(53) (24) Total

Transcription

1 242 Aviva plc Annual report and accounts Notes to the Company s financial statements A Investments in subsidiaries (i) Movements in the Company s investments in its subsidiaries are as follows: Fair value as at 1 January 33,095 31,023 Movement in fair value 835 2,072 At 31 December 33,930 33,095 Fair values are estimated using applicable valuation models underpinned by the Company s market capitalisation, and are classified as Level 2 in the fair value hierarchy described in note 23 to the Group consolidated financial statements. (ii) At 31 December, the Company has two wholly owned subsidiaries, both incorporated in the UK. These are General Accident plc and Aviva Group Holdings Limited. Aviva Group 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 are set out in note 62 to the Group consolidated financial statements. B Operating expenses (i) Operating expenses Operating expenses comprise: Staff costs and other employee related expenditure (see below) Other operating costs Net foreign exchange gains (53) (24) (ii) Staff costs staff costs were: Wages and salaries Social security costs 5 8 Post-retirement obligations Defined contribution schemes 6 11 Equity compensation plans (see (iii) below) Termination benefits (iii) Equity compensation plans All transactions in the Group s equity compensation plans involve options and awards for ordinary shares of the Company. Full disclosure of these plans is given in the Group consolidated financial statements, note 32. The cost of such options and awards is borne by all participating businesses and, where relevant, the Company bears an appropriate charge. As the majority of the charge to the Company relates to directors options and awards, for which full disclosure is made in the Directors Remuneration Report, no further disclosure is given here.

2 Aviva plc Annual report and accounts 243 C Tax (i) Tax credited to the income statement The total tax charge comprises: Current tax For this Prior adjustments (64) (84) (7) (7) current tax (71) (91) Deferred tax Origination and reversal of temporary differences 4 (49) Changes in tax rates or tax laws 24 deferred tax 4 (25) tax credited to income statement (67) (116) (ii) Tax charged/(credited) to other comprehensive income No tax was charged or credited to other comprehensive income in or. (iii) Tax credited to equity Tax credited to equity comprises 19 million (: 22 million) in respect of coupon payments on the direct capital instruments and fixed rate tier 1 notes. (iv) Tax reconciliation The tax on the Company s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows: Profit before tax Tax calculated at standard UK corporation tax rate of 21.5% (: 23.25%) Adjustment to tax charge in respect of prior s (5) (7) Non-assessable dividend income (252) (337) Disallowable expenses 9 13 Non-taxable loss on settlement of intra-group loan 17 Movement in deferred tax not recognised (2) Different local basis of tax on overseas profits 2 Change in future local statutory tax rates 32 Losses surrendered intra-group for nil value tax credited to income statement (67) (116) IFRS Financial statements UK legislation was substantively enacted in July to reduce the main rate of corporation tax from 23% to 21% from 1 April, resulting in an effective rate for the ended 31 December of 21.5%. A further reduction to 20% was also enacted with effect from 1 April The 20% rate has been used in the calculation of the Company s deferred tax assets and liabilities as at 31 December. (v) Deferred tax A deferred tax asset of 201 million (: 205 million), principally arising in respect of deferred interest has been recognised at 31 December at 20%. The Company has unrecognised temporary differences of 45 million (: 54 million) to carry forward indefinitely against future taxable income. (vi) Current tax assets Current tax assets recoverable in more than one are 65 million (: 93 million). D Other assets In, other assets included financial investments of 297 million, made up of UK Government Bonds which were subsequently sold during. These financial investments were valued as Level 1 in the fair value hierarchy described in note 23 to the Group consolidated financial statements and were classified as other than trading as described in note 27.

3 244 Aviva plc Annual report and accounts Notes to the Company s financial statements continued E Reserves Merger Reserve Investment valuation reserve Equitycompensation reserve Balance at 1 January 735 6, ,060 Arising in the : Profit for the 602 Fair value gains on investments in subsidiaries and joint ventures 2,108 Remeasurements of pension schemes (2) Dividends and appropriations (538) Reserves credit for equity compensation plans 37 Trust shares distributed in the (33) Issue of share capital under equity compensation scheme (43) 47 Aggregate tax effect 22 Balance at 31 December 735 8, ,158 Arising in the : Profit for the 563 Fair value gains on investments in subsidiaries and joint ventures 866 Remeasurements of pension schemes (1) Dividends and appropriations (551) Reserves credit for equity compensation plans 39 Trust shares distributed in the (18) Issue of share capital under equity compensation scheme (28) 24 Redemption of direct capital instrument (57) Aggregate tax effect 19 Balance at 31 December 735 9, ,137 Retained earnings Tax of 19 million (: 22 million) is deductible in respect of coupon payments of 88 million (: 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. F Borrowings The Company s borrowings comprise: Subordinated debt 4,594 4, % guaranteed bonds Commercial paper ,310 5,125 Maturity analysis of contractual undiscounted cash flows: Within s 200 1,149 1, ,204 1, s 1,340 1, ,348 1, s 1,188 1,322 2,510 1,341 1,341 Over 15 s 3,442 2,924 6,366 4,165 2,950 7,115 contractual undiscounted cash flows 5,346 7,039 12,385 5,163 7,157 12,320 Where subordinated debt is undated, the interest payments have not been included beyond 15 s. Annual interest payments for these borrowings are 72 million (: 73 million). The fair value of the subordinated debt at 31 December was 5,188 million (: 4,707 million), calculated with reference to quoted prices. The fair value of the 9.5% guaranteed bonds 2016 at 31 December was 223 million (: 236 million), calculated with reference to quoted prices. The fair value of the commercial paper is considered to be the same as its carrying value. Further details of these borrowings and undrawn committed facilities can be found in the Group consolidated financial statements, note 50, with details of the fair value hierarchy in relation to these borrowings in note 23. G Contingent liabilities Details of the Company s contingent liabilities are given in the Group consolidated financial statements, note 53.

4 Aviva plc Annual report and accounts 245 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. Its risks are considered to be the same as those in the operations themselves and full details of the major risks and the Group s approach to managing these are given in the Group consolidated financial statements, note 58. Such investments are held by the Company at fair value in accordance with accounting policy D. The fair values of the subsidiaries and joint ventures are estimated using applicable valuation models, underpinned by the Company s market capitalisation. This uses the Company s closing share price. Given that the key input into the valuation model is based on an observable current share price, and therefore sensitive to movements in that price, the valuation process is not sensitive to non-observable market assumptions. Financial assets, other than investments in subsidiaries and the joint venture, largely consist of amounts due from subsidiaries. As at the balance sheet date, these receivable amounts were neither past due nor impaired. Financial liabilities owed by the Company as at the balance sheet date are largely in respect of borrowings (details of which are provided in note F and the Group consolidated financial statements, note 50) and loans owed to subsidiaries. Loans owed to subsidiaries were within agreed credit terms as at the balance sheet date. rate risk Loans to and from subsidiaries are at either fixed or floating rates of interest, with the latter being exposed to fluctuations in these rates. The choice of rates is designed to match the characteristics of financial investments (which are also exposed to interest rate fluctuations) held in both the Company and the relevant subsidiary, to mitigate as far as possible each company s net exposure. All the Company s long term external borrowings are at fixed rates of interest and are therefore not exposed to changes in these rates. However, for short term commercial paper, the Company is affected by changes in these rates to the extent the redemption of these borrowings is funded by the issuance of new commercial paper or other borrowings. Further details of the Company s borrowings are provided in note F and the Group consolidated financial statements, note 50. The effect of a 100 basis point increase/decrease in interest rates on floating rate loans due to and from subsidiaries and on refinancing short term commercial paper as it matures would be a decrease / increase in profit before tax of 100 million (: decrease / increase of 109 million). The net asset value of the Company s financial resources is not materially affected by fluctuations in interest rates. Currency risk The Company s direct subsidiaries are exposed to foreign currency risk arising from fluctuations in exchange rates during the course of providing insurance and asset management services around the world. The exposure of the subsidiaries to currency risk is considered from a Group perspective in the Group consolidated financial statements, note 58. The Company faces exposure to foreign currency risk through some of its borrowings which are denominated in Euros. However, most of these borrowings have been on-lent to a subsidiary which holds investments in Euros, generating the net investment hedge described in the Group consolidated financial statements, note 59(a). IFRS Financial statements Liquidity risk Liquidity risk is the risk of not being able to make payments as they become due because there are insufficient assets in cash form. The Company s main sources of liquidity are liquid assets held within the Company and its subsidiary Aviva Group Holdings Limited (AGH), and dividends received from the Group s insurance and asset management businesses. Sources of liquidity in normal markets also includes a variety of short and long-term instruments including commercial papers and medium and long-term debt. In addition to the existing liquid resources and expected inflows, the Company maintains significant undrawn committed borrowing facilities ( 1,550 million) from a range of leading international banks to further mitigate this risk. Maturity analysis of external borrowings and amounts due to and by subsidiaries are provided in notes F and I respectively. I Related party transactions The Company receives dividend and interest income from subsidiaries and pays interest and fee expense to those subsidiaries in the normal course of business. These activities are reflected in the table below. Loans to and from subsidiaries are made on normal arm s-length commercial terms. The maturity analysis of the related party loans is as follows: Loans owed by subsidiaries Maturity analysis Within s 1, Over 5 s ,718 1,082

5 246 Aviva plc Annual report and accounts Notes to the Company s financial statements continued I Related party transactions continued Loans owed to subsidiaries Maturity analysis of contractual undiscounted cash flows: Within , , s 10, , Over 5 s 10, ,762 10, ,790 Other related party balances comprise dividends and interest receivable and payable, as well as intercompany balances for fees and other transactions in the normal course of business. During the the facility with General Accident plc was renewed, giving a total loan principal of 10,210 million with a maturity date of December Dividends, loans, interest Services provided to related parties Income earned in Receivable Income earned in Receivable Subsidiaries 1,232 1,992 1,553 1,706 The Company incurred expenses in the of 179,000 (: 130,000) representing audit fees paid by the Company on behalf of subsidiaries. The Company did not recharge subsidiaries for these expenses. The related parties receivables are not secured and no guarantees were received in respect thereof. The receivables will be settled in accordance with normal credit terms. Services provided by related parties Expense incurred in Payable Expense incurred in Payable Subsidiaries , ,260 The related parties payables are not secured and no guarantees were received in respect thereof. The payables will be settled in accordance with normal credit terms. Details of guarantees, indemnities and warranties given by the Company on behalf of related parties are given in note 53(f). The directors and key management of the Company are considered to be the same as for the Group. Information on both the Company and Group key management compensation can be found in note 61. J Subsequent event Refer to note 4(a) for further details on the proposed acquisition of Friends Life. K Statement of cash flows Following a review of the classification of the cash flows, additional disclosure in respect of the receipts under equity compensation plans has been provided and comparative amounts have been amended from amounts previously reported. This has no impact on the total cash and cash equivalents balance.