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Aviva plc
Annual report
and accounts
2015
What makes us
different?
Our strategy in action
and the benefits it
brings to our customers
How we’re doing – and how
we’re going to do better
million
customers
What’s important and
how we help them
every step of the way
33
Our
What’s our
plan of
action?
Aviva
Your
Aviva has
thought about
absolutely
everything
Read
Anna’s
story
Page 4
CUSTOMER FOCUS

Table of contents

  • Page 1
    Aviva plc Annual report and accounts 2015 Our customers What's important and how we help them every step of the way 33 million What makes us different? Our strategy in action and the benefits it brings to our customers CUSTOMER FOCUS What's our plan of action? How we're doing - and how we're ...

  • Page 2
    ... our customers, investors, employees and communities 14.05p £30.7bn Final dividend, a 15% increase Paid out in benefits and claims to our customers in 2015 587,000+ Number of people who have benefited from our corporate responsibility programmes in 2015 320 years Protecting our customers since...

  • Page 3
    ... 30-45 UK, Europe, Asia and Canada We offer: Life insurance Retirement income, Savings & Pensions, Life cover, Protection General insurance Home, Motor, Travel, Pet and Commercial Accident & health insurance Private Medical Insurance, Accident & Health Asset management Investing for Aviva and...

  • Page 4
    ... by good potential for growth, by ensuring our people always put customers first Our strategy Read more on pages 20-27 True customer composite Meeting all customer needs across life, general, accident & health insurance and asset management Digital first Emphasising customer experience...

  • Page 5
    ... report IFRS financial statements 126 Independent auditors' report 133 Accounting policies 147 Consolidated financial statements 270 Financial statements of the Company Other information 279 Performance review 317 Shareholder information 351 Shareholder services 06 Group Chief Executive Officer...

  • Page 6
    ... the business to transforming it. In 2016 I am confident that we will see the true potential of the Group emerge ever more clearly. Aviva has a clear strategy, strong values, a distinct advantage as a composite insurer, a developing reputation as a digital innovator, an outstanding management team...

  • Page 7
    ... focus on reviewing and improving our governance, conduct and risk management processes, with customers always central to everything we do. Further details are contained in the directors' and corporate governance report in the annual report and accounts. Performance and dividend 389p IFRS profit...

  • Page 8
    ...You" is for young people and offers everything from life insurance to health benefits in the event of injuries like breaks, twists or sprains. "Me" provides the full spectrum of insurance to single people - with additional benefits like pet care and even housekeeping. And "We" is for young families...

  • Page 9
    Strategic report Aviva plc Annual report and accounts 2015 | 05

  • Page 10
    ... Wilson Group Chief Executive Officer Now we have a clear strategy for investors, anchored in our investment thesis of cash flow plus growth. We have financial strength and we focus on markets where we can deliver good financial returns. A glance at the numbers highlights the point. Not so long ago...

  • Page 11
    ... increased the final dividend by 15% to 14.05p. What will you be focusing on in 2016? With our strong financial position, we will continue to focus on providing customers with the very best of life, general and health insurance and asset management, through the convenience of our digital channels...

  • Page 12
    ... HIGHLIGHTS Operating profit up 20% on an IFRS basis to £2,665m Cash remittances increase of 5% to £1,507m Value of new business up 19% to £1,192m General insurance combined operating ratio improved 1.1 percentage points to 94.6% Final dividend per share 14.05p In terms of capital, we will...

  • Page 13
    ...general insurance underwriting result } Focus on external fund flows at Aviva Investors } Maintain a resilient Solvency II capital position Strategy True Customer Composite Digital First Not Everywhere For our customers, we have: } Developed new multi-product solutions } Increased the total number...

  • Page 14
    Your Aviva Ricky's story 10 | Aviva plc Annual report and accounts 2015

  • Page 15
    Strategic report Life was good for Ricky, his wife, Sarah, and their daughter, Isabella. He enjoyed his job as a teacher and they'd just bought a family home with space for brothers and sisters for Isabella. Then Ricky found he had testicular cancer. Everything was thrown up in the air. They didn't...

  • Page 16
    ... margins on bulk purchase annuities, offset by lower sales of individual annuities. Underwriting that delivers profits This is a key measure of underwriting profitability of our general insurance business. Our COR improved by 1.1 percentage points with improvements in Canada, Europe and Ireland...

  • Page 17
    Strategic report In 2015 we successfully navigated regulatory change and turbulent external conditions to deliver a stronger, cleaner balance sheet and continued operating momentum Tom Stoddard Chief Financial Officer See pages 30-45 for further details of the financial performance of our markets ...

  • Page 18
    ... data quickly and intuitively to inform the development of products and services that provide real value for customers will lead the way. The age of disruption Agile companies which can make the most of new digital technologies will succeed. Smartphone users worldwide by 20201 Daily active...

  • Page 19
    ... home market of the UK), and it was the hottest year on These long-term record globally 7. trends shape Climate change will our strategy have a significant impact on both society and our business. Some risks are Jason Windsor changing, more complex Chief Capital & Investments Officer risk management...

  • Page 20
    ... told us about an ancient Chinese saying which roughly translates as "save something for a rainy day" - so you feel safe and can enjoy your life. That's our philosophy too. makes me My policy feel safe For video case study visit: www.aviva.com/AR15 16 | Aviva plc Annual report and accounts 2015

  • Page 21
    Strategic report Aviva plc Annual report and accounts 2015 | 17

  • Page 22
    ... most to our customers; whether that's capital growth, securing reliable income or meeting future liabilities. ...operating across 16 markets...UK & Ireland Europe France, Italy, Spain, Poland, Turkey, Lithuania 18 | Aviva plc Annual report and accounts 2015 Asia Singapore, China, India, Indonesia...

  • Page 23
    ... as a major employer and a long-term responsible investor. £30.7bn Paid in benefits and claims to customers in 2015 Read more on pages 21-22 10.4% Total shareholder return in 2015 29,600 Employees worldwide Read more on pages 48-51 £10.8m Total community investment in 2015 Read more on...

  • Page 24
    ...We are not interested in planting flags or being in 100 countries. We will focus on a select number of markets and business lines where we have scale and profitability or a distinct competitive advantage - where we can win. Digital First We put Digital First. This is how we will capitalise on being...

  • Page 25
    ..., accident & health insurance. In Singapore, we have an existing life insurance scheme with the Singapore Armed Forces and have now extended a general insurance discount and upgrade scheme to policyholders and their families. In Canada, we sold over 200,000 Ontario home and auto combined policies in...

  • Page 26
    ... and Global Chairman, Aviva Digital In Italy, we developed a composite life and general insurance proposition tailored specifically for female customers, with over 13,000 policies sold in 2015. We also launched other combinations of life and protection products, including with-profit, unit-linked...

  • Page 27
    ... provide Accident & Health products to 2.5 million customers in the UK, Singapore, China, France and Poland, and have small businesses with growth potential in six other countries. In 2015 we generated sales of over £1.5 billion2. 1 2 Clear strategy We will unlock value from our existing business...

  • Page 28
    ... develop our digital service and capability. For more information on UK Digital see Spotlight on page 26. Our ambition is to allow customers to access all our services and products on any device, 24/7, 365 days a year Andrew Brem Chief Digital Officer 24 | Aviva plc Annual report and accounts 2015

  • Page 29
    .... For example, we have developed MyAgent, a cloud-based sales tool for our 30,000 direct sales force agents. This work has been led by sales and IT teams from Poland and China, alongside colleagues from France, Turkey, Italy, Singapore and the UK. This will change the life of an agent. Instead of...

  • Page 30
    ... lines, and supporting the UK business units in distributing their products (with a focus on direct digital distribution through MyAviva). Our ambition is to create an outstanding experience for customers, whenever and however they contact us. The focus in the second half of 2015 was on working...

  • Page 31
    ...Does it fit with our strategy? We focus our efforts on delivering our strategic ambitions and providing our customers with propositions that they value. Does this investment create value? We aim to invest our Group capital efficiently to get the right balance of risk and return, consistent with our...

  • Page 32
    Your Aviva Marcus's story 28 | Aviva plc Annual report and accounts 2015

  • Page 33
    ... We're proud we helped St Jacob's Farmers' Market to rise from the ashes - and take its place back at the heart of the community. For video case study visit: www.aviva.com/AR15 our insurance best decisions we made was to review One of the regularly Aviva plc Annual report and accounts 2015 | 29

  • Page 34
    ...focusing on products which require less capital backing. And in line with our strategic goal of being Not Everywhere, we're reinvesting capital from the UK in selected international markets. We have one of the largest books of existing pensions, savings and protection customers in the UK, and manage...

  • Page 35
    ... Mortgage Provider at the What Mortgage Awards, and Best Protection Provider Service 2 Operating profit has been restated to exclude amortisation and impairment of acquired value of in-force business, which is now shown as a non-operating item. Aviva plc Annual report and accounts 2015 | 31

  • Page 36
    ... growth. Aviva's British heartland is in good health. We offer customers: • Retirement solutions which help people plan, save for and enjoy a financially secure retirement including annuities, investments, income drawdown, equity release and long-term care insurance. • Protection insurance...

  • Page 37
    ... in our design of propositions to meet those needs. We welcome the UK pensions freedoms. With our broad product range we are well placed to meet customers' needs Andy Briggs Chief Executive Officer, UK&I Life and Chairman, Global Life Insurance Aviva plc Annual report and accounts 2015 | 33

  • Page 38
    ...What's your strategy? Our strategy positions Aviva for future profitable growth by meeting our customers' changing needs. We are building an increasingly digital global General Insurance (GI) business, through our strong direct brand and our partnership with brokers and banks. We have market leading...

  • Page 39
    ... What we plan to do in 2016 } Grow our business profitably in the UK and Ireland and provide new products and services in areas such as pet insurance, warranty, home services and for high net worth customers } Expand the distribution reach of our corporate and speciality commercial lines business to...

  • Page 40
    ...commercial lines in the 2015 Insurance Age Sentiment Survey. In Ireland we won the Irish Broker Association awards for most improved service. Financial performance Total cash remitted to Group was £358 million (2014: £294 million). UK and Ireland general insurance (GI) and health operating profit...

  • Page 41
    ...6m (2014: £138m) General insurance operating profit We are Canada's second largest general insurer1 providing a range of personal and commercial lines products to over 2.8 million customers Overview We have an 8.4%1 market share and a top five position in all major provinces. In 2015, 39% of sales...

  • Page 42
    ... of life, general insurance, health and asset management products to more than ten million customers in five markets - France, Italy, Poland1, Turkey and Spain. We operate a composite model in France, Italy and Poland AN INTERvIEW WITH... David McMillan, Chief Executive Officer, Aviva Europe and...

  • Page 43
    ... position in accident and health through product innovation, wider distribution and digital wellness services } Capitalise on our composite potential in France, Italy, Ireland and Poland by offering integrated and innovative solutions } Continue to deliver profitable growth in general insurance by...

  • Page 44
    ... than 3.3 million customers in France and offer a full range of life, protection, pension, general insurance, health and asset management products. We have a well-diversified distribution model, with half of our profits generated from channels we own or control. We enjoy a long-standing relationship...

  • Page 45
    ...million customers. In 2015, we became the largest pension provider with 19%13 market share in assets under management. The main distribution channel is Akbank, one of the largest privately owned banks, with over 900 branches - part of the Sabancı Group. We also employ the largest direct sales force...

  • Page 46
    ...across life, health, general insurance and asset management, to make the most of the depth of our partnerships. In markets where we meet the needs of a rapidly ageing population, such as China, Hong Kong and Singapore, we're focused on savings, healthcare I'm confident we're protection, and planning...

  • Page 47
    ...) focusing on quality } In Singapore, we digitised our group employment benefit claims processes and opened our Digital Garage What we plan to do in 2016 } Further embrace the True Customer Composite model by delivering Aviva's strengths in Life and Health, plus Aviva Investors and general insurance...

  • Page 48
    ... Munro, Chief Executive Officer, Aviva Investors What is your strategy? Our ambition is to be the global leader in outcome-oriented solutions. This means meeting the specific investment objectives of clients - whether that's capital growth, beating inflation, receiving a reliable income or meeting...

  • Page 49
    ... even more active as shareholders - encouraging companies to look long term and low carbon. Simple steps for good returns today - and tomorrow. £24m (2014: £16m) Aviva Investors fund management operating profit Financial performance Cash remitted to Group during the year increased by 50% to £24...

  • Page 50
    Your Aviva Ian's story 46 | Aviva plc Annual report and accounts 2015

  • Page 51
    ..., AIMS, continues to deliver positive returns in volatile investment markets. We often work with strong partners who complement our business and in the United States we've found one such partner - Virtus Investment Partners, which provides Aviva Investors' strategies to US customers in US open-ended...

  • Page 52
    ... plans support the group strategy, and using technology to reach and engage with our global teams, through live interviews, in which senior leaders answer questions posed by colleagues around the world. At the end of 2015, 82% of employees felt they could make a personal connection to our strategy...

  • Page 53
    ... at 63%. However, in 2015 78% believed Aviva will achieve its priorities and 75% thought their manager does a good job of recognising individuals who go the extra Broadening our perspective I am extremely proud to work for Aviva. I believe in our strategy and see that the customer is at the heart...

  • Page 54
    ... in Italy, Spain, Scotland, Ireland, India and Canada. While 52% of our workforce are women, women are under-represented on the Board, on the Group Executive and in senior management. At Aviva we believe firmly that diversity at every level improves innovation, decision making and our customer focus...

  • Page 55
    ... set up in Italy, Spain, Scotland, Ireland, India and Canada and deeper collaboration between our UK networks. In 2016 all the networks are going to share common aims and objectives. To innovate and succeed, Aviva must be inclusive and diverse, stay relevant to our customers and reflect their...

  • Page 56
    ... first insurer to achieve the Carbon Trust Supply Chain Standard, in recognition of work to measure, manage and reduce carbon emissions outside own direct operational control } Replicated the Aviva Community Fund in six markets (target five) around the world helping increase community investment by...

  • Page 57
    ... processes to reduce our environmental impact whilst improving customer service and reducing costs. Strengthening our local communities Aviva has a long history of investing in communities. Following its success in Canada and Poland, we launched the Aviva Community Fund in the UK, France, Italy...

  • Page 58
    ...also one of the first global fund 54 | Aviva plc Annual report and accounts 2015 managers to integrate environmental, social and governance issues into our investment decision-making across all asset classes (90% AUM) in 2014. Reducing our environmental impact We are reducing our own environmental...

  • Page 59
    ...we reported total emissions of 312,925 CO2e in 2015, costing £2.1 million. This scheme is restricted to UK businesses emissions from building energy, and includes the property portfolio of our investment funds managed by Aviva Investors. The best form of protection is prevention. We can't stop bad...

  • Page 60
    ... income protection and property insurance with Aviva." We're delighted to have a long-term relationship with him which allows us to show him the benefits of our True Customer Composite model. Michael - it's a pleasure to help get you back on the road! 56 | Aviva plc Annual report and accounts 2015

  • Page 61
    Strategic report Aviva plc Annual report and accounts 2015 | 57

  • Page 62
    ... staff pension schemes in surplus (£0.7 billion) - these exclusions have no impact on Solvency II surplus. The impact from internal reinsurance arrangements between UK Life, UK and Ireland General Insurance and Aviva International Insurance Limited and the securitisation of equity release mortgages...

  • Page 63
    ... expenses have increased in Aviva Investors and Asia as we have funded growth 3 4 Operating profit has been restated to exclude amortisation and impairment of acquired value of in-force business, which is now shown as a non-operating item. There is no impact on the result or the total equity for...

  • Page 64
    ... some of this cash to support growth in other business units. The actions to achieve these capital benefits include Part VII transfers to combine our UK Life business (subject to PRA and court approvals), moving Friends Life to an internal model, Solvency II optimisation and hedging of the Friends...

  • Page 65
    ... Chief Financial Officer 9 March 2016 5 6 For the avoidance of doubt, 2015 numbers include Friends Life from 10 April 2015, the acquisition completion date. 2014 numbers are Aviva stand-alone as previously reported (i.e. do not include Friends Life). Net of tax and non-controlling interests...

  • Page 66
    ... core business lines of life, accident & health, general insurance and asset management We achieve significant diversification of risk through our scale, our multi-product offering to customers, the differing countries we choose to operate in and through the different distribution channels we use to...

  • Page 67
    ... that our business runs smoothly, supports good decision making and helps to deliver our strategic aims Angela Darlington Chief Risk Officer y ntif e d I Me a re su M o ni r to 1 Ranked by diversified Solvency II Solvency Capital Requirement Aviva plc Annual report and accounts 2015 | 63 M an...

  • Page 68
    ...and causal factors which may impact our current and longer term profitability and viability, in particular our ability to write profitable new business. We take account of these risks and possible causal factors when developing our long-term business strategy and contingency plans. We may take short...

  • Page 69
    ..., as changes in government policy on insurance, long term savings and pension provision, and in regulation, can significantly impact demand for our products, the types of product we offer customers, how we sell them and how much capital we need to hold. We also engage in key public policy debates...

  • Page 70
    This page is intentionally blank 66 | Aviva plc Annual report and accounts 2015

  • Page 71
    Governance Governance In this section Chairman's governance letter Board of directors Group executive Directors' and corporate governance report Directors' remuneration report Page 68 70 74 76 102 Aviva plc Annual report and accounts 2015 | 67

  • Page 72
    ... composile insurer parlicularly by Sir Good governance and assel manager by Williamson, helps to deliver value Malcolm launching UK Digilal, a lhe Senior Independenl for customers and Direclor, who meels new business slruclure lo develop our digilal wilh lhe shareholders and to independenlly service...

  • Page 73
    ... UK Corporate Governance Code (the Code), to the Group for the 2015 financial year. Whilst many of the recommendations were adopted in our 2014 annual report, one new element for 2015 is that the Board is required to make a statement of Aviva's longer-term viability. The Board has decided to present...

  • Page 74
    ... ï,„ Chief Executive Officer of Aviva UK Life and Chairman of Global Life Nationality: British Appointment date: 29 April 2015 Committee membership: N/A Skills and Experience: Andy joined the Board to lead Aviva's enlarged UK Life business following the acquisition of Friends Life where he was group...

  • Page 75
    ...data and information business. External Appointments: Currently Claudia is a nonexecutive director of Derwent London plc (commercial real estate), Halfords Group plc and the Premier League. She is also a member of the Advisory Board of the Shareholder Executive. • Glyn Barker ï,„ Independent Non...

  • Page 76
    ...Board a wealth of knowledge and experience gained over a long career in the banking and insurance industries, in both executive and non-executive roles in Europe, Asia and Australia. He was formerly chief executive and managing director of Insurance Australia Group, group chief executive of business...

  • Page 77
    ...the Group General Counsel and Company Secretary for Aviva plc and heads the Office of the Chairman. She established the legal and secretarial function as a global team and is responsible for the provision of legal services to the Group, legal risk management, regulatory compliance, public policy and...

  • Page 78
    ... the continual development of the Solvency II internal model and risk management framework. Angela has held a variety of actuarial roles within Aviva, including UK Life chief actuary. David McMillan ï,„ Chief Executive Officer, Aviva Europe and Chairman Global Health Insurance Joined Aviva in 1001...

  • Page 79
    ... to deliver a high-volume of change to support the musiness. Monique previously worked as chief technology officer at Capital One and had responsimility for defining and driving their technology strategy. Maurice Tulloch ï,„ Chief Executive Officer, Aviva UK & Ireland General Insurance and Chairman...

  • Page 80
    ... not work for UK Digital (UKD) which incorporates different business lines and product segments and as a composite insurer requires a different governance model. UKD has its own board of directors, drawn from the senior management across the Group, which is responsible for making all strategic and...

  • Page 81
    ... 3 with Risk Committee members receiving more detailed training on specific areas Financial reporting and controls, capital structure and dividend policy ï,„ As part of its annual work plan, the Board reviewed the financial performance of the Company and approved all financial results announcements...

  • Page 82
    ... Annual General Meeting (AGM), Sir Adrian Montague CBE, who was the Company's Senior Independent Director, was appointed as Chairman of the Board in place of John McFarlane who retired on the same date. As explained in the Company's 2014 annual report, and given the well developed succession plan...

  • Page 83
    ...are a focus at Aviva. What do you think you have brouyht to the Aviva Board and as Aviva's Senior Independent Director? I bring consiyerable experience of the insurance sector, particularly life insurance. As its former Chairman, I specifically bring a yetailey knowleyge of the Frienys Life business...

  • Page 84
    ... CEO in respect of his executive duties a separate process was carried out by the Chairman and in respect of the Chief Financial Officer (CFO), by the Group CEO. The process involved measuring performance against each Executive Director's objectives. 80 | Aviva plc Annual report and accounts 2015

  • Page 85
    ... Senior Insurance Managers Regime (SIMR), Pillar 3 reporting, remuneration developments and matters affecting our IT architecture and related technical platforms. In addition the Board attended in-depth sessions on Aviva France, Aviva Asia, UK and Ireland General Insurance and our digital business...

  • Page 86
    ...guidance on Risk Management, Internal Controls and related financial and business reporting. Boafd Pfiofities fof 2016 2015 was a transformational year for the Company. The Board made good progress against its objectives, including the Friends Life integration, UK Life strategy, continued oversight...

  • Page 87
    ... information, evaluates the Group's disclosure controls and reviews and endorses the Group's key periodic external reports, including the consolidated financial statements. The results of the FRCF process are signed off by business unit chief executive officers and chief financial officers...

  • Page 88
    ... committee reports refer to a number of areas where control issues have been identified and describes the mitigating actions to address them. The risk management framework of a small number of our joint ventures and strategic equity holdings differs from the Aviva framework outlined in this report...

  • Page 89
    ... Darlington, our Chief Risk Officer whose case study is featured later in this report, is a good example of the benefits this policy can bring. The Board takes succession planning very seriously and following the changes that were made at Board level we increased our focus to The Committee's purpose...

  • Page 90
    ... for developing further the Board's succession plans. As part of this ongoing process the Committee will consider the skills and experience of the Board, taking into account all relevant aspects of diversity, to ensure that there remains a good balance on the Board which supports the Group's values...

  • Page 91
    ... Planning in Action Following the Friends Life acquisition and the appointment of John Lister as Chief Financial Officer of the enlarged UK Life business, Angela was appointed as Chief Risk Officer and as a member of the Group Executive in June 2015. Angela has had a 15 year career with Aviva...

  • Page 92
    ... products we offer our clients, to perform in the current as well as tfe operational risks low growth, low interest rate and volatile market present in tfe business environment • ensuring that the strategy Michael Hawker is sensible in light of the Chairman, Risk Committee evolutionary changes...

  • Page 93
    ... development of our digital business. Finally, the Committee's focus on SII did not end with it coming into force in January 2016 and the Committee will spend time reviewing plans to expand the perimeter of the Group's approved partial internal model and ensuring that changes to the risk management...

  • Page 94
    ... systevic risk vanagevent plan to the Board for approval Group Capital, Financial Plan, Liquidity and Stress Testing ï,„ The Covvittee also reviewed proposals to vaterially increase the use of an internal covposite reinsurer to enhance capital transferability and efficiency and a nuvber of strategic...

  • Page 95
    ... in relation to the Friends Life acquisition recommending to the Board that the annual report and accounts are fair, balanced and understandable agreeing the Group's approach to the Longer-Term Viability Statement (LTVS) as required under the UK Corporate Governance Code (the Code). Further details...

  • Page 96
    ... under review and up to the date of this report with the Statutory Audit Services for Large Companies Market Investigation (Mandatory Uses of Competitive Tender Process and Audit Committee Responsibilities) Order 2014. The Company has an External Auditor Business Standard in place which is aimed at...

  • Page 97
    ... US Listing • the impact of the revised moded used to vadue equity redease mortgage doans hedd by the UK Life Annuity business • in dine with the focus by the regudator on increasing the deved of chaddenge that an audit committee shoudd pose in its review of risk management and internad controds...

  • Page 98
    ...internal control and risk management. Financial Statements and accounting policies - 32% Review the significant issues and judgements of management, and the methodology and assumptions used in relation to the Group's financial statements and formal announcements on the Group's financial performance...

  • Page 99
    ... companies within the Group. these issues. They cover a range of topics including The Group's business units continually strategy and planning, remuneration, reassess and reappraise their performance shareholder interaction and governance in delivering good customer outcomes. As accountability...

  • Page 100
    ...chief executive officers of our UK life business, UK & Ireland general insurance business, Aviva Investors business, Canada, France, Poland and Turkey their plans for further enhancing and embedding conduct risk management within their businesses. With the development of the Group's digital strategy...

  • Page 101
    ... the UK life, UK & Ireland general insurance, Aviva Investors, Aviva Canada, Aviva France, Aviva Poland and Aviva Turkey ï,„ Reports detailing ongoing and possible reputational risks and brand and franchise risks were considered by the Covvittee. These also included any vedia or public policy issues...

  • Page 102
    .... 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 would normally vest and become exercisable on...

  • Page 103
    ... 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 management of these instruments are contained in the risk and capital management section, the shareholder information section...

  • Page 104
    ...the Strategic Report as well as note 57 of the IFRS financial statements). The assessment of the Group's prospects by the directors covers the three years to 2018 and is underpinned by management's 2016-2018 business plan which includes projections of the Group's capital, liquidity and solvency. The...

  • Page 105
    ... 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 as this is covered by the Risk and Governance...

  • Page 106
    ... of employment. Key decisions on remuneration in respect of 2015 2015 Long Term Incentive Plan (LTIP) Last year, in line with our Remuneration Policy, we proposed awards of 350% of salary and 250% of salary to Mark Wilson, Group Chief Executive Officer (Group CEO) and Tom Stoddard, Chief Financial...

  • Page 107
    ... our position in terms of capital and liquidity. Performance against non-financial measures (customer, employee and risk) has also been taken into account, together with personal performance. Further information is provided on page 108. When determining bonus payouts, the Committee also took into...

  • Page 108
    ...Aviva values and behaviours. Ensure risk based decision making and good governance. Salary 2016 17% of total package 2017 2018 2019 2020 2021 Phasing of payments (based on CEO's remuneration) Overview of Policy (approved in 2015) ï,„ Set by reference to relevant pay data, levels of increase...

  • Page 109
    ...by the Committee: • there should be an on-going focus on the link between the remuneration framework and the strategic objectives of the Group. This includes taking into account non-financial and strategic measures of performance, as well as financial measures, to ensure that the right culture and...

  • Page 110
    ... to the agreed Policy. Review and recovvend to vanagevent the level and structure of senior vanagevent revuneration. Approve the Aviva Investors' reward strategy, including any changes to the strategy. Governance, regulatory issues and reporting policy - 29% Work with the Risk Covvittee to ensure...

  • Page 111
    ....) 2015 annual bonus outcome The Group's financial performance, together with non-financial modifiers and personal performance have been used to determine ED bonuses paid in respect of 2015. As communicated to shareholders, the targets were reviewed and adjusted to take into account the impact of...

  • Page 112
    ... to structural changes affecting the UK pensions industry. • UK Life has been a key partner in the development of a scalable Digital Direct strategy across the UK, along with the General insurance business and the newly formed UK Digital Board within Aviva. Bonus award : £673,014 Bonus as...

  • Page 113
    ... companies: Aegon, Allianz, Assicurazioni Generali, Axa, CNP Assurances, Direct Line Group, FLG (with performance subsequently reinvested in Aviva), Legal & General, MetLife, Old Mutual, Prudential, RSA Insurance Group, Standard Life and Zurich Financial. The Committee are satisfied that the targets...

  • Page 114
    ... after tax and non-controlling interest, excluding the impact of investment variances pension scheme income/charge and economic assumption changes, over average IFRi equity (excluding pension scheme net surplus/deficit) attrimutamle to the ordinary shareholders of the Company. TSR targets for awards...

  • Page 115
    ... line basis 50% Payments to past directors (audited information) Trevor Matthews resigned from the Board with effect from 8 May 2013 and left the Company on 6 June 2013. • As disclosed in the 2013 Annual Report and Accounts, Trevor's 2012 LTIP award was pro-rated to reflect his service during...

  • Page 116
    ...(albeit with global responsibilities), and pay changes across the Group vary widely depending on local market conditions. 9 Percentage change in remuneration of Group CEO % change in % change in % change in basic salary bonus benefits 2014-2015 2014-2015 2014-2015 Group CEO All UK-based employees...

  • Page 117
    ...The total cost of ordinary dividends paid to shareholders. 4 There were no share buybacks in 2014 or 2015. 5 Total staff costs from continuing operations includes wages and salaries, social security costs, post-retirement obligations, profit sharing and incentive plans, equity compensation plans and...

  • Page 118
    ... not takgn into account in applying thiv tgvt 13 Executive Directors - share ownership requirements Shares held Unvested and Unvested and Unvested and subject to subject to subject to performance continued continued 2 3 conditions employment employment Options held Shareholding requirement (% of...

  • Page 119
    ... Number Pence Market price at date Exercise awards Normal Price vested/option Vesting (Options) exercised Date/Exercise Pence Pence Period6 Governance At 1 January 2015 Number Mark Wilson Aviva long term incentive plan4, 5 2013 2014 2015 Aviva annual bonus plan 2014 2015 Savings-related options...

  • Page 120
    Directors' remuneration report continued Dilution Awards granted under the Aviva all employee share plans are currently met by issuing new shares as agreed by the Board. Shares are still held in employee trusts, details of which are set out in note 32. The Company monitors the number of shares ...

  • Page 121
    ... other non-financial measures will be considered when determining bonus payouts (employee engagement, customer and risk). In addition, each ED's personal performance during the year will be taken into account. LTIP LTIP grants in 2016 will be in line with the levels set out in the Policy report. The...

  • Page 122
    ... each year. The review is informed by: • Redevant pay data incduding market practice among redevant FTSE disted companies of comparabde size to Aviva in terms of market capitadisation, darge European and gdobad insurers; and UK financiad services companies • Leveds of increase for the broader...

  • Page 123
    ... 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 124
    ... consisieni wiih ihe Aviva values is a feaiure of how Aviva operaies iis annual bonus plan for iis senior leaders and managers globally. A disciplined approach is iaken io moderaiion across ihe Company in order io recognise and reward ihe key coniribuiors. The allocaiion of LTIP awards also involves...

  • Page 125
    .... • The value of the LTIP and deferred element of the annual bonus assumes a constant share price and does not include additional shares awarded in lieu of dividends, that may have been accrued during the vesting period. • LTIP as awarded in 2016. Aviva plc Annual report and accounts 2015 | 121

  • Page 126
    ... payment f Other benefits f Sickness f Non-compete f Contract dates f 100%foffbasicfsalaryfforf52fweeks,fandf75%fthereafterfforfaffurtherf52fweeks.ff Duringfemploymentfandfforfsixfmonthsfafterfleavingf(lessfanyfperiodfoffgardenf f leave)fwithoutfthefpriorfwrittenfconsentfoffthefCompany.f Director...

  • Page 127
    ...Remuneration Policy. For example, during 2014 and continuing in 2015, the Committee has had detailed engagement with our largest shareholders to discuss amendments to targets for existing LTIP awards and 2015 annual bonus plan following the acquisition of FLG Governance Non-Executive Directors The...

  • Page 128
    ... table below. 21 Non-Executive Directors' key terms of appointment Provision Period Termination Fees Expenses Time commitment Policy 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...

  • Page 129
    ... 5 Details of income 4 Details of expenses 7 Finance costs 8 Long-term business economic volatility 9 Longer-term investment return and economic assumption changes for non-long-term business 60 Employee information 66 Directors 62 Auditors' remuneration 63 Tax 64 Earnings per share 65 Dividends and...

  • Page 130
    ... the Aviva structure, we performef full scope aufits over the following markets; UK Life (inclufing Frienfs Life), UK General Insurance, Canafa, anf France Life. • We ifentifief a further six markets where specific account balances are consiferef to be significant in size in relation to the Group...

  • Page 131
    Area of focus How our audit addressed the area of focus Valuation of life insurance contract liabilities Refer to page )1 (Audit Committee Report), page 138 (Accounting policies) and page 205 (notes) The Directors' valuation of the provisions for the settlement of future claims involves complex ...

  • Page 132
    ... governance process in place to fetermine the insurance contract liabilities, inclufing testing the associatef financial reporting control framework. • Our actuarial specialist team members performef infepenfent re-projections on selectef classes of business, particularly focusing on the largest...

  • Page 133
    ... 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 134
    ... markets; UK Life, Frienfs Life, UK General Insurance, Canafa, France Life, Aviva Investors UK, Spain, Italy, Polanf, Singapore Life anf Frienfs Provifent International. Where the work was performef by aufitors of the markets, we feterminef the level of involvement we neefef as the Group aufit team...

  • Page 135
    ...C.1.1 of the UK Corporate Governance Code (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 position and performance, business model and strategy is...

  • Page 136
    ... the members of Aviva continued Corporate governance statement Unfer the Listing Rules we are requiref to review the part of the Corporate Governance Statement relating to ten further provisions of the Cofe. We have nothing to report having performef our review. Responsibilities for the financial...

  • Page 137
    Accounting policies Accounting policies Aviva plc (the 'Company'), a public limited company incorporated and domiciled in the United Kingdom (UK), together with its subsidiaries (collectively, the 'Group' or 'Aviva') transacts life assurance and long-term savings business, fund management and most ...

  • Page 138
    ... investment returns, and the impact of changes in economic assumptions on liabilities, are disclosed separately outside operating profit. For non-long-term business, the total investment income, including realised and unrealised gains, is analysed between that calculated using a longer-term return...

  • Page 139
    ... Accounting policy Assessment of whether the Group controls the underlying entities including consideration of its decision making authority and the rights the variable returns from the entity Insurance and Assessment of the significance of participating insurance risk transferred to the Group...

  • Page 140
    ...strategy, the UK and certain does not recognise further losses unless it has incurred European and dsian long-ter- business policyholder funds have obligations or -ade pay-ents on behalf of the entity. invested in a nu-ber of property li-ited partnerships (PLPs), either directly or via property unit...

  • Page 141
    ... between the fair value at initial recognition and the transaction price is recognised as a gain or loss in the income statement. When unobservable market data has a significant (H) Premiums earned Premiums on long-term insurance contracts and participating investment contracts are recognised as...

  • Page 142
    ... accounting practices, with the exception of liabilities remeasured to reflect current market interest rates to be consistent with the value of the backing assets, and those relating to UK with-profit and non-profit contracts. The long-term business provisions are calculated separately for each life...

  • Page 143
    ... statement of financial position. General insurance and health prPvisiPns Outstanding claims prPvisiPns For non-participating investment contracts with an account balance, claims reflect the excess of amounts paid over the account balance released. CPntract liabilities General insurance and health...

  • Page 144
    ... on that date, fess any impairment subsequentfy incurred. Goodwiff arising before 1 January 1998 was efiminated against reserves and has not been reinstated. Acquired value of in-force business (AVIF) The present vafue of future profits on a portfofio of fong-term insurance and investment contracts...

  • Page 145
    ... useful life of the related asset. (Q) Ifvestmeft property Investment property is held for long-term rental yields and is not occupied by the Group. Completed investment property is stated at its fair value. Changes in fair values are recorded in the income statement in net investment income...

  • Page 146
    ... iucome Iutereht rate hwaph are coutractual agreemeuth betweeu two partieh to exchauge fixed rate aud floatiug rate iutereht by meauh of periodic paymeuth, calculated ou a hpecified uotioual amouut aud defiued iutereht rateh. Moht iutereht rate hwap 142 | Aviva plc Annual report and accounts 2015

  • Page 147
    ... costs for non-participating investment and investment fund management contracts are amortised over the period in which the service is provided. General insurance and health deferred acquisition costs are amortised over the period in which the related revenues are earned. The reinsurers' share of...

  • Page 148
    ... plans The Group offers share award and option pfans over the Company's ordinary shares for certain empfoyees, incfuding a Save ds You Earn pfan (SdYE pfan), detaifs of which are given in (AB) Employee benefits the Directors' Remuneration Report and in note 31. Annual leave The Group accounts...

  • Page 149
    ... to paying tax on shareholders' profits ('shareholder tax'), the Group's life businesses in the UK, Ireland and Singapore pay tax on policyholders' investment returns ('policyholder tax') on certain products at policyholder tax rates. The incremental tax borne by the Group represents income tax on...

  • Page 150
    ... average number of ordinary shares purchased by the Group and held as Treasury shares. Earnings per share has also been calculated on the adjusted operating profit before impairment of goodwill and other adjusting items, after tax, attributable to ordinary shareholders, as the directors believe...

  • Page 151
    ... ended 31 December 2015 Note 2015 £m 2014 £m Income Gross written premiums Premiums ceded to reinsurers Premiums written net of reinsurance Net change in provision for unearned premiums Net earned premiums Fee and commission income Net investment income Share of profit after tax of joint ventures...

  • Page 152
    ... for the year from discontinued operations1 Total comprehensive income for the year Attributable to: Equity holders of Aviva plc Non-controlling interests 1 Discontinued operations relates to the US Life and related internal asset management businesses (US Life) sold in 2013. 1,079 - 1,079 1,680...

  • Page 153
    ... a day one loss upon the completion of an outwards reinsurance contract by the UK General Insurance business, which provides significant protection against claims volatility from mesothelioma, industrial deafness and other long tail risks. The £53 million loss comprises £712 million in premiums...

  • Page 154
    ... 31 December 2014 Restated1 Long-term business £m General insurance and health £m Fund management £m Other operations £m Restated1 Total £m United Kingdom & Ireland France Poland Italy, Spain and Other Canada Asia Aviva Investors Other Group activities Corporate Centre Group debt costs...

  • Page 155
    Consolidated statement of changes in equity For the year ended 31 December 2015 Ordinary Preference share share capital capital £m £m Equity attributable to Retained shareholders earnings of Aviva plc £m £m DCI and Nontier 1 controlling notes interests £m £m Share premium £m Merger reserve ...

  • Page 156
    ...sale Total assets Equity Capital Ordinary share capital Preference share capital Capital reserves Share premium Merger reserve Treasury shares Other reserves Retained earnings Equity attributable to shareholders of Aviva plc Direct capital instrument and tier 1 notes Equity excluding non-controlling...

  • Page 157
    ... direct capital instruments and tier 1 notes Capital contributions from non-controlling interests of subsidiaries Dividends paid to non-controlling interests of subsidiaries5 Changes in controlling interest in subsidiaries Net cash used in financing activities - continuing operations Total net cash...

  • Page 158
    ... Sriends Life shareholders 0.74 Group shares for every Sriends Life share held. In total, 1,086,326,606 Group shares were issued and commenced trading on 13 April 2015. Sriends Life is a leading insurance business which provides a range of pension, investment and insurance products and services to...

  • Page 159
    ...Group insurance contract held within the Friends Provident pension scheme (refer to note 48(b)(i)). The adjustment to non-controlling interests represents the fair value adjustment of the 2003 and 2005 Step-up Tier one Insurance Capital Securities ('STICS') issuances based on the market quoted price...

  • Page 160
    ... of subsidiaries, joint ventures and associates comprises: 2015 £m 2014 £m Spain - long-term business Italy - long-term business Korea Turkey - general insurance Aviva Investors Turkey - long-term business Indonesia Other small operations Profit on disposal and remeasurement from continuing...

  • Page 161
    .... The general insurance business predominantly sells personal and small commercial lines insurance products through agents and a direct insurer. Poland Activities in Poland comprise long-term business and general insurance operations, including our long-term business in Lithuania. Italy, Spain and...

  • Page 162
    ... market performance and fiscal policy changes. (a) (i) Segmental income statement for the year ended 31 December 2015 United Kingdom & Ireland Europe Italy, Spain Poland and Other £m £m Aviva Investors2 £m Other Group activities3 £m Life £m GI £m France £m Canada £m Asia £m Total...

  • Page 163
    ... December 2014 United Kingdom & Ireland Europe Italy, Spain and Other £m Aviva Investors2 £m Other Group activities3 £m Life £m GI £m France £m Poland £m Canada £m Asia £m Total £m Gross written premiums Premiums ceded to reinsurers Internal reinsurance revenue Premiums written net...

  • Page 164
    ... Segmental statement sf financial pssitisn as at 31 December 2015 United Kingdsm & Ireland Life £m GI £m France £m Psland £m Eurspe Italy, Spain and Other £m Canada £m Asia £m Aviva Investsrs £m Other Grsup activities £m Tstal £m Goodwill Acquired value of in-force business and intangible...

  • Page 165
    ...(a) (iv) Segmental statement of financial position as at 31 December 2014 United Kingdom & Ireland Life £m GI £m France £m Poland £m Europe Italy, Spain and Other £m Aviva Other Group activities Investors £m £m Canada £m Asia £m Total £m Goodwill Acquired value of in-force business and...

  • Page 166
    ... Segmental incsme statement - products and services for the year ended 31 December 2015 Long-term business £m General insurance Fund and health2 management £m £m Other £m Total £m Gross written premiums1 Premiums ceded to reinsurers Premiums written net of reinsurance Net change in provision...

  • Page 167
    ... (b) (ii) 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 Gross written premiums1 Premiums ceded to reinsurers Premiums written net of reinsurance Net change in...

  • Page 168
    ... financial statements continued 4 - Segmental information continued (b) (iii) Segmental statement of financial position - products and services as at 31 December 2015 Long-term business £m General insurance and health £m Fund management £m Other £m Total £m Goodwill Acquired value of in-force...

  • Page 169
    ... in the income section of the consolidated income statement. 2015 £m 2014 £m Gross written premiums (note 4a and 4b) Long-term: Insurance contracts Participating investment contracts General insurance and health Less: premiums ceded to reinsurers (note 4a and 4b) Gross change in provision...

  • Page 170
    ... statement. 2015 £m 2014 £m Claims and benefits paid Claims and benefits paid to policyholders on long-term business Insurance contracts Participating investment contracts Non-participating investment contracts Claims and benefits paid to policyholders on general insurance and health business...

  • Page 171
    ...risk-free rates and narrowing credit spreads on government and corporate bonds in Italy and Spain. Negative variances in the UK were due to the adverse impact of falling reinvestment yields net of improved underlying property values on commercial mortgages partly offset by a change to the model used...

  • Page 172
    ...and properties are: Equities 2015 % 2014 % 2015 % Properties 2014 % United Kingdom Eurozone 5.4 4.3 6.6 5.7 3.9 2.8 5.1 4.2 The e.pected return on equities and properties is calculated by reference to the opening 10-year swap rate in the relevant currency plus an appropriate risk margin. These...

  • Page 173
    ...: 2015 £m 2014 £m Debt securities Equity securities Properties Cash and cash equivalents Other1 Assets supporting general insurance and health business Assets supporting other non-long-term business2 Total assets supporting non-long-term business 1 2 Includes the internal loan. Represents assets...

  • Page 174
    ...numbers The number of persons employed by the Group, including directors under a service contract, was: At 31 December 2015 Number Restated2 2014 Number Average sor the year1 2015 Number Restated2 2014 Number United Kingdom & Ireland France Poland Italy, Spain and Other Canada Asia Aviva Investors...

  • Page 175
    ... financial information under the Listing Rules of the UK Listing Authority. Fees for other assurance services comprise non-statutory assurance work which is customarily performed by the external auditor, including the audit of the Group's MCEV reporting. Although embedded value is a key management...

  • Page 176
    ...17) (7) 291 983 (ii) The Group, as a proxy for policyholders in the UK, Ireland and Singapore, is required to record taxes on investment income and gains each year) Accordingly, the tax benefit or expense attributable to UK, Irish and Singapore life insurance policyholder returns is included in the...

  • Page 177
    ... corporation tax rates in the UK, France and Italy on the Group's net deferred tax liabilities is £120 million, comprising an £82 million credit included in the income statement and a £38 million credit included in the statement of comprehensive income. Aviva plc Annual report and accounts 2015...

  • Page 178
    ...non-operating item. See note 1 for further details. There is no impact on the result or the total equity for any period presented as a result of this restatement. (ii) Basic earnings per share is calculated as follows: 2015 Net of tax, noncontrolling interests, preference dividends and DCI2 £m Net...

  • Page 179
    ... 49.6 (ii) Diluted earnings per share on operating profit attributable to ordinary shareholders is calculated as follows: 2015 Weighted average number of shares million Weighted average number of shares million Restated1 2014 IFRS Financial statements Total £m Per share p Total1 £m Per share...

  • Page 180
    ...) 2015 £m 2014 £m 2015 £m Total 2014 £m United Kingdom - long-term business United Kingdom - general insurance and health Ireland - general insurance and health France - long-term business Poland Italy - long-term business Italy - general insurance and health Spain - long-term business Canada...

  • Page 181
    .... These plans reflect management's best estimate of future profits based on both historical experience and expected growth rates for the relevant cash generating unit. The underlying assumptions of these projections include market share, customer numbers, premium rate and fee income changes, claims...

  • Page 182
    ... statement of financial position date. Non-participating in-estment contract AVIF is re-iewed for e-idence of impairment, consistent with re-iews conducted for other finite life intangible assets. Insurance and participating in-estment contract AVIF is re-iewed for impairment at each reporting date...

  • Page 183
    ... (ii) The carrying amount at 31 December comprised: 2015 Goodwill aud iutaugibles £m Equity iuterests £m Goodwill and intangibles £m Equity interests £m 2014 Loaus £m Total £m Loans £m Total £m Property management undertakings Long-term business undertakings General insurance and health...

  • Page 184
    ... Life Insurance Co. Ltd AvivaSA Emeklilik ve Hayat A.S Vietinbank Aviva Life Insurance Co. Ltd 1 Property management Property management Property management General insurance Life insurance Life insurance Life and Health insurance Life insurance Life insurance Life insurance UK UK UK Poland Poland...

  • Page 185
    ... of business 2015 2014 Aviva Life Insurance Company India SCPI Ufifrance Immobilier AI UK Commerical Real Estate Debt Fund Encore+1 1 Life insurance Property Management Property Management Property Management India France UK UK 26.00% 20.40% 20.72% 10.19% 26)00% 20)40% 26)33% 10)82% The Group...

  • Page 186
    ... market conditions at the valuation date. If owner-occupied properties were stated on a historical cost basis, the carrying amount would be £361 million (2014: £329 million). The Group has no material finance leases for property and equipment. 182 | Aviva plc Annual report and accounts 2015

  • Page 187
    .... Therefore, unobservable inputs reflect the assumptions the business unit considers that market participants would use in pricing the asset or liability. Examples are investment properties, certain private equity investments and private placements. Aviva plc Annual report and accounts 2015 | 183

  • Page 188
    ... investment contracts, which are legally reinsurance but do not meet the definition of a reinsurance contract under IFRS. These assets are financial instruments measured at fair value through profit and loss and are classified as Level 1 assets. 184 | Aviva plc Annual report and accounts 2015

  • Page 189
    ... (a)) Financial investments measured at fair value (note 26 (b)) Fixed maturity securities Equity securities Other investments (including derivatives) Total Financial liabilities measured at fair value Non-participating investment contracts1 (note 41(a)) Net asset value attributable to unit holders...

  • Page 190
    ... of Group holdings. Assets Other investments (including derivatives) £m Financial assets of operations classified as held for sale £m Non participating investment contracts £m Net asset value attributable to unitholders £m Liabilities 2014 Investment Property £m Loans £m Debt securities...

  • Page 191
    ...for each loan. The risk adjusted cash flows are discounted using a yield curve, taking into account the term dependent gilt yield curve, and global assumptions for the liquidity premium. Loans valued using this model have been classified as Level 3 as the liquidity premium is deemed to be non-market...

  • Page 192
    ...the underlying credit risk and liquidity risk and these assumptions are deemed to be non-market observable. • £0.5 billion (2014: £0.6 billion) of securitised mortgage loan notes, presented within Borrowings, are valued using a similar technique to the related Level 3 securitised mortgage assets...

  • Page 193
    ... UK primary healthcare and PFI businesses which are secured against General Practitioner premises, other primary health-related premises or other emergency services related premises. For all such loans, government support is provided through either direct funding or reimbursement of rental payments...

  • Page 194
    ... any voting rights relate to administrative tasks only, or when the relevant activities are directed by means of contractual arrangements. The Group has interests in both consolidated and unconsolidated structured entities as described below. The Group holds redeemable shares or units in investment...

  • Page 195
    ... at 31 December 2015, the Group's total interest in unconsolidated structured entities was £49.6 billion (2014: £34.4 billion) on the Group's statement of financial position, which are classified as financial investments held at fair value through profit or loss. The increase in the balance is due...

  • Page 196
    ...for sale £m Total £m 2014 Fixed maturity securities Debt securities UK government UK local authorities Non-UK government (note 26e) Corporate bonds Public utilities Other corporate Convertibles and bonds with warrants attached Other Certificates of deposit Equity securities Ordinary shares Public...

  • Page 197
    ... £m 2014 Fair value £m Fair value £m Fixed maturity securities Equity securities Other investments Unit trusts and other investment vehicles Derivative financial instruments Deposits with credit institutions Minority holdings in property management undertakings Other investments - long-term...

  • Page 198
    ... Non-UK Government Debt Securities 2015 £m 2014 £m 2015 £m Participating 2014 £m 2015 £m Shareholder 2014 £m 2015 £m Total 2014 £m Austria Belgium France Germany Greece Ireland Italy Netherlands Poland Portugal Spain European Supranational debt Other European countries Europe Canada United...

  • Page 199
    .... Net of non-controlling interests, our direct shareholder asset exposure to worldwide bank equity securities is £99 million (2014: £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...

  • Page 200
    ...- Long-term business Insurance contracts - General insurance and health business Participating investment contracts - Long-term business Non-participating investment contracts - Long-term business Retail fund management business Total deferred acquisition costs Surpluses in the staff pension schemes...

  • Page 201
    ... ordinary shares of 25 pence each were allotted and issued by the Company as follows: 2015 Share Capital £) Share Pre)iu) £) Share Capital £m 2014 Share Premium £m Nu)ber of shares Number of shares At 1 January Shares issued under the Group's Employee and Executive Share Option Schemes Shares...

  • Page 202
    ... the Aviva recruitment and retention share award plan (RRSAP) in relation to the recruitment or retention of senior managers excluding executive directors. The awards vest in tranches on various dates and vesting is conditional upon the participant being employed by the Group on the vesting date and...

  • Page 203
    ... relating to the performance of the participant's previous employer. These performance conditions are as outlined in the relevant year's directors' remuneration report. The vesting of the awards under the AI LTIP are subject to Aviva Investors Holdings Limited achieving a return on capital employed...

  • Page 204
    ... share award prior to its date of grant. The risk-free interest rate was based on 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 share awards. 200 | Aviva plc Annual report and accounts 2015

  • Page 205
    ...31 - (23) 8 IFRS Financial statements The shares are owned by employee share trusts with an undertaking to satisfy awards of shares in the Company under the Company's share plans and schemes. Details of the features of the plans can be found in the directors' remuneration report and/or in note 31...

  • Page 206
    ... or pay any dividend on its ordinary or preference share capital. These instruments have been treated as equity. Please refer to accounting policy AE. The DCI, FxdRNs and STICS count as 'tier 1 restricted' capital from 1 January 2016 in accordance with the Solvency II Own Funds guidelines issued by...

  • Page 207
    ...2015 £m 2014 £m Balance at 1 January Profit for the year attributable to equity shareholders Remeasurements of pension schemes Dividends and appropriations (note 15) Net shares issued under equity compensation plans Realised loss on redemption of direct capital instrument Effect of changes in non...

  • Page 208
    ... £m 2014 Net £m Long-term business Insurance contracts Participating investment contracts Non-participating investment contracts Outstanding claims provisions Long-term business General insurance and health Provisions for claims incurred but not reported Provision for unearned premiums Provision...

  • Page 209
    ... on completion of an outward reinsurance contract by the UK general insurance business, which provides significant protection against claims volatility from mesothelioma, industrial deafness and other long tail risks. 2014 Gross £m Reinsurance £m Net £m Long-term business liabilities Change...

  • Page 210
    ... the distributed profits, with the shareholders receiving the balance. - 'Non-profit' funds of Aviva Annuity UK, UKLAP, Friends Life Limited and Friends Life and Pensions Limited, where shareholders are entitled to 100% of the distributed profits. Shareholder profits on unitised with-profit business...

  • Page 211
    ... policy-related liabilities, which includes the value of any 'planned enhancements' to benefits agreed by the company. The WPBR for an individual contract is generally calculated on a retrospective basis, and represents the accumulation of the premiums paid on the contract, allowing for investment...

  • Page 212
    ...discount rates 2015 2014 Assurances Life con.entional non-profit Pensions con.entional non-profit Annuities Con.entional immediate and deferred annuities Non-unit reser.es on Unit Linked business Life Pensions Income Protection Acti.e li.es Claims in payment - le.el Claims in payment - index linked...

  • Page 213
    ... types of long-term business, including unit-linked and participating funds, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit. The impact of operating assumption changes of £(0.7) billion in 2015 reduces the carrying value of insurance...

  • Page 214
    ... are based on undiscounted estimates of future claim payments, except for the following classes of business for which discounted provisions are held: Rate Class 2015 2014 2015 Mean term of liabilities 2014 Reinsured London Market business Latent claims Structured settlements 2.0% 0.00% to 2.30...

  • Page 215
    ... discount rates would increase lump sum payments to UK bodily injury claimants. (iv) Movements The following changes have occurred in the general insurance and health claims provisions during the year: 2015 £m 2014 £m Carrying amount at 1 January Impact of changes in assumptions Claim losses and...

  • Page 216
    .... Key elements of the movement in prior accident year general insurance and health net provisions during 2014 were: • £112 million release from UK & Ireland due to favourable development on personal and commercial motor, and commercial property claims. • £97 million release from Canada mainly...

  • Page 217
    ...by the UK genefal insufance business dufing 2015 covefing a lafge pfopoftion of these liabilities, favoufable claims development of 722 million, claim payments net of feinsufance fecovefies and fofeign exchange fate movements. (e) Provision for unearned premiums Movements The following changes have...

  • Page 218
    ... comprised: 2015 £m 2014 £m Long-term business Participating contracts Non-participating contracts at fair value Total 78,048 103,125 181,173 67,232 50,013 117,245 (b) Long-term business investment liabilities Investment contracts are those that do not transfer significant insurance risk from...

  • Page 219
    ... guarantee fund has offered maturity value guarantees on certain unit-linked products. For some unitised with-profit life contracts the amount paid after the fifth policy anniversary is guaranteed to be at least as high as the premium paid increased in line with the rise in RPI/CPI. (ii) No market...

  • Page 220
    ... the fund, mitigating the impact of large falls in investment values and interest rates. (c) Overseas life businesses In addition to guarantees written in the Group's UK and Ireland life businesses, our overseas businesses have also written contracts containing guarantees and options. Details of...

  • Page 221
    ... they transfer significant insurance risk. The reinsurance assets classified as non-participating investment contracts are financial instruments measured at fair value through profit or loss. Reinsurance assets at 31 December 2015 for General insurance and health business include the impact of...

  • Page 222
    ... of premiums ceded on completion of the outward reinsurance contract taken out by the UK general insurance business, which provides significant protection against claims volatility from mesothelioma, industrial deafness and other long tail risks. 218 | Aviva plc Annual report and accounts 2015

  • Page 223
    ...2015 £m Effect on profit 2014 £m Assumptions Long-term insurance business Interest rates Expenses Persistency rates Mortality for assurance contracts Mortality for annuity contracts Tax and other assumptions Investment contracts Interest rates Expenses General insurance and health business Change...

  • Page 224
    ... UK, France and Italy has resulted in a reduction in the Group's net deferred tax liabilities of £120 million, comprising a £82 million credit included in the income statement and a £38 million credit included in the statement of comprehensive income. 220 | Aviva plc Annual report and accounts...

  • Page 225
    ...and present employees. In all schemes, the appointment of trustees of the funds is determined by their trust documentation, and they are required to act in the best interests of the schemes' beneficiaries. The long-term investment objectives of the trustees and the employers are to limit the risk of...

  • Page 226
    ... tothe theconsolidated consolidated financial statements continued 48 - Pension obligations continued The number of scheme members was as follows: United Kingdom 2015 Number 2014 Number 2015 Number Ireland 2014 Number 2015 Number Canada 2014 Number Deferred members Pensioners Total members 1 56...

  • Page 227
    ... by scheme as follows: 2015 UK £m Ireland £m Canada £m Total £m UK £m Ireland £m Canada £m 2014 Total £m Bonds Fixed interest Index-linked Equities Property Pooled investment vehicles Derivatives Cash and other1 Total fair value of assets Less: consolidation elimination for non-transferable...

  • Page 228
    ...other balances includes an insurance policy of £546 million issued by a Group company that is not transferable under IAS 19 and is consequently eliminated from the Group's IAS 19 scheme assets. IAS 19 plan assets include investments in Group-managed funds in the consolidated statement of financial...

  • Page 229
    ...expected undiscounted benefits payable from the main UK defined benefit scheme, ASPS, is shown in the chart below: Undiscounted benefit payments (£m) Deferred member cash ï¬,ows Pensioner cash ï¬,ows 700 600 500 400 300 200 100 0 2015 2045 2075 2105 Aviva plc Annual report and accounts 2015 | 225

  • Page 230
    ... rate risk relative to the funding basis. Main UK scheme The 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...

  • Page 231
    ...). 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. Aviva plc Annual report and accounts 2015 | 227

  • Page 232
    ... financial instruments at fair value, since they are managed as a portfolio on a fair value basis. This presentation provides more relevant information and eliminates any accounting mismatch. The securitised mortgage loan notes are at various fixed, floating and index-linked rates. Further details...

  • Page 233
    ...any companies in t)e Group. Loans of £62 million (2014: £199 million) included in t)e table relate to t)ose Property Funds w)ic) )ave been consolidated as subsidiaries. (b) T)e UK long-term business entered into a financial reassurance agreement wit) Swiss Re in 2008, under w)ic) up-front payments...

  • Page 234
    ... to the level of provisions made for general insurance claims and substantial reinsurance cover now in place, the directors consider that any additional costs arising are not likely to have a material impact on the financial position of the Group. (c) Guarantees on long-term savings products As...

  • Page 235
    ... and/or financial condition and divert managementjs attention from the day-to-day management of the business. IFRS Financial statements (e) Structured settlements The Company has purchased annuities from licensed Canadian life insurers to provide for fixed and recurring payments to claimants...

  • Page 236
    ... in the financial statements, are as follows: 2015 £m 2014 £m Investment property Property and equipment Other investment vehicles1 1 Represents commitments for further investment in certain private equity vehicles. Such commitments do not expose the Group to the risk of future losses in excess...

  • Page 237
    ... Life business United Kingdom & Ireland France Poland Italy Spain Other Europe Europe Asia General insurance & health United Kingdom & Ireland France Italy Other Europe Europe Canada Asia Fund Management Corporate & Other Business1 Total capital employed Financed by Equity shareholders' funds Non...

  • Page 238
    ... Premium / discount on non participating investment contracts Financial instruments Acquired value of in-force business and intangibles Change in unallocated divisible surplus Interest expense on borrowings Net finance charge on pension schemes Foreign currency exchange gains Changes in working...

  • Page 239
    ... EU-based insurance groups are no longer required to disclose their solvency position under the Insurance Groups Directive, as the regulatory jramework has been replaced by the new Solvency II regime. As such, ajter 31 December 2015 Aviva Group will no longer disclose its capital statement under FRS...

  • Page 240
    ... with-profits funds and the RIEESA use internal hedging to limit the impacts of equity market volatility. In aggregate, the Group has at its disposal total available capital of £24.2 billion (2014: £22.2 billion), representing the aggregation of the solvency capital of all of our businesses. This...

  • Page 241
    ... WPF the surplus may only be distributed to policyholders. • (ii) UK non-participating funds - any available surplus held in these is attributable to shareholders. Capital in the non-profit funds may be made available to meet requirements elsewhere in the Group subject to meeting the regulatory...

  • Page 242
    ... aligned to Aviva's risk policies, risks are usually grouped by risk type: credit, market, liquidity, life insurance (including long-term health), general insurance (including short-term health), asset management and operational risk. Risks falling within these types may affect a number of metrics...

  • Page 243
    ... other financial assets are exposures to peripheral European countries and worldwide banks. We continued in 2015 to limit our direct shareholder and participating assets exposure to the governments (including local authorities and agencies) and banks of Greece, Portugal, Italy and Spain. Information...

  • Page 244
    ... Officer (CFO), Chief Risk Officer (CRO), Group ALCO and the Board Risk Committee as appropriate. The Group's largest reinsurance counterparty is BlackRock Life Ltd (including subsidiaries) as a result of the BlackRock funds offered to UK Life customers via unit linked contracts. At 31 December 2015...

  • Page 245
    ... long-term debt and fixed income securities and their movement relative to the value placed on the insurance liabilities. A number of policyholder product features have an influence on the Group's interest rate risk. The major features include guaranteed surrender values, guaranteed annuity options...

  • Page 246
    ... rate Weighted average book value yield on assets Participating contract liabilities £m France Italy Other1 Total 1 'Other' includes UK participating business 0.79% 1.38% N/A N/A 3.67% 3.69% N/A N/A 61,871 9,072 60,980 131,923 Profit before tax on General Insurance and Health Insurance...

  • Page 247
    ...% increase 10% decrease in sterling/ in sterling/ CAD$ rate CAD$ rate £m £m IFRS Financial statements Impact on profit before tax 31 December 2015 Impact on profit before tax 31 December 2014 8 (44) 23 (25) 25 (15) (46) 20 The balance sheet changes arise from retranslation of business unit...

  • Page 248
    ... on factors such as persistency levels, exercising of policy holder options and management and administration expenses. The Group's health insurance business (including private health insurance, critical illness cover, income protection and personal accident insurance, as well as a range of...

  • Page 249
    ... floor (guaranteed return), maturity guarantee, guaranteed death benefit, and guaranteed minimum rate of annuity payment. • Other: indexed interest or principal payments, maturity value, loyalty bonus. The impact of these is reflected in the economic capital model and MCEV reporting and managed as...

  • Page 250
    ... reporting directly to the Aviva Investors' Chief Risk Officer. (h) Operational risk Operational risk is the risk of direct or indirect loss, arising from inadequate or failed internal processes, people and systems, or external events including changes in the regulatory environment. We have limited...

  • Page 251
    ...for annuity contracts by 5%. The impact of an increase in gross loss ratios for general insurance and health business by 5%. Long-term business Sensitivities as at 31 December 2015 2015 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10...

  • Page 252
    ... to the UK. General insurance and health business sensitivities as at 31 December 2015 2015 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Gross loss ratios +5% Gross of reinsurance Net of...

  • Page 253
    57 - Risk management continued Fund management and non-insurance business sensitivities as at 31 December 2015 2015 Impact on profit before tax (£m) Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Total - Interest rates +1% - Interest rates ...

  • Page 254
    ... and hedging conginued (ii) Cash flow hedges At the end of 2015 the Group entered into a cash flow hedge using a foreign exchange forward to hedge the currency exposure related to the acquisition of additional shares in its associate Aviva Life Insurance Company India expected to be completed in the...

  • Page 255
    ... million) are recognised within 'Loans to banks' in note 23(a). Other financial liabilities presented above represent liabilities related to repurchase arrangements recognised within 'Obligations for repayment of cash collateral received' in note 50. Aviva plc Annual report and accounts 2015 | 251

  • Page 256
    ...individual financial positions. Our UK fund management companies manage most of the assets held by the Group's main UK staff pension scheme, for which they charge fees based on the level of funds under management. The main UK scheme holds investments in Groupmanaged funds and insurance policies with...

  • Page 257
    ...Kingdom Canada Aviva Annuity UK Limited Aviva Central Services UK Limited Aviva Employment Services Limited Aviva Equity Release UK Limited Aviva Health UK Limited Aviva Insurance Limited Aviva International Insurance Limited Aviva Investors Global Services Limited Aviva Investors Pensions Limited...

  • Page 258
    ...significant in 2015 are set uut in nutes 18 and 19 tu the financial statements. United Kingdom The Gruup has interests in several pruperty limited partnerships. Further details are pruvided in nutes 18, 19 and 25 tu the financial statements. China vviva-COFCO Life Insurance Cu. Limited (50%) India...

  • Page 259
    ... Country of incorporation Share class % held Aviva-COFCO Life Insurance Company Ltd General Accident plc Aviva Group Holdings Limited China United Kingdom United Kingdom Ordinary shares Ordinary shares Ordinary shares 50 97 600 (b) The indirect related undertakings of the Company as at 31...

  • Page 260
    ... Fi Aviva Credit Services UK Limited France United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom France France France Spain United Kingdom Mutual Fund Ordinary Shares Equity Shares Issued Capital Shares Ordinary Shares Sole Member Sole Member Ordinary Shares Ordinary A Shares...

  • Page 261
    ... Group Ireland Limited Aviva Health Insurance Ireland Limited Aviva Health UK Limited Aviva Holdings CED II (Luxembourg) Sarl Aviva Immo Selection Aviva Impact Investing France Aviva Infrastructure Debt Europe I S.A. Aviva Insurance Company of Canada Aviva Insurance Limited Aviva Insurance Services...

  • Page 262
    ...Investors Global Emerging Markets Index Fund vviva Investors Global Fixed Income Hedged Fund Share Class 3 vviva Investors Global High Yield Bond Fund vviva Investors Global Investment Grade Corporate Bond Fund vviva Investors Global Services Limited vviva Investors GR SPV 10 Limited vviva Investors...

  • Page 263
    ... GmbH Aviva Investors Securities Investment Consulting Company Limited Aviva Investors Selection Aviva Investors Short Duration Global High Yield Bond Fund Aviva Investors Short Term European Bond Fund Aviva Investors Short Term European Bond Fund -A Aviva Investors Small & Mid Ca Aviva Investors...

  • Page 264
    ... Ireland France France France France France France Spain France Italy Canada United Kingdom China China Canada vXv Fixed Interest Investment ICVC - Global High Income Fund vXv Fixed Interest Investment ICVC - Sterling Corporate Bond Fund vXv Fixed Interest Investment ICVC - Sterling Strategic Bond...

  • Page 265
    ... CEIF Properties Sarl Centaurus CER (Aviva Investors) Sarl Central European Industrial Fund FCP- SIF CGNU Life Assurance Limited CGP Entrepreneurs CGU Equilibre2 CGU Gestion Patrimoniale2 CGU Group B.V. CGU International Holdings BV CGU Project Services Private Limited CGWM Select Global Affinity...

  • Page 266
    ... Commercial Property Trust Limited F&C Diversified Growth Fund A Gbp Inc Hedged F&C Diversified Growth X European Income F&C European Capital Partners Limited Partnership F&C European Growth & Income A Gbp Inc2 F&C Institutional Investment Funds ICVC - Institutional Global Equity Fund Jersey United...

  • Page 267
    ... F&C Multi-Capital Fund ICVC - F&C MM Navigator Select F&C Private Equity Trust plc Fastighets AB Lagomstansen Financial Options Services Limited Financiere du Carrousel Finoa Srl First-Aviva Life Insurance Co., Ltd. 3 Fitzroy Place GP 2 Limited Fitzroy Place Management Co Limited Fitzroy Place...

  • Page 268
    ... General Partner Limited Gobafoss Partnership Nominee No 1 Ltd Goodman European Business Park Fund (Lux) S.Ã r.l. Grande Europe 0-100 M Gresham Insurance Company Limited Groupement d'Interet Economique du Groupe Aviva France HCEPP DBP (Diamond Business Park) Sp zoo Health & Case Management Limited...

  • Page 269
    ...Mortimer Street Nominee 3 Limited3 Multitalents M Myria Asset Management Myria Conc.Act.Europ National Home Warranty Group Inc. Navigator Investment Services Limited NBP Developments Limited NDF Administration Limited Netnerve Limited New Broad Street House Unit Trust3 New Broad Street House LP3 New...

  • Page 270
    ... tothe theconsolidated consolidated financial statements continued Name of undertaking Country of incorporation Share class % held NU Invesco European Equity NU Invesco Global Equity NU Invesco International Equity2 NU Invesco Managed Unit Trust NU Invesco Smaller Companies Equity NU Investec...

  • Page 271
    ...Energy Limited Reschop Carré Hattingen GmbH Reschop Carré Marketing GmbH Retirement Housing Property Partnership River & Mercantile UK Equity Smaller Companies2 Rugby Radio Station (General Partner) Limited3 Rugby Radio Station (Nominee) Limited3 S&Y Insurance Company SachsenFonds Asset Management...

  • Page 272
    ... consolidated financial statements continued Name of undertaking Country of incorporation Share class % held Southgate Unit Trust St Christopher's Place Limited Staff Schemes Save from Pay Ltd Stonebridge Cross Management Limited Jersey United Kingdom United Kingdom United Kingdom...

  • Page 273
    ...Guarantee Services Inc. Whitgift Shop Unit Trust Winslade Investments Inc. Wood Lane (Stadium) Limited Wroclaw BC sp. z.o.o Yatra Capital Limited 1 France France France France Australia United States Netherlands United Kingdom United Kingdom United Kingdom United Kingdom Spain France United Kingdom...

  • Page 274
    ... to income statement Remeasurements of pension schemes Other comprehensive income, net of tax Total comprehensive income for the year 677 563 E 1,095 - 1,095 1,772 866 (1) 865 1,428 E Where applicable, the accounting policies of the Company are the same as those of the Group on pages...

  • Page 275
    ...January Profit for the year Other comprehensive income/(expense) Total comprehensive income for the year Dividends and appropriations Employee trust shares distributed in the year Reserves credit for equity compensation plans Shares issued under equity compensation plans Redemption of direct capital...

  • Page 276
    ... Total assets Equity Ordinary share capital Preference share capital Called up capital Share premium Merger reserve Investment valuation reserve Equity compensation reserve Retained earnings Direct capital instrument and tier 1 notes Total equity Liabilities Non-current liabilities Borrowings Loans...

  • Page 277
    ... dividend paid Interest paid on the direct capital instrument and tier 1 notes Interest paid on borrowings Receipts under equity compensation plans Proceeds from issue of ordinary shares Treasury shares purchased for employee trusts Net cash generated/(used in) from financing activities Net increase...

  • Page 278
    ...Level 2 in the fair value hierarchy described in note 22 to the Group consolidated financial statements. (ii) At 31 December 2015, 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...

  • Page 279
    ... the Group consolidated financial statements, note 34. The 6.875% £210 million STICS are reflected in the Company financial statements at a value of £224 million following the transfer at fair value from Friends Life Holdings plc on 1 October 2015. Aviva plc Annual report and accounts 2015 | 275

  • Page 280
    ... credit for equity compensation plans Trust shares distributed in the year Issue of share capital under equity compensation scheme Redemption of direct capital instrument Aggregate tax effect Balance at 31 December 2014 Arising in the year: Profit for the year Fair value gains on investments in...

  • Page 281
    ... Aviva Group Holdings Limited (AGH) and Friends Life Holdings plc, 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...

  • Page 282
    ...normal credit terms. Details of guarantees, indemnities and warranties given by the Company on behalf of related parties are given in note 52(f). Following the acquisition of Friends Life, Aviva plc transferred 100% of its newly acquired shares to Aviva Group Holdings Ltd in exchange for an issue of...

  • Page 283
    ... Selected consolidated financial data Information on the Company Analysis of investments Contractual obligations Risk and capital management Corporate responsibility key performance indicators Corporate responsibility assurance statement Other information Aviva plc Annual report and accounts 2015...

  • Page 284
    ...as lower mortality rates will increase profitability of life insurance 280 | Aviva plc Annual report and accounts 2015 Wit.-profits products are mainly written in our UK & Ireland operating segment, wit. small funds in France and Singapore. T.ese funds enable policy.olders to participate in a large...

  • Page 285
    ...somewhat reduced through our focus on personal lines business and small to medium sized commercial risks in the general insurance business. The Group cedes the majority of its worldwide catastrophe risk to thirdparty reinsurers. In 2015 our UK general insurance business suffered losses due to severe...

  • Page 286
    ... the with-profits fund. The annual excess of premiums and investment return over operating expenses, benefit provisions and claims payments within our with-profits funds that are not distributed as bonuses and related shareholders' profit is transferred from the income statement to the unallocated...

  • Page 287
    ... net written premiums, sales do not - This includes traditional life insurance, long-term health, include premiums received from contracts in-force at the annuity business and with-profits business. beginning of the year, even though these are a source of IFRS - There is an element of insurance risk...

  • Page 288
    ... these sales are excluded from our consolidated accounts, with only our share of profits or losses 284 | Aviva plc Annual report and accounts 2015 United Kingdom & Ireland Life United Kingdom & Ireland GI2 France Poland Italy, Spain and Other Canada Asia Aviva Investors Other Group activities Total...

  • Page 289
    ... operating profit to profit before tax attributable to shareholders' profits under IFRS. Continuing operations 2015 £m Restated1 2014 £m Restated1 2013 £m United Kingdom & Ireland Life United Kingdom & Ireland GI France Poland Italy, Spain and Other Canada Asia Aviva Investors Other Group...

  • Page 290
    ... of £53 million, represents a day one loss upon the completion of an outwards reinsurance contract by the UK General Insurance business, which provides significant protection against claims volatility from mesothelioma, industrial deafness and other long tail risks. Further details on significant...

  • Page 291
    ... tax attributable to shareholders' profits (from continuing operations) Year ended 31 December 2015 Other information Claims and benefits paid net of feinsufance in 2015 incfeased by £2,511 million, of 13% to £21,985 million (2014: £16,474 million). This was mainly due to highef claims payments...

  • Page 292
    ... December 2014 Pensions Annuities Bonds Protection Equity release Others United Kingdom Ireland Long-term insurance, savings and headth sades IFRS net written premiums Adjusted operating profit before tax United Kingdom Ireland Life business Generad insurance and headth - UK headth Fund management...

  • Page 293
    ... rates increasing fixed income security market values. This was offset by an adverse impact from a decrease in the swap rate used to discount latent claims reserves and periodic payment orders. France Other information The table below presents sales, net written premiums, adjusted operating profit...

  • Page 294
    ... in Poland for the three years ended 31 December 2015, 2014 and 2013. 2015 £m Restated1 2014 £m Restated1 2013 £m Sales Long-term insurance and savings business General insurance and health net written premiums Total sales IFRS net written premiums Adjusted operating profit before tax Long-term...

  • Page 295
    ... due to improved margins on with-profits business driven by management actions to reduce the cost of guarantees. In Spain (excluding CxG), life adjusted The weakening of the euro affected all metrics from a Group perspective. Total long-term insurance and savings sales increased by £243 million...

  • Page 296
    ... protection sales in Singapore and China and £582 million sales contributed by Friends Provident International ('FPI'), following the Friends Life acquisition in April 2015. General insurance and health net written premiums, excluding long-term health, were £56 million (2014: £65 million). Total...

  • Page 297
    ... internal debt costs of million). Long-term insurance and savings business increased to £92 million (2014: £186 million) and an increase in the net £1,647 million following the transfer of the UK retail fund finance income on the main UK pension scheme to £94 million management business from UK...

  • Page 298
    ... with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU). On 10 April 2015, the Group completed the acquisition of 100% of the outstanding ordinary shares of Friends Life Group Limited...

  • Page 299
    ... of financial position data Amounts in accordance with IFRS 2015 £m 2014 £m 2013 £m 2012 £m 2011 £m Total assets Gross insurance liabilities Gross liabilities for investment contracts Unallocated divisible surplus Core structural borrowings Other liabilities Total liabilities Total equity 387...

  • Page 300
    ... of Aviva General Aviva plc, a public limited company incorporated under the laws of England and Wales, is the holding company of the Aviva Group. The Group provides customers with long-term insurance and savings, general and health insurance, and fund management products and services. Our...

  • Page 301
    ... in the UK, Europe, North America and Asia. All sales of retail fund management products are included in our long-term insurance and savings business sales. Markot position Aviva Investors was ranked 48th globally by assets under management6. Total worldwide funds managed by Aviva Investors, at 31...

  • Page 302
    ... annuities. We provide a number of traditional life insurance products, including level-term, decreasing-term (with or without critical illness), guaranteed whole of life insurance, over 50s life cover and income protection. Our savings and investment products include ISAs, investment bonds, funds...

  • Page 303
    ... protection products. Italy Business overview and strategy Poland Business overview and strategy Aviva is the second largest insurer in the Life individual market in terms of gross written premiums13 with a market share of 8%. Our general insurance business is the 14th largest with a market share...

  • Page 304
    ...profit sharing is regularly used to increase the policy return. Our traditional plans include savings schemes and income products. Pension savings products have 17 We are Canada's second largest general insurer18. Through our distribution partners we provide a range of personal and commercial lines...

  • Page 305
    ... increasing in market share, the traditional broker channel accounts for a high proportion of distribution (personal lines and commercial lines). In addition to the growth of direct and affinity channels, insurance carriers are increasingly supporting and controlling distribution through investment...

  • Page 306
    ... funds to pension schemes, local authorities and insurance companies. We also supply products to the retail and wholesale markets, principally through UK domiciled bond, real estate, equity, multi-asset and multi-strategy OEIC funds. The Aviva Investors Multi-Strategy ('AIMS') range of funds focuses...

  • Page 307
    ... of the long-term growth potential within these classes of assets, whilst the level of guaranteed payments is managed to mitigate the level of risk that we bear in relation to the volatility of these classes of assets. Non-UK participating business, annuities and non-participating contracts in all...

  • Page 308
    ... than BBB £m Non-rated £m Total £m 2015 - Participating fund assets A £m Government UK Government Non-UK Government Corporate Public utilities Convertibles and bonds with warrants Other corporate bonds Certificate of deposits Structured Wrapped credit Other Total Total % 2014 2014 % - 6,526...

  • Page 309
    ... in value between the date of purchase and the balance sheet date. The significant majority of these holdings are within our participating funds where the risk to our shareholders is governed by the nature and extent of our participation within those funds. Aviva plc Annual report and accounts 2015...

  • Page 310
    ... in the following locations: • UK: UK Life, York and Bristol; 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...

  • Page 311
    ... payment dates at 31 December 2015 included the following: Less than one year £m Between one & three years £m Between three & five years £m After five years £m Total £m Insurance and investment contracts Long-term business - Insurance contracts - non-linked1 - Investment contracts - non...

  • Page 312
    ...) in monetary policy, interest rates and economic growth, and exacerbate 308 | Aviva plc Annual report and accounts 2015 The types of risk to which the Group is exposed have not changed significantly over the year and remain credit, market, insurance, asset management, liquidity, operational and...

  • Page 313
    ... the IFRS Financial Statements. 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 instrument and tier 1 notes Preference shares Subordinated debt Senior...

  • Page 314
    ...guarantees and promises. Realistic balance sheet information is shown below for the four main UK with-profits funds: New With-Profits Sub-Fund (NWPSF), Old With-Profits Sub-Fund (OWPSF), With-Profits Sub-Fund (WPSF) and Friends Provident 310 | Aviva plc Annual report and accounts 2015 We use a risk...

  • Page 315
    ...number of rating agencies. The agencies generally assign ratings based on an assessment of a range of financial factors (e.g. capital strength, liquidity, leverage and fixed charge cover ratios. and non-financial factors (e.g. strategy, competitive position and quality of management.. Certain rating...

  • Page 316
    ... Key indicators1, 2 Indicator 2012 2013 2014 2015 2015 target Trust % of employees who confirm that they have read, understood, and accepted the Business Ethics Code annually; and all employees in Aviva France who are obliged to comply with the Business Ethics Code as a term of their employment...

  • Page 317
    ... figures are based on those markets within which Aviva has continued to operate from 2012, which are: UK, Ireland, Canada, France, Italy, Spain, Poland, Lithuania, Singapore, China, and India. This KPI excludes Friends Life customers. = n/a Y Y Offset 100% CO2e emissions 40% reduction by...

  • Page 318
    ... for CR management and group CR reporting; • evaluated the design of the key structures, systems, processes and controls for managing, recording and reporting the Selected Information. This included visiting head offices in two out of sixteen markets, and performing alternative testing...

  • Page 319
    ... performance and actgvgtges. We permgt thgs report to be dgsclosed gn the Annual Report and Accounts for the year ended 31 December 2015, to assgst the Dgrectors gn respondgng to thegr governance responsgbglgtges by obtagngng an gndependent assurance report gn connectgon wgth the Selected...

  • Page 320
    Corporate responsibility assurance statement continued This page is intentionally left blank 316 | Aviva plc Annual report and accounts 2015

  • Page 321
    ... Company address Share capital Related party disclosures Dividend data Guarantees, securitised assets and off-balance sheet arrangements Liquidity and capital resources Regulation Risks relating to our business 318 318 320 320 321 321 325 331 Other information Aviva plc Annual report and accounts...

  • Page 322
    ... 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 issue: • Ordinary shares of £0.25 each which constitute equity security and hold voting rights...

  • Page 323
    ... the listing rules Details of long-term incentive schemes Waiver of emoluments by a director Waiver of future emoluments by a director Non pre-emptive issues of equity for cash Item (7) in relation to major subsidiary undertakings Parent participation in a placing by a listed subsidiary Contracts of...

  • Page 324
    ... services and for arranging external finance. Our UK fund management companies manage most of the assets held by the Group's main UK staff pension scheme, for which they charge fees based on the level of funds under management. The main UK scheme holds investments in Groupmanaged funds and insurance...

  • Page 325
    ...-term business policyholder funds have invested in a number of property limited partnerships (PLP), either directly or via property unit trusts (PUT), through a mix of capital and loans. The PLPs are managed by general partners (GP), in which the long-term business shareholder companies hold equity...

  • Page 326
    ... Management of debt Operating borrowings Opprational worrowings at amortispd cost Opprational worrowings at fair valup Total 550 1,308 1,858 8,770 Aviva plc is thp principal financing vphiclp in our cpntralispd funding stratpgy. Wp aim to managp our pxtprnal dpwt in linp with rating agpncy limits...

  • Page 327
    ... investment income and group tax relief payments and other financial cash flows previously reported under central spend. Before non-operating items and capital injections. We use funds to pay dividends to our shareholders, to service our debt and to pay our central Group cash flows. In 2015, total...

  • Page 328
    ... position undpr thp Europpan Insurancp Groups Dirpctivp, as thp rpgulatory frampwork has bppn rpplacpd by thp npw Solvpncy II rpgimp. As such, aftpr 31 Dpcpmbpr 2015 Aviva Group will no longpr disclosp its capital solvpncy surplus undpr thp IGD rulps. 324 | Aviva plc Annual report and accounts 2015

  • Page 329
    ... Groups Directive (IGD) excess solvency Cover over EU minimum (calculated excluding UK life funds) 11.8 (11.8) - 10.8 (4.8) 6.0 22.6 (16.6) 6.0 14.4 (11.2) 3.2 Our principal insurance and fund management operations are in the UK, Europe, Canada and Asia. We are therefore subject to financial...

  • Page 330
    ... continupd Shareholder information continued Insurance Groups Directive (IGD) Markets in Financial Instruments Directive (MIFID2) The IGD rpquirpd mpmbpr statps to introducp thp following mpasurps to strpngthpn supprvision of insurancp companips which arp part of a group: • An adjustmpnt margin...

  • Page 331
    ... Marine Insurance Company Ltd Aviva Equity Release UK Ltd Aviva Health UK Ltd Aviva Insurance Services UK Ltd Aviva Investors Global Services Ltd Aviva Investors UK Fund Services Ltd Aviva Investors UK Funds Ltd Aviva Life International Ltd Aviva Life Services UK Ltd Aviva Pension Trustees UK Ltd...

  • Page 332
    ...thp sharing of dptailpd information about thp Group. Arpas of potpntial risk or wpaknpss whprp thp rpgulators particularly rpquirp Aviva to focus attpntion arp formally spt out in a Risk Mitigation Plan (RMP) from thp FCA and kpy actions from thp PRA. 328 | Aviva plc Annual report and accounts 2015

  • Page 333
    ... relating to life and health insurance policies, must be segregated from the assets and liabilities attributable to non-life insurance business or to shareholders. Separate accounting and other records must be maintained and a separate fund established to hold all receipts of long-term business...

  • Page 334
    ... linps products and businpss practicps, including rating formulas, undprwriting and policy tprms and conditions. Commprcial linps insurancp is not subjpct to as pxtpnsivp rpgulations. PRA rulps rpquirp insurancp companips to submit annually thpir auditpd annual accounts, statpmpnts of financial...

  • Page 335
    ... institutions and the stability of European member economies, and likewise affect UK and U.S. based financial institutions, the stability of the global financial markets and any economic recovery. We hold investments in both UK and non-UK securities. Aviva plc Annual report and accounts 2015 | 331

  • Page 336
    ... standing of third partips could impact on thp Group's solvpncy, profitability and sharpholdprs' pquity. 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 an adverse...

  • Page 337
    ... equity and property price risk due to holdings of equities and investment properties in a variety of locations worldwide. Downturns in equity markets will depress equity prices and have a negative impact on our capital position in that unrealised losses in our net investment portfolio will increase...

  • Page 338
    ... failurp of our fund managpmpnt controls to mitigatp thpsp risks could rpsult in financial lossps for us and third party clipnts that participatp in our spcuritips lpnding programmps. Liquidity risks relating to Aviva's business Adverse capital and credit market conditions may adversely affect our...

  • Page 339
    ...limit our ability to pay dividends to shareholders. This could have a material adverse impact on our business. Insurance risks relating to Aviva's business The cyclical nature of the insurance industry may cause fluctuations in our results. Our life insurance companies are required to make a number...

  • Page 340
    ... our ability to writp futurp businpss. Operational risks relating to Aviva's business All of our businesses are subject to operational risks, including the risk of direct or indirect loss resulting from inadequate or failed internal and external processes, systems and human error or from malicious...

  • Page 341
    ... to the Chief Financial Officer, the Group's asset liability committee and the Board's risk committee as appropriate. Our largest reinsurance counterparty is BlackRock Life Ltd (including subsidiaries) arising as a result of BlackRock funds offered to UK Life customers via unit linked contracts. At...

  • Page 342
    ... pvaluation and asspssmpnt of known risks associatpd with thp rpsppctivp asspt class. Such pvaluations and There are inherent funding risks associated with our asspssmpnts arp rpvispd as conditions changp and npw participation in defined benefit staff pension schemes. Wp oppratp both dpfinpd bpnpfit...

  • Page 343
    ... the impact on capital requirements and liquidity. marketplace. A significant proportion of our product sales are unit-linked contracts, where product benefit are linked to the prices of underlying unit funds. While comprehensive controls are in place, there is a risk of error in the calculation of...

  • Page 344
    ...risks relating to Aviva's business We are rated by several rating agencies, and a decline in any of these ratings could affect our standing among customers, broker-dealers, agents, wholesalers and other distributors of our products and services and cause our sales and earnings to decrease. A rating...

  • Page 345
    ... tax treatments, or have higher bonus rates or claims paying ratios. Further, heightened competition for talented and skilled employees with local experience, particularly in the emerging, high growth markets, may limit our ability to grow businesses as quickly as planned. gn certain non UK markets...

  • Page 346
    ... plc Annual report and accounts 2015 potpntial customprs. Rpgulatory action against a mpmbpr of thp Group could rpsult in advprsp publicity for, or npgativp pprcpptions rpgarding, thp Group, or could havp a matprial advprsp pffpct on our businpss, our rpsults of opprations and financial condition...

  • Page 347
    ...that affects policy coverage or interpretation, claim quantification, or pricing; a growing trend of plaintiffs targeting property and casualty insurers in purported class action litigation relating to claims handling and other practices; Other information Aviva plc Annual report and accounts 2015...

  • Page 348
    ... of ordinary shares tax lpgislation may thprpforp, whpn applipd to such products, The trading price of our ADRs and dividends paid on our havp a matprial advprsp pffpct on thp financial condition of thp ADSs may be materially adversely affected by fluctuations in rplpvant long-tprm businpss fund of...

  • Page 349
    ... that may impact our share price include, but are not limited to: • market expectations of the performance and capital adequacy of financial institutions in general; • investor perceptions of the success and impact of our strategies; • a downgrade or review of our credit ratings; • potential...

  • Page 350
    Sharpholdpr information continupd Shareholder information continued Aviva plc is an English company and it may be difficult to enforce judgements against us or our directors and executive officers. Aviva plc is incorporatpd undpr thp laws of England and Walps and our businpss is baspd in thp UK. ...

  • Page 351
    Other information In this section Glossary Shareholder services Page 348 351 Other information Aviva plc Annual report and accounts 2015 | 347

  • Page 352
    .... Open ended investment company (OEIC) These are accumulation products with single or regular premiums and unit-linked or guaranteed investment returns. Critical illness cover A collective investment fund structured as a limited company in which investors can buy and sell shares. Pension Pays out...

  • Page 353
    ... term for life insurance, pensions, savings, investments and related business. The price that would be received to sell or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). Aviva plc Annual report and accounts 2015...

  • Page 354
    ... non-hedgable risks necessary to support the insurance obligations over their lifetime. Risk Margin represents the value of deviation risk of the actual outcome compared with the best estimate, expressed in terms of a defined risk measure. Solvency II The Group operating expense ratio is calculated...

  • Page 355
    ... www.aviva.com/investor-relations/financial-calendar 11am on 4 May 2016 2015 final dividend dates - ordinary shares Ex-dividend date (ordinary)* Record date (ordinary and ADR) Last day for Dividend Reinvestment Plan election Dividend payment date* * Please note that the ADR local payment date will...

  • Page 356
    Sharpholdpr services continued Shareholder services continued Manage your shares online using the Investor Centre at www.aviva.com/online Change your address Change payment options Switch to electronic communications View your shareholding View any outstanding payments Group Company Secretary...

  • Page 357
    ... in fhort or long-term inflation; the im)act of changef in equity or )ro)erty )ricef on our inveftment )ortfolio; fluctuationf in currency exchange ratef; the effect of market fluctuationf on the value of o)tionf and guaranteef embedded in fome of our life infurance )roductf and the value of the...

  • Page 358
    ... 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. View our online summary and download the full report at www.aviva.com/AR15 Aviva plc St Helen's, 1 Undershaft London EC3P 3DQ +44 (0)20 7283 2000 www...