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We are Aviva
Aviva plc
Annual report and accounts 2014

Table of contents

  • Page 1
    We are Aviva Aviva plc Annual report and accounts 2014

  • Page 2
    ...my insurance online with one company at a great price. - Reuben Aviva customer This report contains 'forward-looking statements' with respect to certain of the Group's plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives...

  • Page 3
    ... Income, Savings, Pensions, Life cover, Protection Life Insurance - Home, Motor, Travel, Commercial General Insurance - Private Medical Insurance Health Insurance - Managing assets for Aviva and other clients Asset Management - Across our 16 businesses, we protect our 29+ million customers...

  • Page 4
    ... - UK General Insurer of the Year 70+ - Awards worldwide in 2014 65% - 2014 employee engagement up 9% points4 - A UK Living Wage employer 40,220 - Volunteering hours by our people in 2014 - A top 10 company in the FTSE4 Good 4 Three percentage points above the global financial services norm...

  • Page 5
    ... model Our strategy Our strategic anchor Investment thesis CFO's review Market focus Our people and communities Risk Governance 64 Board of Directors biographies 68 Group Executive biographies 70 Directors' and corporate governance report 90 Directors' remuneration report IFRS Financial Statements...

  • Page 6
    02 | Aviva plc Annual report and accounts 2014 Wigan, United Kingdom Linda's story I nsurance can make a real difference to people's lives. Linda Hunns has had critical illness cover with Aviva since 2002. This is her story. "I was doing fine. I enjoyed life to the full as a mother and ...

  • Page 7
    Aviva plc Annual report and accounts 2014 | 03

  • Page 8
    ... operating ratio to 95.7%. Net asset value increased to 340 pence per share and shareholders benefited from a total shareholder return of 11.5%. Dividend In line with the statement we made in the formal offer for Friends Life, the Board has declared a final dividend of 12.25 pence per share (2013...

  • Page 9
    ... our management team for our customers. Investing in communities As a responsible business, we strive to be a force for good across the markets in which we operate. We provide access to a range of insurance products tailored to the needs of low income groups and, through Aviva Investors, we work to...

  • Page 10
    ... £225 million of expense savings as well as material capital synergies. Strategically, this transaction secures our position in our home market, adds up to £70 billion of funds to Aviva Investors and gives us flexibility to invest in key existing growth segments and markets. Our Strategy We...

  • Page 11
    Aviva plc Annual report and accounts 2014 | 07 Strategic report £692m Operating profit on an IFRS basis Excess centre cash flow1, a 65% increase £2,173m 47 .0p 1 Aviva has travelled a long way in the past two years. But we have further to travel than the distance we have come. - Mark Wilson ...

  • Page 12
    ... our management team and bring new skills into the Group. Tom Stoddard Chief Financial Officer Chris Wei CEO, Global Life Insurance and Chairman Asia Euan Munro CEO, Aviva Investors 1 2 Monique Shivanandan Chief Information Officer Andrew Brem Chief Digital Officer Based on customer numbers as...

  • Page 13
    ... II • Enhanced capital management of Ireland Life and Spain. 1 2 3 4 Based on 2011 baseline expense total of £3,366 million. Our turnaround businesses include Spain, Aviva Investors, Ireland and Italy. Excludes Eurovita, Aseval, CxG and Malaysia. Based on customer numbers as at 31 December 2013...

  • Page 14
    ... individual annuity sales offset by increases in bulk annuities and equity release and protection. 2014 Combined Operating Ratio (COR) This is a key measure of underwriting profitability of our General Insurance business. COR improved 1.6 percentage points with improvements in the UK, Ireland and...

  • Page 15
    Aviva plc Annual report and accounts 2014 | 11 Strategic report Our financial, customer, employee and community measures are all moving in the right direction, although we still have much to do. - Mark Wilson, Group CEO Relevance and performance We also measure non-financial metrics, such as the ...

  • Page 16
    12 | Aviva plc Annual report and accounts 2014

  • Page 17
    ...report and accounts 2014 | 13 Singapore Help when it's needed most I t must be one of the worst moments imaginable: a diagnosis of terminal cancer. That was the devastating news given to one of our customers in Singapore, Mr Yeo Chong Kheng and his family. But because Mr Yeo had a life insurance...

  • Page 18
    ...report and accounts 2014 The horizon Where the world is going We have identified six long-term 'horizons' which will impact our industry over the next few years My life, my way Customers will be much more in control, expecting to self-serve and self-solve. They will want to be able to access data...

  • Page 19
    ... 2014 Revision. The cost of technology continues to fall. Combined with the increasing use of Big Data, this enables existing organisations and disruptive new entrants to gain new and faster customer insights, and to provide more products and services digitally. Growth in connected objects Some...

  • Page 20
    ..., Savings & Pensions, Life cover, Protection Customers buy insurance products to save for the future, to provide reassurance their savings will last through retirement, and to protect against the risks to their family income after an accident, illness or death. General insurance Home, Motor, Travel...

  • Page 21
    ... a major employer, long-term investor, and enabler of economic growth by helping people and businesses to manage risk, as well as via specific investment in the communities in which we operate, such as our community funds. 29+ million1 11.5% Customers worldwide Total shareholder return in 2014 1 As...

  • Page 22
    ...in the UK, which means we are one of only a few insurance companies in the world which can provide customers with life, general and health insurance and asset management in one place. For more information see pages 20-21. Where the world is going Our role within it Our business strategy Our plan of...

  • Page 23
    Aviva plc Annual report and accounts 2014 | 19 Our strategy Strategic framework Embedding our strategy We want to ensure everyone in every team understands our strategy, their role in delivering it and how they can live out our values. In December, we ran our second worldwide 'Week of ...

  • Page 24
    ... holdings and profitability. For example, in Singapore we now offer discounted general insurance products to Singapore Armed Forces life assurance policyholders. In France, we offer discounts on selected new products to existing business customers, and we are selling unit-linked products to existing...

  • Page 25
    ... together the products that help our customers in the UK protect their life, health, loved ones, future and possessions in one secure and simple-to-use online place. It has a single login so they can see all their Aviva policies in one place, offers access to discounts on a range of our products, as...

  • Page 26
    ... insurance. So our business in Singapore set out to make travel insurance simple and convenient with its Travel App. This means customers can buy travel insurance, view and manage their policy, and get help with claims through their smartphone. Why it's important The environment in which we operate...

  • Page 27
    ... in Polish financial services. Customers can hold a video conference with a professional adviser on their investment choices, complete their application and make their investment online. It's a great option for busy people and is proving popular with investors who have little time to manage their...

  • Page 28
    ... Partners. insurance, savings and asset management April business with 16 million customers1. We announced the sale of our entire 47% These customers stand to benefit from stake in South Korean business Woori Aviva being part of a stronger, more diversified Life Insurance to NongHyup Financial Group...

  • Page 29
    ... financial priorities Group UK Life UK General Insurance France Canada Italy Spain Ireland Poland Turkey Asia Aviva Investors KEY Growth We focus on growing value of new business in life insurance, underwriting profit in general insurance and external fund flows in Aviva Investors: • The value...

  • Page 30
    ... our largest unit, UK & Ireland Life, our focus has been on expense efficiency and improving the financial resilience of our large back book of existing business in force. The objective has been to both improve the solvency capital position within the business and deliver more cash to the Group. The...

  • Page 31
    ... 2014 | 27 Strategic report £1,383m (2013: £1,254m) Operating profit attributable to ordinary shareholders5 The Group has made substantial progress in improving its financial- flexibility. Tom Stoddard CFO 51.5% (2013: 54.1%) Operating expense ratio 4 5 The economic capital surplus represents...

  • Page 32
    .... The proposed Friends Life transaction provides the opportunity to add up to c.£70 billion funds under management to Aviva Investors. Capital and liquidity In 2014, IFRS net asset value (NAV) increased 26% to 340p (2013: 270p) and our Market Consistent Embedded Value per share was 14% higher...

  • Page 33
    ...We continue to work with regulators on the application of Solvency II principles to our business, and will submit our Group internal model for formal regulatory review in June this year. Friends Life will be on a standard formula basis for reporting under Solvency II from year end 2015. Once Friends...

  • Page 34
    ...they didn't want to disappoint their customers. Mr and Mrs Blazye and our case manager, Helen Anderson, worked closely with the loss adjuster to work out what the Blazyes wanted and how it could be delivered. Opening in time wouldn't have been possible using standard drying and repair techniques. So...

  • Page 35
    Aviva plc Annual report and accounts 2014 | 31

  • Page 36
    ... customer service and retention. Ireland with an overall market share of The proposed acquisition of Friends nearly 10%1. We offer a broad range of life Life would create the UK's leading insurance, investment, pension and health insurance, savings and asset management insurance products. business...

  • Page 37
    ... Life completes, one in four existing pension customers in the UK will be Aviva customers. That provides the opportunity to offer pensions, drawdown, equity release and long-term care, and create long-term value for shareholders. Similarly, our strengths in the employer-sponsored pension market...

  • Page 38
    ...the businesses within Aviva work closely to share their insight and innovations to provide better services to customers across their markets and deliver value to our shareholders. number of awards in 2014, most notably the Insurance Times General Insurer of the Year, Digital Insurer of the Year and...

  • Page 39
    ...: UK & Ireland Strategic report £294m (2013: £347m) Cash remitted to Group £499m (2013: £489m) General insurance and health operating profit £755m (2013: £818m) Operating expenses 94.9% (2013: 97.2%) Combined Operating Ratio (COR) • Grew the market share in our Irish business for...

  • Page 40
    ... leading general based on vehicle use. This customises insurers, with a 7.8%3 market share. We pricing to reflect how customers drive and provide personal, home and motor rewards good driving behaviour. Our first insurance; small and medium-size enterprise commercial insurance, (including step is to...

  • Page 41
    ...risk, reviewing our products, pricing and our flood mapping. We will also continue to work with the public authorities in Ontario to reduce claims costs and lower premiums to make car insurance more affordable and accessible in our largest market. We support the steps taken by the Ontario Government...

  • Page 42
    38 | Aviva plc Annual report and accounts 2014 Market focus continued Europe Europe - David McMillan Chairman, Global Health Insurance and CEO, Europe What excites me is the prospect of becoming a True Customer Composite insurer and developing state-of-the-art digital services for our customers....

  • Page 43
    ... range of life, protection, pension, general insurance, health and asset management products. We have significant strength in distribution, with half of our profits from 4 5 6 7 In 2014 we: • Increased the weight of unit-linked sales as a proportion of total saving products sales from 22% in 2013...

  • Page 44
    ... Aim to become the most trusted financial services brand and the first choice insurer for key market segments, including middle income and affluent customers, and the family segment. Priorities In 2015 we will: • Continue to grow our pensions and protection sales, focusing on maximising the value...

  • Page 45
    ...the Aviva Savings and Pensions Institute. Strategic report Spain Overview We provide life and pensions products through our bancassurance partners and our retail business and have around 1.1 million customers. We are sixth11 in life premiums and fifth11 in individual protection by market share. In...

  • Page 46
    ...We offer savings, protection, accident and health insurance to individual and corporate customers, and in Singapore we offer motor, home and travel products, as well as a fund management platform, Navigator. We have three million customers across our markets1. We have leading insurance operations in...

  • Page 47
    ... and protection product composite model by further expanding propositions. our multi-line business in Singapore and £2m loss £80m (2013: £1m profit) General insurance and health operating profit (2013: £86m) Operating expenses Astra Aviva Life Khor Hock Seng, CEO, Aviva Asia (pictured right...

  • Page 48
    ... months. The fund has pension scheme, corporation, financial already achieved positive 'buy' ratings adviser or individual saver, what matters from several pension consultants. This is to them is achieving reliable capital translating into business opportunities growth, securing a reliable income...

  • Page 49
    ... with Aviva Group businesses to make maximum use of Aviva's powerful brand and sales network • Widen our distribution network, with products available through Aviva and third party platforms • Enter new markets, such as the United States • Operate as a globally integrated business in...

  • Page 50
    ..., who acts as strategic adviser to the fund and chairs the Strategic Investment Group, a Company-wide forum that provides the fund's managers with investment ideas. www.aviva.com/aims/ We aim to deliver simple and specific outcomes that clients will value. - Euan Munro CEO, Aviva Investors

  • Page 51
    Aviva plc Annual report and accounts 2014 | 47

  • Page 52
    ... in products, services and procurement through clear and transparent reporting • Engage with our stakeholders to build strategic relationships and evolve our strategy. 65% (2013: 56%) 2014 employee engagement Silver award Sustainability Index Community development To best develop the...

  • Page 53
    .... In 2014 we used new ways employees feel informed about important of engaging with our people through digital events (26% points above global financial channels. This included a series of live events services' norms), 81% understand our presented by members of the Group business priorities, 92...

  • Page 54
    ... engaging culture, our immediate aim is to increase our overall diversity across all levels in the organisation, with an initial focus on gender. Half our employees and customers are women. Yet only 21% of our senior management team and subsidiary board members, 19% of our Group Executive and 18% of...

  • Page 55
    ... for managing the risks of financial crime so that the costs are not passed on to our customers. Our employees receive annual training on financial crime prevention. Our global confidential malpractice reporting service 'Right Call' provides the means to report employee fraud. All cases reported are...

  • Page 56
    ... also building environmental Scope 1 - Aviva controls directly benefits into our products and services, for Greenhouse gases emitted directly from example in the way in which we settle activities Aviva owns claims. In the UK, where possible, we now or part-owns Gas Fugitive Company aim to clean and...

  • Page 57
    Aviva plc Annual report and accounts 2014 | 53 We have used the two most appropriate intensity measures to our business: tCO2e per employee and tCO2e per £ million Gross Written Premiums which are expressed in the table below. Aviva plc - Global greenhouse gas emissions data Tonnes CO2e 2014 2013 ...

  • Page 58
    ... Aviva plc Annual report and accounts 2014 Lille, France Support for social enterprises T he Social Entrepreneurship sector in France is booming. But these businesses often struggle to find the funding to support their continued development. Aviva Impact Investing France, run by Aviva France and...

  • Page 59
    Aviva plc Annual report and accounts 2014 | 55

  • Page 60
    ... Our risk management processes 3. Our risk governance Such operational failures may adversely impact customers directly or our reputation with the public, customers, agents and regulators, and impair our Liquidity risk is the risk of ability to attract new not being able to make business. payments...

  • Page 61
    ... Groups Directive (IGD) capital: Based on maintaining an appropriate level of required regulatory solvency capital in a severe loss event • Liquidity: Based on stressing one year forecast central liquid assets and cash inflows and outflows (covering Group centre costs, debt costs and dividends...

  • Page 62
    ... Group-level equity and foreign exchange hedging programme • Pension fund de-risking • Asset and liability duration matching limits impact of interest rate changes and actions taken to manage guarantee risk, through product design • Risk appetites set to limit exposures to key life and health...

  • Page 63
    ... outcome of the Group's application to use an internal model to calculate our capital requirements. • Political risk - governments in the markets in which we operate incentivise long-term saving and private pension provision through tax benefits, while also providing an alternative through state...

  • Page 64
    60 | Aviva plc Annual report and accounts 2014 This page is intentionally blank

  • Page 65
    Aviva plc plc Annual Annual report report and accounts 2014 | 61 Aviva Governance In this section Chairman's governance letter Board of directors Group executive Directors' and corporate governance report Directors' remuneration report Page 62 64 68 70 90 Governance

  • Page 66
    ... 2014 2014 Chairman's governance letter Dear shareholder Your Board firmly believes that a sound governance framework is essential in supporting management in delivering the Group's strategy to drive business success This ensures that your investment and the assets of the Company are protected...

  • Page 67
    ... its control environment. Aviva Investors has fixed the issues, improved the systems and controls and made substantial changes to the management team. Risk Committee During the year the Risk Committee closely scrutinised the Group's work towards compliance with Solvency II (SII), reviewing and...

  • Page 68
    64 | Aviva plc Annual report report and and accounts accounts 2014 2014 Boafd of difectofs Board of directors We have a strong, experienced and diverse Board with a good balance of skills 05 01 06 02 03 04

  • Page 69
    ... plc plc Annual Annual report fepoft and accounts 2014 | 65 Aviva It will be a privilege to chair Aviva's Board. - Sir Adrian Montague, CBE Governance 07 08 11 09 01. John McFarlane Chairman 02. Mark Wilson Group Chief Executive Officer 03. Tom Stoddard Chief Financial Officer 04. Sir Adrian...

  • Page 70
    ... Old Oak Holdings Ltd (financial holding company). Pfeviously, John was Chief Executive Officef of Austfalia and New Zealand Banking Gfoup Ltd (banking), Executive Difectof at Standafd Chaftefed plc (banking), head of Citicofp Investment Bank Ltd and latef head of Citicofp and Citibank in the United...

  • Page 71
    ... insurance), is a Director and Chair of the Audit Committee of Resolution Life Holdings, Inc. and is a trustee emeritus of the Board of trustees of the US Actuarial Foundation. Bob spent most of his working life at Ernst & Young (accountancy) in the US, where he held a number of managing partner...

  • Page 72
    68 | Aviva plc Annual report and accounts 2014 Group executive Group executive 01 02 05 09 13 06 10 14 03 07 15 04 08 11 12 16

  • Page 73
    ... growth and profitability of Aviva's Life Insurance businesses. He aims to achieve this by providing excellent customer service and expanding our multi-distribution platforms. Prior to joining Aviva Chris was Group CEO of Great Eastern Holdings Ltd, a leading insurance company in Asia. 16. Jason...

  • Page 74
    ... business runs smoothly, to aid effective decision making and support the achievement of the Group's objectives. The Board is responsible to shareholders for promoting the long-term success of the Company and, in particular, for setting the Group's strategic aims, monitoring management's performance...

  • Page 75
    ..., business plans and the Gfoup's lgfe and pensgons jognt ventufe performance monitoring 12% gn Tufkey Financial reporting and controls, capital structure and dividend policy 24% • Appfoved the Gfoup's fecovefy plan and Corporate governance 18% lgqugdgty fgsk management plan fequgfed Group risk...

  • Page 76
    ... of SII, Avivahs UK defined benefit pension scheme, remuneration, Avivahs investment process and asset portfolio, and information security. Training sessions have been built into the Boardhs and committeesh work plans for 2015. The Chairman ensures that all new directors receive a comprehensive...

  • Page 77
    ... business Balance Sheet within risk appetite and objectives and is embedded throughout the provides financial and insurance risk Group. The RMF has been in place for the management oversight. year under review and up to the date of The Operational Risk Committee is also approval of the Annual report...

  • Page 78
    ...financial provide reasonable assurance of the performance, management, remuneration material accuracy and completeness of the and governance, within the constraints of business unit Chief Executive Officer's information already made public, to assessment understand any issues of concern to investors...

  • Page 79
    ...to creating long-term shareholder Membership and attendance value and business success. Number of meetings Percentage As previously reported, I will be stepping Committee member attended attendance down as both Chairman of the Board and John McFarlane of the committee following the Group's (Chairman...

  • Page 80
    ... the benefits of diversity on the Board, including gender. The committee strongly believes that diversity throughout the Group and at Board and senior management level is a driver of business success. Diversity brings a broader, more rounded perspective to decision-making and risk management, making...

  • Page 81
    ... to the services of the CAO, the Group Company Secretary, senior financial management and external professional advisers. During the year committee members attended meetings of business unit Audit Committees in Poland, France and Spain. Revised committee Terms of Reference were In November 2014, the...

  • Page 82
    ... and assumptions applied in calculating the year end liabilities are appropriate. The committee considered a change in the model used to value equity release mortgage loans held by the UK Life Annuity Financial statements and business. The new methodology accounting policies 29% incorporates more...

  • Page 83
    ... Officer The CAO had direct access to the Board Chairman, the committee Chairman and the committee members. The committee worked with the Group CEO to determine the CAO's objectives and evaluate his levels of achievement, and to approve the CAO's remuneration. His annual performance related bonus...

  • Page 84
    ... be used. Non-audit services where the external auditor may be used include: non-recurring internal controls (such as the work commissioned in relation to Aviva Investors referred to below) and risk management reviews (excluding outsourcing of internal audit work), advice on financial reporting and...

  • Page 85
    ... to capital and liquidity and to make recommendations on risk appetite to the Board • Review the implementation of management actions and strategic decisions required to meet the capital implications of the new SII and GSII regulations • Review the Group's investment risk strategy, credit limit...

  • Page 86
    ...during 2014. Risk Committee - allocation of agenda time Risk appetite, risk management and risk reporting Group capital, liquidity management and stress testing Solvency II/Global Systemically Important Insurer Business unit and functional updates Risk review of Group Plan Regulatory and governance...

  • Page 87
    ... product lines. During the year, the committee received reports on the UK and Ireland General Insurance and Aviva Investors businesses, as well as a detailed review of the business in Canada. IT risks are increasingly high profile and, following the appointment of a new Chief Information Officer...

  • Page 88
    ... of the committee, I am pleased to present the Governance Committee's report for the year ended 31 December 2014. The Board strongly believes that good governance and strong, responsible, balanced leadership by the Board are critical to creating long-term shareholder value and business success. Our...

  • Page 89
    ...rights, environmental and employee-related information for inclusion in the Strategic report. The committee received progress reports on all the Group's corporate responsibility key performance indicators and received an in-depth review of the business ethics code completion rates across all markets...

  • Page 90
    ... commercial contracts and joint venture agreements. None are considered to be significant in terms of their potential impact on the business of the Group as a whole. All of the Company's employee share incentive plans contain provisions relating to a change of control. Outstanding awards and options...

  • Page 91
    ... by shareholders at the 2016 AGM. Financial instruments - Group companies use financial instruments to manage certain types of risks, including those relating to credit, foreign currency exchange, cash flow, liquidity, interest rates, and equity and property prices. Details of the objectives and...

  • Page 92
    ... understandable and provides the information necessary for shareholders to assess the Group's and the company's performance, business model and strategy. Each of the directors, whose names and functions are listed in the Directors' and corporate governance report confirm that, to the best of their...

  • Page 93
    ... the remuneration policy for Executive Directors to the Board and shareholders for approval. The Company has an Audit Committee comprised of independent NEDs and at least one member meets both the NYSE and Code requirements on financial experience. The Audit Committee does not review risk management...

  • Page 94
    ... reported for the 2014 annual bonus, and financial targets are being disclosed for 2013. • Long Term Incentive Pdan - Extend the Dear Dear Shareholder sharehodder On behalf of the Board, the Remuneration Committee is pleased to present the Directors' Remuneration Report (DRR) for the year ended...

  • Page 95
    ... Company's Annual Report and accounts for the financial year ended 31 December 2014 (Annual report) have been determined under the existing remuneration policy - and the current annual bonus opportunities and incentive plan conditions. • Basic salafy - No change in basic salary is major strategic...

  • Page 96
    ...to achieve the annual business plan. To reward EDs who achieve the Company's strategic objectives and demonstrate the Aviva values and behaviours. Deferral provides alignment with shareholder interests and aids retention of key personnel. Awards are based on performance in the year. Targets are set...

  • Page 97
    ... and private medical insurance. In the case of non-UK executives, the committee may consider additional allowances in line with standard relevant market practice. EDs employed under UK contracts are eligible to participate in any HMRC approved all employee share plans operated by the Company on the...

  • Page 98
    ...include financial, risk, employee and customer measures. Achievement against individual strategic objectives is also taken into account. LTIP performance measures are chosen to provide an indication of both absolute and relative return generated for shareholders. In terms of target setting, a number...

  • Page 99
    ...plc Annual Annual report report and accounts 2014 2014 | 95 Aviva The committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with...

  • Page 100
    ... and accounts accounts 2014 2014 Directors' remuneration report continued Illustration of the policy The charts below illustrate how much EDs could earn under different performance scenarios in one financial year: • Minimum - basic salary, pension or cash in lieu of pension and benefits, no bonus...

  • Page 101
    ... registered office during normal hours of business, and at the place of the Company's 2015 AGM from 10.45 am on 29 April 2015 until the close of the meeting. The key employment terms and conditions of the current EDs, and those who served during the year, as stipulated in their employment contracts...

  • Page 102
    ... in 2015, the committee has had detailed engagement with our largest shareholders to discuss the remuneration policy proposals as set out in this report Topics covered included: âˆ' Appropriate benchmarking group âˆ' Measures of short-term and long-term performance âˆ' Decisions on annual bonus and...

  • Page 103
    .... Table 5: Non-Executive Directors' key terms of appointment Provision Policy Period In line with the requirement of the UK Corporate Governance Code, all NEDs, including the Chairman, are subject to annual re-election by shareholders at each AGM. By the director or the Company at their discretion...

  • Page 104
    ...to management the level and structure of remuneration for senior management and, other than in respect of Board members, approve exceptional remuneration activity for employees outside agreed policy The full terms of reference for the committee can be found on the Company's website at www.aviva.com...

  • Page 105
    ... approval of the bonus targets and consideration of a new Aviva Investors LTIP. Remuneration Policy/Governance/ Regulatory Issues/Reporting Senior Management Objectives/ Remuneration/Successon Planning Share plans operation/ Performance Testing/Targets Strategic Reward Review/ Shareholder Liaison 16...

  • Page 106
    ... bonus agard for 2013 or 2014. 2 Bonus payable in respect of the financial year including any deferred element at face value at date of agard. 3 Pension contributions consist of employer contributions into the defined contribution section of the Aviva Staff Pension Scheme, excluding salary exchange...

  • Page 107
    ... aim is to Selp drive and reward effective risk management and a robust control environment across tSe Group. Personal performance, • Progress against Group strategic objectives: - True customer composite - Digital first - Not everywSere • LeadersSip and demonstration of tSe Aviva values: - Care...

  • Page 108
    ...long as the participant remains employed by the Company. Participants are eligible to receive dividend shares through the AESOP. The Aviva 2007 SAYE Scheme allows eligible employees to acquire options over the Company's shares at a discount of up to 20% of their market value at the date of grant. In...

  • Page 109
    ... Face value has been calculated using the average of the middle-market closing price of an Aviva ordinary share on the three consecutive business days immediately preceding the date of grant, on 24 March 2014. Accordingly 601,226 LTIP shares and 150,306 ABP shares were awarded to the Group CEO...

  • Page 110
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Directors' remuneration report continued Payments for loss of office (audited information) There were no payments for loss of office during the year. Implementation of remuneration policy in 2015 The implementation of the policy...

  • Page 111
    ...local market conditions. Table 18: Percentage change in remuneration of Group CEO % change in basic salary 2013 - 2014 % change in bonus 2013 - 2014 % change in benefits 2013 - 2014 Group CEO All UK-based employees - 4.01% 15.56% (15.72)%1 (77.41)% 5.51% Notes 1 The decrease in bonus awards for...

  • Page 112
    ... Company, showing both gross income, and also taking into account integration and restructuring costs. Table 19: Relative importance of spend on pay Year end 31 December 2013 £m Year end 31 December 2014 £m % change Adjusted operating profit before tax1 Dividends paid2 Share buybacks3 Total staff...

  • Page 113
    ... Market price at date awards vested/ option exercised Pence Normal Vesting Date/ Exercise Period7 Patrick Regan Aviva long term incentive plan5, 6 2011 2012 2013 Aviva annual bonus plan 2011 2012 Savings-related options 20108 Mark Wilson Aviva long term incentive plan5, 6 2013 2014 Aviva annual...

  • Page 114
    ...share plans (5% in any rolling ten-year period) was 2.95% and 1.86% respectively on 31 December 2014. Governance Regulatory remuneration code The Financial Conduct Authority's (FCA) remuneration code applies to Aviva Investors and one small 'firm' (as defined by the FCA) within the UK & Ireland Life...

  • Page 115
    ... held to cover linked liabilities 31 Ordinary share capital 32 Group's share plans 33 Shares held by employee trusts 34 Preference share capital 35 Direct capital instruments and fixed rate tier 1 notes 36 Merger reserve 37 Other reserves 38 Retained earnings 39 Non-controlling interests 40 Contract...

  • Page 116
    ... to shareholders' profit adjusted for integration and restructuring costs. • Specific audit procedures were performed within the UK Life, UK General Insurance, Canada, France and Spain markets to address the areas of focus identified below. • We identified a further five markets where account...

  • Page 117
    ... plc plc Annual Annual report report and accounts 2014 | 113 Aviva Area of focus How our audit addressed the area of focus • We peffofmed feasonableness checks on the modelled fesults of managements' analysis of change and tested the accufacy of the manual calculations. This included assessing...

  • Page 118
    ... reporting format is along market reporting lines with supplementary information being given by business activity. The operating segments of the Group are 'United Kingdom & Ireland' (Life and General Insurance), France, Poland, 'Italy, Spain and Other', Canada, Asia, Aviva Investors and 'Other Group...

  • Page 119
    ... of the UK Corporate Governance Code IFRS Financial statements ("the Code"), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group's and parent company's performance, business model and...

  • Page 120
    ... on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the parent company's members as...

  • Page 121
    ... 2014 | 117 Aviva 117 Accounting policies Aviva plc (t'e 'Company'), a public limited company incorporated and domiciled in t'e United Kingdom (UK), toget'er wit' its subsidiaries (collectively, t'e 'Group' or 'Aviva') transacts life assurance and long-term savings business, fund management...

  • Page 122
    ...on investments supporting its long-term and non-long-term businesses. Operating profit for long-term business is based on expected investment returns on financial investments backing shareholder and policyholder funds over the reporting period, with allowance for the corresponding expected movements...

  • Page 123
    ... liabilities Pension obligations Deferred income taxes In several countries, the Group has invested in a number of specialised investment vehicles such as Open-ended Investment Companies (OEICs) and unit trusts. These invest mainly in equities, bonds, cash and cash equivalents, and properties...

  • Page 124
    ... investment valuation reserve within equity. (E) Foreign currency translation Income statements and cash flows of foreign entities are translated into the Group's presentation currency at average exchange rates for the year while their statements of financial position are translated at the year-end...

  • Page 125
    ... the year, movements in amortised cost on debt securities, realised gains and losses, and unrealised gains and losses on fair value through profit or loss investments (as defined in accounting policy T). Dividends on equity securities are recorded as revenue on the ex-dividend date. Interest income...

  • Page 126
    ...reporting date, the Group reviews its unexpired risks and carries out a liability adequacy test for any overall excess of expected claims and deferred acquisition costs over unearned premiums, using the current estimates of future cash flows under its contracts after taking account of the investment...

  • Page 127
    ...unit fund value, plus additional non-unit reserves if required based on a discounted cash flow analysis. For non-linked contracts, the fair value liability is based on a discounted cash flow analysis, with allowance for risk calibrated to match the market price for risk. Amortised cost is calculated...

  • Page 128
    .... management and non-hnsurance operathons. Purchases and sales of hnvestments are recognhsed on the (Q) Investment property trade date, whhch hs the date that the Group commhts to Investment property hs held for long-term rental yhelds and hs not purchase or sell the assets, at thehr fahr values...

  • Page 129
    ... exchange rates, and the timing of payments. Interest rate futures, forwards and options contracts Interest rate futures are exchange-traded instruments and represent commitments to purchase or sell a designated security or money market instrument at a specified future date and price. Interest rate...

  • Page 130
    ... mortgages are estimated using discounted cash flow models, based on a risk-adjusted discount rate which reflects the risks associated with these products. They are revalued at each period end, with movements in their fair values being taken to the income statement. At each reporting date, we review...

  • Page 131
    ... liability fof annual leave as a fesult of sefvices fendefed by employees up to the statement of financial position date. Pension obligations Pufchases and sales of investment pfopefty, loans and financial investments afe included within opefating cash flows as the pufchases afe funded ffom cash...

  • Page 132
    ... the Group, as employer, has no further payment obligations. The Group's contributions are charged to the income statement in the year to which they relate and are included in staff costs. Equity compensation plans The Group offers share award and option plans over the Company's ordinary shares for...

  • Page 133
    ... costs net of income taxes) is shown as a deduction from total shareholders' equity. The Group's only such holding comprises shares purchased by employee trusts to fund certain awards under the equity compensation plans described in accounting policy AB above. Gains and losses on sales of own shares...

  • Page 134
    ... 50.4p 49.6p 48.4p 4).)p Discontinued operations represent the results of the US life and related internal asset management businesses (US Life) until the date of disposal (2 October 2013). See note 4 for further details. The accounting policies (identified alphabetically) on pages 117 to 129 and...

  • Page 135
    ... operations1 Total comprehensive income for the year Attributable to: Equity shareholders of Aviva plc Non-controlling interests 1 Discontinued operations represent the results of the US life and related internal asset management businesses (US Life) until the date of disposal (2 October 2013). See...

  • Page 136
    ... Group operating profit to profit for the year For the year ended 31 December 2014 2014 £m Note Continuing operations Continuing operations 2013 £m Discontinued operations1 Operating profit before tax attributable to shareholders' profits Life business General insurance and health Fund management...

  • Page 137
    ... - 2,173 Year ended 31 December 2013 Long-term General business insurance and £m health £m Fund management £m Other operations £m Total £m United Kingdom & Ireland France Poland Italy, Spain and Other Canada Asia Aviva Investors Other group activities Corporate centre Group debt costs and...

  • Page 138
    ... further detail. For the year ended 31 December 2013 Ordinary share capital £m Preference share capital £m Share premium £m Shares held Merger by employee reserve trusts £m £m Other Reserves1 £m Retained earnings £m Equity attributable to shareholders of Aviva plc £m DCI and fixed rate tier...

  • Page 139
    ...capital Capital reserves Share premium Merger reserve Shares held by employee trusts Other reserves Retained earnings Equity attributable to shareholders of Aviva plc Direct capital instruments and fixed rate tier 1 notes Non-controlling interests Total equity Liabilities Gross insurance liabilities...

  • Page 140
    136 | Aviva plc Annual report report and and accounts accounts 2014 2014 Consolidated financial statements continued Consolidated statement of cash flows For the year ended 31 December 2014 The cash flows presented in this statement cover all the Group's activities and include flows from both ...

  • Page 141
    ... statement of comprehensive income or consolidated statement of changes in equity for the year ended 31 December 2013. IFRS Financial statements 2 - Exchange rates The Group's principal overseas operations during the year were located within the eurozone, Canada and Poland. The results and cash...

  • Page 142
    ... using the equity method. On 17 January 2014, Aviva and PT Astra International Tbk ("Astra") signed an agreement to form the 50-50 joint venture (Astra Aviva Life) which completed in May 2014. As of that date, Aviva and Astra began to share joint control and the Group's holding in Astra Aviva Life...

  • Page 143
    ...-term business - initial public offering On 13 November 2014 Aviva and its joint venture partner Sabanci Holdings completed an initial public offering of a minority share of their Turkish life and pensions joint venture AvivaSA Emeklilik ve Hayat A.S ("Aviva SA"), reducing the Group's holding in...

  • Page 144
    140 | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 4 - Subsidiaries continued (vi) Spain - long-term business On 19 September 2014 Aviva announced the sale of its 50% holding in CXG Aviva Corporacion Caixa Galicia de ...

  • Page 145
    ... plc plc Annual Annual report report and accounts 2014 | 141 Aviva 4 - Subsidiaries continued (c) Assets and liabilities of operations classified as held for sale During 2014 it was determined that the value of the Group's Taiwan joint venture, First-Aviva Life Insurance Co. Ltd. ("Taiwan"), would...

  • Page 146
    ... life insurance, long-term health (in the UK) and accident insurance, savings, pensions and annuity business. UK and Ireland General Insurance provides insurance cover to individuals and businesses, for risks associated mainly with motor vehicles, property and liability (such as employers' liability...

  • Page 147
    ... Group Reinsurance. Discontinued operations represent the results of the US Life and related internal asset management business (US Life) until the date of disposal (2 October 2013). For further details, see note 4. In 2014, the Group paid a settlement of £20 million related to the purchase price...

  • Page 148
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 5 - Segmental information continued (a) (ii) Segmental income statement for the year ended 31 December 2013 United Kingdom & Ireland Europe Italy, Spain and Other £m Aviva...

  • Page 149
    ...(iii) Segmental statement of financial position as at 31 December 2014 United Kingdom & Ireland Europe Italy, Spain and Other £m Other Group Aviva Asia Investors activities £m £m £m Life £m GI £m France £m Poland £m Canada £m Total £m Goodwill Acquired value of in-force business and...

  • Page 150
    ... products, including investment funds, unit trusts, OEICs and ISAs. Clients include Aviva Group businesses and third-party financial institutions, pension funds, public sector organisations, investment professionals and private investors. Other Other includes service companies, head office expenses...

  • Page 151
    Aviva plc plc Annual Annual report report and accounts 2014 | 147 Aviva 5 - Segmental information continued (b) (i) Segmental income statement - products and services for the year ended 31 December 2014 Long-term business £m General insurance Fund and health2 management £m £m Other £m Total £m...

  • Page 152
    ... report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 5 - Segmental information continued (b) (ii) Segmental income statement - products and services for the year ended 31 December 2013 General Long-term insurance and Fund business health2 management...

  • Page 153
    Aviva plc plc Annual Annual report report and accounts 2014 | 149 Aviva 5 - Segmental information continued (b) (iii) Segmental statement of financial position - products and services as at 31 December 2014 Long-term business £m General insurance Fund and health management £m £m Other £m Total ...

  • Page 154
    ...gives further detail on the items appearing in the income section of the consolidated income statement. Continuing operations 2014 £m 2013 £m Gross written premiums (note 5a and 5b) Long-term: Insurance contracts Participating investment contracts General insurance and health Less: premiums ceded...

  • Page 155
    ... note gives further detail on the items appearing in the expenses section of the consolidated income statement. Continuing operations 2014 £m 2013 £m Claims and benefits paid Claims and benefits paid to policyholders on long-term business Insurance contracts Participating investment contracts Non...

  • Page 156
    ... on risk-free fixed interest assets at the end of each financial year. The same margins are applied on a consistent basis across the Group to gross risk-free yields, to obtain investment return assumptions for equities and properties. Expected funds under management are equal to the opening value of...

  • Page 157
    ... business unit. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the longer-term rate of investment return. The longer-term rate of investment return is determined using...

  • Page 158
    ... during 2014 compared with 2013 is mainly due to a decrease in risk free rates increasing fixed income security market values, and other market movements impacting Group centre investments and the centre hedging programme. (d) The total assets supporting the general insurance and health business...

  • Page 159
    ...the total staff costs. (a) Employee numbers The number of persons employed by the Group, including directors under a service contract, was: At 31 December Continuing operations 2014 Number 2013 Number Average for the year1 2014 Number 2013 Number United Kingdom & Ireland France Poland Italy, Spain...

  • Page 160
    ...£0.5 million relating to a controls review at Aviva Investors and £1.0 million for a number of other, individually smaller services. Details of the Group's process for safeguarding and supporting the independence and objectivity of the external auditors are given in the Audit Committee report. 14...

  • Page 161
    ...(v) Deferred tax charged to the income statement represents movements on the following items: 2014 £m 2013 £m Long-term business technical provisions and other insurance items Deferred acquisition costs Unrealised gains/(losses) on investments Pensions and other post-retirement obligations Unused...

  • Page 162
    ...of coupon payments on the direct capital instruments and fixed rate tier 1 notes (2013: £22 million). In 2013, £30 million related to the currency translation reserve recycled to the income statement on the sale of Aviva USA Corporation. (d) Tax reconciliation The tax on the Group's profit before...

  • Page 163
    ...shareholders' profits Tax attributable to shareholders' profit Profit/(loss) for the year Amount attributable to non-controlling interests Cumulative preference dividends for the year Coupon payments in respect of direct capital instruments (DCI) and fixed rate tier 1 notes (net of tax) Profit/(loss...

  • Page 164
    160 | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 15 - Earnings per share continued (b) Diluted earnings per share (i) Dgluted earngngs per share gs calculated as follows: 2014 Weighted average number of shares million...

  • Page 165
    ... lives (detailed in note 18) 2014 £m 2013 £m 2014 £m Total 2013 £m United Kingdom - general insurance and health Ireland - general insurance and health France - long-term business Poland - long-term business Italy Long-term business General insurance and health Spain - long-term business Aviva...

  • Page 166
    ... ggowth gate 2014 % 2013 % Futuge new business pgofits discount gate 2014 % 2013 % Italy long-term busgness Spagn long-term busgness MCEV MCEV MCEV MCEV 2.0 1.5 2.0 1.5 8.4 10.0 10.5 10.0 Genegal insugance, health, fund management and otheg businesses Value gn use gs calculated as the...

  • Page 167
    ... Disposals Foreign exchange rate movements At 31 December 2013 Impairment losses charged to expenses Disposals Foreign exchange rate movements At 31 December 2014 Carrying amosnt At 1 January 20133 At 31 December 2013 At 31 December 2014 1 2 3 On insurance and participating investment contracts. On...

  • Page 168
    ... property management undertakings. Reductions in Group interest in 2014 relate to the sale of the South Korean joint venture, Woori Aviva Life Insurance Co. Ltd, and the IPO share sale of AvivaSA Emeklilik ve Hayat A.S. See note 4 for further details. The Group's share of total comprehensive income...

  • Page 169
    ...of long-term business cash generating units for the impairment testing of goodwill, as set out in note 17(b). The recoverable amount of property management undertakings is the fair value less costs to sell of the joint venture, measured in accordance with the Group's accounting policy for Investment...

  • Page 170
    ...by Group companies. Properties under construction £m Owner occupied properties £m Motor vehicles £m Computer equipment £m Other assets £m Total £m Cost or valuation At 1 January 2013 Additions Disposals1 Transfers (to)/from investment property (note 22) Fair value losses Foreign exchange rate...

  • Page 171
    Aviva plc plc Annual Annual report report and accounts 2014 | 167 Aviva 22 - Investment property This note gives details of the properties we hold for long-term rental yields or capital appreciation. 2014 Freehold £m Leasehold £m Total £m Freehold £m Leasehold £m 2013 Total £m Carrying value...

  • Page 172
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 23 - Fair value methodology continued The majority of the Group's assets and liabilities measured at fair value are based on quoted market information or observable market...

  • Page 173
    ... and are subject to a number of monitoring controls, such as monthly price variances, stale price reviews and variance analysis. Pricing services, where available, are used to obtain the third-party broker quotes. Where pricing services providers are used, a single valuation is obtained and applied...

  • Page 174
    ...Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 23 - Fair value methodology continued Transfer to/from Level 3 Transfers out of Level 3 of £0.5 billion principally related to debt securities held by our business in France...

  • Page 175
    ... of equity release mortgages held by our UK Life annuity business valued using an internal model which has been refined during 2014 (see note 41(b)(iii) for further details). Inputs to the model include property growth rates, mortality and morbidity assumptions, cost of capital and liquidity premium...

  • Page 176
    172 | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 23 - Fair valun mnthodology continund Where possible, the Group tests the sensitivity of the fair values of Level 3 investments to changes in unobservable inputs to ...

  • Page 177
    ...one year after the statement of financial position date. Loans at fair value Fair values have been calculated by discounting the future cash flows using appropriate current interest rates for each portfolio of mortgages. Further details of the fair value methodology are given in note 23. The change...

  • Page 178
    174 | Aviva plc Annual report 174 report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 25 - Securitised mortgages and related assets The Group, in its UK Life business has loans receivable, secured by mortgages, which have then been securitised through...

  • Page 179
    ... of short term liquidity funding. For commitments to property management joint ventures, please refer to Note 19. In relation to risk management, disclosures on debt securities and investment vehicles are given in note 58(b)(iii). The Group has not provided any other financial or other support in...

  • Page 180
    ...: 2014 At fair value through profit or loss Trading £m Other than trading £m Available for sale £m Total £m At fagr value through profgt or loss Tradgng £m Other than tradgng £m Avaglable for sale £m Total £m Restated1 2013 Fixed maturity securities Debt securities UK government UK local...

  • Page 181
    ... 2013 Fair value £m Fair value £m Fixed maturity securities Equity securities Other investments Unit trusts and specialised investment vehicles Derivatives financial instruments Deposits with credit institutions Minority holdings in property management undertakings Other long-term investments...

  • Page 182
    ... Securities 2014 £m 2013 £U 2014 £m Participating 2013 £U 2014 £m Shareholder 2013 £U 2014 £m Total 2013 £U Austrga BelgguU France GerUany Greece Ireland Italy Netherlands Poland Portugal Spagn European Supranatgonal debt Other European countrges Europe Canada Ungted States North America...

  • Page 183
    ... banks. Net of non-controlling interests, our direct shareholder asset exposure to worldwide bank equity securities is £75 million. Net of non-controlling interests, the participating fund exposures to worldwide bank debt securities, where the risk to our shareholders is governed by the nature and...

  • Page 184
    ... staff pension schemes are recoverable more than one year after the statement of financial position date. (b) Deferred acquisition costs - movements in the year The movements in deferred acquisition costs (DAC) during the year were: 2014 General insurance Retail fund and health management business...

  • Page 185
    ... costs deferred during the year were offset by amortisation, the effect of assumption changes and exchange rate movements. Assumption changes mainly reflect the announcement in March 2014 of a 0.75% charge cap for default funds and removal of active member discounts on auto-enrolment pension schemes...

  • Page 186
    ...Aviva Investors Holdings Limited 2009 long term incentive plan, a long term profit sharing arrangement for key Aviva Investors' employees. Awards will vest on the 3rd anniversary of grant, subject to achieving performance conditions. (vi) Aviva Investors deferred share award plan awards These awards...

  • Page 187
    ... long term incentive plan are subject to Aviva Investors Holdings Limited achieving a return on capital employed (ROCE) of 27% per annum over a three year performance period. Shares which do not vest will lapse. (iii) Shares to satisfy awards and options From July 2008 to 2014, it was the Company...

  • Page 188
    ... the yields available on UK government bonds as at the date of grant. The bonds chosen were those with a similar remaining term to the expected life of the options. 4,626,781 options granted after 7 November 2002 were exercised during the year (2013: 2,442,874). (ii) Share awards The fair value of...

  • Page 189
    ... shares. The Company does not have a contractual obligation to deliver cash or other financial assets to the preference shareholders and therefore the directors may make dividend payments at their discretion. 35 - Direct capital instruments and fixed rate tier 1 notes Notional amount 2014 £m 2013...

  • Page 190
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 35 - Direct capital instruments ang fixeg rate tier 1 notes continueg The Company has the option to defer coupon payments on the DCI or FxdRNs on any relevant payment date...

  • Page 191
    .... 2014 £m 2013 £m Balance at 1 January Profit for the year attributable to equity shareholders Remeasurements of pension schemes Dividends and appropriations (note 16) Shares issued under equity compensation plans Shares distributed by employee trusts Realised loss on redemption of direct capital...

  • Page 192
    188 | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 40 - Contract liabilities and associated reinsurance The follo.ing notes explain ho. the Group calculates its liabilities to policyholders for insurance and investment ...

  • Page 193
    ...) 31 (5) 26 (2,181) IFRS Financial statements (b) Long-term business liabilities (i) Business description The Group underwrites long-term business in a number of countries as follows: • In the UK mainly in: - New With-Profits sub-fund (NWPSF) of Aviva Life & Pensions UK (UKLAP), where the with...

  • Page 194
    ... with reference to implied volatility data on traded market instruments, where available, or on a best estimate basis where not. Volatility 2014 2013 Equity returns Property returns Fixed interest yields 22.3% 15.0% 27.2% 22.1% 15.0% 16.3% The equity volatility used depends on term, money-ness...

  • Page 195
    ... discount fates 2014 2013 IFRS Financial statements Assufances Life conventional non-pfofit Pensions conventional non-pfofit Annuities Conventional immediate and defeffed annuities Non-unit fesefves on Unit Linked business Life Pensions Income Pfotection Active lives Claims in payment - level...

  • Page 196
    ... plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued For the main pensions annuity business in Aviva Annuity UK Limited, the underlying mortality assumptions for Males are 101.5% of PCMA00 (2013...

  • Page 197
    ... estimates of future claim payments, except for the following classes of business for which discounted provisions are held: Rate Class 2014 2013 2014 Mean term of liabilities 2013 IFRS Financial statements Reinsured London Market business Latent claims Structured settlements 2.1% 0.16% to...

  • Page 198
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 41 - Insurance liabilities continued The following explicit assumptions are made which could materially impact the level of booked net reserves: UK mesothelioma claims The...

  • Page 199
    ... the estimated cost of claims. Key elements of the release from prior accident year general insurance and health net provisions during 2014 were: • £112 million release from UK & Ireland due to favourable development in UK & Ireland on personal and commercial motor, and commercial property claims...

  • Page 200
    ... consolidated financial statements continued 41 - Insurance liabilities continued (iii) Net of reinsurance After the effect of reinsurance, the loss development table is: Accident year All prior years 6m 2005 6m 2006 6m 2007 6m 2008 6m 2009 6m 2010 6m 2011 6m 2012 6m 2013 6m 2014 6m Total £m Net...

  • Page 201
    ... the year IFRS Financial statements The following movements have occurred in the gross provisions for investment contracts in the year: (i) Participating investment contracts 2014 £m 2013 £m Carrying amount at 1 January Provisions in respect of new business Expected change in existing business...

  • Page 202
    198 | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 42 - Liability for investment contracts continued For many types of long-term business, including unit-linked and participating funds, movements in asset values are ...

  • Page 203
    ... stochastic model, and amounts to £33 million at 31 December 2014 (2013: £31 million). (ii) Guaranteed unit price on certain products IFRS Financial statements Certain unitglinked pension products linked to longgterm life insurance funds provide policyholders with guaranteed benefits at...

  • Page 204
    ... performance of gnvestments held gn the wgth-profgt fund. Amounts payable under these guarantees are determgned by the bonuses declared on these polgcges. (iii) Spain and Italy Guaranteed investment returns and guaranteed surrender values The Group has also wrgtten contracts contagngng guaranteed...

  • Page 205
    ... in related liabilities and other non-financial assets. (ii) In respect of general insurance and health outstanding claims provisions and IBNR 2014 £m 2013 £m IFRS Financial statements Carrying amount at 1 January Impact of changes in assumptions Reinsurers' share of claim losses and expenses...

  • Page 206
    ...Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 45 - Effect of changes in assumptions and estimates during the year Certagn estgmates and assumptgons used gn determgngng our liabilities for insurance and investment contract...

  • Page 207
    ... fund. The method for estimation of the recoverable negative UDS balance uses a real-world embedded value method, with a risk-discount rate of 5.00% (2013: 6.60%). The embedded value method includes an implicit allowance for the time value of options and guarantees. The negative UDS balance in Italy...

  • Page 208
    ...) (312) (7) (319) (ii) The net deferred tax liability arises on the following items: 2014 £m 2013 £m Long-term business technical provisions and other insurance items Deferred acquisition costs Unrealised gains on investments Pensions and other post-retirement obligations Unused losses and tax...

  • Page 209
    ... pdc Annual Annual report report and accounts 2014 | 205 Aviva 48 - Provisions This note details the non-insurance provisions that the Group holds, and shows the movements in these during the year. (a) Carrying amounts 2014 £m 2013 £m Total IAS 19 obligations to main staff pension schemes (Note...

  • Page 210
    ...| Aviva pdc plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 49 - Pension obligations continued The number of scheme members was as follows: United KingdoU 2014 Number 2013 NuUber 2014 Number Ireland 2013 NuUber 2014 Number Canada...

  • Page 211
    Aviva plc pdc Annual Annual report report and accounts 2014 | 207 Aviva 49 - Pension obligations continued Fair Value of Scheme Assets £m Present Value of defined benefit obligation £m IAS 19 Pensions net surplus/ (deficits) £m 2013 Net surplus in the schemes at 1 January Current service costs...

  • Page 212
    ... of the pension obligations. Financial assumptions The main financial assumptions used to calculate scheme liabilities under IAS 19 are: UK 2014 2013 2014 Ireland 2013 2014 Canada 2013 Inflation rate1 General salary increases 2 Pension increases1 Deferred pension increases1 Discount rate Basis of...

  • Page 213
    ... UK scheme whe Company works closely with the trustee, who is required to consult it on the investment strategy. Interest rate and inflation risks are managed using a combination of liability-matching assets and swaps. Exposure to equity risk has been reducing over time and credit risk is managed...

  • Page 214
    ... expense for defined contribution schemes is shown section (d) below. (d) Charge to staff costs in the income statement The total pension charge/ (credit) to staff costs for all of the Group's defined benefit and defined contribution schemes were: 2014 £m 2013 £m Continuing operations UK defined...

  • Page 215
    ... (2013: £73 million). Contractual undiscounted interest payments are calculated based on underlying fixed interest rates or prevailing market floating rates as applicable. Year-end exchange rates have been used for interest projections on loans in foreign currencies. (c) Operational borrowings...

  • Page 216
    ... 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 2014 was £223 million (2013: £236 million), calculated with reference to quoted prices. (iii) Commercial paper The commercial paper consists...

  • Page 217
    ...in such holdings over the year are reflected in the tables above. All movements in fair value in 2013 and 2014 on securitised mortgage loan notes designated as fair value through profit or loss were attributable to changes in market conditions. (f) Undrawn borrowings The Group and Company have the...

  • Page 218
    ...43 gives details of these guarantees and options. In providing these guarantees and options, the Group's capital position is sensitive to fluctuations in financial variables including foreign currency exchange rates, interest rates, property values and equity prices. Interest rate guaranteed returns...

  • Page 219
    ... plc pdc Annual Annual report report and accounts 2014 | 215 Aviva 53 - Contingent liabilities and other risk factors continued (e) Structured settlements The Company has purchased annuities from licensed Canadian life insurers to provide for fixed and recurring payments to claimants. As a result...

  • Page 220
    ... Asia General insurance & health United Kingdom Ireland United Kingdom & Ireland France Italy Other Europe Europe Canada Asia Fund Management Corporate & Other Business1 Total capital employed Financed by Equity shareholders' funds Non-controlling interests Direct capital instruments & fixed rate...

  • Page 221
    ...reflects a number of factors, including the level of premium income, payments of claims, creditors and surrenders and purchases and sales of operating assets including financial investments. It also includes changes in the size and value of consolidated cash investment funds and changes in the Group...

  • Page 222
    ... sale in the Group IFRS statement of financial position still included in the Group's available capital resources at 31 December 2014. Available capital resources Old withprofit sub-fund £m New withprofit sub-fund £m Withprofit sub-fund5 £m Total UK life Total Overseas Other withOther Total life...

  • Page 223
    ... that exist in our Group. Within the Aviva Group there exist intra-group arrangements to provide capital to particular business units. Included in these arrangements is a subordinated loan ox £200 million xrom Aviva Lixe Holdings UK Limited to Aviva Annuity Limited to provide capital to support the...

  • Page 224
    ..., general insurance, asset management and operational risk. Risks falling within these types may affect a number of metrics including those relating to balance sheet strength, liquidity and profit. They may also affect the performance of the products we deliver to our customers and the service to...

  • Page 225
    ... committee structures with equivalent terms of reference exist in the business units. Further information on the types and management of specific risk types is given in sections (b) âˆ' (j) below. The risk management framework of a small number of our joint ventures and strategic equity holdings...

  • Page 226
    ... the funds' risk profiles. At the Group level, we also monitor the asset quality of unit trusts and other investment vehicles against Group set limits. A proportion of the assets underlying these investments are represented by equities and so credit ratings are not generally applicable. Equity...

  • Page 227
    ...are described below. (i) Equity price risk The Group is subject to equity price risk arising from changes in the market values of its equity securities portfolio. We continue to limit our direct equity exposure in line with our risk preferences. At a business unit level, investment limits and local...

  • Page 228
    ...property prices is given in section '(j) risk and capital management' below. (iii) Interest rate risk Interest rate risk arises primarily from the Group's investments in long-term debt and fixed income securities and their movement relative to the value placed on the insurance liabilities. A number...

  • Page 229
    ...risk Inflation fisk afises pfimafily ffom the Gfoup's exposufe to genefal insufance claims inflation, to inflation linked benefits within the defined benefit staff pension schemes and within the UK annuity poftfolio and to expense inflation. Incfeases in long-tefm inflation expectations afe closely...

  • Page 230
    ... through the application of a Group liquidity risk policy and business standard and through the development of its liquidity risk management plan. At Group and business unit level, there is a liquidity risk appetite which requires that sufficient liquid resources be maintained to cover net outflows...

  • Page 231
    ... longevity risk was reduced as a result of the Aviva Staff Pension Scheme entering into a longevity swap covering £5 billion of pensioner in payment scheme liabilities on 5 March 2014, while any significant reduction in individual annuity new business volumes as a result of the UK budget changes to...

  • Page 232
    ...risks associated with operating an asset management business through its ownership of Aviva Investors. The underlying risk profile of our asset management risk is derived from investment performance, specialist investment professionals and leadership, product development capabilities, fund liquidity...

  • Page 233
    ... used to manage the business and to inform the decision making process. (ii) Life insurance and investment contracts The nature of long-term business is such that a number of assumptions are made in compiling these financial statements. Assumptions are made about investment returns, expenses...

  • Page 234
    230 | Aviva plc Annual report report and and accounts accounts 2014 2014 Notes to the consolidated financial statements continued 58 - Risk management continued Long-term business Sensitivities as at 31 December 2014 2014 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% ...

  • Page 235
    ... expense provision. Fund management and non-insurance business sensitivities as at 31 December 2014 2014 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Total - - 5 (15) 25 IFRS Financial statements 2014...

  • Page 236
    ... rate related swaption contracts most closely resembles option-type contracts. Fair value assets are recognised as 'Derivative financial instruments' in note 27(a), while fair value liabilities are recognised as 'Derivative liabilities' in note 51. The Group's derivative risk management policies...

  • Page 237
    ... assets and liabilities in the table below are made up of the contracts described in detail in note 59. Aviva participates in a number of stock lending and repurchase arrangements. In some of these arrangements cash is exchanged by Aviva for securities and a related receivable is recognised...

  • Page 238
    ...repurchase arrangements totalling £3,763 million (2013: £4,844 million) is recognised within 'Loans to Banks' in note 24(a). Other financial liabilities presented above represent liabilities related to repurchase arrangements recognised within "Obligations for repayment of cash collateral received...

  • Page 239
    ...associates and staff pension schemes. The Group undertakes transactions with related parties in the normal course of business. Loans to related parties are made on normal arm's-length commercial terms. Services provided to, and by related parties 2014 Income earned in period £m Expenses incurred in...

  • Page 240
    ... Group's annual return to Companies House. Aviva plc* Aviva - COFCO Life Insurance Company Limited** Aviva Group Holdings Limited* General Accident plc*** Aviva Life Holdings UK Limited* Aviva Investors Holdings Limited* Aviva Central Services UK Limited* Aviva International Insurance Limited...

  • Page 241
    ...(50%) Caja Murcia Vida y Pensiones, de Seguros y Reaseguros S.A. (50%) Vietinbank Aviva Life Insurance Company Limited (50%) IFRS Financial statements 63 - Subsequent events In February 2015, Aviva Investors reached a settlement with the FCA for certain systems and controls failings that happened...

  • Page 242
    ... and accounts accounts 2014 2014 Financial statements of the Company Income statement For the year ended 31 December 2014 Note 4014 £m 2013 £m Income Dividends received from subsidiaries Interest receivable from Group companies Expenses Net investment expense Operating expenses Interest payable...

  • Page 243
    ... report report and accounts 2014 | 239 Aviva Statement of changes in equity For the year ended 31 December 2014 Direct capital instruments and fixed rate tier 1 notes Equity £m £m Ordinary share capital £m Note Preference share capital £m Share premium £m Merger reserve £m Investment...

  • Page 244
    ... and cash equivalents Total assets Equity Ordinary share capital Preference share capital Called up capital Share premium account Merger reserve Investment valuation reserve Equity compensation reserve Retained earnings Direct capital instruments and fixed rate tier 1 notes Total equity Liabilities...

  • Page 245
    ... through the Company's own bank accounts. 2014 £m 2013 £m Cash flows from investing activities Sale/(purchase) of financial investments Interest received Net cash generated from/(used in) investing activities Cash flows from financing activities Funding provided from subsidiaries New borrowings...

  • Page 246
    ...Holdings Limited is an intermediate holding company, whilst General Accident plc has preference shares listed on the London Stock Exchange. The principal subsidiaries of the Aviva Group at 31 December 2014 are set out in note 62 to the Group consolidated financial statements. B - Operating expenses...

  • Page 247
    ... Financial statements 2014 £m 2013 £m Profit before tax Tax calculated at standard UK corporation tax rate of 21.5% (2013: 23.25%) Adjustment to tax charge in respect of prior years Non-assessable dividend income Disallowable expenses Non-taxable loss on settlement of intra-group loan Movement...

  • Page 248
    ...(2013: £92 million) on the direct capital instruments and fixed rate tier 1 notes. Details of the Merger reserve are given in the Group consolidated financial statements, note 36. The remeasurement of pension schemes relates to a small unfunded defined benefit scheme which is closed to new entrants...

  • Page 249
    ...plc plc Annual Annual report report and accounts 2014 | 245 Aviva H - Risk management Risk management in the context of the Group is considered in the Group consolidated financial statements, note 58. The business of the Company is managing its investments in subsidiary and joint venture operations...

  • Page 250
    24I | Aviva plc Annual report 246 report and and accounts accounts 2014 2014 Notes to the Company's financial statements continued I - Related party transactions continued Loans owed to subsidiaries Maturity analysis of contractual undiscounted cash flows: Principal £m Interest £m 2014 Total £m ...

  • Page 251
    Aviva plc plc Annual Annual report and accounts 2014 | 247 Aviva Other information Performance review In this section Financial and operating performance Selected consolidated financial data Information on the Company Analysis of investments Contractual obligations Risk and capital management ...

  • Page 252
    ... Capital and credit market conditions An important part of our business involves investing client, policyholder and shareholder funds across a wide range of financial investments, including equities, fixed income securities and properties. Our results are sensitive to volatility in the market value...

  • Page 253
    ...reflect our strategic objectives of narrowing our focus to businesses where we can produce attractive returns and exit businesses which we do not consider central to our future growth. Activity in 2014 Changes in government policy and legislation applicable to our business in many of the markets in...

  • Page 254
    ... share resulting in gross cash proceeds of £353 million. On 8 March 2013, the Group completed the disposal of its Irish long-term business subsidiary, Ark Life to Allied Irish Bank (AIB), and the acquisition of the non-controlling interest in Aviva Life Holdings Ireland Limited from AIB for total...

  • Page 255
    ... new business, we administration costs. define sales as the sum of the present value of new business premiums (PVNBP) of life, pension and savings products and Fund management investment sales. Fund management operating earnings consist of fees earned for PVNBP is equal to total single premium sales...

  • Page 256
    ... average outstanding term of the new contracts and the projection assumptions. • Share of lonv-term new business sales from joint United Kingdom & Ireland Life United Kingdom & Ireland GI France Poland Italy, Spain and Other Canada Asia Aviva Investors Other group activities Total sales 1 12,444...

  • Page 257
    ...financial investments backing shareholder funds over the period. Expected investment returns are calculated for equities and properties by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the longer-term rate of return. This rate of return...

  • Page 258
    ... equity markets. 21% as the level of transformation activity in UK and Ireland's general insurance business in 2012 was not repeated and Other income (from continuing operations) Solvency II implementation costs reduced to £79 million (2012: Year ended 31 December 2014 £117 million). Other income...

  • Page 259
    ... note 7 - Details of expenses' for further details. Year ended 31 December 2013 Pensions Annuities Bonds Protection Equity release Other United Kingdom Ireland Long-term in)urance, )aving) and health )ale) IFRS net written premium) Adju)ted operating profit before tax United Kingdom Ireland Life bu...

  • Page 260
    ... a decrease in risk free rates increasing fixed income securitw market values. This was offset bw an adverse impact from a decrease in the swap rate used to discount latent claims reserves and periodic pawment orders. Year end 31 December 2013 UK & Ireland general insurance and health NWP decreased...

  • Page 261
    ... tax attributable to shareholders' profits under IFRS from our operations in Poland for the three years ended 31 December 2014, 2013 and 2012. 2014 £m 2013 £m 2012 £m Sales Long-term insurance and savings business General insurance and health net written premiums Total sales IFRS net written...

  • Page 262
    258 | Aviva plc Annual report report and and accounts accounts 2014 2014 Financial and operating performance continued 2014 £m 2013 £m 2012 £m Sales Long-term insurance and savings business Italy - excluding Eurovita Spain - excluding Aseval & CxG Other Eurovita, Aseval & CxG Total long-term ...

  • Page 263
    ... in MCEV liquidity premium and extension of the MCEV covered business. Year ended 31 December 2014 Long term insurance and savings sales in Asia (excluding Malaysia) increased by 12% to £1,951 million (2013: £1,739 million) due to higher health sales in Singapore and higher protection sales in...

  • Page 264
    ... and profit/(loss) before tax attributable to shareholders for the three years ended 31 December 2014, 2013 and 2012. On 2 October 2013 the Group completed the sale of its United States life and related internal asset management businesses (US Life) to Athene Holding. See 'IFRS Financial Statements...

  • Page 265
    ... the Group completed the sale of its US Life and related internal asset management operations, which have been shown as discontinued operations in the income statement, statement of comprehensive income and statement of cash flows. In 2014, the Group paid a settlement related to the purchase price...

  • Page 266
    ...plc Annual report report and and accounts accounts 2014 2014 Selected consolidated financial data continued Statement of financial position data Amounts in accordance with IFRS 2014 £m Restated 2013 £m Restated 2012 £m Restated 2011 £m Restated 2010 £m Total assets Gross insurance liabilities...

  • Page 267
    .... In Octobef 2013 the Gfoup completed the sale of its United States life, savings and felated intefnal fund management business, which has been classified as a discontinued opefation fof the pufposes of fepofting financial peffofmance. Other information Life insurance and savings business We have...

  • Page 268
    ... fanges include single pfemium investment bonds and fegulaf pfemium savings plans. • Investment sales - compfise fetail sales of mutual fund type pfoducts such as unit tfusts, individual savings accounts (ISAs) and open ended investment companies (OEICs). • Othef - includes equity felease. Some...

  • Page 269
    ... We focus on personal and commercial insurance. In the UK we hold top three positions in the motor and property markets3. We believe our key strengths include underwriting and pricing sophistication, claims and cost management and excellent customer service. Our aim is to deliver cash and profitable...

  • Page 270
    266 | Aviva plc Annual report report and and accounts accounts 2014 2014 Infofmation on the Company continued France Business overview and strategy Podand Business overview and strategy France is the second largest insurance mafket in Eufope7. We have a significant pfesence in the Ffench Life ...

  • Page 271
    ... rate new products sold since July 2014. We have reviewed our unit-linked product ranwe, and further improved our protection offerinw. Our weneral insurance business in Italy mainly provides motor and home insurance products to individuals, as well as commercial risk insurance to small businesses...

  • Page 272
    ...pefsonal line pfoducts. Ouf Asian businesses offef a wide fange of pfotection, savings, and pension pfoducts, including univefsal life, pafticipating and non-pafticipating endowments, unit-linked single and fegulaf pfemium life insufance, othef savings and pensions pfoducts, and a fange of accident...

  • Page 273
    ... solutions that aim to meet the identified financial goals of investors. We also have a range of specialist property funds and six money market funds, domiciled in Ireland and France. Distribution Other information Aviva Investors has a Global Business Development team based in 15 locations with...

  • Page 274
    ...ow guaranteed wuture payments. We endeavour to match the investments held against these types ow business to wuture cash wlows. We therewore have a policy ow generally holding wixed income securities and mortgage loans with appropriate maturity dates. With unit-linked business, the primary objective...

  • Page 275
    ... sale £m Carrying value in the statement of financial position £m 2014 Policyholder Participating Shareholder assets fund assets assets £m £m £m Total assets analysed £m Investment property Loans Financial investments Debt securities Equity securities Other investments Total Total % 2013...

  • Page 276
    272 | Aviva plc Annual report report and and accounts accounts 2014 2014 Analysis ow investments continued Ratings AAA £m AA £m A £m BBB £m Less than BBB £m Non-rated £m Total £m 2014 - Shareholder assets Government UK Government Non-UK Government Corporate Public utilities Convertibles ...

  • Page 277
    ... below analyses our investments in equity securities by sector. 2014 Policyholder Participating Shareholder £m £m £m Total £m Public utilities Banks, trusts and insurance companies Industrial, miscellaneous and all other Non-redeemable preferred shares Total Total % 2013 2013 % 2,324 4,821 19...

  • Page 278
    ...offices in the following locations: • UK: UK Life, York; UK General Insurance, Norwich; Aviva Investors, London; • Asia: Singapore; • North America: Scarborough, Ontario, Canada. • Europe: Paris, France; Dublin, Ireland; Madrid, Spain; Warsaw, Poland; and Milan, Italy. As of 31 December 2014...

  • Page 279
    ... payments, including for those classes of business for which discounted provisions are held, see 'Financial statements IFRS - Note 41 - 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...

  • Page 280
    ... £5 billion of pensioner in payment scheme liabilities on 5 March 2014. Risk environment During 2014, the Group continued to pay-down the interThe benign financial market conditions experienced in 2013 company loan between Aviva Insurance Limited (AIL) and Aviva continued during 2014, albeit with...

  • Page 281
    ... that capital is funded. 2014 £m 2013 £m Long-term savings General insurance and health Fund management Corporate and other business1 Total capital employed Financed by: Equity shareholders' funds Non-controlling interests Direct capital instruments and fixed rate tier 1 notes Preference shares...

  • Page 282
    ... the liability for insurance and investment contracts on the consolidated IFRS statement of financial position at 31 December 2014 and 31 December 2013. We use a risk-based capital model to assess economic capital requirements and to aid in risk and capital management across the Group. The model is...

  • Page 283
    ... of which was held within Aviva Group Holdings Limited at the 2014 year end, the Group also has access to unutilised committed credit facilities of £1.6 billion provided by a range of leading international banks. 1 Note that Moody's assign a Negative outlook to Aviva Life & Pensions UK Limited.

  • Page 284
    ... employment % of business that are in or above the upper quartile relative to the local market average (NPS score) Environment and climate change A % of CO e emissions offset annually 2 A A A A A 2011 89% 2012 88% 2013 95% 2014 96% 2014 target 100% 42% 25% 33% 50% Improve past performance...

  • Page 285
    ... plc plc Annual Annual report and accounts 2014 | 281 Aviva Change Met target 2015 target 1i 1% Notes Business ethics: All employees are required to complete annual training of the Code except in France where the Code is included as part of their employment contracts. While our target remains at...

  • Page 286
    ... analysing and visiting head offices in two markets out of sixteen markets, selected on the basis of their inherent risk and materiality to the group, to understand the key processes and controls for reporting site performance data to the group CR team; • performed limited substantive testing on...

  • Page 287
    ... to anyone other than the Board of Directors and Aviva for our work or this report except where terms are expressly agreed between us in writing. PricewaterhouseCoopers LLP, Chartered Accountants, London 4 March 2015 1 The maintenance and integrity of Aviva's website is the responsibility of the...

  • Page 288
    284 | Aviva plc Annual report 284 report and and accounts accounts 2014 2014 Risk and capital management continued This page is intentionally blank

  • Page 289
    ... plc Annual Annual report and accounts 2014 | 285 Aviva Other information Shareholder information In this section Company address Share capital Related party disclosures Dividend data Guarantees, securitised assets and off-balance sheet arrangements Liquidity and capital resources Regulation Risks...

  • Page 290
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Shareholder information Company address The Company's registered office is St Helens, 1 Undershaft, London, EC3P 3DQ. The Company's telephone number is +44 (0)20 7283 2000. Share capital The Company has two classes of shares in...

  • Page 291
    ... 2014 1. For more information on our various option schemes, see note 32 in the financial statements. 2. The issue of shares in lieu of cash dividends is considered a bonus issue under the terms of the Companies Act 2006 and the nominal value of the shares is charged to the share premium account...

  • Page 292
    ... the last three financial years are shown in the table below: 2014 £m 2013 £m 2012 £m Loans to joint ventures 73 24 43 Dividend data Various directors and key management of Aviva may from time to time purchase insurance, asset management or annuity products, from Aviva Group companies in the...

  • Page 293
    ...Annual report and accounts 2014 | 289 Aviva May1. The following table shows certain information regarding the dividends that we paid on ordinary shares for the periods indicated in pounds sterling and converted into US dollars at the noon buying rate in effect on each payment date. Interim dividend...

  • Page 294
    ...31 December 2014, the Group had £17.6 billion (31 December 2013: £16.1 billion) of total capital employed on an IFRS basis in our trading operations which is financed by a combination of equity shareholders' funds, preference capital, a direct capital instrument, subordinated debt and internal and...

  • Page 295
    ...). Application of funds Other information We use funds to pay dividends to our shareholders, to service our debt and to pay our central Group cash flows. In 2014, total cash paid by the Company as ordinary and preference dividends and coupon payments on direct capital instruments and Fixed Rate...

  • Page 296
    ...in the UK and Ireland with-profit life operating cash outflow reflects a number of factors, including the level of premium income, payments of claims, creditors and funds. The minimum solvency requirement for our European surrenders and purchases and sales of operating assets including businesses is...

  • Page 297
    ... member states to conduct business without having to be separately licensed in each. The general exception is selling activity which continues to be regulated by the state in which the sale takes place. Insurance Groups Directive (IGD) Other information Our principal insurance and fund management...

  • Page 298
    ... introducing greater harmonisation governing the organisation and conduct of business of investment firms. Systemic Risk In July 2013 the Financial Stability Board (FSB) designated nine insurance groups as Global Systemically Important Insurers G-SIIs. As an international insurer, Aviva is one of...

  • Page 299
    ... Aviva Annuity UK Ltd Aviva Health UK Ltd Aviva Insurance Ltd Aviva International Insurance Ltd Aviva Investors Pensions Ltd Aviva Life & Pensions UK Ltd Gresham Insurance Company Ltd The Ocean Marine Insurance Company Ltd Aviva Equity Release UK Ltd Aviva Insurance Services UK Ltd Aviva Investors...

  • Page 300
    ... interaction at business unit and Group level, and the sharing of detailed information about the Group. Areas of potential risk or weakness where the regulators particularly require Aviva to focus attention are formally set out in a Risk Mitigation Plans (RMPs) from FCA and key actions from...

  • Page 301
    ... annual accounts, statements of financial position and Restrictions on business life insurers' annual reports from the actuary performing the UK regulatory rules restrict an insurance company from carrying actuarial function with the regulator. There is also a requirement on any commercial business...

  • Page 302
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Shareholder information continued to secure the transfer of all or part of the business to another insurance company. FSMA provides further protection to policyholders of insurance companies effecting or carrying out contracts of...

  • Page 303
    ... Annual report and accounts 2014 | 299 Aviva Risks relating to our business You should carefully review the following risk factors together with other information contained in this Annual Report before making an investment decision relating to our ordinary shares or ADSs. Our business, financial...

  • Page 304
    ... of the investments held. Such movements could impact on the Group's solvency, profitability and shareholders' equity. Market risks relating to Aviva's business Changes in interest rates may cause policyholders to surrender their contracts, reduce the value of our investment portfolio and may have...

  • Page 305
    ...stopped. Surrenders of life insurance policies and fixed annuity contracts may increase as policyholders seek higher returns and higher guaranteed minimum returns. Obtaining cash to satisfy these surrenders may require us to liquidate fixed maturity investments at a time when market prices for those...

  • Page 306
    302 | Aviva plc Annual report report and and accounts accounts 2014 2014 Shareholder information continued Interest rate guaranteed returns, such as those available on guaranteed annuity options ("GAOs"), are sensitive to interest rates falling below the guaranteed level. Other guarantees, such as ...

  • Page 307
    ... to cover operating expenses and dividend payments. The use of inaccurate assumptions in pricing and reserving for insurance business may have an adverse effect on our business profitability. As a holding company, Aviva plc has no substantial operations of its own. Our principal sources of funding...

  • Page 308
    ... results of operations or financial condition. AVIF reflects the estimated present value of future profit that will emerge over the remaining life of certain in-force contracts in a life insurance company, acquired either directly or through the purchase of a subsidiary, and represents the portion...

  • Page 309
    ... providing the liability management and risk functions have an active necessary capital to promote future growth. monitoring role with escalation to the Chief Financial Officer, In addition, we outsource certain customer service, the Group's asset liability committee and the Board's risk committee...

  • Page 310
    ... UK, we operate two main pension identical assets or liabilities (Level 1); the middle priority to fair schemes: the Aviva Staff Pension Scheme ("ASPS") and the RAC values other than quoted prices based on observable market (2003) Pension Scheme. The defined benefit section of the ASPS information...

  • Page 311
    ... Gfoup and Ffiends Life afe listed companies whose acquifed businesses may fail to achieve, in the neaf of long ofdinafy shafes afe ffeely tfaded on the London Stock Exchange. tefm, the financial fesults pfojected of the stfategic objectives of It is possible that an existing of new shafeholdef with...

  • Page 312
    ... ratings could auuect our standing among customers, broker-dealers, agents, wholesalers and other distributors ou our products and services and cause our sales and earnings to decrease. If the Proposed Acquisition is completed, the current operations of the Aviva Group and the Friends Life Group...

  • Page 313
    ... our ability to sell our products, including fiscal incentives, price and yields offered, financial strength and ratings, range of product lines and product quality, brand strength and name recognition, service levels to customers, fund management performance and historical bonus levels. In some of...

  • Page 314
    ...of operations and financial condition. A decline in personal pensions, the sale of mortgage-related endowments minimum capital and surplus amounts may also limit the ability and investments in split capital investment trusts and sale of of an insurance subsidiary to make dividend payments or payment...

  • Page 315
    ... desired outcomes: (i) Customers are actively encouraged to shop around; (ii) Consumers are provided with relevant and timely information about the potential benefits of any guaranteed annuity rate or risks of a market value reduction that exists in their existing pension contract; (iii) Consumers...

  • Page 316
    ... report report and and accounts accounts 2014 2014 Shareholder information continued jurisdictions in which we operate. These actions arise in various contexts, including in connection with our activities as an insurer, securities issuer, employer, investment adviser, investment manager, investor...

  • Page 317
    ... plc Annual Annual report and accounts 2014 | 313 Aviva shafes in a non-US corporation, quoted and traded in US dollars in the US securities market. Any dividends are paid to investors in US dollars. ADRs are specifically designed to facilitate the purchase, holding and sale of non-US securities by...

  • Page 318
    ...; • the operations, accounting practices or regulatory investigations, and share price performance of other companies in the insurance and fund management markets in which we operates; and • conjecture about our business in the press, media or investment communities. • strategic actions by...

  • Page 319
    Aviva plc plc Annual Annual report and accounts 2014 | 315 Aviva Other information In this section Glossary Shareholder services Page 316 318 Other information

  • Page 320
    ... by a capital sum. Equity Helease This is an open-ended investment fund, structured as a legally independent joint stock company, whose units are issued in the form of shares. Single premium Equity Release Mortgages allow a homeowner to receive a lump sum in return for a mortgage secured on their...

  • Page 321
    ...Annual Annual report and accounts 2014 | 317 Aviva Cash remittances Long-term and savings business Dividends paid by our operating businesses to the Group. Combined operating ratio (COR) Collective term for life insurance, pensions, savings, investments and related business. Net written premiums...

  • Page 322
    ... | Aviva plc Annual report report and and accounts accounts 2014 2014 Shareholder services Shareholder profile as at 31 December 2014 By category of shareholder Number of shareholders %* Number of shares %* Individual Banks and nominee companies Pension fund managers and insurance companies Other...

  • Page 323
    ... plc Annual Annual report and accounts 2014 | 319 Aviva Manage your holdings online Contact details Ordinary and preference shares - Computershare You can view and manage your shareholding online at: www.aviva.com/ecomms. To log in you will require your 11 digit Shareholder Reference Number (SRN...

  • Page 324
    ... products; funding risks associated with our participation in defined benefit staff pension schemes; the failure to attract or retain the necessary key personnel; the effect of systems errors or regulatory changes on the calculation of unit prices or deduction of charges for our unit-linked products...

  • Page 325
    ... Silk 100, made from 100% genuine de-inked post consumer waste and is FSC® certified. This report was printed using vegetable oil based inks by Pureprint Group a CarbonNeutral® printer certified to ISO 14001 environmental management system and registered to EMAS the Eco Management Audit Scheme.

  • Page 326
    ... to life what we do every day for our customers. We would like to thank the customers who took part and invited us into their homes and businesses, to allow us to share their stories, and our people for their dedication to our customers. To find out more, view our video at www.aviva.com Aviva plc...