A Aviva plc viva plc Aviva plc St Helen’s, 1 Undershaft London EC3P 3DQ Annual report and accounts 2003 Telephone +44 (0)20 7283 2000 www.aviva.com and accounts 2003 Annual report Registered in England Number 2468686 01 Highlights of the year 61 Consolidated profit and loss account 02 Chairman’s statement Non-technical account 04 Business overview 62 Reconciliation of Group operating 06 Group Chief Executive’s review profit to profit on ordinary activities 08 Operating review before tax 26 Corporate social responsibility 63 Consolidated statement of total 28 Financial review recognised gains and losses 36 Board of directors 63 Reconciliation of movements in Shareholder profile 39 Directors’ report consolidated shareholders’ funds 41 Corporate governance 64 Consolidated Group balance sheet The categories of ordinary shareholders and the ranges and size of shareholding as at 31 December 2003 are set out below: 44 Audit Committee report 66 Consolidated cash flow statement 46 Nomination Committee report 67 Company balance sheet Analysis of shareholders No. of shareholders % No. of shares % 46 Chairman's Committee report 68 Notes to the accounts Individuals 849,765 97.10 306,227,641 13.57 47 Directors’ remuneration report 101 Five year review 55 Independent auditors’ report 102 Alternative method of reporting Banks and nominee companies 19,440 2.22 1,792,006,710 79.39 56 Accounting policies long-term business Pension fund managers and insurance companies 122 0.01 14,514,272 0.64 59 Consolidated profit and loss account 111 Aviva Group of companies Other corporate bodies 5,853 0.67 144,533,878 6.40 information Shareholder Technical account – long-term business 112 Shareholder information 60 Consolidated profit and loss account Total 875,180 100.00 2,257,282,501 100.00 113 Technical account – general business Range of shareholdings No. of shareholders % No. of shares % viva plc 1 – 1,000 820,348 93.73 212,548,895 9.42 A 1,001 – 5,000 49,169 5.62 90,014,648 3.99 5,001 – 10,000 2,710 0.31 18,648,208 0.82 10,001 – 250,000 2,290 0.26 113,292,874 5.02 250,001 – 500,000 232 0.03 83,663,387 3.71 500,001 and above 431 0.05 1,739,114,489 77.04 Total 875,180 100.00 2,257,282,501 100.00 Group financial calendar for 2004 Ex-dividend date (ordinary shares) 24 March Record date (ordinary shares) 26 March 3 First dividend payment for 8 ⁄8% cumulative irredeemable preference shares 1 April Dividend Reinvestment Plan election date 23 April Annual General Meeting 27 April Announcement of first quarter long-term savings new business figures 5 May Dividend payment date (ordinary shares) 17 May 3 First dividend payment for 8 ⁄4% cumulative irredeemable preference shares 1 July Announcement of unaudited six months’ interim results 4 August 3 Second dividend payment for 8 ⁄8% cumulative irredeemable preference shares 30 September Announcement of third quarter long-term savings new business figures 2 November 3 Second dividend payment for 8 ⁄4% cumulative irredeemable preference shares 31 December Useful contact details Detailed below are various addresses that may prove useful in the event that you have a query in respect of your shareholding. Please quote Aviva plc, as well as the name and address in which your shares are held, in all correspondence. General shareholding, Lloyds TSB Registrars The Causeway 0870 600 3952 administration queries Worthing and Aviva share account queries West Sussex BN99 6DA Corporate and single company Peps Barclays Stockbrokers Limited Tay House 0870 514 3263 300 Bath Street Glasgow G2 4LH Individual Savings Accounts (“Isas”) Lloyds TSB Registrars The Causeway 0870 242 4244 (Isa Manager) Worthing West Sussex BN99 6DA Internet sites Aviva owns various internet sites, most of which interlink with each other. Aviva Group www.aviva.com UK long-term savings and general insurance www.norwichunion.com Fund management www.morleyfm.com Aviva worldwide internet sites www.aviva.com/customers/global.cfm Life profits reporting In reporting the Aviva plc headline operating profit, life profits have been included using the achieved profit basis. This is used throughout the Aviva group and by many in the investment community to assess performance. The modified statutory basis, which is used in our accounts, is also identified in the headline figures. We have focused on the achieved profit basis, as we believe life achieved operating profit Designed and produced by Radley Yeldar using RingMaster®. Feature photography is a more realistic measure of the performance of life businesses than the modified by Nick David, Board photography by Keith Waldegrave. Printed by CTD Capita statutory basis. Life modified statutory operating profit before tax amounted to Limited. All registered trademarks acknowledged. This document is printed on £1,138 million. The basis used for reporting achieved profit is consistent with the Mega Matt, using a chlorine free process, produced from 50% pre and post consumer guidance circulated by the Association of British Insurers. waste. Nordic Swan certified. Highlights of the year 01 viva plc A Aviva is the world’s seventh-largest insurance group† and the biggest in the UK. It is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world. Its main activities are long-term savings, fund management and general insurance. It has premium income and investment sales from continuing operations of £30 billion**, and around £240 billion of assets under management. The group has 56,000 employees serving 30 million customers worldwide. Operational highlights Highlights of the year Strong performance in both long-term savings and general insurance businesses £1,907m operating profit before tax* Robust life results: good sales growth in continental Europe; signs of confidence returning to UK market; margins up to 26.1% £14.4bn worldwide long-term savings new business sales** Significant growth from bancassurance: sales up 27%; now accounts for 25% of new life and pensions sales; average margins 39.7% 24.15p full year dividend Excellent and sustainable general insurance results with new group combined operating ratio target of 100% for next three years £11.2bn shareholders’ funds*** Strong capital position and well-prepared for new UK realistic solvency reporting regime Geographical breakdown of worldwide business mix‡ Long-term savings# 6 1 5 1 UK 33% *From continuing operations, including life achieved operating profit, before 2 Continental Europe 34% amortisation of goodwill and exceptional items. 3 Rest of world 5% **From continuing operations, including share of associates’ premiums. 4 ***On an achieved profit basis. 3 General insurance ‡With reference to net premium income from continuing operations. 4 UK 17% #Including health premium income. 2 5 Continental Europe 6% †Based on gross worldwide premiums. 6 Rest of world 5% All growth rates in this document are quoted at constant rates of exchange. In the UK, our long-term savings business is showing resilience in a slow market. We are making steady progress in France, with strong performances in Spain and Italy. Our recent bancassurance agreement with ABN Chairman’s statement Chairman’s AMRO in the Netherlands is off to a promising start. In the United States we 02 are growing profitably. Our start-up operations in India and China are growing well, above plan. viva plc Aviva is a firm supporter of sensible A Our UK general insurance operation is corporate governance disciplines, and turning in excellent results and good we already follow what has become free cashflow. Worldwide, our general regarded as best boardroom practice. insurance business is improving steadily, From the 2004 financial year we shall Chairman’s statement and Canada is promising after a setback be required to report the board’s earlier in the year. compliance with the revised Combined Code on Corporate Governance. The Our fund management results are more Code incorporates recommendations robust than in the previous year. from the Higgs review of the role of Aviva has come through a third year non-executive directors, which of adverse economic conditions. We continue to look for promising generated considerable debate in the Some of our competitors have strategic opportunities, and will expand City throughout 2003, and the Smith suffered severely. Others have our business where we see the chance report on audit committees. We are undertaken massive capital raisings. to be a market leader and grow the ahead of the game reporting this year as At Aviva we reduced dividends early business profitably. if the Code had been in effect for 2003. to a sustainable level. We further increased our capital strength by We propose a final dividend for 2003 Two non-executive directors, issuing subordinated debt in 2001 of 15.15 pence net per share, Carole Piwnica and Anna Catalano, and 2003 to raise altogether which brings the total for the year to joined our board during the year, and £2.8 billion. 24.15 pence, an increase of 5%. are already making significant This will be payable on 17 May 2004 contributions. Through strict cost control and stringent to shareholders on the register on capital allocation we have run and 26 March 2004. Our policy remains One long-time executive director, developed our business with undisturbed that of growing the dividend by about Tony Wyand, retired in November 2003. continuity and maintained a Standard & 5% a year. Likewise, Philip Twyman will retire in Poor’s AA range of ratings for the group. March this year. I would like to thank both of them for their exceptional Our two main operational aims – to be contributions. They will be missed for the insurance industry’s low-cost their eminent qualities and their producer and provider of choice – are international experience.