Appendix C - Analysis of Assets
C3 – Total assets – Shareholder/Policyholder exposure to risk
Within this disclosure, the Group’s total assets have been segmented based on where the market and credit risks are held, according to the following guidelines.
Policyholder Assets
The Group writes unit-linked business in a number of long-term business operations. In unit-linked business, the policyholder bears the investment risk on the assets in the unit-linked funds, as the policy benefits are directly linked to the value of the assets in the funds. These assets are managed according to the investment mandates of the funds which are consistent with the expectations of the policyholders. By definition, there is a precise match between the investment assets and the policyholder liabilities, and so the market risk and credit risk lie with policyholders. The shareholders’ exposure on this business is limited to the extent that income arising from asset management charges is based on the value of assets in the funds.
Participating Fund Assets
Some insurance and investment contracts in our long-term businesses contain a discretionary participating feature, which is a contractual right to receive additional benefits as a supplement to guaranteed benefits. These are referred to as participating contracts. The market risk and credit risk in relation to assets held within Participating Funds (including ‘with-profit’ funds) are shared between policyholders and shareholders in differing proportions. In general, the risks and rewards of participating funds rest primarily with the policyholders.
The assets within Participating Funds cover liabilities for participating insurance contracts and participating investment contracts in addition to other liabilities within the participating funds.
Shareholder Assets
Assets held within long-term businesses that are not backing unit-linked liabilities or participating funds, directly expose the Shareholders of Aviva plc to market and credit risks. Likewise, assets held within General Insurance & Health, Fund Management and non-insurance businesses also expose our shareholders to market and credit risks. The Group has established comprehensive risk management policies to monitor and mitigate these risks.
| Policyholder assets £m |
Participating fund assets £m |
Shareholder assets £m |
Total assets analysed £m |
Less assets of operations classified as held for sale £m |
Swiss Life Belgium operations £m |
Balance sheet total £m |
|
|---|---|---|---|---|---|---|---|
| Assets | |||||||
| Goodwill and Acquired value of in-force business and intangible assets | - | - | 6,423 | 6,423 | (260) | 55 | 6,218 |
| Interests in joint ventures and associates | 557 | 1,865 | 1,377 | 3,799 | - | - | 3,799 |
| Property and equipment | 47 | 95 | 864 | 1,006 | (15) | 5 | 996 |
| Investment property | 4,985 | 6,768 | 2,915 | 14,668 | - | - | 14,668 |
| Loans | 106 | 8,957 | 28,324 | 37,387 | - | - | 37,387 |
| Financial investments | |||||||
| Debt securities | 16,951 | 64,169 | 44,240 | 125,360 | (3,405) | 2,221 | 124,176 |
| Equity securities | 25,591 | 18,896 | 5,418 | 49,905 | (1,518) | 130 | 48,517 |
| Other investments | 23,932 | 12,106 | 2,551 | 38,589 | (134) | 21 | 38,476 |
| Reinsurance assets | 1,876 | 709 | 5,752 | 8,337 | (17) | 7 | 8,327 |
| Deferred tax assets | - | - | 249 | 249 | - | - | 249 |
| Current tax assets | - | - | 543 | 543 | (9) | - | 534 |
| Receivables and other financial assets | 828 | 2,711 | 7,752 | 11,291 | (570) | 39 | 10,760 |
| Deferred acquisition costs and other assets | 130 | 293 | 4,607 | 5,030 | (57) | 101 | 5,074 |
| Prepayments and accrued income | 181 | 1,434 | 1,770 | 3,385 | (247) | 45 | 3,183 |
| Cash and cash equivalents | 4,978 | 5,325 | 8,914 | 19,217 | (411) | (23) | 18,783 |
| Assets of operations classified as held for sale | - | - | - | - | 6,643 | - | 6,643 |
| Total assets | 80,162 | 123,328 | 121,699 | 325,189 | - | 2,601 | 327,790 |
| 24.7% | 37.9% | 37.4% | |||||
As can be seen from the table above, 37% of assets can be directly attributed to shareholder assets where the apportionment of assets is predominantly weighted towards debt securities and loans. In comparison equities, investment property and other investments (e.g. unit trusts) are weighted more towards policyholder and participating assets, reflecting the underlying policyholder investment mandates.
Note, the remainder of this disclosure is prepared based on gross assets prior to the adjustment for assets of operations classified as held for sale and excludes the assets consolidated following the acquisition of Swiss Life Belgium on 30 June 2008.
