Aviva 2013 Annual Report Download - page 15

Aviva plc
Annual report and accounts 2013
13
Strategic report Governance IFRS Financial statements Other information
Chief Financial Ofcer’s statement continued
Since then, we have reduced the loan balance by
£1.7 billion to £4.1 billion at the end of February
2014 by repaying £450 million in cash and we
have also taken actions to reduce the required
capital in AIL, which has allowed us to retire a
further £1.25 billion of the internal loan.
We have agreed with the Prudential Regulation
Authority (PRA) the appropriate long-term level of
the internal loan between AGH and AIL. That
level has been set such that AIL places no reliance
on the loan to meet its stressed insurance
liabilities assessed on a 1:200 basis. The PRA
agree with this approach. The effect of this will
be to reduce the internal loan balance from its
current level of £4.1 billion to approximately
£2.2 billion. We will complete this reduction by
the end of 2015.
We plan to achieve our £2.2 billion targeted
balance through a further cash repayment of
£450 million along with other actions that will
bring the loan balance down by £1.45 billion.
These planned actions include the funding and
de-risking of our pension scheme, along with
more effective use of internal reinsurance and
other actions to reduce stressed liabilities. We
expect the future cash repayment to be funded
from our existing central cash balance and future
disposal proceeds. We do not expect these
actions to have a material adverse impact on
Group protability.
Our overall plan to reduce the loan balance to
£2.2 billion has been reviewed and agreed by
the PRA.
External leverage
External leverage remains broadly unchanged in
2013, with a debt to tangible equity ratio of 50%
(2012: 50%). On an S&P basis, our leverage ratio
is 32%.
In February 2014, we announced our intention
to call a £200 million 10.6725% and a €50
million 10.464% hybrid bond on their respective
April 2014 call dates.
We remain committed to achieving a debt to
tangible capital ratio of below 40% over the
medium term, and below 30% on an S&P basis,
consistent with an AA rating.
Net Asset Value
Our 2013 MCEV book value per share7 increased
5% to 445p, primarily due to operating earnings,
the effect of the US disposal and positive
investment variances, being partially offset by
dividend payments, IAS19 pension movements,
and integration and restructuring costs.
The IFRS book value declined 3%, primarily due
to movement in the IAS19 position of our
pension schemes and in the rst half of 2013, we
increased the provision for default in our
commercial mortgage portfolio by £300 million.
These reductions more than offset positive
contributions from operating prot and higher
proceeds from the US disposal.
Net asset value *
IFRS MCEV7
Opening NAV per share at
31 December 2012
278p 422p
Operating prot 53p 55p
Effect of US disposal 6p 6p
Dividends & appropriations (18)p (18)p
Investments variances including
commercial mortgage provision increase
(14)p 18p
Pension schemes (19)p (19)p
Integration and restructuring costs,
goodwill impairment and other
(14)p (16)p
Foreign exchange movements (2)p (3)p
Closing NAV per share at
31 December 2013
270p 445p
* Net of tax and non-controlling interests.
Patrick Regan
Chief Financial Ofcer
We have agreed the
target for the long-term
level of the
intercompany loan.
Patrick Regan
Chief Financial Ofcer To read more about how we
performed in each market, turn to
pages 30–42
Our response to the
UK oods
Flooding gets to the heart of
what insurance is all about.
For thousands of families
across the UK hit by
unprecedented ooding and
storms during this winter, the
day they hoped would never
happen arrived. This is the
time when insurers step in.
The immediate challenge
was to look after those
whose lives were turned
upside down and those
under threat of rising ood
waters and gales. The longer-
term challenge is to dene
what steps we can take as a
country to minimise ood
damage and disruption in
the future. We can’t stop the
weather, but we can act in
unison to minimise the
impact of extreme events.
No single person,
company or government
agency alone can solve
ooding. However the public
deserves and demands a
sustainable and workable
solution. That will only
happen through a tangible
commitment from everyone
involved to play their part.
During the oods we:
§Dealt with tens of
thousands of calls
§Many claims were settled
with a single call
§The household claims
centre remained open
24/7
§ A team of loss adjusters
was kept on standby, able
to reach every part of the
country.
7 In preparing MCEV information, the directors have done so in accordance with the MCEV Principles with the exception of stating held for sale operations at their expected fair value as represented by
expected sale proceeds less costs to sell.