Appendix C - Analysis of Assets
C5 – Loans
The Group loan portfolio is principally made up of:
- Policy loans which are generally collateralised by a lien or charge over the underlying policy;
- Loans and advances to banks which primarily relate to loans of cash collateral received in stock lending transactions. These loans amount to £8 billion, are made to highly rated backing counterparties and are fully collateralised by other securities;
- Residential mortgage loans (securitised and non-securitised). Securitised mortgages are secured by non-recourse borrowings;
- Non-securitised commercial loans which are primarily held to back annuity liabilities; and,
- Other loans which typically represent loans and advances to customers of our banking business.
Shareholder exposure to non-securitised mortgage loans is predominantly to commercial, rather than residential, mortgages. These are typically held to back annuity liabilities. Historical data has shown the portfolio to be of very high quality, with minimal bad debts incurred on the large UK portfolio in the last 15 years.
Securitised mortgage loans of £7.8 billion are secured through non-recourse borrowings in our UK Life and Dutch businesses.
Arrears
| Financial assets that are due but not impaired | |||||||
|---|---|---|---|---|---|---|---|
| Neither past due nor impaired £m |
0-3 months £m |
3-6 months £m |
6 months - 1 year £m |
Greater than 1 year £m |
Financial assets that have been impaired £m |
Total £m |
|
| Total loans | 37,200 | 155 | 13 | 2 | 1 | 16 | 37,387 |
| 99.6% | 0.4% | 0.0% | 0.0% | 0.0% | 0.0% | ||
| Policyholder assets | 105 | - | - | - | - | 1 | 106 |
| Participating fund assets | 8,957 | - | - | - | - | - | 8,957 |
| Shareholder assets | 28,138 | 155 | 13 | 2 | 1 | 15 | 28,324 |
| Total loans | 37,200 | 155 | 13 | 2 | 1 | 16 | 37,387 |
Over 99% of the loan portfolio is neither past due nor impaired, the level of arrears is negligible in relation to the size of the portfolio (which includes the various types of loans outlined above).
Loan to Value
The following section provides an analysis of the loan to value of the securitised and non-securitised mortgage loans.
| LTV >100% £m |
LTV 95-100% £m |
LTV 90-95% £m |
LTV 80-90% £m |
LTV 70-80% £m |
LTV <70% £m |
Total £m |
|
|---|---|---|---|---|---|---|---|
| Mortgage loans – Loan to value (LTV) | |||||||
| Securitised mortgage loans – residential | - | 135 | 2,086 | 3,070 | 251 | 2,262 | 7,804 |
| Securitised mortgage loans – commercial | - | - | - | - | - | - | - |
| Total Securitised mortgage loans | - | 135 | 2,086 | 3,070 | 251 | 2,262 | 7,804 |
| Non-securitised mortgage loans – residential | 7 | 76 | 1,158 | 1,623 | 74 | 987 | 3,925 |
| Non-securitised mortgage loans – commercial | 883 | 1,612 | 1,583 | 3,742 | 2,765 | 3,654 | 14,239 |
| Total Non-securitised mortgage loans | 890 | 1,688 | 2,741 | 5,365 | 2,839 | 4,641 | 18,164 |
| Total | 890 | 1,823 | 4,827 | 8,435 | 3,090 | 6,903 | 25,968 |
| 3.4% | 7.0% | 18.6% | 32.5% | 11.9% | 26.6% |
The loan to value data is based on an estimated current property valuation.
The Group’s loan portfolio includes £18.1 billion of non-securitised and £7.8 billion of securitised mortgages. The securitised mortgages are secured through non-recourse borrowings in our UK Life and Dutch business whereby the risk is passed to the note holders. As such, the comments on LTVs here are focused on the Group’s non-securitised mortgage portfolio.
The majority of non-securitised mortgages are commercial mortgages with 78% of the Group’s portfolio being commercial and 22% being residential.
Our entire US mortgage portfolio is commercial. The LTVs of our US portfolio are strong with 94% of the US loan portfolio having a LTV of less than 70%.
The commercial mortgages shown above with the LTV’s of greater than 100% are from our UK businesses. The un-collateralised portion of these loans is £47 million.
The LTV of a loan is only one measure of evaluating the recoverability of the loan. The Group also focuses on the credit quality of the counterparty, the quality and level of rental income (where appropriate) and the level of loan service cover when issuing and monitoring the loan book.
Commercial loans are principally held by our UK Life Business to back annuity liabilities. The portfolio is well diversified in terms of property type, location and tenants as well as the spread of loans written over time. The UK portfolio has had an excellent track record with minimal losses in the last 15 years. A high proportion of borrowers are long-term property investors and long standing customers of Aviva with a strong track record.
The Dawnay Day Group companies have been borrowers from Norwich Union since the mid-1980s and have built up their portfolio with us since that time.
There are total loans of £642m with three companies, Starlight Investment, Insureprofit and Dawnay Day Properties Limited, which are now in administrative receivership.
In addition, there are loans of £141m with other related Dawnay Day companies (including joint venture companies) and £116m of other loans are held in a trust company. The average loan to value (LTV) ratio of these loans is 86%, average loan service cover is 1.1 times and none of these is currently in default.
The £642m loans with Starlight Investment, Insureprofit and Dawnay Day Properties are secured by a fixed charge over properties (where the average LTV is 91%) and a floating charge over the remaining assets of the businesses. The loans are supported by a well-diversified tenant base (by geographic region and by business sector) and there is currently sufficient rental income to meet loan service payments.
As a result, no provision for impairment of these loans is considered necessary but we will keep these under close and continuous review.
