Aviva 2009 Annual Report Download - page 62

164,055 407,790
60
Aviva plc Contractual obligations
Annual Report and Accounts 2009
Contractual obligations
Contractual obligations with specified payment dates at 31 December 2009 included the following:
Between Between
Less one and three After
than one three and five five
year years years years
£m £m £m £m Total
Insurance and investment contracts
Long term business
— Insurance contracts – non-linked1 10,554 9,609 33,980 135,004 189,147
— Investment contracts – non-linked2 59,504 — — — 59,504
— Linked business2 80,206 — — — 80,206
General insurance3 7,215 4,549 2,467 4,111 18,342
157,479 14,158 36,447 139,115 347,199
Other contractual obligations4
Borrowings 1,336 1,244 1,751 23,613 27,944
Operating lease obligations 145 408 55 834 1,442
Capital commitments 133 93 47 52 325
Payables and other financial liabilities5 20,095 357 93 441 20,986
Net asset value attributable to unitholders 9,894 — — — 9,894
Total 189,082 16,260 38,393
Reconciliation to the statement of financial position £m
Total contractual obligations above 407,790
Effect of discounting contractual cash flows for insurance contracts (66,092)
Contractual undiscounted interest payments6 (12,169)
Difference between carrying value of borrowings and undiscounted cash flows of principle (775)
Contractual cash flows under operating leases and capital commitments (1,767)
Difference between derivative liabilities contractual cash flows and carrying value (444)
Liabilities of operations classified as held for sale 33
Non-contractual / short-term obligations
— Unallocated divisible surplus7 3,866
— Provisions8 3,980
— Current and deferred tax liabilities 1,230
— Other liabilities 3,653
Total liabilities per statement of financial position 339,305
1. Amounts shown in respect of long-term insurance contracts represent estimated undiscounted cash flows for the Group’s life assurance contracts. In determining the projected payments,
account has been taken of the contract features, in particular that the amount and timing of the contractual payments reflect either surrender, death or contract maturity. In addition, the
undiscounted amounts shown include the expected payments based on assumed future investment returns on assets backing insurance and investment contract liabilities. The projected cash
flows exclude the unallocated surplus of with-profits funds (see below).
2. All linked contracts and almost all non-linked investment contracts may be surrendered or transferred on demand. For such contracts the earliest contractual maturity is therefore at the current
statement of financial position date, for a surrender amount approximately equal to the current statement of financial position liability. Although we expect surrenders, transfers and maturities
to occur over many years, the total liability for non-linked investment contracts is shown in the Within 1 year column above.
3. Amounts shown in respect of general insurance contracts are based on undiscounted estimates of future claim payments, including for those classes of business for which discounted provisions
are held, see “Financial Statements IFRS – Note 38 – Insurance liabilities”. The timing of cash flows reflects a best estimate of when claims will be settled.
4. The Group has no material finance leases for property and equipment.
5. Includes obligations under stock lending and repurchase agreements.
6. When subordinated debt is undated or loan notes perpetual, the interest payments have not been included beyond 15 years. Annual interest payments for these borrowings are £75 million.
Contractual undiscounted interest payments are calculated using fixed interest rates or prevailing market floating rates as applicable.
7. The unallocated surplus represents the excess of assets over liabilities, including policyholder ‘‘asset share’’ liabilities, which reflect the amount payable under the realistic Peak 2 reporting regime
of the FSA. Although accounted for as a liability, as permitted by IFRS 4, there is currently no expected payment date for the unallocated surplus.
8. Provisions include pension obligations, which have been excluded from the contractual obligations table above, due to the uncertainty of the amount and timing of future cash flows. The Group
operates both funded defined benefit and funded defined contribution pension schemes around the world, full details of which are provided in “Financial Statements IFRS – Note 47 – Pension
obligations”. We have a contractual obligation to fund these schemes. However, the amount and timing of the Group’s cash contributions to these schemes is uncertain and will be affected by
factors such as future investment returns and demographic changes. Our cash funding of defined contribution schemes is based on percentages of salary. Our cash contribution to defined
benefit schemes is agreed in advance with scheme trustees for the short term, typically a period of up to five years. However, these contributions are revisited annually in light of changes in
expectations of investment returns and other assumptions. The scheme liabilities have an average duration of 22 years in the UK schemes and between 12 and 18 years in the non-UK schemes.