Aviva 2013 Annual Report Download - page 293

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
291
Shareholder information continued
These special purpose entities have been consolidated as we
retain the residual interest in them. The transactions and
reasons for consolidation are discussed further within ‘IFRS
Financial statements – note 25 – Securitised mortgages and
related assets’.
Undrawn borrowings
At 31 December 2013, we had £1.5 billion (2012: £2.1 billion)
undrawn committed central borrowing facilities available to us,
provided by a range of leading international banks, all of which
have investment grade credit ratings. We have allocated £750
million to support the credit rating of Aviva’s commercial paper
programme. Undrawn borrowings are analysed below:
2013
£m
2012
£m
Expiring within one year 400 420
Expiring beyond one year 1,100 1,725
Total 1,500 2,145
Our committed central borrowing facilities have two financial
covenants:
 Borrowings (excluding non-recourse indebtedness) may not
exceed total shareholders’ funds. At 31 December 2013,
borrowings were 56% of total shareholders funds.
 Total shareholders’ funds to exceed 32% of non-life net
written premiums for the previous 12 months. At 31
December 2013, total shareholders funds were 150%
of non-life net written premiums.
Total shareholders’ funds are defined as the aggregate of
nominal share capital of Aviva and the IFRS retained profits and
reserves, plus the value of in-force long-term business, on a
consolidated basis.
Sources of liquidity
In managing our cash flow position, we have a number of
sources of liquidity, including:
 dividends from operating subsidiaries;
 external debt issuance;
 internal debt and central assets; and
 funds generated by the sale of businesses.
One of our principal sources of liquidity is dividends from our
subsidiaries. The level of dividends is based on two primary
factors: the financial performance and the local solvency and
capital requirements of our individual business units.
The table below shows liquid resources provided to Group
Centre from operating companies, subsidiaries, associates and
joint ventures in 2013. Cash remittances include amounts
received from Aviva Insurance Limited in January 2014 in
respect of 2013 activity.
Amounts received in respect of 2013 activit
y
£m
UK & Ireland life insurance 370
France 235
Poland 85
Spain 51
Italy 12
Other Europe 5
Canada 130
Asia 20
Other operations 14
922
UK & Ireland general insurance1 347
Total 1,269
1 Includes amounts received in respect of 2013 activity.
During 2013, the Group took action to improve its access to
dividends from the Group’s insurance and asset management
businesses by undertaking a corporate restructuring whereby
Aviva Group Holdings (“AGH”) purchased from Aviva Insurance
Limited (“AIL”) its interest in the majority of its overseas
businesses.
Under UK company law, dividends can only be paid if a
company has distributable reserves sufficient to cover the
dividend. At 31 December 2013, Aviva plc itself had
distributable reserves of £3,153 million, which would have
covered four years of historic dividend payments to our
shareholders. In UK Life, our largest operating subsidiary,
distributable reserves, which could be paid to Aviva plc via its
intermediate holding company, are created mainly by the
statutory long-term business profit transfer to shareholders.
While the UK insurance regulatory laws applicable to UK Life
and our other UK subsidiaries impose no statutory restrictions
on an insurer’s ability to declare a dividend, the rules require
maintenance of each insurance company’s solvency margin,
which might impact their ability to pay dividends to the parent
company. Our other life and general insurance, and fund
management subsidiaries’ ability to pay dividends and make
loans to the parent company is similarly restricted by local
corporate or insurance laws and regulations. In all jurisdictions,
when paying dividends, the relevant subsidiary must take into
account its capital position and must set the level of dividend
to maintain sufficient capital to meet minimum solvency
requirements and any additional target capital expected by local
regulators. These minimum solvency requirements, which are
consolidated under the European Insurance Groups Directive,
are discussed later in this section under the heading ‘Regulatory
capital position’. We do not believe that the legal and regulatory
restrictions constitute a material limitation on the ability of our
businesses to meet their obligations or to pay dividends to the
parent company, Aviva plc.
The Group has received and expects to receive proceeds on
completion of the disposals as disclosed in ‘IFRS Financial
statements – note 4 – Subsidiaries’.
Aviva plc maintains two £2 billion commercial paper
programmes, one of which is guaranteed by Aviva Insurance
Limited, which allow debt to be issued in a range of currencies.
At 31 December 2013, outstanding debt issued under the
guaranteed programme was £nil (2012: £603 million) while
£556 million (2012: £nil) was unguaranteed. More details of
movements in debt can be found in the ‘Management of
debt section’.
Aviva plc has also issued longer term debt under a Euro
Medium Term Note (EMTN) programme. Debt issued under this
programme may be senior debt or regulatory qualifying debt
and may 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
We use funds to pay dividends to our shareholders, to service
our debt and to pay our central Group cash flows.
In 2013, total cash paid by the Company as ordinary and
preference dividends and coupon payments on direct capital
instruments and Fixed Rate Tier 1 notes amounted to £538
million, compared with £720 million in 2012.
In 2013, our total interest costs on central borrowings were
£328 million. This compared with £317 million of interest paid
on central borrowings in 2012. Total corporate centre expenses
in 2013 were £150 million compared with £136 million in 2012.
An additional application of our funds is the acquisition of
businesses. In 2013, cash paid for the acquisition of subsidiaries,
joint ventures and associates from continuing operations net of
cash acquired amounted to £nil million, compared with cash
paid of £129 million in 2012.
Capital injections
We make capital injections into our businesses where necessary
to ensure that they meet their local solvency requirements and
also to support development of their operations. Capital is
provided either by equity or, where a local holding company
is in place, may be via loans with the holding company