Aviva 2013 Annual Report Download - page 291

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
289
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 subsequent dividends, the Aviva Scrip Dividend
Scheme was withdrawn. The Company has decided to introduce
a DRIP effective from dividend payable on 16 May 2014.
An interim dividend is generally paid in November of each
year. A final dividend is proposed by the Company’s Board after
the end of the relevant year and generally paid in May. The
following table shows certain information regarding the
dividends that we paid on ordinary shares for the periods
indicated in pounds sterling and converted into US dollars at
the noon buying rate in effect on each payment date.
Year
Interim
dividend
per share
(pence)
Interim
dividend
per share
(cents)
Final dividend
per share
(pence)
Final dividend
per share
(cents)
2007 11.90 24.37 21.10 41.31
2008 13.09 19.69 19.91 30.31
2009 9.00 14.75 15.00 23.55
2010 9.50 15.20 16.00 25.80
2011 10.00 15.70 16.00 25.27
2012 10.00 15.85 9.00 13.67
2013 5.60 9.01 9.40 na
Guarantees, securitised assets and off-balance
sheet arrangements
As a normal part of our operating activities, various Group
companies have given financial guarantees and options,
including interest rate guarantees, in respect of certain long-
term assurance and fund management products, as set out in
note 43. These are accounted for on-balance sheet as either
part of the host insurance contract or as financial instruments
under IFRS.
Information on operating lease commitments can be found
in ‘IFRS Financial statements – note 54(b)’.
It is standard business practice for our Group companies to
give guarantees, indemnities and warranties in connection with
disposals of subsidiaries and associates to third parties. As of
31 December 2013, we believe no material loss will arise in
respect of these guarantees, indemnities and warranties.
Principal warranties include the accuracy and completeness of
the statement of financial position at an agreed specified date,
details of outstanding litigation, regulatory matters, material
contractual commitments, the position on tax filings and other
customary matters together with any specific items identified
during due diligence. In addition, specific clauses cover such
items as regulatory approvals and licences, the basis of
calculation regarding actuarial insurance liabilities, reinsurance
contracts and the status of employee pension plans. Their exact
terms are tailored to each disposal and are set out in the
respective sale and purchase agreement. Similarly, the open
warranty periods, within which the purchaser could claim, and
limits on the maximum amount potentially recoverable will vary
for each item covered in each disposal.
The sale of the Aviva USA business completed on 2 October
2013. The final purchase price is subject to customary
completion adjustments. The process to agree completion
adjustments is ongoing and is expected to complete by mid-
2014. Until the outcome of this process is known there remains
uncertainty on the final determination of the consideration.
Refer to ‘IFRS Financial statements – note 4(b)’ for further
details.
Apart from the US disposal, there are a number of other
outstanding claims on recent disposals, none of which are
material. There are also open claim periods on other recent
disposals on which we have neither received, nor expect to
receive, any such claims. We believe that there is no material
exposure in this respect.
We have loans receivable, secured by mortgages, which
have then been securitised through non-recourse borrowings by
special purpose entities in our UK Life business, as set out in
‘IFRS Financial statements – note 25’. These special purpose
entities have been consolidated and included in the statement
of financial position, as we retain the residual interest in them.
Limited liability partnerships classified as joint ventures
As part of their investment strategy, the UK and certain
European long-term business policyholder funds have invested
in a number of property limited partnerships (PLP), either directly
or via property unit trusts (PUT), through a mix of capital and
loans. The PLPs are managed by general partners (GP), in which
the long-term business shareholder companies hold equity
stakes and which themselves hold nominal stakes in the PLPs.
The PUTs are managed by a Group subsidiary.
Accounting for the PUTs and PLPs as subsidiaries, joint
ventures or other financial investments depends on whether the
Group is deemed to have control or joint control over the PUTs
and PLPs’ shareholdings in the GPs and the terms of each
partnership agreement are considered along with other factors
that determine control. If a partnership is managed by an
agreement such that there is joint control between the parties,
notwithstanding that the Group’s partnership share in the PLP
(including its indirect stake via the relevant PUT and GP) may be
greater than 50%, such PUTs and PLPs have been classified as
joint ventures. Of the PLPs accounted for as joint ventures at 31
December 2013, the Group’s economic interest exceeded 50%
in respect of one partnership, The Mall Limited Partnership, in
which the Group had a 50.52% economic interest.
IFRS Financial statements – note 19 provides a list of the
principal PLPs accounted for as joint ventures, as well as
summarised information on the Group’s interests in its joint
ventures in aggregate. In respect of these PLPs, there are no
significant contingent liabilities to which we are exposed, nor do
we have any significant contingent liabilities in relation to our
interests in them. External debt raised by the PLPs is secured on
their respective property portfolios, and the lenders are only
entitled to obtain payment of both interest and principal to the
extent there are sufficient resources in the respective PLPs. The
lenders have no recourse whatsoever to the policyholder and
shareholders’ funds of any companies in the Aviva Group. At 31
December 2013, we had £140 million capital commitments to
these PLP joint ventures.
Liquidity and capital resources
Treasury function
The treasury function of our business is managed by our
centralised treasury team, headed by the Group treasurer. The
Group treasurer acts as owner of Group business standards for
liquidity and foreign exchange risk management within the
Group risk governance and oversight framework. Changes in
policy require the agreement of the chief risk and capital officer.
These policies are independently implemented and monitored
by each of our businesses. Our central treasury team is split into
distinct functions: a Group team, which develops our overall
treasury strategy, and our treasury team at Aviva Investors,
which manages and monitors our treasury and cash flow
positions for our holding companies. Each business unit is
responsible for monitoring its own cash and liquidity positions,
as well as its ongoing funding requirements. It is our policy to
make the majority of our financing arrangements at the parent
company level, primarily through external borrowings and
equity offerings. This enables us to achieve the efficiencies
afforded by our collective size. A number of our business units
also raise debt on their own behalf.
Our principal objective in managing our liquidity and capital
resources is to maximise the return on capital to shareholders,
while enabling us to pay dividends, service our debt and our
holding companies’ cash flows. In the context of a financial
services company where our working capital is largely