Aviva 2009 Annual Report Download - page 187

185
Performance review
Aviva plc Notes to the consolidated financial statements continued
Corporate responsibility
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
19 – Interests in, and loans to, associates continued
Although the Group’s holding in two of the three Cyrte funds is less than 20%, it has significant influence through ownership of
the fund manager, Cyrte Investments BV, a subsidiary of which acts as general partner to the funds, and through membership of
its investment committee.
The Group’s Dutch subsidiary owns 30.8% of the shares, and depositary receipts for shares, in Van Lanschot NV, a financial
services company in the Netherlands. The Group is not able to appoint management representation on the board of this company
and is therefore unable to exert significant influence over its affairs. Accordingly, this investment is treated as a financial investment
rather than as an associate.
(c) Additional information
Summarised aggregate financial information on the Group’s interests in its associates is as follows:
2009 2008 2007
£m £m £m
Share of revenues 216 460 385
Share of results before tax (53) (54) 51
Share of assets 3,013 3,812 3,123
Share of liabilities (2,120) (2,974) (2,324)
Share of net assets 893 838 799
The associates have no significant contingent liabilities to which the Group is exposed, nor has the Group any significant
contingent liabilities in relation to its interest in them.
(d) Impairment testing
RBS Life Investments Limited and RBSG Collective Investments Limited
The Group’s investments in RBS Life Investments Limited and RBSG Collective Investments Limited have been tested for impairment
by comparing their carrying values (which include goodwill which arose on their acquisition) with their recoverable amounts.
The recoverable amounts for both investments have been determined based on value in use calculations, using an appraisal
value methodology. The appraisal value comprises MCEV and a value of future new business. Future new business is valued using a
similar approach as used for the in-force business. The value of 2010 planned new business is based on planned volumes, planned
margins for manufactured business and current margins for collectives and adopted business all approved by management. This
value is then multiplied by an annuity factor to give the value of 25 years of future new business and then discounted back to the
valuation date. The annuity factor for Life business allows for new business growth of 2.8% in 2011 and 5.4% thereafter and a
pattern of market-consistent time dependent risk discount rates equivalent to a single risk discount rate of 4.4%. For Collective
Investments the new business growth assumptions are 7.7% in 2011 and 6.1% thereafter. This value is adjusted to allow for
future expense over-runs and under-runs, based on the projected expenses and sales volumes.
The test performed in the current year estimates the value of future new business on an MCEV basis. This methodology
incorporates more of the risk of future new business into the underlying cash flows and so consequently a lower risk discount rate
is applied relative to the prior period.
The recoverable amounts exceed the carrying values of both the investments.
Banca Network Investimenti SpA
The Group’s investment in Banca Network Investimenti SpA has been tested for impairment by comparing its carrying value (which
includes goodwill which arose on its acquisition) with its recoverable amount.
The recoverable amount has been determined based on a value in use calculation prepared by an external valuation expert.
Value in use was calculated using a discounted cash flow projection based on business plans and growth assumptions approved by
management and discounted at an appropriate risk discount rate.
Key assumptions used for the calculation were:
— A cash flow project based on a five year plan period; and
— Risk adjusted discount rate of 10.3% based on the weighted average cost of capital of similar Italian listed companies.
As a result of the testing, an impairment of £26 million has been recognised. This reflects adverse developments in the business
environment in which this associate operates.
(e) Non-adjusting subsequent event
On 17 February 2010, the Group sold its 35% holding in Sogessur SA to that company’s main shareholder, Société Générale, for
a consideration of £35 million, realising a profit on disposal of £24 million.
Financial statements IFRS