Aviva 2013 Annual Report Download - page 168

Aviva plc
Annual report and accounts 2013
166
Notes to the consolidated financial statements continued
23 – Fair value methodology continued
Owner-occupied properties are stated at their revalued amounts, as assessed by qualified external valuers in line with the Group’s
policy. The fair values stated in the table above are as at 31 December 2013. Further details on the valuation of these properties
can be found in note 21.
Fair value hierarch
y
Sub-total
fair
value
£m
Amortised
cost
£m
Less:
Assets of
operations
classified
as held
for sale
£m
Statement of
financial
position
Total
£m 2012 (Restated)1,2
Level 1
£m
Level 2
£m
Level 3
£m
Financial investments and loans measured at fair value (notes 24 & 27)
Loans — 18,973 — 18,973 8,961 (3,397) 24,537
Fixed maturity securities 108,107 43,588 10,082 161,777 — (33,617) 128,160
Equity securities 33,610 230 473 34,313 — (1,248) 33,065
Other investments (including derivatives) 20,533 5,650 2,885 29,068 — (1,550) 27,518
Total 162,250 68,441 13,440 244,131 8,961 (39,812) 213,280
Financial Liabilities
Non-participating investment contracts (note 42 (a))3 45,032 825 442 46,299 1,400 (3,958) 43,741
Borrowings (note 50) — 1,332 — 1,332 6,992 (145) 8,179
Derivative liabilities (note 51) 122 1,570 59 1,751 — (108) 1,643
Total 45,154 3,727 501 49,382 8,392 (4,211) 53,563
1 Restated for the impact of the adoption of IFRS 10. Refer to note 1 for further details.
2 This table was prepared in accordance with IFRS 7.
3 In addition to the balances in this table, included within Reinsurance Assets in the Statement of Financial Position and note 44 are £1,581 million of non-participating investment contracts, which are legally reinsurance but do not
meet the definition of a reinsurance contract under IFRS. These assets are financial instruments measured at fair value through profit and loss and are classified as level 1 assets.
Assets and liabilities for which fair value is disclosed
The table below shows the fair value and fair value hierarchy for those assets and liabilities not carried at fair value but for which
fair value is disclosed in the notes. These exclude any assets or liabilities held for sale.
Fair value hierarch
y
Total fair
value
£m
2013
Level 1
£m
Level 2
£m
Level 3
£m
Assets and liabilities not carried at fair value
Loans — 1,021 4,313 5,334
Borrowings 5,499 383 1,027 6,909
Investments classified as Level 2
Please see note 23(a) for a description of typical Level 2 inputs.
Fixed income assets, in line with market practice, are generally valued using an independent pricing service. These valuations
are determined using independent external quotations from multiple sources and are subject to a number of monitoring controls,
such as monthly price variances, stale price reviews and variance analysis. Pricing services, where available, are used to obtain the
third-party broker quotes. Where pricing services providers are used, a single valuation is obtained and applied. When prices are
not available from pricing services, quotes are sourced from brokers.
Other level 2 investments, including Unit Trusts, are valued using net assets values which are deemed to be observable
market inputs.
e) Transfers between levels of the fair value hierarchy
For recurring fair value measurements, the Group determines whether transfers have occurred between the levels of the fair value
hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of the year.
Level 1 to 2
For the year to 31 December 2013, transfers of financial assets from fair value hierarchy Level 1 to Level 2 amounted to £29.4
billion (2012: £1.3 billion). The transfers from Level 1 to Level 2 arose primarily in the UK and Ireland (£26.9 billion) as a result of
the enhanced understanding of pricing vendor methodologies for the fair value hierarchy level classification of certain debt
securities. Other transfers from level 1 to 2 arose mainly from changes in the level of market activity for specific assets in Asia
(£1.2 billion) and Europe (£1.3 billion).
Level 2 to 1
Transfers from Level 2 to Level 1 of £1.1 billion (2012: £0.3 billion) arose in France (£0.5 billion), Ireland (£0.4 billion), and Spain
(£0.2 billion) and were due to improvements in pricing sourcing or increasing liquidity of underlying investments.