Aviva 2009 Annual Report Download - page 251

249
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
53 – Statement of cash flows continued
(c) Cash flows in respect of the disposal of subsidiaries, joint ventures and associates:
2009 2008
£m £m
Cash proceeds from disposal of subsidiaries, joint ventures and associates 1,738 396
Net cash and cash equivalents divested with subsidiaries (607) (43)
Cash flows on disposals 1,131 353
(d) Cash and cash equivalents in the statement of cash flows at 31 December comprised:
2009
£m
Restated
2008
£m
Restated
2007
£m
Cash at bank and in hand
Cash equivalents
10,681
14,495
11,928
12,208
3,718
12,037
Bank overdrafts
25,176
(925)
24,136
(605)
15,755
(621)
24,251 23,531 15,134
Of the total cash and cash equivalents shown above, £nil has been classified as held for sale (2008: £493 million, 2007: £96 million)
(see note 3d).
54 – Group capital structure
Accounting basis and capital employed by segment
The table below shows how our capital, on an MCEV basis, is deployed by segment and how that capital is funded.
Restated
2009 2008
£m £m
Long-term savings 20,693 19,440
General insurance and health 4,562 5,516
Fund management 269 340
Other business (246) (199)
Corporate1 (34) (30)
Total capital employed 25,244 25,067
Financed by
Equity shareholders’ funds 13,035 13,162
Minority interests 4,237 3,080
Direct capital instrument 990 990
Preference shares 200 200
Subordinated debt 4,637 4,606
External debt 852 919
Net internal debt2 1,293 2,110
Total capital employed 25,244 25,067
1. The “corporate” net liabilities represent the element of the pension scheme deficit held centrally.
2. In addition to our external funding sources, we have certain internal borrowing arrangements in place which allow some of the assets that support technical liabilities to be invested in a pool
of central assets for use across the group. These internal debt balances allow for the capital allocated to business operations to exceed the externally sourced capital resources of the group.
Net internal debt represents the balance of the amounts due from corporate and holding entities, less the tangible net assets held by these entities. Although intra-group in nature, they are
included as part of the capital base for the purpose of capital management. These arrangements arise in relation to the following:
— Certain subsidiaries, subject to continuing to satisfy stand alone capital and liquidity requirements, loan funds to corporate and holding entities. These loans satisfy arms length criteria and
all interest payments are made when due.
— Aviva International Insurance (AII) Ltd acts as both a UK general insurer and as the primary holding company for our foreign subsidiaries. Internal capital management mechanisms in place
allocate a portion of the total capital of the company to the UK general insurance operations. These mechanisms also allow for some of the assets backing technical liabilities to be made available
for use across the group. Balances in respect of these arrangements are also treated as internal debt for capital management purposes.
Total capital employed is financed by a combination of equity shareholders’ funds, preference capital, subordinated debt and
borrowings (including internal borrowings as described in footnote 2 above).
At 31 December 2009 we had £25.2 billion
(2008: £25.1 billion) of total capital employed in our trading operations, measured
on an MCEV basis. Over the period the benefit of operating profits and investment gains have been offset by foreign exchange
losses and actuarial losses on staff pension schemes.
In April 2009 we issued a private placement of £245 million equivalent of Lower Tier 2 hybrid in a dual tranche transaction
(£200 million on 1 April 2009 and a further €50 million on 30 April 2009). These transactions had a positive impact on group IGD
solvency and economic capital measures.
Financial leverage, the ratio of external senior and subordinated debt to MCEV capital and reserves, was 31.8%
(2008:
34.0%)
. If centre assets were offset against this debt the financial leverage would be 19.0% (2008: 25.4%) . Fixed charge cover,
which measures the extent to which external interest costs, including subordinated debt interest and preference dividends, are
covered by MCEV operating profit was 8.5 times
(2008: 9.2 times) .
Financial statements IFRS