Aviva 2013 Annual Report Download - page 212

Aviva plc
Annual report and accounts 2013
210
Notes to the consolidated financial statements continued
50 – Borrowings continued
(d) Description and features
(i) Subordinated debt
A description of each of the subordinated notes is set out in the table below:
Notional amount Issue date Redemption date
Callable at par at option of
the Compan
y
from
In the event the Compan
y
does not call the notes,
the coupon will reset at each applicable reset date to
£700 million 14 Nov 2001 14 Nov 2036 16 Nov 2026 5 year Benchmark Gilt + 2.85%
€500 million 29 Sep 2003 Undated 29 Sep 2015 3 month Euribor + 2.35%
£800 million 29 Sep 2003 Undated 29 Sep 2022 5 year Benchmark Gilt + 2.40%
£400 million 20 May 2008 20 May 2058 20 May 2038 3 month LIBOR + 3.26%
£200 million 8 Aug 2008 20 May 2058 20 May 2038 3 month LIBOR + 3.26%
€500 million 20 May 2008 22 May 2038 22 May 2018 3 month Euribor + 3.35%
£200 million 1 Apr 2009 1 Apr 2019 1 Apr 2014 3 month LIBOR + 8.10%
€50 million 30 Apr 2009 30 Apr 2019 30 Apr 2014 3 month Euribor + 8.25%
£450 million 26 May 2011 3 June 2041 3 June 2021 6 Month LIBOR + 4.136%
$400 million 22 November 2011 1 December 2041 1 December 2016 8.25%(fixed)
€650 million 5 July 2013 5 July 2043 5 July 2023 5 year EUR mid-swaps + 5.13%
Subordinated notes issued by the Company rank below its senior obligations and ahead of its preference shares and ordinary
share capital. The dated subordinated notes rank ahead of the undated subordinated notes. The fair value of these notes at
31 December 2013 was £4,707 million (2012: £4,435 million), calculated with reference to quoted prices.
On 28 February 2014, the Company notified the respective holders of the £200 million subordinated notes due 2019 and the
€50 million subordinated notes due 2019 that it would redeem each of the notes on their respective first call dates in April 2014.
(ii) Debenture loans
The 9.5% guaranteed bonds were issued by the Company at a discount of £1.1 million. This discount and the issue expenses are
being amortised over the full term of the bonds. Although these bonds were issued in sterling, the loans have effectively been
converted into euro liabilities through the use of financial instruments in a subsidiary.
All these borrowings are at fixed rates and their fair value at 31 December 2013 was £236 million (2012: £246 million),
calculated with reference to quoted prices.
(iii) Commercial paper
The commercial paper consists of £556 million issued by the Company (2012: £603 million) and is considered core structural
funding.
All commercial paper is repayable within one year and is issued in a number of different currencies, primarily sterling, euros and
US dollars. Its fair value is considered to be the same as its carrying value.
(iv) Loans
Loans comprise:
2013
£m
Restated1
2012
£m
Non-recourse
Loans to property partnerships (see (a) below) 804 989
Loans to Irish investment funds (see (b) below) 7 20
UK Life reassurance (see (c) below) 208 257
Other non-recourse loans (d) 288 336
1,307 1,602
Other loans (see (e) below) 103 251
1,410 1,853
1 Restated for the adoption of IFRS10. See note 1 for further details.
(a) As explained in accounting policy D, 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 Group. Loans of
£804 million (2012: £989 million) included in the table relate to those PLPs which have been consolidated as subsidiaries.
(b) There is one Irish policyholder investment fund, which has been fully consolidated in accordance with accounting policy D,
that has raised external borrowings. The borrowings are secured on the fund, with the only recourse on default being the
underlying investments in this fund. The lender has no recourse whatsoever to the shareholders’ funds of any companies in the
Aviva Group. The loan runs for a period of five years, with the interest rate fixed quarterly based on a fixed margin above the
euro inter-bank rate.
(c) The UK long-term business entered into a financial reassurance agreement with Swiss Re in 2008, under which up-front
payments are received from Swiss Re in return for 90% of future surpluses arising. The loan will be repaid as profits emerge on the
business. The UK long-term business entered into an additional financial reassurance agreement with BNP Paribas in 2012 in return
for 100% of future surpluses arising. The loan will be repaid as profits emerge on the business.
(d) Other non-recourse loans primarily include external debt raised by special purpose vehicles in the UK long-term business.
The lenders have no recourse whatsoever to the shareholders’ funds of any companies in the Group.
(e) Other loans include external debt raised by overseas long-term businesses to fund operations.
(v) Securitised mortgage loan notes
Loan notes have been issued by special purpose securitisation companies in the UK. Details are given in note 25.