preference dividends declared and charged to equity in the year	9	9	17
Coupon payments on direct capital instrument	-	-	56
	536	563	975

Subsequent to 30 June 2009, the directors proposed an interim dividend for 2009 of 9.0 pence per ordinary share (six months to 30 June 2008: 13.09 pence), amounting to £247 million (six months to 30 June 2008: £348 million) in total. The dividend will be paid on 17 November 2009 and will be accounted for as an appropriation of retained earnings in the year ending 31 December 2009.

Interest on the direct capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. Tax relief is obtained at a rate of 28.0% (2008: 28.5%).

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Page 75

A8 - Insurance liabilities

(a) Carrying amount

Insurance liabilities at 30 June/31 December comprise:

	30 June 2009			30 June 2008			31 December 2008
	Long-term business £m	General insurance and health £m	Total £m	Long-term business £m	General insurance and health £m	Total £m	Long-term business £m	General insurance and health £m	Total £m
Long-term business provisions
Participating	61,230	-	61,230	64,563	-	64,563	66,863	-	66,863
Unit-linked non-participating	20,284	-	20,284	21,948	-	21,948	22,060	-	22,060
Other non-participating	62,586	-	62,586	52,266	-	52,266	67,265	-	67,265
	144,100	-	144,100	138,777	-	138,777	156,188	-	156,188
Outstanding claims provisions	1,105	9,948	11,053	916	10,778	11,694	907	11,842	12,749
Provision for claims incurred but not reported	-	2,710	2,710	-	2,043	2,043	-	2,518	2,518
	1,105	12,658	13,763	916	12,821	13,737	907	14,360	15,267
Provision for unearned premiums	-	5,220	5,220	-	5,760	5,760	-	5,493	5,493
Provision arising from liability adequacy tests	-	11	11	-	33	33	-	13	13
Other technical provisions	-	-	-	2,195	8	2,203	-	-	-
Total	145,205	17,889	163,094	141,888	18,622	160,510	157,095	19,866	176,961
Less: Obligations to staff pension schemes transferred to provisions	(1,234)	-	(1,234)	(1,109)	-	(1,109)	(1,402)	-	(1,402)
Amounts classified as held for sale	(85)	-	(85)	(3,854)	(954)	(4,808)	-	(709)	(709)
	143,886	17,889	161,775	136,925	17,668	154,593	155,693	19,157	174,850

(b) Movements in long-term business liabilities

The following movements have occurred in the long-term business provisions during the period

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January	156,188	135,312	135,312
Provisions in respect of new business	6,425	6,288	13,414
Expected change in existing business provisions	(3,268)	(2,920)	(6,423)
Variance between actual and expected experience	(765)	(4,918)	(9,401)
Effect of adjusting to PS06/14 realistic basis	-	-	(40)
Impact of other operating assumption changes	(128)	23	(812)
Impact of economic assumption changes	(2,562)	(1,607)	(604)
Other movements	228	(157)	(527)
Change in liability recognised as an expense	(70)	(3,291)	(4,393)
Effect of portfolio transfers, acquisitions and disposals	35	2,129	1,872
Foreign exchange rate movements	(12,053)	4,627	23,397
Carrying amount at 30 June/31 December	144,100	138,777	156,188

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IFRS condensed financial statements continued

A8 - Insurance liabilities continued

(b) Movements in general insurance and health liabilities

The following changes have occurred in the general insurance and health claims provisions during the period:

	6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January - reported	14,360	13,142	12,941
Prior year adjustment - impact of discounting on latent claims	-	(201)	-
Carrying amount at 1 January - restated	14,360	12,941	12,941
Impact of changes in assumptions	(72)	(5)	120
Claim losses and expenses incurred in the current year	3,689	4,188	8,721
Decrease in estimated claim losses and expenses incurred in prior years	(303)	(470)	(828)
Exceptional strengthening of general insurance latent claims provisions	-	-	356
Incurred claims losses and expenses	3,314	3,713	8,369
Less:
Payments made on claims incurred in the current year	(1,511)	(1,684)	(4,682)
Payments made on claims incurred in prior years	(2,254)	(2,627)	(4,307)
Recoveries on claim payments	132	163	293
Claims payments made in the year, net of recoveries	(3,633)	(4,148)	(8,696)
Unwind of discounting	20	16	32
Other movements in the claims provisions	6	-	(27)
Changes in claims reserve recognised as an expense	(293)	(419)	(322)
Effect of portfolio transfers, acquisitions and disposals	(655)	16	128
Foreign exchange rate movements	(754)	283	1,613
Carrying amount at 30 June/31 December	12,658	12,821	14,360

The following changes have occurred in the provision for unearned premiums (UPR) during the period:

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January	5,493	5,484	5,484
Premiums written during the year	5,320	6,193	11,934
Less: premiums earned during the year	(5,366)	(6,017)	(12,322)
Changes in UPR recognised as (income)/expense	(46)	176	(388)
Gross portfolio transfers and acquisitions	-	34	(11)
Foreign exchange rate movements	(227)	66	408
Carrying amount at 30 June/31 December	5,220	5,760	5,493

A9 - Liability for investment contracts

(a) Carrying amount

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Long-term business
Participating contracts	59,604	54,979	65,278
Non-participating contracts at fair value	37,291	42,480	39,509
Non-participating contracts at amortised costs	2,279	1,614	2,772
	39,570	44,094	42,281
	99,174	99,073	107,559
Less: Amounts classified as held for sale	(1,633)	(446)	-
	97,541	98,627	107,559

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A9 - Liability for investment contracts continued

(b) Movements in participating investment contracts

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January	65,278	53,609	53,609
Provisions in respect of new business	2,906	1,801	3,391
Expected change in existing business provisions	(2,071)	(946)	(1,909)
Variance between actual and expected experience	489	(2,258)	(4,661)
Impact of operating assumption changes	(16)	-	(166)
Impact of economic assumption changes	(156)	(88)	244
Other movements	(177)	(14)	13
Change in liability recognised as an expense/(income)	975	(1,505)	(3,088)
Effect of portfolio transfers, acquisitions and disposals	14	-	2,181
Foreign exchange rate movements	(6,663)	2,875	12,576
Carrying amount at 30 June/31 December	59,604	54,979	65,278

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January	42,281	44,635	44,635
Provisions in respect of new business	1,029	2,987	5,314
Expected change in existing business provisions	(1,096)	(835)	(2,273)
Variance between actual and expected experience	(377)	(2,868)	(9,503)
Impact of operating assumption changes	-	-	(28)
Impact of economic assumption changes	9	(120)	5
Other movements	(234)	(1,078)	(169)
Change in liability	(669)	(1,914)	(6,654)
Effect of portfolio transfers, acquisitions and disposals	-	277	(14)
Foreign exchange rate movements	(2,042)	1,096	4,314
Carrying amount at 30 June/31 December	39,570	44,094	42,281

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IFRS condensed financial statements continued

A10 - Reinsurance assets

(a) Carrying amounts

The reinsurance assets at 30 June/31 December comprised:

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Long-term business
Insurance contracts	3,804	4,622	4,466
Participating investment contracts	45	23	52
Non-participating investment contracts	954	1,400	1,047
Outstanding claims provisions	134	117	145
Less: Amounts classified as held for sale	(11)	(4)	-
	4,926	6,158	5,710
General insurance and health
Outstanding claims provisions	1,572	1,553	1,737
Provisions for claims incurred but not reported	108	-	29
	1,680	1,553	1,766
Provision for unearned premiums	393	556	418
Other technical provisions	6	19	-
Less: Amounts classified as held for sale	-	(13)	-
	2,079	2,115	2,184
Total	7,005	8,273	7,894

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

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January	5,565	5,781	5,781
Asset in respect of new business	107	143	235
Expected change in existing business asset	(58)	52	243
Variance between actual and expected experience	(37)	(140)	(1,141)
Impact of other operating assumption changes	8	(38)	(761)
Impact of economic assumption changes	(274)	(131)	306
Other movements	(52)	28	(231)
Change in asset	(306)	(86)	(1,349)
Effect of portfolio transfers, acquisitions and disposals	-	123	140
Foreign exchange rate movements	(456)	227	993
Carrying amount at 30 June/31 December	4,803	6,045	5,565

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A10 - Reinsurance assets continued

	6 months 2009 £m	Restated 6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January - reported	1,766	1,718	1,663
Prior year adjustment - impact of discounting on latent claims	-	(55)	-
Carrying amount at 1 January - restated	1,766	1,663	1,663
Impact of changes in assumptions	(15)	(3)	21
Exceptional strengthening of latent claims provisions	-	-	52
Reinsurers' share of claim losses and expenses
Incurred in current year	120	78	228
Incurred in prior years	(22)	(102)	12
Reinsurers' share of incurred claim losses and expenses	98	(24)	240
Less:
Reinsurance recoveries received on claims
Incurred in current year	(23)	(31)	(107)
Incurred in prior years	(109)	(87)	(257)
Reinsurance recoveries received in the year	(132)	(118)	(364)
Unwind of discounting	11	12	24
Change in reinsurance asset recognised as income	(38)	(133)	(27)
Effect of portfolio transfers, acquisitions and disposals	-	8	27
Foreign exchange rate movements	(48)	15	105
Other movements	-	-	(2)
Carrying amount at 30 June/31 December	1,680	1,553	1,766

(d) Reinsurers' share of the provision for unearned premiums (UPR)

	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
Carrying amount at 1 January	418	511	511
Premiums ceded to reinsurers in the year	373	393	797
Less: Reinsurers' share of premiums earned during the year	(386)	(405)	(908)
Changes in reinsurance asset recognised as income	(13)	(12)	(111)
Reinsurers' share of portfolio transfers and acquisitions	-	54	8
Foreign exchange rate movements	(12)	3	10
Carrying amount at 30 June/31 December	393	556	418

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IFRS condensed financial statements continued

A11 - Effect of changes in assumptions and estimates during the period

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

	Effect on profit six month 2009 £m	Effect on profit six month 2008 £m	Effect on profit full year 2008 £m
Assumptions
Long-term insurance business
Interest rates	1,876	1,136	(521)
Expenses	-	-	24
Persistency rates	10	-	2
Mortality for assurance contracts	-	-	44
Mortality for annuity contracts	6	-	26
Tax and other assumptions	(1)	(58)	93
Investment contracts
Interest rates	(158)	(1)	(75)
Expenses	-	-	(27)
Persistency rates	-	-	2
Other assumptions	-	-	36
General insurance and health business
Change in loss ratio assumptions	4	(2)	(1)
Change in discount rate assumptions	54	-	(94)
Change in expense ratio assumptions	(1)	(1)	-
Total	1,790	1,074	(491)

The impact of interest rates for long-term business relates primarily to the UK, Ireland and the Netherlands, driven by the market level of risk-free rates. Higher valuation interest rates in 2009 had the effect of reducing liabilities for traditional business and hence a positive impact on profit. This follows a reduction in market interest rates in 2008 which had the reverse effect. The overall impact on profit also depends on movements in the value of assets backing the liabilities, which is not included in this disclosure.

A12 - Borrowings

On 27 February 2009, Delta Lloyd issued subordinated debt of €500 million at a fixed rate of 10.4% maturing 27 February 2019. On 31 March 2009, Aviva plc issued subordinated debt of £200 million at a fixed rate of 10.8% maturing on 31 March 2019. In addition, on 30 April 2009, Aviva plc issued subordinated €50 million at a fixed rate of 10.5% maturing on 30 April 2019.

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A13 - Unallocated divisible surplus

The following movements have occurred in the period:

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Carrying amount at 1 January	2,325	6,785	6,785
Change in participating contract assets	(2,695)	(6,935)	(12,022)
Change in participating contract liabilities	2,796	4,245	7,699
Effect of special bonus to with-profit policyholders	-	-	(89)
Other movements	(12)	(56)	(70)
Change in liability recognised as an expense/(income)	89	(2,746)	(4,482)
Movement in respect of change in pension scheme deficit	(148)	(71)	(78)
Foreign exchange rate movements	10	97	88
Other movements	10	-	12
	2,286	4,065	2,325
Less: amounts classified as held for sale	(3)	-	-
Carrying amount at 30 June/31 December	2,283	4,065	2,325

A14 - Pension schemes

(a) Pension scheme deficits in condensed consolidated statement of financial position

On the condensed consolidated statement of financial position, the amount described as provisions includes the pension scheme deficit and comprises:

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Deficits in the staff pension schemes	1,988	543	613
Other obligations to staff pension schemes - insurance policies issued by group companies1	1,234	1,109	1,402
Total IAS 19 obligations to staff pension schemes	3,222	1,652	2,015
Restructuring provisions	208	182	253
Other provisions	542	578	722
Less: amounts classified as held for sale	(17)	(14)	(6)
Total provisions	3,955	2,398	2,984

1. Pension assets in our Dutch pension schemes include insurance policies which are non-transferable under the terms of IAS 19 so have been treated as other obligations to staff pension schemes within provisions above.

(b) Movements in the scheme deficits and surpluses

Movements in the pension schemes' deficits and surpluses comprise:

	30 June 2009 £m	31 December 2008 £m
Net deficits in the schemes at 1 January	(613)	(178)
Employer contributions	186	620
Current and past service cost (see (c) below)	(80)	(163)
Losses on curtailments (see (c) below)	13	(3)
(Charge)/credit to investment income (see (c) below)	(59)	121
Other actuarial losses (see (c) below)	(1,456)	(987)
Exchange rate movements on foreign plans	21	(23)
Net deficits in the schemes at 30 June	(1,988)	(613)

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IFRS condensed financial statements continued

A14 - Pension scheme continued

(i) Recognised in the income statement

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Current service cost	(65)	(83)	(162)
Past service cost	(15)	-	(1)
Gains/(losses) on curtailments	13	(1)	(3)
Total pension cost charged to net operating expenses	(67)	(84)	(166)
Expected return on scheme assets	238	315	706
Less: Income on insurance policy assets accounted for elsewhere (see (iii) above)	(29)	(30)	(64)
	209	285	642
Interest charge on scheme liabilities	(297)	(288)	(585)
(Charge)/credit to investment income	(88)	(3)	57
Total charge to income	(155)	(87)	(109)

(ii) Recognised in the statement of comprehensive income

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Expected return on scheme assets	(238)	(315)	(706)
Actual negative return on these assets	(318)	(683)	(1,245)
Actuarial losses on scheme assets	(556)	(998)	(1,951)
Less: losses on insurance policy assets accounted for elsewhere	76	78	58
Actuarial losses on admissible assets	(480)	(920)	(1,893)
Experience gains arising on scheme liabilities	1	66	105
Changes in assumptions underlying the present value of the scheme liabilities	(901)	164	859
Actuarial losses recognised in the statement of comprehensive income	(1,380)	(690)	(929)

A15 - Cash and cash equivalents in the statement of cash flows

	30 June 2009 £m	30 June 2008 £m	31 December 2008 £m
Cash at bank and in hand	14,440	8,832	11,249
Cash equivalents	11,300	10,362	13,425
	25,740	19,194	24,674
Bank overdrafts	(1,145)	(1,273)	(605)
	24,595	17,921	24,069

Of the total cash and cash equivalents shown above, £192 million has been classified as held for sale (30 June 2008: £411 million; 31 December 2008: £493 million).

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A16 - Related parties

The group received income from related parties from transactions made in the normal course of business. Loans to related parties are made on normal arm's-length commercial terms.

	30 June 2009		30 June 2008		31 December 2008
	Income earned in period £m	Receivable at end of period £m	Income earned in period £m	Receivable at end of period £m	Income earned in year £m	Receivable at end of year £m
Associates	22	3	29	2	61	3
Joint ventures	9	299	11	198	20	300
Employee pension schemes	15	4	18	4	24	6
	46	306	58	204	105	309

The related parties' receivables are not secured and no guarantees were received in respect thereof. The receivables will be settled in accordance with normal credit terms.

A17 - Risk management

Risk management

As a global company, we face a large and diverse number of risks. Each of these risks has the potential to impact our financial performance or hinder the achievement of our strategic objectives.

To ensure that risks are effectively identified and assessed and that appropriate controls and responses are in place, the Chief Risk Officer co-ordinates all group-wide risk management activities supported by local chief risk officers in each of our regions. A full description of our approach and management of risks is set out in the 2008 Annual Report and Accounts.

In accordance with the requirements of the Transparency Directive (DTR 4.2.7) we provide an update here on the material risks and uncertainties facing the group for the next six months.

Market risk

The world-wide economic backdrop to this half year report remains negative. Even though some indicators are beginning to show a positive trend there is a risk that recovery could be delayed, or in a worst case reverse. As a result we expect to continue to see heightened levels of market volatility in respect of interest rates, asset values and foreign exchange rates.

Aviva regularly monitors its investment holdings and asset-liability matching and we continue to explore new ways of mitigating the risks we are exposed to. We actively manage our equity exposures and have purchased additional protection in the half year to June 2009. Equity markets have demonstrated significant liquidity despite adverse economic conditions. We consider equity hedging to continue to be appropriate to protect the Group's statement of financial position against a general decline in the economic position.

Credit risk

Credit spreads have reduced in recent months reflecting some return of confidence to the market and the removal of some forms of hybrid capital from the market indices. However default experience will tend to lag the financial markets.

Aviva has taken a prudent approach to its overall credit risk exposure including a reduction in some counter party credit limits and through increased monitoring of exposures. A new credit risk management information system has been introduced which improves the timeliness of information to support the management and optimisation of our credit risk.

Liquidity risk

We need to ensure that we maintain sufficient liquid assets to meet our cash flow obligations as they fall due. All our businesses identify their sources of liquidity risk and monitor the potential exposures.

At a group level we maintain a prudent level of liquidity by maintaining a buffer of liquid assets to cover unforeseen circumstances. In addition, the group maintains significant committed undrawn borrowing facilities from a range of leading international banks.

Foreign exchange risk

As an international business we are exposed to fluctuations in exchange rates; these affect the value of shareholder funds which are expressed in sterling. Generally we don't hedge these currency risks as profits are retained to support growth in the business units. However significant declared dividends from overseas businesses or other material transaction exposure risks such as mergers and acquisitions are hedged.

We centrally monitor against limits the amount of foreign exchange risk to our group regulatory capital positions. We use currency borrowings and derivatives when necessary to keep currency exposures within these limits.

Insurance risk

We continue to monitor our insurance risks, particularly those most affected by the economic crisis, such as customer retention, creditor insurance and general insurance claims. Where appropriate we take steps to address emerging trends via underwriting or rating changes in order to ensure we deliver the right level of profit from our insurance business.

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IFRS condensed financial statements continued

A17 - Risk management continued

Regulatory risk

The financial crisis is driving increased regulatory scrutiny of the group's business; however we continue to maintain constructive relationships with our regulators around the globe. We face substantial change in the regulatory framework driven by the implementation of the Solvency II Directive in Europe as well as national, European and global regulatory reform proposals in response to the financial crisis.

We are actively involved in the consultation exercises on these new regulatory proposals both through direct lobbying activity and via influencing the input of UK, European and international bodies representing the financial services industry. In this way we are seeking to ensure effective but proportionate regulation is applied.

Regulatory changes will also influence future distribution opportunities for our products and services. In the USA, there is a significant likelihood that distribution of equity indexed annuity products will be subject to regulation by the SEC rather than by state insurance departments by 2011. In the UK, the Retail Distribution Review, which is scheduled for implementation in 2012, is expected to significantly change the landscape for the distribution of life and pensions contracts. We continue to influence these developments and prepare for the business changes each will necessitate.

Other risks

We have noted no material changes to the other risks identified in the 2008 Annual Report and Accounts.

A18 - Subsequent events

At the Board meeting on 5th of August, the Directors approved the commencement of a process to initiate an initial public offering for a minority stake in the Delta Lloyd Group.

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A19 - Analysis of general insurance and health

	Net written premiums			Underwriting result			Longer-term investment return			Operating profit
	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m
General insurance
United Kingdom1,2	2,091	2,628	5,024	63	32	70	227	286	579	282	314	642
France	434	386	678	7	2	28	24	23	53	31	25	81
Ireland	240	262	494	15	8	(3)	33	33	67	47	41	63
Netherlands	677	562	1,028	6	18	54	53	39	92	59	56	146
Other	234	199	417	1	5	-	23	17	45	24	22	45
Europe	1,585	1,409	2,617	29	33	79	133	112	257	161	144	335
North America	889	771	1,601	21	15	21	66	61	124	87	76	145
Asia Pacific	4	3	6	-	(2)	(5)	1	-	1	1	(2)	(4)
	4,569	4,811	9,248	113	78	165	427	459	961	531	532	1,118
Health insurance
United Kingdom	207	204	389	-	(1)	8	2	3	6	2	2	14
France	130	99	204	(2)	(1)	11	7	6	15	5	5	26
Ireland	23	4	19	1	-	4	-	-	1	1	-	5
Netherlands3	-	671	1,250	-	(25)	(11)	-	12	42	-	(12)	31
Europe	153	774	1,473	(1)	(26)	4	7	18	58	6	(7)	62
Asia Pacific	18	11	27	6	1	4	-	-	-	6	1	4
	378	989	1,889	5	(26)	16	9	21	64	14	(4)	80
Total	4,947	5,800	11,137	118	52	181	436	480	1,025	545	528	1,198

1. United Kingdom includes Aviva Re and agencies in run-off.

2. Operating profit includes an unfavourable impact of £9 million resulting from unwind of discount (30 June 2008: £4 million; 31 December 2008: £8 million).

3. Delta Lloyd health was sold 1 January 2009.

(i) United Kingdom (excluding group reinsurance and agencies in run-off)

	Net written premium			Underwriting result			Combined operating ratio
	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 %	6 months 2008 %	Full year 2008 %
Personal
Motor	541	693	1,329	4	(18)	(37)	101%	102%	103%
Homeowner	517	585	1,188	15	(27)	(57)	98%	105%	104%
Other	199	301	602	(41)	(8)	4	117%	107%	103%
	1,257	1,579	3,119	(22)	(53)	(90)	104%	103%	103%
Commercial
Motor	252	330	577	14	22	28	96%	92%	95%
Property	335	418	774	10	(9)	(6)	97%	99%	100%
Other	205	262	511	37	64	92	86%	77%	85%
	792	1,010	1,862	61	77	114	94%	91%	94%
Total	2,049	2,589	4,981	39	24	24	99%	98%	99%

(ii) France

	Net written premium			Underwriting result			Combined operating ratio
	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 %	6 months 2008 %	Full year 2008 %
Motor	187	164	290	(4)	(3)	-	101%	100%	100%
Property and other	247	222	388	11	5	28	92%	93%	93%
Total	434	386	678	7	2	28	96%	96%	96%

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IFRS condensed financial statements continued

A19 - Analysis of general insurance and health continued

(iii) Ireland

	Net written premium			Underwriting result			Combined operating ratio
	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 %	6 months 2008 %	Full year 2008 %
Motor	117	131	243	23	(1)	9	81%	101%	99%
Property and other	123	132	251	(8)	9	(12)	106%	95%	107%
Total	240	263	494	15	8	(3)	94%	98%	103%

(iv) Netherlands

	Net written premium			Underwriting result			Combined operating ratio
	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 %	6 months 2008 %	Full year 2008 %
Motor	174	150	323	1	(7)	8	100%	105%	98%
Property	218	174	343	9	(5)	(2)	97%	98%	98%
Liability	55	50	78	(1)	(2)	14	98%	97%	81%
Other	230	188	284	(3)	32	34	95%	73%	87%
Total	677	562	1,028	6	18	54	97%	92%	94%

(v) Canada

	Net written premium			Underwriting result			Combined operating ratio
	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 £m	6 months 2008 £m	Full year 2008 £m	6 months 2009 %	6 months 2008 %	Full year 2008 %
Motor	506	450	880	24	37	47	93%	91%	95%
Property	274	229	512	(19)	(25)	(50)	110%	112%	110%
Liability	92	79	166	14	(2)	15	86%	101%	90%
Other	17	13	43	2	5	9	69%	58%	73%
Total	889	771	1,601	21	15	21	97%	98%	99%

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A20 - Margin on assets

This disclosure presents the operating profit from the long-term business as if generated by a margin on the income-bearing assets supporting that business, expressed in basis points (bps).

	30 June 2009		30 June 2008		31 December 2008
	Average assets £bn	Operating profit bps	Average assets £bn	Operating profit bps	Average assets £bn	Operating profit bps
UK	111.3	33	124.2	35	119.4	63
France	62.5	20	53.2	27	58.4	47
Ireland	9.2	32	9.6	29	9.8	63
Italy	16.7	22	14.1	26	15.1	31
Netherlands (including Belgium and Germany)	38.7	39	33.0	41	35.9	55
Poland	10.5	69	11.1	68	10.9	148
Spain	12.1	58	10.5	70	11.5	135
Other Europe	0.6	(16)	0.6	(130)	0.7	(267)
Europe	150.3	32	132.1	36	142.3	62
North America	26.6	9	17.9	17	22.1	7
Asia	2.3	214	1.9	(37)	2.4	8
Australia	2.2	99	2.6	83	2.5	185
Asia Pacific	4.5	157	4.5	31	4.9	94
Total	292.7	32	278.7	34	288.7	59

The above tables are based on the IFRS income statement and statement of financial positiont for the long-term business segment: average assets is the arithmetic average of the opening and closing value of assets, together with non-consolidated funds under management and excluding certain non-financial assets; excluded assets are goodwill, acquired value of in-force business (AVIF) and other intangibles, reinsurance assets, deferred acquisition costs and other assets, and prepayments and accrued income.

The total operating profit margin on assets for the 2009 half year was 32 bps (six months to 30 June 2008: 34 bps). The slight reduction in margin reflects the lower operating profit and higher average assets under management. On an annualised basis this equates to 64 bps, an increase of 5 bps on the 2008 full year margin of 59 bps. The margin fell in all regions except for Asia Pacific, which benefited from the effect of reserving changes in Singapore.

For the United Kingdom business, the operating profit margin reduced to 33 bps from 35 bps in the prior period. The United Kingdom margin on assets is a blended figure combining our participating (with-profits) and non-profit business. The reduced overall margin reflects the lower with-profits result due to lower special distribution bonus and other shareholder transfers, while the non-profit result improved.

The operating profit margin for the Europe region was 32 bps compared to 36 bps for the prior period.

The margin in France was adversely affected by a lower result from distribution companies due to reduced activity. In Italy, new business strain increased from changes in business mix. High margins on protection business portfolios were maintained in Poland and Spain, with lower investment margins in Spain. There was an improvement in margins for the newer smaller operations in Europe.

In the Netherlands, improved new business strain on lower volumes was offset by a lower expected return on shareholders' funds.

The North America operating margin reduced to 9 bps from 17 bps in the prior period, with adverse economic conditions leading to investment margin compression and associated higher DAC amortisation.

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IFRS condensed financial statements continued

A21 - Cost savings commitments for targets announced since October 2007

This note provides details of the group's published commitments to deliver cost savings, and represents an update on the information provided at full year 2008.

Movement in cost savings target (recurring, annualised savings)	Cost savings targets b/fwd £m	New targets announced in year £m	Less: Cost savings achieved £m	Changes to the phasing of saving £m	Savings over/ (under) delivered £m	Impact of economic changes on targets c/fwd £m	Cost savings targets c/fwd £m
Savings expected to be achieved in:
Six months ended 30 June 2009	90	-	(89)	-	(2)	1	-
Six months ended 31 December 2009	62	-	-	-	3	1	66
Year ended 31 December 2010	55	-	-	-	1	1	57
Savings to be achieved	207	-	(89)	-	2	3	123
Savings achieved in prior years:	340						429
Total savings	547						552

Targets brought forward include £123 million for Aviva UK General Insurance, £65 million for Aviva UK Life and £19 million for Europe.

Movement in initial costs to deliver Cost savings targets (total expenses incurred)	Costs to deliver b/fwd £m	Cost of delivery of new targets in year £m	Less: Costs incurred in year £m	Changes to the phasing of costs £m	Change in costs of delivery £m	Impact of economic changes on targets c/fwd £m	Costs to deliver c/fwd £m
Costs expected to be incurred in:
Six months ended 30 June 2009	111	-	(76)	(26)	(10)	1	-
Six months ended 31 December 2009	108	-	-	17	3	-	128
Year ended 31 December 2010	33	-	-	9	(13)	2	31
Costs to be incurred	252	-	(76)	-	(20)	3	159
Costs incurred in prior years:	369						445
Total costs	621						604

All £76 million of costs incurred in the year were classified as restructuring costs in the income statement.

1. Cost savings initiatives included in this note are supported by detailed operational implementation plans, which identify the activities, timeframe and expected costs of delivering the planned initiatives.

2. Cost savings targets brought forward represent commitments made in prior years that are due to be delivered in 2009 or future periods. Cost savings targets brought forward were measured at the value of the relevant recurring costs in the period ended 30 June 2009. All cost saving targets carried forward have been restated to the value of the relevant recurring costs in the period ended 30 June 2009. For half year 2009, this reflects the effect of exchange rates on European targets.

3. Cost savings ''achieved'' are the annualised, recurring costs delivered in the period ended 30 June 2009.

4. Initial costs to deliver cost savings targets are the total one-off initial costs that will be required to complete and deliver announced cost savings programmes. They are measured at the real value of the initial costs expected to be incurred.

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Page 89

Directors' responsibility statement

The half yearly report includes the regulated information required to be made public under DTR 4.2.2, as defined in DTR 6.3.5 of the Transparency Directive.

The directors confirm that, to the best of each person's knowledge:

(a) the group condensed financial statements in this report, which have been prepared in accordance with IFRS as adopted by the EU, IFRIC interpretation and those parts of the Companies Act 1985 applicable to companies reporting under IFRS, give a true and fair view of the assets, liabilities, financial position and results of the group taken as a whole;

(b) the commentary contained in this report includes a fair review of the development and performance of the business and the position of the group taken as a whole, together with a description of the principal risks and uncertainties that they face; and

(c) the interim report includes a fair review of the information required on material transactions with related parties and changes since the last annual report.

Information on the directors can be found on page 84 of Aviva plc's 2008 Annual Report and Accounts.

By order of the board

Andrew Moss Philip Scott

Group Chief Executive Chief Financial Officer

5 August 2009

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Page 89

Independent review report to Aviva plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the Consolidated Income Statement, the Condensed Statement of Comprehensive Income, the Condensed Statement of Changes in Equity, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Cash Flows and the related notes A1 to A18 on pages 49 to 84. Our review did not extend to the information disclosed in notes A19 to A21. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standards on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom (ISRE 2410). To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note A1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with ISRE 2410. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

London

5 August 2009

End of part 3 of 5

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