Aviva 2005 Annual Report Download - page 138

Financial statements continued
Notes to the consolidated financial statements continued
21 – Loans
(a) Carrying amounts
The carrying amounts of loans at 31 December 2005 and 2004 were as follows:
2005 2004
£m £m
Policy loans 1,020 1,032
Bank loans 125 52
Securitised mortgage loans (see note 22) 7,476 5,106
Non-securitised mortgage loans 15,224 14,663
Other loans 699 1,202
Total 24,544 22,055
Of the above loans, £12,257 million (2004: £11,014 million) is expected to be recovered more than one year after the balance
sheet date.
The impairment charge in respect of the above loans, charged to profit for the year, was £8 million (2004: £5 million) and reversals of
impairments on these loans were £4 million (2004: £4 million).
(b) Collateral
At 31 December 2005, the fair values of collateral which the Group has accepted and is permitted to sell or repledge in the absence
of default, and of collateral that the Group has sold and has an obligation to return, were £580 million and £nil, respectively
(2004: £nil and £nil, respectively).
22 – Securitised mortgages and related assets
The Group has loans secured by mortgages, subject to non-recourse finance arrangements, in a UK long-term business subsidiary and in
two Dutch subsidiaries. Details of the relevant transactions are as follows:
(a) United Kingdom
In a United Kingdom long-term business subsidiary (NUER), the beneficial interest in certain portfolios of lifetime mortgages has been
transferred to five special purpose securitisation companies, Equity Release Funding (No 1) plc (ERF1), Equity Release Funding (No 2) plc
(ERF2), Equity Release Funding (No 3) plc (ERF3), ERF Trustee (No 4) Limited (ERF4T) held on trust for the benefit of Equity Release Funding
(No. 4) plc (ERF4), and ERF Trustee (No 5) Limited (ERF5T) held on trust for the benefit of Equity Release Funding (No. 5) plc (ERF5)
(together “the ERF companies”), in return for initial consideration and, at later dates, deferred consideration. The deferred consideration
represents receipts accrued within the ERF companies after meeting all their obligations to the note holders, loan providers and other third
parties in the priority of payments. No gain or loss was recognised on the transfers to ERF1, ERF3 and ERF5T, and gains of £5 million and
£9 million were recognised on the transfers to ERF2 and ERF4T respectively. The purchases of the mortgages were funded by the issue of
fixed rate, floating rate and index-linked notes by the ERF companies.
All the shares in the ERF companies are held by independent companies, whose shares are held on trust. Although NUER does not own,
directly or indirectly, any of the share capital of the ERF companies or their parent companies, these have been treated as subsidiaries in
the consolidated financial statements. NUER has no right to repurchase the benefit of any of the securitised mortgage loans, other than
in certain circumstances where NUER is in breach of warranty or loans are substituted in order to effect a further advance.
NUER has purchased subordinated notes and granted subordinated loans to some of the ERF companies. These have been offset against
the borrowings of the ERF companies in the consolidated balance sheet.
(b) Netherlands
In two Dutch subsidiaries, Delta Lloyd Levensverzekering NV (DLL) and Amstelhuys NV (AMS), the principal benefits of certain portfolios of
mortgage loans have been transferred to a number of special purpose securitisation companies, Arena 2000 - I BV, Arena 2001 - I BV,
Arena 2002 - I BV, Arena 2003 - I BV, Arena 2004 - I BV, Arena 2004 - II BV, Arena 2005 - I BV and DARTS Finance BV (the securitisation
companies), which were funded primarily through the issue of fixed rate, floating rate and index-linked notes. No gains or losses were
recognised on these transfers.
Aviva plc 2005 Financial statements
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