Aviva 2014 Annual Report Download - page 158

Aviva plc Annual report and accounts 2014
Notes to the consolidated financial statements continued
154
10 – Longer-term investment return and economic assumption changes for non-long-term
business continued
Market value movements which give rise to variances between actual and longer-term investment returns are disclosed separately
in short term fluctuations outside operating profit.
The favourable movement in short term fluctuations 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, which contribute towards the longer-term return, are:
2014
£m
Restated
20132
£m
Debt securities 10,858 10,105
Equity securities 251 339
Properties 223 140
Cash and cash equivalents 1,300 1,982
Other3 3,767 5,435
Assets supporting general insurance and health business 16,399 18,001
Assets supporting other non-long-term business1 562 695
Total assets supporting non-long-term business 16,961 18,696
1 For 2014 represents assets backing non-long-term business in Group centre investments, including the centre hedging programme. For 2013 represents assets backing non-long-term business in the France holding company and
Group centre investments, including the centre hedging programme.
2 Restated following the adoption of amendments to ‘IAS 32: Financial Instruments: Presentation’. Refer to note 1 for further information.
3 Includes the internal loan.
The principal assumptions underlying the calculation of the longer-term investment return are:
Longer-term rates of
return Equities
Longer-term rates of
return Properties
2014
%
2013
%
2014
%
2013
%
United Kingdom 6.6 5.4 5.1 3.9
Eurozone 5.7 5.1 4.2 3.6
Canada 6.8 5.8 5.3 4.3
To calculate the longer-term investment return for its non-long-term business in 2013 and 2014, the Group has applied the same
economic assumptions for equities and properties as are used under MCEV principles.
(e) The table below compares the actual return on investments attributable to the non-long-term business, after deducting
investment management expenses and charges, with the aggregate longer-term return over a five-year period.
Continuing operations
2010-2014
£m
2009-2013
£m
Actual return attributable to shareholders 2,760 2,902
Longer-term return credited to operating results (3,293) (3,578)
Excess of longer-term returns over actual returns (533) (676)
(f) The table below shows the sensitivity of the Group’s non-long-term business operating profit for continuing operations before
tax to changes in the longer-term rates of return:
Continuing operations – Movement in investment return for By Change in
2014
£m
2013
£m
Equities 1% higher/lower Group operating profit before tax 38
Properties 1% higher/lower Group operating profit before tax 11
(g) The economic assumption changes mainly arise from movements in the rate used to discount latent claims reserves and periodic
payment orders.
As explained in accounting policy L, provisions for latent claims are discounted, using rates based on the relevant swap curve, in
the relevant currency at the reporting date, having regard to the duration of the expected settlement of the claims. The discount
rate is set at the start of the accounting period, with any change in rates between the start and end of the accounting period being
reflected below operating profit as an economic assumption change. The range of discount rates used is disclosed in note 41.
154 | Aviva plc Annual report and accounts 2014