(b) Long-term business investment liabilities Investment contracts are those that do not transfer significant insurance risk from the contract holder to the issuer, and are therefore treated as financial instruments under IFRS. Many investment contracts contain a discretionary participation feature in which the contract holder has a contractual right to receive additional benefits as a supplement to guaranteed benefits. These are referred to as participating contracts and are measured according to the methodology and Group practice for long-term business liabilities as described in note 39. They are not measured at fair value as there is currently no agreed definition of fair valuation for discretionary participation features under IFRS. In the absence of such a definition, it is not possible to provide a range of estimates within which a fair value is likely to fall. The IASB has deferred consideration of participating contracts to Phase II of its insurance contracts project. For participating business, the discretionary participation feature is recognised separately from the guaranteed element and is classified as a liability, referred to as unallocated divisible surplus. Guarantees on long-term investment products are discussed in note 41. Investment contracts that do not contain a discretionary participation feature are referred to as non-participating contracts and the liability is measured at either fair value or amortised cost. Of the non-participating investment contracts measured at fair value, £45,087 million in 2012 are unit linked in structure and the fair value liability is equal to the unit reserve plus additional non-unit reserves, if required, on a fair value basis. These contracts are generally classified as ‘Level 1’ in the fair value hierarchy, as the unit reserve is calculated as the publicly quoted unit price multiplied by the number units in issue, and any non-unit reserve is insignificant. For unit-linked business, a deferred acquisition cost asset and deferred income reserve liability are recognised in respect of transaction costs and front-end fees respectively, that relate to the provision of investment management services, and which are amortised on a systematic basis over the contract term. The amount of the related deferred acquisition cost asset is shown in note 27 and the deferred income liability is shown in note 50. In the US, funding agreements consist of one to ten year fixed rate contracts. These contracts may not be cancelled by the holders unless there is a default under the agreement, but may, subject to a call premium, be terminated by Aviva at any time. Aviva issued no new funding agreements in 2012. The weighted average interest rates for fixed-rate and floating-rate funding agreements as at 31 December 2012 were 4.688% and 0.305% respectively. Funding agreements issued before 2008 are measured at fair value equal to the present value of contractual cash flows and, for business issued since 2008, are measured at amortised cost. Most funding agreements are fully collateralised and therefore their fair values are not adjusted for own credit risk. Funding agreements carried at fair value total £0.6 billion and are classified as ‘Level 2’ in the fair value hierarchy. There is a small volume of annuity certain business for which the liability is measured at amortised cost using the effective interest method. The fair value of contract liabilities measured at amortised cost is not materially different from the amortised cost liability.
(c) Movements in the year The following movements have occurred in the year: (i) Participating investment contracts £m
Carrying amount at 1 January 67,707 72,440 Provisions in respect of new business 2,695 3,688 Expected change in existing business provisions (2,039) (2,618) Variance between actual and expected experience 102 (2,708) Impact of operating assumption changes 9 (72) Impact of economic assumption changes 74 631 Other movements (82) 211 Change in liability recognised as an expense 759 (868) Foreign exchange rate movements (1,610) (1,352) Deconsolidation of Delta Lloyd — (2,523) Other movements (7) 10
Carrying amount at 31 December 66,849 67,707 1 Following a review of the classification of contracts issued by the Group’s Italian long-term business, there has been a reallocation from participating insurance liabilities at 31 December 2011 to participating investment contract liabilities of £2,722 million.
Notes to the consolidated financial statements continued 40 – Liability for investment contracts continued For many types of long-term business, including unit-linked and participating funds, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit. Minor variances arise from differences between actual and expected experience for persistency, mortality and other demographic factors. The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of participating investment contract liabilities. For participating business, a movement in liabilities is generally offset by a corresponding adjustment to the unallocated divisible surplus and does not impact on profit. Where assumption changes do impact on profit, these are included in the effect of changes in assumptions and estimates during the year shown in note 43, together with the impact of movements in related non-financial assets.
Carrying amount at 1 January 45,659 48,305 Provisions in respect of new business 3,851 3,863 Expected change in existing business provisions (2,531) (2,558) Variance between actual and expected experience 982 (2,796) Impact of operating assumption changes 14 1 Impact of economic assumption changes 4 7 Other movements 104 (123) Change in liability 2,424 (1,606) Effect of portfolio transfers, acquisitions and disposals 25 — Deconsolidation of Delta Lloyd — (832) Foreign exchange rate movements (404) (206) Other movements (5) (2)
41 – Financial guarantees and options This note details the financial guarantees and options that the Group has given for some of our insurance and investment products. As a normal part of their operating activities, various Group companies have given guarantees and options, including investment return guarantees, in respect of certain long-term insurance and fund management products. Further information on assumptions is given in notes 39 and 40.
(a) UK Life with-profit business In the UK, life insurers are required to comply with the FSA’s realistic reporting regime for their with-profit funds for the calculation of FSA liabilities. Under the FSA’s rules, provision for guarantees and options within realistic liabilities must be measured at fair value, using market-consistent stochastic models. A stochastic approach includes measuring the time value of guarantees and options, which represents the additional cost arising from uncertainty surrounding future economic conditions. The material guarantees and options to which this provision relates are: (i) Maturity value guarantees Substantially all of the conventional with-profit business and a significant proportion of unitised with-profit business have minimum maturity values reflecting the sums assured plus declared annual bonus. In addition, the guarantee fund has offered maturity value guarantees on certain unit-linked products. For some unitised with-profit life contracts the amount paid after the fifth policy anniversary is guaranteed to be at least as high as the premium paid increased in line with the rise in RPI/CPI.
Notes to the consolidated financial statements continued 41 – Financial guarantees and options continued (iii) Guaranteed annuity options The Group’s UK with-profit funds have written individual and group pension contracts which contain guaranteed annuity rate options (GAOs), where the policyholder has the option to take the benefits from a policy in the form of an annuity based on guaranteed conversion rates. The Group also has exposure to GAOs and similar options on deferred annuities. Realistic liabilities for GAOs in the UK with-profit funds were £1,156 million at 31 December 2012 (2011: £1,170 million). With the exception of the New With-Profits Sub Fund (NWPSF), movements in the realistic liabilities in the with-profit funds are offset by a corresponding movement in the unallocated divisible surplus, with no net impact on IFRS profit. Realistic liabilities for GAOs in the NWPSF were £180 million at 31 December 2012 (2011: £193 million).
(b) UK Life non-profit business The Group’s UK non-profit funds are evaluated by reference to statutory reserving rules, including changes introduced in 2006 under FSA Policy Statement 06/14, Prudential Changes for Insurers.
(c) Overseas life businesses In addition to guarantees written in the Group’s UK life businesses, our overseas businesses have also written contracts containing guarantees and options. Details of the significant guarantees and options provided by overseas life businesses are set out below.
(i) France Guaranteed surrender value and guaranteed minimum bonuses Aviva France has written a number of contracts with such guarantees. The guaranteed surrender value is the accumulated value of the contract including accrued bonuses. Bonuses are based on accounting income from amortised bond portfolios, where the duration of bond portfolios is set in relation to the expected duration of the policies, plus income and releases from realised gains on equity-type investments. Policy reserves are equal to guaranteed surrender values. Local statutory accounting envisages the establishment of a reserve, ‘Provision pour Aléas Financiers’ (PAF), when accounting income is less than 125% of guaranteed minimum credited returns. No PAF was established at the end of 2012. The most significant of these contracts is the AFER Eurofund which has total liabilities of £33 billion at 31 December 2012 (2011: £33 billion). The guaranteed minimum bonus is agreed between Aviva France and the AFER association at the end of each year, in respect of the following year. The bonus was 3.45% for 2012 (2011: 3.43%) compared with an accounting income from the fund of 3.94% (2011: 3.92%). Non-AFER contracts with guaranteed surrender values had liabilities of £14 billion at 31 December 2012 (2011: £14 billion) and all guaranteed annual bonus rates are between 0% and 4.5%.
Notes to the consolidated financial statements continued 41 – Financial guarantees and options continued ‘No MVR’ guarantees Certain unitised with-profit policies containing ‘no MVR’ guarantees, similar to those in the UK, have been sold in Ireland. These guarantees are currently ‘in-the-money’ by £0.4 million (2011: £5.5 million). This has been calculated on a deterministic basis as the excess of the current policy surrender value over the discounted value (excluding terminal bonus) of the guarantees. The value of these guarantees is usually sensitive to the performance of investments held in the with-profit fund. Amounts payable under these guarantees are determined by the bonuses declared on these policies. There is no sensitivity to either interest rates or equity markets since there is no longer any exposure to equity in these funds and a matching strategy has been implemented for bonds.
Return of premium guarantee Until 2005, Aviva Life and Pensions Ireland wrote two tranches of linked bonds with a return of premium guarantee, or a price floor guarantee, after five or six years. The first tranche expired before the end of the previous financial reporting period. The second tranche expired during the last quarter of the current reporting period. As a result there is no provision held for this business (2011: £7 million).
Notes to the consolidated financial statements continued 42 – Reinsurance assets This note details the reinsurance recoverables on our insurance and investment contract liabilities.
Long-term business Insurance contracts 4,291 3,747 Participating investment contracts 3 — Non-participating investment contracts 1 1,678 1,626
General insurance and health Outstanding claims provisions 900 974 Provisions for claims incurred but not reported 354 395
Carrying amount at 1 January 5,373 5,115 Asset in respect of new business 387 187 Expected change in existing business asset 166 7 Variance between actual and expected experience 197 290 Impact of operating assumption changes (306) (9) Impact of economic assumption changes 143 433 Other movements (137) (260)
Incurred in current year (138) (138) Incurred in prior years (150) (196)
Amounts classified as held for sale include £32 million of deferred tax assets (2011: £nil) and £680 million of deferred tax liabilities (2011: £nil).
Net deferred tax liability (1,007) (933) Less: Amounts classified as held for sale 648 —
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. In countries where there is a history of tax losses, deferred tax assets are only recognised in excess of deferred tax liabilities if there is convincing evidence that future profits will be available. Where this is the case, the directors have relied on business plans supporting future profits. The Group has unrecognised tax losses and other temporary differences of £1,005 million (2011: £910 million) to carry forward against future taxable income of the necessary category in the companies concerned. Of these, trading losses of £278 million will expire within the next 20 years. The remaining losses have no expiry date. In addition, the Group has unrecognised capital losses of £652 million (2011: £418 million). These have no expiry date. There are no temporary differences in respect of unremitted overseas retained earnings for which deferred tax liabilities have not been recognised at 31 December 2012 (2011: £nil).
Total IAS 19 obligations to main staff pension schemes (note 47(e)(vii) 651 406 Deficits in other staff pension schemes 88 86
Total IAS 19 obligations to staff pension schemes 739 492 Restructuring provisions 144 106 Other provisions 423 398
Other provisions comprise many small provisions throughout the Group for obligations such as costs of compensation, litigation, staff entitlements and reorganisation. Of the total, £901 million (2011: £605 million) is expected to be settled more than one year after the statement of financial position date.
Change in the discounted amount arising from passage of time — 5 5 — 3 3
As noted below, the final salary sections of both the UK schemes were closed to future accrual with effect from 1 April 2011. The Canadian scheme closed to future accrual on 31 December 2011.
(c) UK schemes In the UK, the Group operates two main pension schemes, the Aviva Staff Pension Scheme (ASPS) and the smaller RAC (2003) Pension Scheme which was retained after the sale of RAC Limited in September 2011. The Group confirmed its decision to close the final salary sections of both UK schemes with effect from 1 April 2011, with entry into the defined contribution sections being offered to the staff members affected. New entrants join the defined contribution section of the ASPS. Closure of the schemes has removed the volatility associated with adding future accrual for active members, and has also led to lower service costs and their cash funding since April 2011.
(d) Charge to staff costs in the income statement The total pension charge to staff costs of all the Group’s defined benefit and defined contribution schemes were: £m £m
Continuing operations UK defined benefit schemes 12 36 Overseas defined benefit schemes 7 22
Total defined benefit schemes (note 10b) 19 58 UK defined contribution schemes 91 75 Overseas defined contribution schemes 11 11
There were no significant contributions outstanding or prepaid as at either 31 December 2012 or 2011.
Alternative measurement methods There are alternative methods of measuring liabilities, for example by calculating an accumulated benefit obligation (the present value of benefits for service already rendered but with no allowance for future salary increases) or on a solvency basis, using the cost of securing the benefits at a particular date with an insurance company or one of the growing market of alternative buy-out providers. This could take the form of a buy-out, in which the entire liability will be settled in one payment with all obligations transferred to an insurance company or buy-out provider, or a buy-in, in which annuities or other insurance products are purchased to cover a part or all of the liability. A valuation of the liabilities in either of these cases will almost always result in a higher estimate of the pension deficit than under an on-going approach, as they assume that the sponsor immediately transfers the majority, if not all, of the risk to another provider who would be seeking to make a profit on the transaction. However there is no active market of organisations that would be able to offer a full buy-out option for schemes of the size of our main UK scheme. There is a small buy-out market in Ireland, largely restricted to pensions currently in payment and it is not clear whether current capacity would enable an immediate buy-out of our Irish pension liabilities at present. The Canadian defined benefit plan’s liabilities represent the likely limit on what the Canadian group annuity market could absorb at normal competitive group annuity prices if the entire plan were subject to a buy-out valuation. There is in fact a reasonably high chance that only a portion of the plan’s liabilities could be absorbed in one tranche. IAS 19 requires us to use the projected unit credit method to measure our pension scheme liabilities. Neither of the alternative methods is considered appropriate in presenting fairly the Group’s obligations to the members of its pension schemes on an ongoing basis, so they are not considered further.
Valuations and assumptions The valuations used for accounting under IAS 19 have been based on the most recent full actuarial valuations, updated to take account of that standard’s requirements in order to assess the liabilities of the material schemes at 31 December 2012. Scheme assets are stated at their fair values at 31 December 2012.
Notes to the consolidated financial statements continued 47 – Pension obligations continued The main actuarial assumptions used to calculate scheme liabilities under IAS 19 are: UK Ireland Canada
Mortality assumptions Mortality assumptions are significant in measuring the Group’s obligations under its defined benefit schemes, particularly given the maturity of these obligations in the material schemes. The assumptions used are summarised in the table below and have been selected to reflect the characteristics and experience of the membership of these schemes. The mortality tables, average life expectancy and pension duration used at 31 December 2012 for scheme members are as follows: Life expectancy/(pension duration) at NRA of a male Life expectancy/(pension duration) at NRA of a female
Ireland 94% PNA00 with allowance for future improvements 61 87.0 90.2 89.9 93.0
(ii) Assumptions on scheme assets The expected rates of return on the schemes’ assets are: UK Ireland Canada
(iv) Pension expense The total pension expense comprises: Recognised in the income statement £m £m
Total pension cost from continuing operations (4) (51) Total pension cost from discontinued operations — (7)
Charge to finance costs from continuing operations (82) (87) Charge to finance costs from discontinued operations — (26)
The gains on curtailments in 2012 arose from restructuring activities in Ireland.
Notes to the consolidated financial statements continued 47 – Pension obligations continued Recognised in the statement of comprehensive income £m £m
Attributable to equity shareholders of Aviva plc (830) 1,002 Attributable to non-controlling interests — 5
The loss arising from changes in assumptions in 2012 primarily reflects the impact of lower discount rates for liabilities. The cumulative amount of actuarial gains and losses on the pension schemes recognised in other comprehensive income since 1 January 2004 (the date of transition to IFRS) is a loss of £1,054 million at 31 December 2012 (2011: cumulative loss of £224 million).
(v) Experience gains and losses The following disclosures of experience gains and losses give a five-year history. Scheme assets exclude insurance policies with Group companies and income on the assets underlying them.
Fair value of scheme assets at the end of the year 12,281 11,791 9,971 8,754 7,936 Present value of scheme liabilities at the end of the year (11,675) (10,527) (11,419) (11,812) (9,951)
Difference between the expected and actual return on scheme assets Amount of gains/(losses) 184 1,363 5471 5611 (1,893)1
Percentage of the scheme assets at the end of the year 1.5% 11.6% 5.5% 6.4% 23.8% Experience (losses)/gains on scheme liabilities (excluding changes in assumptions) Amount of (losses)/gains (100) (46) 4501 771 1051
(vi) Risk management and asset allocation strategy As noted above, the long-term investment objectives of the trustees and the employers are to limit the risk of the assets failing to meet the liabilities of the schemes over the long term, and to maximise returns consistent with an acceptable level of risk so as to control the long-term costs of these schemes. To meet these objectives, each scheme’s assets are invested in a diversified portfolio, consisting primarily of debt securities, equity securities and property.
Total fair value of assets 11,647 406 228 12,281 11,190 382 219 11,791 Present value of scheme liabilities (10,501) (777) (397) (11,675) (9,606) (539) (382) (10,527)
(viii) Movements in the scheme deficits and surpluses Movements in the pension schemes’ surpluses and deficits comprise: Scheme assets £m
Employee contributions 2 (2) — — — Benefits paid (357) 357 — — — Current and past service cost (see (iv) above) — (19) (19) — (19) Gain on curtailments and settlements (see (iv) above) — 15 15 — 15 Credit/(charge) to finance costs (see (iv) above) 427 (509) (82) — (82) Actuarial gains/(losses) (see (iv) above) 184 (1,014) (830) — (830) Exchange rate movements on foreign plans (16) 24 8 — 8
Exchange rate movements on foreign plans 67 (61) 6 (80) (74)
Notes to the consolidated financial statements continued 48 – Borrowings Our borrowings are either core structural borrowings or operational borrowings. This note shows the carrying values and contractual maturity amounts of each type, and explains their main features and movements during the year.
Borrowings are considered current if the contractual maturity dates are within a year. Where subordinated debt is undated or loan notes are perpetual, the interest payments have not been included beyond 15 years. Annual interest payments for these borrowings are £72 million (2011: £73 million).
(c) Operational borrowings (i) The carrying amounts of these borrowings are: £m £m
All the above borrowings are stated at amortised cost, except for the loan notes issued in connection with the UK lifetime mortgage business of £1,332 million (2011: £1,306 million). These loan notes are carried at fair value, their values are modelled on risk-adjusted cash flows for defaults discounted at a risk-free rate plus a market-determined liquidity premium, and are therefore classified as ‘Level 2’ in the fair value hierarchy. These have been designated at fair value through profit and loss in order to present the relevant mortgages, borrowings and derivative financial instruments at fair value, since they are managed as a portfolio on a fair value basis. This presentation provides more relevant information and eliminates any accounting mismatch. The securitised mortgage loan notes are at various fixed, floating and index-linked rates. Further details about these notes are given in note 24.
(ii) Debenture loans The 9.5% guaranteed bonds were issued by the Company at a discount of £1.1 million. This discount and the issue expenses are being amortised over the full term of the bonds. Although these bonds were issued in sterling, the loans have effectively been converted into euro liabilities through the use of financial instruments in a subsidiary. All these borrowings are at fixed rates and their fair value at 31 December 2012 was £246 million (2011: £246 million), calculated with reference to quoted prices.
Amortisation of discounts and other non-cash items 1 (13) (12) 3 — 3 Deconsolidation of Delta Lloyd — — — (816) (5,683) (6,499) Movements in debt held by Group companies1 32 — 32 (12) 1 (11)
All movements in fair value in 2011 and 2012 on securitised mortgage loan notes designated as fair value through profit or loss were attributable to changes in market conditions.
(f) Undrawn borrowings The Group and Company have the following undrawn committed central borrowing facilities available to them, of which £750 million (2011: £750 million) is used to support the commercial paper programme: £m £m
Payables arising out of direct insurance 1,234 1,098 Payables arising out of reinsurance operations 426 360 Deposits and advances received from reinsurers 318 346 Bank overdrafts 566 668 Derivative liabilities 1,761 1,850 Amounts due to brokers for investment purchases 135 60 Obligations for repayment of cash collateral received (notes 25d(i) & 57c) 4,460 5,229 Other financial liabilities 1,649 1,628
Expected to be settled within one year 8,613 10,253 Expected to be settled in more than one year 828 977
Bank overdrafts arise substantially from un-presented cheques and amount to £194 million (2011: £211 million) in long-term business operations and £372 million (2011: £457 million) in general business and other operations. All payables and other financial liabilities are carried at cost, which approximates to fair value, except for derivative liabilities, which are carried at their fair values.
Expected to be settled within one year 1,458 2,195 Expected to be settled in more than one year 385 633 51 – Contingent liabilities and other risk factors This note sets out the main areas of uncertainty over the calculation of our liabilities.
Later than 1 year and not later than 5 years 832 562 Later than 5 years 1,570 1,738
Later than 1 year and not later than 5 years 421 400 Later than 5 years 587 667
Accounting basis and capital employed by segment The table below shows how our capital, on an MCEV3 basis, is deployed by segment and how that capital is funded.
Total capital employed 21,369 20,750 1 ‘Corporate’ includes centrally held tangible net assets, the staff pension scheme surplus and also reflects internal lending arrangements. These internal lending arrangements, which net out on consolidation, arise in relation to the following: – Aviva Insurance Limited (AI) acts as both a UK general insurer and as the primary holding company for our foreign subsidiaries. Internal capital management mechanisms in place allocate a portion of the total capital of the company to the UK
2 – Subsequent to the year end, the Group has taken action to improve its access to dividends from the Group’s insurance and asset management business by undertaking a corporate restructure. This will see the Group’s interest in the majority of its overseas businesses move to Aviva Group Holdings Limited from Aviva Insurance Limited.
– Certain subsidiaries, subject to continuing to satisfy stand-alone capital and liquidity requirements, loan funds to corporate and holding entities. These loans satisfy arm’s length criteria and all interest payments are made when due. 3 – In preparing the MCEV information, the directors have done so in accordance with the MCEV Principles with the exception of stating held for sale operations at their expected fair value, as represented by expected sale proceeds, less cost to sell.
Total capital employed is financed by a combination of equity shareholders’ funds, preference capital, subordinated debt and borrowings. At the end of 2012 we had £21.4 billion (2011: £20.8 billion) of total capital employed in our trading operations measured on an MCEV3 basis. In May 2012 we issued US$650 million of Fixed Rate Tier 1 Notes. The Notes are perpetual and may be called from November 2017. The Notes qualify as Innovative Tier 1 capital under current regulatory rules and are expected to be treated as Fixed Rate Tier 1 capital under Solvency II transitional rules. The transaction had a positive impact on Group IGD solvency and Economic Capital measures. In June 2012 US$300 million of Lower Tier 2 floating rate notes were redeemed at first call. Financial leverage, the ratio of external senior and subordinated debt to MCEV 3 capital and reserves, was 35.1% (2011: 36.7%). Fixed charge cover, which measures the extent to which external interest costs, including subordinated debt interest and preference dividends, are covered by MCEV3 operating profit was 5.1 times (2011: 8.9 times). The impact of the agreement to sell Aviva USA has meant that financial leverage under IFRS is higher at 52.6% (FY11: 37.1%).
Depreciation of property and equipment 42 54 Equity compensation plans, equity settled expense 42 48 Impairment and expensing of: Goodwill on subsidiaries 109 160 Financial Investments, loans and other assets 46 95 Acquired value of in-force business and intangibles 122 49 Non-financial assets — 1
Operating cash flows reflect the movement in both policyholder and shareholder controlled cash and cash equivalent balances. Around two thirds of the Group’s balances relate to unit-linked or participating policyholder funds. As such, the asset mix and the level of cash held by these funds are determined from a policyholder perspective and can move significantly from one year to another. Shareholder cash at 31 December 2012 is at £9.0 billion (2011: £8.6 billion). Purchases and sales of operating assets, including financial investments, are included within operating cash flows as the purchases are funded from cash flows associated with the origination of insurance and investment contracts, net of payments of related benefits and claims. During the year, the net operating cash inflow reflects a number of factors, including changes in the investment strategy of funds to hold a lower weighting of cash and higher levels of financial investments, the level of premium income and the timing of receipts of premiums and the payment of creditors, claims and surrenders. It also includes changes in the size and value of consolidated cash investment funds and changes in the Group participation in these funds.
Notes to the consolidated financial statements continued 54 – Statement of cash flows continued (b) Cash flows in respect of, and additions to, the acquisition of subsidiaries, joint ventures and associates comprised: £m £m
Cash flows on disposals – continuing operations 421 877 Cash flows on disposals – discontinued operations — (502)
Cash at bank and in hand 13,020 8,854 Cash equivalents 10,794 14,215
Cash and cash equivalents reconciles to the statement of financial position as follows: £m £m
Notes to the consolidated financial statements continued 55 – Capital statement This statement sets out the financial strength of our Group entities and provides an analysis of the disposition and constraints over the availability of capital to meet risks and regulatory requirements. The capital statement also provides a reconciliation of shareholders’ funds to regulatory capital. The analysis below sets out the Group’s available capital resources, which includes available capital resources of subsidiaries classified as held for sale in the Group IFRS statement of financial position still included in the Group’s available capital resources at 31 December 2012.
Regulatory valuation and admissibility restrictions4 48 1,312 298 1,658 (2,564) (906) 1,615 709 (686) 23 (3,279)
Analysis of liabilities: Participating insurance liabilities7 1,909 14,078 11,228 27,215 8 27,223 22,250 49,473 — 49,473 52,872
Available capital resources at 1 January 240 1,159 1,629 3,028 2,779 5,807 3,745 9,552
Expected change in available capital resources 18 196 235 449 283 732 1,343 2,075 Variance between actual and expected experience1 58 (20) 50 88 (20) 68 7,596 7,664 Effect of operating assumption changes 2 (13) 21 10 26 36 — 36 Effect of economic assumption changes (19) (103) (69) (191) — (191) 79 (112) Effect of changes in management policy — — (23) (23) — (23) 7 (16) Effect of changes in regulatory requirements — — — — — — (10) (10) Transfers, acquisitions and disposals — — — — — — (43) (43) Foreign exchange movements — — — — — — (127) (127)
Available capital resources at 31 December 291 907 1,836 3,034 2,688 5,722 12,360 18,082 1 The positive variance between actual and expected experience is driven by increases in the market value of assets backing participating funds in continental Europe, and consequential increases in unallocated divisible surplus.
Notes to the consolidated financial statements continued 55 – Capital statement continued The with-profit funds and the RIEESA use internal hedging to limit the impacts of equity market volatility. In aggregate, the Group has at its disposal total available capital of £19.0 billion (2011: £12.3 billion), representing the aggregation of the solvency capital of all of our businesses. This capital is available to meet risks and regulatory requirements set by reference to local guidance and EU directives. After effecting the year-end transfers to shareholders, the UK with-profit funds have available capital of £3.0 billion (2011: £3.0 billion) (including amounts held in RIEESA). Subject to certain conditions, the RIEESA capital can be used to write new non-profit business, but the primary purpose of this capital is to provide support for the UK with-profit business. The capital is comfortably in excess of the required capital margin, and therefore the shareholders are not required to provide further support. For the remaining life and general insurance operations, the total available capital amounting to £16.0 billion (2011: £9.3 billion) is higher than the minimum requirements established by regulators and, in principle, the excess is available to shareholders. In practice, management will hold higher levels of capital within each business operation to provide appropriate cover for risk. The total available capital of £19.0 billion is arrived at on the basis of local regulatory guidance, which evaluates assets and liabilities prudently and includes the Group’s unallocated divisible surplus of overseas life operations. This is a limitation of the Group Capital Statement which, to be more meaningful, needs to evaluate available capital on an economic basis and compare it with the risk capital required for each individual operation, after allowing for the considerable diversification benefits that exist in our Group. Within the Aviva Group there exist intra-group arrangements to provide capital to particular business units. Included in these arrangements is a subordinated loan of £200 million from Aviva Life Holdings UK Limited to Aviva Annuity Limited to provide capital to support the writing of new business. The available capital of the Group’s with-profit funds is determined in accordance with the ‘Realistic balance sheet’ regime prescribed by the FSA’s regulations, under which liabilities to policyholders include both declared bonuses and the constructive obligation for future bonuses not yet declared. The available capital resources include an estimate of the value of their respective estates, included as part of the unallocated divisible surplus. The estate represents the surplus in the fund that is in excess of any constructive obligation to policyholders. It represents capital resources of the individual with-profit fund to which it relates and is available to meet regulatory and other solvency requirements of the fund and, in certain circumstances, additional liabilities may arise. The liabilities included in the balance sheet for the with-profit funds do not include the amount representing the shareholders’ portion of future bonuses. However, the shareholders’ portion is treated as a deduction from capital that is available to meet regulatory requirements and is therefore shown as a separate adjustment in the capital statement. In accordance with the FSA’s regulatory rules under its realistic capital regime, the Group is required to hold sufficient capital in its UK life with-profit funds to meet the FSA capital requirements, based on the risk capital margin (RCM). The determination of the RCM depends on various actuarial and other assumptions about potential changes in market prices, and the actions management would take in the event of particular adverse changes in market conditions.
2 Estimated realistic inherited estate at 31 December 2011 was £nil, £0.3 billion and £1.6 billion for NWPSF, OWPSF and WPSF respectively. 3 This represents the reattributed estate of £0.7 billion at 31 December 2012 (31 December 2011: £1.1 billion) held within NPSF1 (a non-profit fund within UKLAP included within other UK life operations). 4 The WPSF fund includes the Provident Mutual (PM) fund, which has realistic assets and liabilities of £1.7 billion and therefore does not impact the realistic inherited estate.
 (iv) General insurance operations – the capital requirements and corresponding regulatory capital held by overseas businesses are calculated using the locally applicable regulatory regime. The available capital resources in all these businesses are subject to local regulatory restrictions which may constrain management’s ability to utilise these in other parts of the Group. Any transfer of available capital may give rise to a tax charge, subject to availability of tax relief elsewhere in the Group.
Notes to the consolidated financial statements continued 56 – Risk management continued Further information on the types and management of specific risk types is given in sections (b) - (j) below.
(b) Credit risk Credit risk is the risk of financial loss as a result of the default or failure of third parties to meet their payment obligations to Aviva, or variations in market values as a result of changes in expectations related to these risks. Credit risk is an area where we can provide the returns required to satisfy policyholder liabilities and to generate returns for our shareholders. In general we prefer to take credit risk over equity and property risks, due to the better expected risk adjusted return, our credit risk analysis capability and the structural investment advantages conferred to insurers with long-dated, relatively illiquid liabilities. Our approach to managing credit risk recognises that there is a risk of adverse financial impact resulting from fluctuations in credit quality of third parties including default, rating transition and credit spread movements. Our credit risks arise principally through exposures to debt security investments, structured asset investments, bank deposits, derivative counterparties, mortgage lending and reinsurance counterparties. The Group manages its credit risk at business unit and Group level. All business units are required to implement credit risk management processes (including limits frameworks), operate specific risk management committees, and ensure detailed reporting and monitoring of their exposures against pre-established risk criteria. At Group level, we manage and monitor all exposures across our business units on a consolidated basis, and operate a Group limit framework that must be adhered to by all.
The carrying amount of assets included in the statement of financial position represents the maximum credit exposure. The impact of collateral held on the net credit exposure is shown below.
Total (excluding held for sale) 187,770 (24,213) 163,557 218,640 (27,896) 190,744
Additional information in respect to collateral is provided in notes 23(c) and notes 25(d)(i).
To the extent that collateral held is greater than the amount receivable that it is securing, the table above shows only an amount equal to the latter. In the event of default, any over-collateralised security would be returned to the relevant counterparty.
These loans are fully collateralised by other securities; and  Mortgage loans collateralised by property assets.
(v) Credit concentration risk The long-term and general insurance businesses are generally not individually exposed to significant concentrations of credit risk due to the regulations applicable in most markets and the Group credit policy and limits framework, which limit investments in individual assets and asset classes. Credit concentrations are monitored as part of the regular credit monitoring process and are reported to Group ALCO. With the exception of government bonds the largest aggregated counterparty exposure within shareholder assets is approximately 1.5% of the total shareholder assets (gross of ‘held for sale’).
Debt securities 128,006 — — — — — 128,006 Reinsurance assets 6,684 — — — — — 6,684
Receivables and other financial assets 7,518 46 13 14 26 — 7,617
Notes to the consolidated financial statements continued 56 – Risk management continued (iii) Interest rate risk Interest rate risk arises primarily from the Group’s investments in long-term debt and fixed income securities and their movement relative to the value placed on the insurance liabilities. A number of policyholder product features have an influence on the Group’s interest rate risk. The major features include guaranteed surrender values, guaranteed annuity options, and minimum surrender and maturity values. Details of material guarantees and options are given in note 41. Exposure to interest rate risk is monitored through several measures that include duration, economic capital modelling, sensitivity testing and stress and scenario testing. The impact of exposure to sustained low interest rates is considered within our scenario testing. The Group typically manages interest rate risk by investing in fixed interest securities which closely match the interest rate sensitivity of the liabilities where this is available. Interest rate risk is also managed in some business units using a variety of derivative instruments, including futures, options, swaps, caps and floors. Sensitivity to changes in interest rates is given in section ‘(j) risk and capital management’ below. Further information on borrowings is included in note 48.
(v) Currency risk The Group has minimal exposure to currency risk from financial instruments held by business units in currencies other than their functional currencies, as nearly all such holdings are backing either by unit-linked or with-profit contract liabilities or hedging. The Group operates internationally and as a result is exposed to foreign currency exchange risk arising from fluctuations in exchange rates of various currencies. Approximately half of the Group’s premium income arises in currencies other than sterling and the Group’s net assets are denominated in a variety of currencies, of which the largest are euro, sterling and US dollars. The Group does not hedge foreign currency revenues as these are substantially retained locally to support the growth of the Group’s business and meet local regulatory and market requirements. Businesses aim to maintain sufficient assets in local currency to meet local currency liabilities, however movements may impact the value of the Group’s consolidated shareholders’ equity which is expressed in sterling. This aspect of foreign exchange risk is monitored and managed centrally, against pre-determined limits. These exposures are managed by aligning the deployment of regulatory capital by currency with the Group’s regulatory capital requirements by currency. Currency borrowings and derivatives are used to manage exposures within the limits that have been set.
At 31 December 2012 and 2011, the Group’s total equity deployment by currency including assets ‘held for sale’ was: Sterling £m Euro £m
A 10% change in sterling to euro/US$ foreign exchange rates would have had the following impact on profit before tax, excluding ‘discontinued operations’.
Impact on profit before tax 31 December 2012 (32) 32 1 (1) Impact on profit before tax 31 December 2011 (84) 11 (4) 17
(vii) Correlation risk The Group recognises that lapse behaviour and potential increases in consumer expectations are sensitive to and interdependent with market movements and interest rates. These interdependencies are taken into consideration in the internal economic capital model and in scenario analysis.
(d) Liquidity risk Liquidity risk is the risk of not being able to make payments as they become due because there are insufficient assets in cash form. The relatively illiquid nature of insurance liabilities is a potential source of additional investment return by allowing us to invest in higher yielding, but less liquid assets such as commercial mortgages. The Group seeks to ensure that it maintains sufficient financial resources to meet its obligations as they fall due through the application of a Group liquidity risk policy and business standard. At Group and business unit level, there is a liquidity risk appetite which requires that sufficient liquid resources be maintained to cover net outflows in a stress scenario. The Company’s main sources of liquidity are liquid assets held within the Company and Aviva Group Holdings Limited (AGH), and dividends received from the Group’s insurance and asset management businesses. Sources of liquidity in normal markets also includes a variety of short and long-term instruments including commercial papers and medium and long-term debt. For 2012 and prior years, the Company’s main sources of liquidity also included intercompany loans from Aviva Insurance Limited and Aviva International Insurance Limited, subject to regulatory constraints. In addition to the existing liquid resources and expected inflows, the Group and Company maintain significant undrawn committed borrowing facilities (£2.1 billion) from a range of leading international banks to further mitigate this risk.
Long-term business Insurance contracts – non-linked 117,602 8,303 31,894 44,455 32,950
Long-term business Insurance contracts – non-linked (restated)1 117,442 9,693 35,403 45,829 26,517 Investment contracts – non-linked (restated)1 62,412 6,240 20,208 26,252 9,712 1 Following a review of the classification of contracts issued by the Group’s Italian long-term business, certain portfolios have been reclassified from participating insurance to participating investment contracts for all years presented. There is no impact on the result for any year presented as a result of this classification. 2 Linked business maturity profile has been restated to reflect an expected rather than contractual basis. Contractually, the total liability for linked business would be shown in the ‘within 1 year column’.
(e) Life insurance risk Life insurance risk in the Group arises through its exposure to mortality and morbidity risks and exposure to worse than anticipated operating experience on factors such as persistency levels and management and administration expenses. The Group chooses to take measured amounts of life insurance risk provided that the relevant business has the appropriate core skills to assess and price the risk and adequate returns are available. The underlying risk profile of our life insurance risks, primarily persistency, longevity, mortality and expense risk, has remained stable during 2012, although the current low levels of interest rates have increased our sensitivity to longevity shocks. Persistency risk remains significant and continues to have a volatile outlook with underlying performance linked to some degree to economic conditions. However, businesses across the Group have continued to make progress with a range of customer retention activities. The Group has continued to write strong volumes of life protection business, and to utilise reinsurance to reduce exposure to potential losses. More generally, life insurance risks are believed to benefit from a significant diversification against other risks in the portfolio. Life insurance risks are modelled within the internal economic capital model and subject to sensitivity and stress and scenario testing. The assumption and management of life insurance risks is governed by the group-wide business standards covering underwriting, pricing, product design and management, in-force management, claims handling, and reinsurance. The individual life insurance risks are managed as follows:  Mortality and morbidity risks are mitigated by use of reinsurance. The Group allows businesses to select reinsurers, from those approved by the Group, based on local factors, but retains oversight of the overall exposures and monitor that the aggregation of risk ceded is within credit risk appetite.
 Persistency risk is managed at a business unit level through frequent monitoring of company experience, and benchmarked against local market information. Generally, persistency risk arises from customers lapsing their policies earlier than has been assumed. Where possible the financial impact of lapses is reduced through appropriate product design. Businesses also implement specific initiatives to improve retention of policies which may otherwise lapse. The Group has developed guidelines on persistency management.
Embedded derivatives The Group has exposure to a variety of embedded derivatives in its long-term savings business due to product features offering varying degrees of guaranteed benefits at maturity or on early surrender, along with options to convert their benefits into different products on pre-agreed terms. The extent of the impact of these embedded derivatives differs considerably between business units and exposes Aviva to changes in policyholder behaviour in the exercise of options as well as market risk.
Notes to the consolidated financial statements continued 56 – Risk management continued Examples of each type of embedded derivative affecting the Group are:  Options: call, put, surrender and maturity options, guaranteed annuity options, options to cease premium payment, options for withdrawals free of market value adjustment, annuity options, and guaranteed insurability options.  Guarantees: embedded floor (guaranteed return), maturity guarantee, guaranteed death benefit, and guaranteed minimum rate of annuity payment.  Other: indexed interest or principal payments, maturity value, loyalty bonus.
(f) General insurance risk Types of risk General insurance risk in the Group arises from:  Fluctuations in the timing, frequency and severity of claims and claim settlements relative to expectations;  Unexpected claims arising from a single source or cause;  Inaccurate pricing of risks or inappropriate underwriting of risks when underwritten; and  Inadequate reinsurance protection or other risk transfer techniques.
Equity/property market values The impact of a change in equity/property market values by ± 10%. Expenses The impact of an increase in maintenance expenses by 10%.
Annuitant mortality (life insurance only) The impact of a reduction in mortality rates for annuity contracts by 5%. Gross loss ratios (non-life insurance only) The impact of an increase in gross loss ratios for general insurance and health business by 5%.
Long-term business Sensitivities as at 31 December 2012 2012 Impact on profit before tax £m
Assets backing life shareholders' funds (5) — (45) 50 (50) — — —
Total excluding Delta Lloyd and United States (315) 195 (585) 125 (170) (130) (50) (520)
Sensitivities as at 31 December 2011 2011 Impact on profit before tax £m
Total excluding Delta Lloyd and United States (140) 20 (450) 110 (230) (140) (55) (520)
Assets backing life shareholders' funds 125 — (15) 15 (15) — — —
Notes to the consolidated financial statements continued 56 – Risk management continued Changes in sensitivities between 2012 and 2011 reflect movements in market interest rates, portfolio growth, changes to asset mix and the relative durations of assets and liabilities and asset liability management actions. The sensitivities to economic movements (excluding the United States) relate mainly to business in the UK. In general, a fall in market interest rates has a beneficial impact on non-participating business, due to the increase in market value of fixed interest securities and the relative durations of assets and liabilities; similarly a rise in interest rates has a negative impact. The mortality sensitivities also relate primarily to the UK. In the United States, most debt securities are classified as AFS for which movements in unrealised gains or losses are taken directly to shareholders’ equity. This limited the overall sensitivity of IFRS profit to interest rate and credit spread movements. Following the classification of the business as held for sale in 2012 it was remeasured to fair value less costs to sell. It has been assumed that economic movements would not materially impact the fair value less costs to sell and the impact on shareholders’ equity is therefore reported as £nil. As a result, were economic movements to occur, the corresponding movements in AFS assets which would be taken directly to shareholders’ equity, are reversed out through profit before tax in order to maintain the remeasurement value of the US at fair value less costs to sell.
General insurance and health business sensitivities as at 31 December 2012 2012 Impact on profit before tax £m
Gross of reinsurance excluding Delta Lloyd (260) 235 (125) 45 (50) (120) (300)
Net of reinsurance excluding Delta Lloyd (300) 285 (125) 45 (50) (120) (285)
Gross of reinsurance excluding Delta Lloyd (205) 180 (125) 50 (55) (130) (300)
Total excluding Delta Lloyd (10) 10 — (40) 75 2011 Impact on shareholders' equity before tax £m
(i) The Group’s non-hedge derivative activity at 31 December 2012 and 2011 was as follows: Contract/ notional amount £m
The 2011 figures have been restated in respect of the notional values of the exchange traded equity option contracts. £5,478 million notional of credit derivatives (and their related fair values) have been reclassified out of the ‘other’ and ‘interest rate swap’ categories to the ‘credit’ contracts category. Additionally £3,156 million notional of inflation linked swaps have been reclassified out of the ‘interest rate swap’ category to the ‘other’ category. Fair value assets are recognised as ‘Derivative financial instruments’ in note 25(a), while fair value liabilities are recognised as ‘Derivative liabilities’ in note 49. Fair value assets in note 25(a) of £1,590 million represent non-hedge derivative assets of £1,585 million per the table above plus £5 million of cash flow hedges. Fair value liabilities in note 49 of £1,761 million represent non-hedge derivative liabilities of £1,707 million per the table above plus £54 million of fair value hedges. The Group’s derivative risk management policies are outlined in note 56.
(ii) The contractual undiscounted cash flows in relation to non-hedge derivative liabilities have the following maturities: £m £m
Notes to the consolidated financial statements continued 58 – Assets under management In addition to the assets included in the consolidated statement of financial position, the Group manages funds for third parties. This note details the total assets under management.
Total IFRS assets included in the consolidated statement of financial position 315,689 312,376 Less: Third-party funds included within consolidated IFRS assets (13,525) (11,814)
Managed by: Aviva Investors 274,484 262,506 Other Aviva and external managers 74,657 74,055 59 – Related party transactions This note gives details of the transactions between Group companies and related parties which comprise our joint ventures, associates and staff pension schemes. The Group undertakes transactions with related parties in the normal course of business. Loans to related parties are made on normal arm’s-length commercial terms.
Salary and other short-term benefits1 4.7 6.7 Other long-term benefits 0.4 2.8 Post-employment benefits1 1.9 1.7 Equity compensation plans1 4.8 5.9 Termination benefits1 1.5 0.7 1 Following a review of the composition of key management in the current year, comparative amounts have been restated from the amounts previously reported. The total key management compensation reported in 2011 was £65 million.
Statement of changes in equity For the year ended 31 December 2012
Profit for the year — — — — — — 231 231 — 231
Statement of financial position At 31 December 2012 and 2011 and 2010 £m
Investment valuation reserve D 6,794 4,414 6,803 Equity compensation reserve D 60 86 99
Direct capital instruments and fixed rate tier 1 notes 33 1,382 990 990
Current liabilities Borrowings E 603 506 504 Loans owed to subsidiaries H 794 502 514 Other amounts owed to subsidiaries H 3,569 3,366 3,184
Cash flows from financing activities Funding provided by subsidiaries 868 847 New borrowings, net of expenses 2,200 3,319 Repayment of borrowings (2,295) (3,326) Net repayment of borrowings (95) (7) Proceeds from issue of fixed rate tier 1 notes, net of expenses 392 — Preference dividends paid (17) (17) Ordinary dividends paid (630) (431) Interest paid on borrowings (383) (376)
A – Presentation changes During 2012, the Company reviewed the presentation of its investment in its subsidiary General Accident plc (‘GA’) which was previously shown net of an intercompany liability in the statement of financial position and determined that the investment should be presented gross of the intercompany liability. The result of this has been to increase the value of investments in subsidiaries at 31 December 2011 by £13,659 million, intercompany loan liabilities by £13,919 million, and the investment valuation reserve by £260 million. The value of investments in subsidiaries at 31 December 2010 has been restated by £13,661 million, intercompany loan liabilities by £13,919 million, and the investment valuation reserve by £258 million.
(iii) Current tax assets Amounts due in respect of current tax assets are expected to be recovered in more than 12 months.
Arising in the year: Profit for the year — — — 231 Fair value losses on investments in subsidiaries and joint ventures — (2,389) — — Actuarial gains on pension provisions — — — 1 Dividends and appropriations — — — (813) Reserves credit for equity compensation plans — — 48 — Shares issued in lieu of dividends — — — 307 Trust shares distributed in the year — — — (18) Issue of share capital under equity compensation scheme — — (61) 61 Aggregate tax effect — — — 16
Total contractual undiscounted cash flows 5,179 6,648 11,827 5,327 7,061 12,388
Where subordinated debt is undated, the interest payments have not been included beyond 15 years. Annual interest payments for these borrowings are £72 million (2011: £73 million). The fair value of the subordinated debt at 31 December 2012 was £4,435 million (2011: £3,814 million). The fair value of the 9.5% guaranteed bonds 2016 at 31 December 2012 was £246 million (2011: £246 million). The fair value of the commercial paper is considered to be the same as its carrying value. Further details of these borrowings and undrawn committed facilities can be found in the Group consolidated financial statements, note 48.
Currency risk The Company’s direct subsidiaries are exposed to foreign currency risk arising from fluctuations in exchange rates during the course of providing insurance and asset management services around the world. The exposure of the subsidiaries to currency risk is considered from a Group perspective in the Group consolidated financial statements, note 56. The Company faces exposure to foreign currency risk through some of its borrowings which are denominated in Euros and US dollars. However, most of these borrowings have been on-lent to a subsidiary which holds investments in these currencies, generating the net investment hedge described in the Group consolidated financial statements, note 57(a)(iii).
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. Details of guarantees, indemnities and warranties given by the Company on behalf of related parties are given in note 51(g).
OEIC (Open ended investment company) An collective investment fund structured as a limited company in which investors can buy and sell shares.
Pensions A means of providing income in retirement for an individual and possibly his/her dependants.
Unit trusts A form of open ended collective investment constituted under a trust deed, in which investors can buy and sell units.
Unit-linked annuities A type of deferred annuity which is invested in units of investment funds, whose value depends directly on the market value of assets in those funds.
Whole life A protection policy that remains in force for the insured’s whole life. Traditional whole life contracts have fixed premium payments that typically cannot be missed without lapsing the policy. Flexible whole life contracts allow the policyholder to vary the premium and/or amount of life cover, within certain limits.
FSA The UK’s Financial Services Authority – Main regulatory body appointed by the government to oversee financial services industry in the UK. Since December 2001 it has been the single statutory regulator responsible for savings, insurance and investment business. From 1 April 2013, the FSA will split into two new regulatory bodies: the Prudential Regulation Authority (PRA), which will be a subsidiary of the Bank of England, and the Financial Conduct Authority (FCA).
Independent Financial Advisers (IFAs) A person or organisation authorised to give advice on financial matters and to sell the products of all financial service providers.
Shareholder profile as at 31 December 2012 By category of shareholder Number of shareholders %* Number of shares %*
+The number of registered ordinary shares represented by ADRs. Please note that each Aviva ADR represents two (2) ordinary shares. *Percentages do not necessarily add up due to rounding.
2013 financial calendar Annual General Meeting 9 May 2013 Announcement of first quarter Interim Management Statement 16 May 2013 Announcement of unaudited half-year results 8 August 2013 Announcement of third quarter Interim Management Statement 7 November 2013 2012 final dividend dates – ordinary shares Ex-dividend date 20 March 2013 Record date 22 March 2013 Dividend payment date* 17 May 2013 *Please note that the ADR local payment date will be approximately five business days after the proposed dividend date for ordinary shares.
Street, London EC2Y 8DS on Thursday, 9 May 2013 at 11am.
 The voting results for the 2013 AGM will be accessible on the Company’s website at www.aviva.com/agm shortly after the meeting.
 If you are unable to attend the AGM but would like to ask the directors a question in connection with the business of the meeting, you can do so by sending a question to the group company secretary by email to aviva.shareholders@aviva.com. We will endeavour to provide you with a response as soon as possible.
AGM voting instructions  Completed proxy instructions must be submitted to the
Company’s Registrar, Computershare Investor Services PLC (Computershare), as soon as possible, but in any event to arrive by no later than:  11am on Tuesday, 7 May 2013 for ordinary shareholders; and
 Dividends on preference shares are normally paid in March, June, September and December - please visit www.aviva.com/preferenceshares for the latest dividend payment dates.
Overseas global dividend service  The Global Payments Service provided by Computershare enables shareholders living overseas to elect to receive their dividends in a choice of over 65 international currencies. For further details and fees for this service please visit www.investorcentre.co.uk/faq and select the Dividends and Payments tab, followed by Global Payment Service.
In writing: Citibank Shareholder Services, PO Box 43077, Providence, Rhode Island 02940-3077 USA
Aviva Annual Review In response to shareholder feedback, we have reintroduced the Annual Review as an alternative to the full Annual Report and Accounts. The Annual Review provides a summary of Aviva’s businesses and performance in an easier to read format, which many of our shareholders found useful in the past. You can find further information and view the Annual Review at www.aviva.com/reports. If you prefer to receive hard copy documents and would like to elect to receive a copy of the Annual Review instead of the full Annual Report and Accounts, please contact Computershare.