Aviva 2007 Annual Report Download - page 171
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Please find page 171 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.22 – Loans
This note analyses the loans our Group companies have made, the majority of which are mortgage loans.
(a) Carrying amounts
The carrying amounts of loans at 31 December 2007 and 2006 were as follows:
2007 2006
£m £m
Policy loans 1,316 1,217
Loans to banks 7,576 3,295
Securitised mortgage loans (see note 23)
UK 1,777 1,923
Netherlands 5,610 4,786
7,387 6,709
Non-securitised mortgage loans 17,596 15,185
Loans and advances to bank customers 1,307 1,085
Loans to brokers and other intermediaries 80 –
Other loans 931 1,083
Total 36,193 28,574
Of the above loans, £25,666 million (2006: £23,243 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 £5,476 million (2006:
£4,941 million) of securitised mortgage loans and £12,849 million (2006: £11,316 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 cash flows 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 a loss of £210 million
(2006: £nil). The cumulative change attributable to changes in credit risk to 31 December 2007 was a loss of £210 million
(2006: £nil).
(b) Collateral
The Group holds collateral in respect of loans where it is considered appropriate, in order to reduce the risk of non-
recovery. This collateral generally takes 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 amount of collateral received with respect to loans which the Group is permitted to sell or repledge in the absence
of default was £6,282 million (2006: £2,129 million). The value of collateral that was actually sold or repledged in the
absence of default was £nil (2006: £nil).
23 – Securitised mortgages and related assets
The Group has loans receivable, secured by mortgages, which have then been securitised through non-recourse
borrowings, in our UK Life and Dutch businesses. This note gives details of the relevant transactions.
(a) Description of arrangements
(i) United Kingdom
In a long-term business subsidiary (NUER), the beneficial interest in certain portfolios of lifetime mortgages has been
transferred to five special purpose securitisation companies (“the ERF companies”), in return for initial consideration and,
at later dates, deferred consideration. The deferred consideration represents receipts accrued within the ERF companies
after meeting all their obligations to the noteholders, loan providers and other third-parties in the priority of payments.
The purchases of the mortgages were funded by the issue of fixed rate, floating rate and index-linked notes by the
ERF companies.
All the shares in the ERF companies are held by independent companies, whose shares are held on trust. Although NUER
does not own, directly or indirectly, any of the share capital of the ERF companies or their parent companies, it retains
control of the residual or ownership risks related to them, and they have therefore been treated as subsidiaries in the
consolidated financial statements. NUER has no right to repurchase the benefit of any of the securitised mortgage loans,
other than in certain circumstances where NUER is in breach of warranty or loans are substituted in order to effect a
further advance.
NUER has purchased subordinated notes and granted subordinated loans to some of the ERF companies. These have been
eliminated on consolidation through offset against the borrowings of the ERF companies in the consolidated balance
sheet.
Aviva plc
Annual Report and
Accounts 2007
167
Financial
statements