Aviva 2006 Annual Report Download - page 154

Aviva plc
Annual Report and Accounts 2006 150
Notes to the consolidated financial statements continued
20 – Investment property
Freehold Leasehold Total
£m £m £m
Carrying value
At 1 January 2005 9,100 1,957 11,057
Additions 1,596 173 1,769
Capitalised expenditure on existing properties 126 61 187
Fair value gains 1,169 402 1,571
Disposals (1,171) (80) (1,251)
Foreign exchange rate movements (55) (3) (58)
At 31 December 2005 10,765 2,510 13,275
Additions 1,373 342 1,715
Capitalised expenditure on existing properties 125 48 173
Acquisitions of subsidiaries 35 – 35
Fair value gains 1,227 280 1,507
Disposals (1,494) (47) (1,541)
Transfers from property and equipment 6 – 6
Foreign exchange rate movements (41) (6) (47)
At 31 December 2006 11,996 3,127 15,123
Investment properties arestated at their market values as assessed by qualified external valuers or by local qualified staffof the Group in
overseas operations, all with recent relevant experience. Values are calculated using a discounted cash flow approach and are based on
current rental income plus anticipated uplifts at the next rent review, assuming no future growth in rental income. This uplift and the
discount rate arederived from rates implied by recent market transactions on similar properties.
The fair value of investment properties leased to third-parties under operating leases was as follows:
2006 2005
£m £m
Freeholds 10,423 9,036
Long leaseholds – over 50 years 3,039 3,018
13,462 12,054
21 – Loans
(a) Carrying amounts
The carrying amounts of loans at 31 December 2006 and 2005 were as follows:
2006 2005
£m £m
Policy loans 1,217 1,020
Bank loans 170 125
Securitised mortgage loans (see note 22) 6,709 7,476
Non-securitised mortgage loans 15,185 15,224
Other loans 3,164 699
Total 26,445 24,544
Of the above loans, £23,243 million (2005: £23,031 million) is expected to be recovered more than one year after the balance
sheet date.
The carrying amounts of the above loans are stated at amortised cost with the exception of £4,941 million (2005: £5,084 million) of
securitised mortgage loans and £11,316 million (2005: £10,000 million) of non-securitised mortgage loans which are designated as other
than trading and measured at fair value.
The fair value has been calculated by discounting the future cashflows using appropriate current interest rates for each portfolio of
mortgages.
The change in fair value of these loans during the year, attributable to a change in credit risk, was £nil (2005: £nil).The cumulative
change attributable to changes in credit risk to 31 December 2006 was £nil (2005: £nil).
(b) Collateral
The Group holds collateral in the form of liens or charges over properties and, in the case of policy loans, the underlying policy for the
majority of the loan balances above. In the event of a default, the Group is able to sell or repledge the collateral. The Group did not hold
any collateral which it was permitted to sell or repledge in the absence of default, at the end of either 2006 or 2005.
Financial statements continued