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| Retirement | Investments | Insurance | Health |
Aviva plc
Annual report and accounts 2013

Table of contents

  • Page 1
    Aviva plc Annual report and accounts 2013 | Retirement | Investments | Insurance | Health |

  • Page 2
    ... to make it easier for them to plan for the future. And we have been doing this for the last 318 years. Our purpose is all about what we do for our customers and ensuring we build a strong business on which they can depend. In this report, you can read more about how we are changing Aviva to...

  • Page 3
    ... report 2013 Find out more about our commitment to acting as a responsible member of the international business community. Governance Directors' and corporate governance report Directors' remuneration report 68 86 Shareholder information Share capital 286 Related party disclosures 288 Guarantees...

  • Page 4
    Anne Lawlor Dublin, Republic of Ireland When young mother Anne Lawlor found a lump in her breast, she was glad she had an Aviva health insurance policy. The tumour was diagnosed in September 2013 and Anne had surgery within ... to afford and how quickly I was going to be able to access that treatment."

  • Page 5
    ... has placed his personal insurance with Aviva too. "It's a relationship based on trust,'' he says. "To me, trust is paramount in insurance. It means I can focus on making a quality product, knowing my business is well protected, so I don't have to worry." Governance IFRS Financial statements Other...

  • Page 6
    ...being designated a Global Systemically Important Insurer. £2.8bn Total IFRS profit before tax John McFarlane Chairman 17% increase Share price growth during 2013 2013 has been a very important year for Aviva and for shareholders. The positive changes made by your Board and management, have begun...

  • Page 7
    ... on low incomes, for a policy premium of less than £2 a year. Aviva Investors also works with fund managers and analysts globally to integrate environmental, social and corporate governance issues into our investment decision-making and analysis to deliver long-term shareholder value for our...

  • Page 8
    ...loss last year principally due to the writedown of Aviva USA, our profit after tax increased to £2.2 billion. 31.4m Customers worldwide 27,700 Employees 1 The pro forma economic capital surplus at 31 December 2012 included the benefit of disposals and an increase in pension scheme risk allowance...

  • Page 9
    ... expenses (£m) £3,366m 11% £2,049m IFRS Financial statements 2011 2013 Value of new business - excl Malaysia and Sri Lanka (£m) £738m 13% 2012 2013 £835m £3,006m Other information I believe Aviva is now more focused and better managed. Mark Wilson Group Chief Executive Officer...

  • Page 10
    8 Aviva plc Annual report and accounts 2013 Group Chief Executive Officer's statement continued Key statistics in 2013 £8.3bn Economic capital5 surplus (2012: £5.3bn) £4.1bn Intercompany loan as at 28 February 2014 Over the last 12 months there has been substantial focus on the intercompany ...

  • Page 11
    ...accounts 2013 Group Chief Executive Officer's statement continued Progress against 2013 focus areas Improve cash remittances § Cash remittances up 40% to £1,269 million Turnaround Italy, Spain, Ireland and Aviva Investors § Structural progress made, new management appointed § Dividend payments...

  • Page 12
    ... and SME-focused corporate pensions offering. Individual protection sales are lower however, as banks have pulled back from advised selling. Patrick Regan Chief Financial Officer £2,151m IFRS profit after tax £1.3bn Cash remittances¹ £241bn Aviva Investors assets under management Going...

  • Page 13
    11 Strategic report Aviva plc Annual report and accounts 2013 Chief Financial Officer's statement continued Personal motor, home and commercial property all achieved improved combined operating ratios. Total commercial COR was 102.9% (2012: 104.0%). Within this, large commercial lines business ...

  • Page 14
    ...40% from 2012 with a remittance ratio of 72% of OCG. £3.6bn IGD surplus Patrick Regan Chief Financial Officer Cash remittances Operational capital generation £m Change from 2012 vs 2013 Total by country* Dividend £m Remitted to Group UK & Ireland Life UK & Ireland GI** France Canada Poland...

  • Page 15
    ...Financial statements Opening NAV per share at 31 December 2012 Operating profit Effect of US disposal Dividends & appropriations Investments variances including commercial mortgage provision increase Pension schemes Integration and restructuring costs, goodwill impairment and other Foreign exchange...

  • Page 16
    ... Baker-Collingwood London, United Kingdom When Charlie Baker-Collingwood's father passed away, Charlie started thinking about putting money into a pension because, as a self employed business owner, nobody else was going to do it for him. Charlie runs a tailoring business on London's Savile Row...

  • Page 17
    ... we just can't control. But my illness was a gift because it's made me recognise the most cherished people and things in my life." Once returned to full health, Mr Miu married Zheng Lina and they are looking forward to their new life together. Governance IFRS Financial statements Other information

  • Page 18
    ... and health insurance products including motor and home insurance We offer pensions, annuities, life insurance and savings products Our products are sold to individuals and businesses We sell products directly to customers and through partners and third parties such as banks Managing risk and...

  • Page 19
    ...Aviva plc Annual report and accounts 2013 Our business model continued Adjusted operating profit split by geography 52% 18% 6% 5% 7% 9% 3% UK & Ireland and other France Italy Spain Poland and Turkey Canada Asia Governance We provide: Life insurance Customers take out life policies and annuities...

  • Page 20
    ... our customers § Customers are increasingly open to digital sales channels and digital interaction. Mobile technology is prevalent and customers increasingly expect to manage their insurance on the move at a time and in a place that suits them. World population Billions Adults Children 2013 Rapid...

  • Page 21
    ... Annual report and accounts 2013 Strategic framework Our purpose and plan Our long-term strategic framework is based on four theses - investment, distribution, customer and people. The following pages outline our strategic direction. Governance Mark Wilson Group Chief Executive Officer Our values...

  • Page 22
    ... and reduce debt levels over time. Insurance companies' financials have been overly complex. We have simplified our financial reporting metrics to focus on five key measures which can be seen in the adjacent table. Group UK&I Life UK&I GI France Canada Aviva Investors Italy Spain Poland Turkey Asia...

  • Page 23
    ... Aviva plc Annual report and accounts 2013 Customer Key statistics in 2013 Simplicity, your way We start with what our customers really need and deliver it more simply than anyone else. Governance 31.4m Customers £27.5bn Paid out in claims and benefits during 2013 £8.3bn Economic capital...

  • Page 24
    ...and direct sales forces in some of our markets is falling as a result of customer choice. Where we want Aviva distribution to be § We are targeting a more balanced distribution portfolio in each of our business units § We will support our bancassurance and broker partners by building best practice...

  • Page 25
    23 Strategic report Aviva plc Annual report and accounts 2013 People Key statistics in 2013 Achievement, potential, collaboration Supporting people to achieve their potential; enabling us to achieve outstanding performance. Governance 27,700 Employees across 17 countries 21% Of senior managers ...

  • Page 26
    ... house, allowing them to rebuild their lives. Husband D'Arcy Finlay says: "Life's full of uncertainties and major challenges; for us, after the flood, it became whether we'd even have a home. Fortunately, Aviva had our backs. Our boys are safe and now we're looking forward to making the new house...

  • Page 27
    ... months later, Danuta was diagnosed with bilateral kidney cancer. Her critical illness cover guaranteed quick access to treatment which saved her life. "None of us know what the future holds. But I have high hopes. And I have people to live for" she says. Governance IFRS Financial statements Other...

  • Page 28
    ... 2011 2012 IFRS profit/(loss) before tax2 Relevance and measurement Performance IFRS profit/(loss) before tax (£m) 2013 This measures the total IFRS profit or loss during the year including operating profit and non-operating items such as restructuring costs, impairments, short-term investment...

  • Page 29
    ... local market conditions and the disposal of Aseval. 2011 2012 2013 General insurance combined operating ratio (COR) Relevance and measurement Performance General insurance combined operating ratio (%) excluding Delta Lloyd and RAC 2013 Other information COR measures the profitability of...

  • Page 30
    ... capital we have invested. Return on equity is calculated as total after tax operating return divided by opening equity shareholders' funds. Return on equity has increased in 2013 principally due to a reduction in opening capital as a result of a write-down of the United States life and annuities...

  • Page 31
    29 Strategic report Aviva plc Annual report and accounts 2013 Measuring our performance in 2013 continued Non-financial metrics Business ethics 95% of our employees accepted our business ethics code in 2013 (2012: 88%). We aim for 100% each year and continue to work towards this goal. Performance...

  • Page 32
    ...Annual report and accounts 2013 Market focus Business in brief UK & Ireland Life Aviva is a leading life insurer in the UK and Ireland, offering retirement, risk and savings products to both individuals and groups. David Barral CEO, Aviva UK & Ireland life insurance We offer: Pensions, annuities...

  • Page 33
    ... Strategic report Aviva plc Annual report and accounts 2013 Market focus continued Full year performance UK & Ireland Life 2013 £m 2012 £m Cash remitted to Group Operating capital generation Life operating profit: IFRS basis Expenses Operating expenses Integration and restructuring costs Value...

  • Page 34
    ... Aviva plc Annual report and accounts 2013 Market focus continued Business in brief UK & Ireland General Insurance We are the UK's largest general insurer and a leading general insurer in Ireland, providing a wide range of products to personal and commercial customers. Maurice Tulloch CEO, Aviva...

  • Page 35
    ...Strategic report Aviva plc Annual report and accounts 2013 Market focus continued Full year performance UK & Ireland General Insurance 2013 £m 2012 £m Cash remitted to Group Operating capital generation Operating profit: IFRS basis Expenses Operating expenses Integration and restructuring costs...

  • Page 36
    ... insurance & health Expenses Operating expenses Integration and restructuring costs Value of New Business (VNB) Combined Operating Ratio (COR) IFRS profit before tax 644 34 678 303 98.1% 1,144 Market type Cash generator France Growth Poland, Turkey Turnaround Spain, Italy For more information...

  • Page 37
    ...second largest direct general insurer. In 2013 we made strong progress improving our life product mix, focusing on capital efficient products. Unit-linked savings and life protection VNB increased by 130% and 35% respectively. In 2014 we are continuing this trend, launching new unit-linked funds and...

  • Page 38
    ..., good economic growth and increasing demand for financial products. In both markets we are well-placed to make the most of the growth opportunities. 1,400 Employees Our strategic focus has shifted from targeting volume, to preserving capital and creating value. For more information about market...

  • Page 39
    ..., operating through five partnerships. We also have a retail network selling life, pensions and protection products through more than 1,000 brokers and Seguros Pelayo. Our retail business has been recognised by ADECOSE (the broker and IFA association) as the best insurance company in Spain to work...

  • Page 40
    38 Aviva plc Annual report and accounts 2013 Market focus continued Business in brief Canada We are the second largest general insurer in Canada, providing personal and commercial insurance products. We continue to innovate and offer new products to meet our customers' needs. In 2014, we will ...

  • Page 41
    39 Strategic report Aviva plc Annual report and accounts 2013 Market focus continued Full year performance Canada 2013 £m 2012 £m Cash remitted to Group Operating capital generation Operating profit: IFRS basis Expenses Operating expenses Integration and restructuring costs Combined Operating ...

  • Page 42
    ... ten banks. mix to maximise value In Singapore, to complement our successful of new business. bancassurance business, we have a leading position in the financial advisory channel. We offer: Protection, savings, pensions, accident and health insurance 3m 1 Customers 1, 100 Employees Market type...

  • Page 43
    ...in Singapore on the rights of street children in South East Asia, to name just a few of our initiatives. Governance Cash remitted to Group Operating capital generation Operating profit: IFRS basis Life General insurance & health Expenses Operating expenses Integration and restructuring costs Value...

  • Page 44
    ... Investors 2013 £m 2012 £m Cash remitted to Group Operating capital generation Aviva Investors: Operating profit, IFRS basis Fund management Long-term insurance and savings business - Pooled Pensions 14 23 68 2 (96) (26) 15 7 39 3 - 42 306 33 339 2 900 Employees Our strategy We aim to increase...

  • Page 45
    ...legacy for Bath in this sustainable, long-term investment. The design complements the city's historic architecture and will stand the test of time, so we won't have to create carbon waste by continually redeveloping it to keep it contemporary." Governance IFRS Financial statements Other information

  • Page 46
    ... living longer than we expect), mortality risk (customers with life protection dying), expense risk (cost to service contracts) and persistency risk (customers not renewing their policies). Some of our life and savings products provide guaranteed minimum investment returns to customers. As a result...

  • Page 47
    45 Strategic report Aviva plc Annual report and accounts 2013 Risks to our business continued How we manage our risks Our core expertise is understanding and managing these risks, so that we can competitively price our products, deliver on our promises to customers and provide sustainable earnings...

  • Page 48
    ... We are the only insurer listed in the Global Compact 100 Index Recognising exceptional performance and rewarding outcomes; providing clarity and enabling accountability through the way we structure the organisation and the way we operate. Environment and climate change Controlling our impacts and...

  • Page 49
    ... pay for direct staff exceeds the UK national living wage. We are discussing payment of the Living Wage for onsite contractors with our suppliers, following the value the LLW has brought to our contracted relationships in London. IFRS Financial statements Employee engagement Our annual engagement...

  • Page 50
    ..., we have employee consultative forums in both the UK and Europe. Employee involvement in business performance is encouraged through a number of share plans including Save As You Earn, share matching plan and share awards are given as a long-term incentive for some senior managers. Safety and...

  • Page 51
    ... investment funds managed by Aviva Investors. Our annual CRC Report 2012-13 showed total emissions of 108,013 tonnes which cost £1,296 million in the purchase of Government allowances. Our target is to cut CO2e emissions by 20% between 2010 and 2020. We aim for a 5% year-on-year reduction. In 2013...

  • Page 52
    ...address our concerns. In 2013, Aviva Investors was recognised at the Sustainable City Awards convened by the City of London Corporation, winning the Leadership in Sustainability Award. Promoting low carbon Aviva Investors is targeting long-term profitability with a reduced risk appetite by investing...

  • Page 53
    ...-connected children. The third International Day for Street Children took place in April 2013 to raise awareness of the global issue. Since 2011, the number of countries participating has grown from 30 to 128. In December 2013, we held a round table in Singapore in partnership with the UN Office of...

  • Page 54
    ...eld, United Kingdom Grocery delivery service Ocado minimises its insurance costs and reduces risk by putting video cameras in its delivery vans. The cameras, triggered by an accelerometer or the driver, film the road ahead and the driver, and were an important consideration when the company agreed...

  • Page 55
    ... taken out an Aviva credit-linked life insurance policy to support a loan. This policy paid for his recuperation and allowed him to take time to recover and plan for the future, without the worry of putting financial pressure on his family. Losing his sight has meant making changes to many aspects...

  • Page 56
    54 Aviva plc Annual report and accounts 2013 Board of directors Board of directors We have a strong, experienced and diverse Board with a good balance of skills. Front (left to right): Sir Adrian Montague CBE, Mark Wilson, John McFarlane, Patrick Regan Back (left to right): Glyn Barker, Gay Huey ...

  • Page 57
    ... Chief Operating Officer at Willis Group (insurance). He was also Chairman of Willis Capital Markets and Advisory, the investment banking business which he established. Patrick was also Group Financial Controller at Royal & Sun Alliance plc (insurance), and finance and claims director for UK general...

  • Page 58
    ... chaired the Governance Committee until February 2014. She is currently a Non-Executive Director of ConocoPhillips (exploration and production), Falcon Private Wealth Ltd (wealth management), Bank Itaú BBA International Ltd (banking), and the Financial Reporting Council. Gay is also a member of the...

  • Page 59
    ... Board in September 2013 and is a member of the Governance, Risk and Nomination Committees. He is currently the Senior Independent Director at the Care Quality Commission (the UK's independent hospital and adult social care regulator). Michael was a senior partner at McKinsey & Company (consultancy...

  • Page 60
    ... supporting and FCA), serving as Chief a move to the open market Operating Officer. option for UK annuity He has also held senior customers. management roles in WH Smith David has 20 years in financial Group plc and Cadbury services including roles in sales, Schweppes plc. marketing, operations...

  • Page 61
    ... and audit committee member of Mothercare plc. She is on the board of the National Youth Orchestra and is a member of Lord Davies' steering group to increase the number of women on boards. Amanda was awarded an OBE in the 2014 New Year Honours List for services to marketing. Other information

  • Page 62
    ... John became Finance Director of Aviva UK Life, and in July 2012 he was appointed Group Chief Risk and Capital Officer. Non-Executive Director of Aviva Health. He began his career with Aviva as Director of Partnerships (bancassurance). David has 12 years' experience in management consulting with...

  • Page 63
    ...clock with an antique Viennese clock. In June 2013, the new clock fell off the wall and was badly damaged. Aviva arranged for the clock to be expertly repaired and it now hangs in its rightful place in the hall, keeping better time than ever. "Without insurance, I would be on edge all the time" says...

  • Page 64
    ... reporting from the committees. This has allowed the Board to concentrate more on strategy; financial strength and performance; risk management; internal controls and compliance; and succession planning. I believe the Board and management have made good progress in achieving the turnaround aims...

  • Page 65
    ... report. I believe that the policy is clear and aligns executive remuneration with the Company's performance and shareholder outcomes. I hope that you will support the policy at this year's AGM. Risk Committee During the year the Group was designated a Global Systemically Important Insurer (G-SII...

  • Page 66
    ... plc Annual report and accounts 2013 Extract of directors' remuneration report Dear shareholder On behalf of the Board, the Remuneration Committee is pleased to present an extract of the Directors' Remuneration Report (DRR) for the year ended 31 December 2013. Responding to new requirements Aviva...

  • Page 67
    ... of relevant financial, employee and customer targets and personal objectives as set by the committee. For example, in 2013 the financial KPIs were: § Net capital returns § IFRS profit before tax § MCEV value of new business § Combined operating ratio § Total expenses Financial performance is...

  • Page 68
    ... left Aviva on 6 June 2013 and so 2013 figures represent the period up to that date. 4 Bonus payable in respect of the financial year including any deferred element at face value at date of award. 5 Value of the LTIP for 2013 relates to the 2011 award, which had a three year performance period...

  • Page 69
    67 Strategic report Aviva plc Annual report and accounts 2013 Governance In this section Directors' and Corporate governance report Directors' remuneration report 68 86 Governance IFRS Financial statements Other information

  • Page 70
    ... transactions and expenditure „ Corporate governance issues (e.g. appointment and removal of the Group Company Secretary and Chief Risk and Capital Officer (CRCO), Board and committee succession planning and the constitution of Board committees) The Board's terms of reference also set out those...

  • Page 71
    ... each Board committee „ Presentations from business units and functions As part of its annual work plan, the Board reviewed and approved all financial results announcements, the Annual report and accounts, the operational plan and dividend payments, all changes to the composition of the Board and...

  • Page 72
    70 Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued external review was facilitated by Independent Board Evaluation and supported by internal questionnaires to the Board committees. The results were discussed by the Board and each of the committees and...

  • Page 73
    71 Strategic report Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued reviewed and comply with the Financial Reporting Council's Internal Control: Revised Guidance for Directors. Risk Management Framework business unit Chief Executive Officers and ...

  • Page 74
    ... Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued Aviva plc Board Board Committees Audit Risk Remuneration Nomination Governance Committee Committee Committee Committee Committee Management Committees Disclosure Committee Asset Liability Committee...

  • Page 75
    ... Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued Nomination Committee report Committee role and responsibilities The Board strongly believes that good governance and strong, responsible, balanced leadership by the Board are critical to creating long...

  • Page 76
    ... in UK Life, Ireland Life, Ireland Health, Aviva Investors, Canada, France and Italy. The Chairman, Group CEO, CFO, CAO and the external auditor normally attended committee meetings. Other members of senior management were also invited to attend as appropriate to present reports. During the year the...

  • Page 77
    .... Aviva Investors Other information Financial statements and accounting policies In conjunction with members of management and the internal and external auditors, the committee reviewed the Group's financial announcements, the Annual report and accounts and associated documentation, the half year...

  • Page 78
    ... in fixed income securities at Aviva Investors. The committee received quarterly reports from the CAO on audit reviews carried out, management's response to the findings and progress in addressing identified issues. The CAO prompted management to increase focus throughout the year on closing overdue...

  • Page 79
    77 Strategic report Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued Chief Audit Officer The CAO had direct access to the Board Chairman, the committee chairman and the committee members. The committee worked with the Group CEO to determine the CAO's ...

  • Page 80
    ... Committee and the Governance the Group Committee which ensures the committee is linked to the work „ Review the Group's investment risk strategy, credit limit of the other Board committees. framework and approve individual counterparty exposures In performing its duties, the committee had access...

  • Page 81
    ... business units. Regulatory oversight IFRS Financial statements Other information Following the approval of a revised capital management framework in 2012, the committee has closely monitored the Group's economic capital and liquidity positions against risk appetite and targets for the Group and...

  • Page 82
    80 Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued development of the Group's Systemic Risk Management Plan and the plans to meet the potential capital requirements. Fraud and financial crime Governance Committee report This Report provides details ...

  • Page 83
    ...Strategic report Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued Governance Committee - allocation of agenda time 35% 9% 11% 14% 11% 20% Shareholder (Governance) Regulatory and Government Reputation Customer People Community into product governance...

  • Page 84
    82 Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued Other statutory information The directors submit their Annual report and accounts for Aviva plc, together with the consolidated financial statements of the Aviva group of companies, for the year ended...

  • Page 85
    ... of risks, including those relating to credit, foreign currency exchange, cash flow, liquidity, interest rates, and equity and property prices. Details of the objectives and management of these instruments are contained in the Risk and Capital Management section, the Shareholder Information section...

  • Page 86
    ...Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period. In preparing these financial...

  • Page 87
    85 Strategic report Aviva plc Annual report and accounts 2013 Directors' and Corporate governance report continued New York Stock Exchange listing requirements The Company's ordinary shares are admitted to the NYSE and are traded as American Depositary Shares. As a foreign company listed on the ...

  • Page 88
    86 Aviva plc Annual report and accounts 2013 Directors' remuneration report Dear shareholder On behalf of the Board, the Remuneration Committee is pleased to present the Directors' Remuneration Report (DRR) for the year ended 31 December 2013. Responding to new requirements „ Aviva's 2013 DRR ...

  • Page 89
    ... of relevant financial, employee and customer targets and personal objectives as set by the committee. For example in 2013 the financial KPI's were: „ Net capital returns „ IFRS profit before tax „ MCEV value of new business „ Combined operating ratio „ Total expenses Financial performance is...

  • Page 90
    ... TSR comparator group are agreed by the committee annually and disclosed in the annual remuneration report section. N/A Pension To give a market competitive level of provision for postretirement income. EDs are eligible to participate in a defined contribution plan up to the annual limit. Any...

  • Page 91
    ... and relative return generated for shareholders. In terms of target setting, a number of reference points are taken into account each year including, but not limited to, the Group's business plan and external market expectations of the Company. Maximum payouts require exceptional performance that...

  • Page 92
    ... Annual report and accounts 2013 Directors' remuneration report continued Illustration of the policy The charts below illustrate how much EDs could earn under different performance scenarios in one financial year: „ Minimum - basic salary, pension or cash in lieu of pension and benefits, no bonus...

  • Page 93
    ... of the Company. Director: Mark Wilson Patrick Regan1 Trevor Matthews2 Date current contract commenced: 1 January 2013 22 February 2010 2 December 2011 IFRS Financial statements Governance Remuneration and benefits Expenses Car allowance Holiday entitlement Other benefits Private medical insurance...

  • Page 94
    ... that pay structures are suitably aligned and that levels of remuneration remain appropriate. The committee reviews levels of basic salary increases for other employees and executives based in the UK. It reviews changes in overall bonus pool funding and long term incentive grants. The committee does...

  • Page 95
    ... Policy Period Termination Fees Expenses In line with the requirement of the UK Corporate Governance Code, all NEDs including the Chairman, are subject to annual re-election by shareholders at each AGM. By the director or the Company at their discretion without compensation upon giving one month...

  • Page 96
    ... market competitive remuneration, and incentivises EDs to achieve both the annual business plan and longer term strategic objectives of the Group. Significant levels of deferral and a shareholding requirement align EDs' interests with those of shareholders and aid retention of key personnel. As well...

  • Page 97
    ... the year. The chart also shows how the committee dedicated its time to these activities. Remuneration Committee - allocation of agenda time 5% 29% 28% 38% Shareholder liaison Remuneration policy/Governance/ Regulatory issues/Reporting Share plans operation/Performance testing/Targets Senior...

  • Page 98
    ...Group 2013 performance against its KPIs Weighting (% of total bonus opportunity) Business measures (70%) Key performance indicators Plan (%) Stretch (%) Actual outcome (%) Net capital returns IFRS profit before tax MCEV value of new business Combined operating ratio Total expenses Customer Employee...

  • Page 99
    ... into account. In considering the Group CEO's 2013 bonus the committee took full account of the Group outcomes and noted in particular the performance against financial targets. The performance on net capital returns, IFRS profit before tax, the MCEV value of new business and total expenses were...

  • Page 100
    ... limits set in the Company's articles of association, which have previously been approved by shareholders. Share awards made during the financial year (audited information) LTIP awards are made in shares which vest conditionally upon performance targets being met. The number of conditional shares...

  • Page 101
    ...of Aviva Life & Pensions UK Limited, Aviva Annuity UK Limited and Aviva Life Services UK Limited, each of which are subsidiary companies of Aviva plc. IFRS Financial statements Payments for loss of office (audited information) Trevor Matthews resigned from the Board with effect from 8 May 2013 and...

  • Page 102
    ... from the Board with effect from 8 May 2012 and left the Company on 31 May 2012. 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. As the current Group CEO...

  • Page 103
    ... Company, showing both gross income, and also taking into account integration and restructuring costs. Table 19: Relative importance of spend on pay Year end 31 December 2012 £m Year end 31 December 2013 £m % change Adjusted operating profit before tax1 Dividends paid2 Share buybacks3 Total staff...

  • Page 104
    ..., 2011: 434 pence, 2012: 336 pence and 2013; 299 pence. The three day average closing middle-market price of an ordinary share of the Company used to grant the 2010 One Aviva Twice the Value Bonus Plan (OATTV) award was 386 pence. The five day average closing middle-market price of an ordinary share...

  • Page 105
    ...Strategic report Aviva plc Annual report and accounts 2013 Directors' remuneration report continued Share options (audited information) Details of the EDs who were in office for any part of the 2013 financial year and hold or held options over ordinary shares of the Company pursuant to the Company...

  • Page 106
    ... the level and structure of senior management remuneration „ approve the Aviva Investors' reward strategy, including any changes to the strategy and note the total bonus pool; receive remuneration details of Aviva Investors' 'material' employees; and approve any new share and incentive plans or...

  • Page 107
    ... Strategic report Aviva plc Annual report and accounts 2013 IFRS financial statements In this section Independent auditors' report Accounting policies Consolidated income statement Consolidated statement of comprehensive income Reconciliation of Group operating profit to profit/(loss) for the year...

  • Page 108
    ... operating profit to profit/(loss) for the year then ended; „ the Consolidated and the Company statements of changes in equity and statements of cash flows for the year then ended; and „ the Accounting policies and the notes to the financial statements, which include other explanatory information...

  • Page 109
    ...to be those that required particular focus in the current year. This is not a complete list of all risks or areas of focus identified by our audit. For the Consolidated financial statements we discussed these areas of focus with the Audit Committee. Their report on those matters that they considered...

  • Page 110
    ... the recognition of gross earned premium, fees receivable under investment contracts, reinsurance and acquisition costs associated with written premium, and their presentation in the Consolidated income statement. (Refer also to note 6 to the Consolidated financial statements.) As the foundation of...

  • Page 111
    109 Strategic report Aviva plc Annual report and accounts 2013 Independent auditors report to the members of Aviva plc continued Other information in the Annual Report Under ISAs (UK & Ireland), we are required to report to you if, in our opinion, information in the Annual Report is: „ ...

  • Page 112
    ... Aviva plc (the 'Company'), a public limited company incorporated and domiciled in the United Kingdom (UK), together with its subsidiaries (collectively, the 'Group' or 'Aviva') transacts life assurance and long-term savings business, fund management and most classes of general insurance and health...

  • Page 113
    111 Strategic report Aviva plc Annual report and accounts 2013 Accounting policies continued is the replacement of the interest cost on the defined benefit obligation and the expected return on plan assets with a net interest income (or expense). This is based on the net defined benefit asset (or ...

  • Page 114
    ... accounting for contributions from employees or third parties to defined benefit plans. They are not expected to have significant implications for the Group's consolidated financial statements. The amendments have yet to be endorsed by the EU. (vi) Improvements to IFRSs 2010-2012 and 2011-2013...

  • Page 115
    ... long-term business policyholder funds have invested in a number of property limited partnerships (PLPs), either directly or via property unit trusts (PUTs), through a mix of capital and loans. The PLPs are managed by general partners (GPs), in which the long-term business shareholder companies hold...

  • Page 116
    ... fair value is evidenced by comparison with other observable current market transactions (H) Premiums earned Premiums on long-term insurance contracts and participating investment contracts are recognised as income when receivable, except for investment-linked premiums which are accounted for when...

  • Page 117
    ...' share of future ex-dividend date. Interest income is recognised as it accrues, bonuses. For UK non-profit insurance contracts, the Group applies taking into account the effective yield on the investment. It regulatory requirements, adjusted to remove certain regulatory includes the interest rate...

  • Page 118
    116 Aviva plc Annual report and accounts 2013 Accounting policies continued Unallocated divisible surplus In certain participating long-term insurance and investment business, the nature of the policy benefits is such that the division between shareholder reserves and policyholder liabilities is ...

  • Page 119
    ... in-force business (AVIF) Properties under construction Owner-occupied properties, and related mechanical and electrical equipment „ Motor vehicles „ „ No depreciation 25 years Other information The present value of future profits on a portfolio of long-term insurance and investment contracts...

  • Page 120
    ..., credit rating declines and a breach of contract. A decline Financial assets and liabilities are offset and the net amount in fair value below amortised cost due to changes in risk-free reported in the statement of financial position when there is a interest rates does not necessarily represent...

  • Page 121
    ... 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...

  • Page 122
    ...Aviva plc Annual report and accounts 2013 Accounting policies continued Changes in the fair value of derivatives that are designated and qualify as net investment or cash flow hedges, and that prove to be highly effective in relation to the hedged risk, are recognised in other comprehensive income...

  • Page 123
    ... a number of pension schemes, whose members receive benefits on either a defined benefit or defined contribution basis. Under a defined contribution plan, the Group's legal or constructive obligation is limited to the amount The Group offers share award and option plans over the Company's ordinary...

  • Page 124
    ... shareholders' profits, 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. Policyholder tax is accounted for as an income tax and is included in the total tax expense. The Group...

  • Page 125
    ... costs net of income taxes) is shown as a deduction from total shareholders' equity. The Group's only such holding comprises shares purchased by employee trusts to fund certain awards under the equity compensation plans described in accounting policy AB above. Gains and losses on sales of own shares...

  • Page 126
    ... change in provision for unearned premiums Net earned premiums Fee and commission income Net investment income Share of profit/(loss) after tax of joint ventures and associates Profit/(loss) on the disposal and remeasurement of subsidiaries, joint ventures and associates Expenses Claims and benefits...

  • Page 127
    125 Strategic report Aviva plc Annual report and accounts 2013 Consolidated financial statements continued Consolidated statement of comprehensive income For the year ended 31 December 2013 Note 2013 £m Restated2 2012 £m Profit/(loss) for the year from continuing operations Profit/(loss) for ...

  • Page 128
    126 Aviva plc Annual report and accounts 2013 Consolidated financial statements continued Reconciliation of Group operating profit to profit/(loss) for the year For the year ended 31 December 2013 2013 £m Note Continuing Discontinued operations operations1 Total Continuing operations Discontinued...

  • Page 129
    ... insurance Fund and health management £m £m Other operations £m Total £m Year ended 31 December 2013 United Kingdom & Ireland France Poland Italy, Spain and Other Canada Asia Aviva Investors Other Group activities Corporate centre Group debt costs and other interest Share of operating profit...

  • Page 130
    128 Aviva plc Annual report and accounts 2013 Consolidated financial statements continued Consolidated statement of changes in equity For the year ended 31 December 2013 Ordinary share capital £m Preference share Share capital premium £m £m Shares held by employee trusts £m Equity attributable...

  • Page 131
    ... 'Consolidated Financial Statements' - see note 1 for details. There is no impact on the result for any year presented as a result of this restatement. Other information Approved by the Board on 5 March 2014. Patrick Regan Chief financial officer Company number: 2468686 The accounting policies...

  • Page 132
    130 Aviva plc Annual report and accounts 2013 Consolidated financial statements continued Consolidated statement of cash flows For the year ended 31 December 2013 The cash flows presented in this statement cover all the Group's activities and include flows from both policyholder and shareholder ...

  • Page 133
    ... investment income Share of loss after tax of joint ventures and associates Total expenses Effect of change in policy analysed as: Fee and commission expense Other expenses Finance costs Profit before tax Tax attributable to policyholders' returns Tax attributable to shareholders' profits Loss after...

  • Page 134
    ...change in policy analysed as: Profit before tax from continuing operations Adjustment for share of loss of joint ventures and associates Adjustment for fair value gains Adjustment for interest expense on borrowings Adjustment for net finance charge on pension schemes Changes in working capital Total...

  • Page 135
    133 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 3 - Presentation changes (a) Discontinued operations As described in note 4, the Group's US life and annuity business and associated investment management operations (together '...

  • Page 136
    ... Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 4 - Subsidiaries continued 2013 £m Assets Intangible assets Investment property Financial Investments Reinsurance assets Prepayments and accrued income Other assets Cash and cash equivalents Total...

  • Page 137
    135 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 4 - Subsidiaries continued (iii) Malaysia On 12 April 2013 the Group disposed of its 49% interest in its Malaysia long-term business joint ventures, CIMB Aviva Assurance Berhad ...

  • Page 138
    136 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 4 - Subsidiaries continued (vii) Discontinued operations - US long term business The profit/loss on disposal and remeasurement on discontinued operations is as follows: 2013 £m 2012 £m Profit...

  • Page 139
    ... and PT Astra International Tbk signed an agreement to form Astra Aviva Life, a 50-50 joint venture to sell and distribute life insurance products in Indonesia. „ Management determined that the value of our long-term business joint venture in South Korea, in which the group has a 47% share, will be...

  • Page 140
    ..., with a focus on the unit-linked market. The general insurance business predominantly sells personal and small commercial lines insurance products through agents and a direct insurer. Poland Activities in Poland comprise long-term business and general insurance operations. Italy, Spain and Other...

  • Page 141
    139 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 5 - Segmental information continued (a) (i) Segmental income statement for the year ended 31 December 2013 United Kingdom & Ireland Europe Italy, Spain and Other £m Other Group ...

  • Page 142
    140 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 5 - Segmental information continued (a) (ii) Segmental income statement for the year ended 31 December 2012 - (Restated)4 United Kingdom & Ireland Europe Italy, Spain and Other £m Aviva ...

  • Page 143
    141 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 5 - Segmental information continued (a) (iii) Segmental statement of financial position as at 31 December 2013 United Kingdom & Ireland Europe Italy, Spain and Other £m Aviva ...

  • Page 144
    ... Our long-term business comprises life insurance, long-term health and accident insurance, savings, pensions and annuity business written by our life insurance subsidiaries, including managed pension fund business and our share of the other life and related business written in our associates and...

  • Page 145
    143 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 5 - Segmental information continued (b) (i) Segmental income statement - products and services for the year ended 31 December 2013 Life business £m General Fund insurance and ...

  • Page 146
    144 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 5 - Segmental information continued (b) (ii) Segmental income statement - products and services for the year ended 31 December 2012 - (Restated)3 Life business £m General Fund insurance and ...

  • Page 147
    145 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 5 - Segmental information continued (b) (iii) Segmental statement of financial position as at 31 December 2013 Long-term business £m General insurance Fund and health management...

  • Page 148
    ... of the consolidated income statement. 2013 £m Restated1 2012 £m Continuing operations Gross written premiums (notes 5a and 5b) Long-term: Insurance contracts Participating investment contracts General insurance and health Less: premiums ceded to reinsurers (notes 5a and 5b) Gross change in...

  • Page 149
    ...the expenses section of the consolidated income statement. 2013 £m Restated1 2012 £m Continuing operations Claims and benefits paid Claims and benefits paid to policyholders on long-term business Insurance contracts Participating investment contracts Non-participating investment contracts Claims...

  • Page 150
    ... corporate bonds in Italy and Spain together with reduction in cost of guarantees in France. In 2012, for continuing operations, negative investment variances of £620 million mainly related to the UK. The total for the UK included increasing the allowance for credit risk defaults on UK commercial...

  • Page 151
    ...insurance and health business. (a) The short-term fluctuations in investment return and economic assumption changes attributable to the non-long-term business result and reported outside operating profit were as follows: Non-long-term business 2013 £m 2012 £m IFRS Financial statements Short-term...

  • Page 152
    150 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 10 - Longer-term investment return and economic assumption changes for non-long-term business continued The longer-term rate of investment return is determined using consistent assumptions ...

  • Page 153
    ... report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 11 - 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...

  • Page 154
    ...(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...

  • Page 155
    ...on the following items: Governance 2013 £m Restated1 2012 £m Long-term business technical provisions and other insurance items Deferred acquisition costs Unrealised gains on investments Pensions and other post-retirement obligations Unused losses and tax credits Subsidiaries, associates and joint...

  • Page 156
    ... to the income statement on the sale of Aviva USA Corporation. (d) Tax reconciliation The tax on the Group's profit/(loss) before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows: Shareholder Policyholder £m £m 2013 Total...

  • Page 157
    ... dividends and DCI1 £m Restated2 2012 IFRS Financial statements Continuing operations Before tax £m Per share p Before tax £m Per share p Operating profit attributable to ordinary shareholders Non-operating items: Investment return variances and economic assumption changes on life...

  • Page 158
    156 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 15 - Earnings per share continued (b) Diluted earnings per share (i) Diluted earnings per share is calculated as follows: 2013 Weighted average number of shares million Weighted average number ...

  • Page 159
    ... 2013 £m 2012 £m Total 2012 £m United Kingdom - general insurance and health Ireland - general insurance and health France - long-term business Poland - long-term business Italy Long-term business General insurance and health Spain - long-term business Other Europe Aviva Investors Canada...

  • Page 160
    ... profits growth rate 2013 % 2012 % Future new business profits discount rate 2013 % 2012 % Italy long-term business Spain long-term business MCEV MCEV MCEV MCEV 2.0 1.5 2.0 0.0 10.5 10.0 10.6 7.9 General insurance, health, fund management and other businesses Value in use is calculated...

  • Page 161
    159 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 18 - Acquired value of in-force business (AVIF) and intangible assets This note shows the movements in cost and amortisation of the in-force business and intangible assets ...

  • Page 162
    160 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 19 - 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 ...

  • Page 163
    ...1 January Share of results before tax Share of tax Share of results after tax Impairment Share of (loss)/profit after tax Impact of the adoption of IFRS 101 Additions Loans repaid Reduction in Group interest Share of losses taken to other comprehensive income Dividends received Foreign exchange rate...

  • Page 164
    ... and accounts 2013 Notes to the consolidated financial statements continued 20 - Interests in, and loans to, associates continued Impairment testing Management has determined that the goodwill in Aviva Life Insurance Company India Limited is fully impaired. An impairment of £29 million (2012...

  • Page 165
    163 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 21 - Property and equipment This note analyses our property and equipment, which are primarily properties occupied by Group companies and computer equipment. Properties under ...

  • Page 166
    164 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 22 - Investment property This note gives details of the properties we hold for long-term rental yields or capital appreciation. 2013 Freehold £m Leasehold £m Total £m Freehold £m Leasehold ...

  • Page 167
    165 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 23 - 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. ...

  • Page 168
    ... of operations classified as held for sale £m 2012 (Restated)1,2 Level 1 £m Level 2 £m Level 3 £m Amortised cost £m Statement of financial position Total £m Financial investments and loans measured at fair value (notes 24 & 27) Loans Fixed maturity securities Equity securities Other...

  • Page 169
    167 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 23 - Fair value methodology continued Transfer to/from Level 3 Transfers out of Level 3 mainly relate to improvements in the market liquidity of certain debt securities held by ...

  • Page 170
    168 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 23 - Fair value methodology continued Total net gains recognised in the income statement in the year ended 31 December 2013 in respect of Level 3 assets measured at fair value amounted to £108 ...

  • Page 171
    169 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 24 - Loans This note analyses the loans our Group companies have made, the majority of which are mortgage loans. (a) Carrying amounts The carrying amounts of loans at 31 ...

  • Page 172
    ... Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 24 - Loans continued The movements in the impairment provisions on these loans for the years ended 31 December 2012 and 2013 were as follows: 2013 £m 2012 £m At 1 January Increase during the year...

  • Page 173
    171 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 26 - Interests in structured entities A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding ...

  • Page 174
    172 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 26 - Interests in structured entities continued (b) Interests in unconsolidated structured entities As part of its investment activities, the Group invests in unconsolidated structured entities....

  • Page 175
    ... Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 27 - Financial investments This note analyses our financial investments by type and shows their cost and fair value. These will change from one period to the next as a result of new...

  • Page 176
    ... Restated1 2012 Fair value £m Fixed maturity securities Equity securities Other investments Unit trusts and specialised investment vehicles Derivative financial instruments Deposits with credit institutions Non-controlling interests in property management undertakings Other long-term investments...

  • Page 177
    ... 2012 £m 2013 £m Shareholder 2012 £m 2013 £m Total Restated1 2012 £m Non UK Government Debt Securities Austria Belgium France Germany Greece Ireland Italy Netherlands Poland Portugal Spain European Supranational debt Other European countries Europe Canada United States North America Singapore...

  • Page 178
    ... plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 27 - Financial investments continued (f) Exposure to worldwide banks - debt securities Direct shareholder and participating fund assets exposures to worldwide bank debt securities (net of non-controlling...

  • Page 179
    177 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 28 - Receivables This note analyses our total receivables. 2013 £m Restated1 2012 £m Amounts owed by contract holders Amounts owed by intermediaries Deposits with ceding ...

  • Page 180
    178 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 29 - Deferred acquisition costs, other assets, prepayments and accrued income continued (b) Deferred acquisition costs - movements in the year The movements in deferred acquisition costs (DAC) ...

  • Page 181
    ...Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 31 - Ordinary share capital This note gives details of Aviva plc's ordinary share capital and shows the movements during the year. (a) Details of the Company's ordinary share capital...

  • Page 182
    180 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 32 - Group's share plans continued (b) Outstanding options and awards (i) Share options At 31 December 2013, options to subscribe for ordinary shares of 25 pence each in the Company were ...

  • Page 183
    181 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 32 - Group's share plans continued (ii) Share awards At 31 December 2013, awards issued under the Company's executive incentive plans over ordinary shares of 25 pence each in ...

  • Page 184
    ... 37% 38% 63% 3.00 years - 0.42% For awards with market-based performance conditions. The long term incentive plan awards granted in 2012 and 2013 include additional shares being provided to employees equal to dividend rights before vesting. As a result, no dividend yield assumption is required for...

  • Page 185
    183 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 35 - Direct capital instruments and fixed rate tier 1 notes Notional amount 2013 £m 2012 £m Issued November 2004 5.9021% £500 million direct capital instrument 4.7291% â,¬700...

  • Page 186
    ... in the consolidated retained earnings during the year. 2013 £m Restated1 2012 £m Balance at 1 January Profit/(Loss) for the year attributable to equity shareholders Remeasurements of pension schemes Dividends and appropriations (note 16) Shares issued in lieu of dividends Shares issued under...

  • Page 187
    185 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 39 - Non-controlling interests This note gives details of the Group's non-controlling interests and shows the movements during the year. Non-controlling interests at 31 December ...

  • Page 188
    186 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities This note analyses the Group insurance contract liabilities by type of product and describes how the Group calculates these liabilities and the assumptions the Group ...

  • Page 189
    ... number of policies participate in investment returns, with the balance being attributable to shareholders. „ In other operations in Europe and Asia, a range of long-term insurance and savings products are written. (ii) Group practice Governance The long-term business provision is calculated...

  • Page 190
    188 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued 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 ...

  • Page 191
    ...Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued Valuation discount rates for business in the non-profit funds are as follows: Valuation discount rates 2013 2012 Assurances Life conventional non-profit Pensions...

  • Page 192
    ... and property returns on liabilities for unit-linked and with profit contracts in the UK and Ireland, and unit-linked contracts in France and Italy. For many types of long-term business, including unit-linked and participating funds, movements in asset values are offset by corresponding changes in...

  • Page 193
    ... start and the end of the accounting period is reflected outside operating profit as an economic assumption change. During 2013, the Group has seen a levelling off in the number of new bodily injury claims settled by periodic payment orders (PPOs) or structured settlements, which are reserved for on...

  • Page 194
    192 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued The assumptions used in most non-life actuarial projection techniques, including future rates of claims inflation or loss ratio assumptions, are implicit in ...

  • Page 195
    193 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued (iv) Movements The following changes have occurred in the general insurance and health claims provisions during the year: 2013 £m 2012 £m...

  • Page 196
    194 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued (ii) Gross figures Before the effect of reinsurance, the loss development table is: Accident year All prior years £m 2004 £m 2005 £m 2006 £m 2007 £m ...

  • Page 197
    195 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued (iii) Net of reinsurance After the effect of reinsurance, the loss development table is: Accident year All prior years £m 2004 £m 2005 £m...

  • Page 198
    196 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 42 - 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...

  • Page 199
    197 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 42 - Liability for investment contracts continued For many types of long-term business, including unit-linked and participating funds, movements in asset values are offset by ...

  • Page 200
    ...Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 43 - Financial guarantees and options continued (iii) Guaranteed annuity options The Group's UK with-profit funds have written individual and group pension contracts which contain guaranteed annuity...

  • Page 201
    199 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 43 - Financial guarantees and options continued 'No MVR' guarantees Certain unitised with-profit policies containing 'no MVR' guarantees, similar to those in the UK, have been ...

  • Page 202
    200 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 44 - Reinsurance assets continued (c) Movements The following movements have occurred in the reinsurance asset during the year: (i) In respect of long-term business provisions 2013 £m 2012 £m...

  • Page 203
    201 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 45 - Effect of changes in assumptions and estimates during the year Certain estimates and assumptions used in determining our liabilities for insurance and investment contract ...

  • Page 204
    ...2012 £m Long-term business technical provisions and other insurance items Deferred acquisition costs Unrealised gains on investments Pensions and other post-retirement obligations Unused losses and tax credits Subsidiaries, associates and joint ventures Intangibles and additional value of in-force...

  • Page 205
    ... Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 48 - Provisions This note details the non-insurance provisions that the Group holds, and shows the movements in these during the year. (a) Carrying amounts 2013 £m 2012 £m Total...

  • Page 206
    ... Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 49 - Pension obligations continued The number of scheme members was as follows: United Kingdom 2013 Number 2012 Number 2013 Number Ireland 2012 Number 2013 Number Canada 2012 Number Active members...

  • Page 207
    205 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 49 - Pension obligations continued The present value of unfunded post-retirement benefit obligations included in the table above is £118 million at 31 December 2013 (2012: £127...

  • Page 208
    ... Annual report and accounts 2013 Notes to the consolidated financial statements continued 49 - Pension obligations continued Plan assets include investments in Group-managed funds in the consolidated statement of financial position of £868 million (2012: £616 million) and transferrable insurance...

  • Page 209
    ... undiscounted benefits payable from the main UK defined benefit scheme, ASPS, is shown in the chart below: Undiscounted benefit payments (£m) Deferred member cash flows Pensioner cash flows 700 600 500 400 300 200 100 0 2014 2044 2074 2104 IFRS Financial statements (iv) Risk management and...

  • Page 210
    ... expense for defined contribution schemes is shown section (d) below. (d) Charge to staff costs in the income statement The total pension (credit)/charge to staff costs for all of the Group's defined benefit and defined contribution schemes were: 2013 £m 2012 £m Continuing operations UK defined...

  • Page 211
    209 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 50 - Borrowings continued 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'. All ...

  • Page 212
    ... whatsoever to the shareholders' funds of any companies in the Aviva Group. The loan runs for a period of five years, with the interest rate fixed quarterly based on a fixed margin above the euro inter-bank rate. (c) The UK long-term business entered into a financial reassurance agreement with...

  • Page 213
    211 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 50 - Borrowings continued (e) Movements during the year Movements in borrowings during the year were: 2013 Core Structural £m Operational £m Total £m Core Structural £m ...

  • Page 214
    212 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 52 - Other liabilities This note analyses our other liabilities at the end of the year. 2013 £m Restated1 2012 £m Deferred income Reinsurers' share of deferred acquisition costs Accruals Other...

  • Page 215
    ...Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 53 - Contingent liabilities and other risk factors continued (e) Structured settlements The Company has purchased annuities from licensed Canadian life insurers to provide for fixed...

  • Page 216
    ... 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 mechanisms...

  • Page 217
    ... the net operating cash inflow reflects a number of factors, including the level of premium income and the timing of receipts of premiums and the payment of creditors, claims and surrenders. It also includes changes in the size and value of consolidated cash investment funds and changes in the Group...

  • Page 218
    216 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 56 - Statement of cash flows continued (b) Cash flows in respect of, and additions to, the acquisition of subsidiaries, joint ventures and associates comprised: 2013 £m 2012 £m Cash ...

  • Page 219
    ...statement of financial position still included in the Group's available capital resources at 31 December 2013. Available capital resources Old withprofit sub-fund £m New with-profit sub-fund £m Total UK With- life withOther profit profit UK life sub-fund5 funds operations £m £m £m Total UK life...

  • Page 220
    218 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 57 - Capital statement continued The with-profit funds and the RIEESA use internal hedging to limit the impacts of equity market volatility. In aggregate, the Group has at its disposal total ...

  • Page 221
    ...), which focuses on business and financial risks, and the Operational Risk and Reputation Committee (ORRC) which focuses on operational and reputational risks. Similar committee structures with equivalent terms of reference exist in the business units. IFRS Financial statements Other information

  • Page 222
    ...and worldwide banks. We continued in 2013 to limit our direct shareholder and participating assets exposure to the governments (including local authorities and agencies) and banks of Greece, Ireland, Portugal, Italy and Spain, which has been offset by an increase in market values. Information on our...

  • Page 223
    221 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 58 - Risk management continued (iii) Other investments Other investments (including assets of operations classified as held for sale) include unit trusts and other investment ...

  • Page 224
    ...performance on guarantees, options and bonus rates. At 31 December 2013 the Group's shareholder funds held £1.5 billion notional of equity hedge put spreads, with up to 15 months to maturity with an average strike of 82-68% of the prevailing market levels on 31 December 2013. Sensitivity to changes...

  • Page 225
    223 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 58 - Risk management continued (ii) Property price risk The Group is subject to property price risk directly due to holdings of investment properties in a variety of locations ...

  • Page 226
    ... the Group's exposure to general insurance claims inflation, to inflation linked benefits within the defined benefit staff pension schemes and within the UK annuity portfolio and to expense inflation. Increases in long-term inflation expectations are closely linked to long-term interest rates and...

  • Page 227
    225 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 58 - Risk management continued (vi) Derivatives risk Derivatives are used by a number of the businesses. Activity is overseen by the Group risk function, which monitors exposure...

  • Page 228
    ... and price the risk and adequate returns are available. The underlying risk profile of our life insurance risks, primarily persistency, longevity, mortality and expense risk, has remained stable during 2013, although the current continued relatively low levels of interest rates have increased our...

  • Page 229
    227 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 58 - Risk management continued Embedded derivatives The Group has exposure to a variety of embedded derivatives in its long-term savings business due to product features ...

  • Page 230
    ...nature of long-term business is such that a number of assumptions are made in compiling these financial statements. Assumptions are made about investment returns, expenses, mortality rates and persistency in connection with the in-force policies for each business unit. Assumptions are best estimates...

  • Page 231
    229 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 58 - Risk management continued Long-term business Sensitivities as at 31 December 2013 2013 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% Credit spreads...

  • Page 232
    230 Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 58 - Risk management continued General insurance and health business sensitivities as at 31 December 2013 2013 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% Credit ...

  • Page 233
    231 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 59 - Derivative financial instruments and hedging This note gives details of the various instruments we use to mitigate risk. The Group uses a variety of derivative financial ...

  • Page 234
    ... Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 59 - Derivative financial instruments and hedging continued (i) The Group's non-hedge derivative activity at 31 December 2013 and 2012 was as follows: 2013 Contract/ notional amount £m Fair value...

  • Page 235
    233 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 60 - Financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements Financial assets and liabilities are offset in the ...

  • Page 236
    ... note 27(a), while fair value liabilities are recognised as 'Derivative liabilities' in note 51. Collateral held by UK Life in relation to securities lending totals £4,844 million (2012: £4,250 million) and is recognised within 'Loans to Banks' in note 24(a). The 2013 total is split in this table...

  • Page 237
    ... report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 61 - Related party transactions This note gives details of the transactions between Group companies and related parties which comprise our joint ventures, associates and staff pension schemes...

  • Page 238
    ...Insurance Services UK Limited Aviva International Insurance Limited Aviva Investors Global Services Limited Aviva Investors Pensions Limited Aviva Investors UK Fund Services Limited Aviva Investors UK Funds Limited Aviva Life & Pensions UK Limited Aviva Life Services UK Limited Aviva Risk Management...

  • Page 239
    237 Strategic report Aviva plc Annual report and accounts 2013 Notes to the consolidated financial statements continued 62 - Organisational structure continued Italy United States Aviva Italia Holding S.p.A and its principal subsidiaries: Avipop Assicurazioni S.p.A (50.0%) Avipop Vita S.p.A (50...

  • Page 240
    238 Aviva plc Annual report and accounts 2013 Financial statements of the Company Income statement For the year ended 31 December 2013 Note 2013 £m 2012 £m Income Dividends receivable from subsidiaries Interest receivable from Group companies Expenses Net investment (expense)/income Operating ...

  • Page 241
    239 Strategic report Aviva plc Annual report and accounts 2013 Financial statements of the Company continued Statement of changes in equity For the year ended 31 December 2013 Ordinary share capital £m Preference share capital £m Share premium £m Merger reserve £m Investment Equity valuation ...

  • Page 242
    ... Ordinary share capital Preference share capital Called up capital Share premium account Merger reserve Investment valuation reserve Equity compensation reserve Retained earnings Direct capital instruments and fixed rate tier 1 notes Total equity Liabilities Non-current liabilities Borrowings Loans...

  • Page 243
    241 Strategic report Aviva plc Annual report and accounts 2013 Financial statements of the Company continued Statement of cash flows For the year ended 31 December 2013 All the Company's operating and investing cash requirements are met by subsidiary companies and settled through intercompany loan...

  • Page 244
    ... defined benefit cost for this scheme across the participating Group entities but, instead, this cost is recognised in the financial statements of the main UK employing company. The Company therefore recognises a pension expense equal to its contributions payable in the year for its staff, together...

  • Page 245
    ...home country of the Company as follows: 2013 £m 2012 £m Profit before tax Tax calculated at standard UK corporation tax rate of 23.25% (2012: 24.5%) Adjustment to tax credit in respect of prior years Non-assessable dividends Disallowable expenses Non-taxable loss on settlement of intra-group loan...

  • Page 246
    244 Aviva plc Annual report and accounts 2013 Notes to the Company's financial statements continued E - Reserves Merger reserve £m Investment valuation reserve £m Equity compensation reserve £m Retained earnings £m Balance at 1 January 2012 Arising in the year: Profit for the year Fair value ...

  • Page 247
    245 Strategic report Aviva plc Annual report and accounts 2013 Notes to the Company's financial statements continued H - Risk management Risk management in the context of the Group is considered in the Group consolidated financial statements, note 58. The business of the Company is managing its ...

  • Page 248
    ...Other related party balances comprise dividends and interest receivable and payable, as well as inter-company balances for fees and other transactions in the normal course of business. Loans owed to Aviva Group Holdings Limited were settled during the year, resulting in a realised fair value loss of...

  • Page 249
    ... Strategic report Aviva plc Annual report and accounts 2013 Other information Performance review In this section Financial and operating performance Selected consolidated financial data Information on the Company Analysis of investments Contractual obligations Risk and capital management Corporate...

  • Page 250
    ... revised structure. Further details of the reportable segments are given in 'IFRS Financial statements - note 5 - Segmental information'. „ On 2 October 2013 the Group completed the sale of its United States life and related internal asset management business (US Life) to Athene Holding. Profit on...

  • Page 251
    ... its own account investment and operating performance of the fund. gaining diversification benefit. See 'IFRS Financial statements - Shareholders also have a participating interest in the with-profits note 58 - Risk management'. funds and any declared bonuses. Generally, policyholder and In 2013 our...

  • Page 252
    ... in 2012 Our earnings originate from three main lines of business: our long-term insurance and savings business, which includes a range of life insurance and savings products; general insurance and health, which focuses on personal and commercial lines; and fund management, which manages funds on...

  • Page 253
    ...and investment return earned For long-term insurance and savings new business, we on assets supporting insurance liabilities and shareholder capital define sales as the sum of the present value of new business exceed claims costs, costs of acquiring new business and premiums (PVNBP) of life, pension...

  • Page 254
    ... Under IFRS, non-participating investment contracts are net written premiums in IFRS. recognised in the Statement of Financial Position by Continuing operations 2013 £m 2012 £m 2011 £m Long-term insurance and savings new business sales General insurance and health sales Total sales Less: Effect...

  • Page 255
    ... Strategic report Aviva plc Annual report and accounts 2013 Financial and operating performance continued Adjusted operating profit for non-long-term insurance business The table below presents our consolidated sales from continuing is based on expected investment returns on financial operations...

  • Page 256
    ... for credit defaults on commercial mortgages were partly offset by narrowing spreads on government and corporate bonds in Italy and Spain. Short term fluctuations on non-long term business of £336 million negative (2012: £7 million positive) mainly reflect lower fixed income security market values...

  • Page 257
    ... 2011. 2013 £m Restated1 2012 £m Restated1 2011 £m Pensions Annuities Bonds Protection Equity release United Kingdom Ireland Life and pensions sales Investment sales Long term savings sales UK Health net written premiums Sales IFRS net written premiums Adjusted operating profit before tax United...

  • Page 258
    ... Bank ("AIB") from April 2012. Non AIB business sales were £530 million (2011: £485 million), with the increase driven by sales of fixed rate deposit funds and the re-launch of protection business in the second half of 2012. Net written premiums in our UK & Ireland long-term insurance and savings...

  • Page 259
    ...three years ended 31 December 2013, 2012 and 2011. IFRS Financial statements 2013 £m 2012 £m 2011 £m Sales Long-term insurance and savings business General insurance and health net written premiums Total sales IFRS net written premiums Adjusted operating profit before tax Long-term insurance and...

  • Page 260
    258 Aviva plc Annual report and accounts 2013 Financial and operating performance continued Net written premiums were £433 million, down £35 million, or 7% (2011: £468 million) driven by lower unit-linked and pensions sales. General insurance sales were stable at £65 million (2011: £65 ...

  • Page 261
    259 Strategic report Aviva plc Annual report and accounts 2013 Financial and operating performance continued combination of improved retention levels and rate increases across both personal and commercial lines. Adjusted operating profit improved by £21 million, or 8%, to £277 million (2011: £...

  • Page 262
    ... £m 2012 and 2011. IFRS net written premiums 46 77 84 On 2 October 2013 the Group completed the sale of its United States life and related internal asset management Adjusted operating loss before tax businesses (US Life) to Athene Holding. See 'IFRS Financial General insurance (51) 22 64 Corporate...

  • Page 263
    ... Strategic report Aviva plc Annual report and accounts 2013 Financial and operating performance continued Delta Lloyd On 6 May 2011, the Group sold 25 million shares in Delta Lloyd, reducing our holding at that date to 42.7% of Delta Lloyd's ordinary share capital, representing 40% of shareholder...

  • Page 264
    ... change in provision for unearned premiums Net earned premiums Fee and commission income Net investment income Share of profit/(loss) after tax of joint ventures and associates Profit/(loss) on the disposal and remeasurement of subsidiaries, joint ventures and associates Expenses Claims and benefits...

  • Page 265
    ... Aviva plc Annual report and accounts 2013 Selected consolidated financial data continued Statement of financial position data Amounts in accordance with IFRS 2013 £m Restated 2012 £m 2011 £m 2010 £m 2009 £m Total assets Gross insurance liabilities Gross liabilities for investment contracts...

  • Page 266
    ... were changed to align them with the revised management reporting structure. The operating segments are: UK & Ireland; France; Poland; Italy, Spain and Other; Canada; Asia; and Aviva Investors. In October Our history the Group completed the sale of its United States life, savings The Group was...

  • Page 267
    ... retail fund management products are included in our long-term insurance and savings business sales. In October 2013 we completed the sale of the internal asset management operations of Aviva Investors North America, as part of the sale of our United States life business. Market position Governance...

  • Page 268
    ... insurance, mortgage protection, specified illness and guaranteed and whole life cover products. The pension range covers retirement and investment products including government personal retirement savings accounts (PRSA) schemes. Distribution The UK is the fourth largest non-life insurance market...

  • Page 269
    ... of insurance solutions: life and long-term savings, general insurance and asset management through Aviva Investors France. The products sold through our life channel are long-term savings, pensions and regular premium products, with a focus on the unit-linked market and a broad range of protection...

  • Page 270
    ... bonds, savings, and protection products. Investment products include both unit linked and traditional plans, where profit sharing is regularly used to increase the policy return. Our traditional plans include savings schemes and income products. Pension savings products have valuable tax advantages...

  • Page 271
    269 Strategic report Aviva plc Annual report and accounts 2013 Information on the Company continued Distribution We operate in Canada through a distribution network focused on approximately 1,600 independent group and retail brokers who distribute our core personal and commercial line products. ...

  • Page 272
    ... Holding Ltd. The results of US Life for all periods are presented as a discontinued operation. See 'IFRS Financial statements - note 4 - Subsidiaries'. Market Aviva USA was a provider of fixed indexed life insurance and fixed indexed annuities in the USA. According to Wink's Sales & Market Report...

  • Page 273
    ... 2012 are listed below: Less assets of operations classified as held for sale £m Carrying value in the statement of financial position £m Other information 2013 Policyholder Participating Shareholder assets fund assets assets £m £m £m Total assets analysed £m Investment property Loans...

  • Page 274
    ...than BBB £m Non-rated £m Total £m 2013 - Participating fund assets Government UK Government Non-UK Government Corporate Public utilities Convertibles and bonds with warrants Other corporate bonds Certificate of deposits Structured Wrapped credit Other Total Total % 2012 Restated1 2012 Restated1...

  • Page 275
    ..., and therefore our statement of financial position and income statement already reflect any reduction in value between the date of purchase and the balance sheet date. The significant majority of these holdings are within our participating funds where the risk to our shareholders is governed by the...

  • Page 276
    ...have major offices in the following locations: „ UK: UK Life, York; UK General Insurance, Norwich; Aviva Investors, London; „ Asia: Singapore; „ Canada: Scarborough, Ontario; and „ Europe: Paris, France; Dublin, Ireland; Madrid, Spain; Warsaw, Poland; and Milan, Italy. As of 31 December 2013, we...

  • Page 277
    ...472 267,859 IFRS Financial statements 2 3 4 5 6 7 8 Amounts shown in respect of long-term insurance contracts represent estimated undiscounted cash flows for the Group's life assurance contracts. In determining the projected payments, account has been taken of the contract features, in particular...

  • Page 278
    ... changed significantly over the year and remain credit, market, insurance, asset management, liquidity, operational and reputational risks as described in note 58 of the IFRS financial statements. Reflecting Aviva's objective of building financial strength and reducing capital volatility, the Group...

  • Page 279
    ... IFRS Financial Statements. This analysis shows an initial benefit to profit before tax and shareholders' equity from a 1% decrease in interest rates due to the increase in market value of the backing fixed income securities. However, in subsequent years the reduction in portfolio yield would result...

  • Page 280
    ... capital is funded. 2013 £m 2012 £m 1.7 times 1.7 times Long-term savings General insurance and health Fund management Corporate and Other business1 United States Total capital employed Financed by: Equity shareholders' funds Non-controlling interests Direct capital instruments and fixed rate...

  • Page 281
    .... Other information As well as financing new business investment, the operating capital generated is used to finance corporate costs, service the Group's debt capital and to finance shareholder dividend distributions. After taking these items into account the net operating capital generated after...

  • Page 282
    ... employees who rate us favourably on the customer index Climate change and environment % of remaining CO2e emissions offset annually 2010 32% 2011 89% 2012 88% 2013 95% 2013 target 100% of employees n/a 50% 89% 52% 88% 39% 95% 31% 100% of employees Maintain or improve past performance 74...

  • Page 283
    281 Strategic report Aviva plc Annual report and accounts 2013 Corporate responsibility key performance indicators continued Change Met target 2014 target 7% X 100% of employees Notes Business ethics: All employees are required to complete annual training of the Code except in France where the ...

  • Page 284
    ... Annual Report and Accounts 2013. 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 or Review of Historical Financial Information' (ISAE...

  • Page 285
    283 Strategic report Aviva plc Annual report and accounts 2013 Corporate responsibility assurance statement continued Our responsibilities We are responsible for: „ planning and performing the engagement to obtain limited assurance about whether the Selected Information is free from material ...

  • Page 286
    284 Aviva plc Annual report and accounts 2013 This page is intentionally left blank.

  • Page 287
    ... Aviva plc Annual report and accounts 2013 Other information Shareholder information In this section Company address Share capital Related party disclosures Dividend data Guarantees, securitised assets and off-balance sheet arrangements Liquidity and capital resources Regulation Risks relating...

  • Page 288
    ... stock option and share award schemes. Details of these schemes are set out in 'IFRS Financial statements - note 32 - Group's share plans'. The Matching Share Plan Under the all employee share ownership plan (AESOP), eligible employees can invest up to statutory limits, currently £125 per month...

  • Page 289
    ... 2013 1 2 For more information on our various option schemes, see note 32 in the financial statements. The issue of shares in lieu of cash dividends is considered a bonus issue under the terms of the Companies Act 2006 and the nominal value of the shares is charged to the share premium account...

  • Page 290
    ... responsibility for planning, directing and controlling the activities of the Group, including the executive and non-executive directors is as follows: 2013 £m 2012 £m 2011 £m Our UK fund management companies manage most of the assets held by the Group's main UK staff pension scheme, for which...

  • Page 291
    289 Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued dividend, which was then used to buy existing shares on the open market. For the 2008 final dividend, Aviva withdrew the DRIP and reintroduced the Aviva Scrip Dividend Scheme. For the 2012 final and ...

  • Page 292
    290 Aviva plc Annual report and accounts 2013 Shareholder information continued representative of our liquidity, we believe that our working capital is sufficient for our present operational requirements. For additional information, see 'IFRS Financial statements - note 58 - Risk management - ...

  • Page 293
    ... have a fixed or floating interest rate. At 31 December 2013, the outstanding debt issued under this programme was £2,626 million (2012: £2,076 million). Application of funds Governance IFRS Financial statements UK & Ireland life insurance France Poland Spain Italy Other Europe Canada Asia Other...

  • Page 294
    ...report and accounts 2013 Shareholder information continued subsequently injecting equity capital in the regulated operating company. Each capital injection is subject to central review and approval by the Board of the relevant holding company and needs to meet our required internal rates of return...

  • Page 295
    ... to maintain the group capital resources, rather than simply to make the calculation) for UK-based companies operating under PRA rules. Reinsurance Directive Governance IFRS Financial statements In addition to its UK businesses, Aviva is active in other EU member states through wholly owned...

  • Page 296
    294 Aviva plc Annual report and accounts 2013 Shareholder information continued Markets in Financial Instruments Directive (MiFID) MiFID, which superseded the earlier Investment Services Directive, builds on the home country control principle, extending the range of 'core' investment services and...

  • Page 297
    ... group of Aviva Investors UK Funds Ltd persons is a 'controller' for the purposes of FSMA, the holdings Aviva Life Services UK Ltd (shares or voting rights) of the person and any other person 'acting in concert', if any, are aggregated. Aviva Pension Trustees UK Ltd Aviva Wrap UK Ltd Orn Capital LLP...

  • Page 298
    296 Aviva plc Annual report and accounts 2013 Shareholder information continued realised in time to meet obligations to policyholders and the matching of linked assets with linked liabilities. Capital and solvency rules for insurers Intervention and enforcement The PRA rules require that a UK ...

  • Page 299
    ... Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued Long-term assets and liabilities Reporting requirements Where a UK insurer carries on life insurance business, its longterm business assets and liabilities - i.e. those assets and liabilities relating...

  • Page 300
    ...Annual report and accounts 2013 Shareholder information continued United States During part of 2013 we wrote life and annuity business in the United States through Aviva USA Corporation (Aviva USA), which was a wholly owned subsidiary formed by the merger of Aviva Life Insurance Company of America...

  • Page 301
    299 Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued Risks relating to our business You should carefully review the following risk factors together with other information contained in this Annual Report before making an investment decision relating to ...

  • Page 302
    ... our results of operations and financial condition. Changes in short or long term inflation may cause policyholders to surrender their contracts, increase the size of our claims payments and expenses and reduce the value of our investments, which could adversely affect our results of operations and...

  • Page 303
    ... poor investment performance of the funds we manage. Governance IFRS Financial statements We operate internationally and are exposed to foreign currency exchange risk arising from fluctuations in exchange rates of various currencies. For the year ended 31 December 2013, 60% of our premium income...

  • Page 304
    ...commercial results of operations. paper, medium and long-term debt, junior subordinated debt, An intercompany loan was granted by Aviva Insurance Limited securities, capital securities and stockholders' equity. to Aviva Group Holdings Limited in February 2013 (the balance We hold certain investments...

  • Page 305
    303 Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued Insurance risks relating to Aviva's business The cyclical nature of the insurance industry may cause fluctuations in our results. Historically, the insurance industry has been cyclical and operating ...

  • Page 306
    ..., results of operations, corporate reputation and financial condition for a substantial period of time. Furthermore, market conditions beyond our control determine the availability and cost of the reinsurance protection we purchase. Accordingly, we may be forced to incur additional expenses for...

  • Page 307
    305 Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued There are inherent funding risks associated with our participation in defined benefit staff pension schemes. We operate both defined benefit and defined contribution staff pension schemes. The defined...

  • Page 308
    306 Aviva plc Annual report and accounts 2013 Shareholder information continued Execution risk is inherent in the completion of all strategic transactions. Such risks include uncertainty in relation to obtaining the required regulatory approvals on satisfactory terms for the change of control ...

  • Page 309
    ... Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued Regulatory and legislative risks relating to Aviva's business Our regulated business is subject to extensive regulatory supervision both in the UK and internationally. There has been an increased focus...

  • Page 310
    ... review may be to compensate customers for losses they have incurred as a result of the products they were sold. All of the above could adversely impact our results of operations or financial condition. From time to time, changes in the interpretation of existing tax laws, amendments to existing tax...

  • Page 311
    309 Strategic report Aviva plc Annual report and accounts 2013 Shareholder information continued Risks related to ownership of the ADSs and ordinary shares The trading price of our ADRs and dividends paid on our ADSs may be materially adversely affected by fluctuations in the exchange rate for ...

  • Page 312
    310 Aviva plc Annual report and accounts 2013 Shareholder information continued As a 'foreign private issuer' in the US we are exempt from certain rules under the US securities laws and are permitted to file less information with the SEC than US companies. As a 'foreign private issuer' we are ...

  • Page 313
    311 Strategic report Aviva plc Annual report and accounts 2013 Other information In this section Glossary Shareholder services 312 314 Governance IFRS Financial statements Other information

  • Page 314
    ... accumulation contracts, which may be used to provide benefits in retirement. Annuities may be guaranteed, unit-linked or index-linked. Bonds and savings A collective investment fund structured as a limited company in which investors can buy and sell shares. Pension A means of providing income in...

  • Page 315
    ... operating ratio (COR) COR is calculated as incurred claims expressed as a percentage of net earned premiums, plus written commissions and written expenses expressed as a percentage of net written premiums. Deferred acquisition costs (DAC) In the UK, the assets of the long-term with-profit funds...

  • Page 316
    314 Aviva plc Annual report and accounts 2013 Shareholder services Shareholder profile as at 31 December 2013 By category of shareholder Number of shareholders %* Number of shares %* Individual Banks and nominee companies Pension fund managers and insurance companies Other corporate bodies Total ...

  • Page 317
    ...preference share price IFRS Financial statements www.londonstockexchange.com Aviva reports information Shareholders may contact the group company secretary as follows: By email: [email protected] In writing: Kirstine Cooper, Group Company Secretary St Helen's, 1 Undershaft, London EC3P...

  • Page 318
    ...; funding risks associated with our participation in defined benefit staff pension schemes; the failure to attract or retain the necessary key personnel; the effect of systems errors or regulatory changes on the calculation of unit prices or deduction of charges for our unit-linked products that...

  • Page 319
    This document is printed on Cocoon Silk which is a recycled grade containing 100% post consumer waste and manufactured using a totally chlorine free process. This document was printed by Butler Tanner and Dennis who are FSC and ISO14001 accredited.

  • Page 320
    ...bring to life what we do every day for our customers. We would like to thank the customers who took part and invited us into their homes and businesses, to allow us to share their stories. To find out more, view our video at www.aviva.com Designed by SASLondon (part of MSL Group) Customer portraits...