Translation differences on debt securities and other monetary financial assets measured at fair value and designated as held at fair value through profit or loss (FVTPL) (see accounting policy T) are included in foreign exchange gains and losses in the income statement. For monetary financial assets designated as available for sale (AFS), translation differences are calculated as if they were carried at amortised cost and so are recognised in the income statement, whilst foreign exchange differences arising from fair value gains and losses are recognised in other comprehensive income and included in the investment valuation reserve within equity. Translation differences on non-monetary items, such as equities which are designated as FVTPL, are reported as part of the fair value gain or loss, whereas such differences on AFS equities are included in the investment valuation reserve.
In certain businesses, the accounting policies or accounting estimates have been changed, as permitted by IFRS 4 and IAS 8 respectively, to remeasure designated insurance liabilities to reflect current market interest rates and changes to regulatory capital requirements. When accounting policies or accounting estimates have been changed, and adjustments to the measurement basis have occurred, the financial statements of that year will have disclosed the impacts accordingly. One such example is our adoption of Financial Reporting Standard 27 Life Assurance (FRS 27) which was issued by the UK’s Accounting Standards Board (ASB) in December 2004 (subsequently withdrawn by the ASB in 2015). The additional requirements of FRS 27 are detailed in accounting policy L below.
138 | Aviva plc Annual report and accounts 2015 the premiums written in a year that relate to periods of risk after the statement of financial position date. Unearned premiums are calculated on either a daily or monthly pro rata basis. Premiums collected by intermediaries, but not yet received, are assessed based on estimates from underwriting or past experience, and are included in premiums written.
(J) Other fee and commission income Other fee and commission income consists primarily of fund management fees, distribution fees from mutual funds, commissions on reinsurance ceded, commission revenue from the sale of mutual fund shares and transfer agent fees for shareholder record keeping. Reinsurance commissions receivable are deferred in the same way as acquisition costs, as described in accounting policy X. All other fee and commission income is recognised as the services are provided.
Unrealised gains and losses, arising on investments which have not been derecognised as a result of disposal or transfer, represent the difference between the carrying value at the year end and the carrying value at the previous year end or purchase value during the year, less the reversal of previously recognised unrealised gains and losses in respect of disposals made during the year. Realised gains or losses on investment property represent the difference between the net disposal proceeds and the carrying amount of the property.
The long-term business provisions are calculated separately for each life operation, based either on local regulatory requirements or existing local GAAP (at the later of the date of transition to IFRS or the date of the acquisition of the entity); and actuarial principles consistent with those applied in each local market. Each calculation represents a determination within a range of possible outcomes, where the assumptions used in the calculations depend on the circumstances prevailing in each life operation. The principal assumptions are disclosed in note 40(b). For the UK with-profit funds, FRS 27 requires liabilities to be calculated on the realistic basis as set out by the UK’s Prudential Regulation Authority (PRA), adjusted to remove the shareholders’ share of future bonuses. For UK non-profit insurance contracts, the Group applies PRA regulatory requirements, adjusted to remove certain regulatory reserves and margins in assumptions, notably for annuity business.
Contract liabilities Deposits collected under non-participating investment contracts are not accounted for through the income statement, except for the investment income attributable to those contracts, but are accounted for directly through the statement of financial position as an adjustment to the investment contract liability.
(N) Reinsurance The Group assumes and cedes reinsurance in the normal course of business, with retention limits varying by line of business. Premiums on reinsurance assumed are recognised as revenue in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies, using assumptions consistent with those used to account for these policies.
Where general insurance liabilities are discounted, any corresponding reinsurance assets are also discounted using consistent assumptions.
Reinsurance of non-participating investment contracts and reinsurance contracts that principally transfer financial risk are accounted for directly through the statement of financial position. A deposit asset or liability is recognised, based on the consideration paid or received less any explicitly identified premiums or fees to be retained by the reinsured. These deposit assets or liabilities are shown within reinsurance assets in the consolidated statement of financial position.
(O) Goodwill, AVIF and intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill arising on the Group’s investments in subsidiaries is shown as a separate asset, whilst that on associates and joint ventures is included within the carrying value of those investments.
Depreciation is calculated on the straight-line method to write down the cost of other assets to their residual values over their estimated useful lives as follows: • Properties under construction No depreciation • Owner-occupied properties, and related mechanical and electrical equipment
Three years, or lease term (up to useful life) if longer
(T) Financial investments The Group classifies its investments as either FVTPL or AFS. The classification depends on the purpose for which the investments were acquired, and is determined by local management at initial recognition. The FVTPL category has two subcategories – those that meet the definition as being held for trading and those the Group chooses to designate as FVTPL (referred to in this accounting policy as ‘other than trading’) upon initial recognition.
AFS equity securities: An AFS equity security is considered impaired if there is objective evidence that the cost may not be recovered. In addition to qualitative impairment criteria, such evidence includes a significant or prolonged decline in fair value below cost. Unless there is evidence to the contrary, an equity security is considered impaired if the decline in fair value relative to cost has been either at least 20% for a continuous six-month period or more than 40% at the end of the reporting period, or been in an unrealised loss position for a continuous period of
142 | Aviva plc Annual report and accounts 2015 more than 12 months at the end of the reporting period. We also review our largest equity holdings for evidence of impairment, as well as individual equity holdings in industry sectors known to be in difficulty. Where there is objective evidence that impairment exists, the security is written down regardless of the size of the unrealised loss.
(V) Loans Loans with fixed maturities, including policyholder loans, mortgage loans on investment property, securitised mortgages and collateral loans, are recognised when cash is advanced to borrowers. Certain loans are carried at their unpaid principal balances and adjusted for amortisation of premium or discount, non-refundable loan fees and related direct costs. These amounts are deferred and amortised over the life of the loan as an adjustment to loan yield using the effective interest rate method. Loans with indefinite future lives are carried at unpaid principal balances or cost.
Operating cash flows Purchases and sales of investment property, loans and financial investments are included within operating cash flows as the purchases are funded from cash flows associated with the
(Z) Leases Leases, where a significant portion of the risks and rewards of ownership is retained by the lessor, are classified as operating leases. Where the Group is the lessee, payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the term of the relevant leases.
(AA) Provisions and contingent liabilities Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more probable than not that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Restructuring provisions include lease termination penalties and employee termination payments. They comprise only the direct expenditures arising from the restructuring, which are those that are necessarily entailed by the restructuring; and not associated with the ongoing activities of the entity. The amount recorded as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Where the effect of the time value of money is material, the provision is the present value of the expected expenditure. Provisions are not recognised for future operating losses.
The Group accounts for options and awards under equity compensation plans, which were granted after 7 November 2002, until such time as they are fully vested, using the fair value based method of accounting (the ‘fair value method’). Under this method, the cost of providing equity compensation plans is based on the fair value of the share awards or option plans at date of grant, which is recognised in the income statement over the expected vesting period of the related employees and credited to the equity compensation reserve, part of shareholders’ funds. In certain jurisdictions, awards must be settled in cash instead of shares, and the credit is taken to liabilities rather than reserves. The fair value of these cashsettled awards is recalculated each year, with the income statement charge and liability being adjusted accordingly.
The principal temporary differences arise from depreciation of property and equipment, revaluation of certain financial assets and liabilities including derivative contracts, technical provisions and other insurance items, provisions for pensions and other post-retirement benefits and tax losses carried forward; and, in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base. The rates enacted or substantively enacted at the statement of financial position date are used to value the deferred tax assets and liabilities.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit 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.
Current and deferred tax relating to items recognised in other comprehensive income and directly in equity are similarly recognised in other comprehensive income and directly in equity respectively. Deferred tax related to fair value re-measurement of available for sale investments, pensions and other postretirement obligations and other amounts charged or credited directly to other comprehensive income is recognised in the statement of financial position as a deferred tax asset or liability. Current tax on interest paid on direct capital instruments and tier 1 notes is credited directly in equity.
In addition to paying tax on shareholders’ profits (‘shareholder tax’), the Group’s life businesses in the UK, Ireland and Singapore pay tax on policyholders’ investment returns (‘policyholder tax’) on certain products at policyholder tax rates. The incremental tax borne by the Group represents income tax on policyholder’s investment return. In jurisdictions where policyholder tax is applicable, the total tax charge in the income statement is allocated between shareholder tax and policyholder tax. The shareholder tax is the corporate tax charge calculated on shareholder profit. The difference between the total tax charge and shareholder tax is allocated to policyholder tax. The Group has decided to show separately the amounts of policyholder tax to provide a meaningful measure of the tax the Group pays on its profit. In the pro forma reconciliations, the operating profit has been calculated after charging policyholder tax.
(AE) Share capital and treasury shares Equity instruments An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Accordingly, a financial instrument is treated as equity if: (i) there is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on terms that may be unfavourable; and
(AG) Earnings per share Basic earnings per share is calculated by dividing net income available to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding the weighted average number of ordinary shares purchased by the Group and held as Treasury shares.
Gross written premiums 21,925 21,670 Premiums ceded to reinsurers (2,890) (1,614)
Premiums written net of reinsurance 19,035 20,056 Net change in provision for unearned premiums (111) 1
Net earned premiums H 18,924 20,057 Fee and commission income I & J 1,797 1,230 Net investment income K 2,825 21,889 Share of profit after tax of joint ventures and associates 180 147 Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates 3b 2 174
Expenses 6 Claims and benefits paid, net of recoveries from reinsurers (21,985) (19,474) Change in insurance liabilities, net of reinsurance 40a(ii) 6,681 (5,570) Change in investment contract provisions (1,487) (6,518) Change in unallocated divisible surplus 45 984 (3,364) Fee and commission expense (3,347) (3,389) Other expenses (2,784) (1,979) Finance costs 7 (618) (540)
Earnings per share AG & 14 Basic (pence per share) 22.6p 50.4p Diluted (pence per share) 22.3p 49.6p
Share of other comprehensive income of joint ventures and associates (14) 22 Foreign exchange rate movements (378) (396) Aggregate tax effect – shareholder tax on items that may be reclassified into profit or loss 13 (9)
Total comprehensive income for the year from continuing operations 576 2,674 Total comprehensive income for the year from discontinued operations1 — 58
Life business 2,419 2,019 General insurance and health 765 808 Fund management 106 86 Other: Other operations (84) (105) Corporate centre (180) (132) Group debt costs and other interest (361) (463)
Adjusted for the following: Investment return variances and economic assumption changes on long-term business 8 14 72 Short-term fluctuation in return on investments on non-long-term business 9a (84) 261 Economic assumption changes on general insurance and health business 9a (100) (145) Impairment of goodwill, associates and joint ventures and other amounts expensed 16a, 19a (22) (24) Amortisation and impairment of intangibles (155) (90) Amortisation and impairment of acquired value of in-force business 17, 18 (498) (40) Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates 3b 2 174 Other2 (53) —
United Kingdom & Ireland 1,432 430 — (24) 1,838 France 395 71 — (17) 449 Poland 129 10 — 2 141 Italy, Spain and Other 242 33 — (7) 268 Canada — 214 — — 214 Asia 244 (6) 1 (16) 223 Aviva Investors 1 — 105 — 106 Other Group activities (24) 13 — (22) (33)
Total – continuing operations 2,213 1 Operating profit has been restated to exclude amortisation and impairment of acquired value of in-force business, which is now shown as a non-operating item. See note 1 for further details. There is no impact on the result or the total equity for any period presented as a result of this restatement.
The accounting policies (identified alphabetically) on pages 133 to 146 and notes (identified numerically) on pages 154 to 269 are an integral part of the financial statements.
Life 272 — — 5,703 — — — 5,975 — — 5,975 Non-controlling interests in acquired subsidiaries2 — — — — — — — — — 504 504 Reclassification of non-controlling interests to financial liabilities3 — — — — — — — — — (272) (272) Reclassification of non-controlling interests to tier 1 notes4 — — — — — — — — 231 (231) — Owner-occupied properties fair value gains transferred to retained earnings on disposals — — — — — (33) 33 — — — —
Dividends and appropriations — — — — — — (724) (724) — — (724) Non-controlling interests share of dividends declared in the year — — — — — — — — — (142) (142) Transfer to profit on disposal of subsidiaries, joint ventures and associates — — — — — 1 — 1 — — 1 Capital contributions from non-controlling interests — — — — — — — — — 5 5 Changes in non-controlling interests in subsidiaries — — — — — — — — — (1) (1) Treasury shares held by subsidiary companies — — — — (27) — — (27) — — (27) Reserves credit for equity compensation plans — — — — — 40 — 40 — — 40 Shares issued under equity compensation plans 3 — 13 — 6 (35) 19 6 — — 6 Aggregate tax effect – shareholder tax — — — — — — 15 15 — — 15 1 Refer to note 36 for further details of balances included in Other reserves. 2 Includes Friends Life’s Step up Tier one Insurance Capital Securities (‘STICS’) issuances classified as equity instruments within non-controlling interests at the date of acquisition. See Note 3a for further detail. 3 On 29 May 2015, notification was given that the Group would redeem the 2005 STICS issuance. At that date the instrument was reclassified as a financial liability. The instrument was redeemed on 1 July 2015, £272 million represents the fair value of instruments recognised on acquisition, made up of the £268 million outstanding principal redeemed on 1 July 2015 and £4 million amortised subsequent to the reclassification and included within finance costs in the income statement.
4 On 1 October 2015 Aviva plc replaced Friends Life Holdings plc as issuer of the 2003 STICS issuance which resulted in a reclassification of the STICS from non-controlling interests to DCI and tier 1 notes.
1 Refer to note 36 for further details of balances included in Other reserves. 2 £57 million relates to the foreign exchange loss on redemption of €700 million direct capital instrument on 28 November 2014.
Ordinary share capital 30 1,012 737 Preference share capital 33 200 200 10,159 4,443 Treasury shares 32 (29) (8) Other reserves 36 (114) 229 Retained earnings 37 4,736 4,617
Consolidated statement of cash flows For the year ended 31 December 2015
Cash flows from operating activities1 Cash generated from/(used in) continuing operations 55a 5,197 (87) Tax paid (442) (457)
Net cash used in financing activities - continuing operations (1,365) (1,955)
Cash and cash equivalents at 31 December 55d 33,170 22,564 1 Cash flows from operating activities include interest received of £5,251 million (2014: £4,986 million) and dividends received of £2,353 million (2014: £1,442 million). 2 Discontinued operations represent the results of the US life and related internal asset management businesses (US Life) sold in 2013. 3 Includes redemption of 2005 STICS of £268 million. 4 Ordinary dividends paid amounted to £635 million (2014: £449 million. £2 million of unclaimed and waived dividends has been set off against this above). 5 Dividends paid to non-controlling interests of subsidiaries included £7 million on the 2003 STICS and £17 million on the 2005 STICS prior to reclassification.
Effect of restatements from change in definition of operating profit – IFRS basis
Operating profit before tax attributable to shareholders’ profits 2,173 40 2,213
Profit before tax attributable to shareholders’ profits 2,281 — 2,281 Tax on operating profit (561) (2) (563) Tax on other activities (40) 2 (38) (601) — (601)
As a result of this change comparative information in note 4 Segmental Information and note 14 Earnings per Share has been restated.
Friends Life is a leading insurance business which provides a range of pension, investment and insurance products and services to both individual customers and corporates. Prior to the acquisition, Friends Life operated through three distinct divisions: the Heritage division which administers products which are no longer actively marketed for new business; the UK division whose main lines of business are corporate benefits, retirement income and protection; and the International division which provides savings, investment and protection products for customers in Asia and the Middle East. The acquisition accelerates the Group’s investment thesis of cash flow plus growth and is expected to benefit the Group over time through the realisation of significant incremental capital, financial and revenue synergies as well as supporting the Group to secure its position as a leading insurance and savings business.
Fair value of total shares exchanged1 5,975 1 Fair value of consideration based on the opening market price on the date of acquisition.
Fair value and accounting policy adjustments A reclassification of £11.3 billion was made from financial investments to reinsurance assets to align to the Group’s presentation policy for reinsurance assets.
Goodwill The residual goodwill on acquisition of £671 million, none of which is expected to be deductible for tax purposes, represents future synergies expected to arise from combining the operations of Friends Life with those of the Group as well as the value of the workforce in place and other future business value. Refer to note 16 for changes to the carrying amount of goodwill during the year.
156 | Aviva plc Annual report and accounts 2015 3 – Subsidiaries continued Profit and loss In the period from 10 April 2015 to 31 December 2015 the acquired Friends Life subsidiaries contributed net earned premiums and fee and commission income of £1,338 million and a loss before tax attributable to shareholders of £371 million, including £160 million of integration and restructuring costs, to the consolidated results of the Group.
If the acquisition had been effective on 1 January 2015, on a pro-forma basis the Group’s net earned premiums and fee and commission income is estimated at £21.1 billion and profit before tax attributable to shareholders is estimated at £1,391 million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on 1 January 2015. The pro-forma results are provided for information purposes only and do not necessarily reflect the actual results that would have occurred had the acquisition taken place on 1 January 2015, nor are they necessarily indicative of the future results of the combined Group.
(b) Profit on the disposal and re-measurement of subsidiaries, joint ventures and associates The profit on the disposal and re-measurement of subsidiaries, joint ventures and associates comprises: £m
Profit on disposal and remeasurement from continuing operations 2 174 Profit on disposal and remeasurement from discontinued operations — 58
The total Group profit on disposal and re-measurement of subsidiaries, joint ventures and associates from continuing operations is £2 million (2014: £174 million). This includes a gain of £1 million (2014: £15 million) recognised on the further sale of shares in the Turkey Life business and profits on the disposal of small reinsurance operations in Asia of £1 million. There was no profit or loss recognised relating to discontinued operations in 2015 (2014: £58 million profit).
(c) Assets and liabilities of operations classified as held for sale There were no operations classified as held for sale as at 31 December 2015.
(d) Subsequent events On 21 January 2016, Aviva plc announced that its Canadian business Aviva Canada will acquire 100% ownership of RBC General Insurance Company, the existing home and motor insurance business of RBC Insurance, and enter into an exclusive 15 year strategic agreement with RBC Insurance. Aviva will pay £281 million ($CAD 581 million) upon completion, subject to customary completion adjustments. The proposed transaction is subject to closing conditions including receipt of required regulatory approvals and is expected to complete in the third quarter of 2016.
3 – Subsidiaries continued (e) Significant restrictions In certain jurisdictions the ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans and advances is subject to local corporate or insurance laws and regulations and solvency requirements. There are no protective rights of non-controlling interests which significantly restrict the Group’s ability to access or use the assets and settle the liabilities of the Group.
4 – Segmental information The Group’s results can be segmented either by activity or by geography. Our primary reporting format is on market reporting lines, with supplementary information being given by business activity. This note provides segmental information on the consolidated income statement and consolidated statement of financial position.
The Group has determined its operating segments along market reporting lines. These reflect the management structure whereby a member of the Executive Management team is accountable to the Group CEO for the operating segment for which they are responsible.
United Kingdom & Ireland United Kingdom and Ireland comprises two operating segments – Life and General Insurance. The principal activities of our UK and Ireland Life operations are life insurance, long-term health (in the UK) and accident insurance, savings, pensions and annuity business, and include the UK insurance operations acquired as part of the acquisition of Friends Life (refer to note 3). UK and Ireland General Insurance provides insurance cover to individuals and businesses, for risks associated mainly with motor vehicles, property and liability (such as employers’ liability and professional indemnity liability) and medical expenses. UK & Ireland General Insurance includes the results of our Ireland Health business.
Italy, Spain and Other These countries are not individually significant at a Group level, so have been aggregated into a single reporting segment in line with IFRS 8. This segment includes our operations in Italy (including Eurovita up until the date of disposal in June 2014) and Spain (including CxG up until the date of disposal in December 2014). The principal activities of our Italian operations are long-term business and general insurance. The life business offers a range of long-term insurance and savings products, and the general insurance business provides motor and home insurance products to individuals, as well as small commercial risk insurance to businesses. The principal activity of the Spanish operation is the sale of long-term business, accident and health insurance and a selection of savings products. Our Other European operations include our life operations in Turkey (including our reduced joint venture share following IPO in November 2014) and our Turkish general insurance business (up until the date of disposal in December 2014).
Asia Our activities in Asia principally comprise our long-term business operations in China, India, Singapore, Hong Kong, Vietnam, Indonesia, Taiwan and the international operations of Friends Life. This segment also includes general insurance and health operations in Singapore, health operations in Indonesia and the results of South Korea (until the date of disposal in June 2014).
Discontinued operations In October 2013 the Group sold its US life operations (including the related internal asset management operations of Aviva Investors), which has been presented as a discontinued operation for the comparative periods in the income statement, statement of comprehensive income and statement of cash flows. In 2014 this represented the settlement of the purchase price adjustment, in conjunction with the aggregate development of other provisions in the year.
158 | Aviva plc Annual report and accounts 2015 4 – Segmental information continued Measurement basis The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments are subject to normal commercial terms and market conditions. The Group evaluates performance of operating segments on the basis of: (i) profit or loss from operations before tax attributable to shareholders (ii) profit or loss from operations before tax attributable to shareholders, adjusted for non-operating items outside the segment management’s control, including investment market performance and fiscal policy changes. (a) (i) Segmental income statement for the year ended 31 December 2015
Change in insurance liabilities, net of reinsurance 7,070 492 (1,093) 17 264 (12) (68) — 11 6,681 Change in investment contract provisions 943 — (1,915) 18 (702) — 328 (159) — (1,487) Change in unallocated divisible surplus 22 — 841 12 93 — 16 — — 984 Fee and commission expense (585) (1,195) (623) (57) (252) (571) (114) (26) 76 (3,347) Other expenses (1,369) (223) (205) (51) (111) (81) (250) (365) (129) (2,784) Inter-segment expenses (169) (5) (9) (6) — (4) — — (2) (195) Finance costs (214) (1) (1) — (4) (4) (3) — (391) (618)
Profit/(loss) before tax from continuing operations 485 140 420 139 191 142 84 81 (510) 1,172 Tax attributable to policyholders’ returns 232 — — — — — (14) — — 218
Operating profit/(loss) before tax attributable to shareholders 1,424 414 449 141 268 214 223 106 (574) 2,665 1 Total reported income, excluding inter-segment revenue, includes £9,031 million from the United Kingdom (Aviva plc’s country of domicile). Income is attributed on the basis of geographical origin which does not differ materially from revenue by geographical destination, as most risks are located in the countries where the contracts were written.
4 – Segmental information continued (a) (ii) Segmental income statement for the year ended 31 December 2014
Gross written premiums 4,306 4,484 5,756 490 3,514 2,176 942 — 2 21,670 Premiums ceded to reinsurers (784) (454) (70) (7) (68) (70) (161) — — (1,614) Internal reinsurance revenue (7) (2) (2) (1) (2) (2) — — 16 —
Claims and benefits paid, net of recoveries from reinsurers (7,522) (2,745) (4,594) (331) (2,572) (1,276) (362) — (72) (19,474)
Change in insurance liabilities, net of reinsurance (3,955) 88 (1,119) (70) (212) (70) (294) — 62 (5,570) Change in investment contract provisions (3,036) — (1,881) 8 (1,347) — — (262) — (6,518) Change in unallocated divisible surplus (62) — (2,182) (6) (1,055) — (59) — — (3,364) Fee and commission expense (462) (1,294) (564) (65) (289) (570) (60) (24) (61) (3,389) Other expenses (674) (228) (232) (59) (127) (81) (61) (332) (185) (1,979) Inter-segment expenses (137) (4) (4) (7) — (4) — — (2) (158) Finance costs (191) (4) (3) — (4) (5) — (2) (331) (540)
160 | Aviva plc Annual report and accounts 2015 4 – Segmental information continued (a) (iii) Segmental statement of financial position as at 31 December 2015
Goodwill 663 1,026 5 23 172 21 45 — — 1,955 Acquired value of in-force business and intangible assets 3,600 139 86 12 539 69 1,206 15 65 5,731 Interests in, and loans to, joint ventures and associates 1,291 — 138 39 72 7 372 — — 1,919 Property and equipment 130 27 225 3 5 10 8 1 40 449 Investment property 7,483 198 2,089 — 1 — — 1,146 384 11,301 Loans 21,502 5 733 1 26 135 31 — — 22,433 Financial investments 163,987 4,715 65,413 2,575 19,176 3,187 9,684 515 4,965 274,217 Deferred acquisition costs 1,394 418 227 32 77 255 57 4 — 2,464 Other assets 42,636 5,301 9,678 239 1,480 860 1,351 901 4,959 67,405
Liability for investment contracts 114,143 — 47,834 2 9,770 — 7,681 1,743 — 181,173 Unallocated divisible surplus 2,575 — 4,941 55 1,047 — 193 — — 8,811 Net asset value attributable to unitholders 203 — 2,863 — 413 — — — 7,936 11,415 External borrowings 1,903 — — — 49 — — — 6,818 8,770 Other liabilities, including inter-segment liabilities 12,261 (1,240) 4,066 99 715 596 565 370 1,485 18,917
Total equity and liabilities 387,874 160 | Aviva plc Annual report and accounts 2015
Goodwill — 1,031 — 8 190 23 50 — — 1,302 Acquired value of in-force business and intangible assets 127 103 96 5 581 60 2 25 29 1,028 Interests in, and loans to, joint ventures and associates 953 — 145 10 82 2 352 — — 1,544 Property and equipment 74 33 214 3 6 9 4 1 13 357 Investment property 5,558 95 1,758 — 1 — — 1,120 393 8,925 Loans 24,178 84 788 — 58 122 30 — — 25,260 Financial investments 97,410 5,415 66,484 2,829 19,959 3,483 3,192 660 3,206 202,638 Deferred acquisition costs 1,310 438 227 23 89 280 4 7 — 2,378 Other assets 19,092 4,895 10,009 171 1,585 937 459 784 4,346 42,278 Assets of operations classified as held for sale — — — — — — — — 9 9
Insurance liabilities Long-term business and outstanding claims provisions 71,619 5,515 16,179 2,444 8,414 2,317 2,598 — 36 109,122 Unearned premiums 225 2,038 402 34 247 1,114 46 — 1 4,107 Other insurance liabilities — 79 46 — — 89 — — 2 216
162 | Aviva plc Annual report and accounts 2015 4 – Segmental information continued (b) (i) Segmental income statement – products and services for the year ended 31 December 2015
Net earned premiums 11,658 7,266 — — 18,924 Fee and commission income 1,161 61 274 301 1,797 12,819 7,327 274 301 20,721 Net investment income/(expense) 2,667 240 (5) (77) 2,825 Inter-segment revenue — — 201 — 201 Share of profit of joint ventures and associates 177 3 — — 180 Profit/(loss) on the disposal and remeasurement of subsidiaries, joint ventures and associates 1 1 — — 2
Profit/(loss) before tax attributable to shareholders’ profits 1,599 369 80 (658) 1,390 Adjusted for: Non-operating items from continuing operations 820 396 26 33 1,275
Operating profit/(loss) before tax attributable to shareholders’ profits 2,419 765 106 (625) 2,665 1 Gross written premiums include inward reinsurance premiums assumed from other companies amounting to £146 million, of which £80 million relates to property and liability insurance and £66 million relates to long-term business. 2 General insurance and health business segment includes gross written premiums of £1,092 million relating to health business. The remaining business relates to property and liability insurance.
4 – Segmental information continued (b) (ii) Segmental income statement – products and services for the year ended 31 December 2014
Goodwill 216 1,043 — 43 1,302 Acquired value of in-force business and intangible assets 691 270 25 42 1,028 Interests in, and loans to, joint ventures and associates 1,526 16 — 2 1,544 Property and equipment 230 100 1 26 357 Investment property 8,310 223 — 392 8,925 Loans 25,053 207 — — 25,260 Financial investments 188,094 11,435 23 3,086 202,638 Deferred acquisition costs 1,519 852 7 — 2,378 Other assets 29,839 6,270 657 5,512 42,278 Assets of operations classified as held for sale — 9 — — 9
Gross insurance liabilities 99,453 13,992 — — 113,445 Gross liabilities for investment contracts 117,245 — — — 117,245 Unallocated divisible surplus 9,467 — — — 9,467 Net asset value attributable to unitholders 3,264 — — 6,218 9,482 External borrowings 2,068 — — 5,310 7,378 Other liabilities, including inter-segment liabilities 12,689 (952) 354 4,333 16,424 Liabilities of operations classified as held for sale — 2 — — 2
General insurance and health 8,738 8,943 21,925 21,670 Less: premiums ceded to reinsurers (note 4a and 4b) (2,890) (1,614) Gross change in provision for unearned premiums (note 40e) (125) (8) Reinsurers’ share of change in provision for unearned premiums (note 43ciii) 14 9 Net change in provision for unearned premiums (111) 1
Fee and commission income Fee income from investment contract business 922 459 Fund management fee income 342 320 Other fee income 310 344 Reinsurance commissions receivable 74 81 Other commission income 134 13 Net change in deferred revenue 15 13
Realised gains/(losses)on disposals 1,264 208 Unrealised gains and losses (policy K)
Gains/(Losses) arising in the year 107 795 (Gains)/Losses recognised now realised (1,264) (208)
(1,157) 587 107 795 Other income from investments designated as other than trading
Realised gains on disposals 2,150 2,829 Unrealised gains and losses (see policy K)
Gains/(Losses) arising in the year (6,279) 13,403 (Gains) recognised now realised (2,150) (2,829)
(8,429) 10,574 (6,279) 13,403 Realised gains and losses on AFS investments
166 | Aviva plc Annual report and accounts 2015 6 – Details of expenses This note gives further detail on the items appearing in the expenses section of the consolidated income statement.
Insurance contracts 12,443 10,085 Participating investment contracts 5,270 4,431 Non-participating investment contracts 368 27
Claims and benefits paid to policyholders on general insurance and health business 5,522 5,917 23,603 20,460 Less: Claim recoveries from reinsurers
Investment income attributable to unitholders 17 112 Reinsurance commissions and other fee and commission expense 399 304
Impairments Net impairment on loans 2 (9) Net impairment on financial investments — 1 Net impairment on receivables and other financial assets 3 5 Net impairment on non-financial assets 2 —
Integration and restructuring costs Integration and restructuring costs were £379 million (2014: £140 million), principally driven by transaction and integration activities in relation to the acquisition of Friends Life. In addition, expenses associated with the Solvency II programme were £82 million (2014: £94 million).
Interest expense on operational borrowings Amounts owed to financial institutions 48 48 Securitised mortgage loan notes at fair value 84 87
Total finance costs 618 540 8 – Long-term business economic volatility The long-term nature of much of the Group’s operations means that, for management’s decision-making and internal performance management, the effects of short-term economic volatility are treated as non-operating items. The Group focuses instead on an operating profit measure that incorporates an expected return on investments supporting its long-term business, as described below.
(b) Economic volatility The investment variances and economic assumption changes excluded from the long-term business operating profit are as follows: Life business 2015 £m
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. These are the same assumptions as are used in MCEV reporting to calculate the longer-term investment return for the Group’s long-term business.
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 risks; this includes an adjustment for credit risk on all eurozone sovereign debt. Where such securities are classified as available for sale, the expected investment return comprises the expected interest or dividend payments and amortisation of the premium or discount at purchase.
9 – Longer-term investment return and economic assumption changes for non-long-term business For non-long-term business, the total investment income, including realised and unrealised gains, is split between a calculated longer-term return, which is included in operating profit, and short-term fluctuations from this, which are disclosed outside operating profit but are included in profit before tax. This note gives details of the longer-term return calculation and the relevant assumptions, as well as the economic assumption changes on our general insurance and health business.
Analysed between: Longer-term investment return, reported within operating profit 401 485 Short-term fluctuation in investment return, reported outside operating profit General insurance and health (166) 181 Other operations1 82 80 (84) 261 1 Represents short-term fluctuations on assets backing non-long-term business in Group centre investments, including the centre hedging programme.
Total assets supporting non-long-term business 14,675 16,961 1 Includes the internal loan. 2 Represents assets backing non-long-term business in Group centre investments, including the centre hedging programme.
(e) The table below compares the actual return on investments attributable to the non-long-term business, after deducting investment management expenses and charges, with the aggregate longer-term return over a five-year period.
Actual return attributable to shareholders 2,527 2,760 Longer-term return credited to operating results (2,945) (3,293)
(g) The economic assumption changes arise as a result of an increase in the expected future inflation rates used to calculate claims reserves for periodic payment orders and a decrease in the swap rates used to discount latent claim reserves and periodic payment orders.
170 | Aviva plc Annual report and accounts 2015 10 – Employee information This note shows where our staff are employed throughout the world, excluding staff employed by our joint ventures and associates, and analyses the total staff costs.
United Kingdom & Ireland 16,222 14,144 16,695 14,333 France 4,161 4,082 4,122 4,135 Poland 1,677 1,380 1,706 1,342 Italy, Spain and Other 950 932 958 1,169 Canada 3,558 3,461 3,542 3,455 Asia 1,486 999 1,517 1,021 Aviva Investors 1,204 953 1,095 957 Other Group Activities 381 413 372 525
Total employee numbers 29,639 26,364 30,007 26,937 1 Average employee numbers have been calculated using a monthly average that takes into account recruitment, leavers, transfers, acquisitions and disposals of businesses during the year. 2 Following a move of certain employees within the Group, to facilitate comparison the 2014 comparatives above have been restated as follows: 180 employees (at 31 December 2014) and 284 employees (average for 2014) previously reported within United Kingdom & Ireland have been reclassified to Other Group Activities. There is no impact on total employee numbers as a result of this restatement.
Wages and salaries 1,047 1,016 Social security costs 190 177 Post-retirement obligations
Total staff costs 1,628 1,534 1 Following a review of the staff costs disclosure, £51 million previously reported within wages and salaries in 2014 has been reclassified to profit sharing and incentive plans. There is no impact on total staff costs in 2014 as a result of this restatement.
Total staff costs 1,628 1,534 11 – Directors Information concerning individual directors’ emoluments, interests and transactions is given in the Directors’ Remuneration Report in the ‘Corporate governance’ section of this report. For the purposes of the disclosure required by Schedule 5 to the Companies Act 2006, the total aggregate emoluments of the directors in respect of 2015 was £11.5 million (2014: £5.6 million). Employer contributions to pensions for executive directors for qualifying periods were £57,581 (2014: £62,257). The aggregate net value of share awards granted to the directors in the period was £9.7 million (2014: £3.6 million). The net value has been calculated by reference to the closing middle market price of an ordinary share at the date of grant. During the year no share options were exercised by directors (2014: 2,903 share options).
Fees payable to PwC LLP and its associates for the statutory audit of the Aviva Group and Company financial statements 3.8 2.5 Fees payable to PwC LLP and its associates for other services
Audit of Group subsidiaries 12.4 9.8 Additional fees related to the prior year audit of Group subsidiaries 0.5 0.1
In addition to the fees shown above, during 2015 the Group paid PwC £0.2 million (2014: £0.2 million) in relation to the audit of Group occupational pension schemes.
Total audit fees (excluding additional fees relating to the prior year audits of Group subsidiaries), audit-related assurance fees and fees for the audit of the Group’s MCEV reporting were £20.2 million (2014: £15.8 million). The main driver of the increase is the audit fee in respect of the acquired Friends Life subsidiaries. The fee also includes £1.1 million in respect of the audit work relating to the acquisition balance sheet.
Audit related assurance comprises services in relation to statutory and regulatory filings. These include audit services for the audit of regulatory returns in the UK and review of interim financial information under the Listing Rules of the UK Listing Authority.
Fees for other assurance services comprise non-statutory assurance work which is customarily performed by the external auditor, including the audit of the Group’s MCEV reporting. Although embedded value is a key management reporting basis and our disclosures are audited, the relevant fees are not classified as being for statutory audit.
Other assurance services in 2015 of £13.3 million (2014: £9.8 million) includes fees relating to the audit of the Group’s MCEV reporting of £1.4 million (2014: £1.2 million) and £11.6 million (2014: £6.4 million) associated with assurance services related to Solvency II implementation. Solvency II implementation is a major project requiring substantial model validation assurance that the Company believes is most appropriately performed by the principal auditors. In view of the significance and scale of this work, the Audit Committee specifically assessed the suitability of PwC to provide this service.
The 2015 fees for other non-audit services of £1.5 million includes £0.3 million relating to a controls review, £0.3 million relating to a regulatory advice engagement and £0.9 million for a number of other, individually smaller services.
(a) Tax charged to the income statement (i) The total tax charge comprises: Continuing operations 2015 £m
Deferred tax Origination and reversal of temporary differences (227) 315 Changes in tax rates or tax laws (82) (17) Write back of deferred tax assets (30) (7)
(ii) The Group, as a proxy for policyholders in the UK, Ireland and Singapore, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish and Singapore life insurance policyholder returns is included in the tax charge. The tax credit attributable to policyholder returns included in the charge above is £218 million (2014: charge of £382 million).
(iv) Unrecognised tax losses and temporary differences of previous years were used to reduce the current tax expense and deferred tax expense by £5 million and £30 million (2014: £5 million and £nil), respectively.
Long-term business technical provisions and other insurance items 517 (1,209) Deferred acquisition costs (46) 34 Unrealised gains/(losses) on investments (847) 1,254 Pensions and other post-retirement obligations (4) 7 Unused losses and tax credits 34 32 Subsidiaries, associates and joint ventures 4 5 Intangibles and additional value of in-force long-term business (149) (7) Provisions and other temporary differences 152 175
Current tax from continuing operations In respect of pensions and other post-retirement obligations (44) (77) In respect of foreign exchange movements (7) (12)
(ii) The tax charge attributable to policyholders’ returns included above is £nil (2014: £nil).
13 – Tax continued (c) Tax credited to equity Tax credited directly to equity in the year amounted to £15 million (2014: £19 million). This is in respect of coupon payments on the direct capital instrument and tier 1 notes.
Tax attributable to policyholder returns (218) 382 UK corporation tax at a rate of 20.25% (2014: 21.5%) in respect of the policyholder tax deduction 44 (82) Different local basis of tax of overseas profits — 2
174 | Aviva plc Annual report and accounts 2015 14 – Earnings per share This note shows how we calculate earnings per share, based both on the present shares in issue (the basic earnings per share) and the potential future shares in issue, including conversion of share options granted to employees (the diluted earnings per share). We have also shown the same calculations based on our operating profit as we believe this gives a better indication of operating performance.
(a) Basic earnings per share (i) The profit attributable to ordinary shareholders is: Restated1
Profit before tax attributable to shareholders’ profits 2,665 (1,275) 1,390 2,213 68 2,281 Tax attributable to shareholders’ profit (598) 287 (311) (563) (38) (601)
Net of tax, noncontrolling interests, preference dividends and DCI2 £m Per share p
Operating profit attributable to ordinary shareholders 2,665 1,841 49.2 2,213 1,421 48.3 Non-operating items: Investment return variances and economic assumption changes on long-term business 14 (37) (1.0) 72 4 0.1 Short-term fluctuation in return on investments backing non-long-term business (84) (62) (1.7) 261 197 6.7 Economic assumption changes on general insurance and health business (100) (80) (2.1) (145) (114) (3.9) Impairment of goodwill, joint ventures and associates and other amounts expensed (22) (22) (0.6) (24) (24) (0.8) Amortisation and impairment of intangibles (155) (121) (3.2) (90) (61) (2.1) Amortisation and impairment of acquired value of in-force business1 (498) (376) (10.1) (40) (38) (1.3)
Profit attributable to ordinary shareholders 844 3,741 22.6 1,425 2,943 48.4 Dilutive effect of share awards and options — 39 (0.3) — 44 (0.7)
(ii) Diluted earnings per share on operating profit attributable to ordinary shareholders is calculated as follows: Restated1
Operating profit attributable to ordinary shareholders 1,841 3,741 49.2 1,421 2,943 48.3 Dilutive effect of share awards and options — 39 (0.5) — 44 (0.7)
Operating profit attributable to ordinary shareholders — 3,741 — — 2,943 — Dilutive effect of share awards and options — 39 — — 44 —
Diluted operating profit per share from discontinued operations — 3,780 — — 2,987 —
Ordinary dividends declared and charged to equity in the year Final 2014 – 12.25 pence per share, paid on 15 May 2015 362 — Final 2013 – 9.40 pence per share, paid on 16 May 2014 — 277 Interim 2015 – 6.75 pence per share, paid on 17 November 2015 273 — Interim 2014 – 5.85 pence per share, paid on 17 November 2014 — 172 635 449 Dividends waived/unclaimed returned to the Company — (3) Preference dividends declared and charged to equity in the year 17 17 Coupon payments on the direct capital instruments and tier 1 notes 72 88
Accumulated impairment At 1 January (201) (290) Impairment losses charged to expenses (22) — Disposals — 73 Foreign exchange rate movements 8 16
Goodwill from acquisitions and additions primarily arose on the acquisition of Friends Life (£671 million), a network of independent financial advisors in Poland (£15 million) and a property fund in France (£5 million).
The total impairment of goodwill in subsidiaries, joint ventures and associates is a charge of £22 million as management determined that goodwill in subsidiaries of £13 million in Hong Kong and £9 million in Italy was impaired. Impairment tests on goodwill were conducted as described in note 16(b).
(b) Goodwill allocation and impairment testing A summary of the goodwill and intangibles with indefinite useful lives allocated to cash generating units is presented below.
Italy long-term business MCEV MCEV 1.3 2.0 8.1 8.4 Spain long-term business MCEV MCEV 1.5 1.5 10.0 10.0
General insurance, health, fund management and other businesses Value in use is calculated as the discounted value of expected future profits of each business. The calculation uses cash flow projections based on business plans approved by management covering a three year period. These plans reflect management’s best estimate of future profits based on both historical experience and expected growth rates for the relevant cash generating unit. The underlying assumptions of these projections include market share, customer numbers, premium rate and fee income changes, claims inflation and commission rates.
United Kingdom general insurance and health 1.3 1.3 6.4 6.7 Ireland general insurance and health 1.3 – 2.5 1.3 6.1 5.9 Italy general insurance and health 1.3 2.0 6.5 – 7.8 6.8 – 7.9
Results of impairment testing The goodwill associated with the Italian long-term and general insurance cash generating units was reviewed in the first half of the year due to prevailing economic conditions in Italy. As a result of revised estimates, management concluded that the goodwill was no longer fully recoverable. Impairments of £6 million and £3 million were recognised in the Italian long-term and general insurance cash generating units respectively reducing the carrying values to their recoverable amounts. Subsequently, management reviewed the goodwill at 31 December 2015 and concluded that no further impairment was required as the recoverable amount exceeded the carrying amount.
Other than the cash generating units noted above, the recoverable amount exceeds the carrying value of the cash generating units including goodwill. Furthermore, a reasonably possible change in assumptions would not cause the carrying amount to exceed its recoverable amount.
Accumulated amortisation At 1 January 2014 (383) (78) (433) — (894) Amortisation for the year (32) (5) (76) — (113) Disposals 30 21 34 — 85 Foreign exchange rate movements 22 1 7 — 30
Accumulated Impairment At 1 January 2014 (85) (24) (61) (66) (236) Impairment losses charged to expenses — — (10) — (10) Disposals 40 — 6 — 46 Foreign exchange rate movements 2 — — 4 6
(a) Additions relate to the acquisition of Friends Life. AVIF on insurance and investment contracts is generally recoverable in more than one year. Of the total AVIF of £4,383 million (£2,002 million on insurance contracts, £2,381 million on investment contracts), £3,962 million is expected to be recovered more than one year after the statement of financial position date. Non-participating investment contract AVIF is reviewed for evidence of impairment, consistent with reviews conducted for other finite life intangible assets. Insurance and participating investment contract AVIF is reviewed for impairment at each reporting date as part of the liability adequacy requirements of IFRS 4. AVIF is reviewed for evidence of impairment and impairment tested at product portfolio level by reference to the value of future profits. No impairment charges for AVIF were recognised in the year.
Impairment losses on intangible assets with finite lives of £18 million arose from impairments of capitalised software in the UK long-term business and Aviva Investors.
(c) Intangible assets with indefinite useful lives primarily comprise the value of the Union Financière de France Banque distribution channel, where the existing lives of the assets and their competitive position in, and the stability of, their respective markets support this classification. Impairment testing of these intangible assets is covered in note 16(b).
18 – Interests in, and loans to, joint ventures In several businesses, Group companies and other parties jointly control certain entities. This note analyses these interests and describes the principal joint ventures in which we are involved.
The Group’s share of total comprehensive income related to joint venture entities is £148 million (2014: £151 million).
The investment in general insurance and health undertakings relates to the health insurance operations in our Indonesian joint venture and the general insurance operations in our Polish joint venture.
Airport Property Partnership Property management UK 50.00% 50.00% Ascot Real Estate Property LP Property management UK 50.00% — 2-10 Mortimer Limited Partnership Property management UK 50.00% 45.54% BZ WBK-Aviva Towarzystwo Ubezpieczen Ogolnych SA1 General insurance Poland 51.00% 34.00% BZ WBK-Aviva Towarzystwo Ubezpieczen na Zycie SA1 Life insurance Poland 51.00% 34.00% Aviva-COFCO Life Insurance Co. Ltd Life insurance China 50.00% 50.00% PT Astra Aviva Life Life and Health insurance Indonesia 50.00% 50.00% First-Aviva Life Insurance Co. Ltd Life insurance Taiwan 49.00% 49.00% AvivaSA Emeklilik ve Hayat A.S Life insurance Turkey 40.00% 41.28% Vietinbank Aviva Life Insurance Co. Ltd Life insurance Vietnam 50.00% 50.00%
The Group has one joint venture whose non-controlling interest (NCI) is material on the basis of their share of profit/(loss), as follows: Proportion of ownership interests held by NCI Proportion of voting rights held by NCI Profit/(loss)
The recoverable amount of long-term business undertakings is the value in use of the joint venture. This is calculated according to the methodology for the calculation of the value in use of long-term business cash generating units for the impairment testing of goodwill, as set out in note 16(b).
The recoverable amount of property management undertakings is the fair value less costs to sell of the joint venture, measured in accordance with the Group’s accounting policy for Investment Property (see accounting policy Q).
At 1 January — 404 — 404 — 262 5 267 Share of results before tax — 18 — 18 — 44 — 44 Share of tax — — — — — (2) — (2)
Share of results after tax — 18 — 18 (24) 42 — 18 Acquisitions — 4 — 4 — — — — Additions 26 6 — 32 24 34 — 58 Loans repaid by associate — — — — — — (8) (8) Reduction in Group interest — (94) — (94) — (43) — (43) Reclassification from subsidiary — — — — — 125 — 125 Reclassification from investment — — — — — 25 — 25 Reclassification to joint venture — (9) — (9) — — — — Dividends received from associate — (17) — (17) — (30) — (30) Foreign exchange rate movements — (9) — (9) — (11) 3 (8)
Other movements Additions of equity interests and reduction in Group interests relate to the purchase and sale of portions of the Group’s holdings in various property management undertakings.
Aviva Life Insurance Company India Life insurance India 26.00% 26.00% SCPI Ufifrance Immobilier Property Management France 20.40% 20.40% AI UK Commerical Real Estate Debt Fund Property Management UK 20.72% 26.33% Encore+1 Property Management UK 10.19% 10.82%
(ii) The associates have no significant contingent liabilities to which the Group is exposed. The Group has commitments to provide funding to property management associates of £15 million (2014: £21 million).
182 | Aviva plc Annual report and accounts 2015 20 – Property and equipment This note analyses our property and equipment, which are primarily properties occupied by Group companies.
At 31 December 2014 — 343 3 563 159 1,068 Additions 3 53 — 8 30 94 Disposals1 — (51) — (300) (2) (353) Transfers (to)/from investment property (note 21) — (13) — — 55 42 Fair value gains — 39 — — — 39 Foreign exchange rate movements — (11) — (4) (6) (21)
Depreciation and impairment At 1 January 2014 — (1) (2) (569) (146) (718) Charge for the year — — — (13) (6) (19) Disposals — — — 37 5 42 Impairment charge — (26) — — — (26) Foreign exchange rate movements — — — 5 5 10
At 31 December 2014 — (27) (2) (540) (142) (711) Charge for the year — — — (11) (13) (24) Disposals1 — 4 — 300 2 306 Impairment charge — — — — — — Foreign exchange rate movements — — — 3 6 9 1 Disposals of computer equipment primarily comprise exhausted assets within Aviva Corporate Services.
The Group has no material finance leases for property and equipment.
1 Additions include investment property bought as part of the acquisition of Friends Life in 2015.
184 | Aviva plc Annual report and accounts 2015 22 – Fair value methodology continued The majority of the Group’s assets and liabilities measured at fair value are based on quoted market information or observable market data. 16.1% of assets and 4.2% of liabilities measured at fair value are based on estimates and recorded as Level 3. Where estimates are used, these are based on a combination of independent third-party evidence and internally developed models, calibrated to market observable data where possible. Third-party valuations using significant unobservable inputs validated against Level 2 internally modelled valuations are classified as Level 3, where there is a significant difference between the third-party price and the internally modelled value. Where the difference is insignificant, the instrument would be classified as Level 2.
Recurring fair value measurements Investment Property (note 21) — — 11,301 11,301 — 11,301 Loans (note 23 (a)) — 950 18,129 19,079 3,354 22,433 Financial investments measured at fair value (note 26 (b))
Financial liabilities measured at fair value Non-participating investment contracts1 (note 41(a)) 99,459 245 3,421 103,125 — 103,125 Net asset value attributable to unit holders 11,393 — 22 11,415 — 11,415 Borrowings (note 49 (a)) — 781 527 1,308 7,462 8,770 Derivative liabilities (note 58 (b)) 304 2,484 1,093 3,881 — 3,881 1 In addition to the balances in this table, included within Reinsurance assets in the Statement of financial position and note 43 are £13,967 million of non-participating investment contracts, which are legally reinsurance but do not meet the definition of a reinsurance contract under IFRS. These assets are financial instruments measured at fair value through profit and loss and are classified as Level 1 assets.
Financial liabilities measured at fair value Non-participating investment contracts1 (note 41(a)) 49,791 222 — 50,013 — 50,013 Net asset value attributable to unit holders 9,463 — 19 9,482 — 9,482 Borrowings (note 49 (a)) — 812 560 1,372 6,006 7,378 Derivative liabilities (note 58 (b)) 180 2,310 991 3,481 — 3,481 1 In addition to the balances in this table, included within Reinsurance assets in the Statement of financial position and note 43 are £2,533 million of non-participating investment contracts, which are legally reinsurance but do not meet the definition of a reinsurance contract under IFRS. These assets are financial instruments measured at fair value through profit and loss and are classified as level 1 assets.
(e) Transfers between levels of the fair value hierarchy For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels of the fair value hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the reporting period.
Transfer to/from Level 3 Transfers out of Level 3 of £0.6 billion relate principally to debt securities held by our businesses in the UK and France which were transferred to Level 2 as observable inputs became available.
Transfers of assets into Level 3 of £4.3 billion included: • £2.9 billion of Primary Healthcare, Private Finance Initiative (PFI) and infrastructure loans. During the year, these loans were valued using a Portfolio Credit Risk Model in place of the previous discounted cash flow model. As the liquidity premium input in this model has been deemed to be non-market observable and significant, the loans have been classified as Level 3 and transferred from Level 2.
• £0.9 billion of debt securities held in the UK and £0.3 billion held in France were transferred from Level 2 due to the unavailability of significant observable market data or sufficiently significant differences between the valuation provided by the counterparty and broker quotes and the validation models.
186 | Aviva plc Annual report and accounts 2015 22 – Fair value methodology continued (f) Valuation approach for fair value assets and liabilities classified as Level 2 Please see note 22(a) for a description of typical Level 2 inputs. Debt securities, in line with market practice, are generally valued using an independent pricing service. These valuations are determined using independent external quotations from multiple sources and are subject to a number of monitoring controls, such as monthly price variances, stale price reviews and variance analysis. Pricing services, where available, are used to obtain the thirdparty broker quotes. Where pricing services providers are used, a single valuation is obtained and applied. When prices are not available from pricing services, quotes are sourced from brokers. Over the counter derivatives are valued using broker quotes or models such as option pricing models, simulation models or a combination of models. The inputs for these models include a range of factors which are deemed to be observable, including current market and contractual prices for underlying instruments, period to maturity, correlations, yield curves and volatility of the underlying instruments. Unit Trusts and other investment funds included under the Other investments category are valued using net assets values which are not subject to a significant adjustment for restrictions on redemption or for limited trading activity.
1 Total net gains/(losses) recognised in the income statement includes realised gains/(losses) on disposals.
22 – Fair value methodology continued The principal assets classified as Level 3, and the valuation techniques applied to them, are described below.
(i) Investment property • Investment property amounting to £11.3 billion (2014: £8.9 billion) is valued in the UK at least annually by external chartered surveyors in accordance with guidance issued by The Royal Institution of Chartered Surveyors, and using estimates during the intervening period. Outside the UK, valuations are produced by external qualified professional appraisers in the countries concerned. Investment properties are valued on an income approach that is based on current rental income plus anticipated uplifts at the next rent review, lease expiry, or break option taking into consideration lease incentives and assuming no further growth in the estimated rental value of the property. The uplift and discount rates are derived from rates implied by recent market transactions on similar properties. These inputs are deemed unobservable.
• Collateralised non-recourse loans of £0.6 billion (2014: £0.5 billion) have been valued using internally developed models incorporating a significant number of modelling assumptions including the probability of counterparty default and the expected loss in the event of counterparty default. These inputs are deemed unobservable.
• Structured bond-type and non-standard debt products held by our business in France amounting to £5.8 billion (2014: £7.4 billion) and bonds held by our UK business of £2.2 billion (2014: £1.0 billion) have no active market. These debt securities are valued either using counterparty or broker quotes and validated against internal or third-party models. These bonds have been classified as Level 3 because either (i) the third-party models included a significant unobservable liquidity adjustment, or (ii) differences between the valuation provided by the counterparty and broker quotes and the validation model were sufficiently significant to result in a Level 3 classification.
• Corporate debt securities held by our French business of £1.5 billion (2014: £0.3 billion) and debt securities of £0.9 billion held by our UK and Asia businesses (2014: £nil) which are not traded in an active market have been valued using third party or counterparty valuations. These prices are considered to be unobservable due to infrequent market transactions.
(iv) Equity securities • Equity securities which primarily comprise private equity holdings of £0.8 billion (2014: £0.1 billion) held in the UK are valued by a number of third party specialists. These are valued using a range of techniques, including earnings multiples, forecast cash flows and price/earnings ratios which are deemed to be unobservable.
Remaining Level 3 investments amount to £0.7 billion (2014: £1.1 billion) within debt securities, equity securities and other investments held by a number of businesses throughout the Group.
(vi) Liabilities The principal liabilities classified as Level 3, and the valuation techniques applied to them, are: • £3.4 billion (2014: £nil) of non-participating investment contract liabilities are classified as Level 3, either because the underlying unit funds are classified as Level 3 or because the liability relates to unfunded units or other non-unit adjustments which are based on a discounted cash flow analysis using unobservable market data and assumptions.
• Derivative liabilities of £0.9 billion (2014: £1.0 billion) comprising over the counter derivatives such as credit default swaps and inflation swaps. These swaps are valued using either discounted cash flow models or other valuation models. Cash flows within these models may be adjusted based on assumptions reflecting the underlying credit risk and liquidity risk and these assumptions are deemed to be non-market observable.
• Remaining Level 3 liabilities amount to £0.3 billion (2014: £nil) and relate to a range of liabilities held by a number of businesses throughout the Group.
Borrowings classified as Level 1 have increased by 23% due to the inclusion of Friends Life Group subordinated debt.
(a) Carrying amounts The carrying amounts of loans at 31 December 2015 and 2014 were as follows: At fair value through profit or loss other than trading £m
At fair value through profit or loss other than trading £m
Of the above loans, £20,948 million (2014: £23,771 million) are due to be recovered in more than one year after the statement of financial position date.
Non-securitised mortgage loans include £3.3 billion (2014 Restated1: £3.5 billion) relating to UK primary healthcare and PFI businesses which are secured against General Practitioner premises, other primary health-related premises or other emergency services related premises. For all such loans, government support is provided through either direct funding or reimbursement of rental payments to the tenants to meet income service and provide for the debt to be reduced substantially over the term of the loan. Although the loan principal is not government-guaranteed, the nature of these businesses and premises provides considerable comfort of an ongoing business model and low risk of default.
Loans at amortised cost The fair value of these loans at 31 December 2015 was £3,228 million (2014: £4,240 million).
AER has purchased subordinated notes and granted subordinated loans to some of the ERF companies. In addition, Group companies have invested in loan notes issued by the ERF companies. These have been eliminated on consolidation through offset against the borrowings of the ERF companies in the consolidated statement of financial position.
On 1 January 2016 a UK subsidiary, Aviva Annuity UK Limited, securitised £4,179 million of equity release mortgages by transferring them to a wholly owned subsidiary, Aviva ERFA 15 UK Limited. In return, Aviva Annuity UK Limited received £4,154 million of loan notes issued by Aviva ERFA 15 UK Limited.
Securitised mortgage loans At fair value (note 23) 2,452 (1,564) 2,406 (1,539) Other securitisation assets/(liabilities) 297 (1,185) 319 (1,186)
Total loan notes issued, as above 1,564 1,539 Less: Loan notes held by Group companies (256) (167)
The Group has also given support to the consolidated structured entity Aviva Equity Release UK Limited (AER). As set out in note 24, at the inception of the securitisation vehicle, the UK subsidiary, Aviva Equity Release UK Limited (AER), has granted subordinated loan facilities to some of the ERF companies. AER receives various fees in return for the services provided to the entities. Aviva receives cash management fees based on the outstanding loan balance at the start of each quarter for the administration of the loan note liabilities. AER receives portfolio administration fees as compensation for managing the mortgage assets. Refer to note 24 for details of an equity release securitisation on 1 January 2016.
Structured debt securities1 — — 4,260 4,260 — — 2,549 2,549 Other investments 1,191 258 43,907 45,356 765 361 30,731 31,857
The Group’s maximum exposure to loss related to the interests presented above is the carrying amount of the Group’s investments. The majority of debt securities above are investment grade securities held by the UK business. In some cases, the Group may be required to absorb losses from an unconsolidated structured entity before other parties when and if Aviva’s interest is more subordinated with respect to other owners of the same security.
Aviva’s interest in unconsolidated structured entities that it also manages at 31 December 2015 is £2.3 billion (2014: £2.1 billion) and the total funds under management relating to these investments at 31 December 2015 is £15.3 billion (2014: £16.1 billion).
Fixed maturity securities Debt securities UK government — 33,279 — 33,279 — 20,590 — 20,590 UK local authorities — 18 — 18 — 18 — 18 Non-UK government (note 26e) — 41,952 712 42,664 — 44,140 815 44,955 Corporate bonds
Convertibles and bonds with warrants attached — 158 — 158 — 170 — 170 Other — 10,765 — 10,765 — 8,177 — 8,177
Of the above total, £174,362 million (2014: £120,743 million) is due to be recovered in more than one year after the statement of financial position date.
26 – Financial investments continued (b) Cost, unrealised gains and fair value The following is a summary of the cost/amortised cost, gross unrealised gains and losses and fair value of financial investments: Cost/amortised cost £m
Fixed maturity securities 155,247 10,864 (3,147) 162,964 118,245 14,130 (714) 131,661 Equity securities 60,124 7,663 (4,229) 63,558 29,701 7,114 (1,196) 35,619 Other investments
Unit trusts and other investment vehicles 41,620 2,155 (1,134) 42,641 27,304 2,152 184 29,640 Derivative financial instruments 928 2,698 (298) 3,328 917 3,660 (489) 4,088 Deposits with credit institutions 460 — — 460 539 — — 539 Minority holdings in property management undertakings 938 132 (110) 960 740 120 (106) 754 Other investments – long-term 316 20 (31) 305 344 22 (30) 336 Other investments – short-term 1 — — 1 1 — — 1
These are further analysed as follows: At fair value through profit or loss 258,777 23,447 (8,938) 273,286 176,843 27,098 (2,339) 201,602 Available for sale 857 85 (11) 931 948 100 (12) 1,036
Unrealised gains and losses on financial investments classified as at fair value through profit or loss, recognised in the income statement in the year, were a net loss of £9,586 million (2014: £11,161 million net gain). Of this net loss, £1,157 million net loss (2014: £587 million net gain) related to financial investments designated as trading and £8,429 million net loss (2014: £10,574 million net gain) related to investments designated as other than trading.
The total accumulated impairment provision for financial investments classified as available-for-sale included in the table above within unrealised losses and impairments was £9 million (2014: £9 million).
194 | Aviva plc Annual report and accounts 2015 26 – Financial investments continued (d) Financial investment arrangements (i) Stock lending arrangements The Group has entered into stock lending arrangements in the UK and overseas in accordance with established market conventions. The majority of the Group’s stock lending transactions occur in the UK, where investments are lent to EEA-regulated, locally domiciled counterparties and governed by agreements written under English law.
The Group receives collateral in order to reduce the credit risk of these arrangements, either in the form of securities or cash. See Note 59 for further discussion regarding collateral positions held by the Group.
(e) Non-UK Government Debt Securities (gross of non-controlling interests) The following is a summary of non-UK government debt by issuer as at 31 December 2015, analysed by policyholder, participating and shareholder funds.
Our direct shareholder asset exposure to government (non-UK) debt securities amounts to £9.6 billion (2014: £10.4 billion). The primary exposures, relative to total shareholder (non-UK) government debt exposure, are to Canadian (20%), French (19%), Spanish (7%), German (6%) and Italian (5%) government debt securities.
The participating funds exposure to (non-UK) government debt amounts to £30.5 billion (2014: £32.4 billion), a decrease of £1.9 billion. The primary exposures, relative to total (non-UK) government debt exposures included within our participating funds, are to the (non-UK) government debt securities of France (35%), Italy (20%), Germany (5%), Belgium (4%), Netherlands (4%) and Spain (4%).
Net of non-controlling interests, our direct shareholder assets exposure to worldwide bank debt securities is £5.9 billion (2014: £3.7 billion). The majority of our holding (83%) is in senior debt. The primary exposures are to UK (31%), US (20%) and Spanish (12%) banks. Net of non-controlling interests, our direct shareholder asset exposure to worldwide bank equity securities is £99 million (2014: £75 million).
Net of non-controlling interests, the participating fund exposures to worldwide bank debt securities, where the risk to our shareholders is governed by the nature and extent of our participation within those funds, is £15.7 billion (2014: £13.3 billion). The majority of the exposure (82%) is in senior debt. Participating funds are the most exposed to French (22%), UK (14%) and US (11%) banks.
Amounts owed by contract holders 1,546 1,512 Amounts owed by intermediaries 1,132 1,100 Deposits with ceding undertakings 1,244 1,322 Amounts due from reinsurers 376 277 Amounts due from brokers for investment sales 223 69 Amounts receivable for cash collateral pledged 992 512 Amounts due from government, social security and taxes 437 415 Dividends receivable 56 6 Other receivables 869 720
28 – Deferred acquisition costs, other assets, prepayments and accrued income (a) Deferred acquisition costs and other assets – carrying amount The carrying amount comprises: Deferred acquisition costs in respect of: Insurance contracts – Long-term business 610 529 Insurance contracts – General insurance and health business 812 852 Participating investment contracts – Long-term business 20 22 Non-participating investment contracts – Long-term business 1,017 968 Retail fund management business 5 7
Surpluses in the staff pension schemes and £1 million (2014: £1 million) of other assets are recoverable more than one year after the statement of financial position date.
Where amortisation of the DAC balance depends on projected profits, changes to economic conditions may lead to a movement in the DAC balance and a corresponding impact on profit. It is estimated that the movement in the DAC balance would reduce profit by £26 million (2014: £18 million) if market yields on fixed income investments were to increase by 1% and increase profit by £36 million (2014: £31 million) if yields were to reduce by 1%. At both 31 December 2015 and at 31 December 2014 the DAC balance has been restricted by the value of projected future profits and hence is more sensitive to changes in the value of those projected profits.
(c) Prepayments and accrued income Prepayments and accrued income of £3,094 million (2014: £2,466 million), includes £88 million (2014: £81 million) that is expected to be recovered more than one year after the statement of financial position date.
Loans 83 302 Debt securities 24,022 13,628 Equity securities 47,394 26,324 Reinsurance assets 14,002 2,536 Cash and cash equivalents 8,705 3,514 Other 47,386 31,777
The increase during the year to £141,592 million (2014: £78,081 million) is primarily due to the acquisition of Friends Life.
The allotted, called up and fully paid share capital of the Company at 31 December 2015 was: 4,048,465,173 (2014: 2,950,487,340) ordinary shares of 25 pence each 1,012 737
At the 2015 Annual General Meeting, the Company was authorised to allot up to a further maximum nominal amount of: • £492,022,336 of which, £246,011,168 can be in connection with an offer by way of a rights issue • £100 million of new ordinary shares in relation to any issue of Solvency II compliant Tier 1 instruments
Schemes 11,651,227 3 13 3,547,718 1 7 Shares issued in relation to the acquisition of Friends Life 1,086,326,606 272 — — — —
(iii) Aviva annual bonus plan awards These awards have been made under the Aviva annual bonus plan 2011 (ABP), and are described in section (b) below and in the directors’ remuneration report.
(iv) Aviva recruitment and retention share plan awards These are conditional awards granted under the Aviva recruitment and retention share award plan (RRSAP) in relation to the recruitment or retention of senior managers excluding executive directors. The awards vest in tranches on various dates and vesting is conditional upon the participant being employed by the Group on the vesting date and not having served notice of resignation. Some awards can be subject to performance conditions. If a participant’s employment is terminated due to resignation or dismissal, any tranche of the award which has vested within the 12 months prior to the termination date will be subject to clawback and any unvested tranches of the award will lapse in full.
(v) Aviva Investors long-term incentive plan awards These awards have been made under the Aviva Investors Holdings Limited 2009 Long Term Incentive Plan (AI LTIP), a long-term profit sharing arrangement for key Aviva Investors’ employees. Awards will vest on the 3rd anniversary of grant, subject to achieving performance conditions.
(vii) The Aviva Chief Financial Officer Award 2014 Awards were granted to Tom Stoddard under the Aviva Chief Financial Officer Award 2014 (Aviva CFO Award) following his recruitment to compensate Mr Stoddard for the loss from his previous employer, on a like for like basis. The awards are described in section (b) below and in the directors’ remuneration report. No further awards will be made under this plan.
No new Aviva plc ordinary shares will be issued to satisfy awards made under plans iv, v, vi or vii.
(b) Outstanding options and awards (i) Share options At 31 December 2015, options to subscribe for ordinary shares of 25 pence each in the Company were outstanding as follows: Aviva savings related share option scheme
Aviva annual bonus plan 2011 Number of shares Year of vesting
Aviva Investors Holdings Limited 2009 long-term incentive plan Number of shares Year of vesting
No performance conditions are attached to the awards under the ABP, AI DSAP, Aviva CFO Award or some of the awards under the RRSAP except as outlined below. Under the RRSAP, some shares are subject to the attainment of the same performance conditions that apply to the LTIP grants as follows. • 321,330 of the shares which vest in 2016 are linked to the same performance conditions that apply to the 2013 grant.
- 96,238 of the shares which vest in 2016 are subject to the performance conditions relating to the performance of the participant’s previous employer.
- 22,222 of the shares which vest in 2018 are subject to the performance conditions relating to the performance of the participant’s previous employer.
These performance conditions are as outlined in the relevant year’s directors’ remuneration report.
The vesting of the awards under the AI LTIP are subject to Aviva Investors Holdings Limited achieving a return on capital employed (ROCE) of 27% per annum over a three year performance period.
200 | Aviva plc Annual report and accounts 2015 31 – Group’s share plans continued
(c) Movements in the year A summary of the status of the option plans as at 31 December 2014 and 2015, and changes during the years ended on those dates, is shown below.
Outstanding at 1 January 17,241,534 313.21 20,069,848 286.18 Granted during the year 7,810,302 380.00 3,994,548 419.00 Exercised during the year (5,011,905) 275.90 (4,626,781) 282.30 Forfeited during the year (323,950) 341.43 (1,028,382) 277.24 Cancelled during the year (1,446,795) 401.38 (490,267) 298.10 Expired during the year (116,787) 383.40 (677,432) 412.83
(e) Fair value of options and awards granted after 7 November 2002 The weighted average fair values of options and awards granted during the year, estimated by using the Binomial option pricing model and Monte Carlo Simulation model, were £0.88 and £4.49 (2014: £1.47 and £4.19) respectively.
Share price 453p 524p Exercise price 380p 419p Expected volatility 26% 32% Expected life 3.69 years 3.73 years Expected dividend yield 3.99% 2.91% Risk-free interest rate 0.94% 1.42%
(ii) Share awards The fair value of the awards was estimated on the date of grant based on the following weighted average assumptions: Weighted average assumption 2015 2014
Share price 560p 484p Expected volatility1 25% 33% Expected volatility of comparator companies’ share price1 22% 29% Correlation between Aviva and comparator competitors’ share price1 44% 58% Expected life1 2.85 years 2.83 years Expected dividend yield2 3.20% 2.94% Risk-free interest rate1 0.56% 0.75%
Cost debited to shareholders’ funds At 1 January 2,585,824 8 8,561,382 31 Acquired in the year 5,790,872 1 19,603 — Distributed in the year (6,458,608) (7) (5,995,161) (23)
These shares were either purchased in the market or, in 2015, new shares were issued to the trust and are carried at weighted average cost. At 31 December 2015, they had an aggregate nominal value of £479,522 (2014: £646,456) and a market value of £9,897,334 (2014: £12,528,317). The trustees have waived their rights to dividends on the shares held in the trusts.
202 | Aviva plc Annual report and accounts 2015 34 – Direct capital instrument and tier 1 notes
Notional amount 2015 £m 5.9021% £500 million direct capital instrument – issued November 2004 500 500
The direct capital instrument (the DCI) was issued on 25 November 2004 and qualifies as Innovative Tier 1 capital, as defined by the PRA in GENPRU Annex 1 ‘Capital Resources’ as at 31 December 2015. The DCI has no fixed redemption date but the Company may, at its sole option, redeem all (but not part) of the principal amount on 27 July 2020, at which date the interest rate changes to a variable rate, or on any respective coupon payment date thereafter. The variable rate will be the six month sterling deposit rate plus margin.
No interest will accrue on any deferred coupon on the DCI or FxdRNs. Interest will accrue on deferred coupons on the STICS at the then current rate of interest on the STICS.
During 2015, the balance of the merger reserve has increased by £5,703 million to £8,974 million (2014: £3,271 million) due to the acquisition of Friends Life which attracted merger relief under section 612 of the Companies Act 2006. Refer to note 3(a) for further details regarding the acquisition of Friends Life.
Total other comprehensive income for the year (361) 7 56 56 — (242) Fair value gains transferred to retained earnings on disposals — (2) — — — (2) Transfer to profit on disposal of subsidiaries, joint ventures and associates (12) (2) 1 — — (13) Reserves credit for equity compensation plans — — — — 39 39 Shares issued under equity compensation plans — — — — (28) (28)
Balance at 31 December 2014 534 77 75 (522) 65 229 Arising in the year through other comprehensive income: Fair value gains — 27 (9) — — 18 Fair value gains transferred to profit on disposals — — — — — — Share of other comprehensive income of joint ventures and associates — — (14) — — (14) Foreign exchange rate movements (377) — — 44 — (333) Aggregate tax effect – shareholders’ tax 7 — 6 — — 13
Equity shares in subsidiaries 447 472 Share of earnings 222 202 Share of other reserves 226 242
39 – Contract liabilities and associated reinsurance The following notes explain how the Group calculates its liabilities to policyholders for insurance and investment products it has sold to them. Notes 40 and 41 cover these liabilities and note 42 details the financial guarantees and options given for some of these products. Note 43 details the reinsurance recoverables on these liabilities while note 44 shows the effects of changes in the assumptions.
Long-term business Insurance contracts (125,348) 5,018 (120,330) (98,110) 4,032 (94,078) Participating investment contracts (78,048) 11 (78,037) (67,232) 3 (67,229) Non-participating investment contracts (103,125) 13,967 (89,158) (50,013) 2,533 (47,480)
Less: Amounts classified as held for sale — — — 1 — 1 1 Total gross provisions at 31 December 2015 for long-term business includes £95,338 million for Friends Life business. 2 Reinsurance assets at 31 December 2015 for General insurance and health business include the impact of the £659 million reinsurance asset recognised on completion of an outward reinsurance contract by the UK general insurance business, which provides significant protection against claims volatility from mesothelioma, industrial deafness and other long tail risks. Reinsurance assets at 31 December 2015 for long-term business include £11,927 million for Friends Life business.
Less: Amounts classified as held for sale — — — — (1) (1)
Long-term business liabilities Change in long-term business provisions (note 40b(iv)) (6,640) 252 (6,388) Change in provision for outstanding claims 179 4 183
Long-term business liabilities Change in long-term business provisions (note 40b(iv)) 5,847 (376) 5,471 Change in provision for outstanding claims 128 4 132
206 | Aviva plc Annual report and accounts 2015 40 – Insurance liabilities continued (b) Long-term business liabilities (i) Business description The Group underwrites long-term business in a number of countries as follows: • In the UK mainly in: - New With-Profits Sub-Fund (NWPSF) of Aviva Life & Pensions UK (UKLAP), where the with-profit policyholders are entitled to at least 90% of the distributed profits, with the shareholders receiving the balance. Any surplus or deficit emerging in NWPSF that is not distributed as bonus will be transferred from this sub-fund to the Reattributed Inherited Estate External Support Account (RIEESA) (see below).
- ‘Non-profit’ funds of Aviva Annuity UK, UKLAP, Friends Life Limited and Friends Life and Pensions Limited, where shareholders are entitled to 100% of the distributed profits. Shareholder profits on unitised with-profit business written by WPSF and on stakeholder unitised with-profit business are derived from management fees and policy charges, and emerge in the nonprofit funds.
- The RIEESA of UKLAP, which is a non-profit fund where shareholders are entitled to 100% of the distributed profits, but these cannot be distributed until the ‘lock-in’ criteria set by the Reattribution Scheme have been met. The RIEESA has been used to write non-profit business and also to provide capital support to NWPSF.
- The Friends Provident With-Profits Fund (FP WPF) where shareholders are entitled to 10% of the distributed profits, plus 60% of the surplus arising on pre-demutualisation non-profit and unitised business and non-investment sources of surplus on policies held by post-demutualisation policyholders. The Friends Provident demutualisation occurred in 2001.
Material judgement is required in calculating the provisions and is exercised particularly through the choice of assumptions where discretion is permitted. In turn, the assumptions used depend on the circumstances prevailing in each of the life operations. Provisions are most sensitive to assumptions regarding discount rates and mortality/morbidity rates. Where discount rate assumptions are based on current market yields on fixed interest securities, allowance is made for default risk implicit in the yields on the underlying assets.
Bonuses paid during the year are reflected in claims paid, whereas those allocated as part of the bonus declaration are included in the movements in the long-term business provision.
For UK with-profit life funds falling within the scope of the PRA realistic capital regime, and hence FRS 27, an amount is recognised for the present value of future profits (PVFP) on non-participating business written in a with-profit fund where the determination of the realistic value of liabilities in that with-profit fund takes account, directly or indirectly, of this value. For our UK with-profit funds, other than FLAS, FLC and WL WPFs, no adjustment for this value is made to the participating insurance and investment contract liabilities or the unallocated divisible surplus. For FLAS, FLC and WL WPFs the non-profit PVFP is offset against the related participating insurance and investment contract liabilities.
Under the net premium method, the premium taken into account in calculating the provision is determined actuarially, based on the valuation assumptions regarding discount rates, mortality and disability. The difference between this premium and the actual premium payable provides a margin for expenses. This method does not allow for voluntary early termination of the contract by the policyholder, and so no assumption is required for persistency.
40 – Insurance liabilities continued (a) UK With-profit business The valuation of with-profit business uses the methodology developed for the Realistic Balance Sheet, adjusted to remove the shareholders’ share of future bonuses. The key elements of the Realistic Balance Sheet methodology are the with-profit benefit reserve (WPBR) and the present value of the expected cost of any payments in excess of the WPBR (referred to as the cost of future policy-related liabilities). The realistic liability for any contract is equal to the sum of the WPBR and the cost of future policy-related liabilities, which includes the value of any ‘planned enhancements’ to benefits agreed by the company. The WPBR for an individual contract is generally calculated on a retrospective basis, and represents the accumulation of the premiums paid on the contract, allowing for investment return, taxation, expenses and any other charges levied on the contract.
The items included in the cost of future policy-related liabilities include: • Maturity Guarantees; • Guarantees on surrender, including no-MVR (Market Value Reduction) Guarantees and Guarantees linked to inflation; • Guaranteed Annuity Options; • GMP (Guaranteed Minimum Pension) underpin on Section 32 transfers; and • Expected payments under Mortgage Endowment Promise.
The cost of future policy-related liabilities is determined using a market-consistent approach and, in the main, this is based on a stochastic model calibrated to market conditions at the end of the reporting period. Non-market-related assumptions (for example, persistency, mortality and expenses) are based on experience, adjusted to take into account future trends.
Future regular bonuses Annual bonus assumptions for 2016 have been set consistently with the year-end 2015 declaration. Future annual bonus rates reflect the principles and practices of each fund. In particular, the level is set with regard to the projected margin for final bonus and the change from one year to the next is limited to a level consistent with past practice.
Mortality Mortality assumptions for with-profit business are set with regard to recent Company experience and general industry trends. The mortality tables used in the valuation are summarised below: Mortality table used 2015 2014
208 | Aviva plc Annual report and accounts 2015 40 – Insurance liabilities continued Allowance for future mortality improvement is in line with the rates shown for non-profit business below.
Non-profit business The valuation of non-profit business is based on regulatory requirements, adjusted to remove certain regulatory reserves and margins in assumptions, notably for annuity business. Conventional non-profit contracts, including those written in the with-profit funds, are valued using gross premium methods which discount projected future cash flows. The cash flows are calculated using the amount of contractual premiums payable, together with explicit assumptions for investment returns, inflation, discount rates, mortality, morbidity, persistency and future expenses. These assumptions vary by contract type and reflect current and expected future experience.
Valuation discount rates for business in the non-profit funds are as follows: Valuation discount rates 2015 2014
Assurances Life conventional non-profit 1.8% 1.7% Pensions conventional non-profit 2.3% 2.1%
Non-unit reserves on Unit Linked business Life 1.8%to 2.9% 1.7% Pensions 1.8% to 3.5% 2.1%
Mortality assumptions for non-profit business are set with regard to recent Company experience and general industry trends. The mortality tables used in the valuation are summarised below: Mortality tables used 2015 2014
(c) Other countries In all other countries, local generally accepted interest rates and published standard mortality tables are used for different categories of business as appropriate. The tables are based on relevant experience and show mortality rates, by age, for specific groupings of people.
Carrying amount at 31 December 125,348 98,110 1 The movement during 2015 relates to Friends Life, as at the acquisition date. 2 The movement during 2014 includes £103 million related to the disposal of Eurovita, £696 million related to the disposal of CxG and £6 million related to the restructuring of our operations in Indonesia.
The £(2.2) billion impact of economic assumption changes reflects an increase in valuation interest rates in response to increased interest rates and widening spreads, primarily in respect of immediate annuity and participating insurance contracts in the UK.
Motor 3,509 1,055 4,564 3,510 1,130 4,640 Property 1,339 158 1,497 1,402 67 1,469 Liability 1,776 1,106 2,882 1,916 1,224 3,140 Creditor 23 18 41 25 21 46 Other 416 46 462 445 136 581
The gross outstanding claims provision before discounting was £9,911 million (2014: £10,326 million). The period of time which will elapse before the liabilities are settled has been estimated by modelling the settlement patterns of the underlying claims.
40 – Insurance liabilities continued The following explicit assumptions are made which could materially impact the level of booked net reserves: UK mesothelioma claims The level of uncertainty associated with latent claims is considerable due to the relatively small number of claims and the long-tail nature of the liabilities. UK mesothelioma claims account for a large proportion of the Group’s latent claims. The key assumptions underlying the estimation of these claims include claim numbers, the base average cost per claim, future inflation in the average cost of claims and legal fees.
The timing of the conclusion of this review is unclear and it is still uncertain whether or by how much the rate will change. However, an allowance has been included in provisions to reflect the potential for a change in the Ogden discount rates. A reduction in the Ogden discount rates would increase lump sum payments to UK bodily injury claimants.
(iv) Movements The following changes have occurred in the general insurance and health claims provisions during the year: £m
Changes in claims reserve recognised as an expense (note 40a(ii)) 29 (76) Effect of portfolio transfers, acquisitions and disposals (64) (121) Foreign exchange rate movements (395) (222) Other movements — (3)
The Group aims to maintain strong reserves in respect of its general insurance and health business in order to protect against adverse future claims experience and development. The Group establishes strong reserves in respect of the current accident year (2015) where the development of claims is less mature and there is much greater uncertainty attaching to the ultimate cost of claims. As claims develop and the ultimate cost of claims become more certain, the absence of adverse claims experience will result in a release of reserves from earlier accident years, as shown in the loss development tables and movements table (c)(iv) above. Releases from prior accident year reserves are also due to an improvement in the estimated cost of claims.
Key elements of the release from prior accident year general insurance and health net provisions during 2015 were: • £166 million release from UK & Ireland due to favourable development on personal and commercial motor, commercial liability and commercial property claims. • £109 million release from Canada mainly due to continued favourable experience on motor, following the legislative changes in
Estimate of gross ultimate claims At end of accident year 7,533 8,530 9,508 7,364 6,911 6,428 6,201 6,122 5,896 5,851 One year later 7,318 8,468 9,322 7,297 7,006 6,330 6,028 6,039 5,833 Two years later 7,243 8,430 9,277 7,281 6,950 6,315 6,002 6,029 Three years later 7,130 8,438 9,272 7,215 6,914 6,292 5,952 Four years later 7,149 8,409 9,235 7,204 6,912 6,262 Five years later 7,167 8,446 9,252 7,239 6,906 Six years later 7,167 8,381 9,213 7,217 Seven years later 7,176 8,381 9,207 Eight years later 7,184 8,378 Nine years later 7,207
Estimate of gross ultimate claims 7,207 8,378 9,207 7,217 6,906 6,262 5,952 6,029 5,833 5,851 Cumulative payments (7,077) (8,257) (8,986) (6,958) (6,564) (5,712) (5,118) (4,916) (4,295) (2,991)
Present value recognised in the statement of financial position 1,929 127 119 189 208 278 488 752 1,034 1,462 2,860 9,446 212 | Aviva plc Annual report and accounts 2015
40 – Insurance liabilities continued (iii) Net of reinsurance After the effect of reinsurance, the loss development table is: Accident year
Estimate of net ultimate claims At end of accident year 7,430 8,363 9,262 7,115 6,650 6,202 5,941 5,838 5,613 5,548 One year later 7,197 8,302 9,104 7,067 6,751 6,103 5,765 5,745 5,575 Two years later 7,104 8,244 9,028 7,036 6,685 6,095 5,728 5,752 Three years later 6,996 8,249 9,007 6,978 6,644 6,077 5,683 Four years later 6,980 8,210 8,962 6,940 6,634 6,034 Five years later 6,992 8,221 8,949 6,977 6,614 Six years later 6,939 8,149 8,926 6,908 Seven years later 6,938 8,143 8,894 Eight years later 6,947 8,133 Nine years later 6,948
Present value 645 83 99 208 232 319 552 807 1,101 1,496 2,681 8,223 Cumulative effect of foreign exchange
The loss development tables above include information on asbestos and environmental pollution claims provisions from business written before 2006. The undiscounted claim provisions, net of reinsurance, in respect of this business at 31 December 2015 were £237 million (2014: £984 million). The movement in the year reflects a reduction of £705 million due to the reinsurance purchased by the UK general insurance business during 2015 covering a large proportion of these liabilities, favourable claims development of £22 million, claim payments net of reinsurance recoveries and foreign exchange rate movements.
Carrying amount at 1 January 4,107 4,226 Premiums written during the year 8,738 8,943 Less: Premiums earned during the year (8,613) (8,935)
214 | Aviva plc Annual report and accounts 2015 41 – Liability for investment contracts This note analyses our investment contract liabilities by type of product and describes how the Group calculates these liabilities and the assumptions used.
Long-term business Participating contracts 78,048 67,232 Non-participating contracts at fair value 103,125 50,013
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 40. 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.
(c) Movements in the year The following movements have occurred in the gross provisions for investment contracts in the year: (i) Participating investment contracts
Carrying amount at 1 January 67,232 70,628 Provisions in respect of new business 3,710 4,144 Expected change in existing business provisions (4,219) (1,972) Variance between actual and expected experience 1,590 713 Impact of operating assumption changes 43 14 Impact of economic assumption changes 97 303 Other movements 49 16 Change in liability recognised as an expense 1,270 3,218 Effect of portfolio transfers, acquisitions and disposals1 12,245 (2,671) Foreign exchange rate movements (2,699) (3,943)
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 40 and 41.
(i) Guaranteed annuity options Similar options to those written on with-profit business have been written in relation to non-profit products. Provision for these guarantees does not materially differ from a provision based on a market-consistent stochastic model, and amounts to £112 million at 31 December 2015, which includes £86 million relating to the recently acquired Friends Life business (2014: £33 million).
The most significant of these contracts is the AFER Eurofund which has total liabilities of £31 billion at 31 December 2015 (2014: £32 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 3.05% for 2015 (2014: 3.20%) compared with an accounting income from the fund of 3.54% (2014: 3.69%).
(ii) Spain and Italy Guaranteed investment returns and guaranteed surrender values The Group has also written contracts containing guaranteed investment returns and guaranteed surrender values in both Spain and Italy. Traditional profit-sharing products receive an appropriate share of the investment return, assessed on a book value basis, subject to a guaranteed minimum annual return of up to 6% in Spain and up to 4% in Italy on existing business, while on new business the maximum guaranteed rate is lower. Liabilities are generally taken as the face value of the contract plus, if required, an explicit provision for guarantees calculated in accordance with local regulations. At 31 December 2015, total liabilities for the Spanish business were £1 billion (2014: £1 billion) with a further reserve of £14 million (2014: £6 million) for guarantees. Total liabilities for the Italian business were £13.8 billion (2014: £13.9 billion), with a further provision of £41 million (2014: £42 million) for guarantees. Liabilities are most sensitive to changes in the level of interest rates. It is estimated that provisions for guarantees would need to increase by £12 million (2014: £34 million) in Spain and £nil (2014: £nil) in Italy if interest rates fell by 1% (subject to a minimum of 0%) from end 2015 values. Under this sensitivity test, the guarantee provision in Spain is calculated conservatively, assuming a long-term market interest rate of 0.91% and no lapses or premium discontinuances. In the local valuation there is no allowance for stochastic modelling of guarantees and options.
Of the above total, £16,341 million (2014: £5,974 million) is expected to be recovered more than one year after the statement of financial position date.
Carrying amount at 1 January 6,568 5,784 Assets in respect of new business 664 316 Expected change in existing business assets 197 7 Variance between actual and expected experience (1,007) 536 Impact of operating assumption changes (351) (585) Impact of economic assumption changes (177) 554 Other movements1 636 34
Carrying amount at 31 December 18,996 6,568 1 The other movements in 2015 include the reclassification of the UK Life staff pension scheme investments in Blackrock and Schroder life insurance funds from investments to reinsurance assets. 2 The movement during 2015 relates to Friends Life, as at the acquisition date. The movement during 2014 includes £12 million related to the disposal of Eurovita and £1 million related to the disposal of CxG.
Incurred in current year 301 292 Incurred in prior years1 527 (105)
Change in reinsurance asset recognised as income (note 40a(ii)) 504 (49) Effect of portfolio transfers, acquisitions and disposals (4) (31) Foreign exchange rate movements (2) 8 Other movements — 5
Carrying amount at 1 January 250 256 Premiums ceded to reinsurers in the year1 1,360 643 Less: Reinsurers’ share of premiums earned during the year1 (1,346) (634) Changes in reinsurance asset recognised as income 14 9 Reinsurers’ share of portfolio transfers and acquisitions 33 (2) Foreign exchange rate movements (8) (10) Other movements — (3)
Long-term insurance business Interest rates 2,053 (4,578) Expenses 248 75 Persistency rates (2) 15 Mortality for assurance contracts 1 20 Mortality for annuity contracts 17 283 Tax and other assumptions 48 75 Investment contracts Interest rates — (2) Expenses (4) — General insurance and health business Change in discount rate assumptions (100) (145) Change in expense ratio and other assumptions 1 1
The impact of interest rates on long-term business relates primarily to UK annuities, where an increase in the valuation interest rates, reflecting an increase in risk-free rates and widening of spreads, has reduced liabilities. The overall impact on profit also depends on movements in the value of assets backing the liabilities, which is not included in this disclosure.
There has been a release of expense reserves for the UK Life business following actions to reduce the current and long-term cost base. There has been a release of the annuitant mortality reserves following the annual review of experience in UK Life.
Negative UDS balances result from an accounting mismatch between participating assets carried at market value and participating liabilities measured using local practice. Any negative balances are tested for recoverability using embedded value methodology and in line with local accounting practice. Testing is conducted at a participating fund-level within each life entity.
In both Italy and Spain, all participating funds had positive UDS balances at 31 December 2015, and consequently testing of negative UDS was not required. In Italy, the carrying value of UDS was £840 million positive (2014: £953 million positive); in Spain, the carrying value of UDS was £207 million positive (2014: £248 million positive).
220 | Aviva plc Annual report and accounts 2015 46 – Tax assets and liabilities This note analyses the tax assets and liabilities that appear in the statement of financial position and explains the movements in these balances in the year.
(b) Deferred tax (i) The balances at 31 December comprise: £m
1 The movement during 2015 relates to the acquisition of Friends Life.
The Group has unrecognised gross tax losses (excluding capital losses) and other temporary differences of £562 million (2014: £694 million) to carry forward against future taxable income of the necessary category in the companies concerned. Of these, trading losses of £51 million will expire within the next 20 years. The remaining losses have no expiry date.
Total IAS 19 obligations to main staff pension schemes (note 48(a)) 686 391 Deficits in other staff pension schemes 46 43
Total IAS 19 obligations to staff pension schemes 732 434 Restructuring provisions 166 97 Other provisions 518 348
The assets of the UK, Irish and Canadian schemes are held in separate trustee-administered funds to meet long-term pension liabilities to past and present employees. In all schemes, the appointment of trustees of the funds is determined by their trust documentation, and they are required to act in the best interests of the schemes’ beneficiaries. 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.
Number 1 The net increase in members in the UK is primarily due to the Friend Provident Pension Scheme, which as at 31 December 2015 has 9,688 deferred members and 4,125 pensioners.
Net IAS 19 surplus in the schemes at 31 December 16,161 (14,324) 1,837 1 Administrative expenses are expensed as incurred. 2 Net interest income of £105 million has been credited to investment income and net interest expense of £25 million has been charged to finance costs (see Note 7). 3 The gross surplus of £68 million on acquisition relates to the FPPS. As the FPPS assets include an insurance policy of £631 million at acquisition date, issued by a Group company that is not transferable under IAS 19, it is eliminated from the scheme assets.
The present value of unfunded post-retirement benefit obligations included in the table above is £111 million at 31 December 2015 (2014: £120 million).
48 – Pension obligations continued The net surplus at 31 December 2015 includes FPPS following the acquisition of Friends Life. Remeasurements recognised in other comprehensive income reflect reduced asset values driven by a rise in interest rates in the UK partly offset by a decrease in the defined benefit obligation due to an increase in the UK discount rate. These impacts were offset in the net surplus by employer contributions.
Remeasurements: Actual return on these assets 3,135 — 3,135 Less: Interest income on scheme assets (542) — (542)
Net IAS 19 surplus in the schemes at 31 December 15,474 (13,170) 2,304 1 Administrative expenses are expensed as incurred. 2 Net interest income of £33 million has been credited to investment income and net interest expense of £13 million has been charged to finance costs (see note 7).
(ii) Scheme assets Scheme assets are stated at their fair values at 31 December 2015.
Bonds Fixed interest 5,542 216 133 5,891 5,519 213 130 5,862 Index-linked 5,758 114 — 5,872 5,568 122 — 5,690
Equities 70 — — 70 98 — — 98 Property 377 7 — 384 328 9 — 337 Pooled investment vehicles 2,904 143 96 3,143 2,010 137 110 2,257 Derivatives 96 — — 96 584 1 — 585 Cash and other1 1,244 4 3 1,251 626 1 18 645
Total fair value of assets 15,991 484 232 16,707 14,733 483 258 15,474 Less: consolidation elimination for non-transferable Group
Equities 70 — 70 74 24 98 Property — 384 384 — 337 337 Pooled investment vehicles 291 2,852 3,143 130 2,127 2,257 Derivatives 6 90 96 (22) 607 585 Cash and other1 532 719 1,251 432 213 645
Total IAS 19 fair value of scheme assets 9,131 7,030 16,161 8,761 6,713 15,474 1 Cash and other assets comprise cash at bank, insurance policies, receivables and payables. 2 FPPS assets are included in the UK balances. As at 31 December 2015, the FPPS’s cash and other balances includes an insurance policy of £546 million issued by a Group company that is not transferable under IAS 19 and is consequently eliminated from the Group’s IAS 19 scheme assets.
Inflation rate1 3.15%/2.05% 3.1%/2.0% 1.6% 1.5% 2.5% 2.5% General salary increases2 4.95% 4.9% 3.1% 3.0% 3.0% 3.0% Pension increases3 3.15%/2.05% 3.1%/2.0% 0.4% 0.4% 1.25% 1.25% Deferred pension increases3 3.15%/2.05% 3.1%/2.0% 1.6% 1.5% — — Discount rate4 3.75%/
Basis of discount rate AA-rated corporate bonds AA-rated corporate bonds AA-rated corporate bonds 1 For the UK schemes, assumptions provided for RPI/CPI. In the UK, the assumptions for the ASPS and RAC schemes are the single rates for RPI/CPI; for FPPS, relevant RPI/CPI swap curves are used, which are broadly equivalent to these single rates.
2 In the UK, the only remaining linkage between pension benefits and general salary increases is in respect of a small amount of Guaranteed Minimum Pension benefits, in line with National Average Earnings. 3 For the UK schemes, assumptions provided for RPI/CPI. In the UK, the assumptions for the ASPS and RAC schemes are single rates for RPI/CPI; for FPPS, relevant RPI/CPI swap curves are used, which are broadly equivalent to these single rates. The assumptions are also adjusted to reflect the relevant caps/floors and the inflation volatility. 4 To calculate scheme liabilities in the UK, a single discount rate is used in ASPS/RAC, whereas in FPPS, separate discount rates are used for the defined benefit obligation for pensioners and deferred.
48 – Pension obligations continued 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 2015 for scheme members are as follows: Life expectancy/(pension duration) at NRA of a male Life expectancy/ (pension duration) at NRA of a female
Canada Canadian Pensioners’ Mortality 2014 Private Table 65 86.5 87.6 89.0 90.0 (21.5) (22.6) (24.0) (25.0)
Impact on present value of defined benefit obligation at 31 December 2015 (2,398) 3,112 2,592 (2,064) 396 Impact on present value of defined benefit obligation at 31 December 2014 (2,170) 2,911 2,747 (2,081) 367 1 The effect of assuming all members in the schemes were one year younger.
Maturity profile of the defined benefit obligation The discounted scheme liabilities have an average duration of 19 years in ASPS, 21 years in FPPS, 19 years in the RAC scheme, 19 years in the Irish scheme and 12 years in the Canadian scheme. The expected undiscounted benefits payable from the main UK defined benefit scheme, ASPS, is shown in the chart below: Undiscounted benefit payments (£m)
Interest rate and inflation risks are managed using a combination of liability-matching assets and swaps. Exposure to equity risk has been reducing over time and credit risk is managed within risk appetite. Currency risk is relatively small and is largely hedged. The other principal risk is longevity risk. In 2014, ASPS entered into a longevity swap covering approximately £5 billion of pensioner in payment scheme liabilities.
Other schemes The other schemes are considerably less material but their risks are managed in a similar way to those in the main UK scheme. During the year, the RAC pension scheme entered into a longevity swap covering approximately £600 million of pensioner in payment scheme liabilities.
For ASPS, following the latest formal actuarial valuation (with an effective date of 31 March 2012) a deficit recovery plan was agreed, to make good the deficit over a period of time, consistent with the requirements of the UK pension regulations. As at 31 December 2015, the ASPS was fully funded. The Company is currently undergoing a triennial actuarial valuation as at 31 March 2015. Total employer contributions for all schemes in 2016 are currently expected to be £130 million.
(d) Charge to staff costs in the income statement The total pension charge to staff costs for all of the Group’s defined benefit and defined contribution schemes were: Continuing operations UK defined benefit schemes 12 31 Overseas defined benefit schemes 1 (1)
Subordinated debt 6.125% £700 million subordinated notes 2036 — 693 — 693 — 692 — 692 5.700% €500 million undated subordinated notes — — — — 387 — — 387 6.125% £800 million undated subordinated notes 795 — — 795 794 — — 794 6.875% £600 million subordinated notes 2058 — 594 — 594 — 594 — 594 6.875% €500 million subordinated notes 2018 — 368 — 368 — 387 — 387 12.00% £162 million subordinated notes 2021 — 221 — 221 — — — — 8.25% £500 million subordinated notes 2022 — 615 — 615 — — — — 6.625% £450 million subordinated notes 2041 — 447 — 447 — 447 — 447 8.25% $400 million subordinated notes 2041 — 269 — 269 — 252 — 252 7.875% $575 million undated subordinated notes 430 — — 430 — — — — 6.125% €650 million subordinated notes 2043 — 477 — 477 — 502 — 502 3.875% €700 million subordinated notes 2044 — 512 — 512 — 539 — 539 5.125% £400 million subordinated notes 2050 — 394 — 394 — — — — 3.375% €900 million subordinated notes 2045 — 654 — 654 — — — —
Less: Amount held by Group companies (17) (25) — (42) — — — —
The classifications between Upper Tier 2, Lower Tier 2 and Senior debt shown above are as defined by the PRA in GENPRU Annex 1 ‘Capital Resources’. The Upper Tier 2 and Lower Tier 2 instruments count as ‘Tier 1 restricted’ and ‘Tier 2’ capital respectively from 1 January 2016 under the Solvency II Own Funds guidelines issued by the PRA.
Within one year 485 394 879 516 304 820 1 to 5 years — 1,577 1,577 200 1,149 1,349 5 to 10 years 662 1,731 2,393 — 1,340 1,340 10 to 15 years 1,190 1,668 2,858 1,188 1,322 2,510 Over 15 years 4,448 3,496 7,944 3,442 2,924 6,366
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 in future years for these borrowings are £79 million (2014: £72 million).
228 | Aviva plc Annual report and accounts 2015 49 – Borrowings continued (c) Operational borrowings (i) The carrying amounts of these borrowings are: £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 £1,308 million (2014: £1,372 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 either ‘Level 2’ or ‘Level 3’ in the fair value hierarchy, depending on whether observable market prices are available for the loan note. 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.
1 The €500 million subordinated notes were redeemed at their first call date on 29 September 2015.
(a) As explained in accounting policy D, the UK long-term business policyholder funds have invested in a number of property funds and structures (the ‘Property Funds’), some of which have raised external debt, secured on the relevant Property Fund’s property portfolio. The lenders are only entitled to obtain payment of interest and principal to the extent there are sufficient resources in the relevant Property Fund and they have no recourse whatsoever to the policyholder or shareholders’ funds of any companies in the Group. Loans of £62 million (2014: £199 million) included in the table relate to those Property Funds which have been consolidated as subsidiaries. (b) The UK long-term business entered into a financial reassurance agreement with Swiss Re in 2008, under which up-front payments are received from Swiss Re in return for 90% of future surpluses arising. The loan will be repaid as profits emerge on the business. (c) Other non-recourse loans primarily include external debt raised by special purpose vehicles in the UK long-term business. The lenders have no recourse whatsoever to the shareholders’ funds of any companies in the Group. (d) Other loans include external debt raised by overseas long-term businesses to fund operations.
New borrowings drawn down, excluding commercial paper, net of expenses 1,045 22 1,067 552 1 553 Repayment of borrowings, excluding commercial paper (833) (161) (994) (241) (372) (613) Movement in commercial paper1 (3) — (3) 1 — 1
Net cash inflow/(outflow) 209 (139) 70 312 (371) (59) Foreign exchange rate movements (106) (2) (108) (132) (5) (137) Borrowings acquired/(loans repaid) for non-cash consideration 1,568 11 1,579 — (321) (321) Fair value movements — 37 37 — 70 70 Amortisation of discounts and other non-cash items (27) (17) (44) 5 (29) (24) Movements in debt held by Group companies2 (42) (100) (142) — 1 1
230 | Aviva plc Annual report and accounts 2015 50 – Payables and other financial liabilities This note analyses our payables and other financial liabilities at the end of the year.
Payables arising out of direct insurance 1,106 948 Payables arising out of reinsurance operations 443 358 Deposits and advances received from reinsurers 110 92 Bank overdrafts (see below) 506 550 Derivative liabilities (note 58) 3,881 3,481 Amounts due to brokers for investment purchases 341 73 Obligations for repayment of cash collateral received 4,855 5,577 Other financial liabilities 1,206 933
Expected to be settled within one year 2,277 1,756 Expected to be settled in more than one year 525 517 52 – Contingent liabilities and other risk factors This note sets out the main areas of uncertainty over the calculation of our liabilities.
(c) Guarantees on long-term savings products As a normal part of their operating activities, various Group companies have given guarantees and options, including interest rate guarantees, in respect of certain long-term insurance and investment products. Note 42 gives details of these guarantees and options. In providing these guarantees and options, the Group’s capital position is sensitive to fluctuations in financial variables including foreign currency exchange rates, interest rates, property values and equity prices. Interest rate guaranteed returns, such as those available on guaranteed annuity options, are sensitive to interest rates falling below the guaranteed level. Other guarantees, such as maturity value guarantees and guarantees in relation to minimum rates of return, are sensitive to fluctuations in the investment return below the level assumed when the guarantee was made. The directors continue to believe that the existing provisions for such guarantees and options are sufficient.
52 – Contingent liabilities and other risk factors continued (d) Regulatory compliance The Group’s insurance and investment business is subject to local regulation in each of the countries in which it operates. A number of the Group’s UK subsidiaries are dual regulated (directly authorised by both the PRA (for prudential regulation) and the FCA (for conduct regulation) whilst others are solo regulated (regulated solely by the FCA for both prudential and conduct regulation). Between them, the PRA and FCA have broad powers including the authority to grant, vary the terms of, or cancel a regulated firm’s authorisation; to investigate marketing and sales practices; and to require the maintenance of adequate financial resources. The Group’s regulators outside the UK typically have similar powers, but in some cases they also operate a system of ‘prior product approval’.
(e) Structured settlements The Company has purchased annuities from licensed Canadian life insurers to provide for fixed and recurring payments to claimants. As a result of these arrangements, the Company is exposed to credit risk to the extent that any of the life insurers fail to fulfill their obligations. The Company’s maximum exposure to credit risk for these types of arrangements is approximately CAD$1,212 million as at 31 December 2015 (2014: CAD$1,224 million). Credit risk is managed by acquiring annuities from a diverse portfolio of life insurers with proven financial stability. This risk is reduced to the extent of coverage provided by Assuris, the Canadian life insurance industry compensation plan. As at 31 December 2015, no information has come to the Company’s attention that would suggest any weakness or failure in life insurers from which it has purchased annuities and consequently no provision for credit risk is required.
232 | Aviva plc Annual report and accounts 2015 53 – Commitments This note gives details of our commitments to capital expenditure and under operating leases.
(a) Capital commitments Contractual commitments for acquisitions or capital expenditures of investment property and property and equipment, which have not been recognised in the financial statements, are as follows: Investment property 71 97 Property and equipment 61 8 Other investment vehicles1 202 —
1 Represents commitments for further investment in certain private equity vehicles. Such commitments do not expose the Group to the risk of future losses in excess of its investment.
Within 1 year 318 234 Later than 1 year and not later than 5 years 996 732 Later than 5 years 1,382 1,203
Life business United Kingdom & Ireland 11,088 5,668 France 2,151 2,234 Poland 305 318 Italy 849 929 Spain 506 557 Other Europe 72 82 Europe 3,883 4,120 Asia 1,355 791
General insurance & health United Kingdom & Ireland 4,089 4,145 France 506 556 Italy 231 276 Other Europe 63 32 Europe 800 864 Canada 957 969 Asia 24 29
Financed by Equity shareholders’ funds 15,764 10,018 Non-controlling interests 1,145 1,166 Direct capital instrument & tier 1 notes2 1,123 892 Preference shares 200 200 Subordinated debt3 6,427 4,594 Senior debt 485 716
Total capital employed 25,144 17,586 1 ‘Corporate’ and ‘other Business’ includes centrally held tangible net assets, the main UK staff pension scheme surplus and also reflects internal lending arrangements. These internal lending arrangements, which net out on consolidation, include the formal loan arrangement between Aviva Group Holdings Limited and Aviva Insurance Limited (AIL). Internal capital management in place allocated a majority of the total capital of AIL to the UK general insurance operations with the remaining capital deemed to be supporting residual (non-operational) Pillar II ICA risks.
At the end of 2015 the market value of our external debt, subordinated debt, preference shares (including both Aviva plc preference shares of £200 million and General Accident plc preference shares, within non-controlling interests, of £250 million), and direct capital instrument and tier 1 notes was £9,094 million (2014: £7,511 million).
(a) The reconciliation of profit before tax to the net cash inflow from operating activities is: Profit before tax from continuing operations 1,172 2,663 Adjustments for: Share of profits of joint ventures and associates (180) (147) Dividends received from joint ventures and associates 45 52 (Profit)/loss on sale of: Investment property (120) (49) Property and equipment (1) (4) Subsidiaries, joint ventures and associates (2) (174) Investments (3,404) (3,040)
Premium / discount on debt securities 104 255 Premium / discount on borrowings (44) (24) Premium / discount on non participating investment contracts 237 5 Financial instruments 12 12 Acquired value of in-force business and intangibles 390 108 699 356 Change in unallocated divisible surplus (984) 3,364 Interest expense on borrowings 588 525 Net finance charge on pension schemes (80) (20) Foreign currency exchange gains (358) (199)
Cash consideration for subsidiaries, joint ventures and associates acquired and additions 97 79 Less: Cash and cash equivalents acquired with subsidiaries (7,880) —
The above figures form part of cash flows from investing activities.
Cash and cash equivalents reconciles to the statement of financial position as follows: Cash and cash equivalents (excluding bank overdrafts) 33,676 23,114 Less: Assets classified as held for sale — (9)
From 1 January 2016 EU-based insurance groups are no longer required to disclose their solvency position under the Insurance Groups Directive, as the regulatory framework has been replaced by the new Solvency II regime. As such, after 31 December 2015 Aviva Group will no longer disclose its capital statement under FRS 27.
The analysis below sets out the Group’s available capital resources at 31 December 2015.
Analysis of liabilities: Participating insurance liabilities 1,652 11,325 9,395 4,493 3,215 30,080 3,400 20,395 53,875 — 53,875 44,834 Unit-linked liabilities — — — — — — 10,482 4,286 14,768 — 14,768 7,963 Other non-participating life insurance 363 3,366 559 26 — 4,314 50,712 3,381 58,407 — 58,407 46,656
2 Unallocated divisible surplus for overseas life operations is included gross of minority interest. 3 Includes goodwill and other intangibles of £116 million in joint ventures and associates. 4 Includes an adjustment for minorities (except for other sources of capital that are reflected net of minority interest). 5 Includes the Provident Mutual With-Profits Fund and the Ireland With-Profits Sub-Fund. 6 Includes FPLAL WPF, FLC New WPF, FLC Old WPF, FLAS WPF and WL WPF. 7 Other operations include general insurance and fund management business.
236 | Aviva plc Annual report and accounts 2015 56 – Capital statement continued Analysis of movements in capital of long-term businesses For the year ended 31 December 2015
Further analysis of the movement in the liabilities of the long-term business can be found in notes 40 and 41. The analysis of movements in capital provides an explanation of the movement in available capital of the Group’s life business for the year. This analysis is intended to give an understanding of the underlying causes of changes in the available capital of the Group’s life business, and provides a distinction between some of the key factors affecting the available capital.
The negative shareholders’ funds balance within the UK with-profits funds arises in NWPSF as a result of regulatory valuation and admissibility differences in the reattributed estate which is valued on a realistic regulatory basis compared to the disclosure on an IFRS basis.
For the remaining life and general insurance operations, the total available capital amounting to £20.2 billion (2014: £18.3 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.
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-profits funds is determined in accordance with the ‘Realistic balance sheet’ regime prescribed by the PRA’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-profits 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.
NWPSF 14.0 (14.0) — 2.1 (0.2) 1.9 1.9 OWPSF 2.6 (2.4) 0.2 — — 0.2 0.2 WPSF4 16.7 (15.2) 1.5 — (0.3) 1.2 1.3 FP WPF5 7.2 (7.0) 0.2 — (0.2) — — Other Friends Life WPFs6 10.7 (10.7) — — — — —
2 Estimated realistic inherited estate at 31 December 2014 was £nil, £0.3 billion and £1.6 billion for NWPSF, OWPSF and WPSF respectively. 3 The support arrangement represents the reattributed estate (RIEESA) of £2.1 billion at 31 December 2015 (31 December 2014: £2.1 billion). 4 The WPSF fund includes the Ireland With-Profits Sub-Fund (IWPSF) and the Provident Mutual (PM) Fund which have realistic assets and liabilities of £2.4 billion in total, and therefore do not contribute to the realistic inherited estate. 5 For FP WPF the realistic inherited estate is restricted to the estimated risk capital margin with excess available capital used to enhance asset shares. 6 Includes FPLAL WPF, FLC New WPF, FLC Old WPF, FLAS WPF and WL WPF. For these funds it is assumed that the entire estimated realistic inherited estate is distributed to policyholders.
For UK non-participating business, the relevant capital requirement is the minimum solvency requirement determined in accordance with PRA regulations. The available capital reflects the excess of regulatory basis assets over liabilities before deduction of capital resources requirement.
For UK general insurance businesses, the relevant capital requirement is the minimum solvency requirement determined in accordance with the PRA requirements.
For overseas businesses in the European Economic Area (EEA), Canada, Hong Kong and Singapore, the available capital and the minimum requirement are calculated under the locally applicable regulatory regimes. The businesses outside these territories are subject to the PRA rules for the purposes of calculation of available capital and capital resource requirement.
The available capital resources in each regulated entity are generally subject to restrictions as to their availability to meet requirements that may arise elsewhere in the Group. The principal restrictions are: • (i) UK with-profits funds – (NWPSF, OWPSF, WPSF, FP WPF and Other Friends Life WPFs) – any available surplus held in each fund can be used to meet the requirements of the fund itself, be distributed to policyholders and shareholders or in the case of NWPSF and OWPSF, transferred via the capital support arrangement explained above (for OWPSF only to the extent support has been provided in the past). In most cases, with-profits policyholders are entitled to at least 90% of the distributed profits while the shareholders receive the balance. The latter distribution would be subject to a tax charge, which is met by the fund. In the FP WPF, shareholders are additionally entitled to 60% of surplus arising in respect of the pre-demutualisation non-profit and unitised business written in the fund (excluding the investment elements). Also, post-demutualisation policyholders are only entitled to surplus from the return on their investments; other sources of surplus are wholly owned by shareholders. In the FPLAL WPF the surplus may only be distributed to policyholders.
To promote a consistent and rigorous approach to risk management across all businesses we have a set of risk policies and business standards which set out the risk strategy, appetite, framework and minimum requirements for the Group’s worldwide operations. On a semi-annual basis the business chief executive officers and chief risk officers sign-off compliance with these policies and standards, providing assurance to the relevant oversight committees that there is a consistent framework for managing our business and the associated risks.
(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.
57 – Risk management continued (i) Financial exposures by credit ratings Financial assets are graded according to current external credit ratings issued. AAA is the highest possible rating. Investment grade financial assets are classified within the range of AAA to BBB ratings. Financial assets which fall outside this range are classified as sub-investment grade. The following table provides information regarding the aggregated credit risk exposure of the Group for financial assets with external credit ratings. ‘Not rated’ assets capture assets not rated by external ratings agencies.
Debt securities 13.6% 35.6% 21.3% 21.9% 2.1% 5.5% 131,661 131,661 Reinsurance assets 0.3% 71.3% 21.9% 0.1% 0.0% 6.4% 7,958 7,958 Other investments 0.0% 0.1% 1.3% 0.0% 0.2% 98.4% 35,358 35,358 Loans 1.3% 9.0% 2.1% 0.2% 0.0% 87.4% 25,260 25,260
The Group continues to hold a series of macro credit hedges to reduce the overall credit risk exposure, and has increased these hedges during 2015. The Group’s maximum exposure to credit risk of financial assets, without taking collateral or these hedges into account, is represented by the carrying value of the financial instruments in the statement of financial position. These comprise debt securities, reinsurance assets, derivative assets, loans and receivables. The carrying values of these assets are disclosed in the relevant notes: financial investments (note 26), reinsurance assets (note 43), loans (note 23) and receivables (note 27). The collateral in place for these credit exposures is disclosed in note 59; Financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements.
240 | Aviva plc Annual report and accounts 2015 57 – Risk management continued (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 (i.e. excluding potential exposures arising from reinsurance of unit linked funds) is to the Swiss Reinsurance Company Limited (including subsidiaries), representing approximately 2.2% of the total shareholder assets.
Debt securities 918 — — — — — 918 Reinsurance assets 6,951 — — — — — 6,951 Other investments — — — — — — — Loans 3,353 — — — — 1 3,354 Receivables and other financial assets 6,775 84 5 7 3 1 6,875
57 – Risk management continued (c) Market risk Market risk is the risk of adverse financial impact resulting, directly or indirectly from fluctuations in interest rates, foreign currency exchange rates, equity and property prices. Market risk arises in business units due to fluctuations in both the value of liabilities and the value of investments held. At Group level, it also arises in relation to the overall portfolio of international businesses and in the value of investment assets owned directly by the shareholders. We actively seek some market risks as part of our investment and product strategy. However, we have limited appetite for interest rate risk as we do not believe it is adequately rewarded.
(i) Equity price risk The Group is subject to equity price risk arising from changes in the market values of its equity securities portfolio.
As at 31 December 2015, no material derivative contracts had been entered into to mitigate the effects of changes in property prices.
The Group typically manages interest rate risk by investing in fixed interest securities which closely match the interest rate sensitivity of the liabilities where such investments are available. In particular, a key objective is to at least match the duration of our annuity liabilities with assets of the same duration, and in some cases where appropriate cash flow matching has been used. These assets include corporate bonds, residential mortgages and commercial mortgages. Should they default before maturity, it is assumed that the Group can reinvest in assets of a similar risk and return profile, which is subject to market conditions. Interest rate risk is also managed in some business units using a variety of derivative instruments, including futures, options, swaps, caps and floors.
242 | Aviva plc Annual report and accounts 2015 57 – Risk management continued Certain of the Group’s product lines, such as protection, are not significantly sensitive to interest rate or market movements. For unit-linked business, the shareholder margins emerging are typically a mixture of annual management fees and risk/expense charges. Risk and expense margins will be largely unaffected by low interest rates. Annual management fees may increase in the short-term as the move towards low interest rates increases the value of unit funds. However, in the medium term, unit funds will grow at a lower rate which will reduce fund charges. For the UK annuities business interest rate exposure is mitigated by closely matching the duration of liabilities with assets of the same duration.
57 – Risk management continued At 31 December 2015 and 2014, the Group’s total equity deployment by currency including assets ‘held for sale’ was: Sterling £m
Net assets at 31 December 2015 (166) 128 (33) 67 Net assets at 31 December 2014 (78) 210 (96) 91
A 10% change in sterling to euro/Canada$ (CAD$) average foreign exchange rates applied to translate foreign currency profits would have had the following impact on profit before tax, including resulting gains and losses on foreign exchange hedges and excluding ‘discontinued operations’.
(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 and through the development of its liquidity risk management plan. 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. In addition to the existing liquid resources and expected inflows, the Group maintains significant undrawn committed borrowing facilities (£1,650 million) from a range of leading international banks to further mitigate this risk.
(i) Analysis of maturity of insurance and investment contract liabilities For non-linked insurance business, the following table shows the gross liability at 31 December 2015 and 2014 analysed by remaining duration. The total liability is split by remaining duration in proportion to the cash-flows expected to arise during that period, as permitted under IFRS 4, Insurance Contracts.
244 | Aviva plc Annual report and accounts 2015 57 – Risk management continued This table includes assets held for sale.
Long-term business Insurance contracts – non-linked 85,723 7,980 25,318 32,534 19,891 Investment contracts – non-linked 55,634 3,311 10,852 23,919 17,552 Linked business 75,341 8,141 21,444 27,673 18,083 General insurance and health 13,993 6,014 5,400 2,115 464
(e) Life and health insurance risk Life insurance risk in the Group arises through its exposure to mortality risk and exposure to worse than anticipated operating experience on factors such as persistency levels, exercising of policy holder options and management and administration expenses. The Group’s health insurance business (including private health insurance, critical illness cover, income protection and personal accident insurance, as well as a range of corporate healthcare products) exposes the Group to morbidity risk (the proportion of our customers falling sick) and medical expense inflation. The Group chooses to take measured amounts of life and health insurance risk provided that the relevant business has the appropriate core skills to assess and price the risk and adequate returns are available.
The impact of these is reflected in the economic capital model and MCEV reporting and managed as part of the asset liability framework. Further disclosure on financial guarantees and options embedded in contracts and their inclusion in insurance and investment contract liabilities is provided in note 42.
(g) Asset management risk Aviva is directly exposed to the risks associated with operating an asset management business through its ownership of Aviva Investors. The underlying risk profile of our asset management risk is derived from investment performance, specialist investment professionals and leadership, product development capabilities, fund liquidity, margin, client retention, regulatory developments, fiduciary and contractual responsibilities. The risk profile is regularly monitored. Investment performance has remained strong over 2015 despite some positions being impacted by the volatility of global markets.
Our business units are primarily responsible for identifying and managing operational risks within their businesses, within the group-wide operational risk framework including the risk and control self-assessment process. Businesses must be satisfied that all material risks falling outside our risk tolerances are being mitigated, monitored and reported to an appropriate level. Any risks with a high potential impact are monitored centrally on a regular basis. Businesses use key indicator data to help monitor the status of the risk and control environment. They also identify and capture loss events, taking appropriate action to address actual control breakdowns and promote internal learning.
57 – Risk management continued (j) Risk and capital management (i) Sensitivity test analysis The Group uses a number of sensitivity tests to understand the volatility of earnings, the volatility of its capital requirements, and to manage its capital more efficiently. Sensitivities to economic and operating experience are regularly produced on the Group’s key financial performance metrics to inform the Group’s decision making and planning processes, and as part of the framework for identifying and quantifying the risks to which each of its business units, and the Group as a whole, are exposed.
For long-term business in particular, sensitivities of market consistent performance indicators to changes in both economic and non-economic experience are continually used to manage the business and to inform the decision making process.
Insurance participating (10) (60) (20) (175) 70 (25) (5) (45) Insurance non-participating (155) 130 (425) 40 (40) (80) (50) (590) Investment participating (15) — (10) — — (5) — — Investment non-participating (40) 30 (10) 55 (60) (35) — — Assets backing life shareholders’ funds (75) 45 (60) 20 (20) — — —
Insurance participating (10) (60) (20) (175) 70 (25) (5) (45) Insurance non-participating (155) 130 (425) 40 (40) (80) (50) (590) Investment participating (15) — (10) — — (5) — — Investment non-participating (40) 30 (10) 55 (60) (35) — — Assets backing life shareholders’ funds (115) 80 (65) 20 (20) — — —
Sensitivities as at 31 December 2014 2014 Impact on profit before tax (£m)
In the narrative and tables below, figures are given for both the notional amounts and fair values of these instruments. The notional amounts reflect the aggregate of individual derivative positions on a gross basis and so give an indication of the overall scale of the derivative transaction. They do not reflect current market values of the open positions. The fair values represent the gross carrying values at the year end for each class of derivative contract held (or issued) by the Group.
(a) Instruments qualifying for hedge accounting The Group has formally assessed and documented the effectiveness of its instruments qualifying for hedge accounting in accordance with IAS 39, Financial Instruments: Recognition and Measurement.
(i) Net investment hedges To reduce its exposure to foreign currency risk, the Group has designated a portion of its euro denominated debt as a hedge of the net investment in its European subsidiaries. The carrying value of the debt at 31 December 2015 was £368 million (2014: £1,292 million) and its fair value at that date was £413 million (2014: £1,359 million).
The foreign exchange gain of £42 million (2014: gain of £94 million) on translation of the debt to sterling at the statement of financial position date has been recognised in the hedging instruments reserve in shareholders’ equity. This hedge was fully effective throughout the current and prior years.
Forwards 7,791 50 (186) 5,999 54 (42) Interest rate and currency swaps 5,152 133 (346) 2,237 141 (153) Options 4,800 28 (16) 14,741 92 (48)
Fair value assets made up of £2 million in hedge derivatives and £3,326 million in non-hedge derivatives are recognised as ‘Derivative financial instruments’ in note 26(a), while fair value liabilities are recognised as ‘Derivative liabilities’ in note 50.
The Group’s derivative risk management policies are outlined in note 57.
(c) Collateral Certain derivative contracts, primarily interest rate and currency swaps, involve the receipt or pledging of cash and non-cash collateral. The amounts of cash collateral receivable or repayable are included in notes 27 and 50 respectively. Collateral received and pledged by the Group is detailed in note 59.
Aviva participates in a number of stock lending and repurchase arrangements. In some of these arrangements cash is exchanged by Aviva for securities and a related receivable is recognised within ‘Loans to Banks’ (note 23). These arrangements are reflected in the tables below. In instances where the collateral is recognised on the statement of financial position, the obligation for its return is included within ‘Payables and other financial liabilities’.
Offset under IAS 32 Amounts under a master netting agreement but not offset under IAS 32 amounts Amounts offset
Net amounts reported in the statement of financial position Financial instruments Cash collateral
Financial assets Derivative financial assets 4,467 (1,065) 3,402 (1,846) (931) (404) 221 Loans to banks and repurchase arrangements 3,763 — 3,763 — — (3,763) —
Financial liabilities Derivative financial liabilities (3,725) 1,065 (2,660) 2,108 338 146 (68) Other financial liabilities (1,859) — (1,859) — — 1,859 —
Derivative assets are recognised as ‘Derivative financial instruments’ in note 26(a), while fair value liabilities are recognised as ‘Derivative liabilities’ in note 50. £504 million (2014: £686 million) of derivative assets and £687 million (2014: £821 million) of derivative liabilities are not subject to master netting agreements and are therefore excluded from the table above.
252 | Aviva plc Annual report and accounts 2015 59 – Financial assets and liabilities subject to offsetting, enforceable master netting agreements and similar arrangements continued (b) Collateral In the tables above, the amounts of assets or liabilities presented in the consolidated statement of financial position are offset first by financial instruments that have the right of offset under master netting or similar arrangements with any remaining amount reduced by the amount of cash and securities collateral. The actual amount of collateral may be greater than amounts presented in the tables above in the case of over collateralisation.
The total amount of collateral received which the Group is permitted to sell or repledge in the absence of default was £22,424 million (2014: £20,566 million), all of which other than £2,588 million (2014: £2,896 million) is related to securities lending arrangements. £2,915 million (2014: £4,036 million) of collateral has been received related to balances recognised within ‘Loans to banks’ (refer to note 23). The value of collateral that was actually sold or repledged in the absence of default was £nil (2014: £nil).
Subsidiaries The principal subsidiaries of the Company are listed below by country of incorporation.
A complete list of the Group’s related undertakings comprising of subsidiaries, joint ventures, associates and other significant holdings is contained within Note 62.
62 – Related Undertakings The Companies Act 2006 requires disclosure of certain information about the Group’s related undertakings which is set out in this note. Related undertakings comprise subsidiaries, joint ventures, associates and other significant holdings. Significant holdings are where the Group either has a shareholding greater than or equal to 20% of the nominal value of any share class, or a book value greater than 20% of the Group’s assets.
(b) The indirect related undertakings of the Company as at 31 December 2015 are listed below: Name of undertaking Country of incorporation Share class % held 7-13 Boulevard Paul Emile Victor S.a.r.l France Ordinary Shares 100 1 Fitzroy Place Jersey Unit Trust Jersey Unit Trust 50 1 Fitzroy Place LP United Kingdom Limited Partnership 50 11 Rue De L'Echelle France Ordinary Shares 100 11-12 Hanover Square LP3 United Kingdom Limited Partnership 50 11-12 Hanover Square Nominee 1 Limited3 United Kingdom Ordinary Shares 50 11-12 Hanover Square Nominee 2 Limited3 United Kingdom Ordinary Shares 50 11-12 Hanover Square Unit Trust3 Jersey Unit Trust 50 130 Fenchurch Street LP3 United Kingdom Limited Partnership 50 130 Fenchurch Street Nominee 1 Limited3 United Kingdom Ordinary Shares 50 130 Fenchurch Street Nominee 2 Limited3 United Kingdom Ordinary Shares 50 130 Fenchurch Street Unit Trust3 Jersey Unit Trust 50 1-5 Lowndes Square Management Company Limited United Kingdom Ordinary 'B' Shares 75 2 Fitzroy Place Jersey Unit Trust Jersey Unit Trust 50 2 Fitzroy Place LP United Kingdom Limited Partnership 50 20 Gracechurch (General Partner) Limited United Kingdom Ordinary 'A' Shares
Ordinary 'B' Shares 100 20 Gracechurch LP United Kingdom Limited Partnership 100 20 Gracechurch Unit Trust Jersey Unit Trust 100 20 Lowndes Square Management Company Limited United Kingdom Ordinary 'A' Shares
Ordinary ‘B’ Shares 77 43 Lowndes Square Management Company Limited United Kingdom Ordinary ‘A’ Shares Ordinary ‘B’ Shares 44-49 Lowndes Square Management Company Limited United Kingdom Ordinary ‘A’ Shares Ordinary ‘B’ Shares 6-10 Lowndes Square Management Company Limited United Kingdom Ordinary ‘A’ Shares Ordinary ‘B’ Shares
Airport Property H1 Limited United Kingdom Ordinary Shares 50 Airport Property Property Partnership3 United Kingdom Limited Partnership 50 Airport Property Unit Trust Jersey Unit Trust 50 Alternative Use Group Plc United Kingdom Ordinary Shares 100 Amundi Eq.Gl.Luxury Lifest.Aec France Mutual Fund 24 Anesco Mid Devon Limited United Kingdom Ordinary Shares 100 Anesco South West Limited United Kingdom Ordinary Shares 100 Anna Livia Properties Limited Ireland Ordinary Shares 100 Antarius Fonds Actions Plus France Mutual Fund 100 Antarius Fonds Obligataire France Mutual Fund 100 Antarius Obli 1-3 Ans France Mutual Fund 100 Antarius Rotation Sectorielle France Mutual Fund 97 Antarius S.A France Ordinary € 16 Shares 50 Apia Nominee 1 Limited3,4 United Kingdom Ordinary Shares 50 Apia Nominee 2 Limited3,4 United Kingdom Ordinary Shares 50 Apia Regional Office Fund (General Partner) Limited3,4 United Kingdom Ordinary Shares 50 Apia Regional Office Fund (No.1) Limited3,4 United Kingdom Ordinary Shares 50 APIA Regional Offices Fund Limited Partnership United Kingdom Limited Partnership 28 APIA Regional Offices Fund Unit Trust Jersey Unit Trust 28 Architas Liquidity R Acc United Kingdom OEIC 29 Architas MA Active Intermediate Income Fund United Kingdom OEIC 30 Architas Multi-Manager Global Solutions ICVC - Reserve Fund United Kingdom OEIC 26 Architas Multi-Manager Protector Funds ICVC - Diversified Protector 70 United Kingdom Fund of Funds 49 Architas Multi-Manager Protector Funds ICVC - Diversified Protector 80 United Kingdom Fund of Funds 35 Area Life International Assurance Limited Ireland A Shares
Aviva Brands Limited United Kingdom Ordinary Shares 100 Aviva Canada Inc. Canada Class A,Class B, Common, & New Common
Aviva Capital Planete Fcp France Mutual Fund 100 Aviva Central Services UK Limited United Kingdom Ordinary Shares 100 Aviva Client Nominees UK Limited United Kingdom Ordinary Shares 100 Aviva Commercial Finance Limited United Kingdom Ordinary Shares 100 Aviva Company Secretarial Services Limited United Kingdom Ordinary Shares 100 Aviva Consumer Products UK Limited United Kingdom Ordinary Shares 100 Aviva Convertibles France Ordinary Shares 92 Aviva Conviction Opportunites France Mutual Fund 100 Aviva Conviction Patrimoine France Mutual Fund 100 Aviva Corto Plazo -A- Fi Spain Mutual Fund 33 Aviva Credit Services UK Limited United Kingdom Ordinary Shares 100 256 | Aviva plc Annual report and accounts 2015
Aviva Deposits UK Limited United Kingdom Ordinary Shares 100 Aviva Développement France Ordinary Shares 99 Aviva Direct Ireland Limited Ireland Ordinary Shares 100 Aviva Director Services Limited United Kingdom Ordinary Shares 100 Aviva Diversifie France Ordinary Shares 95 Aviva Driving School Ireland Limited Ireland Ordinary Shares 100 Aviva Employment Services Limited United Kingdom Ordinary Shares 100 Aviva Epargne Retraite France Ordinary Shares 100 Aviva Equity Release UK Limited United Kingdom Ordinary Shares 100 Aviva ERFA 15 UK Limited United Kingdom Ordinary Shares 100 Aviva Espabolsa Fi Spain Mutual Fund 51 Aviva Eur Corp Senior Debts France Mutual Fund 100 Aviva Eurobolsa Fi Spain Mutual Fund 76 Aviva Europe France Ordinary Shares 96 Aviva Europe SE United Kingdom Ordinary Shares 92 Aviva Europe Services Europe Economic Interest Group United Kingdom Ordinary Shares 100 Aviva Flexible Emergents A Fcp France Mutual Fund 100 Aviva Flexible Emetgents I FCP France Mutual Fund Aviva Fonvalor -A- Fi Spain Mutual Fund 65 Aviva France France Ordinary Shares 100 Aviva France Opportunites France Mutual Fund 95 Aviva Gestion SGIIC SA Spain Ordinary Shares 92 Aviva Global Services (Management Services) Private Ltd. Singapore Ordinary Shares 100 Aviva Grandes Marque France Mutual Fund 100 Aviva Grdes Marq A C. France Mutual Fund 100 Aviva Group Holdings Limited United Kingdom Ordinary Shares 100 Aviva Group Ireland plc Ireland Ordinary Shares 100 Aviva Group Services Ireland Limited Ireland Ordinary Shares 92 Aviva Grupo Corporativo S.L. Spain Ordinary Shares 92 Aviva Health Group Ireland Limited Ireland Ordinary Share 70 Aviva Health Insurance Ireland Limited Ireland Ordinary Shares 70 Aviva Health UK Limited United Kingdom Ordinary Shares 100 Aviva Holdings CED II (Luxembourg) Sarl Luxembourg €100 Units 100 Aviva Immo Selection France Ordinary Shares 100 Aviva Impact Investing France France Ordinary Shares 100 Aviva Infrastructure Debt Europe I S.A. United Kingdom Ordinary Shares 100 Aviva Insurance Company of Canada Canada Common Shares 100 Aviva Insurance Limited United Kingdom Ordinary Shares 100 Aviva Insurance Services UK Limited United Kingdom Ordinary Shares 100 Aviva Insurance UK Limited United Kingdom Ordinary Shares 100 Aviva International Holdings Limited United Kingdom Ordinary Shares 100 Aviva International Insurance Limited United Kingdom Ordinary Shares 100 Aviva Interoblig France Mutual Fund 100 Aviva Inv Eu Aggr A C. France Mutual Fund 81 Aviva Inv Eur Cre Bd France Mutual Fund 98 Aviva Inv Yield Curve Abs Ret France Mutual Fund 88 Aviva Inv Yield Curve Abs Rt R France Mutual Fund 100 Aviva Inv.E.Aggr.I France Mutual Fund 92 Aviva Invesco Perpetual Global Targeted Returns2 United Kingdom OEIC 86 Aviva Invest.Credit Europe(C) France Mutual Fund 40 Aviva Invest.Credit Europe(D) France Mutual Fund 99 Aviva Investissements France Ordinary Shares 100 Aviva Investment Advisory Services Private Limited India Equity Shares 100 Aviva Investors UK Equity Share Class 3 United Kingdom OEIC 90 Aviva Investors (FP) Limited United Kingdom Ordinary Shares 100 Aviva Investors (FP) LP United Kingdom Ordinary Shares 100 Aviva Investors (GP) Scotland Limited United Kingdom Ordinary Shares 100 Aviva Investors Actions Euro France Mutual Fund 91 Aviva Investors Akcyjny Poland OEIC 100 Aviva Investors Alpha Taux A France Mutual Fund 100 Aviva Investors Alpha Yield France Mutual Fund 95 Aviva Investors Americas LLC United States Sole Member 100 Aviva Investors Asia Pte. Limited Singapore Ordinary Shares 100 Aviva Investors Asian Equity Income Fund Luxembourg SICAV 90 Aviva Investors Asian High Yield Bond Fund Luxembourg SICAV 96 Aviva Investors Australian Logistics Property Trust Australia Ordinary Shares 100 Aviva Investors Australian Logistics Property Truts No. 2 Australia Unit Trust 100 Aviva Investors Australian Value Enhanced Logistics Strategy II Trust Australia Unit Trust 100 Aviva Investors Australian Value Enhanced Logistics Strategy III Trust Australia Unit Trust 100 Aviva Investors Australian Value Enhanced Logistics Strategy Trust Australia Unit Trust 100 Aviva Investors Aviva Perspective 2024 Luxembourg SICAV 100 Aviva Investors Aviva Perspective 2026 Luxembourg SICAV 100 Aviva Investors Balance Fund of Funds Share Class 3 United Kingdom OEIC 0 Aviva Investors Britannia (D) France Mutual Fund 100 Aviva Investors Canada Inc. Canada Common Shares 100 Aviva Investors Cash Share Class 3 United Kingdom OEIC 86 Aviva Investors Cautious Fund of Funds Share Class 3 United Kingdom OEIC 87 Aviva Investors Central European Property Fund FCP-SIF Luxembourg FCP 49 Aviva Investors Commercial Assets GP Limited United Kingdom Ordinary Shares 100 Aviva Investors Conviction France Mutual Fund 100 Aviva Investors Corporate Bond 3 United Kingdom OEIC 45 Aviva Investors Depozyt Plus Luxembourg UCIT 31 Aviva Investors Dłużny Poland OEIC 100 Aviva Investors Dynamic Master Fund Luxembourg SICAV 100 Aviva Investors EBC GP Limited United Kingdom Ordinary Shares 100 Aviva Investors EBC Limited Partnership United Kingdom Ordinary shares 100 Aviva Investors EBC S.à r.l. Luxembourg Ordinary A Shares 100 Aviva Investors Emerging Markets Bond Fund Luxembourg SICAV 75 Aviva Investors Emerging Markets Corporate Bond Fund Luxembourg SICAV 100 Aviva Investors Emerging Markets Debt Opportunities Fund Luxembourg SICAV 100 Aviva Investors Emerging Markets Equity Income Fund Luxembourg SICAV 99 Aviva Investors Emerging Markets Equity Small Cap Fund Luxembourg SICAV 78 Aviva Investors Emerging Markets Local Currency Fund Luxembourg SICAV 80
Aviva Investors Employment Services Limited United Kingdom Ordinary Shares 100 Aviva Investors Energy Centre No.1 GP Limited United Kingdom Ordinary Shares 100 Aviva Investors Euro Liquidity Fund Ireland ICVC 86 Aviva Investors European Corporate Bond A Italy SICAV 37 Aviva Investors European Corporate Bond Fund Luxembourg SICAV 64 Aviva Investors European Equity Fund Luxembourg SICAV 61 Aviva Investors European Equity Income Fund Luxembourg SICAV 97 Aviva Investors European Equity Share Class 3 United Kingdom OEIC 100 Aviva Investors European Fund Luxembourg SICAV 100 Aviva Investors European Property Fund Share Class I Account Euro United Kingdom OEIC 72 Aviva Investors European Property Fund Share Class I Account GBP United Kingdom OEIC 81 Aviva Investors European Property Share Class R GBP United Kingdom OEIC 61 Aviva Investors European Real Estate Securities Fund Luxembourg SICAV 71 Aviva Investors European Reit Fund A Italy SICAV 36 Aviva Investors European Renewable Energy S.A. Luxembourg Ordinary Shares 100 Aviva Investors European Secondary Infrastructure Credit SV S.A Luxembourg Ordinary Shares 68 Aviva Investors European Secondary Infrastructure Credit SVA Luxembourg Ordinary Shares 68 Aviva Investors France S.A France Ordinary Shares 100 Aviva Investors Funds SPC Ltd. Cayman Islands Ordinary Shares 100 Aviva Investors Global Aggregate Bond Fund Luxembourg SICAV 100 Aviva Investors Global Bond Absolute Return Fund Luxembourg SICAV 100 Aviva Investors Global Convertibles Absolute Return Fund Luxembourg SICAV 61 Aviva Investors Global Convertibles Fund Luxembourg SICAV 69 Aviva Investors Global Emerging Markets Index Fund Luxembourg SICAV 100 Aviva Investors Global Fixed Income Hedged Fund Share Class 3 United Kingdom OEIC 100 Aviva Investors Global High Yield Bond Fund Luxembourg SICAV 51 Aviva Investors Global Investment Grade Corporate Bond Fund Luxembourg SICAV 98 Aviva Investors Global Services Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 10 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 11 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 12 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 13 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 14 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 15 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 4 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 5 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 6 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 7 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 8 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV 9 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV1 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV2 Limited United Kingdom Ordinary Shares 100 Aviva Investors GR SPV3 Limited United Kingdom Ordinary Shares 100 Aviva Investors Ground Rent GP Limited United Kingdom Ordinary Shares 100 Aviva Investors Ground Rent Holdco Limited United Kingdom Ordinary Shares 100 Aviva Investors Growth Fund of Funds Share Class 3 United Kingdom OEIC 93 Aviva Investors GSL Asia Pacific Property Fund Share Class A GBP United Kingdom OEIC 99 Aviva Investors Higher Income Plus Share Class 3 United Kingdom OEIC 100 Aviva Investors Holdings Limited United Kingdom Ordinary Shares 100 Aviva Investors Inflation Euro France Mutual Fund 100 Aviva Investors Infrastructure GP Limited United Kingdom Ordinary Shares 100 Aviva Investors Ireland Holdings Limited Ireland Ordinary Shares 100 Aviva Investors Ireland Limited Ireland Ordinary Shares 100 Aviva Investors Japan France Mutual Fund 97 Aviva Investors Japan Equity Monthly 1 United Kingdom OEIC 100 Aviva Investors Jersey Unit Trusts Management Limited Jersey Ordinary Shares 100 Aviva Investors London Limited United Kingdom Ordinary Shares 100 Aviva Investors Long Term European Bond - A Italy SICAV 30 Aviva Investors Luxembourg Luxembourg Nominal Par Value Shares 100 Aviva Investors Luxembourg Services S.à r.l. Luxembourg Ordinary Shares 100 Aviva Investors Małych Spółek Poland UCITs 30 Aviva Investors Monetaire (C) France Mutual Fund 50 Aviva Investors Monetaire (D) France Mutual Fund 95 Aviva Investors Monetaire (P) France Mutual Fund 100 Aviva Investors Monthly Income Plus Account 3 United Kingdom OEIC 100 Aviva Investors Multi Strategy Target Income 3 Income GBP United Kingdom OEIC 82 Aviva Investors Multi- Strategy Target Income Fund 5 Income GBP United Kingdom OEIC 25 Aviva Investors Multi-Asset Fund I United Kingdom OEIC 100 Aviva Investors Multi-Asset Fund I Share Class 3 United Kingdom OEIC 100 Aviva Investors Multi-Asset Fund II United Kingdom OEIC 100 Aviva Investors Multi-Asset Fund III United Kingdom OEIC 97 Aviva Investors Multi-Asset Fund IV United Kingdom OEIC 100 Aviva Investors Multi-Asset Fund V United Kingdom OEIC 100 Aviva Investors Multi-Strategy Target Income Fund Luxembourg SICAV 96 Aviva Investors Multi-Strategy Target Return Fund Luxembourg SICAV 70 Aviva Investors Multi-Strategy Target Return Fund 3 GBP United Kingdom OEIC 94 Aviva Investors North America Holdings, Inc United States Common Stock of No Par Value Shares 100 Aviva Investors Nowoczesnych Technologii Poland UCITs 71 Aviva Investors Nowych Spółek Poland UCITs 76 Aviva Investors Obligacji Luxembourg UCITs 60 Aviva Investors Pacific Pty Ltd Australia Ordinary Shares 100 Aviva Investors Papierów Nieskarbowych Poland OEIC 100 Aviva Investors Pensions Limited United Kingdom Ordinary Shares 100 Aviva Investors Perspective 2028 Luxembourg SICAV 100 Aviva Investors Perspective 2030 Luxembourg SICAV 100 Aviva Investors Perspective 2032 Luxembourg SICAV 100 Aviva Investors Perspective 2034 Luxembourg SICAV 100 Aviva Investors Perspective 2036 Luxembourg SICAV 100 Aviva Investors Pieniężny Poland OEIC 100 Aviva Investors PIP Solar PV (General Partner) Limited United Kingdom Ordinary Shares 100 Aviva Investors PIP Solar PV NO.1 Limited United Kingdom Ordinary Shares 100 Aviva Investors Poland S.A. w likwidacji Poland Ordinary Shares 100 Aviva Investors Poland Towarzystwo Funduszy Inwestycyjnych S.A. Poland Ordinary D Shares 95 258 | Aviva plc Annual report and accounts 2015
Aviva Rendement Europe France Ordinary Shares 100 Aviva Rendement Oblig 2020 Fcp France Mutual Fund 100 Aviva Renta Fija -A- Fi Spain Mutual Fund 60 Aviva Renta Variable -Zona No Euro-, Fi Spain Mutual Fund 51 Aviva Repo Fcp France Mutual Fund 100 Aviva Risk Management Solutions UK Limited United Kingdom Ordinary Shares 100 Aviva SA Emeklilik ve Hayat3 Turkey Ordinary Shares 40 Aviva Selection Opportunites France Mutual Fund 99 Aviva Selection Patrimoine France Mutual Fund 98 Aviva Services Payment Limited Ireland Ordinary Shares 92 Aviva Services Spółka z ograniczoną odpowiedzialnością Poland Ordinary Of 1,000 Pln Shares 92 AVIVA SFIO Subfundusz Aviva Oszczednosciowy Poland OEIC 97 Aviva Signatures Europe France Mutual Fund 100 Aviva Solutions France Ordinary € 20.00 Shares 100 Aviva SPA Italy Ordinary Shares 51 Aviva Special PFI GP Limited United Kingdom Ordinary Shares 100 Aviva Spółka z ograniczoną odpowiedzialnością Poland Ordinary Shares 90 Aviva Staff Pension Trustee Limited United Kingdom Ordinary Shares 100 Aviva Structure Index 2 France Mutual Fund 100 Aviva Structure Index 1 C. France Mutual Fund 100 Aviva Structure Index 3 France Mutual Fund 100 Aviva Towarzystwo Ubezpieczen Na Zycie S.A. Poland Ordinary Shares 90 Aviva Towarzystwo Ubezpieczen Ogolnych S.A. Poland Ordinary Shares 90 Aviva Trustee Company Ireland Limited Ireland Ordinary Shares 92 Aviva Trustees UK Limited United Kingdom Ordinary Shares 100 Aviva UK Digital Limited United Kingdom Ordinary Shares 100 Aviva UKGI Investments Limited United Kingdom Ordinary Shares 100 Aviva Undershaft Four Limited Ireland Ordinary Shares 100 Aviva Undershaft One SE Ireland Ordinary Shares 100 Aviva Undershaft Three SE Ireland Ordinary Shares 100 Aviva Val Resp Par I France Mutual Fund 100 Aviva Valeurs Francaises France Ordinary Shares 99 Aviva Valeurs Immobilieres France Ordinary Shares 59 Aviva Valeurs Responsable A France Mutual Fund 100 Aviva Valorisation Opportunite France Mutual Fund 99 Aviva Valorisation Patrimoine France Mutual Fund 99 Aviva Vida y Pensiones, Sociedad Anonima de Seguros y Reaseguros Spain Ordinary Shares 100 Aviva Vie, Société Anonyme d'Assurances Vie et de Capitalisation France Ordinary Shares 100 Aviva Vita S.p.A Italy Ordinary Shares 80 Aviva Warranty Services Inc. Canada Common Shares 100 Aviva Wrap UK Limited United Kingdom Ordinary Shares 100 Aviva-Cofco Life Insurance Co. Ltd3 China Ordinary Shares 50 Aviva-COFCO Yi Li Asset Management Co Ltd China Ordinary Shares 21 A-Win Insurance Ltd. Canada Class B Voting Common shares
Class C Non-voting Common shares First Non-voting Preferred shares Second Non-voting Preferred shares
AXA Fixed Interest Investment ICVC - Global High Income Fund United Kingdom OEIC 20 AXA Fixed Interest Investment ICVC - Sterling Corporate Bond Fund United Kingdom OEIC 23 AXA Fixed Interest Investment ICVC - Sterling Strategic Bond Fund United Kingdom OEIC 26 AXA General Trust United Kingdom Unit Trust 95 AXA Global Investment Company ICVC - Global Distribution Fund United Kingdom OEIC 68 AXA IM Cash Sterling Liquidity Fund2 Luxembourg SICAV 94 AXA Rosenberg Global Investment Company ICVC - American Fund United Kingdom OEIC 92 AXA Rosenberg Global Investment Company ICVC - Asia Pacific ex Japan Fund United Kingdom OEIC 91 AXA Rosenberg Global Investment Company ICVC - European Fund United Kingdom OEIC 92 AXA Rosenberg Global Investment Company ICVC - Global Fund United Kingdom OEIC 94 AXA Rosenberg Global Investment Company ICVC - Japan Fund United Kingdom OEIC 92 AXA Sun Life Private Equity (No 1) Limited Partnership United Kingdom Limited Partner 100 AXA UK Infrastructure Investment SAS France Ordinary Shares 100 AXA UK Investment Company ICVC - Ethical Fund United Kingdom OEIC 35 AXA World Funds II - Global Masters Equities United Kingdom SICAV 51 Axcess 10 Management Company Limited United Kingdom Guarantee transferred pursuant to the Part VII
transfer, effective 28 December 2012, by which the assets and liabilities of Friends Life Assurance Society Limited and Friends Life Company Limited were transferred to Friends Life Limited.
Baillie Gifford Managed B Account United Kingdom OEIC 29 Ballard Investment Company Limited United Kingdom Ordinary Shares 25 Banca Network Investimenti SPA Italy Ordinary Shares 20 Bankhall Investment Management Limited United Kingdom Ordinary Shares 100 Bankhall PMS Limited United Kingdom Ordinary Shares 100 Baring Korea Feeder A USD Acc Ireland SICAV 26 Barratt House LP3 United Kingdom Limited Partner 50 Barratt House Nominee 1 Limited3 United Kingdom Ordinary Shares 50 Barratt House Nominee 2 Limited3 United Kingdom Ordinary Shares 50 Barratt House Unit Trust3 Jersey Unit Trust 50 Barwell Business Park Nominee Limited United Kingdom Ordinary Shares 100 Bay-Mill Specialty Insurance Adjusters Inc. Canada Common Shares 100 Bell, Noble, Elliott, (Brokers) Limited United Kingdom Ordinary Shares 100 Bellatrix France Ordinary Shares 83 Berkley Investments S.A. Poland Ordinary Shares 90 Betelgeuse (Sicav) France Ordinary Shares 92 BGI Consensus United Kingdom OEIC 23 BGI Overseas Equity Consensus Index Tracker United Kingdom OEIC 39 BIGG Regeneration (General Partner) Limited United Kingdom Ordinary Shares 25 Bigg Regeneration Partnership United Kingdom Limited Partnership 25 Biomass UK No.1 1 LLP United Kingdom Limited Liability Partnership 100 Biomass UK No.2 Limited United Kingdom A Shares
Commercial Union Corporate Member Limited United Kingdom Ordinary Shares 100 Commercial Union Life Assurance Company Limited United Kingdom Ordinary Shares 100 Commercial Union Nominee Holdings Limited United Kingdom Ordinary Shares 100 Commercial Union Trustees Limited United Kingdom Ordinary Shares 100 Cornerford Limited2 United Kingdom Ordinary 'A' Shares
FPPE Fund Public Limited Company Ireland No Par Value Shares, 1 Subscriber Euro €1 Shares
Free Solar (Stage 1) Limited United Kingdom Ordinary Shares 100 Free Solar (Stage 2) Limited United Kingdom Ordinary Shares 100 Free Solar Holdco Limited United Kingdom Ordinary Shares 100 Freetricity Southeast Limited United Kingdom Ordinary Shares 100 French Core + Two S.a.r.l France Ordinary Shares 100 Friars Square (Aylesbury) Management Limited United Kingdom Ordinary Shares 100 Friends AEL Trustees Limited United Kingdom Ordinary Shares 100 Friends AELEM Limited United Kingdom Ordinary Shares 100 Friends AELLAS Limited United Kingdom 1p Ordinary Shares 100 Friends AELRIS Limited United Kingdom £1 Stock Shares 100 Friends ALF Limited United Kingdom Ordinary Shares 100 Friends Annuities Limited United Kingdom Ordinary Shares 100 Friends ASLH Limited United Kingdom Ordinary Shares 100 Friends Life and Pensions Limited United Kingdom Ordinary Shares 100 Friends Life Assurance Society Limited United Kingdom Ordinary Shares 100 Friends Life BHA Limited United Kingdom Ordinary Shares 100 Friends Life Company Limited United Kingdom Ordinary Shares 100 Friends Life Distribution Limited United Kingdom Ordinary Shares 100 Friends Life FPG Limited United Kingdom Ordinary Shares 100 Friends Life FPL Limited United Kingdom Ordinary Shares 100 Friends Life FPLMA Limited United Kingdom Ordinary Shares 100 Friends Life Funds Asia Pacific Ex Japan Fund United Kingdom Mutual Fund 100 Friends Life Funds Balanced Fund United Kingdom Mutual Fund 100 Friends Life Funds Cautious Fund United Kingdom Mutual Fund 100 Friends Life Funds Distribution Fund United Kingdom Mutual Fund 100 Friends Life Funds Europe Equity Ex UK Fund United Kingdom Mutual Fund 100 Friends Life Funds Global Equity Alpha Fund United Kingdom Mutual Fund 100 Friends Life Funds Global Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds Japan Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds Limited United Kingdom Ordinary Shares 100 Friends Life Funds Money Market Vnav Fund United Kingdom Mutual Fund 100 Friends Life Funds North American Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds Sterling Corporate Bond Fund United Kingdom Mutual Fund 100 Friends Life Funds Sterling Gilt Fund United Kingdom Mutual Fund 100 Friends Life Funds Stewardship Fixed Interest Fund United Kingdom Mutual Fund 100 Friends Life Funds Stewardship International Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds Stewardship UK Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds Stewardship UK Equity Income Fund United Kingdom Mutual Fund 100 Friends Life Funds Strategic Global Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds UK Equity Fund United Kingdom Mutual Fund 100 Friends Life Funds UK Equity Income Fund United Kingdom Mutual Fund 100 Friends Life Group Limited Guernsey Ordinary Shares 100 Friends Life Holdings plc United Kingdom Ordinary Shares 100 Friends Life Investment Solutions Limited United Kingdom Ordinary Shares 100 Friends Life Investments Limited United Kingdom Ordinary Shares 100 Friends Life Limited United Kingdom Ordinary Shares 100 Friends Life Management Services Limited United Kingdom Ordinary Shares 100 Friends Life Marketing Limited United Kingdom Ordinary Shares 100 Friends Life Secretarial Services Limited United Kingdom Ordinary Shares 100 Friends Life Services Limited United Kingdom Ordinary Shares
Friends Life Staff Schemes Limited United Kingdom Ordinary Shares 100 Friends Life The Blue Line Limited United Kingdom Ordinary Shares 100 Friends Life WF Limited United Kingdom Ordinary Shares 100 Friends Life WL Limited United Kingdom Ordinary Shares 100 Friends Milestones Limited United Kingdom Ordinary Shares 100 Friends Pensions Limited United Kingdom Ordinary Shares 100 Friends PPPLTC Limited United Kingdom Ordinary Shares 100 Friends Provident Distribution Holdings Limited United Kingdom Ordinary Shares 100 Friends Provident First Call Limited United Kingdom Ordinary Shares 100 Friends Provident International Limited Isle of Man Ordinary B Shares
Friends Provident International Services Limited Isle of Man Ordinary Shares 100 Friends Provident Investment Holdings Plc United Kingdom Ordinary B Shares
Friends Provident Life Assurance Limited United Kingdom Ordinary Shares 100 Friends Provident Linked Life Assurance Limited United Kingdom Ordinary Shares 100 Friends Provident Managed Pension Funds Limited United Kingdom Ordinary Shares 100 Friends Provident Pension Scheme Trustees Limited United Kingdom Ordinary Shares 100 Friends Provident Pension Solutions Direct Limited United Kingdom Ordinary Shares 100 Friends Provident Pensions Services Limited United Kingdom Ordinary Shares 100 Friends Provident Trustees Limited United Kingdom Ordinary Shares 100 Friends Retirement Income Limited United Kingdom Ordinary Shares 100 Friends SL Nominees Limited United Kingdom Ordinary Shares 99 Friends SLFA Limited United Kingdom Ordinary Shares 100 Friends SLFS Limited United Kingdom Ordinary Shares 99 Friends SLOLAC Limited United Kingdom Ordinary Shares 100 Friends SLPM Limited United Kingdom Ordinary Shares 100 Friends SLPS Limited United Kingdom Ordinary Shares 100 Friends SLUA Limited United Kingdom Ordinary Shares 100 Friends SLUS Limited United Kingdom A Shares
Gobafoss General Partner Limited United Kingdom Ordinary Shares 100 Gobafoss Partnership Nominee No 1 Ltd United Kingdom Ordinary Shares 100 Goodman European Business Park Fund (Lux) S.àr.l. Luxembourg Ordinary Shares 42 Grande Europe 0-100 M France Mutual Fund 100 Gresham Insurance Company Limited United Kingdom Ordinary Shares 100 Groupement d'Interet Economique du Groupe Aviva France France Ordinary €15.25 Shares 100 HCEPP DBP (Diamond Business Park) Sp zoo Poland Ordinary Shares 100 Health & Case Management Limited United Kingdom Ordinary Shares
Hemel Hempstead Estate Management Limited United Kingdom Ordinary Shares 100 Henderson Horizon China A2 USD Acc Luxembourg SICAV 24 Henderson Horizon European Growth R USD Hedged Inc Luxembourg SICAV 43 Hengrove Park Bristol (Phase I) Management Company Limited United Kingdom Ordinary Shares 100 Herax Nominees (No. 1) Limited United Kingdom Ordinary Shares 100 Herax Nominees (No. 2) Limited United Kingdom Ordinary Shares 100 Hexagone S.à r.l. Luxembourg Ordinary Shares 100 Hillswood Management Limited United Kingdom Ordinary Shares 24 Homesun 2 Limited United Kingdom Ordinary Shares 100 Homesun 3 Limited United Kingdom Ordinary Shares 100 Homesun 4 Limited United Kingdom Ordinary Shares 100 Homesun 5 Limited United Kingdom Ordinary Shares 100 Homesun Limited United Kingdom Ordinary Shares 100 Hsbc Gig Dttr S21hd D. France Mutual Fund 100 IFA Exchange Limited United Kingdom Ordinary Shares 100 IFA Network Limited United Kingdom Ordinary Shares 100 IFAEngine Limited United Kingdom Ordinary Shares 100 Igloo Regeneration (Butcher Street) Limited3 United Kingdom Ordinary Shares 50 Igloo Regeneration (General Partner) Limited3 United Kingdom Ordinary Shares 50 Igloo Regeneration (Nominee) Limited3 United Kingdom Ordinary Shares 50 Igloo Regeneration Developments (General Partner) Limited3 United Kingdom Ordinary Shares 50 Igloo Regeneration Developments (Nominees) Limited3 United Kingdom Ordinary Shares 50 Igloo Regeneration Developments LP3 United Kingdom Limited Partnership 50 Igloo Regeneration Partnership3 United Kingdom Limited Partnership 40 Igloo Regeneration Property Unit Trust3 United Kingdom Unit Trust 50 Igloo3 United Kingdom Limited Partnership 40 Insurance Agent Service Inc. Canada Common Shares 100 Invesco FS 3 Global Health Care C USD Acc Ireland Unit Trust 24 Invesco FS 3 Global Technology C USD Inc Ireland Unit Trust 23 Invesco FS 5 Emerging Markets Equity C USD Inc Ireland Unit Trust 26 Investec Diversified Growth Fund United Kingdom OEIC 27 Investec Global Gold Fund United Kingdom OEIC 24 IOG Breclav Industrial Park S.r.o. Czech Republic Ordinary Shares 90 IOG Cestlice Industrial Park s.r.o. Czech Republic Ordinary Of 1 Czk Shares 99 IOG City Point 1 Sp zoo. Poland Ordinary Shares 100 IOG Home Park Ingatianhasznosito (Property Management) Kft Hungary Ordinary Shares 100 IOG Innovations Park Ingatlanhasznosito Kft Hungary Ordinary of 1 Huf Shares 83 264 | Aviva plc Annual report and accounts 2015
IOG Ipari (Industrial) Park Ingatlanhasznosito Kft Hungary Ordinary Shares 97 IOG Ivancice Industrial Park S.r.o. Czech Republic Ordinary Shares 90 IOG M0 Park Ingatlanhasznosito Kft Hungary Huf 1 Ordinary Shares 97 IOG Pohorelice Industrial Park S.r.o. Czech Republic Ordinary Czk 1 each Shares 90 IOG Poland Park 1 Sp z.o.o. Poland Ordinary of 500 Zlo Shares 100 IOG Sanitas Management sro Czech Republic Ordinary Shares 90 IOG TKB Park Ingatlanhasznosito Kft Hungary Ordinary Shares 81 IOG Uhrineves Industrial Park s.r.o. Czech Republic Ordinary Of 1 Koruna Shares 90 IOG Üzleti (Business) Park Ingatlanhasznosito Kft Hungary Ordinary Shares 100 IQUO Limited United Kingdom A Shares 67 Irongate House LP3 United Kingdom Limited Partnership 50 Irongate House Nominee 1 Limited3 United Kingdom Ordinary Shares 50 Irongate House Nominee 2 Limited3 United Kingdom Ordinary Shares 50 Irongate House Unit Trust3 Jersey Unit Trust 50 Jetsolid Limited United Kingdom Ordinary Shares 100 Journey Financial Advice Limited United Kingdom Ordinary Shares 68 JP Morgan Emerging Markets Fund United Kingdom OEIC 21 JP Morgan Indonesia USD Acc Hong Kong Ordinary Shares 31 JP Morgan US Dollar Money Market A USD Acc Luxembourg SICAV 37 Knockanevin Limited Ireland Ordinary Shares 100 Kou Investment Holdings PTE LTF Singapore Ordinary of Jpy 1.00 Shares 100 Kout Investment Holdings Pte. Limited Singapore Ordinary Shares 80 Kroknet S.rr.l Poland Ordinary Shares 90 Lazard European Alpha R Inc United Kingdom OEIC 34 Lazard Multicap Uk Income R Account2 United Kingdom OEIC 61 Lend Lease JEM Partners Fund Limited Bermuda Ordinary Shares 23 Lend Lease Retail Partners Australia Australia Ordinary Shares 26 Liberty M Fcp France Mutual Fund 100 Life Plus Sp Zoo Poland Ordinary Shares 90 Lime Property Fund (General Partner) Limited United Kingdom Ordinary Shares 100 Lime Property Fund (Nominee) Limited United Kingdom Ordinary Shares 100 Living in Retirement Limited United Kingdom Ordinary Shares 47 Livingbridge IV Limited Partnership United Kingdom Limited Partner 32 LMS Prolink Limited Canada Common Series 1 Shares
NU Invesco European Equity United Kingdom OEIC 38 NU Invesco Global Equity United Kingdom OEIC 41 NU Invesco International Equity2 United Kingdom OEIC 63 NU Invesco Managed Unit Trust United Kingdom Unit Trust 38 NU Invesco Smaller Companies Equity United Kingdom OEIC 24 NU Investec American United Kingdom OEIC 41 NU Investec Caust Mgd2 United Kingdom OEIC 59 NU Library For Brighton Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Bradford) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Chichester No.1) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Chichester No.2) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Chichester No.3) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Chichester No.4) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Chichester No.5) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Chichester No.6) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (Farnham) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres (West Park) Limited United Kingdom Ordinary Shares 100 NU Local Care Centres Limited United Kingdom Ordinary Shares 100 NU Offices for Redcar Limited United Kingdom Ordinary Shares 100 NU Offices for Surrey Limited United Kingdom Ordinary Shares 100 NU Schools for Redbridge Limited United Kingdom Ordinary Shares 100 NU Technology and Learning Centres (Hackney) Limited United Kingdom Ordinary Shares 100 NU Technology and Learning Centres Limited United Kingdom Ordinary Shares 100 NUPPP (Care Technology and Learning Centres) Limited United Kingdom Ordinary Shares 100 NUPPP (GP) Limited United Kingdom Ordinary Shares 100 NUPPP Hard Services Limited United Kingdom Ordinary Shares 100 NUPPP Nominees Limited United Kingdom Ordinary Shares 100 Objectif Japon Couvert France Mutual Fund 22 Objectif Recovery Eurozone R France Mutual Fund 30 Obligations 5-7 M France Mutual Fund 66 OIS Ontario Insurance Service Limited Canada Common Shares 100 Opal (UK) Holdings Limited United Kingdom Ordinary Shares 29 Opal Information Systems Limited United Kingdom Ordinary Shares 29 Opci Logiprime France Property Fund 100 Opci Preim Retail 1 France Property Fund 35 Opci Résidial France Property Fund 35 Optimum Investment Management Limited United Kingdom B shares (50% of total voting shares) 50 Optimum Investment Solutions Limited United Kingdom Ordinary Shares 82 ORN Capital LLP United Kingdom Capital Member 98 ORN Capital Management (Bermuda) Ltd. Bermuda Ordinary Shares 100 ORN Capital Services Limited United Kingdom Ordinary Shares 100 ORN Management Company Limited Bermuda Ordinary Shares 100 Outsourced Professional Administration Limited United Kingdom Ordinary Shares 29 Paddington Central III (GP) Limited United Kingdom Ordinary A Shares
Paddington Central III LP United Kingdom Ordinary shares 100 Paragon Insurance Company Guernsey Limited Guernsey Ordinary Shares 47 Parnasse Square Invest France Ordinary Shares 100 Peace Harbor Investment Capital sp. z o.o. Poland Ordinary Shares 100 Peak Re Limited Ireland Ordinary £1 Shares
Pegasus House and Nuffield House LP3 United Kingdom Limited Partnership 50 Pegasus House and Nuffield House Nominee 1 Limited3 United Kingdom Ordinary Shares 50 Pegasus House and Nuffield House Nominee 2 Limited3 United Kingdom Ordinary Shares 50 Pegasus House and Nuffield House Unit Trust3 United Kingdom Unit Trust 50 Pelayo Vida Seguros y Reaseguros Sociedad Anonima Spain Ordinary Shares 46 Percussion Properties Limited United Kingdom Ordinary Shares 100 Petunia SPA Italy Ordinary 'A' Shares 41 Pierrevenus France Partner Shares 84 Pilot Insurance Company Canada Common Shares 100 Pioneer Momentum Masters Iii (Side Pocket) Italy Fund of Hedge Funds 26 Pioneer Momentum Stars Ii (Side Pocket) Italy Fund of Hedge Funds 20 Point One Limited United Kingdom Ordinary Shares 100 Polaris U.K. Limited United Kingdom Ordinary Shares 96 Portfolio Member Services Limited United Kingdom Ordinary Shares 94 Porth Teigr Management Company Limited United Kingdom Ordinary Shares 50 Precis (1994) Limited United Kingdom Ordinary Shares 100 Premier Mortgage Service Limited United Kingdom Ordinary Shares 100 Primofin France Ordinary Shares 100 Primonial Real Estate Investment Management France Ordinary Shares 23 Primotel Europe France Ordinary Shares 100 Professional Advisory Holdings Ltd. Singapore Ordinary 'A' Shares 91 Professional Investment Advisory Services Pte Ltd Singapore Ordinary 'A' Shares 91 PT Astra Aviva Life3 Indonesia Ordinary Shares 50 Quantum LP3 United Kingdom Limited Partnership 50 Quantum Property Partnership (General Partner) Limited3 United Kingdom Ordinary Shares 50 Quantum Property Partnership (Nominee) Limited3 United Kingdom Ordinary Shares 50 Quantum Unit Trust3 Jersey Unit Trust 50 Quarryvale One Limited United Kingdom Ordinary Shares 100 Quarryvale Three Limited United Kingdom Ordinary Shares 100 Quercus (General Partner) Limited3 United Kingdom Ordinary 'B' Shares 50 Quercus (Nursing Homes No.2) Limited3 United Kingdom Ordinary Shares 50 Quercus (Nursing Homes) Limited3 United Kingdom Ordinary Shares 50 Quercus GP Holdco Limited3 United Kingdom Ordinary Shares 50 Quercus Housing (No. 1) Limited3 United Kingdom Ordinary Shares 50 Quercus Housing (No. 2) Limited3 United Kingdom Ordinary Shares 50 Quercus LP3 United Kingdom Limited Partnership 50 Quercus LP 23 United Kingdom Limited Partnership 50 Quercus No.2 (General Partner) Limited3 United Kingdom Ordinary Shares 50 Quercus Nursing Homes 2001 (A) Limited3 United Kingdom Ordinary Shares 50 Quercus Nursing Homes 2001 (B) Limited3 United Kingdom Ordinary Shares 50 Quercus Nursing Homes 2010 (C) Limited3 United Kingdom Ordinary Shares 50 Quercus Nursing Homes 2010 (D) Limited3 United Kingdom Ordinary Shares 50 266 | Aviva plc Annual report and accounts 2015