Analysis of assets

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Analysis of assets

The quality of our asset base continues to be strong, and prudent management of investments has limited our exposure to market volatility and toxic assets. Although equity and debt markets have recovered value in 2009, there has been a general market deterioration in credit quality, as rating agencies downgraded a number of sovereign governments, financial institutions, corporates and structured assets. Whilst this market trend is reflected in our debt portfolio, the proportion of our shareholder debt securities that are investment grade has actually increased.

Total assets

2009	Policyholder assets £m	Participating fund assets £m	Shareholder assets £m	Total assets analysed £m	Less assets of operations classified as held for sale £m	Balance sheet total £m
Loans	1,468	7,543	32,068	41,079	—	41,079
Financial investments
Debt securities	17,596	86,464	56,450	160,510	—	160,510
Equity securities	28,638	9,678	5,027	43,343	—	43,343
Other investments	24,867	7,222	2,760	34,849	(23)	34,826
Total loans and financial investments	72,569	110,907	96,305	279,781	(23)	279,758
Cash and cash equivalents	4,214	14,349	6,613	25,176	—	25,176
Other assets	5,903	12,744	30,787	49,434	(30)	49,404
Assets of operations classified as held for sale	—	—	—	—	53	53
Total	82,686	138,000	133,705	354,391	—	354,391
Total %	23.3%	39.0%	37.7%	100.0%	—	100.0%
FY 2008 (Restated)	79,105	134,665	140,792	354,562	—	354,562
FY 2008 %	22.3%	38.0%	39.7%	100.0%	—	100.0%

Total assets – Valuation bases

The proportion of total assets measured at fair value (which includes 100% of financial investments) has increased to 84.0% (31 December 2008: 82.1%). The principal asset classes measured at fair value are loans, debt securities, equity securities and other financial investments.

				2009				2008 (Restated)
	Fair value £m	Amortised cost £m	Equity accounted/ tax assets £m	Total £m		Fair value £m	Amortised cost £m	Equity accounted/ tax assets £m	Total £m
Policyholder assets	79,807	2,523	356	82,686		75,391	3,520	194	79,105
Participating fund assets	125,166	12,237	597	138,000		120,945	12,770	950	134,665
Shareholder assets	92,640	38,459	2,606	133,705		94,916	40,773	5,103	140,792
Total	297,613	53,219	3,559	354,391		291,252	57,063	6,247	354,562
Total %	84.0%	15.0%	1.0%	100.0%		82.1%	16.1%	1.8%	100.0%

Shareholders’ assets

As at 31 December 2009, total shareholder exposure to loans and financial investments is £96,305 million (31 December 2008: £93,286 million), including loans of £32,068 million, debt securities of £56,450 million, equity securities of £5,027 million and other investments of £2,760 million. The increase in shareholder exposure to loans and financial investments during the year is predominantly due to general market improvements and increased investment in our debt securities and loan portfolios, partly offset by adverse movements in the Euro and US dollar exchange rates.

Shareholders’ assets – loans

2009	United Kingdom £m	Aviva Europe £m	Delta Lloyd £m	North America £m	Asia Pacific £m	Total £m
Policy loans	7	14	377	230	12	640
Loans and advances to banks	124	—	121	—	—	245
Mortgage loans – securitised	1,840	—	7,315	—	—	9,155
Mortgage loans – non-securitised	11,988	1	5,415	1,645	—	19,049
Other loans	35	4	2,860	78	2	2,979
Total	13,994	19	16,088	1,953	14	32,068
FY 2008 (Restated)	15,075	20	15,521	1,875	33	32,524

Our well diversified UK Life commercial mortgage portfolio remains of high quality, with minimal levels of default losses recorded in the period. Interest service cover remains strong at 1.3 times, over 95% of mortgages are neither past due nor impaired, and average LTV has reduced to 94% (30 June 2009: 106%). During 2009, the combined impact of increased long-term gilt yields, lower market rental income levels and longer rent-free periods, partially offset by higher property values, have led to an overall decrease in risk adjusted loan values.

The provision we made in the UK for short term defaults on corporate bonds and commercial mortgages remains unutilised. Together with our long-term default assumptions, this equates to a provision of £1.1 billion for the life of the UK Life corporate bond and commercial mortgage portfolio, and creates a strong buffer against potential future losses. In addition, we hold £71 million of provisions in our UK General Insurance mortgage portfolio.

The total shareholder exposure to loans issued by Delta Lloyd has increased to £16,088 million (31 December 2008: £15,521 million), including £7,315 million of securitised mortgages and £5,415 million of non-securitised (primarily residential) mortgages. The securitised mortgages have predominantly been sold to third party investors, and therefore present little credit risk to Aviva. Of the non-securitised mortgages, £1,877 million (31 December 2008: £787 million) are guaranteed by the Dutch Government, and over 97% are neither past due nor impaired. Delta Lloyd has not made any additional provisions, as it does not consider the amount of potential loss to be significant.

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