2 2013 and 2014 dividend from UKGI was remitted to Group in January 2014 and February 2015 respectively. Cash remittances disclosed are on a continuing basis.
We measure our performance using five key metrics Read more on page 10
Chairman elect Sir Adrian Montague CBE will become Non-Executive Chairman on the retirement of John McFarlane at the Aviva AGM in April 2015.
I have now served as your Chief Executive for more than two years. By any measure Aviva is now a very different company, which is delivering much more for customers and investors alike.
• It will increase our cash flows, reduce our leverage and support continued growth in our dividend
• Invested in our digital strategy including the appointment of a Chief Digital Officer, Andrew Brem.
in upper quartile 50% 33% at or above market average 33% 17% below market average 17% 50%
As part of the Not Everywhere component of our strategy, we will continue to allocate capital selectively to businesses where we can compete with scale and provide differentiated value and service to our customers, including our growth businesses in Poland, Turkey and Asia.
Aviva also pays close attention to weather patterns and climate change. There is growing evidence that a gradual long-term change in the Earth’s weather patterns and average temperatures is occurring, due to increased quantities of greenhouse gases in the atmosphere and other man-made causes.
The cost of technology continues to fall. Combined with the increasing use of Big Data, this enables existing organisations and disruptive new entrants to gain new and faster customer insights, and to provide more products and services digitally.
Aviva is the only composite of scale in the UK that can offer life, general and health insurance and asset management, and one of only a few international insurers that can do this.
We will leverage digital technology to improve customer experience, increase engagement and reduce cost, leading to longer and more valuable relationships with customers.
The environment in which we operate is changing rapidly due to recent advances in technology and digital distribution.
We want to be at the forefront of emerging technologies, combining that with customer insight to deliver really innovative digital products and services.
Not Everywhere is more than just geography. It is a mindset of excellence. We need to focus our resources where we can be most competitive, underpinned by our core strengths such as underwriting, risk management, asset & liability management, and understanding Big Data and analytics. We will not provide every product to every customer and we will be selective about the risks that we take on.
December We announced our intention to acquire Friends Life in the UK. Our focus on the UK is incredibly important to us. This transaction will create the UK’s leading insurance, savings and asset management business with 16 million customers1. These customers stand to benefit from being part of a stronger, more diversified and resilient group with a wide range of products. We are an iconic British business and this proposed acquisition will increase our scale in attractive segments of our home market.
• Our business model gives us significant diversification benefits. The mix of different businesses reduces the impact on us of market shocks
• The restructuring of our businesses in Italy, Spain and Ireland has created the opportunity for growth in these recovering insurance markets
Aviva is a diversified insurance and investment management group. We operate in 16 countries with differing economic conditions and market structures, and each of our businesses is at different stages of performance improvement and growth.
Our fund management segment, led by Aviva Investors, was largely flat, ending the year with assets under management of £246 billion and operating profit of £86 million, as we increased operating expenses partly in connection with new product development and distribution initiatives. The AIMS fund range has started well and we are confident in this external market proposition. The proposed Friends Life transaction provides the opportunity to add up to c.£70 billion funds under management to Aviva Investors.
Profit before tax from discontinued operations was £58 million (2013: £1,273 million) and relates to our US Life and related internal asset management businesses.
T he British are famous for taking their tea very seriously – so much so that England is home to an exhibition of no fewer than 6,700 teapots. It’s called Teapot Island and
1 Datamonitor UK Insurance Competitor Analytics 2014. 2 Irish Insurance Federation, 2013.
• Drove forward our digital offer by rolling out the benefits of the MyAviva app for customers. MyAviva has now 1.3 million registered users
Supporting our customers How would you feel if you were taken to court for something you didn’t do? Aviva customer Belinda Ellis faced this after hitting a stationary van when parking her car. Months later, the van owner took her to court to pursue a claim for whiplash; Aviva defended Mrs Ellis against this charge.
VNB increased 19% to £205 million due to increased volumes and a continued shift in product mix towards more profitable unit-linked investments.
VNB of £30 million is down 19% primarily due to adverse foreign exchange movements. On a constant currency basis, VNB is down 3%, mainly driven by a reduction in our share of the business following the partial IPO in November 2014.
In 2014 we: • Further strengthened our distribution by rejuvenating our direct sales force, launching new initiatives to increase agents’ activity and productivity
• Simplified our life joint ventures and extended our bancassurance agreements with UBI Banca and UniCredit, prioritising protection and zero per cent guarantee products
The recent trend of general insurers adopting a more technical approach to pricing and focusing on operational efficiencies in Italy is expected to continue. We have taken pricing action in general insurance, deepened our use of analytics and made product changes to improve profitability.
By leveraging our strengths, the depth of our partnerships, our multi-distribution channels and shared expertise we can deliver significant growth in Asia.
The combination of favourable demographic trends, low insurance penetration and the region’s rapidly expanding middle class makes Asia attractive to life insurance companies. Our challenge in this competitive environment is to differentiate ourselves with a compelling strategy, by offering unique value-adding customer propositions and delivering an efficient and seamless customer experience.
3 Swiss Re Sigma 2014. 4 Comparatives restated for the change in MCEV methodology. Refer to glossary for further details. 5 Excludes Malaysia (VNB in 2013 including Malaysia was £104 million).
• Constantly seek new knowledge and better ways of doing things
Aviva continues to take a lead in tackling systemic environmental, social and governance issues relating to the financial services sector. Our strong partnerships with governments, regulators, companies, Non-Governmental Organisations (NGOs) and investors mean that we can play an important role in promoting responsible investment in markets around the world.
Our business is about protecting our customers from the impact of risk. We receive premiums which we invest in order to maximise risk-adjusted returns, so that we can fulfil our promises to customers while providing a return to our shareholders. In doing so, we accept the risks set out below: Risks customers transfer to us
Aviva’s top three risks ranked by economic capital at risk in a 1-200 year loss event over a one year time horizon.
He was also previously Chief Executive of the Treasury Taskforce and a trustee of Historic Royal Palaces. Sir Adrian has significant experience in the financial services industry and in government and regulatory circles. He is a qualified solicitor and was formerly a partner at Linklaters & Paines. On 12 September 2014, it was announced that John McFarlane would step down as Chairman of the Aviva Group. John will remain as Chairman of the Aviva Group until the conclusion of the 2015 AGM, at which point Sir Adrian Montague will be appointed in his place, subject to his reelection.
• Reports from the CRO on the Group’s significant risks and regulatory issues; risk appetite; and compliance with business standards and controls
The directors have an ongoing dialogue and a programme of meetings with institutional investors, fund managers and analysts which are managed by the Company’s investor relations function. At these meetings a wide range of issues are discussed including strategy, financial performance, management, remuneration and governance, within the constraints of information already made public, to understand any issues of concern to investors. Shareholders’ views are regularly shared with the Board through the Group CEO’s and CFO’s reports and the Company’s corporate brokers also periodically brief the Board on investor views.
Revised committee Terms of Reference were adopted in February 2015 following an annual refresh. Oversight responsibility for talent management and development programmes, now lies with the Governance Committee. The full Terms of Reference for the committee can be found on the Company’s website at www.aviva.com/terms-of-reference and are also available from the Group Company Secretary.
The Group Company Secretary acts as the Secretary to the committee. Members of the committee took no part in any discussions concerning their own membership of the Board, but were involved in the recommendation on committee membership changes. The Chairman of the committee reported to subsequent meetings of the Board on the committee’s work and the Board received a copy of the agenda and the minutes of each meeting of the committee.
Chairman succession On being advised that John McFarlane would be stepping down as Chairman and retiring from the Board of the Company, the committee agreed to form a subcommittee led by Scott Wheway, Chairman of the Governance Committee, and comprising Gay Huey Evans and Glyn Barker, to manage the process of identifying and recommending a successor to the Board.
• Consider and make recommendations to the Board on the appointment, reappointment, dismissal or resignation, effectiveness and remuneration of the external auditor
In November 2014, the committee Chairman together with the Chairmen of the Risk and Governance Committees cohosted a two-day conference for the Chairmen of the Board, Risk, Governance and Audit Committees of the Group’s principal subsidiaries, their Chief Risk Officers, Chief Audit Officers and Chief Financial Officers. In addition the NonExecutive Directors of the Company were invited, together with representatives of the External Auditor. The agenda included discussions on Aviva’s strategy; Aviva’s control environment and the role of Internal Audit; Aviva’s ‘Digital First’ strategy; and the Integrated Assurance Implementation (IAI) programme.
Internal controls, including �nancial reporting control framework and �nancial reporting developments 34%
• Satisfy itself that risks to the Group's business plan and any capital implications are adequately identified and assessed by management through appropriate stresstesting, and that mitigating actions are implemented
In performing its duties, the committee had access to the services of the CRO, CAO, the Group Company Secretary and external professional advisers.
Regulatory oversight The committee monitored the regulatory environment and relationship with the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) as well as the relationship with regulators across the Group and discussed the specific management actions identified to address or mitigate issues which arose during the year. As discussed above, the Company has been designated as a GSII which will have a number of implications for the Group if it is still classified as a GSII in 2017. As a GSII, the Group has been required to draft a number of additional risk management plans covering liquidity risk management, recovery, and systemic risk management and the PRA is drafting the requirements for a resolution plan. The purpose of these plans is to ensure that the Group has credible plans to recover from financial stress, but, if those plans were to fail, that regulators have the tools to resolve the Group’s issues in a way that reduces recourse to taxpayer funds and limits the impact on the financial system. The plans would only come into effect in a severe stress scenario. The committee continues to monitor management’s plans to meet potential capital requirements and will regularly review the plans, particularly in light of becoming an enlarged Group if the proposed acquisition of Friends Life is completed successfully.
Committee activities during 2014 — Whilst they are not mutually exclusive, the following categories have been developed for the committee meeting agendas to ensure that sufficient coverage is given to each element of the committee’s remit: conduct; governance; regulatory and financial crime; reputation; customer; people and CR.
“clawback” provisions to apply to vested annual bonus or Aviva Long Term Incentive Plan 2011 (LTIP) awards made after the approval of this policy (this is additional to the current “malus” provisions that already apply to unvested awards)
For Aviva, the financial Key Performance Indicators (KPIs) used in the reward plans will usually be the same measures that are critical to managing the business – and there is a genuine possibility that disclosing the targets used individually and in combination to drive performance for the most recently completed period could be detrimental to Aviva and its shareholders.
For both the Group CEO and Group Chief Financial Officer (CFO) this achievement against financial targets translated to a bonus award of 106.8% of basic salary (i.e. against the current “at target” bonus level of 75% of basic salary).
Malus provisions apply to deferred Aviva Annual Bonus Plan 2011(ABP) and LTIP awards.
The Chairman receives a fixed annual fee. Fees are reviewed annually taking into account market data and trends and the scope of specific Board duties.
Customer Performance against Relationship Net Promoter Score (RNPS) targets and, if these are met, against Average Product Holding (APH) targets reflecting progress against True Customer Composite strategic goal
Company performance 71.31% 67.91% Personal performance 41.19% 91.53% Total bonus % outcomes 112.50% 75.00% 1 Net capital returns represents cash remittances received from subsidiaries and joint ventures and loan repayments from subsidiaries. 2 IFRS profit before tax is calculated as IFRS operating profit before tax attributable to shareholders’ profits (continuing and discontinued operations) after integration and restructuring costs, impairment of goodwill, joint ventures and associates and other amounts expensed and amortisation and impairment of intangibles. 3 MCEV value of new business is for both continuing and discontinued operations. 4 Total expenses include operating expenses and integration and restructuring costs for both continuing and discontinuing operations.
Table 17: Historical Group CEO remuneration outcomes Summarises the Group CEO single figure for total remuneration, annual bonus pay-out and LTIP vesting as a percentage of maximum opportunity over this period.
Percentage change in remuneration of Group CEO The table below would ordinarily set out the increase in the basic salary, bonus and benefits of the Group CEO and that of the wider UK workforce. The UK employee workforce was chosen as a suitable comparator group, as all EDs are based in the UK (albeit with a global role and responsibilities), and pay changes across the Group vary widely depending on local market conditions.
Notes 1 The decrease in bonus awards for all UK based employees in 2014 was expected given the exceptional performance and hence high level of bonuses of the UK businesses against their targets in 2013. Although performance in 2014 was also strong, as flagged in the 2013 DRR, it was anticipated that, given the high level of payout in 2013, bonus awards for 2014 were not likely to remain at this level.
How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industries in which the Group operates. Using the outputs of a risk assessment, along with our understanding of the Aviva structure, we scoped our audit based on the significance of the results and financial position of individual markets relative to the Group result and financial position. In doing so, we also considered qualitative factors and checked that we obtained sufficient coverage across all financial statement line items in the Consolidated financial statements. The Group’s primary reporting format is along market reporting lines with supplementary information being given by business activity. The operating segments of the Group are ‘United Kingdom & Ireland’ (Life and General Insurance), France, Poland, ‘Italy, Spain and Other’, Canada, Asia, Aviva Investors and ‘Other Group Activities’. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at each of the markets by us, as the Group audit team, or auditors of the markets within PwC UK or from other PwC network firms operating under our instructions. Where the work was performed by auditors of the markets, we determined the level of involvement we needed as the Group audit team to have in the audit work at those reporting lines to be able to conclude whether sufficient audit evidence had been obtained as a basis for our opinion on the financial statements as a whole. The Group audit team kept in regular communication with reporting market audit teams including visits, regular phone calls, discussions and written instructions, where appropriate.
(i) Amendments to IAS 32, Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities
The amendments provide an exemption from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments have no impact on the Group’s consolidated financial statements in the current or prior period as the Group has not novated its derivatives to a central counterparty.
(ix) IFRS 15, Revenue from Contracts with Customers IFRS 15 will replace IAS 18, Revenue and establishes a principle based five-step model to be applied to all contracts with customers, except for insurance contracts, financial instruments and lease contracts. IFRS 15 also includes enhanced disclosure requirements. The impact of the adoption of the new standard has yet to be fully assessed by the Group. This standard applies to annual reporting periods beginning on or after 1 January 2017 and has not yet been endorsed by the EU.
(x) IFRS 9, Financial Instruments In July 2014, the IASB published IFRS 9, Financial
The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: the purpose and design of an investee, relevant activities, substantive and protective rights, and voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are consolidated from the date the Group obtains control and are excluded from consolidation from the date the Group loses control. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group companies have been eliminated. Accounting policies of subsidiaries are aligned on acquisition to ensure consistency with the Group policies. The Group is required to use the acquisition method of accounting for business combinations. Under this method, the cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. For each business combination, the Group has the option to measure the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. The excess of the consideration transferred over the fair value of the net assets of the subsidiary acquired is recorded as goodwill (see accounting policy O below). Acquisition-related costs are expensed as incurred. Transactions that do not result in a loss of control are treated as equity transactions with non-controlling interests.
(P) Property and equipment Owner-occupied properties are carried at their revalued amounts, and movements are recognised in other comprehensive income and taken to a separate reserve within equity. When such properties are sold, the accumulated revaluation surpluses are transferred from this reserve to retained earnings. These properties are depreciated down to their estimated residual values over their useful lives. All other items classed as property and equipment within the statement of financial position are carried at historical cost less accumulated depreciation. Investment properties under construction are included within property and equipment until completion, and are stated at cost less any provision for impairment in their values until construction is completed or fair value becomes reliably measurable. 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
Interest rate futures, forwards and options contracts Interest rate futures are exchange-traded instruments and represent commitments to purchase or sell a designated security or money market instrument at a specified future date and price. Interest rate forward agreements are OTC contracts in which two parties agree on an interest rate and other terms that will become a reference point in determining, in concert with an
Total comprehensive income for the year — — — — — (242) 2,884 2,642 — 90 2,732 Owner-occupied properties fair value gains transferred to retained earnings on disposals — — — — — (2) 2 — — — — Dividends and appropriations — — — — — — (551) (551) — — (551) Non-controlling interests share of dividends declared in the year — — — — — — — — — (189) (189) Transfer to profit on disposal of subsidiaries, joint ventures and associates — — — — — (13) 2 (11) — — (11) Changes in non-controlling interests in
Total equity and liabilities 285,719 281,627 317,120 1 The statement of financial position has been restated following the adoption of amendments to IAS 32 ‘Financial Instruments: Presentation’ – see note 1 for details. There is no impact on the result or the total equity for any period presented as a result of this restatement.
(a) Acquisitions There have been no material acquisitions during the year. On 2 December 2014 Aviva plc and Friends Life Group Limited (“Friends Life”) announced they had reached agreement on the terms of a recommended all share acquisition of Friends Life by Aviva plc. The proposed acquisition is subject to a number of conditions including approval from shareholders at a general meeting on 26 March 2015. If the conditions to the proposed transaction are satisfied, it is expected to complete in the second quarter of 2015.
(viii) Discontinued operations – US Life On 21 December 2012, the Group announced that it had agreed to sell US Life for consideration of £1.0 billion including the shareholder loan. Following classification as held for sale, US Life was remeasured to fair value less costs to sell in 2012 resulting in an impairment loss of £2,359 million recognised as a loss on remeasurement of subsidiaries. The sale of US Life completed on 2 October 2013 and the transaction proceeds received were based on the estimated earnings and other improvements in statutory surplus over the period from 30 June 2012 to 30 September 2013. The final purchase price was subject to customary completion adjustments. A profit on disposal of £808 million was recorded in 2013, reflecting management’s best estimate of the completion adjustments as of 31 December 2013. In 2014, the Group paid a settlement of £20 million related to the purchase price adjustment. The settlement and the aggregate development of other provisions related to the discontinued operations in 2014 resulted in a net £58 million gain which has been presented as profit on disposal of discontinued operations.
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
Realised losses on loans (4) — Foreign exchange gains and losses on investments other than trading 146 109 Other investment expenses (89) (48)
Total assets supporting non-long-term business 16,961 18,696 1 For 2014 represents assets backing non-long-term business in Group centre investments, including the centre hedging programme. For 2013 represents assets backing non-long-term business in the France holding company and
Profit/(loss) before tax attributable to shareholders' profits 2,173 108 2,281 2,049 (768) 1,281 Tax attributable to shareholders' profit (561) (40) (601) (534) 131 (403)
Profit attributable to ordinary shareholders 1,383 100 1,483 1,461 460 1,921
Dividends waived/unclaimed returned to the company (3) — Preference dividends declared and charged to equity in the year 17 17 Coupon payments on direct capital instruments and fixed rate tier 1 notes 88 92
‘Reclassification from subsidiary’ relates to the recognition of the Group’s joint venture holdings in Indonesia, which was previously a fully consolidated subsidiary (refer to note 4(b)(i) for further detail). Additions relate to additional investments in, and loans to, property management undertakings. Disposals relate to the disposal of all or a portion of the Group’s holdings in various property management undertakings. Reductions in Group interest in 2014 relate to the sale of the South Korean joint venture, Woori Aviva Life Insurance Co. Ltd, and the IPO share sale of AvivaSA Emeklilik ve Hayat A.S. See note 4 for further details. The Group’s share of total comprehensive income related to joint venture entities is £151 million (2013: £103 million).
General insurance and health undertakings — 10 — 10 — — — —
Cost or valuation At 1 January 2013 74 337 3 608 219 1,241
• Investments including debt securities held by our French business of £0.3 billion (2013: £0.7 billion) have been valued using third party or counterparty valuations.
Loans at fair value Fair values have been calculated by discounting the future cash flows using appropriate current interest rates for each portfolio of mortgages. Further details of the fair value methodology are given in note 23. The change in fair value of these loans during the year, attributable to a change in credit risk, was £361 million loss (2013: £43 million loss). This amount has been determined as the amount that is not attributable to changes in market conditions that give rise to market risk. The cumulative change attributable to changes in credit risk to 31 December 2014 was £3,070 million loss (2013: £2,709 million loss). Non-securitised mortgage loans include £4.6 billion (2013: £4.1 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.
The movements in the impairment provisions on these loans for the years ended 31 December 2014 and 2013 were as follows: £m 2013 £m
Non-redeemable preference shares — 286 — 286 — 397 — 397
Other investments Unit trusts and other investment vehicles — 29,636 4 29,640 — 28,599 7 28,606
Minority holdings in property management undertakings — 754 — 754 — 796 — 796
Less: assets of operations classified as held for sale — 13 — 1,649 — 201 — 1,863
1 Disposals in 2013 include the disposal of US Life (£2,344 million), and the disposal of Ark Life (£67 million).
Notes to the consolidated financial statements continued 32 – Group’s share plans This note describes various equity compensation plans operated by the Group, and shows how the Group values the options and awards of shares in the Company. Details of other share plans where shares are acquired and held in trust for the participant from the outset are not set out here but described in the shareholder information section of page 286.
(iv) Aviva recruitment and retention share plan awards These are conditional awards granted under the Aviva recruitment and retention share award plan 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.
(iii) Shares to satisfy awards and options From July 2008 to 2014, it was the Company’s practice to satisfy all awards and options using shares purchased in the market and held by employee trusts except where local regulations made it necessary to issue new shares. During 2014, this practice has changed and new issue shares are now generally used to satisfy all awards and options granted under plans that have received shareholder approval and where local regulations permit. Further details are given in note 33.
33 – Shares held by employee trusts Prior to 2014, we satisfied awards and options granted under the Group’s share plans primarily through shares purchased in the market and held by employee share trusts. During 2014 we have moved to a general practice of issuing new shares except where it is necessary to use shares held by an employee share trust. This note gives details of the shares held in these trusts. Movements in the carrying value of shares held by employee trusts comprise: Number £m Number £m
36 – Merger reserve Prior to 1 January 2004, certain significant business combinations were accounted for using the ‘pooling of interests method’ (or merger accounting), which treats the merged groups as if they had been combined throughout the current and comparative accounting periods. Merger accounting principles for these combinations gave rise to a merger reserve in the consolidated statement of financial position, being the difference between the nominal value of new shares issued by the Parent Company for the acquisition of the shares of the subsidiary and the subsidiary’s own share capital and share premium account. The merger reserve is also used where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 1985 and, from 1 October 2009, the Companies Act 2006. The balance on the reserve of £3,271 million (2013: £3,271 million) has arisen through the mergers of Commercial Union, General Accident and Norwich Union companies, forming Aviva plc in 2000, together with the acquisition of RAC plc (“RAC”) in 2005. Because RAC ownership was immediately transferred from Aviva plc to a subsidiary company, this reserve is unaffected by the disposal of RAC in 2011.
Provision arising from liability adequacy tests (10) — (10) (10) — (10)
Carrying amount at 1 January 10,298 10,554 Impact of changes in assumptions 211 (80) Claim losses and expenses incurred in the current year 5,950 6,337 Decrease in estimated claim losses and expenses incurred in prior years (329) (237)
Present value recognised in the statement of financial position 1,338 77 133 146 271 377 457 766 1,103 1,470 2,641 8,779
In the loss development tables shown above, the cumulative claim payments and estimates of cumulative claims for each accident year are translated into sterling at the exchange rates that applied at the end of that accident year. The impact of using varying exchange rates is shown at the bottom of each table. Disposals are dealt with by treating all outstanding and IBNR claims of the disposed entity as ‘paid’ at the date of disposal. The loss development tables above include information on asbestos and environmental pollution claims provisions from business written before 2005. The undiscounted claim provisions for continuing operations, net of reinsurance, in respect of this business at 31 December 2014 were £984 million (2013: £976 million). The movement in the year reflects reclassification from other commercial liability provisions of £65 million partly offset by favourable claims development of £12 million in the UK (2013: £5 million strengthening), other decreases in undiscounted provisions of £12 million (2013: £2 million), claim payments net of reinsurance recoveries and foreign exchange rate movements.
Carrying amount at 1 January 48,140 47,699 Provisions in respect of new business 2,273 3,386 Expected change in existing business provisions (1,442) (2,698) Variance between actual and expected experience 1,575 3,122 Impact of operating assumption changes 2 4 Impact of economic assumption changes 11 1 Other movements 8 46 Change in liability 2,427 3,861 Effect of portfolio transfers, acquisitions and disposals2 (20) (3,785) Foreign exchange rate movements (534) 365
Reinsurers’ share of incurred claim losses and expenses 187 280 Less: Reinsurance recoveries received on claims
The amount of UDS has increased to £9.5 billion at 31 December 2014 (2013: £6.7 billion) driven primarily by positive investment market movements in Continental Europe. These have mainly been caused by the significant appreciation of assets due to the fall in Eurozone government and corporate bond yields during the year. 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. Following the reversal of previous losses, all Italian participating funds at 31 December 2014 had positive UDS balances with the exception of one very small fund. The method for estimation of the recoverable negative UDS balance uses a real-world embedded value method, with a risk-discount rate of 5.00% (2013: 6.60%). The embedded value method includes an implicit allowance for the time value of options and guarantees. The negative UDS balance in Italy was tested for recoverability and £0.1 million of negative UDS was considered irrecoverable (2013: £42 million, of which £39 million was for Eurovita). Following this there are no longer any negative UDS balances in Italy at 31 December 2014. The total UDS balance in Italy was £953 million positive at 31 December 2014 (2013: £205 million positive). In Spain, all participating funds had positive UDS balances at 31 December 2014, and consequently testing of negative UDS was not required. The carrying value of UDS was £248 million positive (2013: £132 million positive).
Employer contributions 391 — 391 Employee contributions — — — Benefits paid (385) 385 — Administrative expenses paid from scheme assets1 (27) 27 — Foreign exchange rate movements (38) 57 19
Borrowings are considered current if the contractual maturity dates are within a year. Where subordinated debt is undated or loan notes are perpetual, the interest payments have not been included beyond 15 years. Annual interest payments for these borrowings are £72 million (2013: £73 million). Contractual undiscounted interest payments are calculated based on underlying fixed interest rates or prevailing market floating rates as applicable. Year-end exchange rates have been used for interest projections on loans in foreign currencies.
Notes to the consolidated financial statements continued 55 – Group capital structure The Group maintains an efficient capital structure from a combination of equity shareholders’ funds, preference capital, subordinated debt and borrowings, consistent with our overall risk profile and the regulatory and market requirements of our business. This note shows where this capital is employed.
Net purchases of operating assets Purchases of investment property (725) (370) Proceeds on sale of investment property 1,811 1,115 Net sales of financial investments (1,973) (4,033)
Cash (used in)/generated from operating activities – continuing operations (87) 2,562 Cash generated from operating activities – discontinued operations — 1,950
Cash and cash equivalents (excluding bank overdrafts) 23,114 26,482 Less: Assets classified as held for sale (9) (351)
Available capital resources at 1 January 363 1,298 1,510 3,171 2,793 5,964 10,732 16,696
At 31 December 2014 and 2013, the Group’s total equity deployment by currency including assets ‘held for sale’ was: Sterling £m Euro £m CAD$
(iv) Sensitivity test results Illustrative results of sensitivity testing for long-term business, general insurance and health business and the fund management and non-insurance business are set out below. For each sensitivity test the impact of a reasonably possible change in a single factor is shown, with other assumptions left unchanged.
60 – Financial assets and liabilities subject to offsetting, enforceable master netting agreements and similar arrangements
Derivative assets are recognised as ‘Derivative financial instruments’ in note 27(a), while fair value liabilities are recognised as ‘Derivative liabilities’ in note 51. £686 million (2013: £648 million) of derivative assets and £821 million (2013: £617 million) of derivative liabilities are not subject to master netting agreements and are therefore excluded from the table above. Amounts receivable related to securities lending and reverse-repurchase arrangements totalling £3,763 million (2013: £4,844 million) is recognised within ‘Loans to Banks’ in note 24(a). Other financial liabilities presented above represent liabilities related to repurchase arrangements recognised within “Obligations for repayment of cash collateral received” in note 51.
Aviva plc has a 50% interest in the joint venture *** Incorporated in Scotland
Statement of comprehensive income For the year ended 31 December 2014
(ii) At 31 December 2014, the Company has two wholly owned subsidiaries, both incorporated in the UK. These are General Accident plc and Aviva Group Holdings Limited. Aviva Group Holdings Limited is an intermediate holding company, whilst General Accident plc has preference shares listed on the London Stock Exchange. The principal subsidiaries of the Aviva Group at 31 December 2014 are set out in note 62 to the Group consolidated financial statements.
Staff costs and other employee related expenditure (see below) 65 194 Other operating costs 150 156 Net foreign exchange gains (53) (24)
D – Other assets In 2013, other assets included financial investments of £297 million, made up of UK Government Bonds which were subsequently sold during 2014. These financial investments were valued as Level 1 in the fair value hierarchy described in note 23 to the Group consolidated financial statements and were classified as other than trading as described in note 27.
Natural and man-made disasters Our general insurance business results are affected by the amount of claims we need to pay out which, in turn, can be subject to significant volatility depending on many factors, including natural and man-made disasters. Natural disasters arise from adverse weather, earthquakes and other such natural phenomena. Manmade disasters include accidents and intentional events, such as acts of terrorism. These events are difficult to predict with a high degree of accuracy, although they generally occur infrequently at a material level. Our exposure to large disasters is somewhat reduced through our focus on personal lines business and small to medium sized commercial risks in the general insurance business. The Group cedes the majority of its worldwide catastrophe risk to third-party reinsurers. In 2014 our operations in Canada suffered from losses due to the severe winter in the first quarter of 2014 followed by hailstorms in August (see 'Market performance – Canada' below for further details) and our operations in France were also impacted by adverse weather.
Activity in 2013 On 8 January 2013, Aviva sold the remainder of its stake in Delta Lloyd at €12.65 per share resulting in gross cash proceeds of £353 million. On 8 March 2013, the Group completed the disposal of its Irish long-term business subsidiary, Ark Life to Allied Irish Bank (AIB), and the acquisition of the non-controlling interest in Aviva Life Holdings Ireland Limited from AIB for total cash consideration of £117 million. On 24 April 2013, the Group disposed of its entire holding in its Spanish long-term business subsidiary, Aseval to Bankia for cash consideration of £502 million. In April 2013, the Group also completed the disposal of Aviva Zao, its Russian long-term business subsidiary, for consideration of £30 million, as well as completing the sale of its Malaysian joint ventures for cash consideration of £153 million. In May 2013, the Group sold its Romania Pensions business to MetLife Inc. for consideration of £5 million. On 2 October 2013, the Group completed the disposal of its US life and related internal fund management business to Athene Holding Ltd receiving consideration of £1.4 billion. In November 2013, the Group reached a conditional agreement to sell its holding in Eurovita Assicurazioni S.p.A. to JC Flowers, subject to regulatory approval. Eurovita was classified as held for sale at 31 December 2013. Further details can be found in the section 'IFRS Financial statements – note 4 – Subsidiaries'.
Financial highlights The following analysis is based on our consolidated financial statements and should be read in conjunction with those statements. In order to fully explain the performance of our business, we discuss and analyse the results of our business in terms of certain financial measures which are based on 'nonGAAP measures' and which we use for internal monitoring purposes. We review these in addition to GAAP measures, such as profit before and after tax. The remainder of the financial performance section focuses on the activity of the Group's continuing operations. Details of the performance of the US Life business which was classified as discontinued and sold on 2 October 2013, can be found in the market performance section.
• Deposits taken on non-participating investment contracts and equity release contracts Under IFRS, non-participating investment contracts are recognised in the Statement of Financial Position by recording the cash received as a deposit and an associated liability and are not recorded as premiums received in the IFRS income statement. Only the margin earned is recognised in the IFRS income statement.
joint ventures and associates, integration and restructuring costs and exceptional items. Whilst these excluded items are significant components in understanding and assessing our consolidated financial performance, we believe that the presentation of adjusted operating profit enhances the understanding and comparability of the underlying performance of our segments by highlighting net income attributable to on-going segment operations. Adjusted operating profit for long-term insurance and savings business is based on expected investment returns on financial investments backing shareholder and policyholder funds over the period, with consistent allowance for the corresponding expected movements in liabilities. The expected rate of return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return and asset classification. Where assets are classified as fair value through profit and loss, expected return is based on the same assumptions used under embedded value principles for fixed income securities, equities and properties. Where fixed interest securities are classified as available for sale the expected return comprises interest or dividend payments and amortisation of the premium or discount at purchase. Adjusted operating profit includes the effect of variances in experience for non-economic items, such as mortality, persistency and expenses, and the effect of changes in non-economic assumptions. Changes due to economic items, such as market value movement and interest rate changes, which give rise to variances between actual and expected investment returns, and the impact of changes in economic assumptions on liabilities, are disclosed as non-operating items. Adjusted operating profit for non-long-term insurance business is based on expected investment returns on financial investments backing shareholder funds over the period. Expected investment returns are calculated for equities and properties by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the longer-term rate of return. This rate of return is the same as that applied for the long-term business expected returns. The longer-term return for other investments is the actual income receivable for the period. Changes due to market value movement and interest rate changes, which give rise to variances between actual and expected investment returns, are disclosed as non-operating items. The impact of changes in the discount rate applied to claims provisions is also treated outside adjusted operating profit. Adjusted operating profit is not a substitute for profit before income taxes and non-controlling interests in earnings or net income as determined in accordance with IFRS. Our definition of adjusted operating profit may differ from similar measures used by other companies, and may change over time. The table below presents our consolidated adjusted operating profit for the three years ended 31 December 2014, 2013 and 2012, as well as the reconciliation of adjusted operating profit to profit/loss before tax attributable to shareholders’ profits under IFRS.
Pensions 5,803 5,476 5,158 Annuities 1,948 2,327 3,211 Bonds 174 183 379 Protection 1,103 992 1,228 Equity release 696 401 434 Other 2,285 2,545 2,648
Financial and operating performance continued million), mainly from longevity assumption changes and expense reserve releases, which are partially offset by increased DAC amortisation charges on pension business. Excluding these items, profits have decreased 10%, with the benefits of cost savings offset by the impact of reduced annuity trading and lower expected returns as a result of de-risking activity. Ireland adjusted operating profit was up to £23 million (2013: £22 million) as we continue to make progress in turning the business around. Adjusted operating profit from other operations resulted in a £4 million loss (2013: £131 million profit which included a £145 million one-off gain from plan amendments to the Ireland pension scheme). IFRS profit before tax increased to £980 million (2013: £717 million). This includes adjusted operating profits of £1,052 million (2013: £1,124 million). The increase in profit before tax was due to lower negative economic variances of £13 million (2013: £414 million negative). Adverse variances in the UK were due to the adverse impact of falling reinvestment yields net of improved underlying property values on commercial mortgages partly offset by a change to the model used to value certain equity release assets and the consequential impact on the liabilities that they back.
IFRS net written premiums/sales United Kingdom 3,663 3,823 4,062 Ireland 365 377 428
Year ended 31 December 2013 On a PVNBP basis, long-term insurance and savings business sales in France increased by £860 million, or 24%, to £4,498 million (2012: £3,638 million), with higher sales in both savings (particularly unit-linked) and protection products. General insurance and health sales were up 10% to £1,105 million (2012: £1,002 million), benefiting from rating and other management actions. IFRS net written premiums were up 18% to £5,565 million (2012: £4,702 million) for similar reasons. Adjusted operating profit before tax increased by 6% to £448 million (2012: £422 million). Within this, life profits increased by 15% to £385 million (2012: £335 million), mainly reflecting increased margins. General insurance and health profits decreased to £84 million (2012: £95 million) with the reduction largely due to adverse weather, partly offset by higher profits from the health business. IFRS profit before tax decreased to £457 million (2012: £482 million). This includes the higher adjusted operating profits discussed above. The reduction in profits is due mainly to higher restructuring costs of £25 million (2012: £11 million), and lower favourable investment variances of £55 million (2012: £96 million favourable).
floods in the results of our internal reinsurance business – see “other group activities” below), partly offset by lower expenses and favourable prior year reserve development. Long-term investment return was down £11 million to £135 million reflecting lower reinvestment yields. Profit before tax attributable to shareholders was £104 million (2012: £245 million), reflecting the lower operating profits and negative short-term investment variances of £122 million (2012: £10 million negative).
Year ended 31 December 2013 The results for 2013 were for the 9 month period to 2 October 2013. 2012 represents a full year’s results. Net written premiums were £1,489 million (2012: £3,589 million). Adjusted operating profit before tax was £290 million (2012: £239 million), driven mainly by higher life profits of £272 million (2012: £200 million). Profit before tax of £1,538 million (2012: £2,696 million loss) reflects the adjusted operating profits above. It also includes positive investment variances of £452 million (2012: £342 million), which were driven mainly by the impact of favourable equity market performance on embedded derivatives, and profits on disposal of £808 million (2012: £2,359 million loss) mainly reflecting currency translation and investment valuation reserves recycled to the income statement on completion.
Life insurance and savings business Long-term insurance and savings business accounted for approximately 78% of our total worldwide sales from continuing operations for the year ended 31 December 2014. We reported total long-term insurance and savings new business sales from continuing operations of £27.1 billion1.
• Annuities – is a type of policy that pays out regular amounts of benefit, either immediately and for the remainder of a person's lifetime, or deferred to commence from a future date. Immediate annuities may be purchased for an individual and his or her dependants or on a bulk purchase basis for groups of people. Deferred annuities are asset accumulation contracts, which may be used to provide benefits in retirement, and may be guaranteed, unit-linked or indexlinked.
Brands and products Our general insurance business operates under the Aviva brand globally and concentrates on the following products: • Personal lines - motor, household, travel and creditor; • Commercial lines - fleet, liability and commercial property insurance; • Health insurance - private health insurance, income protection and personal accident insurance, as well as a range of corporate healthcare products; and
UK & Ireland General Insurance Business overview and strategy The UK and Irish businesses are managed under a single management structure and work is progressing to leverage the scale and expertise that we believe exists in the UK to benefit the Irish business. We are a leading general insurer in both the UK and Ireland with market shares of 10.5%3 and 13.3%6 respectively. We employ around 7,000 people and operate from a number of locations throughout the UK and Ireland, including Norwich, Perth, Glasgow, London and Dublin. We focus on personal and commercial insurance. In the UK we hold top three positions in the motor and property markets3. We believe our key strengths include underwriting and pricing sophistication, claims and cost management and excellent customer service. Our aim is to deliver cash and profitable growth by focussing on the fundamentals of the insurance business to maximise underwriting returns and we have a portfolio strategy to deliver greater stability of earnings.
6 Irish Insurance Federation, 2013 7 Swiss Re Sigma Study (World Insurance 2013)
9 Polish Financial Supervision Authority (“KNF”) 10 BZ WBK Bank Zachodni 3Q14 results 11 Associazione Nazionale fra le Imprese Assicuratrici (“ANIA”) 12 Istituto per la Vigilanza sulle Assicurazioni (“IVASS”)
Distribution Across Asia, we operate a multi-distribution strategy. In Singapore, we have a core bancassurance relationship with DBS Bank and also own a majority interest in PIAS, a leading financial advisory firm. In China, our products are sold mainly through telemarketing, bancassurance, and agents. In Indonesia, group business is sold through our direct sales force and individual business is primarily sold through our bancassurance channel. In Taiwan and Vietnam, bancassurance is the main distribution channel. We are also investing in other channels such as direct marketing and digital to differentiate ourselves from competitors.
Property Our global headquarters are located in St. Helen’s, 1 Undershaft, London, England, EC3P 3DQ. In addition, we have major offices in the following locations: • UK: UK Life, York; UK General Insurance, Norwich; Aviva Investors, London; • Asia: Singapore; • North America: Scarborough, Ontario, Canada. • Europe: Paris, France; Dublin, Ireland; Madrid, Spain; Warsaw, Poland; and Milan, Italy.
% reduction of CO2e emissions relative to our 2010 baseline New KPI New KPI New KPI 32% 20%
Professional standards applied and level of assurance We performed a limited assurance engagement in accordance with International Standard on Assurance Engagements 3000 – ‘Assurance Engagements other than Audits and Reviews of Historical Financial Information’ and, in respect of the CO2 emissions, in accordance with International Standard on Assurance Engagements 3410 – ‘Assurance engagements on greenhouse gas statements’ issued by the International Auditing and Assurance Standards Board. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks.
Net cash and cash equivalents At 31 December 2014, total consolidated net cash and cash equivalents, net of bank overdrafts, amounted to £22,564 million, a decrease of £3,425 million over £25,989 million in 2013 (restated for IAS 32).
Net cash outflow on financing activities Net cash used in financing activities increased by £410 million to an outflow of £1,529 million (2012: £1,119 million outflow). The increase in cash used is due to repayment of borrowings, a lower dividend payment and 2012 benefitting from the issue of fixed rate tier 1 notes.
Estimated IGD solvency surplus at 31 December 2014 3.2 1 Market movements include the impact of equity, credit spread, interest rate and foreign exchange movements net of the effect of hedging instruments. In the period market movements also include positive variances in the UK due to a change in the model used to value certain equity release assets and the consequential impact on the liabilities that they back, offset by the higher cost of replacing mortgages after a fall in the risk free interest rate.
Ongoing difficult conditions in the global financial markets and the economy generally may adversely affect our business and results of operations, and these conditions may continue. Our results of operations are materially affected by uncertainty in the worldwide financial markets and macro-economic conditions generally. A wide variety of factors, including concerns over slowing growth, high sovereign debt within, and to a lesser degree outside, the eurozone, the stability and solvency of financial institutions, longer-term low interest rates in developed markets, inflationary threats as well as geopolitical issues in, and emanating from, the Middle East, Russia, Ukraine and North Africa, have contributed to increased volatility in the financial markets in recent years and have diminished growth expectations for the global economy going forward. Global fixed income markets continue to experience periods of both volatility and limited market liquidity, which have affected a broad range of asset classes and sectors. Factors relating to general economic conditions (such as consumer spending, business investment, government spending, exchange rates and commodity prices) uncertainty over the United Kingdom’s continued membership of and influence in the European Union (“EU”), the volatility and strength of both debt and equity markets, and inflation, all affect the profitability of our business. In a sustained economic phase of low growth and high public debt, characterised by higher unemployment, lower household income, lower corporate earnings, lower business investment and lower consumer spending, the demand for financial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of claims or surrenders of policies or claims of mis-selling. Any potential material adverse effect will also be dependent upon customer behaviour and confidence. As a result of these market exposures, our financial position and results of operations may be subject to significant volatility, and there can be no assurance as to the effects of this volatility, particularly if it is prolonged, on our financial position or results of operations. Such effects may include, inter alia: (i) a general reduction in business activity and market volumes which affects fees, commissions and margins from customer-driven transactions and revenues, and from sales of insurance products; (ii) market downturns which are likely to reduce the volume and valuations of assets managed on behalf of clients, thereby reducing asset-based and performance-based fees; (iii) reduced market liquidity, limiting trading and arbitrage opportunities and presenting impediments for managing risks, impacting both trading income and performance-based fees; (iv) a reduced value in assets held for our own account as trading positions could continue to fall in value; (v) increased impairments and defaults on credit exposures and on trading and investment positions, which losses may be exacerbated by falling collateral values; (vi) increased collateral requirements under derivative and other financial instruments; (vii) increased costs of hedging against market risks such as equity or interest rate exposure; (viii) pressure to reduce equity and/or debt investments or maintain additional capital in respect of such holdings; (ix) an increase in technical provisions and capital requirements in response to market-related stress tests; and (x) a requirement to hold a larger proportion of liquid assets in order to off-set the impact of a reduction in market liquidity on a company’s ability to meet payment obligations. The interdependence of global financial institutions means that the failure of a sufficiently large and influential financial institution could materially disrupt global securities markets or clearance and settlement systems in the markets. This could cause severe market decline or volatility. Such a failure could also lead to a chain of defaults by counterparties that could materially adversely affect the Group. This risk, known as “systemic risk”, could adversely impact our future product sales as a result of reduced confidence in the financial services industry. It could also adversely impact our results because of market declines and write-downs of assets.
Interest rate guaranteed returns, such as those available on guaranteed annuity options (“GAOs”), 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. Periods of significant and sustained downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction to net income. We use reinsurance in combination with derivative instruments to mitigate some of the liability exposure and the volatility of net income associated with these liabilities, and while we believe that these and other actions mitigate the risks related to these benefit, we remain liable for the guaranteed benefit in the event that reinsurers or derivative counterparties are unable or unwilling to pay. We are also subject to the risk that the cost of hedging these guaranteed minimum benefit increases, resulting in a reduction to net income. In addition, we are subject to the risk that unanticipated policyholder behaviour or mortality, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed. These, individually or collectively, may have a material adverse effect on our results of operations, financial condition or liquidity.
If the Proposed Acquisition is completed, the Group’s success will be dependent upon its ability to integrate the two businesses; there will be numerous challenges associated with the integration and the synergies expected from the Proposed Acquisition may not be fully achieved. If the Proposed Acquisition is completed, the current operations of the Aviva Group and the Friends Life Group will be integrated to form the combined operations of an enlarged Aviva Group over a period of two to three years. To the extent that the enlarged Group is unable to efficiently integrate the operations, realise cost reductions, transfer existing Friends Life Group asset management contracts to Aviva Investors, retain qualified personnel or customers and avoid unforeseen costs or delay, there may be an adverse effect on the business, results of operations and/or the financial condition of the enlarged Group. While Aviva believes that the costs and synergies expected to arise from the Proposed Acquisition have been reasonably estimated, unanticipated events or liabilities may arise which result in a delay or reduction in the benefits derived from the transaction, or in costs significantly in excess of those estimated. The integration of the Aviva Group and the Friends Life Group will be supported by a strong management team with experience of large integration processes. However, no assurance can be given that the integration process will deliver all or substantially all of the expected benefits or realise such benefits in a timely manner. If the Proposed Acquisition is completed, the enlarged Group will encounter numerous integration challenges as a consequence thereof. In particular, following completion, the enlarged Group’s management and resources may be diverted from its core business activity of administering the enlarged businesses due to personnel being required to assist in the integration process. The integration process may lead to an increase in the level of administrative errors. A decline in the service standards of the enlarged Group may result in an increase in customer complaints and customer and/or regulatory actions, which may lead to reputational damage and the loss of customers and/or distributors by the enlarged Group and have an adverse impact on financial performance and condition. Furthermore, whether as a result of a decision or action taken by a regulator with jurisdiction over the enlarged Group’s business or otherwise, it may not prove possible to achieve the expected level of synergy benefits on integration of the businesses of the Aviva Group and the Friends Life Group on time or at all and/or the cost of delivering such benefits may exceed the expected cost. There will inevitably be a cost involved in revising the current systems and structures of the enlarged Group if the Proposed Acquisition is completed. There is a risk that these costs could exceed current estimates, which would adversely affect anticipated integration benefits.
Operating profit This is also referred to as adjusted operating profit or operating profit (IFRS basis).
Annual General Meeting (AGM) • The 2015 AGM will be held at The QEII Centre, Broad
Company’s Registrar, Computershare Investor Services PLC (Computershare), to arrive by no later than: • Monday, 27 April 2015 at 11am for ordinary shareholders; and