Aviva 2013 Annual Report Download - page 277

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
Contractual obligations
275
Contractual obligations
Contractual obligations with specified payment dates at 31 December 2013 included the following:
Less than
one year
£m
Between
one & three
years
£m
Between
three & five
years
£m
After five
years
£m
Total
£m
Insurance and investment contracts
Long-term business
–
Insurance contracts
–
non-linked1 7,997 15,330 12,211 80,325 115,863
–
Investment contracts
–
non-linked2 60,039 — — — 60,039
–
Linked business2 73,458 — — — 73,458
General Insurance3 6,177 3,796 1,848 3,087 14,908
147,671 19,126 14,059 83,412 264,268
Other contractual obligations4
Borrowings 1,509 1,298 1,095 12,783 16,685
Operating lease obligations 111 192 165 575 1,043
Capital commitments 19 8 — — 27
Payables and other financial liabilities5 8,674 259 140 927 10,000
Net assets attributable to unit holders 10,362 — — — 10,362
Total 168,346 20,883 15,459 97,697 302,385
Reconciliation to the statement of financial position £m
Total contractual obligations above 302,385
Effect of discounting contractual cash flows for insurance contracts (37,655)
Contractual undiscounted interest payments6 (8,395)
Difference between carrying value of borrowings and undiscounted cash flows of principal (471)
Contractual cash flows under operating leases and capital commitments (1,070)
Difference between derivative liabilities contractual cash flows and carrying value (806)
Liabilities of operations classified as held for sale 3,023
Unallocated divisible surplus7 6,713
Provisions8 984
Current and deferred tax liabilities 679
Other liabilities 2,472
Total liabilities per statement of financial position 267,859
1 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 that the amount and timing of the contractual payments reflect either surrender, death or contract maturity. In addition, the undiscounted amounts shown include the expected payments based on assumed
future investment returns on assets backing insurance and investment contract liabilities. The projected cash flows exclude the unallocated divisible surplus of with-profits funds (see below).
2 All linked contracts and almost all non-linked investment contracts may be surrendered or transferred on demand. For such contracts the earliest contractual maturity is therefore at the current statement of financial position date, for
a surrender amount approximately equal to the current statement of financial position liability. Although we expect surrenders, transfers and maturities to occur over many years, the total liability for linked non-linked investment
contracts is shown in the less than one year column above.
3 Amounts shown in respect of general insurance contracts are based on undiscounted estimates of future claim payments, including for those classes of business for which discounted provisions are held, see ‘IFRS Financial statements
– Note 41 – Insurance liabilities’. The timing of cash flows reflects a best estimate of when claims will be settled.
4 The Group has no material finance leases for property and equipment.
5 Includes obligations for repayment of collateral received under stock lending arrangements and derivative transactions amounting to £3,958 million.
6 When subordinated debt is undated or loan notes perpetual, the interest payments have not been included beyond 15 years. Annual interest payments for these borrowings are £73 million. Contractual undiscounted interest
payments are calculated using fixed interest rates or prevailing market floating rates as applicable.
7 The unallocated divisible surplus represents the excess of assets over liabilities, including policyholder ‘asset share’ liabilities in the UK, which reflect the amount payable under the realistic Peak 2 reporting regime of the PRA.
Although accounted for as a liability, as permitted by IFRS 4, there is currently no expected payment date for the unallocated divisible surplus.
8 Provisions include pension obligations, which have been excluded from the contractual obligations table above, due to the uncertainty of the amount and timing of future cash flows. The Group operates both funded defined benefit
and funded defined contribution pension schemes, full details of which are provided in ‘IFRS Financial Statements – Note 49 – Pension obligations’. We have a contractual obligation to fund these schemes. However, the amount and
timing of the Group’s cash contributions to these schemes is uncertain and will be affected by factors such as future investment returns and demographic changes. Our cash funding of defined contribution schemes is based on
percentages of salary. Our cash contribution to defined benefit schemes is agreed in advance with scheme trustees. The Company and trustees have agreed to a long-term funding plan where contributions, together with anticipated
growth on scheme investments are expected to eliminate the funding deficits over time. Contributions to these and the other schemes are regularly reviewed in light of changes in expectations of investment returns and other
assumptions. The discounted scheme liabilities have an average duration of 20 years in the main UK scheme, 19 years in the RAC scheme, 20 years in the Irish scheme and 12 years in the Canadian scheme.