Aviva 2013 Annual Report Download - page 294

Aviva plc
Annual report and accounts 2013
292
Shareholder information continued
subsequently injecting equity capital in the regulated operating
company. Each capital injection is subject to central review and
approval by the Board of the relevant holding company and
needs to meet our required internal rates of return. To the
extent that capital injections are provided or funded by
regulated entities, then we have to consider the impact on
regulatory capital of the capital injection.
Otherwise our ability to make capital injections into our
businesses is not materially limited by applicable legal and
regulatory restrictions. Total capital injections into the
business units were £157 million and £169 million in 2013
and 2012 respectively.
Consolidated cash flows
The cash and cash equivalents consist of cash at banks and in
hand, deposits held at call with banks, treasury bills and other
short-term highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an
insignificant risk of change in value.
For the purposes of the cash flow statement, cash and cash
equivalents also include bank overdrafts, which are included in
payables and other financial liabilities on the statement of
financial position.
Year ended 31 December 2013
Net cash from operating activities
Total net cash from operating activities increased by £1,498
million to a £3,997 million inflow in 2013 (2012: £2,499 million
inflow). The increase was primarily due to an increase in
operating cash flows in discontinued operations (US Life) prior
to disposal.
Net cash from investing activities
Net cash used in investing activities increased by £1,210 million
to £1,225 million outflow (2012: £15 million outflow). The
movement is mainly a result of the disposal of the US Life
business.
Net cash used in financing activities
Net cash used in financing activities increased by £410 million to
an outflow of £1,529 million (2012: £1,119 million outflow).
The movement is mainly due to higher repayment of borrowings
in 2013, and the one-off issue of fixed rate tier 1 notes in 2012,
partly offset by a lower ordinary dividend payment in 2013.
Net cash and cash equivalents
At 31 December 2013, total consolidated net cash and cash
equivalents, net of bank overdrafts, amounted to £24,857
million, an increase of £1,404 million over £23,453 million
in 2012.
Currency
Our exposures to movements in exchange rates and the
management of these exposures is detailed in ‘Other
information – Financial and operating performance – Exchange
rate fluctuations’.
Year ended 31 December 20121
Net cash from operating activities
Total net cash from operating activities increased by £2,841
million to a £2,499 million inflow in 2012 (2011: £342 million
outflow). The increase was primarily due to an increase in flows
from the net purchase/sale of operating assets.
Net cash used in investing activities
Net cash from investing activities decreased by £93 million to
£15 million outflow (2011: £78 million inflow). The decrease is
mainly a result of a decrease in cash inflows from disposal of
1 The statement of cash flows has been restated following the adoption of IFRS 10 ‘Consolidated Financial
Statements’ – see IFRS Financial statements – Note 1 for further details.
subsidiaries, joint ventures and associates, partly offset by lower
cash used in discontinued operations.
Net cash out flow on financing activities
Net cash used in financing activities decreased by £654 million
to an outflow of £1,119 million (2011: £1,773 million outflow).
The decrease is due to proceeds from the issuance of a Fixed
Rate Tier 1 notes, and lower cash used in discontinued
operations partly offset by higher dividend payments.
Net cash and cash equivalents
At 31 December 2012, total consolidated net cash and cash
equivalents, net of bank overdrafts, amounted to £23,453
million, an increase of £1,052 million over £22,401 million
in 2011.
Currency
Our exposures to movements in exchange rates and the
management of these exposures is detailed in ‘Other
information – Financial and operating performance –
Exchange rate fluctuations’.
Regulatory capital position
Individual regulated subsidiaries measure and report solvency
based on applicable local regulations, including in the UK the
regulations established by the PRA. These measures are also
consolidated under the European Insurance Groups Directive
(IGD) to calculate regulatory capital adequacy at an aggregate
group level, where we have a regulatory obligation to have a
positive position at all times.
This measure represents the excess of the aggregate value of
regulatory capital employed in our business over the aggregate
minimum solvency requirements imposed by local regulators,
excluding the surplus held in the UK and Ireland with-profit life
funds. The minimum solvency requirement for our European
businesses is based on the Solvency 1 Directive. In broad terms,
for EU operations, this is set at 4% and 1% of non-linked and
unit-linked life reserves respectively and for our general
insurance portfolio of business is the higher of 18% of gross
premiums or 26% of gross claims, in both cases adjusted to
reflect the level of reinsurance recoveries. For our businesses in
Canada a risk charge on assets and liabilities approach is used.
European Insurance Groups Directive
UK life
funds
£bn
Other
business
£bn
31
December
2013
£bn
31
December
2012
£bn
Insurance Groups Directive (IGD)
capital resources 5.8 8.6 14.4 14.4
Less: capital resources
requirement (5.8) (5.0) (10.8) (10.6)
Insurance Group Directive
(IGD) excess solvency — 3.6 3.6 3.8
Cover over EU minimum
(calculated excluding UK
life funds) 1.7 times 1.7 times
The EU IGD regulatory capital solvency surplus has decreased by
£0.2 billion since 31 December 2012 to £3.6 billion. The key
movements over the period are set out in the following table:
£bn
IGD solvency surplus at 31 December 2012 3.8
Operating profits net of other income and expenses 1.2
Dividends and appropriations (0.5)
Market movements including foreign exchange1 (0.4)
Pension scheme funding (0.1)
Disposals 0.2
Poland pension legislative changes (0.3)
Increase in capital resources requirement (0.1)
Other regulatory adjustments (0.2)
Estimated IGD solvency surplus at 31 December 2013 3.6
1 Market movements include the impact of equity, credit spread, interest rate and foreign exchange movements
net of the effect of hedging instruments.