Aviva 2009 Annual Report Download - page 192

190
Aviva plc Notes to the consolidated financial statements continued
Annual Report and Accounts 2009
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 Aviva Equity Release UK Limited (AER), 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 note holders, loan providers and other third parties in the priority of payments.
The purchases of the mortgages were funded by the issue of fixed and floating rate notes by the ERF companies.
All the shares in the ERF companies are held by independent companies, whose shares are held on trust. Although AER does
not own, directly or indirectly, any of the share capital of the ERF companies or their parent companies, it retains control of the
majority of the residual or ownership risks and rewards related to the assets of the securitisation companies, and they have
therefore been treated as subsidiaries in the consolidated financial statements. AER has no right to repurchase the benefit of any
of the securitised mortgage loans, other than in certain circumstances where AER is in breach of warranty or loans are substituted
in order to effect a further advance.
AER 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 statement of financial position.
(ii) Delta Lloyd
In three subsidiaries, Delta Lloyd Levensverzekering NV (DLL), Amstelhuys NV (AMS), and Delta Lloyd Bank (Belgium) NV/SA (DLB),
the principal benefits of certain portfolios of mortgage loans have been transferred to a number of special purpose securitisation
companies, which were funded primarily through the issue of fixed and floating rate notes.
All the shares in the securitisation companies are held by independent trustee companies. Although DLL, AMS and DLB do not
own, directly or indirectly, any of the share capital of the securitisation companies or their parent companies, they retain control
of the majority of the residual or ownership risks and rewards related to the assets of the securitisation companies, and these
companies have therefore been treated as subsidiaries in the consolidated financial statements. DLL, AMS and DLB have no right,
nor any obligation, to repurchase the benefit of any of the securitised mortgage loans before the optional call date, other than in
certain circumstances where they are in breach of warranty.
Delta Lloyd companies have purchased notes in the securitisation companies, which have been eliminated on consolidation
through offset against the borrowings of the securitisation companies in the consolidated statement of financial position.
(iii) General
In all of the above transactions, the Company and its subsidiaries are not obliged to support any losses that may be suffered by the
note holders and do not intend to provide such support. Additionally, the notes were issued on the basis that note holders are only
entitled to obtain payment, of both principle and interest, to the extent that the available resources of the respective special
purpose securitisation companies, including funds due from customers in respect of the securitised loans, are sufficient and that
note holders have no recourse whatsoever to other companies in the Aviva Group.
(b) Carrying values
The following table summarises the securitisation arrangements:
2009 2008 2007
Securitised
assets
Securitised
borrowings
Securitised
assets
Securitised
borrowings
Securitised
assets
Securitised
borrowings
UK
Securitised mortgage loans
At fair value (note 22)
Other securitisation assets/(liabilities)
1,840
—
(1,444)
(396)
1,861
78
(1,614)
(325)
1,777
23
(1,691)
(109)
1,840 (1,840) 1,939 (1,939) 1,800 (1,800)
Delta Lloyd
Securitised mortgage loans
At fair value (note 22) 5,544 (4,441) 4,936 (4,820) 3,699 (3,706)
At amortised cost (note 22) 1,770 (2,656) 2,262 (2,353) 1,911 (2,283)
7,314 (7,097) 7,198 (7,173) 5,610 (5,989)
Other securitisation assets/(liabilities) — (217) — (25) 379 —
7,314 (7,314) 7,198 (7,198) 5,989 (5,989)
Loan notes held by third parties are as follows:
2009 2008 2007
Total loan notes issued, as above
Less: Loan notes held by Group companies
UK
£m
1,444
—
Delta
Lloyd
£m
7,097
(1,212)
UK
£m
1,614
(24)
Delta
Lloyd
£m
7,173
(978)
UK
£m
1,691
(17)
Delta
Lloyd
£m
5,989
(369)
Loan notes held by third parties (note 48c) 1,444 5,885 1,590 6,195 1,674 5,620