Malta 184 St. Lucia Street, Valletta, VLT 1189 Herakles SICAV 60 Mauritius 4th Floor, Raffles Tower, 19 Cybercity, Ebene Reliance Emergent India Fund OEIC 88 Les Cascades, Edith Cavell Street, Port Louis Actis China Investment Company Limited Us$ A Shares 50 Norway Tollbugate 27,0157 Oslo Aviva Investors CELLs Norway Holding AS Cells Fund 100 Aviva Investors CELLs Norway AS Cells Fund 100 Kongsgard Alle 20 AS Cells Fund 100 Poland Al. Jana Pawła II 25, 00-854 , Warszawa Focus Park Piotrków Trybunalski sp.z o.o Focus Mall Zielona Gora Sp. Z o.o.
Lodz BC Sp. z o.o Ordinary Shares 100 Wroclaw BC sp. z.o.o Ordinary Shares 100 Inflancka 4b, 00-189 Warszawa Aviva Investors FIO Aktywnej Alokacji UCITS 24 Aviva Investors Fio Depozyt Plus UCITS 38 Aviva Investors Fio Nowoczesnych Technologii UCITS 72 Aviva Investors Fio Nowych Spolek UCITS 86 Aviva Investors Fio Obligacji UCITS 78 Aviva Investors Fio Polskich Akcji UCITS 56 Aviva Investors FIO Subfundusz Aviva Investors Obligacji Dynamiczny
Aviva Spółka z ograniczoną odpowiedzialnością Ordinary Shares 90 Aviva Towarzystwo Ubezpieczen Na Zycie S.A. Parent Interest 90 Aviva Towarzystwo Ubezpieczen Ogolnych S.A. Santander Aviva Towarzystwo Ubezpieczeń na Życie Spółka Akcyjna Santander Towarzystwo Ubezpieczeń Spółka Akcyjna
Aviva Ltd Ordinary Shares 100 Navigator Investment Services Limited Ordinary Shares 100 6 Shenton Way, #09-08, OUE Downtown, 068809
Spain Avda Andalucia, 10-12, Malaga Ahorro Andaluz, S.A Ordinary Shares 46 Avda de Bruselas – Numero 13, Edificio, America, Piso 1, Puerta d,Alcobendas 28Madrid
AvivaSA Emeklilik ve Hayat A.S2 Ordinary Shares 40 United Kingdom 1 Dorset Street, Southampton, Hampshire, SO15 2DP
Opal (UK) Holdings Limited Ordinary Shares 29 Opal Information Systems Limited Ordinary Shares 29 Outsourced Professional Administration Limited Ordinary Shares 29 Synergy Financial Products Limited Ordinary Shares 29 29 Queen Anne’s Gate, London SW1H 9BU CF Bentley Global Growth OEIC 29 30 Finsbury Square, London, EC2P 2YU Defined Returns Limited Ordinary Shares 57 Invesco Emerging Markets Equity Fund Unit Trust 25 Invesco Global Health Care Fund Unit Trust 35 Invesco Funds Series – Invesco UK Equity Fund Unit Trust 27 NDF Administration Limited Ordinary Shares, Non Voting B
Company Limited by Guarantee 42 Dingwall Road, Croydon, Surrey, CR0 2NE Ballard Investment Company Limited Ordinary Shares 25 Health & Case Management Limited Ordinary Shares, Preference 43-45 Portman Square, London, W1H 6LY Quantum Property Partnership (General Partner) Limited2
Ordinary Shares 50 4th Floor, New London House, 6 London Street, London, EC3R 7LP
Tenet Group Limited Ordinary B Shares 47 Tenet Limited Ordinary Shares 47 Tenet Platform Services Limited Ordinary A Shares 47 TenetConnect Limited Ordinary Shares 47 TenetConnect Services Limited Ordinary Shares 47 TenetFinancial Solutions Limited Ordinary Shares 47 TenetLime Limited Ordinary Shares 47 TenetSelect Limited Ordinary Shares 47 5 Old Broad Street, London EC2N 1A Architas Multi-Manager Diversified Protector 70 OEIC 48
Homesun 2 Limited Ordinary Shares 100 Homesun 3 Limited Ordinary Shares 100 Homesun 4 Limited Ordinary Shares 100 Homesun 5 Limited Ordinary Shares 100 Homesun Limited Ordinary Shares 100 c/o James Fletcher, Mainstay, Whittington Hall, Whittington Road, Worcester, WR5 2ZX
Aviva Investors GR SPV 1 Limited Ordinary Shares 100 Aviva Investors GR SPV 2 Limited Ordinary Shares 100 Aviva Investors GR SPV 3 Limited Ordinary Shares 100 Aviva Investors GR SPV 4 Limited Ordinary Shares 100 Aviva Investors GR SPV 5 Limited Ordinary Shares 100 Aviva Investors GR SPV 6 Limited Ordinary Shares 100 Aviva Investors GR SPV 7 Limited Ordinary Shares 100 Aviva Investors GR SPV 8 Limited Ordinary Shares 100 Aviva Investors GR SPV 9 Limited Ordinary Shares 100 Aviva Investors GR SPV 10 Limited Ordinary Shares 100 Aviva Investors GR SPV 11 Limited Ordinary Shares 100 Aviva Investors GR SPV 12 Limited Ordinary Shares 100 Aviva Investors GR SPV 13 Limited Ordinary Shares 100 Aviva Investors GR SPV 14 Limited Ordinary Shares 100 Aviva Investors GR SPV 15 Limited Ordinary Shares 100 Aviva Investors GR SPV 16 Limited Aviva Investors GR SPV 17 Limited
Cannock Designer Outlet (GP Holdings) Limited Ordinary Shares 100 Cannock Designer Outlet (GP) Limited Ordinary Shares 100 Cannock Designer Outlet (Nominee 1) Limited Ordinary Shares 100 Cannock Designer Outlet (Nominee 2) Limited Ordinary Shares 100 Pitheavlis, Perth, Perthshire, PH2 0NH Aviva (Peak No.1) UK Limited Ordinary Shares 100 Aviva Insurance Limited Ordinary Shares 100 Aviva Investors (FP) Limited Ordinary Shares 100 Aviva Investors (GP) Scotland Limited Ordinary Shares 100 Pixham End, Dorking, Surrey, RH4 1QA Aviva Administration Limited Ordinary Shares 100 Aviva Investment Solutions UK Limited Ordinary Shares 100 Aviva Management Services UK Limited Ordinary Shares 100 Bankhall Support Services Limited Ordinary Shares 100 DBS Financial Management Limited Ordinary Shares 100 DBS Management Limited Ordinary Shares 100 Friends AEL Trustees Limited Ordinary Shares 100 Friends AELLAS Limited Ordinary Shares 100 Friends AELRIS Limited £1 Stock Shares 100 Friends Life and Pensions Limited Ordinary Shares 100 Friends Life Assurance Society Limited Ordinary Shares 100
Company name Share Class1 % held Friends Life Company Limited Ordinary Shares 100 Friends Life Distribution Limited Ordinary Shares 100 Friends Life FPG Limited Ordinary Shares 100 Friends Life FPL Limited Ordinary Shares 100 Friends Life FPLMA Limited Ordinary Shares 100 Friends Life Holdings plc Ordinary Shares 100 Friends Life Limited Ordinary Shares 100 Friends Life WL Limited Ordinary Shares 100 Friends Provident Distribution Holdings Limited Ordinary Shares 100 Friends Provident Investment Holdings Limited Ordinary A Shares 100 Friends Provident Life Assurance Limited Ordinary Shares 100 Friends Provident Managed Pension Funds Limited
Ordinary Shares 100 2 Fitzroy Place Limited Partnership2 Limited Partnership 50 20 Gracechurch (General Partner) Limited General Partner 100 20 Gracechurch Limited Partnership Limited Partnership 100 20 Lowndes Square Management Company Limited
A Shares, B Shares 100 2-10 Mortimer Street (GP No 1) Limited2 Ordinary Shares 50 2-10 Mortimer Street GP Limited2 Ordinary Shares 50 2-10 Mortimer Street Limited Partnership2 Limited Partnership 50 30 Warwick Street LP2 Limited Partnership 50 30 Warwick Street Nominee 1 Limited2 Ordinary Shares 50 30 Warwick Street Nominee 2 Limited2 Ordinary Shares 50 30-31 Golden Square LP2 Limited Partnership 50 30-31 Golden Square Nominee 1 Limited2 Ordinary Shares 50 30-31 Golden Square Nominee 2 Limited2 Ordinary Shares 50 41-42 Lowndes Square Management Company Limited
AI Special PFI SPV Limited Ordinary Shares 100 Ascot Real Estate Investments LP2 Limited Partnership 50 Ascot Real Estate Investments GP LLP2 Limited Partnership 50 Atlas Park Management Company Limited Limited By Guarantee 100 Aviva Brands Limited Ordinary Shares 100 Aviva Commercial Finance Limited Ordinary Shares 100 Aviva Company Secretarial Services Limited Ordinary Shares 100 Aviva Credit Services UK Limited Ordinary Shares 100 Aviva Employment Services Limited Ordinary Shares 100 Aviva Europe SE Ordinary Shares 92 Aviva Insurance Services UK Limited Ordinary Shares 100 Aviva International Holdings Limited Ordinary Shares 100 Aviva International Insurance Limited Ordinary Shares 100 Aviva Investors 30 70 GLobal Eq Ccy Hedged Ind Fund
Company name Share Class1 % held Aviva Investors Asia Pacific ex Japan Fund ACS 100 Aviva Investors Asia Pacific Property Fund OEIC 80 Aviva Investors Balanced Life Fund ACS 100 Aviva Investors Balanced Pension Fund ACS 100 Aviva Investors Cash Fund OEIC 56 Aviva Investors Cautious Pension Fund ACS 100 Aviva Investors Commercial Assets Nominee Limited Aviva Investors Commercial Assets GP Limited
Aviva Investors Corporate Bond Fund OEIC 93 Aviva Investors Dev Asia Pacific Ex Japan Eq Ind Fund
Aviva Investors Dev Euro Ex UK Equity Index Fund ACS 100 Aviva Investors Dev World Ex UK Equity Index Fund ACS 100 Aviva Investors Developd Overseas Gov Bd Ex UK Ind Fund
Aviva Investors Distribution Life Fund ACS 100 Aviva Investors EBC GP Limited Ordinary Shares 100 Aviva Investors EBC Limited Partnership Limited Partnership 100 Aviva Investors Employment Services Limited Ordinary Shares 100 Aviva Investors Europe Equity ex UK Fund ACS 100 Aviva Investors European Property Fund OEIC 73 Aviva Investors Global Equity Alpha Fund ACS 100 Aviva Investors Global Equity Fund ACS 100 Aviva Investors Global Equity Income Fund OEIC 81 Aviva Investors Global Services Limited Ordinary Shares 100 Aviva Investors Ground Rent GP Limited Ordinary Shares 100 Aviva Investors Ground Rent Holdco Limited Ordinary Shares 100 Aviva Investors Holdings Limited Ordinary Shares 100 Aviva Investors Idx-Lkd Gilts Ovr 5 Yrs Idx Fund ACS 100 Aviva Investors Index Linked Gilt Fund ACS 100 Aviva Investors Infrastructure GP Limited Ordinary Shares 100 Aviva Investors Infrastructure Income Midco 6.1 Limited
Aviva Investors International Index Tracking Fund Aviva Investors Japan Equity Alpha Fund
Aviva Investors Multi-Asset III Fund OEIC 50 Aviva Investors Multi-Asset IV Fund OEIC 41 Aviva Investors Multi-Manager 20-60% Shares Fund
Aviva Investors Multi-Manager Flexible Fund OEIC 81 Aviva Investors Multi-Strategy Target Income Fund OEIC 82 Aviva Investors Multi-Strategy Target Return Fund OEIC 47 Aviva Investors Non-Gilt Bond All Stocks Index Fund
Aviva Investors Non-Gilt Bond Over 15 Yrs Index Fund Aviva Investors Non-Gilt Bond Up To 5 Years Index Fund
Aviva Investors North American Equity Fund ACS 100 Aviva Investors North American Equity Index Fund Aviva Investors Pacific Ex-Japan Equity Index Fund
Aviva Investors Real Estate Finance Limited Ordinary Shares 100 Aviva Investors Real Estate Limited Ordinary Shares 100 Aviva Investors Realm Energy Centres GP Limited Aviva Investors REaLM Energy Centres No.1 LP
Limited Partnership 100 Aviva Investors Realm Infrastructure No.1 Limited Ordinary Shares 100
Aviva Investors Sterling Corporate Bond Fund ACS 100 Aviva Investors Sterling Gilt Fund ACS 100 Aviva Investors Stewardship Fixed Interest Fund ACS 100 Aviva Investors Stewardship International Equity Fund
Aviva Investors Strategic Bond Fund OEIC 41 Aviva Investors Strategic Global Equity Fund ACS 100 Aviva Investors UK Commercial Real Estate Senior Debt LP
Aviva Investors UK CRESD GP Limited Ordinary Shares 100 Aviva Investors UK Eq Ex Aviva Inv Trusts Index Fund
Boston Biomass Limited Ordinary Shares 100 Boston Wood Recovery Limited Ordinary Shares 100 Capital Residential Fund Capital Residential Fund Nominee No.1 Limited Capital Residential Fund Nominee No.2 Limited
Cardiff Bay Gp Limited Ordinary Shares 100 Cardiff Bay Limited Partnership Limited Partnership 100 CGU International Holdings BV Ordinary Shares 100 Chancery House London LP2 Limited Partnership 50 Chancery House London Nominee 1 Limited2 Ordinary Shares 50 Chancery House London Nominee 2 Limited2 Ordinary Shares 50 Chesterford Park2 Limited Partnership 50 Chesterford Park (General Partner) Limited2 Ordinary Shares 100 Chesterford Park (Nominee) Limited2 Ordinary Shares 100 Chichester Health (Holdings) Limited Ordinary Shares 100 Commercial Union Corporate Member Limited Ordinary Shares 100 Commercial Union Life Assurance Company Limited
Commercial Union Trustees Limited Ordinary Shares 100 Cornerford Limited Ordinary Shares 100 COW Real Estate Investment General Partner Limited
Company name Share Class1 % held Fitzroy Place GP 2 Limited2 Ordinary Shares 50 Fitzroy Place Management Co Limited2 Ordinary Shares 50 Fitzroy Place Residential Limited2 Ordinary Shares 50 Free Solar (Stage 2) Limited Ordinary Shares 100 Free Solar Holdco Limited Ordinary Shares 100 Friends Life Funds Limited Ordinary Shares 100 General Accident Executor and Trustee Company Limited
Igloo Regeneration Developments LP2 Limited Partnership 50 Igloo Regeneration Partnership2 Limited Partnership 40 Igloo Regeneration Property Unit Trust2 Unit Trust 50 IPE BV Ordinary Shares 100 Irongate House LP2 Limited Partnership 50 Irongate House Nominee 1 Limited2 Ordinary Shares 50 Irongate House Nominee 2 Limited2 Ordinary Shares 50 Lime Property Fund (General Partner) Limited Ordinary Shares 100 Lime Property Fund (Nominee) Limited Ordinary Shares 100 Lombard (London) 1 Limited Ordinary Shares 100 Lombard (London) 2 Limited Ordinary Shares 100 LUC Holdings Limited Ordinary Shares 20 Matthew Parker Street (Nominee No 1) Limited Ordinary Shares 100 Matthew Parker Street (Nominee No 2) Limited Ordinary Shares 100 Medium Scale Wind No.1 Limited Ordinary Shares 100 Mortimer Street Associated Co 1 Limited2 Ordinary Shares 50 Mortimer Street Associated Co 2 Limited2 Ordinary Shares 50 Mortimer Street Nominee 1 Limited2 Ordinary Shares 50 Mortimer Street Nominee 2 Limited2 Ordinary Shares 50 Mortimer Street Nominee 3 Limited2 Ordinary Shares 50 New Broad Street House LP2 Limited Partnership 50 New Broad Street House Nominee 1 Limited2 Ordinary Shares 50 New Broad Street House Nominee 2 Limited2 Ordinary Shares 50 Norwich Union (Shareholder GP) Limited Ordinary Shares 100 Norwich Union Public Private Partnership Fund Limited Partnership 100 NU 3PS Limited Ordinary Shares 100 NU Library For Brighton Limited Ordinary Shares 100 NU Offices for Redcar Limited Ordinary Shares 100 NU Schools for Redbridge Limited Ordinary Shares 100 NU Technology and Learning Centres (Hackney) Limited
NUPPP (GP) Limited Ordinary Shares 100 NUPPP Nominees Limited Ordinary Shares 100 Opus Park Management Limited Limited By Guarantee 100 Opus Park Management Limited Limited Partnership 100 ORN Capital Services Limited Ordinary Shares 100 Paddington Central III GP Ltd Ordinary Shares 100 Paddington Central III Limited Partnership Limited Partnership 100 Pegasus House and Nuffield House LP2 Limited Partnership 50 Pegasus House and Nuffield House Nominee 1 Limited2
The Designer Retail Outlet Centres (Mansfield) LP Limited Partnership 97 The Designer Retail Outlet Centres (York) General Partner Limited
The Designer Retail Outlet Centres (York) LP Limited Partnership 97 The Gobafoss Partnership Limited Partnership 100 The Ocean Marine Insurance Company Limited Ordinary Shares 100 The Square Brighton Limited Ordinary Shares 100 Tyne Assets (No 2) Limited Ordinary Shares 100 Tyne Assets Limited Ordinary Shares 100 Undershaft Limited Ordinary Shares 100 W Nine LP2 Limited Partnership 50 W Nine Nominee 1 Limited2 Ordinary Shares 50 W Nine Nominee 2 Limited2 Ordinary Shares 50 The Welsh Insurance Corporation Limited Ordinary Shares 100 The Yorkshire Insurance Company Limited Ordinary Shares 100 Aviva Investors UK Equity Dividend Fund Collective Investment Scheme 100 Chichester Health plc Ordinary Shares 100 Aviva Investors Energy Centres No.1 GP Limited Ordinary Shares 100 Swan Court Waterman’s Business Park, Kingsbury Crescent, Staines, Surrey, TW18 3BA
Anesco Mid Devon Limited Ordinary Shares 100 Anesco South West Limited Ordinary Shares 100 Free Solar (Stage 1) Limited Ordinary Shares 100 New Energy Residential Solar Limited Ordinary Shares 100 Norton Energy SLS Limited Ordinary Shares 100 TGHC Limited Ordinary Shares 100 Wellington Row, York, YO90 1WR Aviva (Peak No.2) UK Limited Ordinary Shares 100 Aviva Annuity UK Limited Ordinary Shares 100 Aviva Client Nominees UK Limited Ordinary Shares 100 Aviva Equity Release UK Limited Ordinary Shares 100 Aviva ERFA 15 UK Limited Ordinary Shares 100 Aviva Life & Pensions UK Limited Ordinary Shares 100 Aviva Life Holdings UK Limited Aviva Life Investments International (Recovery) Limited
Synergy Sunrise (Sentinel House) Limited Ordinary Shares 100 Undershaft (NULLA) Limited Ordinary Shares 100 Whittington Hall, Whittington Road, Worcester, Worecestershire, WR5 2ZX
Aviva Investors GR SPV16 Limited Ordinary Shares 100 61 Conduit Street London W1S 2GB AKO Global UCITS-BF (AKOGUBF) Mutual Fund 73 12 Throgmorton Avenue BlackRock US Dynamic Fund Unit Trust 21 BlackRock Market Advantage Fund Unit Trust 52 Artemis Fund Managers Limited, 57-59 St James’s Street, London SW1A 1LD
Company name Share Class1 % held Liontrust Sustainable Future European Growth Fund
Wealthify Limited Ordinary Shares 60 Pitheavlis, PERTH, Perthshire, PH2 0NH, United Kingdom
Aviva Vietnam Life Insurance Company Limited Non-Listed Shares 90 1 Investment Company with Variable Capital (‘ICVC’) Fond Common de Placement (‘FCP’) Open Ended Investment Fund (‘OEIC’) Société d ‘Investment à Capital Variable (‘SICAV’) Undertaking for Collective Investment in Transferrable Securities (‘UCITS’) Irish Collective Asset Management Vehicle (‘ICAV’) Authorised Contractual Scheme (‘ACS’) Organisme de Placement Collectif Immobilier (‘OPCI’) Sociétés Civiles de Placement Immobilier (‘SCPI’) 2 Please see accounting policies (D) Consolidation principles, for further details on Joint Ventures and the factors on which joint management is based.
Income Net investment income B 2,874 1,856 2,874 1,856 Expenses Operating expenses C (246) (217) Other expenses1 (8) — Finance costs D (519) (527)
Statement of financial position As at 31 December 2018 £m £m £m
Net (decrease)/increase in cash and cash equivalents (78) 4 Cash and cash equivalents at 1 January 87 82 Exchange gains on cash and cash equivalents 6 1
(i) Impact of changes on income statement There is no impact on the Company’s income statement.
Total assets 47,807 (9,828) 37,979 47,678 (9,121) 38,557 Effect analysed as: Investment in subsidiaries 41,192 (9,404) 31,788 40,521 (8,733) 31,788 Investment in joint venture 547 (424) 123 511 (388) 123 Total equity and liabilities 47,807 (9,828) 37,979 47,678 (9,121) 38,557 Total equity 23,080 (9,828) 13,252 22,912 (9,121) 13,791 Effect analysed as: Investment valuation reserve 9,828 (9,828) — 9,121 (9,121) — Total Liabilities 24,727 — 24,727 24,766 — 24,766
Staff costs and other employee related expenditure (see (ii) below) 19 107 Other operating costs 227 105 Net foreign exchange losses — 5 Total 246 217
Wages and salaries — 54 Social security costs — 7 Defined contribution schemes — 8 Equity compensation plans (see (iii) below) 19 30 Termination benefits — 8
C – Operating expenses continued (ii) Staff costs continued The Company is no longer charged staff costs directly by the UK employing entity. Staff costs in 2018 are included within other operating costs as part of the overall recharges from the service company within the Group.
(iii) Equity compensation plans All transactions in the Group’s equity compensation plans, which involve options and awards for ordinary shares of the Company, are included in other operating costs. Full disclosure of these plans is given in the Group consolidated financial statements, note 33. The cost of such options and awards is borne by all participating businesses and, where relevant, the Company bears an appropriate charge. As the majority of the charge to the Company relates to directors’ options and awards, for which full disclosure is made in the directors’ remuneration report, no further disclosure is given here.
Finance Act 2016, which received Royal Assent on 15 September 2016, will reduce the rate of corporation tax to 17% from 1 April 2020. The reduction in rate from 19% to 17% has been used in the calculation of the Company’s deferred tax assets and liabilities at 31 December 2018.
F – Investments in subsidiaries and joint venture (i) Subsidiaries Movements in the Company’s investments in its subsidiaries are as follows: £m £m
At 31 December 2018, the Company has two wholly owned subsidiaries, both incorporated in the UK. These are General Accident plc and Aviva Group Holdings Limited. Aviva Group Holdings Limited is an intermediate holding company, while General Accident plc has preference shares listed on the London Stock Exchange. The principal subsidiaries of the Aviva Group at 31 December 2018 are set out in note 63 to the Group consolidated financial statements.
Expected to be recovered in less than one year 414 2,028 Expected to be recovered in more than one year 5,401 3,680 5,815 5,708
Balance at 1 January 2017 (restated)2 6,438 78 3,747 Arising in the year: Profit for the year — — 1,225 Remeasurements of pension schemes — — (2) Dividends and appropriations — — (1,081) Reserves credit for equity compensation plans — 77 — Issue of share capital under equity compensation scheme — (44) 42 Shares purchased in buy-back — — (300) Redemption of fixed rate tier 1 notes3 — — (92) Aggregate tax effect — — 16
The tax effect of £8 million (2017: £16 million) is recognised in respect of coupon payments of £44 million (2017: £81 million) on the direct capital instrument and tier 1 notes.
J – Pension deficits and other provisions (i) Carrying amounts £m
Within 1 year 251 315 566 978 333 1,311 1 – 5 years 708 1,231 1,939 266 1,311 1,577 5 – 10 years 673 1,490 2,163 444 1,591 2,035 10 – 15 years — 1,441 1,441 — 1,589 1,589 Over 15 years 5,365 2,923 8,288 5,791 3,282 9,073
Where subordinated debt is undated, the interest payments have not been included beyond 15 years. Annual interest payments in future years for these borrowings are £49 million (2017: £49 million).
The fair value of the subordinated debt at 31 December 2018 was £5,831 million (2017: £7,046 million), calculated with reference to quoted prices. The fair value of the senior debt at 31 December 2018 was £1,113 million (2017: £756 million), calculated with reference to quoted prices. 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 52, with details of the fair value hierarchy in relation to these borrowings in note 23.
Loans due to subsidiaries P(ii) 12,815 13,008 Amount due to subsidiaries P(iii) 4,206 4,084 Total 17,021 17,092
M – Direct capital instrument and tier 1 notes Details of the direct capital instrument and tier 1 notes are given in the Group consolidated financial statements, note 36. The 6.875% £210 million STICS are reflected in the Company financial statements at a value of £224 million (2017: £224 million) following the transfer at fair value from Friends Life Holdings plc on 1 October 2015.
All of the Company’s long-term external borrowings are at fixed rates of interest and are therefore not exposed to changes in these rates. However, for short term commercial paper, the Company is affected by changes in these rates to the extent the redemption of these borrowings is funded by the issuance of new commercial paper or other borrowings. Further details of the Company’s borrowings are provided in note K and the Group consolidated financial statements, note 52.
O – Risk management continued Interest rate risk continued The effect of a 100 basis point increase/decrease in interest rates on floating rate loans due to and from subsidiaries and on refinancing short term commercial paper as it matures would be a decrease/increase in profit before tax of £104 million (2017: decrease/increase of £114 million). The net asset value of the Company’s financial resources is not materially affected by fluctuations in interest rates.
The interest received on these loans is £92 million (2017: £116 million). See note B.
On 27 June 2016, the Company provided an unsecured loan of C$446 million to Aviva Group Holdings Limited, its subsidiary, with a maturity date of 27 June 2046. The loan accrues interest at 348 basis points above 6 month CDOR. As at the statement of financial position date, the total amount drawn was £256 million (2017: £263 million).
• An unsecured loan of €700 million with a maturity date of 3 July 2024. The loan accrues interest at a fixed rate of 1.64% with settlement to be paid at maturity. As at the statement of financial position date, the total amount drawn down on the facility was £628 million (2017: £621 million).
• An unsecured loan of €900 million with a maturity date of 4 December 2025. The loan accrues interest at a fixed rate of 1.74% with settlement to be paid at maturity. As at the statement of financial position date, the total amount drawn down on the facility was £808 million (2017: £799 million).
Within 1 year — 131 131 3,108 122 3,230 1 – 5 years 12,815 514 13,329 9,900 390 10,290 Over 5 years — — — — — —
Income earned relates to dividends. The Company incurred expenses in the year of £0.5 million (2017: £0.2 million) representing audit fees paid by the Company on behalf of subsidiaries. The Company did not recharge subsidiaries for these expenses.
Subsidiaries 224 4,206 182 4,084 1 Following a review of the Company’s related party classifications, comparative amounts in respect of services provided by related parties have been amended from those previously reported. The balances exclude loans owed to subsidiaries.
Q – Subsequent events There are no subsequent events to report.
Assets under management (AUM) and assets under administration (AUA) Assets under management (AUM) represent all assets managed or administered by or on behalf of the Group, including those assets managed by third parties. AUM include managed assets that are reported within the Group’s statement of financial position and those assets belonging to external clients outside the Aviva Group which are therefore not included in the Group’s statement of financial position.
Consistent with previous years, assets under administration (AUA) comprise AUM plus assets managed by third parties on platforms administered by Aviva Investors.
Both AUM and AUA are monitored as they reflect the potential earnings arising from investment returns and fee and commission income and measure the size and scale of the Group’s fund management business.
AUM managed on behalf of third parties2 Aviva Investors3 64 72 UK Platform4 23 20 Other 9 11
Total AUM 470 487 1 Includes assets classified as held for sale. 2 AUM managed on behalf of third parties cannot be directly reconciled to the financial statements. 3 Following a review of AUM managed on behalf of third parties, comparative amounts for Aviva Investors have been amended from those previously reported to reflect the fact that certain crossholdings had not been correctly eliminated on consolidation. The effect of this change is to reduce total AUM by £2.5 billion at 31 December 2017.
Net earned premiums – GI & Health (as per note 5) 9,887 9,882 Adjusted for: Net earned premiums – Health (857) (906)
Combined operating ratio 96.6% 96.6% 1 Corresponds to the sum of claims and benefits paid, net of recoveries from reinsurers and the change in insurance liabilities, net of reinsurance per note 5. 2 Commission and expenses consists of fee and commission income, fee and commission expense and other operating expenses included within the general insurance & health segmental income statement (per note 5) adjusted to an earned basis and to remove the health business.
Excess centre cash flow This represents the cash remitted by business units to the Group centre less central operating expenses and debt financing costs. Excess centre cash flow is a measure of the cash available to pay dividends, reduce debt or invest back into our business.
Group adjusted operating profit‡# Group adjusted operating profit is a non-GAAP APM which is reported to the Group chief operting decision maker for the purpose of decision making and for internal performance management of the Group’s operating segments that incorporates an expected return on investments supporting the life and non-life insurance businesses. The various items excluded from group adjusted operating profit, but included in IFRS profit before tax, are: Investment variances, economic assumption changes and shortterm fluctuation in return on investments Group adjusted operating profit for the life insurance business is based on expected investment returns on financial investments backing shareholder and policyholder funds over the reporting period, with allowance for the corresponding expected movements in liabilities. The expected rate of return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return and asset classification. For fixed interest securities classified as fair value through profit or loss, the expected investment returns are based on average prospective yields for the actual assets held less an adjustment for credit risk. Where such securities are classified as available for sale the expected return comprises interest or dividend payments and amortisation of the premium or discount at purchase. The expected return on equities and properties is calculated by reference to the opening 10-year swap rate in the relevant currency plus an appropriate risk margin.
Group adjusted operating profit includes the effect of variances in experience for non-economic items, such as mortality, persistency and expenses, and the effect of changes in non-economic assumptions. This would include movements in liabilities due to changes in discount rate arising from discretionary management decisions that impact on product profitability over the lifetime of products. Changes due to economic items, such as market value movement and interest rate changes, which give rise to variances between actual and expected investment returns, and the impact of changes in economic assumptions on liabilities, are disclosed separately outside Group adjusted operating profit.
Group adjusted operating profit for the non-life insurance business is based on expected investment returns on financial investments backing shareholder funds over the period. Expected investment returns are calculated for equities and properties by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the long-term rate of return. This rate of return is the same as that applied for the long-term business expected returns. The long-term return for other investments is the actual income receivable for the period.
The exclusion of short-term investment variances from this APM reflects the long-term nature of much of our business. The Group adjusted operating profit which is used in managing the performance of our operating segments excludes the impact of economic factors, to provide a comparable measure year on year.
• A release of a provision of £78 million relating to the sale of Aviva USA in 2013, which represents the reversal of an item previously excluded from Group adjusted operating profit
• A gain of £36 million relating to negative goodwill on the acquisition of Friends First (see note 3), which is excluded from Group adjusted operating profit for consistency with the treatment of impairment of goodwill
United Kingdom – Life 1,909 1,764 United Kingdom – General Insurance 415 411 Canada 47 46 Europe 1,011 1,059 Asia 262 191 Aviva Investors 151 201 Other Group activities (679) (604)
Group adjusted operating profit before tax attributable to shareholders’ profits 3,116 3,068
Adjusted for the following: Investment return variances and economic assumption changes on life business (197) 34 Short-term fluctuation in return on investments on nonlife business (476) (345) Economic assumption changes on general insurance and health business 1 (7) Impairment of goodwill, associates and joint ventures and other amounts expensed (13) (49) Amortisation and impairment of intangibles (209) (197) Amortisation and impairment of acquired value of inforce business (426) (495) Profit on the disposal and re-measurement of subsidiaries, joint ventures and associates 102 135 Other 231 —
Operating expenses The day-to-day expenses involved in running the business are classified as operating expenses. A reconciliation of operating expenses to the IFRS consolidated income statement is set out below: £m
Other expenses (IFRS income statement) 3,843 3,537 Less: amortisation and impairment (658) (678) Less: foreign exchange gains/(losses) (28) (49) Other acquisition costs 954 892 Claims handling costs 336 330 Integration and restructuring costs — (141) Less: Other costs (421) (113) Operating expenses 4,026 3,778
There have been no costs classified as integration and restructuring in the year. In 2017, these costs relate to integration costs in the UK and Canada, and restructuring costs in the UK and Europe. It is possible that significant integration and restructuring activity undertaken in the future may result in the related costs being excluded from operating profit.
Operating expenses excludes other costs based on management’s assessment of their nature or incidence that are not representative of underlying operating expenses and would distort the year on year operating expenses trend. Other costs represent a reallocation based on management’s assessment of ongoing maintenance of business units and in 2018 includes movements in provisions set aside in respect of ongoing regulatory compliance as well as an increase of £175 million product governance provision relating to a historical issue over pension arrangement advised sales by Friends Provident, of which over 90% of cases relate to pre-2002 (see note 50 – Pension deficits and other provisions).
Operating earnings per share (EPS)‡# Operating EPS1 is calculated based on the Group adjusted operating profit attributable to ordinary shareholders net of tax, deducting non-controlling interests, preference dividends and the direct capital instrument (DCI) and tier 1 note coupons divided by the weighted average number of ordinary shares in issue, after deducting treasury shares. Operating EPS is used by management to determine the dividend payout ratio target and hence a useful APM for users of the financial statements. A reconciliation between Operating EPS and Basic EPS can be found in note 15. 1 In 2016 and 2017 adjustments were made to the Group calculation of Operating EPS for the purposes of calculating Executive Directors' bonus and long-term incentive plans. These adjustments are described in the Annual Report on Remuneration.
Present value of new business premiums (PVNBP) PVNBP measures the additional value to shareholders of sales in the Group’s life insurance business. PVNBP is derived from the present value of new regular premiums expected to be received over the term of the new contracts plus 100% of single premiums from new business written in the financial period and is expressed at the point of sale. The discounted value of regular premiums is calculated using the same methodology as for Value of new business on an adjusted Solvency II basis (VNB). PVNBP also includes any changes to existing contracts which were not anticipated at the outset of the contract that generate additional shareholder risk and associated premium income of the nature of a new policy.
Present value of new business premiums 40,763 40,795 Investment sales 4,799 7,888 General insurance and health net written premiums 9,968 10,035 Long-term health and collectives business (3,840) (5,213) Total sales 51,690 53,505 Effect of capitalisation factor on regular premium longterm business1 (12,726) (11,412) JVs and associates2 (257) (618) Annualisation impact of regular premium long-term business3 (247) (281) Deposits4 (10,329) (10,953) Investment sales5 (4,799) (7,888) IFRS gross written premiums from existing long-term business6 4,776 4,765 Long-term insurance and savings business premiums ceded to reinsurers (1,775) (1,741)
IFRS, premiums from these sales are excluded. 3 The impact of annualisation is removed in order to reconcile the non-GAAP new business sales to IFRS
income statement includes premiums received from all business, both new and existing.
Executive Directors' bonus and long-term incentive plans. These adjustments are described in the Annual Report on Remuneration.
Solvency II Available capital resources determined under Solvency II are referred to as ‘own funds’. This includes the excess of assets over liabilities in the Solvency II balance sheet, calculated on best estimate, market consistent assumptions and net of transitional measures on technical provisions (TMTP), subordinated liabilities that qualify as capital under Solvency II, and off-balance sheet own funds.
The Solvency II regime requires insurers to hold own funds in excess of the Solvency Capital Requirement (SCR). The SCR is calculated at Group level using a risk based capital model which is calibrated to reflect the cost of mitigating the risk of insolvency to a 99.5% confidence level over a one year time horizon – equivalent to a 1 in 200 year event – against financial and non-financial shocks. As a number of subsidiaries utilise the standard formula rather than a risk based capital model to assess capital requirements, the overall Group SCR is calculated using a partial internal model, and it is shown after the impact of diversification benefit.
The reconciliation from total Group equity on an IFRS basis to Solvency II own funds is presented below.
Estimated Solvency II net assets (gross of non-controlling interests) 24.6 26.0
4 Includes valuation adjustments and the impact of the difference between consolidation methodologies under Solvency II and IFRS.
A number of key performance metrics relating to Solvency II are utilised to measure and monitor the Group’s performance and financial strength: • Solvency II shareholder cover ratio‡ • Value of new business on an adjusted Solvency II basis (VNB)‡ • Operating Capital Generation (OCG)#
Definitions and additional information in respect of each of these metrics is included within this section.
Solvency II shareholder cover ratio‡ The estimated Solvency II shareholder cover ratio is an indicator of the Group’s balance sheet strength which is derived from own funds divided by the SCR using a ‘shareholder view’. The shareholder view is considered by management to be more representative of the shareholders’ risk-exposure and the Group’s ability to cover the SCR with eligible own funds, and aligns with management’s approach to dynamically manage its capital position. In arriving at the shareholder position, the following adjustments are typically made to the regulatory Solvency II position: • The contribution to the Group’s SCR and own funds of the most material fully ring fenced with-profits funds and staff pension schemes in surplus are excluded. These exclusions have no impact on Solvency II surplus as these funds are self-supporting on a Solvency II capital basis with any surplus capital above SCR not recognised.
• Pro forma adjustments are made if the Solvency II shareholder cover ratio does not fully reflect the effect of transactions or capital actions that are known as at each reporting date. Such adjustments may be required in respect of planned acquisitions and disposals, group reorganisations and adjustments to the Solvency II valuation basis arising from changes to the underlying regulations or updated interpretations provided by EIOPA. These adjustments have been made in order to show a more representative view of the Group’s solvency position.
• The volatility adjustment is intended to reflect temporary distortions in spreads on government bonds based on rates prescribed by EIOPA.
• The matching adjustment (MA) is an increase applied to the riskfree rate used to value insurance liabilities where the cash flows are relatively fixed and well matched by assets intended to be held to maturity with relatively fixed cash flows (resulting in additional yield from illiquidity risk).
The matching adjustment used for 2018 UK new business (where applicable) was 105 bps (2017 restated1: 132 bps). 1 The 2017 matching adjustment has been restated to reflect an allowance for credit risk and investment expenses.
For life business, OCG is split into the impact of new business, earnings from existing business and other OCG, where other OCG includes the impact of capital actions and non-economic assumption changes. OCG excludes economic variances and economic assumption changes. The expected investment returns assumed within earnings from existing business are consistent with the returns within Group adjusted operating profit.
An analysis of the components of OCG is presented below: Adjusted Solvency II VNB (gross of tax and non-controlling interests)
Allowance for Solvency II contract boundary rules — — Differences due to change in business in scope (0.2) (0.2) Tax & Other1 (0.3) (0.3) Solvency II Own Funds impact of new business (net of tax and non-controlling interests)
Dividend payment options Shareholders are able to receive their dividends in the following ways: • Directly into a nominated UK bank account • Directly into a nominated Eurozone bank account • The Global Payment Service provided by our Registrar,
www.aviva.com/online: You can access Computershare online services and log in using your Computershare details to: • Change your address • Change payment options • Switch to electronic communications • View your shareholding • View any outstanding payments
Annual General Meeting (AGM) The 2019 AGM will be held at The Queen Elizabeth II Centre, Broad Sanctuary, Westminster, London SW1P 3EE, on Thursday, 23 May 2019, at 11am.
This document should be read in conjunction with the documents distributed by Aviva plc (the ‘Company’ or ‘Aviva’) through The Regulatory News Service (RNS).
This announcement contains, and we may make other verbal or written ‘forward-looking statements’ with respect to certain of Aviva’s plans and current goals and expectations relating to future financial condition, performance, results, strategic initiatives and objectives. Statements containing the words ‘believes’, ‘intends’, ‘expects’, ‘projects’, ‘plans’, ‘will’, ‘seeks’, ‘aims’, ‘may’, ‘could’, ‘outlook’, ‘likely’, ‘target’, ‘goal’, ‘guidance’, ‘trends’, ‘future’, ‘estimates’, ‘potential’ and ‘anticipates’, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aviva believes factors that could cause actual results to differ materially from those indicated in forward-looking statements in the announcement include, but are not limited to: the impact of ongoing difficult conditions in the global financial markets and the economy generally; the impact of simplifying our operating structure and activities; the impact of various local and international political, regulatory and economic conditions; market developments and government actions (including those arising from the referendum on UK membership of the European Union); the effect of credit spread volatility on the net unrealised value of the investment portfolio; the effect of losses due to defaults by counterparties, including potential sovereign debt defaults or restructurings, on the value of our investments; changes in interest rates that may cause policyholders to surrender their contracts, reduce the value of our portfolio and impact our asset and liability matching; the impact of changes in short or long-term inflation; the impact of changes in equity or property prices on our investment portfolio; fluctuations in currency exchange rates; the effect of market fluctuations on the value of options and guarantees embedded in some of our life insurance products and the value of the assets backing their reserves; the amount of allowances and impairments taken on our investments; the effect of adverse capital and credit market conditions on our ability to meet liquidity needs and our access to capital; changes in, or restrictions on, our ability to initiate capital management initiatives; changes in or inaccuracy of assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; a cyclical downturn of the insurance industry; the impact of natural and man-made catastrophic events on our business activities and results of operations; our reliance on information and technology and third-party service providers for our operations and systems; the inability of reinsurers to meet obligations or unavailability of reinsurance coverage; increased competition in the UK and in other countries where we have significant operations; regulatory approval of extension of use of the Group’s internal model for calculation of regulatory capital under the European Union’s Solvency II rules; the impact of actual experience differing from estimates used in valuing and amortising deferred acquisition costs (DAC) and acquired value of in-force business (AVIF); the impact of recognising an impairment of our goodwill or intangibles with indefinite lives; changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect of legal proceedings and regulatory investigations; the impact of operational risks, including inadequate or failed internal and external processes, systems and human error or from external events (including cyber attack); risks associated with arrangements with third parties, including joint ventures; our reliance on third-party distribution channels to deliver our products; funding risks associated with our participation in defined benefit staff pension schemes; the failure to attract or retain the necessary key personnel; the effect of systems errors or regulatory changes on the calculation of unit prices or deduction of charges for our unit-linked products that may require retrospective compensation to our customers; the effect of fluctuations in share price as a result of general market conditions or otherwise; the effect of simplifying our operating structure and activities; the effect of a decline in any of our ratings by rating agencies on our standing among customers, broker-dealers, agents, wholesalers and other distributors of our products and services; changes to our brand and reputation; changes in government regulations or tax laws in jurisdictions where we conduct business, including decreased demand for annuities in the UK due to changes in UK law; the inability to protect our intellectual property; the effect of undisclosed liabilities, integration issues and other risks associated with our acquisitions; and the timing/regulatory approval impact, integration risk and other uncertainties, such as non-realisation of expected benefits or diversion of management attention and other resources, relating to announced acquisitions and pending disposals and relating to future acquisitions, combinations or disposals within relevant industries, the policies, decisions and actions of government or regulatory authorities in the UK, the EU, the US or elsewhere, including the implementation of key legislation and regulation. For a more detailed description of these risks, uncertainties and other factors, please see the ‘Risk and risk management’ section of the strategic report.
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