Aviva 2007 Annual Report Download - page 212
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Please find page 212 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.47 – Borrowings continued
(a) As explained in accounting policy C, the UK long-term business policyholder funds have invested in a number of
property limited partnerships (PLPs). The PLPs have raised external debt, 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 or shareholders’ funds of
any companies in the Aviva Group. Loans of £485 million (2006: £123 million) included in the table relate to those PLPs
which have been consolidated as subsidiaries.
(b) Certain Irish policyholder investment funds and unit trusts, which have been fully consolidated in accordance with
accounting policy C, have raised borrowings with external credit institutions. The borrowings are secured on the funds,
with the only recourse on default being the underlying investments in these funds and unit trusts. The lenders have no
recourse whatsoever to the shareholders’ funds of any companies in the Aviva Group. These loans run for a period of five
years, with interest rates fixed monthly and based on a fixed margin above the Euro inter-bank rate. The amount of these
loans can be varied without any penalty being charged, subject to a maximum of 50% Loan to Value and a maximum
facility of 1378 million.
(c) In September 2004, one of the Group’s UK long-term business subsidiaries, Norwich Union Life & Pensions Limited
(NULAP), entered into a securitisation arrangement with The Royal Bank of Scotland Group plc (RBSG), to provide
funding to cover initial new business acquisition and administration costs. Under the arrangement, an RBSG company
provided a loan facility of £200 million to NULAP in respect of selected term assurance policies, secured on future
premiums and repayment of commissions due from brokers where a policy has lapsed. The funding was repayable
over four years from the date of advance, and interest was charged at a floating rate. RBSG had no recourse to the
policyholder or shareholders’ funds of any companies in the Aviva Group. On 12 January 2007, under a Deed of Release
and Termination, this arrangement was cancelled.
(d) One of the Group’s UK long-term business subsidiaries, Norwich Union Equity Release Limited (NUER), has transferred
the beneficial interest in certain portfolios of lifetime mortgages to various UK building societies, retaining a proportion of
the interest earned. The transfers qualify for partial derecognition and, as such, the interest receivable on the mortgages is
recognised as an asset within non-securitised mortgage loans, carried at fair value, with a corresponding liability
recognising the fair value of future interest payable to the building societies. This liability has previously been recognised
within borrowings. As this liability does not represent actual operational borrowings, but a liability to pay a proportion of
future interest receivable on the mortgages to the building societies, the liability has been reclassified to other liabilities.
The fair value of these loans is considered to be the same as their carrying value.
(v) Securitised mortgage loan notes
Loan notes have been issued by special purpose securitisation companies in the UK and the Netherlands. Details of these
securitisations are given in note 23.
For the Dutch securitised mortgage loan notes carried at amortised cost of £2,283 million (2006: £2,038 million), their fair
value is £2,283 million (2006: £2,006 million), calculated based on the future cash flows discounted back at the market
rate of interest.
(e) Movements during the year
Movements in borrowings during the year were:
Total
Core structural Operational 2007
£m £m £m
New borrowings drawn down, net of expenses 4,780 1,542 6,322
Repayment of borrowings (4,799) (1,201) (6,000)
Net cash inflow (19) 341 322
Foreign exchange rate movements 133 499 632
Acquisitions –1818
Borrowings reclassified to other liabilities – (174) (174)
Fair value movements – (268) (268)
Amortisation of discounts and other non-cash items 2–2
Movements in the year 116 416 532
Balance at 1 January 4,195 7,942 12,137
Balance at 31 December 4,311 8,358 12,669
Aviva plc
Annual Report and
Accounts 2007
208
Financial
statements
Notes to the consolidated financial statements continued