21 Aviva plc 2011 Preliminary Announcement
Group performance – IFRS continued
10 – Economic assumption changes on general insurance and health business Economic assumption changes of £90 million adverse (FY10: £61 million adverse) mainly arise as a result of the reduction in the swap rate used to discount latent claims reserves.
11 – Impairment of goodwill, associates and joint ventures Impairment of goodwill, associates and joint ventures is a charge of £392 million (FY10: £24 million). The charge was driven by the write-down of our holdings in Delta Lloyd, Ireland and other subsidiaries. Following the deconsolidation of Delta Lloyd, the recoverable amount of Delta Lloyd NV has been determined based on the market price at 31 December 2011. As a result a write-down of £217 million has been recognised in respect of our associate holding. Following the announcement of the termination of Aviva Ireland’s bancassurance distribution contract, a write-down of £120 million has been recognised in the goodwill associated with this business. Other impairments of £55 million have been recognised in respect of smaller businesses in the group.
12 – Profit/loss on the disposal of subsidiaries and associates The total Group profit on disposal of subsidiaries and associates was £533 million (FY10: £159 million profit). On 30 September 2011, the Group sold RAC Limited (“RAC”) to The Carlyle Group for £977 million, realising a profit of £532 million. Aviva is continuing its commercial relationship with RAC, both as a key underwriter of motor insurance on RAC’s panel and as a partner, selling RAC breakdown cover to our customers. The Group has retained the RAC (2003) Pension Scheme which, at 31 December 2011, had an IAS 19 deficit of £51 million. The Group sold its Australian fund management business, Aviva Investors Australia Ltd, to nabInvest, National Australia Bank’s direct asset management business, for £35 million. Net assets disposed of were £11 million, comprising assets of £15 million and liabilities of £4 million, giving a profit before tax of £20 million after transaction costs. Recycling currency translation reserves of £3 million to the income statement resulted in an overall profit on disposal of £23 million before tax. The Group recorded a loss of £32 million arising from the sale of 25 million ordinary shares in Delta Lloyd N.V, on 6 May 2011, which reduced our holding to approximately 43% and resulted in the deconsolidation of Delta Lloyd. Cash consideration of £380 million was received for the sale of shares, and £8 million of costs are attributable to the disposal transaction. Note A3 on page 45 in the notes to the condensed financial statements gives further information on the calculation of the loss.
13 – Integration and restructuring costs Integration and restructuring costs are £268 million (FY10: £243 million). This includes costs associated with preparing the businesses for Solvency II implementation of £96 million, a £30 million charge in the UK relating to the reattribution of the inherited estate and expenditure relating to the Quantum Leap project in Europe of £51 million. Expenditure relating to other restructuring exercises across the group amounted to £91 million.
14 – Exceptional items There were two exceptional items during 2011 totalling £57 million (FY10: £273 million); relating to a £22 million provision for compensation scheme costs for the leveraged property fund in Ireland, as well as a £35 million expense for the discounted cost of strengthening latent claims provisions in the UK on business written a significant number of years ago. In FY10 exceptional items mainly arose in Delta Lloyd which recognised a total of £549 million comprising the cost of adopting new longevity tables as well as the closure of its German business. This was offset by £286 million benefit from the closure of the final salary section of the UK staff pension scheme.