Aviva plc
Annual Report and Accounts 2022
Part 1
Aviva plc
Results announcement 2022
Make the most out of life. Plan for your future. Have the confidence that if things go wrong, we’ll be there to help put them right.It takes Aviva. How to navigate this reportUse your browser’s bookmarksand tools to navigateTo search this document PC use Ctrl+F, MAC use Command+FThroughout the Strategic Report we use a colour coding system:InsuranceWealthRetirementOur reporting suiteThis report forms part of our reporting suite. Results Presentation 2022Presentation of Group financial results, including non-financial KPIs to analysts. Download PDFSustainability Report 2022Our report on how we are progressing against our sustainability goals. Download PDFClimate-related Financial Disclosure 2022Our report in compliance with the Taskforce on Climate-related Financial Disclosure (TCFD). Download PDFReporting Criteria 2022Sets out the principles and definitions used to report the Group's Key Sustainability Performance Indicators and selected data points. Download PDFResults Announcement 2022Includes our press release and analysis of the financial results. Download PDFRead more and find our reporting suite in the download centre on our website.> aviva.com/investors/reports/It all starts with our customers.
1. Strategic Report1.02At a glance1.04With you today for a better tomorrow1.10Chair’s statement1.12Our investment case1.13Chief Executive Officer’s report1.16Chief Financial Officer’s report1.22Our business model1.26Our strategy1.31Key performance indicators1.33Business review1.45Capital management1.52Our stakeholders1.56Our people1.58Our sustainability ambition1.64Our Climate-related Financial Disclosure1.67Our risks and risk management1.75Non-financial information statement2. Governance2.02Governance at a glance2.04Chair’s Governance letter2.06Our Board of Directors2.10How we are governed2.20Nomination and Governance Committee report2.23Audit Committee report2.29Customer and Sustainability Committee report2.31Risk Committee report2.33Remuneration Committee report2.36Remuneration at a glance2.41Annual report on remuneration2.60Directors’ Remuneration Policy2.70Directors’ report3. IFRS Financial Statements3.03Independent auditors’ report3.14Accounting policies3.30Consolidated financial statements3.38Notes to consolidated financial statements3.158Financial statements of the Company4. Other Information4.02Alternative Performance Measures4.16Shareholder services4.17Cautionary StatementForewordThe Strategic report and Governance pages form part 1 of the Annual Report and Accounts. The IFRS Financial Statements and Other Information form part 2 of the Annual Report and Accounts. Parts 1 and 2 together comprise the Aviva plc Annual Report and Accounts 2022.The Strategic report contains information about Aviva, how we create value and how we run our business. It includes our strategy, our business model, key performance indicators, overview of our businesses, our approach to risk and our responsibility to our people, our communities and the planet.The Strategic report is only part of the Annual Report and Accounts 2022, which was approved by the Board on 8 March 2023 and signed on its behalf by Amanda Blanc, Chief Executive Officer. The Directors' Report required under the Companies Act 2006 comprises the ‘Governance’ section of the Annual Report.The Strategic report should be read in conjunction with the Cautionary Statement, included within the Other Information section.More information about Aviva can be found at www.aviva.com.As a reminderReporting currency:We use £ sterling. Unless otherwise stated, all figures referenced in this report relate to Group.Explanations of key terms used in this report are available on:www.aviva.com/glossarywww.aviva.com/climate-goals-glossaryThe Company’s registered office: St Helen’s 1 Undershaft LondonEC3P 3DQAlternative Performance Measures:Throughout the Annual Report and Accounts we use a range of financial metrics to measure our performance and financial strength. These metrics include Alternative Performance Measures (APMs), which are non-Generally Accepted Accounting Principles (GAAP) measures that are not bound by the requirements of IFRS or Solvency II. A complete list of the APMs used by the Group, and further guidance in respect of their use, can be found in the 'Other information' section in part 2 of the Annual Report and Accounts. This guidance includes definitions and, where possible, reconciliations to relevant line items or sub-totals in the financial statements.1. Strategic Report2. Governance3. IFRS Financial Statements4. Other InformationContentsAviva plc1.01Annual Report and Accounts 2022 1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
At a glance
Aviva is one of the UK’s leading Insurance, Wealth and Retirement businesses,
with 18.7 million customers in the UK, Ireland and Canada.
Our purpose is to be: With you today for a better tomorrow
We’re there to protect the things that matter most to our customers:
their homes and belongings, their health and wealth, their future and their families.
To live up to that
purpose, we have
an ambition to be:
The leading UK
provider and go-to
customer brand for all
insurance, wealth and
retirement solutions,
with strong franchises
in Canada and Ireland
Watch our manifesto
film to find out more
> www.aviva.com/about-us/
who-we-are-and-what-we-do
We have a clear strategy and
plan to achieve this vision:
We are guided by
our values:
Customer
Go-to customer brand for Insurance,
Wealth and Retirement
Growth
Targeted, disciplined and profitable growth
Efficiency
Top quartile efficiency with technology
at the core
Sustainability
Leading on Climate Action, Stronger
Communities and Sustainable Business
Care
We care deeply about the
positive difference we can
make in our customers’ lives
Commitment
We understand the impact we have on
the world and take the responsibility
that comes with it seriously
Community
We recognise the strength that
comes from working as one team,
built on trust and respect
Confidence
We believe the best is yet to
come for our customers,
our people, and society
Delivering our strategy will
unlock our competitive
advantage:
Customer
advantage
Scale
efficiency
Diversification
benefit
By doing so, we will create value for our
stakeholders: our customers, colleagues,
society and shareholders
Read more on our strategy
Read more on people
Read more on our stakeholders
Aviva plc
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At a glance
Our diversified model allows us to build lifetime
relationships with our customers, serving them
across the full range of their insurance, wealth
and retirement needs.
How we’re organised
We provide our customers with insurance, wealth and retirement solutions through
our businesses in the UK, Ireland, Canada and Aviva Investors, each with high quality
businesses and strong market positions. We also have international investments in
China, India and Singapore.
UK & Ireland Life
UK & Ireland
General Insurance
Canada
General Insurance
Aviva Investors
Insurance
Insurance
Wealth
Wealth
Retirement
‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section
1. Comparatives presented are from continuing operations
2. Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS.
Further details are included in the 'Other information' section.
3. Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs
4. Estimated dividends are for guidance and are subject to change. The Board has not approved or made any decision to pay any dividend in respect
of any future period.
Aviva plc
Highlights of the year
Strong results demonstrating
benefits of diversified model
• Solvency II operating own funds
generation‡ up 37% to £1,623m
(20211: £1,187m)
• Operating profit‡,2 up 35% to £2,213m
(20211: £1,634m)
• IFRS loss for the year of £(1,139)m
(2021: £2,036m profit)
• General Insurance gross written
premiums up 8% to £9,749m
(20211: £8,807m)
• UK & Ireland value of new business‡ up
15% to £767m (2021: £668m)
• Cash remittances‡ up 11% to £1,845m
(20211: £1,662m)
• Baseline controllable costs‡,3 down 3%
to £2,771m (20211: £2,854m)
• Final dividend per share of 20.7 p,
up 41% on 2021
Capital position robust - £300m
share buyback to commence
• Solvency II shareholder cover ratio‡ of
212% (2021: 244%)
• Centre liquidity‡ (Feb 23) of £2.2bn
(Feb 22 :£6.6bn)
• Solvency II debt leverage ratio‡ of 31%
(2021: 27%)
• Solvency II return on equity‡ of 16.4%
(2021: 10.7%)
• Given our robust capital position, we are
commencing a £300m share buyback on
10 March 2023
• Our preference remains to return surplus
capital regularly and sustainably
• We expect to pay a dividend of c.£915m
for 20234, with low to mid-single digit
growth in the cash cost of the dividend
thereafter
Significant momentum in 2022
• Our combination of insurance, wealth
and retirement is bringing clear benefits.
• We are investing in Aviva's future:
improving customer experience, targeting
growth, and further reducing costs.
• Delivering strong results despite a difficult
political and economic backdrop shows
that our strategy and diversified business
model is working.
• Our strong performance reinforces our
confidence in the prospects, financial
targets and outlook for the Group.
• We are on target to exceed our Solvency II
own funds generation target, and to meet
our cash remittances and cost targets.
• 2022 performance shows that we can,
and we will, deliver on Aviva's promise.
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As our customers grapple with the financial
puzzles in their lives, we'll be right there to
help solve them. We’re with them when it
matters in the moment, and we’re thinking
about what’s needed for tomorrow too.
The world is undergoing momentous change:
a climate in crisis, social unrest, conflict,
natural disasters and economic uncertainty.
Amongst all that, our customers are trying to
make life work, trying to do the best for their
families or their businesses.
The way we serve people has never been more
important, and we’re going further to help them
make sense of it all. Delivering on our promise to
customers is how we live up to our purpose to be
with you today, for a better tomorrow.
Amanda Blanc,
Group Chief Executive Officer
Aviva plc
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With you today
This year has been a particularly challenging time and we
understand the financial pressure faced by our customers,
colleagues and communities. In response, we’ve acted to
increase the range and amount of support we provide.
Customers: We offered customers flexibility
to reduce their cover and monthly payments,
maintained a payment deferral scheme
implemented during COVID and rolled out
a new range of affordable motor and home
propositions called Quotemehappy
Essentials, so that people can save money
while still maintaining peace of mind.
Colleagues: We’re proud to pay our people
a Real Living Wage. In addition, in October
we made a one-off payment to over 9,000
colleagues to help our people deal with the
financial pinch.
£9m
pledged to Citizens Advice
and the Money Advice Trust
Communities: As people across the UK
struggle to cope with rises in the cost of
living, demand for help and advice has
jumped. Aviva has joined new partnerships
with Citizens Advice and the Money Advice
Trust, pledging £9 million over two years.
The money will allow them to help more
families and small businesses. We also
added a £2 million Cost of Living Boost to
the Aviva Community Fund and the Aviva
Foundation continues to support
organisations that help people with
money problems.
Read more on support for colleagues in
Our people section
Aviva plc
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With our customers
in insurance
When the chips are down, you want your insurer to step up.
This year our teams have been helping customers recover from
the upheaval of storms, fire and flood. And we’re looking at new
ways to help with new problems too.
A familiar story
In February 2022, three violent storms struck
the UK and Ireland in quick succession.
Thousands of households once again had
to face up to widespread flooding, damage
and disruption. Our teams were on hand
for them in their hour of need, dealing with
over 19,000 claims in the UK alone. Thanks
to the flexibility of our model, colleagues
from Canada were able to join in the effort
and 10% of those claims were settled on the
first day, helping people get back to normal
as soon as they could.
19,000
UK customer claims for February
storm damage
A new approach
This year also saw the start of a new
partnership with US insurer Lemonade.
They are widely recognised as a leading
disrupter in the industry, using sophisticated
data and technology to create simple,
quick customer experiences with quotes
in seconds and claims paid instantly.
The partnership will begin by focusing
on developing new products for renters,
a growing market that is typically under-
insured, helping more people protect their
homes and belongings.
Read more in Our business review
Aviva plc
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With our customers
in wealth
As our customers navigate market volatility and an uncertain
economic outlook, we’re expanding our range of products and
services to help. We're also doing more to make sure they have
access to advice and guidance that works for them.
Finding lost money
People can lose track of their pensions as
they move in to new jobs, or move home.
We have been working with Fabric, a start-
up from our Founders Factory partnership,
to help solve the problem. We've automated
the process of tracking down previous
pensions and simplified the experience
for our customers.
Process time has been cut by two thirds
and the journey helps customers
understand what they have, putting
them back in control.
£18k
average pension pot found by new
Fabric pension tracing service
Offering advice
Three in five people in the UK feel stressed
about planning for later life, according
to research we published in November.
The need for accessible, affordable advice
and guidance has never been higher.
This year we acquired Succession Wealth,
a national independent advice firm.
This acquisition broadens our ability
to help customers better secure their
financial future. It complements our
integrated offering from Wealthify at the
self-serve end of the market, through to
our own Aviva Finance Advice offering
and whole-of-market independent advice.
Read more in Our business review
Aviva plc
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With our customers
in retirement
Customers increasingly have to take responsibility for their own
financial futures. Our financial strength and range of products means
we can be with them at every step of the way.
The right products
More customers came to Aviva for open-
market individual annuities as we continue
to meet the demand for a guaranteed
income during retirement.
For the long-term
Our customers rely on us for a dependable
income in retirement. We've got expertise in
investing for sustainable, long-term returns
to live up to our promise to them.
We also expanded our adviser capability
to include advice on equity release,
helping guide customers through the
option of unlocking the value in their
homes. This gives customers the chance
to live the retirement they want, offering
peace of mind and financial flexibility,
without having to leave their homes.
over 1m
annuity customers in the UK
This year, we've gone a step further to find
and originate suitable assets using Aviva
Group capital. Our new in-house capital
unit, Aviva Capital Partners (ACP), will use
our financial strength to create projects
that improve the infrastructure of our
communities while delivering returns to
support people's retirement.
ACP will take a broader spectrum of risks
where our equity can unlock larger scale
assets. It has already signed a partnership
with real estate developer Stories who focus
on projects that make a positive difference
to the quality of life in communities across
the UK.
Read more in Our business review
Aviva plc
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For a better
tomorrow
We’re helping people get ready for a changing climate. From carbon
offsetting car insurance to letting people invest in the transition to
a low carbon economy, we're giving our customers options to make
smart choices for a sustainable future.
Driving change
We're making it easier to make a difference.
In the UK, we've introduced our carbon-
conscious car insurance, Aviva Zero, which
offsets carbon emissions from driving or
charging your car.
In Canada we've launched a new type of
cover for electric vehicles, tackling some
of the concerns people might have with
adopting a new technology. As well as an
insurance discount, it offers free tows to
help deal with range anxiety.
Investing in the future
Your pension is powerful. The move to
automatically enrol people into workplace
pensions has greatly increased the numbers
saving for their future. We offer the chance
to use their money to help shape the future
they want to retire into. By June 2022,
we had exceeded our 2022 goal of £10
billion of auto-enrolment assets into low
carbon equities and climate transition
strategies.
>£10bn
auto-enrolment assets in low carbon
equities and climate transition strategies
Read more in Our sustainability ambition
Aviva plc
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Chair’s statement
We have delivered another twelve months
of strong performance.
George Culmer
Chair
“Difficult times serve to
highlight the importance
of what Aviva does and
why we exist.”
It has been another year like
no other. Hard on the heels of
the pandemic, we're witnessing
war in Europe and a global
energy crisis. Domestic politics
has been volatile, to say the
least. Inflation, rising interest
rates, and a cost of living crisis
unseen in generations are
creating anxiety for millions
of people.
A year of delivery
Times like these are testing for businesses,
as they are for our people, and for our
customers. This year's performance
demonstrates that Aviva is more than
rising to the challenge.
We have delivered another twelve months
of strong performance. We're delivering
against our strategy, focused now in
markets where we have leading positions
and clear competitive advantage.
And our financial stability, and diverse
products and channels mean our customers,
communities and shareholders can have
confidence that we're well positioned to be
there for them come what may.
Our strong financial performance in 2022,
and our confidence in Aviva's prospects,
meant we have declared a full year
dividend of 31.0p. On top of this, we are
also delivering on our commitment to
return further capital through a £300 million
buyback programme, providing even
more value to our shareholders.
31p
2022 total dividend per share
Fundamental strengths
In many ways, the events of the year
brought into sharp relief the fundamental
strengths of our business.
Aviva has always had the right pieces and
they are now much better aligned to
delivering good outcomes for all our
stakeholders. This comes from having the
right leadership team, led by Amanda Blanc
and bolstered further by the recent arrival
of Charlotte Jones as Group Chief Financial
Officer, the right vision and the right strategy
to achieve it.
For our customers, this means we can
serve a very broad range of their lifetime
needs, helping more people with their
financial challenges. This is supported by
our scale, which brings efficiencies on both
costs and investment, and allows us to
share expertise across the organisation.
And our diversification provides resilience
to shifting economic conditions as well as
giving us capital and earnings benefits.
Aviva plc
1.10
Annual Report and Accounts 2022
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Colleagues
None of this year's undoubted progress
would be possible without the ongoing hard
work, expertise and professionalism of our
people. They continue to epitomise our
values of care, commitment, community
and confidence and I'd like to thank all my
colleagues for the tremendous job they
have done.
I'm further encouraged by the increasing
pride our people have in being part of Aviva,
and the high levels of engagement and
support we are seeing for our collective
goal. Our shared success depends on
everyone being able to give their all to
the task.
Looking ahead
It is likely that times will remain difficult
for many people in the months to come.
But difficult times serve to highlight the
importance of what Aviva does and why
we exist.
I'm confident that Amanda, her team, and
our people have got what it takes to take the
business further forward. They have shown
it this year. I trust they will show it again in
the year ahead, doing the right things for our
customers and for you, our shareholders.
George Culmer
Chair
8 March 2023
Chair’s statement continued
Customers
The renewed focus of Aviva means we
are well set up to serve individuals and
businesses. We're on hand to help with
people's financial conundrums, offering
solutions to help make sense of the
increasingly complicated choices about
their insurance, wealth and retirement
needs. We've also acted this year to help
ease the impact of the cost of living crisis.
To serve them fully requires a new focus on
ensuring our customers are at the forefront
of our minds in all aspects of the business.
This in turn demands a shift in our culture
to become outstandingly customer-centric,
a shift that is well underway.
This does not mean we will always get
things right but there is a determination
to learn and improve where we fall down.
We are also intent on building from and
improving on what we already have,
innovating to offer a more seamless service,
and better options to keep pace with our
customers' evolving needs. This way we can
continue to live up to our purpose of being
'with you today, for a better tomorrow'.
Community
That purpose also still underpins our
ambition to be a sustainable business,
fulfilling our responsibilities to be a good
corporate citizen in all aspects of what
we do.
2040
Our ambition to be Net Zero
You can read more fully in this report about
our plans to reach our ambition to be
Net Zero by 2040. This ranges from plans
to generate more of our own renewable
energy, through offering better choices for
our customers, to leading the debate about
the need for organisations in both the
private and public sector to have specific,
credible plans to achieve the transition
to a low-carbon economy.
Sustainability is about more than helping
the UK become ready for a changing
climate, of course. It also involves tackling
the loss of biodiversity, and helping build
stronger, more resilient communities.
We've also taken steps this year to offer
more support to people in the challenging
economic environment, and we remain
committed to reinvesting 2% of Group
adjusted operating profit into communities
in the UK, Ireland and Canada.
2%
of Group adjusted operating profit
reinvested into communities
The Aviva Community Fund and the
Aviva Foundation also continue to support
organisations making a difference to
people's lives up and down the country.
Aviva plc
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Our investment case
Our ambition
The leading UK provider and go-to customer brand for all insurance, wealth
and retirement solutions, with strong franchises in Canada and Ireland
Our strategic priorities
Clear strategy with a focus on execution
in 4 priority areas
Our Group targets
We have confidence in medium-term
financial targets
Customer
Go-to customer
brand for
insurance, wealth
and retirement
Growth
Targeted,
disciplined
and profitable
growth
Efficiency
Top-quartile
efficiency with
technology at
the core
Sustainability
Leading on
climate action
and regenerating
communities
>£5.4bn £1.5bn
cash remittances 2022-24
Solvency II own funds
generated p.a. by 2024
£750m
cost reduction 2018-24
Sustainable cash generation that supports strong returns for shareholders
and makes for a compelling investment case for Aviva
Competitive advantage
of Aviva model:
across customer, scale
and diversification
Position of
market strength:
market leading positions
in core segments
Consistent
performance delivery:
strong 2022 results, operating
momentum continues
Attractive and
growing dividend:
expect to pay c.£915m in 2023
with low-to-mid single digit
growth in cash cost thereafter
Further
capital returns:
£300m in 2023 and preference
to return capital sustainably
and regularly
Aviva plc
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Chief Executive Officer’s report
We are making excellent progress at Aviva. Operating profit and
dividends are growing and we have strong trading momentum
despite significant market volatility.
Aviva had an excellent 2022. We
are making clear strategic
progress and have delivered
consistently strong results
throughout the year.
Overview
Our combination of insurance, wealth and
retirement brings clear benefits. Our capital
position remains very solid and has proven
its resilience in the face of market volatility.
Importantly, we have also invested
significantly in Aviva’s future: improving
customer experience, targeting growth and
further reducing our costs.
The fact that we’ve achieved this despite a
difficult economic and political backdrop,
shows once more that our strategy is the
right one and the diversified business model
we have built is working.
I would like to thank all of my Aviva
colleagues for their contribution to the 2022
results. In the face of a very challenging year,
the team really delivered. Every single
customer that chooses Aviva, every single
life or business that we protect, every single
claim that we handle well, is down to our
people and their ability to deliver for our
customers.
So, a very big thank you to the Aviva team.
Significant momentum in 2022
This year’s results underline Aviva’s ability to
grow. We have demonstrated consistent
and reliable momentum through
disciplined, profitable growth and tight cost
control. Value of new business (VNB) is up
14%, gross written premiums are up 11%,
and we have had over £9 billion of net flows
into our Wealth business.
In Insurance, our Canadian business
performed very well and is now number two
by size in an attractive market. Commercial
lines premiums were up 14%1 across mid-
market and Global Corporate Specialty
(GCS) and Canadian personal lines delivered
excellent growth in our key Royal Bank of
Canada (RBC) partnership.
In the UK we delivered growth of 13% in our
General Insurance Commercial Small and
Medium Enterprise business. Group
protection grew 29%, and health premiums
were up 14% driven by strong SME sales.
In Wealth, workplace net flows of £5.8 billion
were up 14%, driven by strong retention and
the inflationary impact on salaries.
Our advisor platform business remained
resilient with £3.8 billion of net flows,
despite severe cost of living pressures.
Aviva Investors delivered positive net flows
of £1.3 billion with our external clients in an
extremely volatile year and was ranked third
in ShareAction's report on the responsible
investment practices of 77 of the world's
largest asset managers.
In our Retirement business we transacted
on 50 bulk purchase annuities (BPA) deals in
2022 for £4.4 billion of present value of new
business premiums (PVNBP) at very strong
margins. The BPA pipeline is positive and we
announced an £850 million buy-in
transaction with the Arcadia schemes in
February 2023.
External individual annuities PVNBP were
around 70% higher, as rising interest rates
drive more attractive pricing for consumers,
and equity release PVNBP were up 17%.
Solvency II own funds generation increased
by 37%; group adjusted operating profit was
35% higher and we delivered a strong Group
combined operating ratio (COR) of 94.6%
despite the impact of inflation and adverse
weather in the UK.
1. At constant currency
Amanda Blanc
Group Chief Executive Officer
“Our plan is working and our
combination of Insurance,
Wealth and Retirement
brings clear benefits, as
evidenced in our 2022 results.
Although we have delivered a
lot, there is so much more to
go after to satisfy our big
ambitions. This year's
performance shows that we
can, and we will, deliver on
Aviva's promise.”
Aviva plc
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Chief Executive Officer’s report continued
The strength of our COR once more points
to the benefits of the scale and
diversification of our general insurance
businesses in the UK, Ireland and Canada.
Cash remittances from continuing
operations are up 11% to £1.8 billion in 2022
while costs were 3% lower. We have
maintained our focus on cost discipline and
efficiency, which is a strong performance
given the significant inflationary backdrop.
These results are testament to the progress
that we have made over the past two years
in simplifying the business, building
resilience, and further embedding a high
performance culture across Aviva.
And that performance underpins our
confidence in the delivery of our targets.
We completed the return of £4.75 billion of
capital to shareholders during 2022 and we
have declared a final dividend of 20.7p,
bringing the total dividend for the year to
31.0p, in line with our guidance.
We know how important a sustainable
dividend is for our shareholders and our
guidance of c.£915 million cash cost for
2023 remains unchanged. We have also
announced an upgrade to our dividend
guidance. We have strong confidence in our
future performance, and in the outlook for
sustainable growth in cash generation, and
so we now expect to grow the cash cost of
our dividend by low-to-mid single digits
from 2024 onwards.
Under our capital framework, surplus
capital is available for reinvestment in the
business, focused M&A and returns to
shareholders. The momentum and
consistency in our performance, together
with our capital strength allow us to deliver
on our commitment of further capital
returns, starting immediately with a £300
million share buyback programme. Our
preference remains for regular and
sustainable returns of surplus capital over
time, in addition to the ordinary dividend.
Delivering the strategy is
unlocking competitive advantage
Our plan and strategy to transform Aviva
remains unchanged.
We are utterly focused on executing against
each of our four strategic priorities –
customer, growth, efficiency, and
sustainability – and this is unlocking the
clear competitive advantages that come
from Aviva’s model: our customer base, our
scale, and our diversification.
In turn this is driving a higher quality and
more consistent financial performance for
our shareholders.
Meeting more of our
customers' needs
The strategy starts with our 18.7 million
customers. Almost 14% of the UK
population are saving or retiring with Aviva.
They are central to everything we do, and
over the past year we have continued to
deliver for them.
In 2022 we paid £23.2 billion in claims,
fulfilling our purpose to be with people in
the crunch times when it really matters.
We want more customers to stay with us for
longer, so we can look after more of their
needs, brilliantly. And we are making good
progress.
This year we have won over 370 new
Workplace schemes and customer numbers
in the UK have grown to 15.5 million.
We are investing to accelerate this
advantage. To make it easier for our
customers to buy from us, we are building
an engaging mobile-led customer
experience which will deliver more
personalised interactions. And we can see
that this investment is working. For
example, improvements we made to the
MyAviva pension digital journey have
resulted in over £600 million of additional
flows in 2022.
We are also investing in innovation to
improve the products and services we can
offer and are making it easier for customers
to do business with us.
For example, we are launching a new
market-leading pension tracing and
consolidation proposition which will be
available for all Workplace and Direct
customers.
Delivering on our ambitious
growth plans
Our excellent performance is a result of our
simpler, more focused business. We
recognise the difficult economic
environment we are operating in, with the
cost of living crisis, high inflation and macro-
economic uncertainty. But even in these
challenging times, we are driving profitable
growth right across Insurance, Wealth and
Retirement.
Each plays a critical role in our portfolio and
we are not relying on any single business for
our growth.
1. Estimated dividends are for guidance and are subject to change.
The Board has not approved or made any decision to pay any dividend
in respect of any future period.
Aviva plc
1.14
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Executive Officer’s report continued
Delivering real efficiency gains
Running ourselves efficiently remains a non-
negotiable and despite high inflation across
our markets, we have delivered our 2022
target with a net cost1 reduction of
£327 million. This equates to £575 million
gross of inflation. We are on track to deliver
our £750 million gross cost reduction target
by the end of 2024.
We have achieved this with simplified
customer journeys, reduced property costs,
outsourcing in Aviva Investors, streamlined
IT and a reduced number of products.
We have also significantly reduced costs at
the Group centre.
All of this points to a new and permanent
culture of operational efficiency that we are
embedding across the group, to deliver our
commitment of top quartile efficiency.
Leading in sustainability
On sustainability we continue to lead the
pack on climate action, working towards our
ambition to become Net Zero by 2040.
We have leading positions in all chosen
markets, high performing businesses,
talented leaders, committed people and a
formidable brand.
We have the right strategy to unlock the
unique advantages of our model and we are
executing it. We generate an attractive and
growing dividend and we are aiming for
regular and sustainable capital returns
alongside this.
Although we have a delivered a lot, there is
so much more to go after to satisfy our big
ambitions.
This year’s performance shows that we can,
and we will, deliver on Aviva’s promise.
Amanda Blanc
Group Chief Executive Officer
8 March 2023
1. Baseline controllable costs exclude strategic investment, cost
reduction implementation, IFRS 17 and other costs not included
in the 2018 costs savings target baseline
We are ranked fifth amongst global insurers
by Sustainalytics and our S&P Global rating
improved – putting us in the 95th percentile.
We have donated £38 million to restore
Britain’s lost temperate rainforests as part of
a broader £100 million programme to help
address climate change through supporting
biodiversity.
On social action, we are stepping up our
ambition to help regenerate communities,
investing £25 billion in the UK economy over
the next 10 years. And we are reinvesting 2%
of our group adjusted operating profit in
communities every year.
Delivering Aviva’s Promise
All the elements are clicking into place for
Aviva to provide even more value for
customers and shareholders.
We have had an excellent year. We have
delivered strong and resilient financial
performance quarter by quarter.
Our plan is working and our combination of
Insurance, Wealth and Retirement brings clear
benefits, as evidenced in our 2022 results.
We also benefit from scale and
diversification which underpin our
profitable growth. We already enjoy a
balanced portfolio with significant capital
diversification benefits, lower earnings
volatility, and resilient performance.
And, as we continue to accelerate growth in
Insurance and Wealth, we will maximise this
benefit.
In Insurance, our ambition is above market
growth and to achieve this we will continue
expanding our Commercial and GCS
capability in Canada and the UK. We will also
build on our leading position in UK High Net
Worth (HNW) following our acquisition of
Azur's UK HNW personal lines business.
In Wealth, we are aiming for at least 10%
growth in net flows. We have enhanced our
master trust proposition and launched open
banking functionality, furthering our market
leadership in Workplace.
We are now focused on building our direct
wealth offering and an integrated wealth
proposition.
We also completed the acquisition of
Succession Wealth in August and we moved
quickly to enhance our proposition for
customers and advisors with better service, a
lower-cost Aviva platform, and award-winning
investment solutions from Aviva Investors.
Finally, in Retirement we are continuing to
invest in our BPA platform which went live
to new customers in 2022, and we are
expanding our adviser capabilities to
support growth in Equity Release.
Aviva plc
1.15
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Financial Officer’s report
2022 was another excellent year for Aviva. Against the backdrop of an extremely
challenging market environment we have continued to deliver very strong results
and have demonstrated that the diversified business model we have built is working.
Charlotte Jones
Chief Financial Officer
“These results demonstrate
the excellent progress we
have made in transforming
Aviva’s performance. But
there is so much more for us
to go after.”
We have shown consistent and
reliable positive momentum,
through disciplined profitable top
line growth and tight cost control.
We have made further progress
against our existing targets,
which we are now on track to
meet or exceed.
Overview
2022 was an excellent year for Aviva as
we continued to deliver strong financial
performance, giving us momentum as
we move forward into 2023.
We delivered on our promise to
shareholders by returning £3.75 billion of
capital through a B share scheme, taking
the total amount of capital returned to
shareholders to £4.75 billion following the
reshaping of the portfolio.
We made further progress on deleveraging,
reducing debt by £0.5 billion as we move
towards meeting our ambition to reduce
Solvency II debt leverage below 30%.
Cash remittances‡,1
£1,845m
Solvency II operating
own funds generation‡,1
£1,623m
2022
2021
£1,845m
£1,662m
2022
2021
£1,623m
£1,187m
Estimated Solvency II shareholder
cover ratio‡
Controllable costs‡,1,2
212%
£3,152m
2022
2021
212%
244%
2022
2021
£3,152m
£3,096m
‡ This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of financial performance.
Further information on APMs, including a reconciliation to the financial statements (where possible), can be found in the ‘Other Information’
section.
1. Comparatives presented for continuing operations and do not include results from discontinued operations no longer part of the Group
2. Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018
costs savings target baseline
Aviva plc
1.16
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Financial Officer’s report continued
Group adjusted operating profit‡,1,2
IFRS loss for the year
£2,213m
£(1,139)m
2022
2021
£2,213m
£(1,139)m
2022
£1,634m
2021
£2,036m
General insurance gross written
premiums1
Life present value of new
business premiums‡,1
£9,749m
£34,451m
2022
2021
£9,749m
£8,807m
2022
2021
£34,451m
£36,747m
‡ This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of financial
performance. Further information on APMs, including a reconciliation to the financial statements (where possible), can be found in the
‘Other Information’ section.
1. Comparatives presented for continuing operations and do not include results from discontinued operations no longer part of the Group
2. Group adjusted operating profit is an APM which is used by the Group to supplement the required disclosures under IFRS. Please see note B
in the ‘Accounting Policies’ section of IFRS Financial Statements and the ‘Other Information’ section for further information.
3. Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018
costs savings target baseline
4. Estimated dividends are for guidance and are subject to change. The Board has not approved or made any decision to pay any dividend in
respect of any future period.
Throughout this report we use a range of financial metrics to measure our performance and financial strength. These metrics include APMs,
which are non-Generally Accepted Accounting Principles (GAAP) measures that are not bound by the requirements of IFRS or Solvency II. A
complete list of the APMs used by the Group, and further guidance in respect of their use, can be found in the 'Other information' section in
part 2 of the Annual Report and Accounts.
We’ve delivered a further £200 million of
cost reduction gross of inflation3, taking
total cost reduction since 2018 to
£575 million. We are on track to achieve our
cost target of £750 million by 2024.
Our guidance for a c.£915 million dividend
cash cost in 20234 remains unchanged, but
we now expect to grow the cash cost of our
dividend by low-to-mid single-digits from
2024 onwards.
I am confident that Aviva is well placed
to succeed. We have a strong brand and
market leading positions in our core
markets. We have a clear strategy and are
focused on executing it as we have begun
to unlock the competitive advantage of the
diversified business model.
It is clear that we are starting to see the
results of the steps we have taken to
transform performance, but there is so
much more we want to achieve. We are
extremely confident in the future of Aviva
and our commitment to deliver on our
promise to our customers, our shareholders,
our employees and our communities.
Alongside this strong progress on efficiency,
we have also grown the business. We now
expect to exceed our own funds generation
target of £1.5 billion by 2024 and are firmly
on track to meet our cash remittance target
of >£5.4 billion cumulative 2022-24.
Our capital position has proved extremely
robust, remaining very strong throughout
the year in the face of significant market
volatility. This has enabled us to deliver on
our commitment to shareholders as we
have announced a new share buyback of
£300 million which will commence on
10 March 2023. We anticipate further returns
of surplus capital in the future and our
preference remains for returns to be regular
and sustainable.
Our confidence in the performance
trajectory of Aviva, and in the outlook
for sustainable growth in cash generation
means we have also upgraded our
dividend guidance.
Read more
More details can be found in:
> Key performance indicators
Aviva plc
1.17
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Financial Officer’s report continued
Group financial headlines
Operating results
Cash remittances
Cash remittances were up 11% to
£1,845 million (20211: £1,662 million). UK &
Ireland Life remittances were lower in 2022
however this was more than offset by UK &
Ireland General Insurance and Canada,
demonstrating the benefits of our diversified
business model. We are on track to deliver
our cash remittance target of >£5.4 billion
over 2022-24.
IFRS performance
Group adjusted operating profit2 increased
by 35% to £2,213 million
(20211: £1,634 million). Excluding UK Life
management actions and other of
£278 million (2021: £77 million), group
adjusted operating profit2 was up 24% to
£1,935 million (20211: £1,557 million).
UK & Ireland Life adjusted operating profit2
was up 34% with strong performance in
Retirement (Annuities & Equity Release)
driven by improved margins, earnings
growth on the in-force book and other
favourable experience.
Adjusted operating profit2 in Wealth was
lower in 2022 while Protection & Health was
flat. Heritage adjusted operating profit grew
in the period, reflecting the impact of
market movements on policyholder tax.
General Insurance adjusted operating profit2
was up 1% to £771 million
(20211: £762 million) reflecting strong
performance in Canada partly offset by
lower profits in UK & Ireland.
The UK, Ireland and Canada all saw a return
to more normal claims frequency, and
benefited from improved LTIR returns from
higher reinvestment yields. Importantly, the
Group has managed the inflationary
environment well, and continues to remain
vigilant in this regard.
We manage the business on a Solvency II
basis and our hedging strategy, which
reduces volatility from economic and
market fluctuations, is focused on
protecting the Solvency II capital position
and securing our ability to pay dividends.
This approach introduces IFRS volatility
from the movement in the fair-value of
assets which are held for the long term to
back liabilities and capital requirements.
During 2022 our IFRS results were adversely
impacted by rising interest rates which
reduced the fair value of these assets. As we
focus on the Solvency II capital position, we
accept variability in the IFRS results. The
IFRS loss for the year was £(1,139) million
(2021: profit of £2,036 million) while basic
earnings per share decreased to
(38.2) pence (2021: 50.1 pence). Higher
operating profit was more than offset by
these economic and market movements.
Cost reduction
Baseline controllable costs3 from continuing
operations, fell by 3% to £2,771 million
(2021: £2,854 million) despite headwinds
from inflation. Since 2018 we have achieved
£327 million of savings net of inflation,
ahead of target. We are on track to meet our
ambition of £750 million (gross of inflation)
cost reduction from the 2018 baseline by the
end of 2024.
£327m
Controllable costs savings vs. 20183
Solvency II operating own funds
generation (Solvency II OFG)
Solvency II OFG, a key measure of growth,
increased by 37% to £1,623 million
(20211: £1,187 million) driven primarily by
strong growth in UK Life, which benefited
from growth in Retirement, Wealth, and
management actions and other.
Solvency II OFG in UK & Ireland General
Insurance and Canada was marginally lower
in 2022, a good performance given the
inflationary backdrop and the return to
more normal levels of claims frequency in
2022. Solvency II OFG also benefited from
lower central costs and external debt costs
as a result of our simplification and
deleveraging programme.
Solvency II OFG excluding management
actions and other was up 15% in 2022.
We are £1.5 billion per annum by 2024, a
target which assumes a lower contribution
from management actions & other than
seen in 2022.
Financial targets
>£5.4bn
Cash remittances cumulative
2022-2024
£1.5bn
Solvency II Own funds generation
per annum by 2024
£750m
Gross controllable costs reduction
(2018-2024)3
1. Comparatives presented for continuing operations and do not include
results from discontinued operations no longer part of the Group
2. Group adjusted operating profit is an APM which is used by the Group
to supplement the required disclosures under IFRS. Please see note B
in the ‘Accounting Policies’ section of IFRS Financial Statements and
the ‘Other Information’ section for further information.
3. Baseline controllable costs exclude strategic investment, cost
reduction implementation, IFRS 17 and other costs not included in the
2018 costs savings target baseline
Aviva plc
1.18
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Financial Officer’s report continued
Solvency II operating capital
generation (Solvency II OCG)
Solvency II OCG increased by 5% to
£1,434 million (20211: £1,364 million) driven
primarily by growth in UK & Ireland Life,
partly offset by adverse impacts from the
latest reinsurance renewal across our
General Insurance business.
Solvency II return on equity
(Solvency II RoE)
Solvency II RoE was 16.4%, improving by
5.7pp (20211: 10.7%), primarily reflecting the
increase in Solvency II OFG and lower 2022
opening capital driven by higher interest
rates in 2021.
Business performance
UK & Ireland Life
UK & Ireland Life adjusted operating profit2
increased by 34% to £1,908 million
(2021: £1,428 million) driven by strong
margins in Retirement, strong performance
in Ireland Life, the impact of market
movements on policyholder tax in Heritage,
and a higher contribution from
management actions and other, partly
offset by Wealth where revenue was
adversely impacted by market volatility.
Solvency II OFG increased by 44% to
£1,368 million (2021: £953 million) driven by
Retirement, Wealth, and a higher
contribution from Other, partly offset by
Protection & Health and Heritage.
Cash remittances were £780 million
(2021: £1,219 million) reflecting the deferral
of a dividend payment into 2023 amid market
volatility during the second half of 2022.
Solvency II OFG was 14% lower at £293
million (2021: £339 million), with the lower
result primarily reflecting a return to more
normal claims frequency.
Value of new business (VNB) increased by
15% to £767 million (2021: £668 million)
driven by improved margins across all lines
of business.
Present value of new business premiums
(PVNBP) were 7% lower at £33.3 billion
(2021: £35.6 billion) reflecting lower BPA
volumes of £4.4 billion (2021: £6.2 billion)
and the impact of higher discounting of
future premiums in Wealth and Protection &
Health as a result of higher interest rates.
Wealth net flows were resilient at £9.1 billion
(2021: £10.0 billion) driven by strong
performance in Workplace offset by
Platform which remained robust in the face
of market volatility.
Baseline controllable costs3 decreased by
1% to £1,093 million (2021: £1,102 million).
UK & Ireland General Insurance
UK & Ireland General Insurance adjusted
operating profit2 was 5% lower at
£338 million (2021: £356 million) reflecting a
return to more normal claims frequency
partly offset by higher investment returns,
while we have mitigated the impact of rising
inflation through pricing discipline. UK &
Ireland combined operating ratio (COR) was
96.1% (2021: 94.3%), a strong result given
the challenging conditions in 2022.
Cash remittances increased 180% to
£731 million (2021: £261 million), reflecting
both the cash generated from the
operations as well as surplus capital in
excess of local risk appetite.
Gross written premiums (GWP)increased 7%
to £5,740 million (2021: £5,352 million). UK
commercial lines was up 12% driven by
strong retention, new business growth and
increased rates.
UK personal lines was up 2% as we focused
on pricing discipline amid adverse
conditions, while we benefited from our
strengths in price comparison websites and
from the launch of Aviva Zero.
Baseline controllable costs3 reduced 1% to
£703 million (2021: £713 million) despite the
inflationary environment, and while
continuing to grow the business.
Canada
Canada adjusted operating profit2 increased
6% to £433 million (2021: £406 million) and
was flat in constant currency. A lower
underwriting result, driven by increased
claims frequency and the impact of inflation
was offset by improved investment returns.
The combined operating ratio was 92.5%
(2021: 90.7%).
This is a strong performance in 2022 given
challenging conditions and reflects our focus
on prudent underwriting and rate actions.
Solvency II OFG was 2% lower at
£325 million (2021: £332 million) reflecting
inflationary impacts and increased claims
frequency. Cash remittances grew strongly
to £287 million (2021: £156 million), with
higher remittances partly reflecting the
payment of surplus capital in excess of local
risk appetite.
GWP of £4,009 million (2021: £3,455 million)
was up 9% on a constant currency basis.
Personal lines was up 6% in constant
currency reflecting higher rate in Ontario
motor and growth in our direct business.
Commercial lines was up 14%4 reflecting the
favourable rate environment as well as
strong growth in mid-market and large
corporate accounts.
Baseline controllable costs3 increased 3%
on a constant currency basis to £410 million
(2021: £399 million) as we invest in our core
capabilities and our digital direct business.
1. Comparatives presented for continuing operations and do not include
results from discontinued operations no longer part of the Group
2. Group adjusted operating profit is an APM which is used by the Group
to supplement the required disclosures under IFRS. Please see note B
in the ‘Accounting Policies’ section of IFRS Financial Statements and
the ‘Other Information’ section for further information.
3. Baseline controllable costs exclude strategic investment, cost
reduction implementation, IFRS 17 and other costs not included in the
2018 costs savings target baseline
Aviva plc
1.19
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Financial Officer’s report continued
Aviva Investors
Aviva Investors adjusted operating profit1
decreased to £25 million (2021: £41 million),
or £48 million (2021: £58 million) excluding
cost reduction implementation, strategic
investment costs and impact of foreign
exchange movements. Revenues were 6%
lower at £379 million (2021: £403 million)
reflecting the impact of weak investment
markets on average AUM, with the most
significant impact on credit.
Solvency II OFG was £24 million
(2021: £36 million) while cash remittances
increased to £28 million (2021: £15 million).
Net outflows improved to £(3.8) billion
(2021: £(4.6) billion), of which £(3.9) billion
related to strategic actions, mainly from the
sale of France. External net flows were
resilient in light of difficult market conditions
at £1.3 billion (2021: £3.3 billion).
Baseline controllable costs2 were 4% lower
at £331 million (2021: £345 million).
International investments
Adjusted operating profit1 was £52 million
(2021: £97 million) and SII OFG was
£106 million (2021: £124 million), with the
lower operating performance primarily due
to a one-off property charge.
PVNBP was 3% lower in constant currency
at £1,172 million (2021: £1,122 million) and
up 5% at reported FX.
Cash remittances increased to £19 million
(2021: £11 million) benefiting from an
increased dividend pay-out ratio agreed
with our partner in China.
Capital and cash
Solvency II capital
At 31 December 2022, Aviva’s Solvency II
shareholder surplus was £8.7 billion and
estimated Solvency II shareholder cover
ratio was 212% (2021: 13.1 billion and 244%
respectively). Our pro forma Solvency II
shareholder cover ratio allowing for the
remaining debt reduction and £(0.1)billion
pension scheme payment, is estimated at
207%.
After allowing for the payment of the final
dividend and £300 million share buyback,
the ratio is estimated to be 196%.
The solvency capital requirement of
£7.8 billion includes a £2.1 billion benefit
from Group diversification.
Solvency II net asset value per share was
390 pence (2021: 417 pence).
Centre liquidity
At end February 2023, centre liquidity was
£2.2 billion (end February 2022: £6.6 billion)
with the reduction primarily driven by the
£3.75 billion capital return, £0.5 billion
subordinated debt redemption, ordinary
dividends of £0.8 billion and centre and
debt costs of £0.8 billion, partly offset by
cash remittances of £1.8 billion.
Solvency II debt leverage
Solvency II debt leverage ratio increased to
31% (2021: 27%) primarily as a result of the
reduction in own funds following the capital
return.
Our pro forma Solvency II debt leverage
ratio is 30% after allowing for the planned
£0.5 billion debt reduction3 and the
£0.1 billion pension payment.
Dividend
On 8 March 2023 we approved a final
dividend per share for 2022 of 20.7 pence
(2021: 14.7 pence). Together with an interim
dividend of 10.30 pence (2021: 7.35 pence)
this bring total dividends for the year to
31.00 pence (2021: 22.05 pence) with a cash
cost of c.£870 million.
Our guidance for 2023 is for a dividend
payment of c.£915 million4. We anticipate
low-to-mid single digit growth in the cash cost
of ordinary dividends thereafter.
31p
2022 total dividend per share
Share buyback
Under our capital framework, surplus
capital is available for reinvestment in the
business, focused M&A and returns to
shareholders.
Given our strong capital position and
prospects, we have launched a £300 million
share buyback programme, commencing on
10 March 2023. Our preference remains to
return surplus capital regularly and
sustainably. This builds on the £4.75 billion
capital return programme completed in 2022.
1. Group adjusted operating profit is an APM which is used by the Group
to supplement the required disclosures under IFRS. Please see note B
in the ‘Accounting Policies’ section of IFRS Financial Statements and
the ‘Other Information’ section for further information.
2. Baseline controllable costs exclude strategic investment, cost
reduction implementation, IFRS 17 and other costs not included in
the 2018 costs savings target baseline
3. Expected to incorporate a combination of subordinated and
senior debt
4. Estimated dividends are for guidance and are subject to change.
The Board has not approved or made any decision to pay any dividend
in respect of any future period.
Read more
More details can be found in:
> Our business review
> Capital management
Aviva plc
1.20
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chief Financial Officer’s report continued
Shareholder asset portfolio
Aviva’s high quality shareholder asset
portfolio of £78.4 billion at 31 December
2022 continues to perform well and is
defensively positioned.
Shareholder asset exposure to equities,
emerging market sovereigns, and European
peripherals is low.
Corporate bonds represent £21.6 billion or
27.6% of the portfolio. Of this 87% is
externally rated investment grade and 13%
internally rated. Aviva has a long history in
private debt, with a robust internal rating
model, and these internally rated assets
have an average rating of ‘single A’ quality.
The corporate bond portfolio continues to
perform well with <£150 million
downgraded to a lower letter in 2022, and
no corporate bond downgrades below
investment grade.
Our commercial mortgage portfolio of
£6.0 billion comprises largely long-duration
fixed rate contracts with low average loan-
to-value (LTV) ratios of c.49%.
Our securitised mortgage loans and equity
release portfolio of £9.5 billion is mostly
internally securitised with low average LTVs
of c.28%.
Outlook
Our positive momentum continued in 2022
with a strong set of results, and our
diversified business model positions us well
to navigate the current macroeconomic
environment. This reinforces our confidence
in the prospects, financial targets and
outlook for the Group.
In UK & Ireland Life we expect higher BPA
volumes in 2023 as a growing number of
pension schemes look to de-risk. Our Wealth
business remains positioned to grow, and
while market conditions are challenging in
the near-term in Adviser Platform, our
Workplace business offers strong growth
opportunities. We continue to expect good
demand for Protection and Health products.
In General Insurance we will remain focused
on pricing appropriately for the inflationary
environment. In the UK, we expect to see
continued momentum in commercial lines
while we focus on growing our retail business
in personal lines. In Canada, rates are
expected to remain supportive in commercial
lines along with personal property, while we
continue to focus on managing rate in
personal motor given the inflationary
pressures, and growing our RBC partnership
and direct business.
Across General Insurance, we remain
focused on meeting our <94%1 COR
ambition over time.
Aviva Investors continues to focus on
improving efficiency across the business,
and is taking actions to drive improvements.
However, conditions are likely to remain
challenging in 2023 given ongoing
uncertainty in the macro environment and
investment markets.
We are committed to delivering for our
shareholders. We have set out a sustainable
dividend policy, and expect to pay a
dividend of c.£915 million2 for 2023, with
low-to-mid single digit growth in the cash
cost of the dividend thereafter.
Under our capital framework, surplus
capital is available for reinvestment in the
business, focused M&A and returns to
shareholders. We have announced a share
buyback on 9 March 2023, and anticipate
further regular and sustainable capital
returns in the future2.
Charlotte Jones
Chief Financial Officer
8 March 2023
1. Based on IFRS 4
2. Estimated dividends are for guidance and are subject to change.
The Board has not approved or made any decision to pay any dividend
in respect of any future period.
Aviva plc
1.21
Annual Report and Accounts 2022
ment
tire
e
R
I
n
s
u
r
a
n
c
e
With you today,
for a better tomorrow
Wealth
Building on the unique advantages of our model Customer franchise18.7 millionCustomers in UK, Ireland and Canada (2021: 18.5 million)Serving more lifetime customer needs, retaining customers for longer, growing our customer franchise and doing it more effectively than the competition Scale efficiency £352 billionGroup assets under management (2021: £401 billion)Cost and investment efficiencies, synergies of an in-house asset manager and shared talent and know-how Diversification benefit £2.1 billion Capital diversification benefit1 (2021: £1.9 billion)Capital diversification, earnings diversification and capital allocation flexibility 1.The Group diversification between markets is the diversified Solvency Capital Requirement (SCR) arising from the sum of the SCR for each market (e.g. UK & Ireland Life, UK & Ireland GI, Canada, Aviva Investors, International investments) being higher than the SCR at Group2.Aviva's analysis using latest information available including company reporting, Fundscape, Boring Money, LCP, Laing & Buisson, Swiss Re Group Watch, MSA, Milliman 3.Originated in support of our BPA business, with a total of £4.4 billion (including origination for external and internal clients) Leading market positions across Insurance, Wealth and Retirement2 1. Strategic Report2. Governance3. IFRS Financial Statements4. Other InformationOur business modelAviva plc1.22Annual Report and Accounts 2022BPA£4.4bn premiumsUK GI#1Canada GI#2Ireland GI#3Protection#2Health#3Heritage£69bnAUMAviva Investors£223bnAUMAdviser Platform#2 and 250 advisorsWorkplace#1Ireland Life#4Equity Release#3Individual Annuities#1Direct Wealth c.#15Real Assetorigination£2.4bn3 1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business model continued
Meeting the full breadth of our customers' needs
Creating value for all our stakeholders
Insurance
Protecting & insuring our customers against key risks,
including their health and the wellbeing of their employees
Customers pay us a premium to insure against a specific risk. Our scale
enables us to pool these risks and maintain capital strength, so that we
are able to pay customers' claims and be there when they need us the most
Wealth
Helping our customers to save for the future and generate
a return on their investments
We manage and administer these investments for a fee, offering guidance
and financial advice for our customers' complex needs
Retirement
Helping our customers to manage their retirement
Customers pay us premiums which we invest over time to provide them
with income in their retirement via a lump sum or regular payments, or by
releasing the money tied up in their property
1. <50 employees
Our Customers
Providing a trusted
financial services
offering that is easy to
engage with and
delivers great customer
outcomes across all
their needs
£23bn
paid out in benefits
and claims to our
customers in 2022
Our Communities
Leading the UK Financial
Services sector on
Climate Action, building
Stronger Communities
and embedding a
Sustainable Business
Our People
Enabling our people
to thrive as individuals
while delivering
great outcomes for
our customers, Aviva
and themselves
41,610
hours volunteered
by our colleagues
to support local
communities in 2022
86%
employee engagement
score in 2022
Our Suppliers
Supporting our small
business partners1 in
our operations and by
committing to the
Prompt Payment Code
Our Shareholders
Delivering consistent
performance, an
attractive and growing
dividend and anticipate
further capital returns
95%
of small business
invoices are paid
within 30 days
c.£870m
2022 dividend cash
cost
Aviva plc
1.23
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our external environment
Key external trends across our strategic priorities.
90%
customers who say experience is at
least as important as the product
11.1%
UK inflation in October 2022
(41-year high)
$500bn
global spending on artificial intelligence
by 2023
1.5°C
global temperature increases
expected by 2050
Rising customer expectations
Anything, anytime, anywhere - consumers
demand for convenience continues to grow.
Driven by the fast-paced changes in consumer
demands, advancements in technology,
innovation from start-ups and accelerated by
the COVID-19 pandemic, convenience
is increasingly critical to a positive customer
experience and how consumers decide what
products and services to buy.
Research suggests 1 in 4 consumers will pay
up to 10% more if they know they will
receive excellent service. As organisations
continue to innovate, complementing their
in-person experience and creating new
offerings, so will consumers expectations
around convenience continue to rise.
Exceptional market volatility
The global economy is in the midst of a
prolonged period of global economic
volatility.
There are several key drivers, including the
Russian invasion of Ukraine and it's impact
on global energy markets, persistent
inflation, rising interest rates and geo-
political fragmentation affecting global trade
and co-operation.
In the UK, families and businesses are facing
high inflation, while interest rates are
expected to remain above 4% in 2023.
Material increases to food and energy prices
are reducing customers' disposable income
and contributing to the worst cost of living
crisis in the UK since the 1950s.
Rapid advances in AI
Over the last five years, global adoption of
artificial intelligence (AI) has increased 2.5
times, the average number of AI capabilities
has doubled and the 2022 global spend is up
by almost 20%.
Increasingly, AI is being used across the value
chain. From targeting and attracting
customers with direct marketing to driving
new levels of efficiency and productivity
through digitisation and automation.
In addition, while early foundation models in
generative AI are focused on the ability to
augment creative work, recent
breakthroughs suggest this is just the
beginning and more sophisticated and
transformational uses are to come.
Climate urgency rising
As the impacts of climate change continue
to intensify across the globe, the need for
urgent action increases.
In 2022, the world experienced catastrophic
floods in Pakistan, continued drought in
Africa and record heatwaves across the
northern hemisphere which in turn caused
wildfires and mass disruption. These extreme
impacts are expected to continue to intensify.
The latest Emissions Gap Report published
by the United Nations highlights that we
are not on track to meet the target set out
by the Paris Agreement. Urgent, rapid,
and transformative action is required to
cut greenhouse gas emissions across
industries.
Putting customers first
Maintaining a relentless focus on enhancing
customer experience and learning from
experience leaders across other industries.
Benefiting from our diversified model
Leveraging the benefits of our diversified model
to drive targeted and profitable growth and
supporting our customers through the cost of
living crisis.
Putting technology at our core
Monitoring the leading developments in
technology and ensuring we harness the full
potential of AI across our businesses.
Leading on Sustainability
Leading on climate action, building stronger
communities and embedding sustainability
into our businesses.
Source: Salesforce Survey (2022)
Source: Bank of England (2023), Office for National Statistics (2022)
Source: McKinsey Global Survey (2022), IDC forecasts (2022)
Source: United Nations Emissions Gap Report (2022)
Aviva plc
1.24
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our external environment continued
Key external trends across Insurance, Wealth and Retirement.
88%
of new car sales in the UK will be electric vehicles
(battery electric or plug-in-hybrid) by 2030
38 million
adults in the UK are not receiving any formal
support with their finances
1 in 4
people in the UK will be 65+ by 2039
Changing world of mobility
The way we travel is changing radically. The future is
going to be increasingly more autonomous, electric,
connected and underpinned by shared ownership.
Democratisation of financial advice
Due to the high cost of financial advice, much of the UK
population has historically not had access to the right
support for their most complex financial needs.
The pace of this change is fast with immediate impacts
driven by the increase in the number of electric vehicles
and the rapid adoption of connected technology, as the
majority of cars are now sold with this capability.
The impacts of autonomous driving technology,
alternative ownership and mobility models (e.g. mobility-
as-a-service) are still nascent but expected to disrupt the
market and create new opportunities across the mobility
ecosystem, from car manufacturers to insurers.
This situation is changing however as customer digital
adoption, an evolving regulatory stance and innovation are
creating new, lower-cost solutions.
In future, customers will be able to access and choose
between financial support offerings across digital financial
education, robo-guidance and hybrid advice, as well as
traditional financial advice.
Changing nature of retirement
Across the world, people are living longer. Better
standards of living and improvements in medical science
means that between 2015 and 2050, the proportion of the
world’s population over 60 years old will nearly double
from 12% to 22%.
At the same time, there is growing pressure on public
finances and increasing responsibility on individuals to
manage saving for retirement and the rising costs of
healthcare are putting traditional retirement models
under pressure.
As the nature of retirement changes, the demand for
non traditional and flexible retirement products and
services will grow.
Preparing for the future
Ensuring we are ready to serve the needs of customers
with electric vehicles, while also preparing for the
changing world of mobility.
Developing flexible solutions
Creating an integrated wealth proposition, which
offers customers a range of guidance, advice and
hybrid solutions.
Innovating for the new retirement landscape
Developing holistic retirement solutions which provide
customers with flexible drawdown and guaranteed
income components.
Source: SMMT new car market and outlook to 2035 (2021)
Source: The Financial Conduct Authority, Financial Lives Survey (2020)
Source: Office for National Statistics (2022), World Health Organisation ( 2022)
Aviva plc
1.25
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our strategy
We have four clear strategic priorities.
Customer
Growth
Efficiency
Sustainability
Go-to customer brand for
Insurance, Wealth and
Retirement
Targeted, disciplined and
profitable growth
Top quartile efficiency with
technology at the core
Leading on Climate Action,
Stronger Communities and
Sustainable Business
Read more on > page 1.27
Read more on > page 1.28
Read more on > page 1.29
Read more on > page 1.30
Delivering our strategy will further unlock our competitive advantages and create value for our stakeholders
Aviva plc
1.26
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our strategy continued
2022 progress highlights
Helping our customers to navigate the
challenges of today's world is central to
our strategy and critical to accelerating our
customer advantage.
Leveraging our brand across
Insurance, Wealth and Retirement
We recently launched our new brand
campaign 'Making It Click' aimed at
strengthening our brand and highlighting
that our wide range of products and
services can meet all our customers'
Insurance, Wealth and Retirement needs.
Making it easier to engage with us
We have prioritised improvements to our
digital customer journeys, making it easier
and more convenient for customers to
interact with us. This includes the
expansion of our digital support, (e.g.
helping customers through Live Chat) and
the introduction of Apple Pay. We have
also enabled self-help on Aviva Connect,
allowing intermediaries to access
documents and data online.
Innovating for our customers
Customers who hold multiple products
are more engaged, more inclined to buy
new products and more likely to stay with
us for longer.
We are developing propositions that
connect our products for our customers and
have seen some early signs of success (e.g.
offering pension customers real-time
preferential pricing for motor products).
We are also investing in innovation to
improve the products and services we can
offer and are making it easier for customers
to do business with us. For example, we are
launching a new market-leading pension
tracing and consolidation proposition, built
in partnership with the Founders Factory.
This will benefit our Workplace customers
immediately and Direct customers from
April this year. Our ambition here is to
generate material growth over the next three
years.
Focus for 2023
We will focus on strengthening our brand
and connecting it to what we do, while also
enhancing our marketing effectiveness and
moving us towards our ambition to be the
number 1 brand for trust and consideration
across our Insurance, Wealth and
Retirement markets.
We will continue to prioritise the
optimisation of our digital customer
journeys as we aim to engage more
customers through MyAviva and support
more customers to self-serve across
their products.
We will also continue to look for innovative
ways to leverage our product expertise to
develop propositions for our individual and
corporate customers.
18.7m
Number of Customers
(2021: 18.5m)
40.5
Transactional Net Promoter Score
(2021: 42.5)
4.4m
Multi product holding
(UK customers only)
(2021: 4.4m)
Read more on KPIs > page 1.31
Customer
Go-to customer brand
for Insurance, Wealth and
Retirement
Aviva plc
1.27
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our strategy continued
94.6%
Group Combined Operating Ratio
(2021: 94.1%)
£9.1bn
Wealth net flows
(2021: £10.0bn)
15%
UK & Ireland Life Solvency II VNB
growth
(2021: (1)%)
2022 progress highlights
Our diversified portfolio has delivered
material benefits and supported resilient
performance, even in difficult times.
Insurance
We have seen double digit growth in UK
Commercial Lines, driven by an increase in
underwriting capacity for regional brokers
and an expansion of digital trading. We have
also grown our UK Personal Lines business
and shown resilience in a difficult economic
climate. This has been supported by
continued growth in Aviva Online, reaching 1
million policies. We launched Aviva Zero, a
carbon-conscious proposition in Motor,
selling over 50,000 policies and offsetting
over 300 million miles of driving. To further
accelerate our growth in the attractive high
net worth (HNW) segment, we purchased
Azur underwriting, bringing scale and
strength to our HNW proposition. In Canada,
we have continued to accelerate our
Commercial Lines business exploring new
opportunities in Mid-market and GCS.
Wealth
We have made good progress on our
integrated wealth proposition, which
remains critical to our growth strategy.
In Workplace, we have delivered 374 new
Workplace schemes and enhanced our
Master Trust proposition. We have
strengthened our advice business with the
acquisition of Succession Wealth and
recorded above market client and adviser
retentions.
We have also added over £2 billion in
assets through acquisitions. Our Direct
Wealth business has delivered a new
pension consolidation and tracking
service for our customers.
Retirement
Our retirement business continues to play
a key role supporting our medium-term
cash generation. Our BPA business has
delivered stable profits and we have made
good progress on the modernisation of our
BPA platform. We have improved pricing in
Individual Annuities and expanded our
advisor capability to include Equity
Release advice for our customers.
Focus for 2023
We remain focused on delivering targeted,
disciplined and profitable growth and
achieving our external ambitions which
include a combined operating ratio of less
than 94%1, at least 10% compounded
annual growth rate in Wealth net flows and
an annual growth rate of 5-7% in the value
of new business for UK & Ireland Life.
To support these ambitions, we have a
number of focus areas, including targeting
new distribution opportunities in our
General Insurance business, accelerating
GCS growth in Canada, connecting
customers with our integrated wealth
proposition and ensuring our Bulk Purchase
Annuity business continues to play a key
role in delivering future cash generation.
Growth
Targeted, disciplined
and profitable growth
1. On IFRS 4 basis
Aviva plc
Read more on KPIs > page 1.31
1.28
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our strategy continued
2022 progress highlights
We are delivering on our cost commitments
by simplifying, automating and digitising
our business.
IT simplification
We have simplified our IT estate, removing
several legacy systems and applications.
We have modernised our Equity Release
IT estate and re-engineered our General
Insurance claims processes. This has
improved our overall operational
resilience, customer service and agility.
We are on track to achieve our target
reduction in UK IT applications of 25%2
by the end of 2023.
Product rationalisation
We have also prioritised the simplification
of our UK Personal Lines product portfolio,
rationalising the number of product
variations we offer and exceeding our
ambition of 65%2 by the end of 2022.
Digitisation and automation
We have made it easier for our customers
to interact with us by digitising and
automating our customer journeys.
In UK Life, we digitised 34 customer
journeys and implemented data led
pricing and underwriting in our UK General
Insurance business.
Property footprint
Reduction in our property footprint
remains a key priority for us. We have
recently reduced our occupied footprint
across our Leatherhead, Edinburgh and
Bristol properties.
Organisation simplification
We continue to focus on the simplification
of our organisation. In Aviva Investors,
we have optimised the outsourcing of our
Real and Liquid asset operations with
implementation expected to continue into
2023 and in Canada, we have centralised
operations in Commercial Lines. We have
also focused on embedding cost discipline
across the organisation and implemented
a new and more efficient operating model.
Focus for 2023
We will continue to drive scale efficiencies
and deliver our £750 million gross savings
target by the end of 2024.
Simplification of our business will continue
to be a key priority and we remain
committed to delivering top quartile
efficiency across all our businesses.
We will also commence the move to our
new London headquarters. We expect this
to complete delivery of a c.40% reduction
in our Aviva UK property footprint while
continuing to support our sustainability
ambitions with a significant reduction to
our carbon emissions.
£327m
Cumulative controllable cost savings
(vs. 2018 baseline)1
(2021: £244 m)
22%
Reduction in UK IT applications2
(2021: 11%)
70%
Reduction in UK GI Personal
Lines products2
(2021: 30%)
57%
UK Customer journeys digitised
and automated2
(2021: 52%)
Read more on KPIs > page 1.31
Efficiency
Top quartile efficiency with
technology at our core
1. Baseline controllable costs exclude strategic investment, cost
reduction implementation, IFRS 17 and other costs not included
in the 2018 cost savings target baseline
2. Momentum and ambitions against 2020 baseline, unless
otherwise stated
Aviva plc
1.29
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our strategy continued
2022 progress highlights
We are striving to lead the UK Financial
Services on climate change, building
stronger communities and embedding
a sustainable business.
Climate Action
In March 2022, we released our first
Climate Transition Plan, outlining our
pathway to Net Zero across three scopes
of emissions including focus on indirect
emissions (e.g., from our supply chain,
business investments, underwriting and
investment portfolios). To date we have
achieved a 43% reduction in our
operational carbon emissions against our
2019 baseline and are focused on making
our operations and supply chain Net Zero
by 2030.
We have also validated our carbon-
reduction goals with the Science Based
Targets initiatives (SBTi), strengthened our
Environmental, Social and corporate
Governance (ESG) Baseline Underwriting
and Investment Exclusion policies,
established partnerships for our nature-
based projects and received a Building
Public Trust Award for our climate
reporting for the second year in a row.
Stronger Communities
To support those impacted by the cost
of living crisis, we pledged £9 million to
Citizens Advice and The Money Advice Trust.
For our colleagues we have provided 21,000
free kids lunches and made over 9,000 one-
off cost of living payments. For our
customers we have provided affordable and
robust product options and extended our
premium deferrals. We also donated £1.2
million to the DEC Ukraine Humanitarian
Appeal and launched a number of nature-
based projects as part of our partnership
with World Wide Fund for Nature.
Sustainable Business
We have made tangible progress on
diversity, equity and inclusion this year
and increased the percentage of senior
women leaders.
Our overall progress has been recognised
with strong external rankings. In February
2023, we were ranked 5th out of 293 Global
Insurers by Sustainalytics.
Focus for 2023
Along with members of the Net Zero
Insurance Alliance (NZIA), we will publish
our baseline metrics and targets to identify
and understand the attributed carbon
emissions from the activities we underwrite.
We will continue to build stronger
communities, invest in the UK economy and
reinvest 2% of our annual Group adjusted
operating profit into communities (three
year average).
We will continue to ensure sustainability is
embedded across our business and make
progress on our diversity, equity and
inclusion targets.
39%
Reduction in the weighted average
carbon intensity of our credit and
equity investments
(Shareholder and With-profits
Portfolio only)1
(2021: 24%)
£6.9bn
Amount invested in UK infrastructure
and real estate from 2021-22
(2021: £4.3bn)
37.3%
Women in senior leadership roles
(2021: 33.7%)
Read more on KPIs > page 1.31
Sustainability
Leading on Climate Action,
Stronger Communities and
Sustainable Business
1.
% reduction in weighted average carbon intensity (tCO2e/$m
sales) of Aviva's shareholder and with-profit investment portfolio
(equity and credit) and does not extend to policyholder funds
Aviva plc
1.30
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Key performance indicators
We assess how we serve our customers, how we are performing
against out sustainability ambition, the engagement of our
employees and how we generate value for our shareholders.
These financial and non-financial metrics enable us to measure
our performance against our strategic priorities and our purpose.
The financial KPIs include Alternative Performance Measures (APMs), denoted with the
symbol ‡. APMs are non-GAAP measures, which are not bound by the requirements of IFRS
or Solvency II. A complete list of the APMs used by the Group, and further guidance in
respect of their use, can be found in the 'Other information' section. This guidance includes
definitions and, where possible, reconciliations to relevant line items or sub-totals in the
financial statements.
Financial KPIs
Cash remittances‡, 1
Measure of the cash transferred from businesses to
the Group. Cash flows across the Group reflect our aim
of ensuring sufficient net remittances from businesses
to cover the cash requirements at Group level.
£1,845m
2022
2021
£1,845m
£1,662m
Solvency II operating own
funds generation‡, 1
Measures the amount of own funds the Group
generates from operating activities.
Baseline controllable costs‡, 1
Represents the underlying day-to-day expenses
and operational overheads involved in running
the business.
Solvency II debt leverage ratio‡
An indicator used by management to assess the
Group’s financial strength.
£1,623m
2022
2021
£1,623m
£1,187m
£2,771m
2022
2021
31%
2022
2021
£2,771m
£2,854m
31%
27%
Estimated Solvency II
shareholder cover ratio‡
Provides an indicator of the Group’s balance
sheet strength.
Solvency II return on equity‡, 1
Shows how efficiently we are using our financial
resources to generate a return for shareholders.
Value of new business on an adjusted
Solvency II basis‡, 1
Measures growth and is the source of future cash
flows in our life businesses.
Group adjusted operating profit‡, 1
Supports decision making and internal
performance management as it enhances
the understanding of the Group’s operating
performance over time.
Combined operating ratio‡, 1
A measure of general insurance profitability. A COR
below 100% indicates profitable underwriting.
IFRS (loss)/profit for the year1
Measures the profit after tax, attributable
to shareholders, generated by the Group.
Further detail is included within the
Consolidated Income Statement.
212%
2022
2021
16.4%
2022
2021
£851m
2022
2021
212%
244%
16.4%
10.7%
£851m
£746m
£2,213m
2022
2021
£2,213m
£1,634m
94.6%
2022
2021
94.6%
92.9%
£(1,139)m
£(1,139)m
2022
2021
£336m
To read more about how these KPls are used as a base to determine or modify
remuneration, see Directors' Remuneration Policy.
1. Comparatives presented for continuing operations and do not include results from discontinued operations no longer part of the Group
Aviva plc
1.31
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Key performance indicators continued
Non-Financial KPIs
Operational carbon emissions reduction1
Percentage reduction in absolute Scope 1 and 2
(market-based) emissions from 2019 base year.
Financed emissions carbon intensity2
Weighted average carbon intensity (tCO2e / $m
revenue) of credit and equities (includes
shareholder and policyholder).
Transactional Net Promoter Score®
(TNPS®)
Measure of advocacy which quantifies the
likelihood of a customer recommending Aviva
following a recent transaction or interaction in the
Group's businesses in UK, Ireland and Canada.
43%
2022
2021
120
2022
2021
40.5
2022
2021
43%
20%
120
135
40.5
42.5
Number of customers
Total number of policy-holding Aviva customers in
the Group’s businesses in the UK, Ireland and
Canada with at least one active product.
18.7 m
2022
2021
18.7m
18.5m
People saving or retiring with Aviva
Percentage of UK adult population who have a
Aviva Life Savings Policy or Aviva Investment policy
in the UK.
13.9%
2022
2021
13.9%
13.7%
2022
Women in senior leadership roles
The percentage of women in senior leadership
roles in UK, Ireland and Canada).
Ethnic diversity in senior leadership roles
in the UK
The percentage of ethnically diverse employees in
senior leadership roles in the UK.
37.3%
2022
2021
9.4%
2022
2021
37.3%
33.7%
9.4%
9.1%
Amount invested in UK infrastructure and
real estate
Cumulative amount of investment in UK
infrastructure and real estate.
£6.9bn
2022
2021
£4.3bn
£6.9bn
Employee engagement
We measure this through our 'Voice of Aviva'
annual employee engagement survey.
86%
2022
2021
86%
72%
To read more about how these KPls are used as a base to determine or modify
remuneration see Directors' Remuneration Policy.
Indicates that this data was subject to independent reasonable assurance by
PricewaterhouseCoopers LLP.
Indicates that this data was subject to independent limited assurance by
PricewaterhouseCoopers LLP.
The PwC report which was prepared under ISAE 3000 (Revised) and - where relevant - ISAE 3410 is available within the Independent assurance
section of our Climate-related Financial Disclosure.
1. We have updated our baseline from 2010 to 2019. The 2021 comparative has been updated accordingly.
2. The 2021 comparative for weighted average carbon intensity for credit and equities has been re-presented from 134 tCO2e/$m, previously published,
to 135 tCO2e/$m, as a result of the inclusion of policyholder data
Aviva plc
1.32
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review
We serve our customers’
needs across Insurance,
Wealth and Retirement.
We operate through businesses in the UK, Ireland and Canada:
• UK & Ireland Life: Offering insurance (protection and health),
wealth and retirement (annuities and equity release) products
• UK & Ireland General Insurance: Protecting homes, cars,
holidays and businesses
• Canada General Insurance: Protecting homes, cars, lifestyles
and businesses
• Aviva Investors: Global asset manager with expertise in real
assets, multi assets, equities and credit
We also have international investments in India,
China and Singapore.
Aviva plc
1.33
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: UK & Ireland Life
Our ambition
Solvency II VNB
c.5-7%
average per annum growth
Wealth net flows
≥10%
compound annual growth rate 2021-2024
Doug Brown
Chief Executive Officer, UK & Ireland Life
“In 2022, Aviva UK & Ireland
Life displayed resilient
trading performance in
an exceptionally volatile
and challenging economic
environment. We have
shown strong progress
on our strategic ambitions,
pivoting the portfolio
towards Wealth &
Insurance, and have
significant transformation
planned for 2023
and beyond.”
Providing our customers with solutions for:
Insurance
Wealth
Retirement
Aviva plc
Key financial indicators
PVNBP
Solvency II value of new business
Wealth net flows
Adjusted operating profit
IFRS (loss)/profit before tax
Solvency II operating own funds generation
Cash remittances
Solvency II VNB
£767m
2022
2021
£767m
£668m
Wealth net flows
£9.1bn
2022
2021
£9.1bn
£10.0bn
2022
£33bn
£767m
£9.1bn
£1,908m
£(669)m
£1,368m
£780m
2021
£36bn
£668m
£10.0bn
£1,428m
£571m
£953m
£1,219m
Investment in sustainable assets1
£7.7bn
2022
2021
£7.7bn
£6.3bn
Weighted average carbon intensity
(tCO2e/$m revenue)2
116
2022
2021
116
133
Overview
Business strategy overview
Aviva is the largest life insurer in the UK,
holding a 20% share3 of the UK market.
Our unique position in the market
enables us to support over 11 million
customers with products spanning
Insurance, Wealth and Retirement.
More importantly than ever, we continue
to help our customers protect themselves
and their families. We have strengthened
our capabilities to provide customers
with advice, supporting them to save for
their future, and are connecting our
propositions to better coordinate our
offering to clients.
We are innovating to meet the changing
needs of our customers, partner
intermediaries and corporate clients,
whilst developing our digital journeys and
automating our processes to drive
efficiencies.
We have demonstrated resilience and
financial strength during challenging
market conditions and economic
volatility. We are well capitalised and the
composite nature of the UK Life business
and wider Aviva Group gives us a
significant advantage.
1.
In 2022 the definition of Investment in sustainable assets has been
updated. The comparative has been re-presented accordingly.
2. Relates to equity and credit investments within Aviva's shareholder
and policyholder funds
3. Association of British Insurers (ABI) - 9 months to 30 September
2022 based on the share of new business
1.34
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: UK & Ireland Life continued
Operational highlights
• Despite the uncertain environment faced
in 2022, we have successfully delivered
across Aviva’s four strategic priorities:
Customer, Growth, Efficiency and
Sustainability.
• Our commitment to customers remains
paramount, especially at times of
hardship. We have launched additional
support for customers affected by the cost
of living crisis. We have also honoured our
COVID-19 pledge, returning £81 million to
eligible UK private health insurance
customers for claims that were delayed
throughout the pandemic.
+9%
Increase in MyAviva registrations
during 2022 compared to 2021
• We strive to make our customer experience
the best in the market, making it easy
for customers, intermediaries and clients
to do business with us in the way that
works best for them. By the end of 2022,
we digitised over 62% of our customer
journeys, supporting pension consolidation,
faster payments and online customer
service to name but a few. Our MyAviva
app was downloaded over 625,000 times
for managing pensions alone, as customers
are increasingly looking to self-serve on
the go.
• We have listened to our intermediaries
too, delivering the functionality they
need most. In total, 4.6 million digital
transactions took place across our
customers, advisers and brokers.
• As well as enabling us to meet the
changing needs of our customers,
digitisation of our journeys and
automation of our processes has also
supported our efficiency ambitions,
contributing to over £40 million in
operational cost savings during 2022.
• We have pursued targeted growth
opportunities. In March, we announced
the acquisition of leading independent
financial advice firm Succession Wealth
accelerating our ability to offer high-
quality financial advice to a significant
number of our customers without an
existing adviser. Integration was
completed in August, six months ahead
of schedule. Since then, Succession
Wealth has continued to expand its
presence across the UK and the firm’s
advisers can now select Aviva from their
panel of providers.
• Meanwhile, we have written new business
with improved margins across product
lines, for instance winning £4.4 billion bulk
purchase annuity (BPA) deals in 2022
whilst maintaining pricing discipline.
• Our position in the Group is critical to the
delivery of Aviva’s Sustainability Ambition.
By June 2022, we had exceeded our 2022
goal of £10 billion of auto-enrolment
assets placed into low carbon equities
and climate transition strategies.
Products and customers
Insurance
We are the UK’s only provider of scale,
offering protection and health for both
individuals and corporate clients. We have
sustained strong market positions and
received recognition at the 2022 Cover
Excellence Awards for the impact we have
made on the industry over the past 25 years.
Through individual protection, we support
customers and their families in the
event of loss of income, critical illness
or bereavement. In 2021, we paid out
£1.1 billion of individual protection claims.
Group protection helps employers keep
their workforce healthy and supports them
in adverse circumstances. Our Group
Protection portfolio1 grew from £494 million
to £552 million in 2022, driven by strong
retention and large client wins. The strength
of our support and add-on services makes
us first choice for key brokers and employer
benefits consultants.
Our digitally led wellness proposition,
DigiCare+, provides both individual and
group protection customers with a holistic
wellbeing solution, including health checks,
access to digital GPs (General Practitioners),
second medical opinions, mental health
support and bereavement support.
£81m
Returned to eligible UK private health
insurance customers as part of our
COVID-19 pledge
Our health proposition gives 1.1 million
people seamless access to private medical
services and treatment. In 2022, we have
continued to see increased demand for
private health insurance. We have paid over
£485 million in claims and supported our
customers with access to digital GPs.
Wealth
We are the UK’s largest bundled workplace
provider2, with over 26,000 corporate clients
and four million members, and won over
370 new schemes in 2022. Our success has
been built on strong relationships with
intermediaries and innovative workplace
propositions. Our commitment to ESG and
members’ financial wellbeing has been
recognised, winning “Best Default ESG
Strategy” at the 2022 Corporate Adviser
Awards and five Gold awards from
Benefits Guru.
Our Intermediated & Retail business
includes the UK’s second largest adviser
platform by net flows in the open market3,
and we have written business with c.7,600
advisors to whom we provide a wide range
of support.
1. Measure of Annual Premium Equivalent (APE) from total in-force book
2. Corporate adviser, Workplace Savings Report, December 2022
3. Fundscape Q3 2022 press release, 9 months to 30 September 2022
Aviva plc
1.35
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: UK & Ireland Life continued
14%
Of UK population saving or retiring
with Aviva (UK population 18 years
or over)
In 2022, we continued to deliver capability
in support of our sustainability ambitions
and enhanced our ability to support
adviser client conversations regarding
sustainable investing.
We remain committed to our Heritage
customers, enabling 28,000 of them to
approach retirement with the benefit
of a new Aviva policy.
Following our acquisition of Succession
Wealth, we have firmly established our
position in the wealth market and grown
our advice capability to help customers
secure their financial future.
We have also enhanced the capabilities and
customer journeys for our direct-to-
consumer platform as part of building our
integrated proposition for Wealth.
Retirement
Our Retirement business consists of bulk
purchase annuities, individual annuities and
equity release. We work hand in hand with
Aviva Investors to support the UK economy,
with over £25 billion invested in UK
infrastructure and commercial mortgages
over the last ten years.
BPA allows pension trustees to secure future
obligations to defined benefit scheme
members by de-risking their pension
schemes. We are the third largest provider1
in one of the largest growth areas in the UK
insurance market. We manage exposure to
longevity risk and maximise the capital
efficiency of new business by partnering
with reinsurance counterparties.
£3.4bn
The amount of individual and bulk
annuities we paid out in 2022
Individual annuities give customers secure
lifetime retirement income. We are the UK’s
largest provider2 and provide an income to
over one million customers.
Equity release supplements retirement
income in a tax efficient way by unlocking
housing equity. We manage the UK’s largest
book of equity release mortgages3 and lent
over £800 million to customers in 2022.
We believe the market will continue to grow
reflecting an increasing need for customers
to release equity from their homes.
Ireland Life
In Ireland we are number four4 in the
market. We offer a wide range of products
across protection, savings, pensions and
annuities and are committed to making it
easier for intermediaries to do business
with Aviva.
In 2022, we embarked on an ambitious
three-year Digital Transformation &
Automation program to redefine how we
interact with our customers. Our overall
transactional net promoter score (TNPS)
improved by five points to +35 (2021: +30).
+5pts
Increase in 2022 Ireland Life TNPS score
compared to 2021
We delivered on a number of key initiatives,
including the introduction of Master Trust to
our Corporate and Retail pension product
offerings to meet customer demand.
We were awarded eight Sustainability
awards in 2022, including the Diversity,
Equity and Inclusion award at the
prestigious Business & Finance Irish
Business Awards. Aviva Ireland also
announced funding of €5 million to
The Nature Trust to plant new native
woodlands.
Key priorities for 2023
We have come out of 2022 in a strong
position, with many foundations now in
place across Aviva’s strategic priorities.
In 2023, we are continuing to focus on
delivering what matters most to our
customers whilst driving profitable growth
and long-term efficiencies. We remain
committed to deliver on our ambitions
across climate, community, and business
sustainability.
We are leveraging the unique breadth of the
Aviva Group to best meet the needs of our
customers and clients in a compelling,
cohesive way.
We are continuing to develop customer-
focused propositions and innovation across
our Insurance, Wealth and Retirement
businesses.
We are focusing on connecting our
customers to our growing advice capability,
with solutions across the full spectrum of
face-to-face, digital and hybrid engagement.
We are promoting diversified growth by
strengthening our Workplace, Retail, Health
and Protection propositions, whilst
continuing to apply rigorous selection and a
high level of discipline in our BPA growth
strategy and accelerating the development
of our Wealth offering available to our
customers through the direct channel.
Ongoing digitisation of customer journeys,
automation of operations and simplification
of our IT infrastructure remain a priority to
succeed. We are significantly investing in the
digital experiences we bring to our
customers, partners and clients.
Finally, we will continue to deliver on our
promises to be a climate champion by
leading the UK’s financial services industry
in sustainability and ESG.
1. LCP H1 analysis - September 2022
2. Aviva analysis of half year 2022 company reporting
3. UK Finance 2021 data on UK mortgage lenders
4. Aviva calculation derived from the Milliman Life and Pensions New
Business 2022 H1 Report, which is based on responses from a number
of key companies within the Irish Life market
Aviva plc
1.36
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: UK & Ireland General Insurance
Our ambition
Group combined operating ratio (COR)
<94%
Key financial indicators
Gross written premiums
Combined operating ratio
Adjusted operating profit
IFRS (loss)/profit before tax
Solvency II operating own funds generation
Cash remittances
GWP
£5,740m
2022
2021
£5,740m
£5,352m
Combined operating ratio
96.1%
2022
2021
96.1%
94.3%
Adam Winslow
Chief Executive Officer, Aviva UK &
Ireland General Insurance
“In 2022 we have delivered
against our profitable
growth ambitions,
demonstrating resilience in
the face of uncertain times,
and maintaining a great
level of service for
customers. Going forward
we will continue that
customer and growth focus,
concentrating on forging
first class foundations, and
leading on sustainability
across the market.”
Providing our customers with solutions for:
Insurance
2022
£5,740m
96.1%
£338m
£(315)m
£293m
£731m
2021
£5,352m
94.3%
£356m
£247m
£339m
£261m
Commercial lines GWP
£3,162m
2022
2021
£3,162m
£2,815m
Weighted average carbon intensity
(tCO2e/$m sales)1
70
2022
2021
70
84
Overview
Business strategy overview
Aviva is a leading insurer in both the UK
and Ireland market, providing insurance
solutions to around six million customers,
number one in the UK2 and number three
in Ireland3.
The market for general insurance (GI) in
2022 has been impacted by headwinds
from weather and rising inflationary
pressures, combined with the return to
more normal claims frequency following
impacts of the COVID-19 pandemic.
Despite this, we continue to grow market
share by winning new business, while
maintaining pricing and portfolio
discipline and a continued focus on
our cost base.
Our strategy remains investing for
profitable, diversified growth; and to
deliver on our ambition to be the clear
market leader for GI in the UK and Ireland.
We are pursuing this by delivering across
four priorities:
• Being a trusted customer champion;
• Becoming a diversified growth engine;
• Forging first class operational
foundations to drive efficiency;
• Leading on sustainability.
1. Relates to equity and credit investments within Aviva's shareholder
and policyholder funds.
2. Source: ABI General Insurance Company Rankings 2021, by GWP.
3. Source: Insurance Ireland Non-life Members ranking 2021, by GWP.
Aviva plc
1.37
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: UK & Ireland General Insurance continued
Operational highlights
• We started the year with the successful
implementation of the FCA Pricing
Practices regulation, and we support
bringing greater clarity and consistency
to consumers across GI pricing.
We remain confident in both
our execution against the new rules
and our competitive position.
• In Q1 we launched Quotemehappy (QMH)
Essentials, providing quality cover but with
fewer features, helping customers access
insurance in the current cost of living crisis,
and QMH Connect, a new app based
connected motor proposition that
encourages and rewards safer driving
from younger customers.
• We also launched Aviva Zero, our new
sustainable motor proposition, selling
around 51,000 policies in 2022 and carbon
offsetting more than 300 million miles
of driving.
• To further accelerate our growth in the
attractive high net worth (HNW) segment,
we purchased Azur underwriting, bringing
further scale and strength to the Aviva
HNW proposition. We will now build on our
leading position.
• Our cladding proposition now supports
over 7,000 leaseholders, over 1,400 of
which were new customers who previously
had no affordable access to insurance. We
also continue to lobby for greater support
from the wider market through the ABI.
• We have grown our renewables insurance
book by 30%, and are supporting new
initiatives such as “Connected Kerb” in its
plans to deliver 190,000 on-street EV
chargers by 2030.
• Our Risk Management Solutions team
provided prevention advice, virtually and
on-site, with 50,000 client engagements
in 2022.
• We continue to expand our distribution
footprint, launching partnerships that
include offering flexible renters insurance
with Lemonade, and with Zego to offer
telematics based, flexible fleet insurance.
• We provide vital specialist cover for the
particular risks faced by some of the
leading financial institutions, and have
already built a £25 million portfolio.
• We continue to develop our product
proposition suite with the launch of Aviva
Minifleet, a flexible motor policy for
businesses with up to 15 vehicles, writing
more than £3 million in the first year.
• We have continued to build capabilities in
our Commercial Lines business, with over
400 underwriting license increases, 140
promotions and 191 new hires.
• The positive sentiment we receive from
brokers was validated with the Insurance
Times 5* Commercial Lines rating, and our
Financial Lines proposition topped the
Insurance Age broker survey. We were also
winner of ‘General insurer of the year’ for
the ninth year at the Insurance Times
awards in December.
• Performance in the Irish business has now
been stabilised (following a couple of years
of portfolio remediation), and returned to
growth in 2022.
• We are investing heavily in technology to
support the Irish business, modernising
technology in the front and back office.
• Engagement across our people increased
from 70% to 88% for UK & Ireland GI in our
annual ‘Voice of Aviva’ survey.
Products and customers
Personal lines
In personal lines we offer motor, home, travel
and gadget insurance. Our multi-channel
distribution includes selling direct to
customers through MyAviva and price
comparison websites, as well as reaching our
customers through intermediary relationships
with brokers, affinity partners, ‘fintechs’ and
several of the UK’s leading banks.
Our strategy is to focus on growing our
Retail business and attractive, profitable
segments within our market leading
business-to-business (B2B) distribution.
Critically, we priced ahead of inflation,
balancing growth (GWP was higher by 2%)
with the maintenance of pricing and
underwriting discipline. This helped us to
partly mitigate the headwinds of inflation
and increased claims frequency.
The HNW market is a priority in B2B and, in
part due to our growth in that market, we
now enjoy the number one position in the
UK home insurance market.
In October, we became the UK partner for
Lemonade, with a focus on growing share of
an underserved renters market and gaining
insight into leading customer data and
AI techniques.
In addition, we continue to enjoy a leadership
position in the UK bancassurance sector.
Our long-term Home and Travel partnership
with TSB Bank has been renewed for a further
five years to 2028.
2022 saw a material change in regulation
with the introduction of the FCA’s GI Pricing
Practices, implemented on 1 January 2022.
In complying with the new rules, we have
concurrently balanced pricing, profit and
volume.
In service, we have maintained our
relationship NPS lead on the market and
enjoy TNPS scores in the mid-30s for our
main brands. Our digital credentials
continue to grow: more than 75% of Retail
customers are using our digital channels,
and a third of customer support enquiries
are being handled by intelligent virtual
assistance.
We also continue to cut complexity from
our business, removing a further 106
products this year and around 300 since
the end of 2019.
These changes are customer focused,
improving experience through augmented
digital journeys as well as improving our
agility and ability to compete in a highly
price-competitive market.
Aviva plc
1.38
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: UK & Ireland General Insurance continued
Key priorities for 2023
• Continue our ambition of being a trusted
customer champion, by keeping
customers at the forefront of all decisions,
and delivering market leading broker
sentiment through best-in-class servicing.
• Delivering as a diversified growth engine,
growing Retail in personal lines, scaling
Aviva Zero and delivering the Azur
integration; and consolidating our strong
commercial lines position, while also
seeking to grow our share of mid-market
and GCS.
• Forging first class foundations, for example
with the execution of our motor claims re-
design, and continuing to execute our
digitisation and simplification agenda.
• Leading on sustainability in the UK general
insurance market, developing plans for our
Net Zero ambitions, and launching
propositions to help the UK become
climate ready.
Commercial lines
In the UK and Ireland, we offer commercial
lines insurance to a wide array of
businesses, from the micro segment,
right up to large UK and global corporates.
Our strategy is to leverage our market-
leading distribution and broker sentiment
to accelerate profitable growth; and
continually review our underwriting appetite
to create new growth opportunities.
We continue to develop our product
proposition, including specialty lines, and to
deliver on our digital ambition of driving
market-leading broker sentiment towards
Aviva. We’ve also invested in our resource
and capabilities across the regions and have
actively encouraged our people back into
offices and into the market – providing our
customers and brokers direct access to our
underwriters to efficiently write risks. We are
also actively investing in our systems and
processes - we've deployed our broker
claims portal to allow customers to access
their claims data at any time, and built our
analytical and catastrophe modelling
capabilities to allow us to better support our
customers where there is exposure to
natural perils or catastrophes.
#1
for UK broker sentiment1
1.
General insurer of the year, Insurance Times awards 2022
In 2022, we made a step change to our core
capabilities in cyber, and focused on our
heartland Small and Medium Enterprise
(SME) customer base to grow in this market.
We have launched offshore wind as a new
proposition, and are currently trialling a
mass timber construction proposition with
a pool of clients – all to complement and
support our Net Zero ambition.
Investment in automation and digital
distribution continues to play a key role
in creating new opportunities to distribute
our broad product offering.
In 2022, we have grown our SME business
by 13%, enabled by the acceleration of
our digital capabilities, data insights,
automation and additional underwriting
capability.
Our Global Corporate business (GCS)
has grown 12% as our clients sought to get
ahead of underinsurance in property as we
see inflation play into sum insured. In
addition, we saw strong growth in specialty
as we increased lead line propositions.
And we continue to increase efficiency for
our people, decommissioning legacy IT
platforms in our IT infrastructure, freeing up
their time to underwrite and tailor service to
customer needs.
Aviva plc
1.39
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: Canada General Insurance
Our ambition
Group combined operating ratio (COR)
<94%
Key financial indicators
Gross written premiums
Combined operating ratio
Adjusted operating profit
IFRS profit before tax
Solvency II operating own funds generation
Cash remittances
Total GWP
£4,009m
2022
2021
£4,009m
£3,455m
Combined operating ratio
92.5%
2022
2021
92.5%
90.7%
Jason Storah
Chief Executive Officer, Aviva Canada
“A strong year for Aviva
Canada achieving
number two position
in the market with a
combined operating ratio
of 92.5% and premium
growth of 16%, or 9%
at constant currency.
We are well positioned
to deliver for our
customers into 2023.”
Providing our customers with solutions for:
Insurance
2022
£4,009m
92.5%
£433m
£17m
£325m
£287m
2021
£3,455m
90.7%
£406m
£259m
£332m
£156m
Commercial lines GWP
£1,543m
2022
2021
£1,543m
£1,268m
Weighted average carbon intensity
(tCO2e/$m sales)1
50
2022
2021
50
46
Overview
Business strategy overview
We have set clear priorities to become
the leading insurer in Canada – the top
choice for customers, distributors and
our people. Our strategy is aligned to the
Group strategic pillars:
• Set a new industry standard for
customer experience and delivering
fast and fair claims settlement.
• Evolve and diversify our portfolio by
growing Commercial Lines, pursuing
new profit pools, delivering growth
at scale and top-decile profitability .
• Build best-in-class capabilities by
creating a leading data & analytics
practice and modernising our
technology.
• Lead the industry on sustainability
using our scale to drive customers,
businesses, and governments to act
with greater urgency in the transition
to a low carbon economy.
Canada is one of the ten largest
property and casualty insurance
markets globally2 and Aviva Canada
holds the number two position with a
c.8% market share3, offering a range
of general insurance products.
1. Relates to equity and credit investments within Aviva's shareholder
and policyholder funds.
2. Canadian property & casualty market position source: statista.com
3. Canadian market share source: 2022 Q3YTD MSA Research Results.
Includes: Lloyds, excludes: ICBC, SAF, SGI and Genworth.
Aviva plc
1.40
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: Canada General Insurance continued
Operational highlights
• Continued investment in digitisation,
delivering an improved experience for
brokers and customers.
• Steady growth across personal lines led by
strong performance in our Royal Bank of
Canada (RBC) partnership, specialty
personal insurance, and Direct.
• Strong growth in commercial lines driven
by new business opportunities in Aviva
Business (AB) Mid-Market and Global
Corporate Specialty (GCS).
Inflation and supply chain disruption have
posed significant challenges to insurers in
2022. Aviva Canada continues to show
resilience through this inflationary
environment, in large part due to our focus
on improving underlying performance over
the last few years. Significant focus and
resources have been dedicated to monitor
the macro-environment and act swiftly as a
business. Our outlook on 2023 performance
continues to be strong.
In 2022 we have seen more people driving
again, as provinces lifted restrictions from
COVID-19, albeit still below pre-COVID levels.
Consumers have also continued to shift
towards digital channels continuing a trend
that has been evident for the last few years,
and accelerated by the pandemic. Brokers
and carriers are building digital capabilities
and technological change is a top priority
for insurers, including Aviva.
Personal lines
Our Personal insurance portfolio
(CAD$4 billion, 62% of overall business mix)
is largely made up of mass
market propositions, particularly in
regulated lines/geographies.
Our retail and group business is
predominantly sold by brokers and by
RBC Insurance, the most recognised
financial services brand in Canada. Here,
our focus is to improve pricing
sophistication and operational efficiency.
Our market-leading lifestyle products, such
as watercraft, recreational vehicles (RV),
classic cars and snowmobiles, continue to
be a profitable growth driver and our
product range, expertise, broker
relationships and best-in-class claims
service set us apart in the market.
Our focus continues to be on margin
preservation through rate adequacy in
personal lines. We continue to leverage our
expertise in data science, pricing
sophistication and indemnity management
to maintain performance. In addition, we
are focusing on increasing customer digital
interactions for sales and service in order to
deliver value to our customers and drive
efficiency.
In 2022 we launched a new telematics
offering for our brokers in Ontario – Aviva
Journey – which has seen strong uptake in
this initial phase of our public rollout. In the
third quarter we also launched an electric
vehicle product which has been well
received by our distribution partners and
customers. We are innovating in response to
customer and broker needs, and in support
of our sustainability ambition.
Our investment in Digital Direct is ensuring
that our Direct book grows rapidly and
sustainably, with 49.5% revenue growth
in 2022.
Our personal insurance retail segment is
highly commoditised and cyclical. In 2023
growth is projected to be in line with the
market (i.e. low single digit). We are focused
on delivering above-market growth in
our Direct channel as well as in our
speciality lines, where we have market-
leading expertise.
Commercial lines
Our commercial lines are divided into AB
businesses (19% of overall segment) and
GCS businesses (20%). Our commercial lines
business is a focus of our growth ambition,
and we see opportunities for growth across
AB and GCS.
Within AB we are focusing on value growth
over policy-count growth by targeting new
business with a high average premium.
We are gaining traction on our strategy with
growth in Medium Enterprise and Mid-
Market proposition.
Within GCS we have been expanding our
attainable market by building new
capabilities and processes. We have started
to build a fronting business, where we take
a risk-free margin by selling Aviva-branded
insurance in which the insured risks are
ceded to a reinsurer. We're also establishing
ourselves as a multinational insurer, by
offering insurance for the globally domiciled
operations of Canadian customers. We
recognise the value of frequent and high-
quality interactions with our customers,
leveraging the strength of our people.
Across commercial lines we are building
deeper, more meaningful relationships with
brokers and positioning to grow through
differentiated service via operational
efficiency, attractive pricing, and
underwriting expertise. We are also helping
Canadian businesses to protect themselves
against severe weather events by providing
weather index-triggered insurance coverage
– GCS Parametric Solutions – which pays
out based on published indices.
Despite the pressures of inflation, and
challenges posed by macroeconomic
developments, we overcame these
headwinds to achieve significant GWP
growth of 14% in commercial lines in 2022,
on a constant-currency basis (22% GBP,
as reported). Looking ahead, we are
committed to maintaining underwriting
discipline, and we are focused on delivering
strong premium and customer growth in our
target segments through 2023.
Aviva plc
1.41
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: Canada General Insurance continued
Key priorities for 2023:
• Launch Buy Online in Ontario Auto;
• Continue expansion in most
attractive segments;
• Continue to focus on
operational efficiencies;
• Continue to focus on
underwriting excellence;
• Continue to enhance our diversity
and inclusion progress;
• Expand and deliver tangible outcomes
across our sustainability ambitions.
1. RBC market position/share based on market capitalisation and brand
rank source: 2023 ADV ratings; Brand Finance Global 500 2022
Customers
Our claims TNPS performance (Auto +46,
Property +50) has been impacted by
macroeconomic trends that are affecting
the whole insurance industry, resulting in
delays in parts and repair shop capacity.
This has contributed to increased cycle
times in 2022 and a reduction in customer
satisfaction. In response we have
introduced a number of initiatives, for
example launching Aviva-Auto care centres
(car body shops) aimed at providing better
outcomes in customer experience and
indemnity management.
Distribution channels
In Canada, we have a strong, long-standing
relationship with our network of over 800
independent brokers and a partnership with
RBC, the largest bank and most valuable
brand in Canada1.
In 2022 we have undergone an IT
transformation that has significantly
changed how we deliver technology change.
This will allow us to unlock business benefit
through technology, and give us a strong
foundation as we continue on our platform
modernisation journey. We continue to
work on digitising our RBC, Direct, and
broker channels.
Our commercial lines business remains
intermediated by our broker network,
as well as via Managing General Agents,
whose proposition is based on their ability
to provide a unique product or expertise
for a specific group of customers.
Aviva plc
1.42
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: Aviva Investors
Our ambition
Cost income ratio
<75%
Key financial indicators
Aviva Investors revenue
Cost income ratio
Adjusted operating profit1
IFRS profit before tax
Solvency II operating own funds generation
Cash remittances
2022
£379m
87%
£25m
£25m
£24m
£28m
2021
£403m
86%
£41m
£41m
£36m
£15m
Assets under management
£223bn
Amount invested in UK infrastructure
and real estate (cumulative)2
£6.9bn
2022
2021
£223bn
£268bn
2022
2021
£4.3bn
£6.9bn
External net flows3
£1.3bn
2022
£1.3bn
2021
£3.3bn
Climate transition funds4
£1.5bn
2022
2021
£1.5bn
£1.0bn
Overview
Business strategy overview
We continue to deliver for customers
and investors by meeting their investment
needs. Our focus on ESG is demonstrated
by our strategy and actions in 2022,
leading by example and influencing
others to act.
Aviva Investors is an asset manager that
combines our insurance heritage,
investment capabilities and sustainability
expertise to deliver investment outcomes
that matter most to clients. Aviva
Investors manages £223 billion (2021:
£268 billion) of assets, with £185 billion
(2021: £216 billion) managed on behalf of
Aviva Group.
By combining our insurance heritage
with our skills and experience in asset
allocation, portfolio construction and
risk management, we provide a range
of asset management solutions to our
institutional, wholesale and retail clients.
1. Excluding cost reduction implementation, strategic investment
costs and foreign exchange movements this is £48 million
(2021: £58 million)
2. Cumulative amount invested in UK infrastructure and real estate
from 1 October 2020 to 31 December 2022 (2021: 31 December
2021)
3. Net flows from external assets excluding net flows from
strategic actions. Strategic actions include outflows from clients
previously part of the Group and corporate actions.
4. The 2021 comparative for climate transition funds has been re-
presented to align with the updated definition as outlined in our
Climate-related Financial Disclosure 2022 report
1.43
Annual Report and Accounts 2022
Mark Versey
Chief Executive Officer, Aviva Investors
“I am proud of how Aviva
Investors is delivering for
our customers, society
and our people. With
resilient financial and
operating performance in
an extraordinary market
environment we are well
positioned for growth.”
Providing our customers with solutions for:
Wealth
Aviva plc
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our business review: Aviva Investors continued
Operational highlights
• Originated £4.4 billion of real assets for UK
Life and external clients.
• Improved efficiency through a new
outsourcing arrangement.
• Approval for £54 billion of funds to be
classified as SFDR Article 81.
• Strong brand impact - ranked 21st globally
for our integrated marketing2.
We have a highly diversified range of
capabilities, with expertise in real assets, multi-
assets, equities and credit.
Our goal is to support Aviva's vision to be the
leading UK provider and go-to customer brand
while also leveraging our expertise for the
benefit of external clients.
The key drivers of our strategy are:
Market overview
Active managers require good access to
distribution, scale and operating efficiency
as well as the ability to respond to the
changing needs of clients, to compete
effectively and profitably.
Our focus on sustainable investing provides
further opportunities for growth while playing
an active role in the fight against climate
change, promoting biodiversity, human rights
and building stronger communities. We have
an ambition to become Net Zero by 2040, with
2025 and 2030 interim decarbonisation plans.
We have also signed up to the Net Zero
Asset Managers Initiative.
Our leadership position in ESG is recognised
with various industry awards and ratings:
• Voted the Best ESG Asset Manager 2021 and
• Customer: deliver investment needs through
2022 by the Corporate Adviser Awards;
strong investment performance,
sustainability impact and maintaining a
rigorous risk and control culture.
• Simplification: use data and automation
to streamline processes and simplify our
businesses to become more efficient and
deliver better customer outcomes.
• Growth: continue to grow in both our Aviva
client business, supporting its growth in BPAs,
pensions and Wealth, and our external
business, by being recognised for our
expertise and strength in ESG.
• People: develop a high-performance culture
by embedding our diversity, equity and
inclusion strategy, and promoting focused
learning and upskilling, talent management
and career development.
• Strong scores in all modules of the 2021
United Nations’ Principles for Responsible
Investment (PRI) ratings, including ranked
5 stars for strategy and governance;
• Won the Climate Mitigation Investment
Initiative of the Year for the Climate
Engagement Escalation Programme (CEEP)
and the Stewardship Initiative of the Year at
the Insurance Asset Risk Awards 2022;
Top 3
Ranked globally for responsible
investment by ShareAction
• Ranked in the Top 3 asset managers globally
for responsible investment by ShareAction
and rated as a leader on climate voting by
Majority Action; and
• Aviva was ranked 2nd, and the top insurance
company, in the World Benchmark Alliance
2022 Financial System Benchmark.
Products and customers
Consistent delivery of strong investment
performance is key to meeting our customers’
investment needs and remains a key priority. In
2022 our relative investment performance has
been negatively impacted by the exceptional
market environment which included rapidly
rising interest rates and outperformance of
sectors such as energy. Nevertheless, against
this market backdrop, our investment
performance has remained resilient with 51%
(2021: 69%) of AUM exceeding benchmark over
one year and 50% (2021: 65%) over three years.
Net flows excluding strategic actions3 and
liquidity were £42 million (2021: £1.5 billion).
Positive external net flows were resilient in
light of difficult market conditions at
£1.3 billion (2021: £3.3 billion), reflecting the
diversity of our business with strong demand
for our real assets capabilities more than
offsetting a weak market for liquid strategies.
Reduction in internal net outflows to
£(1.3) billion (2021: £(1.8) billion) reflects
demand for new ESG solutions.
Our Aviva client distribution channels
mainly comprise:
• Wealth, where we develop ESG-focused
propositions to meet the long-term savings
needs of Aviva’s pension and savings
customers; and
• Aviva shareholder, where we develop
investment solutions to support Aviva’s
growth ambitions, primarily in the UK BPA
and individual annuity markets.
Our external client distribution
channels include:
• Large asset owners, including insurance
companies, consultants, pension funds, and
sovereign wealth funds;
• Global financial institutions such as large
private banks; and
• UK wholesale intermediaries to retail
customers, such as independent financial
advisers and wealth managers.
Key priorities for 2023:
• Continued improvement in investment
performance to deliver enhanced
investment returns for our clients;
• Capitalising on growth opportunities
within Aviva Group and externally through
our strengths in ESG, real assets, multi-
assets, sustainable equities and credit; and
• Ongoing focus on simplifying our
business to deliver efficiency benefits and
improvements in the cost income ratio.
1. An Article 8 Fund under Sustainable Finance Disclosure Regulation is
defined as an EU domiciled fund which 'promotes, among other
characteristics, environmental or social characteristics, or a
combination of those characteristics, provided that the companies in
which the investments are made follow good governance practices'
2. Per Peregrine Communications Global 100 Report 2022
3. Strategic actions include outflows from clients previously part of the
Group and corporate actions
Aviva plc
1.44
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Capital management
Our Group capital
management policy
Capital and liquidity management
supports strategic decision making, such
as mergers and acquisitions, business
capital allocation, pricing, hedging,
reinsurance, asset allocation and
transformation projects.
Dividend policy
We aim to deliver sustainable dividends
at a level that is resilient in times of
stress and is covered by capital and cash
generated from our businesses.
For the 2023 financial year our dividend
guidance is as follows1:
• Ordinary dividends of c.£915 million
• Thereafter, we anticipate low to mid-single
digit growth in the cash cost of the dividend
Capital framework
At the core of our capital framework is
financial strength and efficient deployment
of capital.
Key elements of our capital framework are
as follows:
• Solvency II shareholder cover ratio working
range of 160%-180%
• Centre liquid assets of c.£1.5 billion
• Solvency II debt leverage ratio below 30%
• To maintain our AA credit rating metrics
Surplus capital
After the payment of our regular dividend,
surplus capital is available for:
• Investment in the business to support
growth and top quartile efficiency
objectives
• Bolt-on M&A where this delivers attractive
risk adjusted returns and the opportunity
is in line with our strategy
• Additional returns to shareholders
releasing excess capital over time
Capital and liquidity risk appetite
The Group seeks to retain financial flexibility
by maintaining strong liquidity, access to a
range of capital markets and significant
unutilised committed credit lines.
The Group’s economic capital risk appetite
is set in terms of our Solvency II shareholder
cover ratio. Our Solvency II shareholder
cover ratio working range is 160%-180%.
Our businesses are capitalised based on
their regulatory minimum levels with further
prudent volatility buffers specific to each
entity. Subsidiary capital appetites and
working ranges are reviewed regularly by
subsidiary boards.
Solvency II capital
Our Solvency II alternative performance measures
212%
Surplus capital
(investment in the business,
bolt-on M&A, additional
return to shareholders)
180%
160%
Working range
Action to restore
capital strength
Solvency II performance
• Solvency II Operating Own Funds Generation
(Solvency II OFG) and Solvency II return on
capital / equity (Solvency II RoC / Solvency II
RoE) is used by the Group to assess
performance and growth
• Solvency II OFG growth is a key driver of
increased Solvency II OCG in future periods
Solvency II capital generation
• Solvency II operating capital generation
(Solvency II OCG): provides a foundation for
sustainable cash remittances from our
businesses
• Solvency II future surplus emergence: provides
an indication of our Solvency II OCG from
existing life business in future periods
Cash remittances and centre
liquidity
• Driven by our capital and liquidity risk appetite
See 'Solvency II performance'section
See 'Solvency II capital generation' section
See 'Cash and Liquidity' section
1. Estimated dividends are for guidance and are subject to change. The Board has not approved or made any decision to pay any dividend in respect of any future period.
Key to our capital framework is our robust Solvency II position
Aviva plc
1.45
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Capital Management continued
Cash and liquidity
Cash remittances
The table reflects actual remittances received
by the Group from our businesses.
Cash remittances from our continuing
operations increased by 11% to
£1,845 million (2021: £1,662 million).
Amid market volatility following the UK
mini-budget, we made the decision to defer
a remittance from UK & Ireland Life and
accelerated remittances from UK & Ireland
General Insurance and Canada. We are on
track to exceed our cash remittance target
of £5.4 billion over 2022-24.
>£5.4bn
Cash remittances cumulative target
2022-2024
Cash remittances
2022:
£1,845m
2022
2021
£1,845m
£1,662m
2021 cash remittances are on a continuing basis
Cash remittances
UK & Ireland Life1,2
UK & Ireland General Insurance1,2
Canada1,2
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Cash remittances from continuing operations
Discontinued operations1 and Other
Total
1. We use a wholly-owned, UK domiciled reinsurance subsidiary for internal capital and cash management purposes. Some remittances otherwise
2022
£m
780
731
287
28
1,826
19
1,845
—
1,845
2021
£m
1,219
261
156
15
1,651
11
1,662
237
1,899
2.
attributable to the operating businesses arise from this internal reinsurance vehicle.
In 2022 a review was undertaken of the basis of allocation of remittances from Aviva’s internal reinsurance vehicle. From April 2022, remittances are
allocated to business units using an aggregate capital basis, previously remittances were allocated on a first in, first out basis.
Centre liquidity
Centre liquidity comprises cash and liquid
assets. Excess centre cash flow represents
cash remitted by our businesses to the
Group centre less central operating
expenses and debt financing costs. It is
an important measure of the cash that is
available to pay dividends, reduce debt or
invest into our core markets. The table
shows the movement in centre liquidity
over the year.
Centre liquidity as at end of February 2023
is £2,220 million (February 2022: £6,644
million) with the decrease primarily driven
by the £3,750 million capital return during
2022 and ordinary dividends to external
shareholders, offset by cash remittances.
Centre Liquidity
Cash remittances
External interest paid
Internal interest paid
Central spend
Other operating cash flows1
Excess centre cash inflow
Ordinary dividend
Net reduction in borrowings
Disposal proceeds
Share buyback
Capital return
Net reduction/(increase) in internal borrowings
Other non-operating cash flows2
Movement in centre liquidity
2022
£m
1,845
(355)
(30)
(397)
88
1,151
(828)
(419)
—
(147)
(3,750)
500
(931)
(4,424)
2021
£m
1,899
(388)
(40)
(432)
62
1,101
(841)
(2,035)
6,150
(853)
—
(708)
(255)
2,559
Centre liquidity as at end of February 2023 and 2022 respectively
2,220
6,644
1. Other operating cash flows include group tax relief receipts.
2. Other non-operating cash flows include capital injections, other investment cash flows and transaction costs paid on disposals and includes a £75
million payment relating to our staff pension scheme.
Aviva plc
1.46
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Capital Management continued
Solvency II operating own funds generation
2022:
£1,623m
2022
2021
£1,623m
£1,187m
Solvency II RoE has increased on continuing
basis by 5.7pp to 16.4% (2021: 10.7%) over
2022 reflecting the increase in Solvency II
operating own funds generation over the
period and the reduction in 2022 opening
capital position due to higher interest rates.
Solvency II return on equity
2022:
16.4%
Solvency II operating own funds generation
by business and Solvency II RoE is summarised
in the tables below.
2022
2021
16.4%
10.7%
2021 Solvency II operating own funds generation is on a continuing basis
2021 Solvency II return on equity is on a continuing basis
Solvency II performance
Solvency II operating own funds
generation and Solvency II return
on capital/equity
Solvency II operating own funds generation
and Solvency II return on equity (Solvency II
RoE) is used by the Group to assess
performance and growth, as we look to
deliver long-term value for our shareholders.
Solvency II RoE is a more relevant measure of
performance than IFRS return on equity as it
is an economic value measure, the basis on
which we manage Group capital.
Solvency II operating own funds generation
from continuing operations has increased
by £436 million to £1,623 million
(2021: £1,187 million).
In the UK & Ireland Life businesses, Solvency II
operating own funds generation has
increased driven by existing business
improvements in BPAs and Wealth as well as
the beneficial impact of longevity and
expense assumption changes.
Solvency II operating own funds generation
UK & Ireland Life
UK & Ireland General Insurance
Canada
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Corporate centre costs and Other
Group external debt costs
Continuing operations
Discontinued operations
In the UK & Ireland general Insurance
businesses and Canada, Solvency II operating
own funds generation has decreased
marginally by £53 million, reflecting a strong
performance given the inflationary backdrop
and the general insurance catastrophe
reinsurance renewal market.
Solvency II operating own funds generation
has benefitted from a reduction in corporate
centre costs and other, £(279) million in 2022
(2021: £(342) million) and Group external
debt costs, £(214) million in 2022
(2021: £(255) million). This is primarily as a
result of lower project spend and debt
reduction over 2021 and 2022.
2022
£m
1,368
293
325
24
2,010
106
(279)
(214)
1,623
—
1,623
2021
£m
953
339
332
36
1,660
124
(342)
(255)
1,187
458
1,645
Solvency II return on capital/equity
Market Solvency II return on capital
UK & Ireland Life
UK & Ireland General Insurance1
Canada
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Discontinued operations
2022
%
2021
%
10.4%
12.5%
18.6%
6.0%
11.3%
10.8%
—%
6.6%
14.1%
21.6%
9.3%
8.8%
13.6%
7.2%
Group Solvency II return on equity
Solvency II return on equity at 31 December
Solvency II return on equity at 31 December on a continuing basis2
Solvency II return on equity at 31 December on a continuing basis
(excluding UK Life Heritage business)2,3
1. For UK General Insurance only, capital held for internal risk appetite purposes is used instead of opening shareholder Solvency II own funds to ensure
consistency in measuring performance across markets. This is only applicable to UK General Insurance Solvency II return on capital and not to the
aggregated Group Solvency II return on equity.
16.4%
16.4%
11.3%
10.7%
19.0%
12.3%
2. Group Solvency II return on equity on a continuing basis excludes our discontinued operations. Further details can be found in the 'Other Information:
Alternative Performance Measure' section.
3. Group Solvency II return on equity (excluding UKL Heritage business) has been calculated on a consistent basis to Group Solvency II RoE except that
an adjustment is made to remove the contribution of UK Life Heritage business from the numerator and the denominator. When calculating opening
unrestricted tier 1 shareholder Solvency II own funds attributable to UKL Heritage, adjusted to exclude excess capital, a proportion of restricted tier 1,
tier 2 and tier 3 capital is assumed to be attributable to UKL Heritage with a consistent adjustment to debt costs in the numerator.
Solvency II operating own funds generation at 31 December
Aviva plc
1.47
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Capital Management continued
Solvency II capital generation
Solvency II operating capital
generation (Solvency II OCG)
Solvency II OCG measures the amount of
Solvency II capital the Group generates
from operating activities. Capital generated
enhances Solvency II surplus which can
be used to support sustainable cash
remittances from our businesses, which
in turn supports the Group’s dividend as
well as funding investment to generate
sustainable growth. Solvency II OCG by
business is summarised in the table below.
In our continuing operations, Solvency II
OCG increased by 5% to £1,434 million
(2021: £1,364 million).
The increase is driven by strong growth
in Solvency II OFG partially offset by lower
solvency capital requirement (SCR) benefit
from management actions and other in
UK & Ireland Life and an increase in capital
requirements in our general insurance
businesses mainly due to changes to
our external catastrophe reinsurance
treaties and higher exposure from strong
business growth.
The increase in capital requirements in
general insurance is partially mitigated
by a higher Group diversification benefit
included within Corporate centre costs
and other Solvency II OCG.
Solvency II operating capital generation
UK & Ireland Life
UK & Ireland General Insurance
Canada
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Corporate centre costs and Other
Group external debt costs
Continuing operations
Discontinued operations
Group Solvency II operating capital generation
2022
£m
1,494
(18)
208
26
1,710
34
(96)
(214)
1,434
—
1,434
2021
£m
1,219
296
338
53
1,906
55
(342)
(255)
1,364
197
1,561
Solvency II future surplus emergence on our
in-force life business together with capital
generation on our future life new business,
Aviva Investors, International investments
and General Insurance business will provide
Solvency II OCG in future periods.
Solvency II future surplus
emergence
The chart shows the expected future
emergence of Solvency II surplus from
our existing long-term in-force UK &
Ireland life business. The projection does
not include future new business or the
potential impact of active management of
the business (for example hedging, risk
transfer and expense management). Years
1 - 9 include the run-off of Transitional
Measures on Technical Provisions (TMTP)
hence there is an uplift from Year 10 onwards.
Solvency II Future surplus emergence – UK & Ireland life business (undiscounted) (£bn)
1.0
0.8
0.6
0.4
0.2
0.0
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20
Aviva plc
1.48
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Capital Management continued
Solvency II capital position
The Group is required to measure and monitor
its capital resources on a regulatory basis and
to comply with minimum capital requirements
of regulators in each territory it operates in. At
a Group level, we have to comply with the
Solvency II requirements regulated by the PRA.
The Group Solvency II capital requirements
are calculated using a Partial Internal Model
(PIM) which assesses the risks on an Internal
Model basis approved by the PRA.
Group capital is represented by Solvency II
own funds. Solvency II own funds are
comprised of a combination of shareholders’
funds, preference share capital, subordinated
debt, and deferred tax assets measured on a
Solvency II basis.
Solvency II surplus at the Group level
represents the excess of eligible Solvency II
own funds over the Group’s solvency capital
requirements calculated in accordance with
Solvency II requirements.
The Group Solvency II position disclosed
is based on a ‘shareholder view’.
The shareholder view is considered by
management to be more representative of the
shareholders’ risk exposure and the Group’s
ability to cover the SCR with eligible own
funds. It also aligns with management’s
approach to dynamically manage its
capital position.
In arriving at the shareholder position,
a number of adjustments are typically made to
the regulatory Solvency II position, including
removal of own funds and SCR in respect of
with-profit funds and staff pension schemes
in surplus.
Cover ratio1
244%
14%
17%
(10)%
(7)%
(41)%
(5)%
212%
(4)%
(1)%
(4)%
(7)%
196%
NAV per share2
417p
Surplus1
1,434
13,074
(325)
(866)
(502)
390p
8,694
(3,750)
(371)
(266)
(75)
(300)
(581)
31
December
2021
Operating
capital
generation
Non-
operating
generation
Dividends
Debt
repayment
Capital
return Acquisitions
31
December
2022
Debt
reduction
Pension
payment
Share
buyback
2022 final
dividend
7,472
31
December
2022 pro
forma
22,150
1,623
(1,827)
(866)
(502)
(3,750)
(360)
16,468
(266)
(9,076)
(189)
1,502
—
—
—
(11)
(7,774)
—
13,074
1,434
(325)
(866)
(502)
(3,750)
(371)
8,694
(266)
(75)
—
(75)
(300)
(581)
15,246
—
—
(7,774)
(300)
(581)
7,472
Financial strength is key to the Group’s
strategy and the Group’s estimated
Solvency II shareholder cover ratio is 212%
at 31 December 2022 (2021: 244%).
The movement in the Solvency II
shareholder surplus over the period
is shown in the chart.
The decrease in surplus since
31 December 2021 is mainly due to
£3.75 billion capital return to shareholders
(reducing Solvency II shareholder cover
ratio by 41pp), dividend payments, net
debt redemption, acquisitions and non-
operating capital generation partially
offset by operating capital generation.
Non-operating capital generation includes
the impact of market movements primarily
from increase in interest rates and
widening of credit spreads.
The pro forma Solvency II cover ratio is
196% allowing for the redemption of
c£0.5 billion of debt over time (which we
now expect to incorporate a combination
of subordinated and senior debt),
£0.1 billion payment in relation to our
staff pension scheme, the £0.3 billion
share buyback and final 2022 dividend
of c.£0.6 billion.
1. The estimated Solvency II position represents the shareholder
view only
2. Solvency II net asset value per share is used to monitor the value
generated by the Group in terms of the equity shareholders' face value
per share investment and is calculated as the closing unrestricted Tier 1
Solvency II shareholder own funds, divided by the actual number of
shares in issue as at the balance sheet date. Solvency II net asset value
per share is an economic value measure used by the Group to
assess growth.
£m
Own funds1
SCR1
Surplus1
Aviva plc
1.49
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Capital Management continued
Group Solvency II cover ratio
Sensitivities at 31 December 2022
Changes in economic assumptions
50 bps increase in interest rate
100 bps increase in interest rate
50 bps decrease in interest rate
100 bps decrease in interest rate
50 bps increase in corporate bond spread1
100 bps increase in corporate bond spread1
50 bps decrease in corporate bond spread1
Credit downgrade on annuity portfolio2
10% increase in market value of equity
25% increase in market value of equity
10% decrease in market value of equity
25% decrease in market value of equity
20% increase in value of commercial property
20% decrease in value of commercial property
20% increase in value of residential property
20% decrease in value of residential property
Changes in non-economic assumptions
10% increase in maintenance and investment expenses
10% increase in lapse rates
5% increase in mortality/morbidity rates – life assurance
5% decrease in mortality rates – annuity business
5% increase in gross loss ratios
Impact on
surplus
–
Impact on
shareholder
cover ratio
212%
£bn
pp
0.0
0.1
(0.1)
(0.1)
0.0
0.0
(0.1)
(0.4)
0.1
0.2
(0.1)
(0.3)
0.4
(0.5)
0.3
(0.5)
(0.7)
(0.3)
(0.2)
(0.7)
(0.3)
4 pp
7 pp
(5) pp
(10) pp
4 pp
6 pp
(5) pp
(7) pp
— pp
(2) pp
— pp
(1) pp
7 pp
(9) pp
5 pp
(9) pp
(10) pp
(4) pp
(2) pp
(12) pp
(4) pp
1. The corporate bond spread sensitivity is applied such that even though movements vary by rating and duration consistent with the approach in the
solvency capital requirement, the weighted average spread movement equals the headline sensitivity. Fundamental spreads remain unchanged.
2. An immediate full letter downgrade on 20% of the annuity portfolio credit assets (e.g. from AAA to AA, from AA to A)
Sensitivity analysis
As part of the Group's internal capital
management process, we regularly monitor
the Group's sensitivity to economic and
non-economic scenarios.
The table shows the absolute change in
Solvency II shareholder surplus and cover
ratio under each sensitivity, e.g. a 2pp
positive impact would result in the Solvency II
shareholder cover ratio increasing from
212% to 214%.
As a result of the capital deployment, the
sensitivity of the Solvency II shareholder cover
ratio to economic and non-economic
assumptions typically reduces. The table
shows the sensitivity impacts post deployment.
Limitations of sensitivity analysis
The table above demonstrates the effect of an
instantaneous change in a key assumption
while other assumptions remain unchanged.
In reality, changes may occur over a period of
time and there is a correlation between the
assumptions and other factors. It should also
be noted that these sensitivities are non-linear,
and larger or smaller impacts should not be
interpolated or extrapolated from these results.
The sensitivity analysis does not take into
consideration that the Group’s assets and
liabilities are actively managed. Additionally,
the Solvency II position of the Group may vary
at the time that any actual market movement
occurs. For example, the Group’s financial risk
management strategy aims to manage the
exposure to market fluctuations.
As investment markets move past various
trigger levels, management actions could
include selling investments, changing
investment portfolio allocations and taking
other protective action.
Other limitations in the above sensitivity
analysis include the use of hypothetical
market movements to demonstrate potential
risks that only represent the Group’s view of
possible near-term market changes that
cannot be predicted with any certainty and
the assumption that all parameters move in
an identical fashion.
Specific examples:
• The sensitivity analysis assumes a parallel
shift in interest rates at all terms. These
results should not be used to calculate the
impact of non-parallel yield movements.
• The sensitivity analysis assumes equivalent
assumption changes across all markets i.e.
UK and non-UK yield curves move by the
same amounts, equity markets across the
world rise or fall identically.
Additionally, the movements observed by
assets held by Aviva will not be identical to
market indices so caution is required when
applying the sensitivities to observed index
movements.
Stress and scenario testing
In addition to our sensitivity analysis,
stress and scenario testing (including reverse
stress testing) is used to test the resilience of
business plans and to inform decision-making.
The results of this testing demonstrates that
through the use of key management actions
(including expense management, hedging and
capital raising) the Group can maintain
sufficient liquidity and surplus of Solvency II
own funds over SCR to withstand a variety of
severe scenarios and stresses.
Aviva plc
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2. Governance
3. IFRS Financial Statements
4. Other Information
Capital Management continued
Diversified Solvency Capital
Requirement (SCR) analysis
The chart summarises the SCR by business.
The Group diversification between businesses
is the SCR diversification arising from the sum
of the SCR for each market being higher than
the SCR at Group.
The benefit from Group diversification is
£2.1 billion at 31 December 2022
(2021: £1.9 billion) primarily due to an increase
in general insurance capital requirements
Capital required is closely linked to the
Group's risk exposures. Analysis of the
SCR by Business (£bn)
0.6
0.3
1.7
5.8
1.0
0.5
7.8
(2.1)
10.0
5.0
0.0
UK&I Life
UK&I GI
Canada
Aviva
Investors
International
Investments
Group
Centre &
Other
Group
Diversification
Total
SCR by Risk (£bn)
3.0
2.0
1.0
0.0
Credit risk
Equity risk
Interest
rate risk
Other
market
risk
Life
insurance
risk
General
insurance
risk
Operational
risk
Other risk
n 2021
n 2022
SCR by risk type is a key measure used in
managing risk exposures. The split of SCR
by risks is summarised in the chart.
The SCR has decreased by £1.3 billion to
£7.8 billion since 31 December 2021 primarily
due to an increase in interest rates over the
period which affect several risks through the
impact of discounting.
Solvency II regulatory own funds
by Tier and Solvency II debt
leverage ratio
One of the objectives of capital
management is to maintain an efficient
capital structure using a combination of
equity shareholders’ funds, preference share
Regulatory view
Solvency II regulatory debt1
Senior notes
Commercial paper
Total debt
Unrestricted Tier 12
Restricted Tier 13
Tier 24
Tier 35
Total regulatory own funds
Solvency II debt leverage ratio6
capital, subordinated debt and borrowings,
in a manner consistent with our risk profile
and the regulatory and market requirements
of our business.
The table provides a summary of the Group’s
regulatory Solvency II own funds by Tier and
Solvency II debt leverage ratio.
Solvency II debt leverage ratio at
31 December 2022 is 31% (2021: 27%).
The increase is primarily due to the decrease
in regulatory own funds following the
completion of the £3.75 billion capital return
to ordinary shareholders during the first half
of 2022 and interest rate increases over the
period. The Group redeemed a net £0.5 billion
of debt in the period.
2022
£m
% of own
funds 2022
2021
£m
% of own
funds 2021
5,210
687
252
6,149
13,162
946
4,264
296
18,668
31%
6,330
651
50
7,031
19,120
967
5,363
123
25,573
27%
70%
5%
23%
2%
75%
4%
21%
—%
1. Solvency II regulatory debt consists of Restricted Tier 1 and Tier 2 regulatory own funds, and Tier 3 subordinated debt
2. Unrestricted Tier 1 capital, 70% of own funds, includes Aviva’s ordinary share capital and share premium which are high quality instruments with principal loss
absorbing features such as permanence, subordination, undated, absence of redemption incentives, mandatory costs and encumbrances
3. Restricted Tier 1, 5% of own funds, includes preference shares and subordinated debt. None of these instruments include principal loss absorbency features
and all qualify as restricted Tier 1 capital under transitional provisions.
4. Tier 2 capital, 23% of own funds, consists of dated subordinated debt. The features of Tier 2 capital include subordination, a minimum duration of 10 years with
no contractual opportunity to redeem within 5 years, absence of redemption incentives and mandatory costs and encumbrances.
5. Tier 3 capital consists of subordinated debt and net deferred tax assets after taking into account the ability to offset assets against deferred tax liabilities.
The features of Tier 3 capital include subordination and a minimum duration of 5 years. Tier 3 regulatory own funds at 31 December 2022 consist of £296 million
net deferred tax assets (2021: £123 million). There is no subordinated debt included in Tier 3 regulatory own funds.
6. Solvency II debt leverage is calculated as the total debt as a proportion of total regulatory own funds plus commercial paper and senior notes
Aviva plc
1.51
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Our Section 172(1) Statement
Our Stakeholders
We report here on how our directors have
performed their duty under Section 172(1)
('s.172') of the Companies Act 2006.
Overview
S.172 sets out a series of matters which the
directors must have regard to when
performing their duty to promote the
success of the Company for the benefit of its
shareholders, including having regard to
other stakeholders. Where this statement
draws upon information contained in other
sections of the Strategic report, this is
signposted accordingly1.
Our Board considers it crucial that the
Company maintains a reputation for high
standards of business conduct. The Board is
responsible for establishing, monitoring and
upholding the culture, values, standards,
ethics and reputation of the Company to
ensure that our obligations to our
shareholders, employees, customers and
others are met. The Board monitors
adherence to our policies and compliance
with local corporate governance
requirements across the Group and is
committed to acting where our businesses
fall short of the standards we expect.
Our Board is also focused on the wider
social context within which our businesses
operate, including those issues related to
climate change which are of fundamental
importance to the planet’s well-being.
A detailed explanation of how Aviva continues
to manage the impact of its business on
communities and the environment is outlined
in the ‘Our Sustainability ambition’ section of
the Strategic report.
Our culture
Our culture is shaped by our clearly defined
purpose – to be with you today for a better
tomorrow. As the provider of financial
services to millions of customers, Aviva
seeks to earn their trust by acting with
integrity and a sense of responsibility at
all times. We look to build relationships
with all stakeholders based on openness
and transparency. We value diversity, equity
and inclusivity in our workforce and beyond,
and the ‘Our people’ section of the Strategic
report sets out how that underpins
everything we do.
Key strategic decisions in 2022
For each matter, the Board considers the
likely consequences of any decision in the
long term, identifies stakeholders who
may be affected, and carefully considers
their interests and any potential impact
as part of the decision-making process.
The key strategic decisions taken during
2022 were informed and supported by
stakeholder engagement activities as
set out in this section.
On 2 March 2022, following the programme
of divestment in 2021, we announced a
£3.75 billion 'B Share Scheme' and share
consolidation which completed in May 2022.
This followed on from the increased and
extended £1 billion share buyback
programme completed on 31 March 2022.
We have subsequently announced a further
£300 million share buyback. This brings the
total capital returned to shareholders to
over £5 billion since 2021. In addition to the
return of capital to shareholders, the Board
also approved the redemption of the Aviva
plc 6.125 % £800 million fixed rate perpetual
reset subordinated notes at the first call
date on 29 September 2022.
On 2 March 2022, the Board announced
the acquisition of Succession Wealth (a
leading national independent financial
advice firm) in order to enhance significantly
our position in the fast-growing wealth
market. The transaction successfully
completed in August 2022. Succession
Wealth's advisers can now access Aviva's
platforms and our customers are benefiting
from the competitive offering and high-
quality service. The Board continues to
consider, where appropriate, potential bolt-
on acquisition candidates that would
complement our target growth areas.
During 2022, we have monitored and
responded to the impact that inflationary
pressures have exerted on our customers,
our people, and our communities.
In response to our customers' needs we
launched our 'Essentials' products on
Quotemehappy, a range of low cost general
insurance products to provide an essential
level of cover for our customers. Following
colleague feedback on the impact of the
cost of living crisis we supported colleagues
in the UK with one-off cost of living
payments and made similar payments to
our colleagues in Canada and Ireland. On
27 October 2022, we pledged to invest
£7 million and £2 million respectively to our
new partnership charities Citizens Advice
and Money Advice Trust's Business Debtline
to support their services in this period of
unprecedented need.
The Board has continued to support Aviva's
Sustainability Ambition into 2023, in a
number of areas. This included committing
£38 million to The Wildlife Trust for the
rebuilding of the Celtic Rainforests. Aviva
Ireland also announced the donation of
€5 million to the Nature Trust to help
accelerate its native afforestation project.
This is part of a £100 million programme of
nature-based projects in the UK and Ireland
to help address climate change by removing
carbon dioxide from the atmosphere.
These investments are aligned to our goal
of reinvesting 2 % of our group adjusted
operating profit in our communities as part
of our Sustainability Ambition. We were
proud to be recognised as the leading
insurance company in the World
Benchmarking Alliance 2022 Financial
System Benchmark2.
1. The s.172 statements of our qualifying subsidiaries will be made
available on the Aviva plc website
2. https://www.worldbenchmarkingalliance.org/financial-system-
benchmark/
Aviva plc
1.52
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our stakeholders continued
Relationships with our stakeholders
We provide an inclusive working environment
where we develop talent, reward performance,
support our people and value our differences.
Our people share in the business’ success as
shareholders through membership of our
global share plans.
Our people
Our people’s wellbeing and
commitment to serving our
customers are the foundations
for our performance
Customers
Understanding what’s
important to our 18.7 million
customers is key to our
long-term success
We aim to provide products and
solutions to meet customer needs as
well as empowering our customers to
save for their goals.
Our relationship NPS survey shows five years of
sustained high-level customer advocacy in a
challenging marketplace.
We treat our suppliers fairly so
we both mutually benefit from
our relationship.
Annually we hold our Club
110 Broker Conference and our
Key Partner Conference, attended
by the Group CEO and senior
management.
Suppliers
We operate in
conjunction with a
wide range of suppliers
to deliver services to
our customers. It is
vital that we build
strong working
relationships with
our intermediaries
Shareholders
Our retail and
institutional shareholders
are the owners of
the Company
Our strategy is to focus on three
core markets to support long-term
delivery of future shareholder
returns through value
appreciation and dividends.
The Board engages with
shareholders, including at the AGM, and
receives briefings from our corporate
brokers on investors’ views.
We support the communities in which we
operate, through investment in business and
infrastructure, paying tax revenues and
community support activity.
The Board receives regular updates on
the work of the Aviva Community Fund and the
Aviva Foundation. Both of these organisations
fund community investment projects aligned
to our values.
Communities
We recognise the importance
of contributing to our communities
through volunteering, community
investment, and long-term
partnerships
Regulators
As an insurance company,
we are subject to financial
services regulations and
approvals in all the markets
we operate in
We maintain a constructive and
open relationship with our regulators and
the Board has regular meetings with
our UK regulators.
Regulators engage with us to discuss
their objectives, priorities and concerns,
and how they affect our business.
Aviva plc
1.53
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our stakeholders continued
Stakeholder engagement
The table below sets out our approach to stakeholder engagement during 2022:
Stakeholders
Why are they important to Aviva? What is our approach to engaging with them?
Customers
Understanding what is
important to our customers is
key to our long term success.
Our people
Our people’s well-being and
commitment to serving our
customers are essential for
our long-term success.
• The Board supports the delivery of our Customer Strategy and reviewed its progress as part of the Strategic Delivery updates to the May and
November 2022 Board meetings.
• The Customer and Sustainability Committee continues to receive regular reporting on customer experience, customer journeys, customer service
levels and outcomes and customer-related strategic initiatives, and engages with the leadership team if our performance does not meet our
customers’ expectations.
• As noted above, the Board supported key strategic decisions such as the launch of our 'Essential' product range.
• The Board engaged with customer facing teams to better understand their role and the challenges they face. During 2022 the Board visited the
teams in the York and Perth offices.
• For further information on how we engage with our customers, please see the ‘With you today’ section.
• Through employee forums, global internal communications and informal meetings, the directors engage with our people on a wide range of
matters and act on the output of our annual global employee engagement survey, Voice of Aviva ('VoA'). In response to the cost of living crisis, we
supported colleagues with one-off payments.
• The Chair continues to participate in the Evolution Council (a diverse group of high calibre leaders from across the business), involving them in
discussions related to the Group’s strategy. The meetings are attended by several Non-Executive directors. The Chair reports feedback from the
Evolution Council to the following Board meeting to allow the Board to consider the Evolution Council’s input in its decision-making. The Evolution
Council feedback included input in to the Group CEO's 2023 objectives.
• The Group CEO and Chair of the Remuneration Committee attended 'Your Forum' meetings in 2022, our fully elected employee forum, representing
UK employees. We believe this method of engagement with Aviva employees is effective in building and maintaining trust and communication and
allows for openness, honesty and transparency within the business. It also acts as a platform for employees to influence change in relation to
matters that affect them. The output of these meetings provided the Remuneration Committee with employee feedback when reviewing wider
workforce remuneration and policies.
• The Board recognises the benefits of a diverse workforce and an inclusive culture and there has been significant investment and activity to increase
diversity, equity and inclusion. To ensure alignment and retain focus on the diversity, equity and inclusion agenda the Executive Directors' Long-
Term Incentive Plan (LTIP) has been linked to two diversity performance metrics and employee engagement is a primary metric in the Annual Bonus
Plan (ABP).
• The Board reviewed the Board Diversity, Equity and Inclusion Statement in August 2022 and the annual VoA colleague engagement survey
and Culture Diagnostic in December 2022 and discussed the areas management had identified for improvement.
• For further information on how we engage with our people, please see the 'Our people' section.
Aviva plc
1.54
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our stakeholders continued
Stakeholders
Why are they important to Aviva? What is our approach to engaging with them?
Suppliers
We operate in conjunction
with a wide range of suppliers
to deliver services to our
customers. It is vital that we
build strong working
relationships with our
intermediaries.
• All supplier-related activity is managed in line with the Group Procurement and Outsourcing Business Standards. This ensures that supply risk is
managed appropriately in relation to customer outcomes, data security, corporate responsibility, and financial, operational, and contractual issues.
• An update on supplier risk and relations was presented to the Board in August 2022 as part of the Board's continuing programme of supplier
engagement.
• In the UK, Aviva is a signatory of the Prompt Payment Code which sets high standards for payment practices. We are a Living Wage employer in the
UK, and our supplier contracts include a commitment to paying eligible employees not less than the Living Wage in respect of work provided to
Aviva in the UK.
• The Group CEO attended three Key Partner Conferences held during the year which provided an opportunity to meet with partners and receive
feedback on their interaction with Aviva.
Communities
We recognise the importance
of contributing to our
communities through
volunteering, community
investment, and long-term
partnerships.
• The Board receives regular updates on our corporate responsibility activity, including the activities supported by the Aviva Community Fund and the
Aviva Foundation.
• The Aviva Foundation will continue to invest in organisations delivering public benefit aligned to Aviva's purpose and expertise with a focus on
financial capability. During the year the Board approved a further £10 million payment to the Aviva Foundation from unclaimed shareholder funds
derived from the 2022 return of capital.
• The Board reaffirmed the Group’s sustainability agenda and Aviva’s ambition to become the first major insurer worldwide to reach Net Zero by 2040
and regularly reviews progress in relation to our ambitions.
• More information on how the Board assesses climate risks and opportunities is included in ‘Our Climate-related Financial Disclosure' section.
Regulators
As an insurance company,
we are subject to financial
services regulations and
approvals in all the markets
we operate in.
• We maintain a constructive and open relationship with our regulators and have a programme of regular meetings between the directors and our
UK regulators.
• Both the Prudential Regulation Authority and the Financial Conduct Authority have attended a Board meeting during the year and discussed
regulatory issues with Board members.
Shareholders
Our retail and institutional
shareholders are the owners
of the Company.
• The Board meets with shareholders at the Annual General Meeting (AGM) which provides an opportunity, predominantly for our retail shareholders,
to engage directly with the Board. In 2022 shareholders were able to attend the AGM in person or to participate electronically, including the ability to
vote and ask questions, to ensure our engagement with shareholders continued as far as possible.
• A shareholder newsletter is published on aviva.com every quarter and provides shareholders with publicly available information including recent
Board changes, financial or strategic updates, and information about our Aviva Foundation projects.
• The Board receives regular updates on management's interaction with institutional shareholders.
1. The Aviva Foundation is administered by Charities Trust under charity registration number 327489
Aviva plc
1.55
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Our people
Aviva’s diverse workforce includes nearly 22,000
colleagues in the UK, Canada and Ireland.
Danny Harmer
Chief People Officer
“Our wonderful people have
continued to commit their
very best to our customers
and our business in a
challenging environment.
Making Aviva a really great
place to work, offering
fantastic development
and careers, now and in
the future, has been our
priority.”
Our approach
The people function is focused on unleashing
the power of our people to deliver our
strategy for our customers, colleagues
and shareholders.
Engaging our people
In our 2022 Voice of Aviva colleague listening
survey 86% of colleagues said they would
recommend Aviva as a great place to work.
Amid our ongoing transformation as a
business, and despite the uncertain socio-
economic environment, our employee
engagement levels have significantly
improved since 2021 and Aviva sits well above
the financial services benchmark.
Understanding of the Group's strategy is
strong and perceptions of flexibility and
workload sustainability have improved.
Feedback on the frequency and quality of
individual talent and performance
conversations is also positive, and these
remain a critical lever to support employee
progression, performance and engagement.
While we have made headway on perceptions
of Diversity, Equity and Inclusion we need to
improve visible representation in leadership.
In response to the 2022 survey, we will focus
on our ability to adapt to change quickly
and continue to help people connect to
our strategy through communications and
engagement approaches, owned by
senior leaders.
Diversity, Equity and Inclusion
Our ambition is for people to be able to be
themselves at Aviva, and for our workforce to
reflect the customers and communities we
serve. It's a fundamental part of living up to
our purpose and values, key to continuing as
a sustainable, successful business and
contributes to a more equal society. In the
Voice of Aviva survey 86% of colleagues
responded that they 'can be themselves
at work'.
Diversity, Equity and Inclusion is woven into
everything we do, from employee policies to
customer propositions to relationships with
suppliers and partners, supported by leaders
owning and driving this agenda. Inclusion
across all communities is important, and we
are particularly focused on gender and
ethnicity. We've set ourselves the targets of
increasing female senior leadership to 40%
and ethnically diverse senior leadership to
13% by 2024. Our Executive Long-Term
Incentive Plans are tied to performance
against these targets, reinforcing our
commitment to action and driving
sustainable change. Our work on gender is
underpinned by our market-leading approach
to equal parental leave and we continue to
champion our Ethnically Diverse Leadership
programme and Reverse Mentoring
Programmes.
In 2022 we launched three programmes to
specifically help our diverse colleagues thrive
and advance their careers. The Mission
Include and Mission Gender Equity cross-
company mentoring programmes for 80
colleagues, in partnership with Moving Ahead,
focused on building and strengthening our
diverse pipeline. The Aviva Sponsorship
Programme, in partnership with School for
CEOs, is pairing 130 sponsees with sponsors
across Aviva. The pilot saw 54% of sponsees
promoted or appointed into stretch roles.
We have been recognised through numerous
awards including achieving Gold Employer
status in Stonewall's Workplace Equality
Index, ranking in the top 15 for the Social
Mobility Index and appearing in the Sunday
Times Top 50 Employers for Women for the
fifth consecutive year. A number of our people
were also recognised on the HERoes,
OUTstanding and EMpower Role Mode lists.
As a Disability Confident Employer, we
interview every disabled applicant who meets
the minimum criteria for the job and offer
Workplace Adjustment Passports to all
colleagues.
86%
of colleagues recommend Aviva
as a great place to work
Aviva plc
1.56
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our people continued
Health and wellbeing
Our people, and their wellbeing, are core to
our success; 83% of our employees believe
Aviva values their health and wellbeing.
We offer extensive health and wellbeing
benefits and foster an environment where
everyone feels cared for, and stigmas
are removed.
This year we've also:
• Refreshed our leader mental health
awareness training which is mandatory
for people leaders;
• Created a fertility awareness hub and
leader guidance, bringing together
information and support for colleagues;
• And worked with our Aviva Inclusion
Communities to build wellbeing content
into events including Mental Health
Awareness Week, International Men's Day,
Carers’ Week, and Grief Awareness Week.
Our support for our people shines through
in the moments that matter. This has
been recognised by Hospice UK who
awarded us their first Gold Standard in
the Compassionate Employer scheme.
Leadership and learning
Upskilling and reskilling our people to
ensure Aviva is ready for the future is one
of our key priorities.
In 2022, 200 leaders participated in our
Courage to Lead programme, designed to
drive a step-change by equipping and
supporting leaders to take bold decisions and
inspire their teams. Courage to Lead will be
cascaded to our top 1,000 leaders during 2023.
All our people accessed Aviva University,
our learning platform, at least once in 2022
with around 50% of colleagues accessing it
each month, and an average of 16 hours
learning per colleague this year. Our Learning
at Work Week was focused on 'getting your
dream job and super charging your
development', and over 4,500 colleagues
participated in Skillsfest, focused on the
capabilities our people need both now and
in the future.
Our plans for 2023
We have the foundations in place to help
Aviva deliver its commitments to our
customers, colleagues and shareholders
through our people.
In 2023 we will:
• Help colleagues put customers at the
forefront of our decisions and the way
we work;
• Continue to build and enable the
workforce of the future;
• Maintain momentum on Diversity,
Equity and Inclusion;
• Push our Courage to Lead leadership
training through the organisation;
• And grow our Aviva University curriculum
with learning for all.
The average number of full-time equivalent
employees during 2022 was 23,701
(2021: 22,312). This includes Aviva India,
Sesame Banking Group, Solus, Succession
Wealth, and Wealthify.
Responding to challenges
At 31 December 2022, we had
the following gender split:
2022 was a challenging year and we
know that the ongoing cost of living
crisis was a worry for many of our
colleagues, along with our
communities and customers.
We are proud to be a Real Living
Wage employer in the UK but also
want our colleagues to be able to
save for their retirement. Our
minimum rate of pay means our
colleagues can make an 8% pension
contribution (benefitting from the
14% employer contribution) while
still taking home the Real
Living Wage.
In October we made a one-off
payment to over 9,000 colleagues
across Aviva. While the payment
didn't benefit everyone, it was
focussed where we believed it would
have the most impact.
We also removed office car parking
charges, provided free lunches to
employees' children over the
holidays and gave colleagues access
to free flu vaccinations. We also offer
our people a range of flexible benefits
including employee rates for Aviva
products, discounted shopping
and financial advice.
Board membership
41.7%
Male (7)
Female (5)
58.3%
Senior management
37.3%
Male (626)
Female (373)
62.7%
Aviva Group employees
51.8%
Male (10,413)
Female (11,215)
48.2%
Read more
More details about our approach to
responsible and sustainable business can
be found in the ‘Our sustainability
ambition’ section of this report and our
people strategy at:
> www.aviva.com/about-us/our-people
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Our sustainability ambition
Our ambition is to
lead the UK financial
services sector in
taking action on
climate change,
building stronger,
more resilient
communities and
running ourselves as a
sustainable business.
We’re setting out a plan to become Net
Zero by 2040, ten years ahead of the Paris
Agreement target.
We're on a mission to create a climate of
change, because the time for action is
now. From lower carbon emissions to
carbon removal, from renewable energy
generation to biodiversity regeneration.
We've an ambitious goal to make 10
million people more resilient to climate
and financial risks by 2025.
We also have goals to ensure we increase
diversity and inclusion within our senior
management teams.
All of our goals are in service of our purpose
to be: with you today for a better tomorrow.
“Acting sustainably is a
cornerstone of Aviva’s
strategy for very good
reasons. It matters to our
customers, our people and
our world. The future health
of our business depends
entirely on a sustainable
future to be doing business
in. We want to help set
the standard.”
Amanda Blanc
Group Chief Executive Officer
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i o n
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With you
today, for
a better
tomorrow
Sustainable
Business
Climate Action
p1.59
Stronger Communities
p1.61
Sustainable Business
p1.62
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Our sustainability ambition continued
Aviva is taking climate action.
We’ve been a carbon neutral
company since 2006 and our
ambition is to have Net Zero
operations by 2030 and
become Net Zero by 2040.
institutions to develop their own plans to
enable the global transition.
In December 2022, Aviva became the first
international composite insurer to have
carbon reduction goals validated by the
Science Based Targets initiative (SBTi)¹.
Aviva’s targets² include commitments to:
• Achieve a 90% reduction in absolute scope
1 and 2 greenhouse gas (GHG) emissions
by 2030 compared to 2019 levels;
• Ensure that 70% of suppliers (by spend)
will have science-based targets by 2025;
• Ensure that a third of shareholder, With-
Profits and Aviva Investors Discretionary
Mandate equity, bonds and loans portfolio
by invested value have science-based
targets by 2025;
• Continue financing only renewable
electricity in electricity generation
project finance portfolio until 2030; and
• Reduce real estate portfolio greenhouse
gas emissions by 57% per square metre
by 2030 compared to 2019 levels.
We will update our Climate Transition
Plan to include the implementation and
progress of our science-based targets
and we will develop further baselines and
targets in 2023 in due course.
In March 2022 we released our first Climate
Transition Plan, outlining how we might get
to Net Zero by 2040. Our Net Zero ambition
covers three scopes of emissions:
• Scope 1 covers direct sources e.g.
fuels used to power our buildings and
company cars;
• Scope 2 is focused on energy
generated elsewhere and supplied to
our business; and
• Scope 3 focuses on indirect emissions
e.g. from our supply chain, business
investments, and underwriting and
investment portfolios.
Quantifying the impact of climate change
is an emerging practice. It is challenging
to obtain consistent asset data across our
entire portfolio and quantify the impact
of carbon emissions from our scope 3
category 15 financial investments. We have
made several methodology improvements
in 2022 and will continue to enhance
our capabilities in line with industry
developments and standards.
We have an ambitious climate transition
plan for our journey to Net Zero by 2040, yet
no one can achieve Net Zero on their own.
We need governments and international
Carbon reductions in our
operations
We have achieved a 43% reduction in our
operational carbon emissions against our
2019 baseline. Now we are focused on our
ambition to make our operations and
supply chain Net Zero by 2030.
We currently offset any remaining
operational emissions, ensuring that
our business continues to remain
‘carbon neutral’.
In 2015, we set ourselves the ambition of
using electricity generated entirely from
renewable sources in our own operations
by 2025. In 2022, we achieved our goal
and now ‘match’ all our electricity to
renewable sources3.
Investments are the largest
source of emissions
For Aviva, the investments we make for
customers and shareholders are the largest
source of emissions in our carbon value
chain. Over 90% of our current emissions
are part of Scope 3.
We have relationships with businesses
and existing assets that may be associated
with significant emissions, and know the
economy-wide shift to Net Zero emissions
requires a greater and deeper level of
engagement between companies and
their investors.
Focusing on the biggest emitters
As an asset owner, we can influence the
global transition to lower-carbon economies
through responsible investments.
Our Engagement Escalation programme,
which started in 2021, involves engagement
with the 30 largest systemically important
carbon emitters in the world that contribute
30% of global Scope 3 emissions. We will
work with them to act on positive climate
transition, or we will withdraw our capital.
The programme includes a five-step
approach to discussions, with progress
monitored twice a year over a three
year period.
During 2022, we engaged either individually
or collaboratively on climate 345 times
and voted on 159 resolutions related
to climate issues.
1. The SBTi Net Zero Standard defines corporate Net Zero as: (i)
Reducing Scope 1, 2 and 3 emissions to zero or to a residual level that
is consistent with reaching Net Zero emissions at the global or sector
level in eligible 1.5°C-aligned pathways; (ii) Neutralising any residual
emissions at the Net Zero target year and any GHG emissions released
into the atmosphere thereafter.
2. See Science Based Targets that Aviva has committed to https://
sciencebasedtargets.org/resources/files/Target-language-and-
summary_Aviva-plc.docx.pdf
3. Our business investments in China (Aviva CofCo) and Singapore
(SingLife) are outside of our control boundary and do not count as our
“own operations”. These are international investments where we do
not have any operational or financial control. As per the GHG Protocol,
China and Singapore operations are accounted for under scope 3
Category 15 - investments. Note: 2010 goal was location based and
2019 to 2030 goal is market-based.f
Read more
More details can be found in the:
> Aviva Climate-related Financial
Disclosure 2022
> Aviva Climate Transition Plan
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Our sustainability ambition continued
Aviva is protecting and restoring biodiversity as part of its climate action.
We are living through climate
and biodiversity crises.
Protecting and enhancing the planet’s
precious biodiversity through nature-based
solutions is an integral part of Aviva’s long-
standing commitment to sustainability.
Investing in nature
Nature-based solutions work with nature to
remove carbon from the atmosphere by
improving habitats and biodiversity.
As part of our 2040 Net Zero announcement
in 2021, we announced funding of
£100 million to remove carbon from
the atmosphere in this way. We are working
initially with The Wildlife Trust, The
Woodland Trust and The Nature Trust, and
other major conservation groups in the UK,
Canada and Ireland.
Confirmed projects will reintroduce
woodland across 3,000 hectares - removing
around 1.4 million tonnes of carbon from
the atmosphere in their lifetime– equivalent
to the emissions created by driving over
4.2 billion miles.
Bringing back the UK’s lost
rainforests
We are re-establishing temperate rainforest
across the UK. Native to the British Isles,
temperate rainforest once stretched from
Cornwall to the west of Scotland.
It now covers less than 1% of the UK and
is thought to be more threatened than
tropical rainforests. Working with the Wildlife
Trust, we aim to re-establish this rare and
biodiverse habitat by planting native tree
species. The project will also bring
biodiversity benefits by creating habitat
that can support flora and wildlife.
A broad focus on biodiversity
We were the first UK insurer to commit
to the Finance for Biodiversity Pledge.
As part of our commitment, we launched
a Biodiversity Policy in 2021. The policy
outlined a set of principles to guide our
biodiversity decisions from 2021 onwards.
In 2022, we published a report to show the
progress we made in our first year of our
policy. It included the following:
• Carried out an assessment of deforestation
risks in our investments and underwriting
activities to understand our exposure
to commodity-driven deforestation.
These results will be used to inform our
investor engagement programme with
high risk companies on deforestation
and inform our decision-making on
insurance activities with associated
deforestation risk.
• Launched our first biodiversity themed
global equity fund (the Nature Capital
Transition Fund) to support the transition
to a nature positive economy.
• Played a leading role in the Finance for
Biodiversity Foundation’s delegation at
COP15 to represent financial institutions,
and make sure they have a defined role to
play in reversing biodiversity loss by the
end of the decade.
• We strengthened our voting policy by
making deforestation a more formal
element. We now vote against targeted
management resolutions at companies
with exposure to deforestation risk when
they lack robust policies and targets on
reducing deforestation. We voted against
75 companies by August 2022 on this basis.
The World Benchmarking Alliance rated
Aviva second out of 400 financial services
companies globally.
The World Benchmarking Alliance (WBA)
said of Aviva:
“This financial institution
is one of the few that is
committed to minimising its
negative impacts on nature
and biodiversity across its
financing activities.”
Read more
> Aviva Sustainability Report 2022
> Aviva Biodiversity Report 2022
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Our sustainability ambition continued
Aviva is building stronger communities.
We help people build financial,
climate and health resilience.
Aviva has an ambition to help 10 million
people become more resilient from 2020 -
2025. By end of 2022 we had helped an
estimated 7.9 million people. In 2022 our
community investment totalled over
£33.7 million¹.
Financial resilience
The rising cost of living puts extra strain
on our customers, our colleagues and
the wider community. That’s why in 2022
we announced millions of pounds of
financial resilience funding to support
our UK customers, colleagues and
communities during 2022.
Aviva committed £9 million to Citizens
Advice and Money Advice Trust. These new
partnerships gave the UK public increased
access to free independent advice.
Aviva employees and families benefitted
from 21,000 free kids’ lunches during the
summer holiday and over 9,400 colleagues
received one-off cost of living payments.
We invest in communities through the Aviva
Community Fund (ACF). In the UK, we have
used the ACF platform to donate funds to
over 7,800 good causes since 2015. In 2022,
we added a £2 million Cost of Living Boost
to the Aviva Community Fund to support
charities helping people tackle the cost of
living challenge.
Responding to a
humanitarian crisis
We’ve worked with the British Red Cross
since 2016. In response to the crisis in
Ukraine, we donated £1.2 million to
the DEC Ukraine Humanitarian Appeal,
including the matching of employee
and customer donations, to support
the Red Cross Movement in accelerating
their response and providing critical
care to those who need it most. We also
continued to contribute to the Red Cross
Disaster Relief Alliance to enable their
response to wider global disasters.
Environmental resilience
Our Building Future Community reports and
the Aviva Climate Ready Index, both call for
greater government, business and cross-
industry support to help protect
communities and make the countries
we operate within more climate ready.
Our partnership with the World Wide Fund
for Nature (WWF) is in its second year using
natural land management to improve flood
resilience. In the UK, Aviva and WWF work
on a range of projects in Scotland, Yorkshire,
East Anglia and the Midlands. One project
is the River Soar in Leicestershire. This area
is vulnerable to flooding. Through WWF
we’re funding innovative large natural flood-
management initiatives that will create
multiple benefits for nature, while building
greater climate resilience within the wider
community.
It takes partnership to tackle cost of living challenge
In 2022, Aviva launched two sector
leading financial resilience partnerships.
One with Citizens Advice and another with
Money Advice Trust, two of the country’s
leading charities, providing financial
support and debt advice across the UK.
These charities faced unprecedented
levels of demand for advice and support.
We supported both organisations to
significantly increase their capacity
to support hundreds of thousands
of people up and down the UK.
Through Aviva’s support:
• Citizens Advice will help up to 250,000
more people over 2 years; and
• Money Advice Trust will support an
estimated 17,000 more small
businesses and self-employed people
through the Business Debtline.
Estimated
7.9m
people made more resilient from
1 January 2020 until 31 December 2022
1. Our community investment focus areas align with our Stronger
Communities priorities which relate to climate, financial and
health resilience
Volunteering in the community
In total, our global employees contributed
more than 41,610 volunteering hours to
support local communities throughout 2022.
Read more
> Building Future Communities
> Climate-Ready Index
> Aviva Reporting Criteria 2022
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Our sustainability ambition continued
Aviva’s sustainable business.
We are committed to high
standards of ethical conduct,
behaving responsibly and
transparently.
Good governance
The high standards of ethical behaviour we
expect are outlined in the Aviva Business
Ethics Code 2022. We require all our people,
at every level, to read and sign-up to our
Code every year (99.6% of our employees
did so in 2022).
We have a zero-tolerance approach to acts
of bribery and corruption. We therefore have
a risk management framework that sets
out relevant policies and standards across
all markets.
These apply to everyone at Aviva and it is
the responsibility of CEOs (or equivalent) to
ensure that their business operates in line
with them.
The Financial Crime Business Standard,
and supporting Minimum Compliance
Standards, guide our risk-based financial
crime programmes. These seek to prevent,
detect and report financial crime, including
any instances of bribery and corruption,
while complying fully with relevant
legislation and regulation.
At a Group level, the Chief Risk Officer
provides the Risk Committee with regular
reporting on financial crime matters.
These include Aviva’s anti-bribery and anti-
corruption programme.
The Customer and Sustainability Committee
assists the Board in its oversight of the
Group’s customer strategy and Aviva’s
Sustainability Ambition.
Aviva plc is subject to the UK Corporate
Governance Code (the Code), which we aim
to comply with fully. Stephen Doherty, our
Chief Brand and Corporate Affairs Officer is
the Aviva Group Executive Committee
member responsible for corporate
responsibility and sustainability.
In 2021 we established the executive level
Aviva Sustainability Ambition Steering
Committee to drive and monitor the
delivery of our plan and targets. The Aviva
Sustainability Ambition Steering Committee
has delegated authority from the Group
Executive Committee. The Sustainability
function, which reports to the Aviva
Executive, provides sustainability expertise
to enable delivery and coordination of
local activity across Aviva’s markets and
functions. Crucially, there is clear
individual executive accountability for all
the sustainability KPIs. ESG factors are
included in senior executive long term
incentive plans.
We conduct due diligence when recruiting
and engaging external partners. At the end
of 2022, 100% of our UK, Canada, Ireland
and India registered suppliers have agreed
to abide by our Third Party Business Code of
Behaviour (or provided a satisfactory reason
why they didn’t do so, for example, because
they have their own existing code of
behaviour). Our Third Party Business Code
of Behaviour outlines the way in which we
commit to behave in our dealings with each
other and includes guidance on financial
crime laws and regulations.
In addition to paying the Living Wage in
the UK we also support the Living Hours
campaign to ensure that workers have
sufficient, predictable hours. We encourage
other companies to do the same.
Our overarching Sustainability Business
Standard includes how we manage our
material operational and core business
environmental and climate impacts, and
our community impacts.
99.6%
Employees signed up to Aviva Business
Ethics Code 2022
Read more
> Aviva ESG Datasheet 2022
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Our sustainability ambition continued
Our support for human rights
We are committed to respecting human
rights and we continue to pursue our anti-
modern slavery agenda both within our
operations and supply chain, and through
our partnerships. In 2022 we refreshed our
human rights approach following our last
biennial Group-wide human rights due
diligence assessment.
We continue to work across sectors to
encourage business action and disclosure
on Human Rights and Modern Slavery.
Our malpractice helpline, Speak Up, makes
it easy to report any concerns in confidence,
with all reports referred to an independent
investigation team. In 2022, 131 cases were
reported through Speak Up (2021: 77), with
none related to modern slavery.
Our modern slavery statement, as well as
our Human Rights Policy and the Aviva
Business Ethics Code 2021, can all be found
on www.aviva.com.
The Company’s compliance with the Code,
as well as the activities of the Customer and
Sustainability Committee, can be found in
the Governance section of this report. Our
climate risks and impacts can be found in
‘Our risks and risk management’ section of
our Climate-related Financial Disclosure.
Towards a sustainable future
As a multinational group, and one of the
UK’s largest companies, we are very aware
that the tax we pay plays an important part
in the economies and societies in which
we operate.
In 2021/22 we were the 11th largest
corporate contributor of tax in the UK1.
We continue to play our role as a
responsible asset owner actively engaging
with the companies, projects and assets
we own on issues such as climate change,
human rights and diversity.
During 2022, we attended the climate
and biodiversity conferences COP27 and
COP15 respectively.
Ahead of COP27, the Women in Finance
Climate Action Group, led by our Group
CEO, with GenderSmart and the 2X
Collaborative, wrote an open letter calling
for urgent action to improve gender equality
when designing, providing and accessing
climate finance.
At COP27, Aviva Investors CEO Mark Versey
called for reform of the international
financial architecture. He called for each
institution to produce its own Net Zero
transition plan and for the institutions
collectively to create and implement a
Global Financial Transition Plan for an
orderly and just transition to Net Zero by
or before 2050.
11th
largest corporate contributor
of tax in the UK1
1. Based on PwC analysis of the 100 Group Total Tax Contribution Survey
December 2022
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Our Climate-related Financial Disclosure
Aviva recognises the
value of disclosure as part
of the journey to a more
sustainable future.
We can control the decarbonisation of
our own operations and supply chain,
and can influence through the £352 billion
in Assets under Management (AUM) that
we have stewardship over, alongside the
innovations and customers we support
via our insurance.
Strategy
To deliver on our climate ambition, and
reduce our exposure to climate-related
risks, we focus on five key areas:
1. Accountability and leadership
We advocate for systemic change to the
international financial architecture so we
can collectively deliver on the goals of the
Paris Agreement. We collaborate across
our industry and with global alliances.
2. Decarbonising our investment
portfolio
As an asset owner and a long-term savings
and pensions provider and as an asset
manager, we seek to align our investments
with a pathway towards Net Zero emissions.
It is our ambition to have a Net Zero portfolio
by 2040. Aviva Investors is building a Climate
Transition Fund range that helps investors
support the transition to a low carbon
economy.
3. Insuring a Net Zero future
To support the transition to a low carbon
economy, we are developing products and
services which reward customers for
environmentally responsible actions across
our global markets. We now offer a range of
34 different green and low carbon insurance
propositions across our businesses. We
have published our ESG Baseline
Underwriting Statement which defines the
activities we exclude as an insurer.
4. Decarbonising our operations
and supply chain
We have an ambition to be Net Zero in our
operations and supply chain by 2030. Our
operations have been carbon neutral since
2006, through reducing our emissions year-
on-year and offsetting any remaining
emissions. We have exceeded our long-term
emissions reduction target of 70% by 2030,
set in 2010. We are now aiming for Net Zero
by 2030.
5. Embedding climate in our culture
ESG considerations have been incorporated
into decision-making processes at Aviva,
and our staff pension scheme trustees
aligned the scheme to be Net Zero by 2040.
Risk management
Aviva’s risk management framework sets
out how we identify, measure, monitor,
manage and report on the risks to which our
business is, or could be, exposed to
(including climate-related risks and other
sustainability risks). We use our risk
identification process to identify potential
exposure to climate-related risks via the
associated physical and transition
transmission channels (for example new
climate policies or increases in average
temperatures). We then conduct exposure
analysis to understand how these risks will
impact our most material exposures. The
principal risks impacted by climate change
are credit risk, market risk, general insurance
risk and life insurance risk.
In 2022, we continued to build our climate
risk capability and integrate it into our
governance, strategy, risk management,
and disclosure as well as to develop our
associated metrics and targets, to support
better understanding, monitoring and
reporting as well as ensure climate-related
risks and opportunities are embedded in
our day-to-day decision making in line with
our climate risk appetite.
See 'Our risks and risk management' section
for further information.
Metrics and targets
Aviva has developed and expanded the
climate metrics reported in 2021. This
includes reporting absolute emissions and
economic carbon intensity for credit and
equities (in addition to weighted average
carbon intensity) and absolute emissions and
carbon intensity for sovereign debt.
We also use scenario analysis as a tool for
helping to identify the potential impact of
climate change on an organisation and its
end to end value chain.
The following table sets out the assets
which are in-scope for our climate
metrics compared to the AUM on the IFRS
consolidated statement of financial position:
£bn
Total assets for which
emissions are calculated
AUM on IFRS consolidated
statement of financial
position
Coverage
2022
165
2021
191
289
57%
329
58%
A reconciliation of climate metrics to AUM on
the IFRS consolidated statement of financial
position and more information on our climate
metrics, is included in the Metrics and Targets
section of the Climate-related Financial
Disclosure report.
Financed emissions
Financed emissions represent the carbon
emissions of our investment portfolio (i.e.
Aviva’s share of Scope 3 category 15) from the
Greenhouse Gas (GHG) Protocol. We monitor
the emissions of our investment portfolio for
shareholder, with-profit funds and policyholder
funds for credit and equities, which is our most
significant asset class in category 15.
Operational emissions
We have set out below our GHG emissions
on an absolute CO2e basis in accordance
with the Streamlined Energy and Carbon
Reporting (SECR). The 2021 comparatives
have been re-presented to exclude the
emissions for China which are presented
under Scope 3 investments reporting, given
there is no operational control.
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Our Climate-related Financial Disclosure continued
Operational emissions
UK
Overseas
Total
UK
Re-presented
Overseas1
2022
Emissions
Scope 1 (tCO2e)
Scope 2 (tCO2e) - market-based
Scope 3 (tCO2e)
Total emissions (tCO2e)
Carbon avoidance credits (tCO2e)2
Total net market-based emissions (tCO2e)
Intensity ratios (market-based)
Scope 1 and 2 - market-based emissions (tCO2e) / £ million GWP
Total market-based emissions (tCO2e) / £ million GWP
Total market-based emissions (tCO2e) / employee
Location-based emissions (tCO2e)
Scope 1 (tCO2e)
Scope 2 (tCO2e) - location-based
Total Scope 1 and 2 location-based (tCO2e)
Scope 3 (tCO2e)
Total location-based (tCO2e)
Intensity ratios (location-based)
Scope 1 and 2 - location-based emissions (tCO2e) / £ million GWP
Total location-based emissions (tCO2e) / £ million GWP
Total location-based emissions (tCO2e) / employee
Energy consumption
6,550
—
3,172
1,976
563
1,697
8,526
563
4,869
9,722
(9,722)
4,236
(4,236)
13,958
(13,958)
—
0.46
0.69
0.59
6,550
5,024
11,574
3,172
14,746
0.82
1.04
0.89
—
0.54
0.90
0.59
1,976
2,813
4,789
1,697
6,486
—
0.48
0.74
0.59
8,526
7,837
16,363
4,869
21,232
1.01
1.37
0.91
0.86
1.12
0.90
8,870
—
1,072
9,942
(9,942)
—
0.58
0.65
0.64
8,870
5,912
14,782
1,072
15,854
0.97
1.04
1.02
2021
Total1
10,594
2,288
1,654
14,536
1,724
2,288
582
4,594
(4,594)
(14,536)
—
0.97
1.11
0.60
1,724
3,517
5,241
582
5,823
1.27
1.41
0.76
—
0.66
0.75
0.63
10,594
9,429
20,023
1,654
21,677
1.03
1.12
0.93
Operational and financed emissions
Scope 1 emissions relate to our operations
excluding electricity usage. Scope 2 emissions
relate to electricity usage of our operations.
Scope 3 emissions relate to the value chain across
15 different categories. Aviva is engaged with
regulators, industry bodies, alliances and
companies across multiple sectors to develop
consistent and standardised frameworks and
approaches to calculate Scope 3 emissions.
Aviva reports Scope 3 emissions as follows:
Not yet reported
Category 1 - Purchased
goods and services
Included in
operational
carbon emissions
Category 3 - Fuel and energy-related
activities, Category 5 - Waste
generated in operations, Category 6 -
Business travel, Category 7 -
Employee commuting
Aviva does not
engage in
activities linked
to these
categories
Included in
Financed
emissions
Category 2 - Capital goods, Category
4 - Upstream transportation and
distribution, Category 8 - Upstream
leased assets, Category 9 -
Downstream transportation and
distribution, Category 10 -
Processing of sold goods, Category
11 - Use of sold products, Category
12 - End-of-life treatment of sold
products, Category 13 - Downstream
leased assets, Category 14 -
Franchises
Category 15 - Investments
Energy consumption (MWh)
57,233
14,537
71,770
65,547
15,524
81,071
Notes:
Scope 1: Natural gas, fugitive emissions (leakage of gases from air conditioning and refrigeration systems), oil, and company-owned car
Scope 2: Electricity
Scope 3: Includes certain Scope 3 categories for business travel (category 6) and grey fleet (private cars used for business) (category 6), waste (category 5) and water
Location-based: A location-based method reflects the average emissions intensity of grids on which energy consumption occurs
Market-based: A market-based method reflects emissions from electricity that companies have purposefully chosen
In 2022 and 2021 we offset our residual carbon emissions from our Scope 2 market-based total as this takes account of the reduced emissions from our use of electricity from renewable sources. In 2020 and 2019 we offset
Scope 2 location-based total. As at 1 March 2023, the 16,354 credits purchased in relation to the 2022 market-based emissions footprint were retired
Includes Scopes 1 and 2 energy MWh and fuel from company car use
1. The 2021 comparatives have been re-presented following review of the treatment of the 50% joint venture in China. See note 1 in the Climate-related Financial Disclosure report.
2. All residual emissions have been offset.
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Our Climate-related Financial Disclosure continued
Taskforce on Climate-related Financial Disclosure (TCFD) compliance summary
The TCFD outlines 11 recommendations for organisations to include in their climate reporting. We have embedded the reporting of climate in this report, including Governance, Strategy,
Risk Management and the inclusion of climate metrics. We also publish a separate Climate-related Financial Disclosure report, which provides more detailed information. This report is
available at aviva.com. Our Climate-related Financial Disclosure report is consistent with the 11 recommendations and the table below sets out the relevant section of the
Climate-related Financial Disclosure report where the 11 TCFD recommendations are covered, also taking into account the TCFD Annex (issued October 2021).
TCFD pillars
TCFD recommended disclosures
Section of the separate Climate-related Financial Disclosure report,
that disclosure is included in
Governance
Disclose the organisation’s governance
around climate-related issues and
opportunities.
Strategy
Disclose the actual and potential impacts of
climate-related risks and opportunities on the
organisation’s business, strategy and
financial planning where such information is
material.
a. Describe the Board’s oversight of climate-related risks and opportunities.
• Governance, page 16
b. Describe management’s role in assessing and managing climate-related
• Governance, page 16
risks and opportunities.
a. Describe the climate-related risks and opportunities the organisation has
• Our climate strategy, risks and opportunities, page 23
identified over the short, medium, and long-term.
b. Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning.
• Our climate strategy, risks and opportunities, page 23
• Our strategic focus, page 29
c. Describe the resilience of the organisation’s strategy, taking into
• Our climate VAR measure, page 27
consideration different climate-related scenarios, including a 2°C or lower
scenario.
Risk management
Disclose how the organisation identifies,
assesses and manages climate-related risks.
a. Describe the organisation’s processes for identifying and assessing
• Risk management - refer to ‘Our process for identifying and assessing
climate-related risks.
climate-related risks’, page 55
b. Describe the organisation’s processes for managing climate-related risks.
• Risk management - refer to ‘Our process for identifying and assessing
climate-related risks’, page 55
c. Describe how processes for identifying, assessing, and managing climate-
• Risk management - refer to ‘Our process for identifying and assessing
related risks are integrated into the organisation’s overall risk
management.
climate-related risks’, page 55
Metrics and Targets
Disclose the metrics and targets used to
assess and manage relevant climate-related
risks and opportunities where such
information is material.
a. Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management
process.
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
emissions (GHG), and the related risks.
• Our metrics to assess climate-related risks and opportunities, page 61
• Decarbonising our investment portfolio, page 33
• Decarbonising our operations and supply chain, page 49
• Our metrics to assess climate-related risks and opportunities, page 61
c. Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
• Our 2022 climate highlights and looking ahead, page 7
• Our metrics to assess climate-related risks and opportunities, page 61
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Our risks and risk management
Effective risk management leadership, capability and culture are key to Aviva’s success.
Stephen Gould
Interim Group Chief Risk Officer
(subject to regulatory approval)
“Enabling Aviva to grow
profitably, responsibly and
sustainably by optimising
our risk exposure safely,
and with a key focus on our
culture and purpose to
protect our customers and
society for a better
tomorrow.”
We accept the risks inherent
in our business lines of life,
health and general insurance
and asset management.
We diversify these risks through
our scale, the variety of the
products and services we offer,
and the channels through
which we sell our products
and services.
Our strategy for risk
We receive premiums which we invest to
maximise risk-adjusted returns, so that we
can fulfil our promises to customers while
providing a return to our shareholders.
In doing so we prefer retaining risks we
believe we are capable of managing to
generate a return.
Looking forward, the preferred risks we
retain may be magnified or dampened by
current and emerging external trends which
may impact our current and longer-term
profitability and viability, in particular our
ability to write profitable new business.
The ‘Principal emerging risk trends and
causal factors’ table in this section describes
those trends, their impact, outlook and how
we manage those emerging risks.
How we manage risk
In 2022, Stephen Gould was appointed as
interim Group Chief Risk Officer (subject to
regulatory approval). Stephen is a Partner in
a Big Four professional services firm and a
leading practitioner in risk management
and risk culture in insurance. He is
supporting the search underway for a
permanent Group Chief Risk Officer.
Effective risk management is fundamental
to the sustainable success of Aviva.
Aviva’s risk management framework (RMF) is
critical in supporting the business to deliver
on Aviva’s purpose for our customers, our
people and our shareholders, helping the
business discover, predict, understand
and manage our risks, thereby maintaining
a safe, sustainable and competitive risk and
control environment.
Our RMF is illustrated on the next page and
comprises our systems of risk governance,
risk and control management processes
and risk appetite framework. It applies
Group-wide, to embed a rigorous and
consistent approach to risk management
throughout the business.
Aviva's culture underpins all aspects of our
RMF and makes sure different and balanced
risk perspectives inform decision-making at
Aviva. We monitor the effectiveness of our
control consciousness and risk behaviours
through feedback from our people
throughout our businesses, regular
assessment and industry benchmarking.
1. Our risk management framework
Our risk management framework (RMF) sets
out our all-encompassing approach to risk
management throughout Aviva. As
illustrated on the figure to the left, our RMF
is made up of several key components,
including sub-frameworks for risk appetite
and key risk categories, as well as our risk
policy, governance, processes, procedures,
systems and desired behaviours and
attitudes for risk management.
2. Our risk appetite framework
Our risk appetite framework outlines the
risks we select and manage in the pursuit
of return, the risks we accept and retain at
a moderate level as part of doing business
and the risks we actively avoid or take
action to mitigate as far as practical.
Our risk appetites express the level of risk
our business is willing to accept, are set
at an aggregate level (sometimes covering
multiple risk types) and act as hard
constraints. The Group has risk appetites
for solvency, liquidity, climate, operational,
conduct and reputational risk.
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Maintaining a safe, sustainable and
competitive risk environment.
Our risk management framework
The risk appetites are supported by risk
tolerances, preferences, triggers, and limits.
3. Our risk processes and systems
The processes and systems we use to
identify, measure, manage, monitor and
report risks, including the use of our risk
models, Operational Risk and Control
Management System (ORCM) and stress and
scenario testing, are designed to enable
dynamic risk-based decision-making and
effective day-to-day risk management.
Having identified the risks to our business
and measured their impact, depending on
our risk appetite, we either accept these risks
or take action to reduce, transfer or mitigate
them.
4. Risk and capital management
The Group’s Own Risk and Solvency
Assessment (ORSA) comprises all
processes and procedures employed
to identify, measure, monitor, manage
and report the short-term and long-term
risks Aviva faces or may face. The ORSA
underpins the consideration of risk and
capital implications in key decisions and,
in particular, in strategy setting and
business planning.
For robust and reliable financial reporting
throughout the Group, we have in place
Group reporting manuals in relation to
International Financial Reporting Standards
(IFRS) and Solvency II reporting
requirements and a Financial Reporting
Control Framework (FRCF).
5. Our risk governance approach
Our governance approach includes risk
policies and business standards, risk
oversight committees (both Board and
management) and clearly defined roles and
responsibilities.
Our suite of risk policies sets out the Board’s
expectations for the management of risk
throughout the Group. The Group’s suite of
business standards sets out Aviva’s required
control objectives and minimum control
requirements for effective internal control
throughout the Group.
These control objectives include:
• the business demonstrating a
commitment to integrity and ethical
behaviour and promotes Aviva’s desired
culture and values, including in relation to
risk and control;
• reducing future losses and detriment to
customers arising from failures in
operational risk management and
controls; and
• supporting reliable reporting on the
operational risk and control environment
at all levels of the business, to increase the
confidence of the Board, Regulator and
Customers in the effectiveness and
efficiency of our operational processes.
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Line management in the business is
accountable for risk management which,
together with the risk function and internal
audit, form our ‘three lines of defence’ risk
governance model.
The roles and responsibilities of the Risk
and Audit Committees in relation to the
oversight of risk management and internal
control are set out in the Governance
section of this Report.
Integration of climate into our
risk management framework
We consider climate change to be a
significant risk to our strategy and
business model and its impacts are
already being felt. We are acting now
through our Sustainability Ambition to
mitigate and manage its impacts both
today and in the future.
Through these actions, we continue to
build resilience to climate-related
transition, physical and liability risks.
The principal risks impacted by climate
change are credit risk, market risk,
general insurance risk, life insurance
risk and operational risk.
Our risk policies (including the risk
management framework and ORSA)
to explicitly cover climate and other
sustainability risks and to integrate
these risks in our risk and control
management activities.
The Board has approved the climate
business plan as well as the risk appetite
which acts as an expression of the level
of risk we are willing to accept.
We use a variety of metrics to identify,
measure, monitor and report alignment
with global or national targets on climate
change mitigation and the potential
financial impact on our business.
We have a very low appetite for climate-
related risks which could have a material
negative impact upon our balance sheet
and business model as well as our
customers and wider society.
We actively seek to limit our exposure over
time to the downside risks arising from the
transition to a low carbon economy. We
seek to identify and support solutions that
will drive a transition to a low-carbon,
climate resilient economy.
We seek to limit our net exposure to the
more acute and chronic physical risks that
will occur in the event the Paris Agreement
target is not met. We actively avoid material
exposure to climate litigation risks including
greenwashing risk. We review and monitor
our exposure to this risk taking into account
rapidly evolving regulatory requirements.
For further details see our Climate-related
Financial Disclosure 2022 report.
The Risk Committee engages with the
Customer and Sustainability Committee
on the Climate and wider Sustainability
agenda. There are three Group-level
management committees designed to
assist members of the Aviva Executive
Committee in the discharge of their
delegated authorities and their
accountabilities within the Aviva
Governance Framework and in relation to
their defined regulatory responsibilities:
the Group Asset and Liability Committee;
the Group Executive Risk Committee and
the Group Disclosure Committee.
6. Oversight and challenge
The risk function is committed to enabling
Aviva to grow profitably, responsibly and
sustainably through oversight and
challenging how the first line optimises
our risk exposure safely with a key focus
on protecting our customers and society
for a better tomorrow. This is delivered
through our risk leadership team
specialising in financial risk, non-financial
risk (including IT, cyber, climate and
conduct), and consists of our Market CROs
and risk directors. The risk function has
been proactive on key initiatives around
climate risk and the Consumer Duty
Regulations in the year.
Three lines of defence
First line of defence
Line management
Accountable for the implementation
and practice of risk management.
Primary responsibility for risk
identification, measurement,
management, monitoring and
reporting lies with management.
Second line of defence
Risk function
Accountable for providing
quantitative and qualitative
oversight and challenge of risk
identification, measurement,
management, monitoring
and reporting, as well as advisory
support to the business on risk
innovation.
Third line of defence
Internal audit
Responsibility for assessing and
reporting on the effectiveness
of the design and operation of
the framework of internal controls
which enable risk to be assessed
and managed.
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Principal risk types
The types of risk to which the Group is exposed have not changed significantly over the year. All of the inherent risks to our business described below, and in particular operational risks,
may have an adverse impact on our brand and reputation. Our exposure to these risks and mitigating actions are set out in detail in note 58.
Types of risk inherent to our business model:
Risks customers transfer to us
Life insurance risk includes longevity risk (annuity
customers living longer than we expect), mortality risk
(customers with life protection), expense risk (the amount
it costs us to administer policies) and persistency risk
(customers lapsing or surrendering their policies). Specific
actions we have taken to mitigate life insurance risk
include use of reinsurance on longevity risk for our annuity
business and the staff pension scheme.
General insurance risk arises from loss events (for
example, fire, flooding, windstorms, accidents) and
inflation (on expenses and claims). Health insurance
exposes the Group to morbidity risk (the proportion of
our customers falling sick) and medical expense inflation.
Specific actions we have taken to mitigate general
insurance risk include use of reinsurance to reduce
the financial impact of a catastrophe and manage
earnings volatility.
Asset management risk is the risk of customers redeeming
funds, not investing with us, or switching funds, resulting
in reduced fee income. Specific actions we have taken to
mitigate asset management risk include investment
performance and risk management oversight and review
process; and client relationship teams managing client
retention risk.
Risks arising from our investments
Credit risks (actual defaults and market expectation of
defaults) create uncertainty in our ability to offer a
minimum investment return on our investments. Specific
actions we have taken:
• credit limit framework imposes limits on credit
concentration by issuer, sector and type of instrument;
• investment restrictions on certain sovereign and
corporate exposures; and
• credit risk hedging programme and asset de-risking.
Liquidity risk is the risk of not being able to make
payments when they become due because there are
insufficient assets in cash form. In September 2022,
we experienced one of the largest liquidity squeezes
in recent times. Specific actions we have taken to
mitigate this risk include:
• maintain borrowing facilities from banks, commercial
paper issuance and contingency funding plans; and
• minimum liquidity buffers and intergroup funding
helped enable us to meet collateral calls in the year
because of the sharp interest rate rises.
Market risks result from fluctuations in asset values,
including equity prices, property prices, foreign exchange,
inflation and interest rates. Specific actions we have taken
to mitigate this risk include:
• ongoing review of strategic asset allocations; and
• active asset management and hedging.
Risks from our operations and other business risks
Operational risk is the risk of direct or indirect loss, arising
from inadequate or failed internal processes, (including
those outsourced to third parties), people and systems, or
external events including changes in the regulatory
environment.
Conduct risk is the risk of causing harm to our customers,
the markets in which we operate and/or our regulatory
relationships.
Specific actions we have taken to mitigate these
risks include:
• implementation plans for new Consumer Duty
Regulations;
• actively monitoring the cyber and data threat
environment leading to actions enhancing the IT
infrastructure and cyber controls to identify, detect and
prevent attacks; and
• supplier oversight and continuity plans in case of third
party supplier failure.
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Principal risk types continued
Principal emerging trends and causal factors
The following table sets out the emerging trends and causal factors impacting our inherent risks, their impact, future outlook and how we take action to manage these risks.
We consider the individual and aggregate impact from these trends when designing and implementing our risk management processes.
Key trends and movement
Trend
Risks impacted
Risks managed
Outlook
Economic and credit cycle –
challenging prospects for future
macroeconomic growth given cost
of living pressures. Rising inflation,
higher interest rates and Sterling
weakness:
• will likely impact our customers’
savings behaviours; and
• could also impact the level of
the returns we can offer to
customers going forwards and our
ability to profitably meet our
promises of the past.
Changes in public policy – any
change in public policy (government
or regulatory) could influence the
demand for, and profitability of,
our products. In some markets,
such as Canada, there are (or could
be in the future) restrictions and
controls on premium rates, rating
factors and charges.
The nature of the UK relationship
with the EU and the EU’s treatment
of third countries in respect of
financial services has implications
for our business models for our asset
management and insurance
businesses in the EU.
Increasing
Credit risk,
Market/
Investment risk,
Liquidity risk
We limit the sensitivity of our balance sheet to investment
risks. While interest rate exposures are complex, we aim to
closely duration-match assets and liabilities and take
additional measures to limit interest rate risk. We hold
substantial capital against market risks, and we protect our
capital with a variety of hedging strategies to reduce our
sensitivity to shocks. We regularly monitor our exposures
and employ both structured and ad-hoc processes to
evaluate changing market conditions. Liquidity is managed
through maintaining sufficient buffers and taking through
asset sales or intergroup funding where required.
The current economic uncertainty continues to pose
trading risks (for example, lower margins) to the business.
Heightened volatility is expected to persist with elevated
inflation, rising interest rates, sterling weakness and
stagnating economic growth.
In 2023 the potential deterioration in global credit and
property markets caused by materially higher borrowing
costs and reduced affordability may pose a risk to our
investments. However, our solvency and group centre
liquidity positions are expected to remain within appetite.
Increasing
Operational risk
We actively engage with governments and regulators in the
development of public policy and regulation. We do this to
understand how public policy may change and to help
obtain better outcomes for our customers and the Group.
The Group’s multi-channel distribution and product
strategy and geographic diversification, although reduced
following the divestment programme, underpin the Group’s
adaptability to public policy risk, and often provides a
hedge to the risk. For example, since the end of compulsory
annuitisation in the UK, we have compensated for falling
sales of individual annuities by increasing sales of other
pension products – particularly bulk purchase annuities
and Workplace pensions.
In the UK, pressure on public finances may result in further
erosion of tax relief for pension savings and increase in
Insurance Premium Tax. The FCA have now confirmed the
new consumer duty rules, which come into effect in July
2023. In Ireland the regulator has expressed concerns over
renewal pricing and have adopted reforms similar to those
recently implemented in the UK. In Canada, where motor
premium increases are approved by provincial regulators,
pressure to minimise these will persist.
The Financial Services and Markets Bill, which will set the
post-Brexit regulatory and policy framework plus new
objectives for the financial regulators, is progressing
through Parliament. The UK has completed its review of
Solvency II and agreed a broadly positive reform package.
The reforms will now be implemented under the new
regulatory framework, although government has reserved
the right to set key aspects (including the Matching
Adjustment) in legislation.
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Principal risk types continued
Key trends and movement
Trend
Risks impacted
Risks managed
Outlook
Increasing
Operational risk
Aviva continues to develop our data science capabilities
to both inform and enable improvements in the customer
journey, our understanding of how customers interact
with us and our underwriting disciplines. Our Data Charter
sets out our public commitment to use data responsibly
and securely. Aviva is continuing to modernise its data
environment and tools to improve the management
and governance of data and deliver improved value for
our customers.
Increasing
General
insurance risk,
Life insurance
risk, Credit risk,
Market risk
Our ambition is to align our business to the 1.5oC Paris
Agreement target and aspire to be a Net Zero carbon
company by 2040. Our Climate-related Financial Disclosure
sets out how Aviva incorporates climate-related risks and
opportunities into governance, strategy, risk management,
metrics (for example, climate Value-at-Risk) and targets.
Data mastery and the effective use of ‘Big Data’ through
artificial intelligence, cognitive and advanced analytics
has and will continue to be a critical driver of competitive
advantage for insurers. However, this will be subject to
increasing regulatory scrutiny to ensure this is being
done so in an ethical, transparent and secure way.
The competitive threat to traditional insurers will continue
to persist with the potential for big technology companies
and low cost innovative digital start-ups to grow their
footprint in the insurance market, where previously
underwriting capability, risk selection and required
capital have proven to be a sufficient barrier to entry.
Aviva considers climate change to be a significant risk to
our strategy and business model and its impacts are
already being felt. Global average temperatures over the
last five years have been the hottest on record. Despite the
United Nations Framework Convention on Climate Change
Paris Agreement, the current trend of increasing CO2
emissions is expected to continue, in the absence of radical
action by governments, with global temperatures likely to
exceed pre-industrial levels by at least 2oC and weather
events (floods, droughts and windstorms) increasing in
frequency and severity.
New technologies and data – failure
to understand and react to the
impact of new technology and its
effect on customer behaviours and
how we distribute products could
potentially result in our business
model becoming obsolete. Failure
to keep pace with the use of data to
price more accurately and to detect
insurance fraud could lead to loss
of competitive advantage and
underwriting losses.
Climate change – potentially
resulting in higher than expected
weather-related claims (including
business continuity claims),
inaccurate pricing of general
insurance risk, possible changes in
morbidity and/or mortality rates,
reputational impact from not being
seen as a responsible steward/
investor, as well as adversely
impacting economic growth and
investment markets. This also
includes transition risks for our
investments relating to the impact
of the transition to a low carbon
economy and litigation risk where
we provide insurance cover.
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Principal risk types continued
Key trends and movement
Trend
Risks impacted
Risks managed
Outlook
Increasing
Operational risk
Cyber crime – criminals (including
state sponsored activity) may
attempt to access our IT systems
to steal and/or utilise company and
customer data, or plant malware
viruses to access customer funds,
company funds, and/or damage
our reputation and brand.
Stable
Life insurance
risk (longevity)
Longevity advancements (e.g. due
to medical advances) – these
contribute to an increase in life
expectancy of our annuity customers
and accordingly future payments
over their lifetime may be higher
than we currently expect.
The threat environment has remained dynamic and in
response Aviva has strengthened its perimeter controls
and enhanced our ability to identify, detect and prevent
such attacks. Aviva has measures in place to prevent and,
where required, assess and respond to data breaches.
The threat environment is actively monitored and our IT
infrastructure and cyber controls are enhanced where
necessary to prevent attacks. Aviva’s cyber defences are
regularly tested using our own ‘ethical hacking’ team as well
as through using external penetration testing to evaluate
our infrastructure. Aviva uses the Information Security
Forum (ISF) Standard of Good Practice and cross references
to ISO 27001 and the NIST Cybersecurity Framework. Aviva
conducts regular internal audits using the financial services
three lines of defence model and are audited externally at
least annually.
We monitor our own experience carefully and analyse
external population data to identify emerging trends.
Detailed analysis of the factors that influence mortality
informs our pricing and reserving policies. We add
qualitative medical expert inputs to our statistical analysis
and analyse factors influencing mortality and trends in
mortality by cause of death. We also use longevity swaps
to hedge some of the longevity risk from the Aviva Staff
Pension Scheme and longevity reinsurance for bulk
purchase annuities and for some of our individual
annuity business.
High profile cyber security incidents continue to impact
corporates globally driven by the use of destructive
malware and ransomware and this is expected to persist
in 2023. Aviva continuously monitors the external threat
environment so that our cyber investment and the
effectiveness of our controls remains appropriate to
mitigate the continued and changing nature of
cyber threats.
There is considerable uncertainty as to whether the
improvements in life expectancy that have been
experienced over the last 40 years will continue into the
future. In particular, there is likely to be a reduced level of
improvement from the two key drivers of recent
improvements, smoking cessation (as you can only give up
smoking once) and the use of statins in the treatment of
cardiovascular disease (where the most significant benefit
from use in higher risk groups has now been seen). Despite
continued medical advances emerging, dietary changes,
increasing obesity and strains on public health services
have slowed the historical trend since around 2011. In the
UK, this has led to some significant industry-wide longevity
reserve releases in recent years, as the assumptions around
future longevity improvements have been weakened.
The potential impact of the COVID-19 pandemic on medium
and longer term longevity projections, via ongoing direct
effects (e.g. endemic COVID-19) or via indirect effects
(e.g. strains on the NHS), also adds to the uncertainty and
we do not currently anticipate a material impact on the
overall outlook.
Aviva plc
1.73
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Principal risk types continued
Key trends and movement
Trend
Risks impacted
Risks managed
Outlook
Talent – an ageing workforce and
new technologies requiring new skills
will make recruitment, retention and
investing in talent increasingly
important.
Increasing
Operational risk
To attract and retain top talent we have various internal
talent development programmes, a broad variety of
graduate and apprentice schemes and a range of diversity,
equity and inclusion initiatives, including gender and
sponsorship programmes. Our ‘Aviva University’ promotes
life-long learning for colleagues supporting development of
skills in key areas such as our customers, data and digital
interactions. We have launched a new career compass to
enable colleagues to have brilliant career conversations as
well as a Data Academy. Our retention measures include
innovative policies such as flexible working and equal
parental leave as well as providing great leadership and
career progression for our people.
We expect technology and automation to increasingly change
the skills required for our workforce, and the pace of change will
accelerate the required reskilling of existing workforces and
recruitment of new talent. Our voluntary attrition has remained
consistent throughout 2022, tracking below the Financial
Services industry average. Our latest colleague survey results
are very positive with engagement rising to 86%, with 84% of
colleagues saying they intend to stay with Aviva for at least the
next 12 months. Recruitment and retention will become more
challenging as the relative size of the working-age population
declines, education systems fail to produce future generations
with the right skills in sufficient numbers and immigration
controls restrict the talent pool. Expectations of the next
generation of employees (i.e. Generation Z) will require us to
change how we operate if we are to retain talent.
Stable
Pandemic – in an increasingly
globalised world, new or mutations
of existing bacteria or viruses may be
difficult for stretched healthcare
systems to contain, disrupting
national economies and affecting
our operations and the health and
mortality of our customers.
Life Insurance
risk (mortality,
longevity,
morbidity),
General
Insurance
(business
interruption,
travel) and
Operational risk.
We have contingency plans which are designed to reduce
as far as possible the impact on operational service arising
from mass staff absenteeism, travel restrictions and supply
chain disruption caused by a pandemic, which we were
able to put into action during the recent COVID-19
pandemic. We reinsure much of the mortality risk arising
from our life protection business and hold capital to cover
the risks of a 1-in-200 year pandemic event. We model a
range of extreme pandemic scenarios including a repeat
of the 1918 global influenza pandemic and COVID-19. In the
Group and commercial insurance business we manage
our potential exposure through our policy wordings.
As an investment manager and investor, we engage with
companies on the responsible use of antibiotics to reduce
the risk that antimicrobial resistance negates the efficacy
of medical treatment.
As COVID-19 becomes endemic its long-term impact on
mortality and morbidity is uncertain and dependent
on the extent natural immunity develops in the general
population, the efficacy of new healthcare treatments
and possible future strains that may emerge. This includes
the long-term effects of Long-COVID.
Legal uncertainty over the outcome of business interruption
claims litigation arising from the COVID-pandemic is
expected to persist for a number of years.
Trends such as global climate change, urbanisation,
antimicrobial resistance and intensive livestock production
are likely to increase the risk of future pandemics, while
reductions in migration and international travel as a result
of COVID-19 have largely reversed making the containment
of future pandemics more challenging. While we expect the
experience and learnings from the recent COVID-19 will
improve the effectiveness of the public healthcare response
to any future pandemics, this is likely to be offset by
increasing strain on public healthcare from an ageing
population and stretched public finances.
Aviva plc
1.74
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Non-financial information statement
The information presented here, including
the sections referred to, represents our non-
financial information statement as required
by sections 414CA and 414CB of the
Companies Act 2006.
Our purpose is to be with you today, for a
better tomorrow. We aim to be the leading
UK provider and go-to customer brand
for all insurance, wealth and retirement
solutions, with strong businesses in Canada
and Ireland.
For further information, see Our business
model and Our strategy.
The table below outlines Aviva’s policies
across certain key, non-financial areas with
links to where further information on these
topics can be found in this Annual Report.
Our policies can be read in full at https://
www.aviva.com/sustainability/reporting/
#policies-and-response.
On the next page is a summary of how we
go about managing these aspects of our
business and measuring our performance.
Climate and environment
Employees
Social matters
Human rights
Anti-corruption
We’ve been a carbon neutral company
since 2006 and our ambition is to have
Net Zero operations and a Net Zero
supply chain by 2030, and to be Net
Zero by 2040. In March 2022 we
published our climate transition plan
setting out our pathway to achieve our
2040 ambition. We can impact the
carbon emissions of our operations
and have significant influence through
our assets under management that we
have stewardship over, alongside the
innovations and customers we support
via our insurance. To deliver on our
climate ambition, and reduce our
exposure to climate-related risk, we
focus on five key areas: accountability
and leadership, decarbonising our
investment portfolio, insuring a Net
Zero future, decarbonising our
operations and supply chain and
embedding climate in our culture.
Our focus is on unleashing the power
of our people to deliver our strategy.
We believe in a high-performance
culture and expect the highest
standards of behaviour and integrity of
our people consistent with our values.
Our Conduct and Performance Policy
sets out the standards for all
colleagues at work. Our mandatory
learning covers all the important
things employees need to know about
working at Aviva so we can protect our
business, customers and colleagues.
We also want our people to feel
comfortable sharing their insights and
experiences so we can work together
to understand the needs of all
customers and find solutions to
problems together. Our Fairness and
Equality at Work policy and its
supporting procedures help colleagues
understand what it means to work in a
way that’s fair, equal, and within the
law – and also how to raise concerns.
We do not tolerate discrimination of
any description on any grounds.
We are building stronger communities
by allocating an average of 2% of
group adjusted operating profit a year
to community investment; helping
people build financial, climate and
health resilience. We have an ambition
to help 10 million people become
more resilient from 2020 - 2025.
Through our fund management
operations, we seek to invest in assets
that can be put to positive social use,
where we can. We finance many social
infrastructure developments, including
healthcare, education, transport,
housing, water and renewable energy.
Through our life insurance companies
we have a goal to help at least 13% of
adults in the UK to save or retire
with Aviva.
Across Aviva we work with our
customers, communities and partners
to help more people get the insurance
protection and income in retirement
they need for a better tomorrow.
Our approach is to be committed to
respecting the human rights of others.
This includes preventing, addressing
and remediating any potential adverse
human rights impacts in our
operations, our business activities and
relationships, and our investments. We
continue to pursue our anti-modern
slavery agenda within our operations
and supply chain, and through our
partnerships. In 2022 we refreshed our
wider human rights approach
following our last biennial, Group-wide
human rights due diligence
assessment. In addition we widened
the scope of our supplier assessments
and selected a new Sustainability
partner - Business for Social
Responsibility (BSR). BSR will
specifically support the ongoing
development of our Human Rights and
Anti-modern slavery agendas, aiming
to identify the most salient issues
across our operations and value chain.
We will always seek to protect our
customers, shareholders, employees
and communities from financial crime.
We have a zero-tolerance approach to
acts of bribery and corruption.
All Group offices must comply with our
Financial Crime Business Standard
and associated Minimum Compliance
Standards, which include robust anti-
bribery and corruption requirements
based on the UK Bribery Act.
Our Business Ethics Code strictly
prohibits any person associated with
the Group from doing anything that
supports, encourages or facilitates
bribery and corruption.
Read more in Our sustainability
ambition and Our Climate-related
Financial Disclosure sections of
this report.
Read more in Our people section of
this report.
Read more in Our sustainability
ambition section of this report.
Read more in this report under Our
support for human rights. Also see
Our modern slavery statement on
aviva.com.
Read more about our Business
Ethics Code on aviva.com.
Aviva plc
1.75
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Non-financial information statement continued
Climate and environment
Employees
Social matters
Human rights
Anti-corruption
• In 2021 we conducted our most
• Financial Crime Business Standard
recent biennial Group-wide human
rights due diligence assessment
across all our businesses.
• Climate governance structure in place
involving board and its committees.
e
c
n
e
g
i
l
i
d
e
u
D
s
e
s
s
e
c
o
r
p
• Sustainability Ambition
Steering Committee monitors
the climate-related risks and
opportunities and evaluates
progress against targets set.
• Sustainability Business
Standard includes how we
manage material operational,
climate, environmental and
community impacts.
• Annual all colleague Voice of
Aviva engagement survey and
pulse surveys.
• People Risk dashboard and
regular tracking of HR metrics
and trends.
• Global People Business Standard
and Remuneration Standard.
• Inclusion Council and executive-
sponsored diversity, equity and
inclusion communities.
• Customer and Sustainability
Committee – oversees the
execution of the Aviva
Sustainability Ambition.
• Net Zero by 2040 ambition.
• Net Zero operations by 2030
ambition.
• Net Zero supply chain by 2030
ambition.
• A great place to work, where
• Use of Aviva's community
• The results were reviewed by
colleagues can build fantastic
careers, feel included and be
fairly rewarded.
investment and asset investments
as a force for good.
Slave Free Alliance, our external
expert partner. We have also
conducted modern slavery threat
assessments on a range of key
suppliers.
• Reduction in returns from
• Talent recruitment, retention
• Reduction in returns from
• Talent recruitment, retention
and reskilling.
investments not compatible with
transition to low-carbon economy.
• Disruption to Life or General
Insurance businesses.
and reskilling.
• Operational carbon
emissions reduction.
• Carbon intensity reduction.
s
I
P
K
• Employee engagement.
• Women in senior management.
• Ethnic diversity in senior
leadership roles.
investments in real estate and
social infrastructure.
• Macroeconomic conditions
impacting customers' capacity to
invest in our insurance, wealth or
retirement products.
• Investment in communities.
• People saving or retiring with Aviva.
s
e
m
o
c
t
u
o
y
c
i
l
o
P
s
k
s
i
r
l
a
p
i
c
n
i
r
P
l
a
i
c
n
a
n
i
f
-
n
o
N
• % of registered suppliers that
• Number of cases reported through
have agreed to Supplier Codes
of Behaviour.
Speak Up.
• % of registered suppliers that
have agreed to Supplier Codes
of Behaviour.
oversight and governance
structure.
• Ongoing group-wide bribery and
corruption risk assessment.
• Risk-based training for those acting
on Aviva’s behalf.
• Due diligence and risk rating of all
third-party relationships.
• Gifts and Entertainment and
Conflicts of Interest procedures.
• Speak Up malpractice helpline.
• Maintaining a culture of the highest
ethics and compliance with our
Business Ethics Code.
• Seeking to prevent, detect and
report financial crime, including
any instances of bribery and
corruption.
• In 2022, 131 cases were reported
through Speak Up (2021: 77).
.
• Failure to prevent, detect and report
financial crime, including instances
of bribery and corruption.
• Cyber criminals: attempting to
access our IT systems to steal or
utilise company and customer data.
Aviva plc
1.76
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Governance
2.02 Governance at a glance
2.04 Chair’s Governance letter
2.06 Our Board of Directors
2.10 How we are governed
2.16 Key board activities/Governance in action
2.20 Nomination and Governance Committee report
2.23 Audit Committee report
2.29 Customer and Sustainability Committee report
2.31 Risk Committee report
2.33 Remuneration Committee report
2.36 Remuneration at a glance
2.41 Annual report on remuneration
2.60 Directors’ Remuneration Policy
2.70 Directors’ report
Aviva plc
2.01
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Governance at a glance
Strong corporate governance delivers
value to all our stakeholders.
Governance highlights
Return of capital
The Board approved a £3.75 billion capital return to
shareholders through a B Share Scheme in addition
to the £1 billion ordinary share buyback completed
in March 2022.
Read more in
> in Governance
in action
Board diversity
The Board met diversity targets and has updated the
Board Diversity, Equity and Inclusion Statement to
recognise wider diversity factors.
Consumer duty
The Board strengthened its customer focus through
its oversight of the new Consumer Duty.
Effective
Governance
The Board streamlined governance to better align
with the size and structure of the Group.
Acquisition of
Succession
Wealth
The Board focused on investing in growth through
targeted acquisition activity that will benefit
customers and shareholders.
Read more in
> in the Nomination
and Governance
Report
Read more in
> in Governance
in action
Read more in
> in Governance
in action
Read more on
> in Governance
in action
Board priorities for 2023
Growth
Efficiency
Customers
Deliver our strategic plan, including delivering targeted, disciplined and
profitable growth.
Target top quartile efficiency with technology at the core.
Provide an engaging customer experience in the market, helping our
customers navigate the challenges of today's world.
Sustainability
Deliver progress on our ambition to become Net Zero and continue to build
stronger communities.
Aviva plc
on 9 May 2022
2.02
Board Governance focus areas1
Key
n Strategy and business plans
n Financial reporting and performance,
capital structure and dividend policy
n Significant transactions
n Oversight of risk and risk management
n Governance and Regulatory
n Sustainability
n People and culture
1. Excludes Board Committee discussions
39%
29%
16%
7%
6%
2%
2%
Board and Committee meetings attendance during 2022
Board
20
Audit
Committee
6
6/6
20/20
20/20
8/10
5/5
Number of meetings held
Chair
George Culmer
Executive Directors
Amanda Blanc
Jason Windsor1
Charlotte Jones2
Non-Executive Directors
Andrea Blance3,6
Mike Craston4
Patricia Cross5
Patrick Flynn7
Belén Romana García5
Shonaid Jemmett-Page6
Mohit Joshi8
Pippa Lambert7
Jim McConville
Michael Mire8
Martin Strobel
1. Jason Windsor resigned from the Board on 9 May 2022
2. Charlotte Jones was appointed to the Board on 5 September 2022
3. Andrea Blance was appointed to the Board on 21 February 2022
4. Mike Craston was appointed to the Board on 17 May 2022
5. Patricia Cross and Belén Romana García retired from the Board
14/16
11/11
8/9
20/20
8/9
20/20
19/20
19/20
20/20
17/20
20/20
2/3
6/6
3/3
6/6
6/6
6/6
Customer and
Sustainability
5
Nomination and
Governance
6
Remuneration
Committee
6
Risk
Committee
6
6/6
5/5
4/4
2/2
3/3
6/6
2/2
4/4
5/5
3/3
2/2
6/6
2/2
6/6
6/6
6/6
6/6
6/6
6/6
6. Meetings not attended were as a result of existing commitments in
5/5
5/5
4/5
6/6
4/4
5/6
2/2
4/5
5/6
6/6
4/4
6/6
place prior to joining the Board
7. Meetings not attended related to unscheduled meetings called at
short notice
8. Meetings were not attended due to prior commitments
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Governance at a glance continued
The tables illustrate the diversity of the Board
as at the date of this report.
Board gender diversity
Board ethnicity
Men
Women
(Other categories)
Not specified/prefer not to say
Number of Board
members
7
5
—
—
Percentage
of the Board
58%
42%
—
—
Number of senior
positions on the Board
(CEO, CFO, SID
and Chair)
2
2
—
—
White British or other White (including
minority-white groups)
Mixed/multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number of Board
members
Percentage
of the Board
Number of senior
positions on the Board
(CEO, CFO, SID
and Chair)
11
—
1
—
—
—
92%
—
8%
—
—
—
4
—
—
—
—
—
Further information on the Board policies on diversity, equity and inclusion can be found in the Nomination and Governance Committee Report.
Non-Executive Directors’ tenure
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Experience and skills1
Non-Executive
including Chair Executive
2
10
Insurance
Executive
committee
10
George Culmer
Patrick Flynn
Shonaid Jemmett-Page
Mohit Joshi
Pippa Lambert
Jim McConville
Michael Mire
Martin Strobel
Andrea Blance
Mike Craston
09/2013
1.
Individual directors may fall into one or more categories
Aviva plc
09/2019
07/2019
12/2020
12/2020
12/2021
01/2021
10/2021
02/2022
05/2022
05/2024
2.03
09/2028
07/2028
12/2029
12/2020
12/2030
01/2030
10/2030
Asset Management
Finance
People
Risk
Legal & Regulatory
Customer
Technology, Digital &
Operations
02/2031
Strategy
05/2031
Sustainability
10
10
8
7
8
6
7
9
2
1
2
1
2
2
1
1
2
1
4
8
6
8
4
5
6
8
4
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chair’s Governance letter
Good governance is central to making good decisions. It helps promote
the long-term, sustainable success of the company, and ensures we
consider the views and interests of the Group’s wider stakeholders.
Governance and strategy at Aviva
Our Governance report sets out how the
Board and its Committees operated during
2022. Our role is to set the strategy and to
ensure that Aviva continues to deliver on
that strategy.
As evidence of that focus on delivery, during
the year the Board approved a substantial
return of capital to shareholders, repayment
of debt, and further investment in our
business to promote growth and better
support our customers.
The Board also approved the acquisition
of Succession Wealth and the high-net-
worth business of Azur. These acquisitions
will support the longer-term growth of
the business.
And as a continuation of our previously
stated proposal to return surplus capital to
shareholders, I am pleased that the Board
has been able to confirm the £300 million
share buyback programme first announced
with the Half Year 2022 results.
Of course 2022 was a challenging year with
the war in Ukraine, the energy crisis and the
severe cost of living pressures.
The Board responded to these challenges in
a number of ways. The period of increasing
inflation and interest rates led to additional
support for our most junior colleagues to
help them adapt to the cost of living crisis
and for our customers through developing
new more affordable products and
propositions. Accordingly we made a one-
off payment to colleagues in the UK and
an equivalent payment to our colleagues
in Canada and Ireland. In response to our
customers' needs we supported the launch
of our new 'Essential' range of products.
The Board will continue to assess the
impact of the cost of living crisis on both our
colleagues and our customers in 2023.
The UK Corporate
Governance Code
As a UK Premium Listed company,
Aviva’s governance framework is
based on the 2018 UK Corporate
Governance Code (the Code).
The Code is publicly available at
www.frc.org.uk. Details of how we
have applied the principles and
complied with the provisions of
the Code during 2022 are set out
in this report and the Directors’
Remuneration report. The Board
can confirm that the Company was
compliant with the Code throughout
the financial year under review.
We set out how we have applied
the principles of the Code in this
report and describe how we have
engaged with our workforce and
performed our duties under s.172 of
the Companies Act 2006 within the
Strategic report.
George Culmer
Chair
“During the year the Board
approved a substantial
return of capital to
shareholders, the
repayment of debt and
further investment in our
business to promote growth
and better support our
customers.”
Aviva plc
2.04
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Chair’s Governance letter continued
Board changes
During the year there have been several
changes to the composition of the Board.
On 13 January 2022 we announced that
Jason Windsor had resigned as an Executive
Director of Aviva plc, he stepped down from
the Board with effect from 9 May 2022. I wish
to thank Jason for his commitment and
contribution during his time with us.
Following the resignation of Jason, the
Nomination and Governance Committee led
the process to identify a replacement CFO,
and on 5 September 2022 Charlotte Jones
joined the Board.
In terms of Non-Executive Directors, on
21 February 2022 Andrea Blance joined
the Board, and Mike Craston joined on
17 May 2022.
Following the AGM on 9 May 2022, Patricia
Cross and Belén Romana García retired
from the Board. Patricia joined the Board in
December 2013, and Belén in June 2015,
and they served as Chairs of the
Remuneration and Risk Committees
respectively. I would like to thank Patricia
and Belén for their contribution to the
Board and for their leadership of these
Committees during their tenure.
Diversity, equity and inclusion
The Board is committed to having a diverse,
equitable and inclusive membership. This
helps ensure we have the range of
perspectives and insight that is so important
for good decision making. I am pleased that
the Board meets the Parker Review target to
have at least one director from an ethnic
minority background and that women
account for 42% of the current Board.
In August 2022, we reviewed our Board
Diversity, Equity and Inclusion Statement,
articulating our commitment to diversity
and setting out targets for women in
leadership roles. I am pleased to report
the Statement has been expanded to
include socio-economic and educational
backgrounds, and we published the revised
Board Diversity, Equity and Inclusion
Statement on our website in January 2023.
More information on diversity, equity and
inclusion is set out in the Nomination and
Governance Committee report.
Culture
The Board continues to assess and monitor
the Group's culture. A culture diagnostic
has been developed along with associated
action plans, which the Board reviews
annually. The culture diagnostic was
updated during 2022 to add two further
measures. The culture diagnostic combines
employee sentiment with other employee
and customer data and is in addition to
our annual Voice of Aviva employee
engagement survey.
Dividend
In light of our 2022 performance and
resilient capital and liquidity, the Board
has declared a final dividend of 20.7 pence
per 32 17/19p ordinary share
(2021: 14.7 pence), bringing the full year
dividend in respect of the 2022 financial year
to 31 pence per 32 17/19p ordinary share
(2021: 22.1 pence per share).
George Culmer
Chair
8 March 2023
Aviva plc
2.05
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our Board of Directors
Key
Audit Committee
Customer and Sustainability Committee
Nomination and Governance Committee
Remuneration Committee
Risk Committee
C
Chair
Executive
Group General Counsel and
Company Secretary
Non-Executive
C
George Culmer
Position: Chair
Nationality: British
Committee membership: Nomination and
Governance Committee (Chair)
Tenure: 3 years 5 months. Appointed to the
Board as a Non-Executive Director on 25
September 2019, as Senior Independent Director
on 1 January 2020 and as Chair on 27 May 2020
Skills and experience: George brings significant
Board-level exposure with 15 years' experience as
a FTSE 100 CFO and a deep understanding of
insurance and wider financial services. George
was previously Chief Financial Officer of Lloyds
Banking Group plc and joined its board on 16
May 2012. He was formerly a director and Chief
Financial Officer of RSA Insurance Group plc;
Head of Capital Management of Zurich Financial
Services and Chief Financial Officer of its UK
operations; and held senior management
positions at Prudential plc. George has deep
insight into the challenges that affect Aviva’s
businesses and the implications for shareholders.
This makes him well placed to lead the Board in
driving the strategy, culture and values of
the Group.
External appointments: Senior Independent
Director of Rolls Royce plc.
Amanda Blanc
Position: Group Chief Executive Officer (CEO)
Nationality: British
Committee membership: N/A
Tenure: 2 years 8 months. Appointed to the
Board as a Non-Executive Director on 2 January
2020 and as CEO on 6 July 2020
Skills and experience: Amanda started her
career as a graduate at one of Aviva’s legacy
companies, Commercial Union plc. Since then
she has held senior executive roles across the
insurance industry. She was previously Group
CEO at AXA UK PPP & Ireland, and CEO, EMEA &
Global Banking Partnerships at Zurich Insurance
Group. Amanda has served as Chair of the
Association of British Insurers; Chair of the
Insurance Fraud Bureau and President of the
Chartered Insurance Institute. In 2021, she was
appointed by HM Treasury to the role of Women
in Finance Charter Champion. In September 2022
she joined the Board of BP plc, as a Non-
Executive Director. Amanda’s broad executive
experience in the insurance industry makes her
well qualified to lead Aviva.
External appointments: Non-Executive
Director of BP plc; member of the Prime
Minister’s Business Council, and GFANZ CEO
Principals Group Meeting; Co-Chair of the UK
Transition Plan Taskforce.
Charlotte Jones
Position: Group Chief Financial Officer (CFO)
Nationality: British
Committee membership: N/A
Tenure: 6 months. Appointed to the Board and
as CFO on 5 September 2022
Skills and experience: Charlotte is a qualified
Chartered Accountant. She is a director of Aviva
Life Holdings UK Limited, and its subsidiary Aviva
Life & Pensions UK Limited. She has held a
number of executive positions during her career,
including Chief Financial Officer of RSA Insurance
plc, Interim Chief Executive Officer of the RSA UK
& International business, Deputy Group CFO at
Deutsche Bank Group and Chief Financial Officer
of Jupiter Fund Management plc; with
responsibility for finance and corporate strategy.
Before that, Charlotte was Head of Group
Finance at Credit Suisse Group and an audit
partner at EY. She is a highly experienced CFO
with an impressive track record across the
insurance, banking and asset management
industries. Charlotte’s financial expertise and
strategic decision-making skills play a
fundamental role in driving Aviva towards its
strategic goals.
External appointments: None.
Aviva plc
2.06
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our Board of Directors continued
C
Patrick Flynn
Position: Senior Independent Director
Nationality: Irish
Committee membership: Audit Committee
(Chair), Nomination and Governance Committee,
Remuneration Committee, Risk Committee
Tenure: 3 years 7 months. Appointed to the
Board as a Non-Executive Director on 16 July
2019 and as Senior Independent Director on 7
September 2020
Skills and experience: Patrick is an experienced
finance executive and has significant experience
in retail, financial and insurance services. Patrick
was previously Chief Financial Officer of ING, the
Netherlands’ largest financial services group.
Prior to that, Patrick was Chief Financial Officer of
HSBC Insurance. He also served as a Non-
Executive Director of the Boards of two listed
former ING insurance companies. His experience
thoroughly equips Patrick to chair the Audit
Committee and to support the Chair as Senior
Independent Director.
External appointments: Non-Executive
Director and Audit Committee Chair of NatWest
Group plc.
C
Shonaid Jemmett-Page
Position: Independent Non-Executive Director
Nationality: British
Committee membership: Customer and
Sustainability Committee (Chair), Audit
Committee, Nomination and Governance
Committee, Risk Committee
Tenure: 1 year 2 months. Appointed to the Board
on 20 December 2021
Skills and experience: Shonaid is an
experienced director and her business leadership
and broad experience including in the financial
services, sustainability and digital sectors make
her a valuable addition to the Board. Shonaid
was previously Chair of MS Amlin and has held a
number of senior roles during her executive
career including as Chief Operating Officer of CDC
Group, Global SVP Finance and Information at
Unilever and a partner at KPMG.
External appointments: Chair of Greencoat UK
Wind Plc and Cordiant Digital Infrastructure
Limited, Senior Independent Director of
ClearBank Ltd and Non-Executive Director of
QinetiQ Group Plc.
Mohit Joshi
Position: Independent Non-Executive Director
Nationality: British
Committee membership: Nomination and
Governance Committee, Risk Committee
Tenure: 2 years 3 months. Appointed to the
Board on 1 December 2020
Skills and experience: Mohit is President of
Infosys Limited, a global leader in next-generation
digital services and consulting. He heads the
Financial Services, Healthcare and Life Sciences
business verticals for the company and is the
Chairperson for EdgeVerve, its software
subsidiary. Mohit joined Infosys in 2000 after an
initial career in banking and has over 24 years of
professional experience working across the US,
India, Mexico, and Europe. Mohit is an established
business leader in technology and transformation
and this expertise adds significantly to the skills
and expertise of the Board.
External appointments: President,
Infosys Limited.
C
Pippa Lambert
Position: Independent Non-Executive Director
Nationality: British
Committee membership: Remuneration
Committee (Chair), Customer and Sustainability
Committee, Nomination and Governance
Committee
Tenure: 2 years 2 months. Appointed to the
Board on 1 January 2021
Skills and experience: Pippa was previously
Global Head of Human Resources at Deutsche
Bank where she was responsible for leading the
development of a successful and progressive HR
transformation programme, focused on
improving the group’s culture, diversity and
inclusion and digital agendas. Prior to that, Pippa
was Group Head of Reward at the Royal Bank of
Scotland plc (now Natwest Group plc) where she
worked closely with the Board on the
redevelopment and restructure of the bank’s
compensation and benefits programme. Pippa’s
experience contributes significantly to the Board
discussions in areas relating to people and
reward matters.
External appointments: Trustee at Breast
Cancer Haven and a member of the Senior
Salaries Review Board.
Aviva plc
2.07
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our Board of Directors continued
Jim McConville
Position: Independent Non-Executive Director
Nationality: British
Committee membership: Customer and
Sustainability Committee, Audit Committee,
Nomination and Governance Committee, Risk
Committee and Remuneration Committee
Tenure: 2 years 3 months. Appointed to the
Board on 1 December 2020
Skills and experience: Jim was previously
Group Finance Director of The Phoenix Group,
where he was responsible for all aspects of the
Group’s financial strategy and management and
led the transition programme bringing Phoenix
and Standard Life Assurance together. Prior to
that he was Chief Financial Officer of Northern
Rock from 2010 to 2012, and for many years
worked for Lloyds TSB Group (now Lloyds Banking
Group plc) in a number of senior finance and
strategy related roles. Jim’s expertise makes him a
strong Chair of the Aviva Life Holdings UK Board
and its subsidiary Aviva Life & Pensions UK
Limited. Jim's experience also significantly adds
to the knowledge and expertise of the Board and
its Committees.
External appointments: Trustee of the
Leuchie Forever Fund and of the National
Galleries of Scotland.
Michael Mire
Position: Non-Executive Director
Nationality: British
Committee membership: Customer and
Sustainability Committee, Nomination and
Governance Committee
Tenure: 9 years 5 months. Appointed to the
Board on 12 September 2013
Skills and experience: Michael was most recently
senior partner at McKinsey & Company where he
worked for more than 30 years, and through his
governmental experience, he brings a unique
perspective and insight to the Board. His experience
with Department of Health and Social Care and
Care Quality Commission gives additional insight
into Aviva's Health and Protection business. Michael
has a detailed understanding of the financial
services sector, and a wealth of experience in
business transformation and developing strategies
for retail and financial services companies. This
makes Michael a valuable member of the Customer
and Sustainability Committee and Nomination and
Governance Committee.
External Appointments: Chairman of Luther
Systems Ltd, Senior Independent Director of
Realty Income Corporation and Senior Adviser
to Lazard.
Martin Strobel
Position: Independent Non-Executive Director
Nationality: Swiss
Committee membership: Audit Committee,
Nomination and Governance Committee, Risk
Committee.
Tenure: 1 year 4 months. Appointed to the Board
on 22 October 2021
Skills and experience: Martin was most recently
Senior Independent Director of RSA Insurance
plc. Prior to this he held a number of senior roles
during his career including Group CEO of Baloise-
Holding AG, Operating Partner of Advent
International and a strategy consultant with
Boston Consulting Group. Martin is an
accomplished director in insurance and private
equity, and his business leadership and non-
executive experience in both the insurance and
technology sectors make him a valuable addition
to the Aviva Board, and Chair of the Aviva
Insurance Limited Board, a wholly owned
subsidiary of Aviva plc.
External appointments: Vice Chair and Lead
Independent Director of Partners Group Holding
AG and Deputy Chair of MSG Life AG.
C
Andrea Blance
Position: Independent Non-Executive Director
Nationality: British
Committee membership: Risk Committee
(Chair), Audit Committee, Nomination and
Governance Committee and Remuneration
Committee.
Tenure: 1 year. Appointed to the Board on 21
February 2022
Skills and experience: Andrea is an experienced
financial services leader and board member who
has deep understanding of governance, the
regulatory environment and risk management,
making her a strong Chair of the Risk Committee.
Andrea spent her executive career at Legal &
General Group plc where she held a range of
senior leadership roles including Group Chief Risk
Officer and Strategy & Marketing Director. More
recently, Andrea has been Senior Independent
Director and Audit Committee Chair at ReAssure
plc and Risk Committee Chair at Scottish Widows
plc and Lloyds Banking Group Insurance.
External appointments: Non-Executive
Director of Hargreaves Lansdown plc and
Senior Independent Director of Vanquis Banking
Group plc.
Aviva plc
2.08
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Our Board of Directors continued
The full biographies for all our Board
and Executive Committee members
are available online at
> www.aviva.com/about-us
Mike Craston
Position: Non-Executive Director
Nationality: British
Committee membership: Customer and
Sustainability Committee and Nomination and
Governance Committee
Tenure: 9 months. Appointed to the Board as a
Non-Executive Director on 17 May 2022
Skills and experience: Mike is Chair of Aviva
Investors Holdings Limited, having been appointed
in September 2017. He is also Chair of the Aviva
Investors Nomination Committee, and of Aviva
Investors Canada Inc. He is a Non-Executive Director
of Aviva Investors Pensions Ltd, Aviva Investors UK
Funds Services Ltd and Aviva Investors North
America Holdings, Inc.
Mike joined Aviva Investors in 2016 as a member of
the Global Executive Committee responsible for
leading the global business development function.
Prior to this he held a number of roles at Legal &
General including that of CEO America and Asia, and
senior positions at Aegon Asset Management,
Scottish Equitable and Schroders, making him well
positioned to serve the Board and its Committees.
External appointments: Chairman of Railpen
Investments Limited, London LGPS CIV Ltd, and
ThomasLloyd plc, Pension Defined Contribution
Schemes Governance Committee member of
Tesco plc.
Kirstine Cooper
Position: Group General Counsel and Company
Secretary
Nationality: British
Committee membership: N/A
Tenure: 12 years 3 months. Appointed as
Company Secretary in December 2010 and a
member of the Executive Committee in July 2012
Skills and experience: Kirstine has over 30
years’ experience at Aviva and is a trusted advisor
to the Board. As a qualified solicitor Kirstine is
able to execute the role of Company Secretary by
advising the Board on governance issues and the
regulatory environment. Kirstine established the
legal and secretarial function as a global team
and is responsible for the provision of legal
services to the Group. She also leads the Group
Investigations team. From March 2016 to March
2017, Kirstine was the Commissioner on the
Cabinet Office’s Dormant Assets Commission.
External appointments: Trustee of the Royal
Opera House and Non-Executive Director of HM
Land Registry. Kirstine is also Insurance and
Pension Champion for the expanded Dormant
Assets scheme.
Aviva plc
2.09
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
How we are governed
Board and Committee structure
The Board is collectively responsible for promoting the long-term, sustainable success of the Company through seeking to generate value for shareholders while fulfilling its
responsibilities to all of our stakeholders and contributing positively to the societies in which we operate. One of the Board’s key roles is to determine our shared purpose and to set and
uphold the Group’s values, standards and ethics which combine to create our corporate culture. We recognise that there is a clear link between our culture and our conduct, both with
regards to our customers and to the way in which governance operates across the Group.
Governance framework
Nomination and
Governance Committee
Assists the Board in its
oversight of Board
composition; Board and
executive succession; talent
development; diversity, equity
and inclusion initiatives; and
the operation of the Group's
governance framework
and Aviva’s subsidiary
governance principles.
The Board
Each Committee Chair reports to the Board on activities after each meeting
Risk Committee
Assists the Board in its
oversight of risk by assessing
the effectiveness of the
Group’s risk management
framework, risk strategy, risk
appetite and risk profile; the
methodology used in
determining the Group’s
capital requirements and
stress testing these
requirements; assessing the
adequacy of the Group’s
system of non-financial
reporting controls; ensuring
due diligence appraisals are
carried out on strategic or
significant transactions; and
compliance with prudential
and conduct regulatory
requirements.
Audit Committee
Assists the Board in its
oversight of financial, climate-
related and non-financial
reporting by assessing the
integrity of the Company’s
financial, climate-related and
non-financial statements and
related announcements;
monitoring the adequacy of
controls over financial,
climate-related and non-
financial reporting; monitoring
the Group’s whistleblowing
policies; and monitoring
the independence and
performance of the internal
audit function and the
external auditors.
Customer and
Sustainability Committee
Assists the Board in its
oversight of the Group’s
customer strategy and
Aviva's Sustainability
Ambition, with responsibility
for overseeing Aviva's
ambition to be a leading
customer-centric company.
Works with the Risk
Committee to oversee
alignment of the Aviva
Sustainability Ambition with
risk management and with the
Audit Committee on climate-
related disclosures. Formerly
the Customer, Conduct and
Reputation Committee.
Remuneration Committee
Assists the Board in its
oversight of remuneration
by reviewing the Group
Remuneration Policy; the
Directors’ Remuneration
Report; approving
remuneration packages for
the Non-Executive Chair and
Group Executive Committee;
reviewing the approach for the
remuneration of regulated
employees; and wider
workforce remuneration and
policies. Works with the Risk
Committee to ensure the
alignment of incentive
and reward with risk
management.
Read more
> Nomination and Governance
Read more
> Risk Committee report
Read more
> Audit Committee report
Read more
> Customer and Sustainability
Committee report
Read more
> Remuneration
Committee report
Committee report
Aviva plc
2.10
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
How we are governed continued
In order to ensure there is a clear division of
responsibilities between the running of the
Board and the running of the business, the
Board has identified certain reserved
matters for its approval. In relation to other
matters, unless they are specifically reserved
for shareholder approval in a general
meeting, the Board delegates responsibility
for these to our Group CEO, who then
delegates responsibility for specific
operations to members of the Group
Executive Committee.
The Board has established committees to
assist in fulfilling its oversight and other
responsibilities, providing dedicated focus
in these areas.
The Board
As at the date of this report the Board is
comprised of a Non-Executive Chair, two
Executive Directors, seven independent
Non-Executive Directors and two Non-
Executive Directors who are not considered
independent. Details of the role of the Board
and its committees are described in this
section and the duties of the Board and
of each of its committees are set out in
their respective Terms of Reference (ToR).
The committees’ ToR can be found on the
Company’s website at www.aviva.com/
committees and are also available on
request from the Group Company Secretary.
The ToR list both matters that are
specifically reserved for decision by our
Board and those matters that must be
reported to it.
The Board delegates clearly defined
responsibilities to its committees and
reports from the Audit, Customer and
Sustainability, Nomination and Governance,
and Risk Committees are contained in this
section. A report from the Remuneration
Committee is included in the Directors’
Remuneration report.
Division of responsibility
Consistent with the Code and the Senior
Managers and Certification Regime (SMCR),
role profiles for the Non-Executive Chair,
Senior Independent Director (SID),
Group CEO and Non-Executive Directors
are all available at www.aviva.com/about-
us/roles.
The Chair is tasked with leadership of the
Board, setting its agenda, ensuring its
effectiveness, and enabling the constructive
challenge of the performance and strategic
plans of the Executive Directors by the Non-
Executive Directors. The Chair also plays
a key role in working with the Board to
establish our culture, purpose and values.
The Group CEO is the senior executive of
the Company and has overall accountability
for the development and execution of the
Group’s strategy in line with the policies
and objectives agreed by the Board.
The role of the SID is to provide a sounding
board for the Chair and to serve as an
intermediary for the other directors where
necessary. The SID should be available to
shareholders should they have concerns
they have been unable to resolve through
normal channels, or when such channels
would be inappropriate.
The Committee also carefully considered
the continued independence of Michael
Mire, who reached nine years tenure on
12 September 2022. As a result, and with
effect from that date, Michael was no longer
considered to be independent and stood
down from the Risk and Remuneration
Committees. The Nomination and
Governance Committee reviewed the Board's
tenure profile and the recent refreshment
activity that had been undertaken.
Following careful consideration, the
Committee considered that Michael
continues to provide constructive challenge
and robust scrutiny of matters that are
brought to the Board for consideration.
Accordingly, while no longer considering
Michael to be independent, the Committee
recommended that Michael remain on the
Board to provide continuity while the newer
Board appointees fully embed in their roles.
In line with the Code, over half of our Board
members, excluding the Chair, are
independent Non-Executive Directors.
Throughout the year the Chair held several
meetings with the Non-Executive Directors
without management present. Additionally,
the SID met with the other Non-Executive
Directors without the Chair present to
discuss any matters they wished to raise
and to review the Chair's performance.
Board independence
During the year the Nomination and
Governance Committee assessed the
independence of the Non-Executive
Directors to ensure that they are able to
properly fulfil their roles on the Board and
provide constructive challenge to the
Executive Directors. The independence
criteria set out in the Code was taken into
account as part of the selection process
for the two Non-Executive Directors who
joined Aviva during 2022.
During 2022, the Committee determined
that all Non-Executive Directors were free
from any relationship or circumstances
that could affect, or appear to affect,
their independent judgement except
Mike Craston and, for part of the year,
Michael Mire. Mike Craston was appointed
to the Board on 17 May 2022, and was not
considered to be independent due to
his previous executive role within Aviva
Investors terminating within the five year
period stipulated in the Code.
Aviva plc
2.11
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
How we are governed continued
Time commitment
It is vital to the proper functioning of our
Board and committees that each Non-
Executive Director is able to commit
sufficient time to their role in order to
discharge their responsibilities effectively. In
January 2023 the Nomination and
Governance Committee assessed the Non-
Executive Directors’ time commitment
considering both the time required for the
Aviva Board and Committee appointments
and the number and nature of the Directors’
external commitments and reported the
outcome to the Board.
In particular the Nomination and
Governance Committee carefully
considered the time commitments for
Shonaid Jemmett-Page, taking into account
investor guidelines and voting policies and
their application to Shonaid’s current
directorships.
The Committee also reviewed in detail her
portfolio, her overall capacity and her Chair
roles on two investment trusts, which have a
lesser time commitment than other listed
company roles. In addition, the Committee
noted that on 24 October 2022 it was
announced that Shonaid would retire from
the board and as Chair of Greencoat UK
Wind Plc at its 2023 AGM. Following its
review, and noting her retirement from the
Board of Greencoat UK Wind Plc, the
Committee considered Shonaid to have
sufficient time to dedicate to her role as
an Independent Non-Executive Director
of Aviva.
The Board also considered and approved a
number of additional external director
commitments. On 12 May 2022, George
Culmer was appointed as Senior
Independent Director at Rolls Royce plc,
having previously served as a Non-Executive
Director since January 2020.
In February 2022, Amanda Blanc was
appointed Co-Chair of the UK Transition
Taskforce, an organisation seeking to assist
in the development of 'gold standard'
private sector climate transition plans.
On 2 August 2022, Amanda was appointed
as an Independent Non-Executive Director
of BP plc with effect from 1 September 2022,
supporting BP as it transforms into an
integrated energy company. Amanda was
also appointed to the Remuneration
Committee and the People and Governance
Committee of BP plc from 1 January 2023.
On 4 July 2022, Mike Craston was appointed
as Non-Executive Chair of ThomasLloyd plc.
The time commitment involved in these
appointments were assessed by the Board
who determined that George, Amanda
and Mike all continued to have sufficient
time to commit to the Aviva Board and
their committee appointments. The SID
reviewed the time commitment of the
Chair as part of his annual review of the
Chair's performance.
During the year, all Non-Executive Directors
have continued to demonstrate that they
have sufficient time to devote to their
present role within Aviva, including during
any potential periods of corporate stress.
Conflicts of interest
In accordance with the Companies Act 2006,
the Company’s Articles of Association allow
the Board to authorise potential conflicts of
interest that may arise and to impose such
limits or conditions as are deemed
necessary. The decision to authorise a
conflict of interest can only be made by non-
conflicted directors (those who have no
interest in the matter being considered) and
in making such a decision the directors
must act in a way they consider, in good
faith, will be most likely to promote the
success of the Company for the benefit of its
shareholders as a whole. The Board
continues to monitor and note any potential
conflicts of interest that each Director may
have and recommends to the Board
whether these should be authorised and
whether conditions should be attached to
any such authorisation.
The directors are regularly reminded of their
continuing obligations in relation to
potential or actual conflicts of interest and
are required to bi-annually review and
confirm their external interests, which helps
to determine whether they can continue to
be considered independent.
The Board carefully considered any
potential conflicts of interest in relation to
the appointment of Amanda Blanc as an
Independent Non-Executive Director of BP
plc and Mike Craston as Non-Executive Chair
of ThomasLloyd plc.
It determined that no actual conflicts
existed at the time of the appointments, and
that any conflicts that may later arise would
be managed in accordance with the Group
Conflicts of Interest Policy.
Independent advice
All directors have access to the advice and
services of the Group Company Secretary in
relation to the discharge of their duties on
the Board and any committees they serve
on. Furthermore, any directors may take
independent professional advice at the
Company’s expense. During the year, no
directors sought to do so.
The Company arranges appropriate
insurance cover in respect of legal actions
against its directors and has also entered
into indemnities with its directors as
described in the Directors' Report section of
this report.
Induction, training and
development
A commitment to support the continuing
development of all employees is a central
part of Aviva’s culture. Our directors are
highly supportive of this and are committed
to their own ongoing professional
development. During 2022, the directors
participated in internal training sessions on
subjects including whistleblowing, climate
change and sustainability, Consumer Duty
regulation and IFRS 17. Further training
sessions have been incorporated into the
Board and Committee plans for 2023.
Aviva plc
2.12
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
How we are governed continued
The Board also receives regular briefings on
a range of strategically important matters to
ensure they are informed of developments
in these areas.
A structured and tailored induction
programme was prepared for each of our
newly appointed Non-Executive Directors
and Group CFO. This covered, amongst
other matters, the current financial and
operational plan; meeting packs and
minutes from recent Board and Committee
meetings; stakeholder engagement;
organisation structure charts; a history of
the Group; role profiles; and all relevant
policies, procedures and other governance
material. The induction also included
meeting key members of the management
team and the external and internal auditors.
Any knowledge or skill enhancements
identified during the directors’ regulatory
application process were also addressed
through directors' induction programmes.
Board calendar
During 2022, 20 Board meetings were held,
of which 13 were scheduled meetings and
seven were additional meetings called to
approve certain strategic matters. In
addition, the Board delegated responsibility
for certain items to specially created Board
Committees which met six times to discuss
these items.
If any directors are unable to attend a
meeting, they can communicate their
opinions and comments on the matters to
be considered via the Chair of the Board or
the relevant Committee Chair.
The Board visited our York offices in
April 2022, and the Perth office in
September 2022.
In June 2022, the Board held its annual two-
day strategy meeting at an offsite location
to review progress against our strategic
priorities and to consider how these should
be further developed to ensure we deliver
on our commitments to our shareholders
and our wider stakeholders.
Communication with
shareholders
The Company places considerable
importance on communication with
shareholders. The Executive Directors have
an ongoing dialogue and a programme of
meetings with institutional investors, fund
managers and analysts which are managed
by the Company’s investor relations
function. The Chair also meets with all the
Group’s major shareholders. At those
meetings a range of issues is discussed
within the constraints of information
already made public to understand
shareholders’ perspectives. Shareholders’
views are regularly communicated to the
Board through reports from the Group CEO
and Group CFO and weekly briefings from
our corporate brokers and the Investor
Relations function. The SID was available to
meet with major investors to discuss any
concerns that could not be resolved through
normal channels. Further detail on our
engagement with shareholders is set out in
the 'Our Stakeholders' section of the
Strategic Report.
2023 Annual General Meeting
(AGM)
The 2023 AGM will be held on Thursday 4
May 2023 and the Notice of AGM and related
papers will be sent to shareholders at least
20 working days before the meeting.
To enable a diverse segment of our
shareholder base to more easily attend our
AGM, the meeting this year will be held in
Norwich at the premises of Norwich City
Football Club. The AGM provides a valuable
opportunity for the Board to communicate
with private shareholders. Shareholders are
invited to ask questions related to the
business of the meeting at the AGM and a
presentation will be given on the Group’s
performance. Further details on the AGM are
provided in the 'Shareholder Services'
section of this report.
Other disclosures relevant to our Board are
included in this report and the reports of our
Committees and in the Directors' report.
Systems for risk management
and internal controls
The Board is responsible for promoting the
long-term success of the Company for the
benefit of shareholders, as well as taking
account of other stakeholders including
employees and customers. This includes
putting in place throughout the Group an
appropriate system of risk governance. To
discharge this responsibility, the Board has
established frameworks for risk
management and internal control using a
‘three lines of defence’ risk governance
model and reserves for itself the setting of
the Group’s risk appetite.
In-depth monitoring of the establishment
and operation of prudent and effective key
controls for assessing and managing the key
risks associated with the Group’s operations
is delegated to the Risk, Customer and
Sustainability and Audit Committees which
report regularly to the Board. However, the
Board retains ultimate responsibility for the
Group’s systems of risk management and
internal control and has reviewed their
effectiveness during the year.
The systems for risk management and
internal control play a key role in the
management of risks that may impact
the fulfilment of the Board’s objectives.
They are designed to identify and manage,
rather than eliminate, the risk of the Group
failing to achieve its business objectives
and can only provide reasonable and not
absolute assurance against material
misstatement or losses. The systems are
regularly reviewed and were in place for
the financial year under review and up to
the date of this report. They help the Group
comply with the Financial Reporting
Council’s (FRC) guidance on risk
management, internal control and related
financial and business reporting.
At the mid-year 2022, the Risk Committee,
on behalf of the Board, carried out a robust
assessment of the Group’s emerging and
principal risks. This exercise was repeated in
January 2023. The outcome of these
assessments was reported to and discussed
at the Board.
Aviva plc
2.13
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
How we are governed continued
In addition to these assessments, the Risk
Committee monitored and assessed the
principal risks facing the Group, the
conclusions of which were also shared with
and discussed by the Board. The
assessments included those emerging risks
that could impact the Group’s business
model, future performance, solvency and
liquidity and therefore required
management prioritisation and action.
Specifically the Board considered the
principal risks facing the Group when
approving the Group business plan.
In 2022, the Risk Committee received updates
on emerging risks and associated mitigating
actions covering the developing conflict in
Ukraine, cyber security, risks posed by
climate change and sources of economic
uncertainty, including inflation. The
Customer and Sustainability Committee
(previously the Customer, Conduct and
Reputation Committee) also received
updates on emerging threats to the Group’s
reputation and conduct risk profile.
Emerging risks were also considered by the
Risk Committee and management in the
design of scenarios which are intended to
stress test the Group’s three-year business
plan, recovery plan, climate change impacts,
decisions on the return of capital to
shareholders and operational resilience.
Aviva’s approach to risk management
together with the principal risks that face
the Group are explained within the 'Our risks
and risk management' section of the
Strategic report.
Risk management framework
Aviva's risk management framework (RMF)
is designed to identify, measure, manage,
monitor and report the principal risks to
the achievement of the Group’s business
objectives and is embedded throughout
the Group.
It is codified through risk policies, business
standards and risk management
frameworks which set out the approach to
risk management, risk appetite and the
minimum requirements and key controls for
the Group’s operations.
Internal controls
Internal controls facilitate effective and
efficient operations, the development of
robust and reliable internal reporting and
compliance with laws and regulations.
Group reporting manuals in relation to the
latest International Financial Reporting
Standards and Solvency II reporting
requirements and a Financial Reporting
Control Framework (FRCF) are in place
across the Group.
The FRCF relates to the preparation of
reliable financial reporting, covering IFRS,
Solvency II, Alternative Performance
Measures (APM) and local statutory
reporting activity. The FRCF methodology
leverages best practice, including
consideration of elements of the Sarbanes
Oxley Act (2002), relating to assessment of
Internal Controls over Financial Reporting.
The methodology follows a risk-based
approach, considering the likelihood of
material misstatement, with management
identification of the areas of higher risk,
assessment of design adequacy and
operating effectiveness of related controls
(documentation and testing), remediation
of identified deficiencies (as required),
reporting and certification over key
financial reporting related controls.
We have a similar Non-Financial Reporting
Control Framework (NFRCF) relating to the
preparation of our climate and non-
financial reporting disclosures.
Any open financial reporting deficiencies
are assessed for the Group as a whole, in
isolation and in aggregate, considering the
impact on the financial reporting control
environment. Materiality is used to assess
whether any deficiency constitutes a
material weakness in our financial reporting
control environment. The assessment is
presented to the Group Audit Committee on
a quarterly basis through reports on the
identification and resolution of control
deficiencies which are also shared with the
external auditors.
Based on its assessment, management
has concluded that, as of 31 December
2022, Aviva Group’s internal controls over
financial reporting are effective.
During 2022, the Aviva Group has continued
to focus on strengthening the internal
controls, overseeing assurance over non-
financial information, including
sustainability and ESG disclosures, and in
continuing to assess the impact from the
Business, Energy and Industrial Strategy
(BEIS) consultation on 'Restoring trust in
audit and corporate governance'.
Management will continue to progress on
these topics and monitor the impact of the
audit and corporate governance reforms
until final requirements are confirmed. The
Aviva Group has also continued to focus on
operational risks to the financial plan,
including people, cyber, operational
resilience and transformation based risks.
Further information is in the 'Our risks
and risk management' section of the
Strategic report.
By March 2022, Aviva had implemented
the initial FCA and PRA policy around
operational resilience (PS21/3). The initial
activity was refreshed throughout the
remainder of 2022, with work being focussed
on extending the breadth and depth of
mapping of our important business services
and developing our approach to stressing
our resilience and recovery capabilities
against severe but plausible scenarios.
Board Oversight of Risk
Management
The Board’s delegated responsibilities
regarding oversight of risk management and
the approach to internal controls are set out
above. There are good working
relationships between the Board
committees, and they provide regular
reports to the Board on their activities and
escalate significant matters where
appropriate.
The responsibilities and activities of each
Board Committee are set out in the
Committee reports.
Aviva plc
2.14
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
How we are governed continued
Assessment of Effectiveness of
Risk Management
Each business unit Chief Executive Officer is
required to make a declaration that the
Group’s governance, and system of internal
controls are effective and are fit for purpose
for their business and that they are kept
under review throughout the year.
Any material risks not previously identified,
key control weaknesses or non-compliance
with the Group’s risk policies or local
delegations of authority must be highlighted
as part of this process. This is supplemented
by investigations carried out at Group level
and a Group CEO and CRO declaration for
Aviva plc.
The effectiveness assessment draws on the
regular cycle of assurance activity carried
out during the year, as well as the results of
the annual assessment process. During
2022, this has been supported by the
application of the Group’s Operational Risk
& Control Management (ORCM) framework.
The details of key failings or weaknesses are
reported to the Risk and Audit Committees
and the Board on a regular basis and are
summarised annually to enable them to
carry out an effectiveness assessment.
The Risk Committee, working closely with
the Audit Committee, on behalf of the Board
carried out a full review of the effectiveness
of the systems of risk management and
internal control during the year, covering all
key controls, including financial, operational
and compliance controls and the RMF.
In addition, internal audit plays a significant
role in contributing to the routine ongoing
assessment of the Group’s RMF. There has
been regular reporting to the Risk
Committee throughout the year so that the
main outstanding areas of improvement
identified in 2021 (relating primarily to risk
transformation activity) had been largely
remediated by the end of 2022.
The reports to the Audit and Risk Committees
also enabled ongoing oversight of the
management of any transitional service
arrangement risks associated with the
businesses divested during 2021 and 2022.
Areas of continued focus remain the
operational risk and control environment
risk profile, cyber security and risk
management through major change.
Specific areas for improvement continued
to be mitigated in India, which became a
majority owned subsidiary in September
2022. The Risk Committee, working in
conjunction with the Audit Committee, on
behalf of the Board, will continue to monitor
the effectiveness of risk management
throughout 2023.
The RMF of Aviva’s international
investments, including China and Singapore
joint ventures, can differ from the RMF
outlined in this report but with a strong
focus on local regulatory compliance. We
continue to work with these entities so that
their residual risk profiles do not unduly
increase the Group’s overall risk profile
compared to Group’s risk appetite.
The principal committees that oversee risk management
The Risk Committee
The Audit Committee
Assists the Board in its oversight of risk and risk management across the Group and makes
recommendations on risk appetite to the Board. Reviews the effectiveness of the RMF, and the
methodology in determining the Group’s capital and liquidity requirements. Ensures that risk
management is properly considered in setting remuneration policy.
Works closely with the Risk Committee and is responsible for assisting the Board in discharging its
responsibilities for the integrity of the Group’s financial statements, the effectiveness of the system of
internal controls and for monitoring the effectiveness, performance and objectivity of the internal and
external auditors. The Committee works with the Customer and Sustainability Committee on climate-
related and non-financial disclosures. The Committee also recommends the appointment and
remuneration of external auditors.
Aviva plc
2.15
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Key board activities/Governance in action
Calendar of events 2022
March
• Approved publication of Full Year
Results 2021
p2.17
• Approved £3.75 billion Capital Return
via ‘B’ share issuance
p2.19
• Approved acquisition of
Succession Wealth
May
• Approved the Q1 trading update
November
• Approved the Q3 trading update
• Approved redemption of the £502 million
• Reviewed a Group Strategic
Delivery update
• Reviewed the Asset Exclusion Policy
p2.19
• Reviewed the progress of our customer
strategy and the new Consumer Duty
6.125 % fixed rate perpetual reset
notes at the first call date on the
29 September 2022
• Approved a new issue of £500 million of
restricted tier 1 securities, subject
to market conditions
• Reviewed a Group Strategic Delivery
update
p2.18
• Streamlined our governance
arrangements to better align with the
size and shape of the Group
December
• Approved the 2023-2025 Group
Financial Plan
• Reviewed the Voice of Aviva Results
and Culture Diagnostic
• Reviewed the Workforce of the
Future outcomes
April
• Board offsite visit to the business unit
operations in York
• Approved appointment of
Charlotte Jones as CFO
June
• Dedicated strategy offsite
August
• Approved Half Year 2022 Results
September
Board offsite visit to the business unit
operations in Perth
Aviva plc
2.16
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Key board activities/Governance in action continued
Outcomes from the 2022 Board evaluation and steps to be taken in 2023
Focus area
Theme
Feedback/actions
Customer
strategy
Becoming the go to
brand for Insurance,
Wealth and Retirement
The Board will continue to focus on delivery of our
customer strategy to meet more of our customer needs
while moving us towards our ambition to be the
number one brand for trust and consideration across
all our Insurance, Wealth and Retirement markets.
Drivers for
growth
Continuing to achieve
profitable growth
The Board will enhance its focus on the key drivers
of growth and review and support delivery of the
change agenda.
Oversight
of change
Ensuring sufficient
change management
capability
The Group's capability for change as it delivers our
customer strategy is crucial and the Board will
continue to focus on change management execution
and change risk.
Board and Committee
evaluation
The effectiveness of the Board is vital to
the success of the Group. The Board
undertakes a rigorous evaluation process
each year to assess how it, its Committees
and individual directors are performing.
In line with the Code, the Board instructed
Lintstock Limited to conduct an externally
facilitated evaluation in November and
December 2022. Lintstock Limited provides
external board evaluation services and
has no other connection with Aviva or
its directors. The evaluation was
conducted through a questionnaire
completed by all directors and the results
of the evaluation were presented and
discussed at the Board in January 2023.
Following this discussion, the Board
agreed the key areas of focus, and
an action plan to address these specific
areas as shown in the table above. All
actions from the 2021 Board evaluation
were addressed during 2022.
The evaluation also assessed the
effectiveness of each of the Board
Committees. The current Committee
structure was considered effective and the
Audit, Nomination and Governance, Risk
and Remuneration Committees were all
considered to be working effectively.
The remit of the Customer and
Sustainability Committee has evolved
during the course of the year to focus more
on customer and sustainability in line with
the Group’s strategic priorities and will
continue to be embedded during 2023.
Capital return
During 2021, the Board delivered on its
strategy to focus the portfolio on the
UK, Ireland and Canada where our
businesses have market-leading
positions and to undertake a
programme of divestment for our other
businesses. On 2 March 2022, we also
delivered on our promise to make a
substantial capital return to
shareholders and announced a £3.75
billion return of capital to ordinary
shareholders via a B Share Scheme.
This was in addition to the £1 billion
share buyback which was completed on
31 March 2022. Ordinary shareholders
approved the B Share Scheme at the
General Meeting on 9 May 2022.
As part of the return of capital, and
recognising that our people are central
to our success, the Board approved the
award of £1,000 in Aviva shares to each
of our 22,000 employees. Later in the
year, the Board considered and approved
the payment of £10 million in unclaimed
payments from the B Share Scheme to
the Aviva Foundation to support a range
of community organisations focused
on financial inclusion and community
resilience. The Board has ensured that
Aviva continues to maintain its financial
strength while returning capital and had
an estimated Solvency II shareholder
cover ratio of 212% at 31 December 2022.
Aviva plc
2.17
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Key board activities/Governance in action continued
Effective governance
Following our successful programme
of divestment in 2021, the Board
commissioned a rigorous review
of governance arrangements to
streamline and better align
governance to the size and structure
of the remaining Group. This review
has resulted in more efficient use
of Board and Committee time, for
example, to further increase the time
available to set and monitor delivery
of our strategy.
During the year, the Board also approved
the change in the remit of the Customer,
Conduct and Reputation Committee
which became the Customer and
Sustainability Committee. The objective
of the change in remit was to allow
more detailed oversight of these two
key areas of strategy.
To further strengthen the linkage
between the Board and the boards of
our principle operating entities, the
Aviva plc Board approved the
appointment of two of its members,
Jim McConville and Martin Strobel, as
Chairs of Aviva Life & Pensions UK
Limited, and Aviva lnsurance Limited,
respectively. In addition, Mike Craston,
Chair of Aviva Investors Holdings Limited
was appointed to the Board of Aviva plc.
Aviva plc
2.18
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Key board activities/Governance in action continued
Acquisition of Succession Wealth
On 2 March 2022 the acquisition of
Succession Wealth was announced.
The acquisition was part of the strategy
to drive growth by enhancing Aviva's
position in the fast growing UK wealth
market and to offer high-quality
financial advice to a significant
number of our six million pension
and savings customers without
an existing advisor. The business
acquired has a proven track-record
of consolidating advice firms and
delivering improved client outcomes.
The acquisition of Succession Wealth
supported delivery on one of the
Board's priorities for 2022 to focus
on 'bolt on' acquisitions, to support
the aim of delivering growth in our
business. The acquisition is expected
to deliver a double digit return on
capital invested in the medium term
and was funded from Aviva's strong
capital position.
Customers and Consumer Duty
The Board, together with the Customer
and Sustainability Committee, has
reviewed the new Consumer Duty
and its alignment with the customer
strategy. The Board's focus was to
ensure that the new Consumer Duty
framework was fully embedded and all
interdependencies with our customer
strategy were understood and
appropriate oversight was in place.
The Board has conducted deep
dives into the new Consumer Duty
regulations and the customer
experience more generally and
designated Consumer Duty champions
have been identified for Aviva Plc and
all our principal regulated entities.
All UK businesses are prepared to
implement the requirements of
Consumer Duty Regulations during
2023.
Aviva plc
2.19
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Nomination and Governance Committee report
George Culmer
Chair, Nomination and
Governance Committee
“During the year, the
Committee reviewed
the skills, experience
and diversity on the
Board and led the
selection process for the
appointments of Andrea
Blance, Mike Craston
and Charlotte Jones.”
Key committee activities during 2022
• The Committee led the selection
process for the appointment of Non-
Executive Directors to the Board.
• The Committee led the appointment
process for the appointment of
Charlotte Jones as Chief Financial
Officer on 5 September 2022.
• The Committee reviewed the
succession plans and the talent
development framework for senior
executives and continued to oversight
the governance and effectiveness of
the Group's subsidiary boards.
Committee at a glance
Committee membership
and meeting attendance
Name
George Culmer (Chair)
Andrea Blance
Mike Craston
Patrick Flynn
Shonaid Jemmett-Page
Mohit Joshi
Pippa Lambert
Jim McConville
Michael Mire
Martin Strobel
Appointed
25/09/19
21/02/22
09/08/22
16/07/19
20/12/21
01/12/20
01/01/21
01/12/20
12/09/13
22/10/21
Meeting
attendance
6/6
5/5
3/3
6/6
6/6
6/6
6/6
6/6
6/6
6/6
I am pleased to present the
Nomination and Governance
Committee (the Committee)
report for the year ended
31 December 2022.
Committee purpose
The Committee assists the Board in its
oversight of Board composition; Board
and executive succession; talent
development; diversity, equity and
inclusion initiatives; and the operation of
the Group’s governance framework and
Aviva’s subsidiary governance principles.
2023 priorities
• Continue to focus on succession planning
at the Board and senior management
level to develop a strong and diverse
talent pipeline.
• Continue to oversee the governance
arrangements of, and engagement with,
our subsidiary boards.
Committee membership
Andrea Blance joined the Committee
upon her appointment on 21 February
2022 and Mike Craston was also appointed
to the Committee on 9 August 2022.
Patricia Cross and Belén Romana García
both retired from the Committee at the
Annual General Meeting on 9 May 2022.
Details of members’ experience,
qualifications and attendance at
Committee meetings, together with the
number of Committee meetings held
during the year, are shown in the ‘Our
Board of Directors’ and 'Governance at a
glance' sections of the Governance report.
As already noted, whilst the Committee
no longer considered Michael Mire
to be independent, he continued
to contribute positively to the
Committee discussions as a member
of the Committee.
Aviva plc
2.20
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Nomination and Governance Committee report continued
Board and executive
succession planning
The 2018 UK Corporate Governance Code
(the Code) places an emphasis on
succession planning and the Committee
continues to build on its existing processes
to strengthen its focus in this area.
The Committee, on behalf of the Board,
assesses the balance of Executive and Non-
Executive Directors, and the composition of
the Board in terms of skills, experience,
diversity and capacity.
During the year, the Committee reviewed
the Board skills matrix and identified
areas of experience which would be
beneficial to add to the composition of
the Board. Andrea Blance was appointed
on 21 February 2022, bringing detailed
understanding of customers, risk and
regulation to the Board. Mike Craston was
appointed as a Non-Executive Director
with effect from 17 May 2022. Mike is Chair
of the Aviva Investors' Board in the UK
and Canada and brings invaluable asset
management and corporate leadership
experience to the Board.
The Committee also reviewed the
succession plan for the Group CEO to ensure
that the internal and external talent pipeline
was robust and diverse.
On 13 January 2022, we announced that
Jason Windsor had resigned as an Executive
Director of Aviva plc, he stepped down from
the Board with effect from 9 May 2022.
The Committee led on the appointment of
Charlotte Jones as Chief Financial Officer
and Executive Director with effect from
5 September 2022.
Michael Mire reached nine years of tenure
on 12 September 2022 and therefore no
longer met the independence criteria from
that date. The Committee considered the
composition of the Board and agreed that
it would further support the Board's
discussion if Michael remained on the
Board as a Non-Executive Director.
Patricia Cross and Belén Romana García
retired from the Board as Non-Executive
Directors at the Company's 2022 AGM.
Board appointments
Our Non-Executive Directors played a
principal role in the process to appoint
new directors to the Board. Russell
Reynolds, an independent consulting
company, undertook the search processes
for the appointment of the CFO. MWM
Consulting supported the Committee in
identifying Andrea Blance as a suitable
candidate for the Board. Mike Craston,
as noted in the 'Effective Governance',
case study on 'Governance in Action' was
Chair of the Aviva Investors Board and
was appointed, inter alia, to strengthen
the linkage between the Board and boards
of our principle operating entities . Neither
Russell Reynolds nor MWM Consulting have
other connections with the Company or any
individual Director other than the provision
of recruitment services.
In line with our succession planning
processes, we undertake a formal, rigorous
and transparent search process for each
external appointment, considering the
current balance of skills, experience and
diversity amongst our directors. Each
appointment is made subject to receipt of
the requisite regulatory approvals.
Furthermore, the Board is subject to an
annual board effectiveness review including
confirming that each Director’s performance
continues to be satisfactory. In accordance
with the Code and the Company's Articles of
Association, all serving directors must retire
and those who wish to continue in office
must stand for election or re-election by our
shareholders at each AGM. All directors
intending to remain in office at the time of
the 2022 AGM, were elected or re-elected
at that meeting.
Talent management
The Committee monitors the development
of the Group Executive Committee (ExCo) to
ensure that there is an appropriate pipeline
of senior executives and potential future
Executive Board members with the required
skills and experience.
During 2022, the Committee received
updates from the Group CEO on
composition and changes to the Group
ExCo and considered the development
plans and talent profiles of these individuals
in line with the Group's succession plans.
The Committee also considered the
development plans designed to prepare
successors for ExCo roles. Internal talent
development and developing a pipeline of
potential future leaders remained an area of
focus for the Committee during the year.
The Committee also considers initiatives
to enhance, strengthen and diversify the
talent pipeline across the wider Group and
members of the Committee remain involved
in various initiatives, including the Ethnically
Diverse Leadership programme and reverse
mentoring programmes with senior leaders.
Diversity, Equity and Inclusion
Diversity, Equity and Inclusion continued
to be an area of focus for the Committee
and the Board. The Board is committed to
having a diverse and inclusive leadership
team which provides a range of perspectives
and insights and the challenge needed
to support good decision making.
Diversity at Aviva includes, but is not
limited to, gender, ethnicity, skills and
experience, geographic and socio-economic
and educational backgrounds, disability
and sexual orientation.
The ways in which we seek to put into
practice these values are set out in our
Board Diversity, Equity and Inclusion
Statement, which supports the
Committee’s approach to succession
planning. This includes our commitment
to increasing the number of women in
leadership roles to 40% by 2024 and to
enhancing the ethnic diversity of our
leadership and succession pipeline.
Aviva plc
2.21
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Nomination and Governance Committee report continued
The Committee considers succession
planning for material subsidiaries around
the Group and, where appropriate, approves
changes to the composition of the material
subsidiary boards. The Committee also
reviews the outcomes of the board
evaluations completed by subsidiaries and
monitors the action plans developed by
those boards in response to those
outcomes.
Committee effectiveness review
The Committee undertakes a review of
its effectiveness annually as part of the
Board Evaluation. More information can
be found in the 'Governance in action'
section of the Governance report.
George Culmer
Chair of the Nomination and
Governance Committee
8 March 2023
During the year, the Committee reviewed
the Statement and expanded its remit to
include socio-economic and educational
backgrounds. The Statement, which aligns
to the overall Group Diversity, Equity and
Inclusion strategy, is available on the
Company’s website at www.aviva.com/
corporate-governance.
As at the date of this report the
representation of women on the Board is
42%. In addition, women represent 42% of
the ExCo and further details on gender
diversity in the workforce and wider senior
leadership population can be found in the
Strategic report.
We actively support women advancing into
senior roles, with the Group CEO being a
member of the 30% Club and HM Treasury's
Women in Finance Champion, which
commits financial services companies to a
range of measures to improve gender
diversity amongst senior management.
The Board is pleased to have met the Parker
Review Committee’s target for all FTSE 100
boards to have at least one director from
an ethnic minority background.
The Company also ranks as number 27 on
the Stonewall UK Workplace Equality Index.
Conflicts of interest and
independence
During 2022, the Committee regularly
reviewed the independence of the Board,
and conducted a review of individual
Director conflict authorisations as recorded
in the Conflicts of Interest register. This
included any potential conflicts related to
external appointments, including Amanda
Blanc’s appointment to the board of BP plc.
In order to form a view of a Director’s
independence, consideration was also
given to other external appointments
held by each Director.
For Non-Executive Directors, independence
of thought and judgement is vital to
facilitating constructive and challenging
debate in the boardroom and is essential
to the operational effectiveness of the
Board and Committees of Aviva. The
Committee determines a Non-Executive
Director’s independence in line with
Provision 10 of the Code and was satisfied
that all Independent Non-Executive
Directors met the criteria for independence
and that the Chair of the Board met the
criteria on appointment to that role. Mike
Craston was not considered an independent
Non-Executive Director upon appointment
due to his previous role at Aviva Investors.
Michael Mire reached nine years of tenure
on 12 September 2022 and therefore no
longer met the independence criteria from
that date. As a result he stood down from
the Risk and Remuneration Committees on
12 September 2022.
Organisational design
The Committee considers proposals for
operating model simplification within the
Group. The reduced geographic size of the
Group provided an opportunity to optimise
and simplify our operating model to drive
efficiency and deliver greater value to our
shareholders. The Committee reviewed
the organisational design plans and the
programme workstreams and considered
the governance and controls around the
proposed changes.
Corporate governance
The Committee monitors the Group’s
compliance with the Code and other areas
of regulation and guidance. The Group
Company Secretary provides updates to
the Committee on governance matters,
and legal and litigation risks which have
the potential to impact the reputation
of the Group.
During 2022, the Committee focused on
the implementation and embedding of
the Group Governance Framework for
the oversight of the Group’s subsidiaries,
as reported in the Subsidiary Governance
dashboard. Updates were provided
relating to enhancements to the Subsidiary
Governance Principles, the effectiveness
of the Company’s subsidiary boards and
the Group Conflicts of Interest policy, and
related safeguards.
Aviva plc
2.22
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Audit Committee report
Patrick Flynn
Chair, Audit Committee
“The Committee
approved a number of
policies relating to the
implementation of IFRS 17,
reviewed developments
in financial and non-
financial reporting
systems and oversaw
enhancements in the
control environment.”
Committee at a glance
Committee membership
and meeting attendance
Name
Andrea Blance
Patrick Flynn (Chair)
Shonaid Jemmett-Page
Jim McConville
Martin Strobel
Appointed
21-02-22
16-07-19
20-12-21
01-12-20
22-10-21
Meeting
attendance
6/6
6/6
6/6
6/6
6/6
I am pleased to present
the Audit Committee
(the Committee) report
for the year ended
31 December 2022.
Committee purpose
The Committee assists the Board in its
oversight of financial reporting to ensure
that the full year, half-year and quarterly
financial statements are suitable for
publication. The Committee also provides
assurance over the integrity of the Group's
financial and non-financial reporting (NFR)
including climate-related disclosures.
Together with the Risk Committee, it
monitors the effectiveness of the internal
control environment over financial and
non-financial reporting.
The Committee monitors the
effectiveness, performance, objectivity
and independence of our internal and
external auditors. The Committee also
monitors our whistleblowing
arrangements.
Key committee activities during 2022:
• Reviewed and recommended for
approval the quarterly reporting, half-
year and full year financial statements.
• Reviewed developments in climate-
related and non-financial reporting.
• Reviewed and approved IFRS 17
accounting policies and monitored
the development and implementation
of systems and processes to support
IFRS 17 reporting.
• Assessed the effectiveness of the work
of the external auditors and the internal
audit function including the outcomes
of associated external reviews.
• Monitored the effectiveness of the
systems of internal control over
financial and non-financial reporting
that support the integrity of Aviva's
financial and non-financial disclosures.
2023 priorities
• Monitor the implementation and
financial reporting under IFRS 17.
• Monitor the process for the transition
of the external auditor from PwC to EY.
• Further enhance the quality and
assurance procedures for climate-
related and non-financial reporting.
• Assess the potential impact of BEIS
proposals on corporate reporting,
internal controls and audit committees.
Committee membership
Andrea Blance was appointed to the
Committee on 21 February 2022. Andrea
is an experienced Board member with
extensive experience of the financial
services industry. Patricia Cross and Belén
Romana García retired from the
Committee at the Annual General Meeting
on 9 May 2022. The members of the
Committee as at 31 December 2022 and
their attendance are shown in the
opposite table. Details of their experience
and qualifications are shown in the 'Our
Board of Directors' and 'Governance at a
glance' sections of the Governance report.
Aviva plc
2.23
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Audit Committee report continued
Committee member
requirements
In my role as Committee Chair I annually
review how members meet the experience
and expertise criteria set out in the 2018 UK
Corporate Governance Code and the FCA
Disclosure Guidance and Transparency
Rules (DTRs). I, as Committee Chair, Andrea
Blance, Shonaid Jemmett-Page and Jim
McConville fulfilled both this Code and the
DTR requirements for financial expertise
and experience. The Committee as a whole
has competence relevant to the insurance
and broader financial services industry.
External and internal audit
effectiveness
The Committee regularly receives reports
from the external auditor on the progress
of its audit activities. The Committee
reviews the contents of these reports and
the level of professional scepticism and
challenge of management assumptions
demonstrated by the external auditor, and
where appropriate, requests that
management respond to that challenge and
tracks management response to
ensure a satisfactory outcome to the
challenges raised.
The 2022 External Audit Effectiveness review
was undertaken to assist the Committee in
assessing the quality of audit services
provided to the Group through completion
of a questionnaire by the Committee,
subsidiary company audit committees,
senior management, and members of the
Group’s finance teams. The review focused
on the effectiveness of the audit team,
expertise and resources and interaction with
audit committee meetings. Overall feedback
was positive and where opportunities for
improvement were identified, PwC was
asked to take account of that feedback in
the planning for future audit activity. The
Committee was provided with the FRC Audit
Quality Review (AQR) report on the PwC
audit of the 2021 Annual Report and
Accounts and discussed the findings with
PwC. No specific actions were required as a
result of the AQR. The AQR provided further
external evidence to the Committee of the
robustness and quality of the external audit.
The Committee concluded that the external
auditor continued to perform effectively and
is recommended to shareholders for
reappointment at the 2023 AGM. PwC have
been Aviva's external auditor since 2012,
and subject to continued satisfactory
performance, it is anticipated that PwC will
continue in its role until completion of the
Full Year 2023 audit, when in line with the
outcomes of last year's competitive tender
process, EY will be appointed as the external
auditor. The Company has complied with
the Statutory Audit Services for Large
Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order
2014 for the year ended 31 December 2022.
The Committee also conducts an annual
review of the internal audit function to
assess its independence, effectiveness and
to satisfy itself that the quality, experience
and expertise of the internal audit function
is appropriate for the business. This is
carried out by reviewing reports issued
by internal audit and the output of an
annual stakeholder effectiveness survey.
This formal process is supplemented by
regular private discussions with executive
management, the internal auditor and the
external auditor. During the year, an
External Quality Assessment (EQA) of the
internal audit function was completed by
Deloitte. The outcome of the EQA was built
into an action plan to further enhance the
effectiveness of the internal audit function.
The Committee concluded that for 2022
the function performed well and
remained effective.
Committee effectiveness review
The Committee undertakes a review of
its effectiveness annually as part of the
Board Evaluation. More information can
be found in the 'Governance in action'
section of the Governance report.
Whistleblowing
The Committee Chair is the whistleblowers’
champion for the Group and is responsible
for overseeing the integrity, independence
and effectiveness of the Group’s policies in
relation to whistleblowing. The Committee
receives reports on the number of cases
reported to the Speak Up Service, the
proportion of reports that are designated as
instances of whistleblowing, the number of
substantiated cases and summaries of the
action taken.
The Committee continues to support the
Speak Up team and review opportunities to
further enhance the Speak Up Service. The
outcome of the Voice of Aviva survey is used
to assess staff comfort and confidence in
the whistleblowing processes.
2023 Priorities
The Committee will continue to monitor
the programme to implement IFRS 17,
including the design of reporting systems
and calculation of new measures.
The Committee will also seek assurance
over the design and implementation of the
system of controls over financial reporting
relating to disclosures under IFRS 17.
Working in conjunction with the Customer
and Sustainability Committee there will be
further enhancement to our climate and
non-financial reporting and assurance
processes.
The Committee also continues to monitor
the latest Government proposals for the
Department for Business, Energy and
Industrial Strategy (BEIS) consultation on
audit and corporate governance reform.
Proposals, including the development of
an Audit and Assurance Policy (AAP), are
being closely monitored. While new
regulation is not expected during 2023, the
Committee is overseeing development of an
AAP and changes in external disclosures in
readiness for the new regulations when they
do take effect.
The Committee will also provide oversight
of the work to transition the role of the
external auditor from PwC to EY, who,
subject to approval at the 2024 AGM, will
be appointed for the financial year ended
31 December 2024.
Patrick Flynn
Chair of the Audit Committee
8 March 2023
Aviva plc
2.24
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Audit Committee report continued
Key matters considered during 2022
The significant matters that the Committee considered during the year are set out in the table below.
Matter considered
Context
Committee’s response
IFRS and Solvency II (SII)
technical provisions
The Committee reviews IFRS and SII
technical provisions and the impact of
those technical provisions on IFRS
Shareholders’ Net assets and SII
surplus used for the quarterly
operating updates, and 2022 Half Year
and Full Year financial statements. The
Committee reviews the underlying
assumptions as these involve complex
judgements and changes can have a
significant impact on reported results.
IFRS and SII key accounting
judgements and disclosures
The Committee reviews and
recommends to the Board Quarterly,
Half Year and Full Year disclosures and
the impact of accounting judgements
on those disclosures. The Committee
reviews and recommends to the Board
the Annual Solvency and Financial
Condition Report.
Technical provisions. The Committee reviewed and challenged the assumptions used in the calculation of the Best Estimate
Liability component of the technical provisions required under SII, and the expense impacts on SII reserves across our life and
general insurance businesses.
The Committee reviewed and challenged the longevity, persistency, expense and residential and commercial property growth
assumptions used for the quarterly operating updates, and 2022 half year and full year financial statements. The process around
the setting of longevity assumptions was a particularly significant area for review as those judgements could have a material
impact on Aviva’s SII and IFRS results. During 2022, the Committee worked closely with the Audit Committee of the Group’s UK
Life subsidiary, Aviva Life & Pensions UK Ltd, to review the detailed analysis and to validate changes observed in recent mortality
experience and the resulting impact on the existing longevity assumptions. The Committee reviewed the impact of the period of
higher inflation and the rising interest rate environment during 2022. This included residential property assumptions, the impact
on the general insurance business of current and future claims inflation, and impacts on the Aviva Staff Pension Scheme.
COVID-19 assumptions on business interruption. The Committee reviewed the judgements made in relation to COVID-19
Business Interruption losses in the UK and Canada businesses and agreed the changes in provisions required. Following
assessment of the proposed assumption changes the Committee considered and noted the expected impact on the financial
statements.
The Committee reviewed and provided comment on the output of a deep-dive conducted on the key issues and judgements
relating to COVID-19 claims for Business Interruption and the expected period of uncertainty while potential claims were
resolved.
Reserving process. Reviewed the controls associated with the SII and IFRS reserving process. The Committee reviewed the sign-
off procedures and control framework for movements in IFRS reporting and SII results.
Estimates and judgements for IFRS and SII reporting bases. The Committee reviewed, challenged and recommended
approval of IFRS and SII judgements, including the impact of acquisitions on the Group balance sheet and the outcome of
goodwill and intangible asset impairment reviews. The Committee reviewed the Group's exposure to contingent liabilities and
other risk factors, including amounts allowed for and disclosures. The Committee also considered the financial impact and
disclosures stemming from the war in Ukraine. Where appropriate, the Committee monitored and tracked management's
response to the challenges it raised to ensure a satisfactory outcome.
Alternative Performance Measures (APMs). The Committee reviewed and approved the clarification and treatment of certain
items within the Group’s Alternative Performance Measures (APMs) to further improve the transparency and consistency of
reporting of APMs.
Fair, balanced and understandable. The Committee reviewed the Quarterly, Half Year and Full Year results to support the
Board conclusion that taken as a whole, these reports were fair, balanced and understandable and provided the information
necessary for shareholders to assess the Group’s position, performance, business model and strategy.
Aviva plc
2.25
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Audit Committee report continued
Matter considered
Context
Committee’s response
Implementation of IFRS 17
IFRS 17 is a new insurance accounting
standard issued by the International
Accounting Standards Board (IASB)
effective from 1 January 2023. IFRS 17
is expected to have a significant impact
on reporting of the Group’s financial
performance.
Non-financial and
Sustainability Reporting
The Committee provides oversight of
the integrity of climate-related and
non-financial reporting.
Internal Controls
The Committee provides oversight of
the system of internal control over
financial reporting.
The Committee continued to monitor preparedness for the implementation of new IFRS standards, but most significantly in respect
of IFRS 17. IFRS 17 will have a significant impact on the measurement and presentation of insurance contracts and the Committee
has spent significant time considering the new accounting policies and judgements. The Committee continued to regularly assess
the impact on the financial reporting process, the operation of new internal financial tools to be used for financial forecasting and
planning purposes, and the calculation of insurance liabilities under the new standard. The Committee monitored updates on the
planning and implementation activities for IFRS 17, and reviewed and approved tranches of accounting methodologies during 2022
in support of a series of ‘dry runs’ ahead of the effective date of 1 January 2023. The Committee initially commenced the review and
agreement of IFRS 17 accounting policies and judgements during 2021. This continued into 2022 as the Committee reviewed,
challenged and approved the material accounting judgements required to implement IFRS 17. The Committee also assessed the
effectiveness of the systems of controls over the new IFRS 17 reporting systems.
The Committee has overseen the implementation of the approved policies in determining the impact of IFRS 17 on Aviva plc's
Statement of Financial Position as at 1 January 2022. Further information on these policies is provided in Note 62.
The Committee reviewed and challenged the application of critical climate-related and non-financial metrics related policies,
practices, methods and judgements to calculate the metrics. This included the monitoring of the systems of controls over these
disclosures. The Committee reviewed the findings of the assurance with the external auditor and shared with the Customer and
Sustainability Committee the outcome of the review, and how it contributed to the integrity of climate and non-financial metrics
reporting in the Annual Report and Sustainability Report. The Committee, working with the Customer and Sustainability
Committee, recommended the climate-related disclosures to the Board for approval.
Review of the effectiveness of the Operational Risk and Control Management (ORCM) system. The Committee regularly
reviewed a number of reports to allow the evaluation of the effectiveness of controls and any failings or weaknesses.
The Committee continued to challenge and support developments to the risk aware culture of our people and strong internal
control framework.
Review of internal controls. The Committee reviewed reports on the effectiveness of the internal controls over financial and
non-financial reporting to gain assurance that these remained in tolerance with no control weaknesses which could have a
material impact on the financial results and non-financial metrics. As referenced in ‘How we are governed’ section, the
Committee received reports on the assessment of financial reporting controls deficiencies and the detailed findings of the testing
undertaken for the remediation. The Committee also reviewed an assessment of the overall effectiveness of the governance, and
risk and control framework of the organisation. The review concluded that Aviva’s risk appetite framework was being adhered to
and was effectively being tracked and monitored.
Legal and regulatory reports. The Committee received quarterly reports on current and emerging legal and regulatory matters
and any potential impact on Aviva’s financial statements.
Aviva plc
2.26
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Audit Committee report continued
Matter considered
Context
Committee’s response
Internal Audit
The Committee has responsibility for
overseeing the work, effectiveness and
independence of the internal audit
function.
External Audit
The Committee has responsibility
for monitoring the external auditor
PricewaterhouseCoopers LLP’s (PwC)
independence and objectivity and
the effectiveness of the external
audit process.
Annual plan, budget and reports. The Committee reviewed and approved the internal audit plan and budget and monitored
progress against this plan to ensure completion of the plan by year end. The Committee received an annual report where
internal audit provided an assessment of the control environment of the areas on which work had not been undertaken. The
Committee reviewed the output of the external quality assessment and actions to further enhance the effectiveness of the
internal audit function.
Internal Audit Charter. Reviewed and approved the Internal Audit Charter.
Quarterly reports. The Committee also received quarterly control reports from the internal audit function, including monitoring
the quantum and trend in internal report findings, and challenged management on the actions being taken to improve the
effectiveness of the governance and risk and control framework of the organisation. The quarterly internal audit reports contain
control environment metrics including: the status of internal audit opinions that are rated as unsatisfactory or where major
improvement is needed; key issues identified, emerging trends and their impacts on the organisation’s risk profile; and the status
of management actions to resolve issues identified.
External auditor independence. The Committee reviewed the auditors compliance with the independence criteria in the UK
Corporate Governance Code and monitored compliance with our external auditor Business standard. The Committee meets with
external auditor without management present to provide a forum for any issues to be raised.
External audit plan and budget. The Committee reviewed and approved the 2022 audit plan presented by PwC and progress
against the plan.
Audit related and non-audit services. The Committee monitors the External Auditor Business Standard to ensure no firm, other
than PwC, undertakes audit and audit-related services other than in exceptional circumstances. The Committee also monitors
non-audit services (including audit-related and other assurance services) provided by PwC. The Committee has put in place a
structure to review and approve the provision of audit and audit-related services by PwC and receives bi-annual reports on these
services provided by PwC and the fees charged for those services. The Committee also gains assurance that the fees remain well
below the 70% non-audit services fee cap. There were no material non-audit services provided by PwC during 2022.
In 2022 the Group paid PwC £30.4 million (2021: £17.5 million) for audit and audit-related assurance services. PwC were paid
£1.7 million (2021: £1.3 million) for other assurance services, giving a total fee to PwC of £32.1 million (2021: £18.8 million). Further
information on auditors' remuneration is set out in note 11.
Implementation of IFRS 17. The Committee reviewed reports from PwC on Aviva's progress in implementing IFRS 17. PwC
reviewed and provided commentary to the Committee on key accounting policies and judgements which supported the
Committee's oversight and approval of IFRS 17 accounting policies and judgements. PwC worked with the FRCF team to perform
process walkthroughs, identify key controls and understand the testing of key controls.
The Committee did not request any specific areas of review from the external auditor beyond the normal cycle of audit activity.
Aviva plc
2.27
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Audit Committee report continued
Matter considered
Context
Committee’s response
Longer Term Viability
Statement (the Statement)
and Going Concern
Assessment
The UK Corporate Governance Code
requires the Board to assess the
Company’s current position and
principal risks and state whether it has
a reasonable expectation the Company
will be able to continue in operation
and meet its liabilities as they fall due
over the period of their assessment.
The Committee supports the Board in
making that assessment.
The Committee reviewed the principles underpinning the Statement for 2022 and concluded that the Company and its
subsidiaries will be able to continue in operation and meet their liabilities as they become due. The Committee recommended to
the Board the Statement and going concern assessment to the Board. More information on these statements can be found in the
Directors' report. The Committee continues to consider it appropriate that the Statement covers a three-year period.
Aviva plc
2.28
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Customer and Sustainability Committee report
Shonaid Jemmett-Page
Chair, Customer and
Sustainability Committee
“During the year, the
Committee transitioned
from the Customer,
Conduct and Reputation
Committee to focus more
closely on overseeing the
progress of our customer
and sustainability
ambitions.”
Committee at a glance
Committee membership
and meeting attendance
Name
Shonaid Jemmett-Page (Chair)
Mike Craston
Jim McConville
Pippa Lambert
Michael Mire
Appointed
14-02-22
09-08-22
01-12-20
01-01-21
12-09-13
Meeting
attendance
4/4
2/2
5/5
5/5
4/5
I am pleased to present the
Customer and Sustainability
Committee (the Committee)
report for the year ended
31 December 2022.
Committee purpose
The Committee assists the Board in its
oversight of customer and sustainability
issues. This includes evaluating progress
on Aviva's ambition to be a leading
customer-service-oriented company,
including in our investments and
innovation in customer experience.
The Committee also reviews our progress
in bringing the power of the whole of
Aviva to the benefit of our existing and
future customers and our communities,
as well as delivering on our
Sustainability Ambition.
Key committee activities during 2022
• Reviewed the customer agenda, received
regular updates on material customer
trends and monitored progress against
customer metrics.
• Undertook deep dives in relation to the
FCA's new Consumer Duty Regulations,
vulnerable customers, customer data,
corporate customers and financial
inclusion, including the community
investments we made.
• Monitored the progress of Aviva's
Sustainability Ambition, including
tracking performance against key
metrics and targets.
• Reviewed our Sustainability Report,
Climate Transition Plan, TCFD report
and non-financial metrics and
recommended these to the Board for
approval.
• Received updates on how we measure
and track our reputation.
• Reviewed the Group's conduct risk
dashboard (including emerging risks)
and received regulatory updates.
• Reviewed the Group's Modern Slavery
Statement and approved Aviva's
Business Ethics Code.
2023 priorities
• Continue to focus on the customer
agenda and the progress of the
customer strategy.
• Monitor the impact the
implementation of the Consumer
Duty will have on our customers.
• Oversee progress against our
sustainability scorecard and review our
Sustainability Report, Climate Transition
Plan and TCFD report.
Committee membership
I was delighted to join the Committee on
14 February 2022. During the year, Jim
McConville stepped down as Chair, while
remaining a member of the Committee.
I became Chair on 17 May 2022. I would
like to thank Jim for his leadership of the
Committee since 2020. Mike Craston
joined the Committee on 9 August 2022.
The members of the Committee as at
31 December 2022 and their attendance
are shown in the table opposite. Details
of their experience and qualifications are
shown within the 'Our Board of Directors'
and 'Governance at a glance' sections of
the Governance report. In addition, the UK
Life Insurance and UK General Insurance
Conduct Committee Chairs also attend the
committee by standing invite.
Aviva plc
2.29
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Customer and Sustainability Committee report continued
Transition to the Customer
and Sustainability Committee
during 2022
During the year, the Committee transitioned
from the Customer, Conduct and
Reputation Committee to the Customer and
Sustainability Committee. Conduct matters
were transferred to the remit of the Risk
Committee and reputational matters to the
Board. This has enabled the Committee to
focus more closely on customer and
sustainability matters across all of Aviva's
businesses, routinely from the UK Life
Insurance and UK General Insurance
businesses and by way of deep dives from
the Canadian and Irish businesses.
Customer
The Committee provided oversight of our
customer strategy and operations. This
included regular reviews of the customer
dashboard, which provided the Committee
with an overview of key customer metrics,
data and insights. The Committee reviewed
our Customer and Marketing transformation
plan, which is designed to help Aviva meet
more of our customers' needs. It also
monitored the progress of customer
journeys which could be undertaken
digitally and the improvements in
customer experience.
The Committee reviewed and supported our
new brand campaign, "Making it Click"
which recognises that taking financial
action can be difficult for customers and
was aimed at helping customers make
decisions in relation to their finances.
In a joint meeting with the Risk Committee,
the Committee undertook a deep dive on
Aviva's data strategy and reviewed our data
capabilities, as well as our plans to enhance
customer experience, including for our more
vulnerable customers.
Sustainability
The Committee tracked progress against
Aviva's Sustainability Ambition, including
programme governance, Key Performance
Indicators and the Sustainability Ambition
scorecard. The Committee reviewed and
agreed the non-financial metrics, which
demonstrate Aviva's ESG performance and
monitored progress against the metrics. The
Committee also provided input into the
governance model for external reporting.
The Committee provided oversight of
the Aviva Climate Transition Plan which
supports Aviva's ambition to become
a Net Zero carbon company by 2040.
The Committee reviewed the content of
the TCFD disclosures in preparation for the
climate disclosures being voted on (on an
advisory basis) at the Annual General
Meeting. The Committee also reviewed the
Aviva Sustainability Report and
recommended this to the Board.
The Committee continued to monitor
and support our community investment
and received updates on the partnership
with Citizens Advice and the Money
Advice Trust.
The Committee received updates on the
actions we are taking to help our customers
and communities through the cost of
living challenge.
Further information on our integrated
responsibility and sustainable business
approach can be found on the Company’s
website at: www.aviva.com/sustainability.
Aviva Canada and Ireland
During the year, Aviva Canada and Aviva
Ireland presented to the Committee an
update on their customer strategies
including customer journeys and experience
and on the sustainability scorecards for
their markets. The presentations provided
the Committee with information on how
Aviva Canada and Ireland contributed to the
overall group performance.
Conduct and compliance
Whilst as the Customer, Conduct and
Reputation Committee, the Committee
reviewed Aviva’s conduct risk agenda,
conduct risk profile, compliance obligations
and the wider regulatory landscape.
The Committee received regular updates
on the implementation of the FCA's Pricing
Practices regulation which came into effect
on 1 January 2022.
The Committee also conducted a deep
dive into the FCA's new Consumer Duty
proposals, following the FCA's second
consultation paper published in December
2021 and reviewed Aviva's response to the
consultation in February.
The Committee continued to receive
regular updates on the Consumer Duty
regulation throughout the year and
assessed the impact the Duty would have
on our customers.
Reputation
Prior to the transition of the Committee,
the Committee monitored developments in
the Group’s reputation and reputational risk
position. Key areas of focus included
feedback on Aviva's reputation amongst
different stakeholder groups, as well as the
impact of business interruption litigation on
Aviva and the cost of living challenges faced
by Aviva customers.
Committee effectiveness review
The Committee undertakes a review of
its effectiveness annually as part of the
Board Evaluation. More information can
be found in the 'Governance in action'
section of the Governance report.
Shonaid Jemmett-Page
Chair of the Customer and
Sustainability Committee
8 March 2023
Aviva plc
2.30
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Risk Committee report
Andrea Blance
Chair, Risk Committee
“In a challenging
macroeconomic
environment, the
Committee has overseen
the Group's current and
future risk exposures
and profile; providing
advice to the Board whilst
overseeing the continued
evolution of the Group Risk
function.”
Committee at a glance
Committee membership
and meeting attendance
Name
Andrea Blance
Patrick Flynn
Shonaid Jemmett-Page
Mohit Joshi
Jim McConville
Martin Strobel
Appointed
21-02-22
16-07-19
16-02-22
01-12-20
01-12-20
01-11-21
Meeting
attendance
5/5
5/6
4/5
5/6
6/6
6/6
I am pleased to present
the Risk Committee
(the Committee) report
for the year ended
31 December 2022.
Committee purpose
The Committee assists the Board in its
oversight of risk by assessing the
effectiveness of the Group’s risk
management framework, risk strategy, risk
appetite and profile; risk intelligent culture;
the methodology used in determining the
Group’s capital requirements and stress
testing these requirements; assessing the
adequacy of the Group’s system of non-
financial reporting controls; ensuring due
diligence appraisals are carried out on
strategic or significant transactions; and
compliance with regulatory requirements.
The Company’s approach to risk and
risk management together with detail
on the principal risks that face the
Group are explained within the 'Our Risks
and Risk Management' section of the
Strategic report.
Key committee activities during 2022
• Monitored risk appetite, risk
management and reporting, including
approving the Group’s Solvency II
capital risk tolerances by risk type, the
internal model change application and
the ORSA report.
• Monitored Group capital and liquidity,
particularly in light of macroeconomic
conditions, and related risks to the
financial plan.
• Approved the scenarios for Group-wide
stress testing to support the financial
plan and the Group Recovery Plan.
• Reviewed the subsidiary Consumer
Duty implementation plans.
• Discussed operational risks to the
financial plan, including people, cyber,
operational resilience and
transformation based risks.
• Considered the impact of economic
stress and related cost of living crisis on
employees and customers.
• Monitored external risk factors,
reviewing the most significant emerging
risk scenarios affecting the delivery of
the Company’s strategy.
2023 priorities
• Monitor the risks created by
the macroeconomic environment,
particularly capital and liquidity risks.
• Oversight of conduct risk and the
implementation of the new Consumer
Duty Regulations.
• Enhance the linkage between the
Committee and subsidiary Risk
Committees.
Committee membership
I was delighted to join the Committee on
21 February 2022 and become Acting
Chair, subject to regulatory approval,
in May 2022, before being subsequently
approved in that role.
Belén Romana García retired from the
Committee on 9 May 2022, and Michael
Mire stood down from the Committee on
12 September 2022. I would like to extend
my thanks to Belén for her commitment in
Chairing the Committee since 31 March
2019, and to Michael Mire for his
contribution over the past nine years.
During the year, I was pleased to welcome
Stephen Gould as our interim Group Chief
Risk Officer.
The members of the Committee as at
31 December 2022 are shown in the table
opposite. Details of members’ experience,
qualifications and attendance at
Committee meetings during the year are
shown within the 'Our Board of Directors'
and 'Governance at a glance' sections of
the Governance report.
Aviva plc
2.31
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Risk Committee report continued
Oversight of risk management
The main purpose of the Committee is to
assist the Board in its oversight of risk
within the Group, with a focus on reviewing
the Group’s risk appetite and risk profile
in relation to solvency, liquidity, climate,
operational, conduct and reputational risks
and reviewing the effectiveness of the
Group’s risk management framework (RMF)
making recommendations to the Board
as required.
The Committee reviews the methodology
and internal model used in determining
the Group’s capital requirements and
associated stress testing, and the due
diligence appraisals carried out on strategic
or significant transactions.
In addition to the risks inherent in
the Group’s investment portfolio, the
Committee reviews the Group’s operational
risks, including significant changes to the
regulatory framework.
During the year the Committee reviewed
management actions in response to the
Group's increased exposure to general
insurance property catastrophic risk as a
result of hardening reinsurance markets.
The Committee works with the
Remuneration Committee so that
risk management and risk culture
are properly considered in setting the
Remuneration Policy and determining
remuneration outcomes.
During the year, the oversight of conduct
risk was transferred to the Risk Committee
as part of the transition of the Customer,
Conduct, and Reputation Committee to the
Customer and Sustainability Committee.
The Committee will continue to focus on
conduct risk into 2023, particularly as the
requirements of the new Consumer Duty
Regulations are embedded.
The Committee also continued to work
closely throughout the year with the Audit
Committee on risk and control matters.
There has been good engagement with
the chairs of the subsidiary risk committees
in 2022, covering thematic risks across the
Group as well as business unit specific
focus areas.
Macroeconomic environment
During the year the Committee considered
one of the biggest threats to the Group's
capital and liquidity position to be
macroeconomic risks and received regular
updates on interest, inflation, capital and
liquidity. Continuing areas of uncertainty
include the war in Ukraine, credit spreads
and downgrades, inflation, interest rate
movements and the risk of commercial
property price volatility on the commercial
mortgage portfolio.
The Committee considered actions being
taken to support customer wellbeing, and
oversaw and supported the proactive steps
undertaken by the business in relation to
specific customer threats, which included
customer focused education and awareness
in response to the cost of living crisis, and
the related increase in cyber based
investment scams targeting customers.
Employee wellbeing has remained high on
the agenda and the Committee discussed
the actions being taken to manage people
risk, including resource stretch, and the
cost of living crisis.
Control environment
The Committee received regular updates on
the risk profile, residual risks, key concerns
and outlook across all markets and risk
appetites. Whilst the insights gained from
the dashboard demonstrated continued
improvement in the management of risk
and controls across the Group, they also
enabled the Committee to request deep
dives in certain areas including the
management of capital and liquidity risk,
cyber and energy security risk, as well as the
risk culture throughout the Group.
The Committee also received regular
updates and challenged the progress made
by management on operational resilience
and change management related risk
appetite and tolerances in particular.
Climate change
As detailed in its Committee Report, the
Customer and Sustainability Committee
oversaw the progress made in 2022 against
the goals contained with Aviva's Sustainability
Ambition. However, overseeing the
management of climate-related risk is a key
pillar of the risk management framework,
and was accordingly managed in close
collaboration between the Committee, the
Customer and Sustainability Committee
and the Audit Committee.
During the year the Committee considered a
deep dive on governance and monitoring
across asset classes and the role of Aviva's
Sustainability Ambition in managing
climate-related risk appetite.
Committee effectiveness review
The Committee undertakes a review of
its effectiveness annually as part of the
Board Evaluation. More information can
be found in the 'Governance in action'
section of the Governance report.
2023 priorities
Continue to support the search and
appointment process for the Group CRO.
Monitor the impacts and associated risks
arising from the macroeconomic
environment, regulatory landscape, and
global climate change, with a particular
focus on consideration of emerging risks.
Focus on the management of capital and
liquidity risks.
Oversight of the current and future conduct
risk exposures of the Group, including
determination of risk appetite and
tolerance and desired risk intelligent
culture, particularly as the new Consumer
Duty Regulations are implemented
during 2023.
Build a strong dialogue between the
Committee and our equivalent subsidiary
level risk committees, and embed the
changes introduced by the repurposing of
the Customer and Sustainability Committee.
Andrea Blance
Chair of the Risk Committee
8 March 2023
Aviva plc
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4. Other Information
Remuneration Committee report
Committee at a glance
Committee membership
and meeting attendance
Name
Pippa Lambert (Chair)
Andrea Blance
Patrick Flynn
Jim McConville
Appointed
01-01-21
21-02-22
15-06-20
01-02-23
Meeting
attendance
6/6
4/4
6/6
N/A
On behalf of the Remuneration
Committee (the Committee), I am
pleased to present the Directors’
Remuneration Report (DRR), for the
year ended 31 December 2022.
The DRR is presented in three parts in
addition to this letter:
• ‘Remuneration at a glance’ - key aspects
of interest to shareholders
• 'Annual report on remuneration' -
further detail on how the Directors'
Remuneration Policy (the Policy) has
been applied and remuneration
outcomes in respect of 2022, and how
the Policy will be implemented in 2023
• 'Directors' Remuneration Policy' -
as approved by shareholders in 2021
Committee purpose
The Committee assists the Board in its
oversight of remuneration by:
• Reviewing the Directors' Remuneration
Policy and Directors’ Remuneration Report
• Approving remuneration packages for
the Non-Executive Chair and Executive
Committee (ExCo)
• Approving the remuneration
framework for regulated employees
and reviewing wider workforce
remuneration and policies
• Working with the Risk Committee
to ensure that risk management is
considered in setting the Policy through
the alignment of incentive and rewards
with risk management
Key committee activities during 2022
• Senior management objectives, pay
decisions, bonus and Long Term
Incentive Plan (LTIP) target setting
• Responding to cost of living challenges
impacting our colleagues
• Progressing our ambitious diversity,
equity and inclusion (DE&I) agenda
• Share plan operations and
performance testing
• Governance and regulatory matters
More details are provided in the Annual
report on remuneration.
The Committee’s decisions are taken in
the context of the Reward Governance
Framework, which sets out the key
policies, guidelines and internal controls
and is summarised in the Annual report
on remuneration.
Pippa Lambert
Chair of the Remuneration Committee
"Our 2022 remuneration
outcomes reflect the
strong performance
of Aviva"
Throughout the Directors' Remuneration
Report we use a colour coding system:
Salary, pension and other benefits
Bonus
LTIP
2023 priorities
• Review of the Directors'
Remuneration Policy
• Continued monitoring of the impact of
the rising cost of living on our colleagues
More details about our 2023 focus areas
are provided later in my letter.
Committee membership
Michael Mire stood down from the
Committee on 12 September 2022. Michael
joined the Committee in 2015 and I would
like to thank him for his contribution over
the past seven years.
Jim McConville joined the Committee in
February 2023. Jim brings significant
experience of the financial services industry
and of group strategy and transformation.
2022 performance
Our strong performance through 2022
reflects our market leading positions,
customer focus and the benefits of our
diversified business.
Aviva’s capital and liquidity position
is strong, and our high-quality asset
portfolio has performed despite
market volatility.
Aviva plc
2.33
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4. Other Information
Remuneration Committee report continued
Growth in the value created
in our businesses
Performance against the financial
measures in relation to our incentive
plans exceeded targets:
• Growth in the value created by our
businesses was demonstrated in the
increase in Solvency II own funds
generation (Solvency II OFG) and cash
remittances, both exceeding target levels.
• Cost reductions achieved in 2022 were
in line with our targets, reflecting
continued efficiency improvements.
• Growth and expense discipline saw
increased group adjusted operating
profit, in excess of target level.
In terms of non-financial performance,
the Committee welcomed the continued
improvement evident in our risk and
control environment, as reflected in an
above target assessment against the
qualitative and quantitative measures
within the Risk scorecard. Our employee
engagement levels saw a 14 point increase
to 86%, a figure well ahead of market
norms. This reflects the focus on
leadership development and visibility, and
actions to support our people through a
difficult economic environment.
Performance against our customer
measures was more challenging, given the
impact of inflation on product pricing,
supply chain issues, and market volatility
on pension valuations.
Supporting our people
Oversight of remuneration across the
wider colleague population featured
prominently on the Committee’s agenda
during 2022. Aviva is proud to pay all of our
UK colleagues at least the Real Living
Wage, plus an additional 8% to enable
colleagues to benefit from our 14%
matching pension contribution and save
for their retirement.
During 2022, we closely monitored the
impact of the rising cost of living on our
colleagues and welcomed the actions
that were taken to support them, which
included:
• Over 9,000 colleagues received a one-off
cost of living payment of up to £1,000.
• All colleagues received £1,000 of free
shares to recognise their contribution to
the reshaping of our business and the
capital return to shareholders.
• Car parking charges have been removed at
UK sites where Aviva is the facility operator.
• An extension to our wellbeing programmes
to include financial education.
• 21,000 free lunches were provided
to children of UK colleagues during
school holidays.
For 2023, the UK salary budget was 7%.
Recognising the current cost of living
challenges, a higher budget was targeted
at more junior colleagues offset by a
significantly lower budget for senior
management.
Remuneration outcomes
for 2022
Our remuneration outcomes reflect the
strong performance of Aviva in 2022, as
set out below.
2022 annual bonus
The formulaic outcome from the annual
bonus scorecard was 79.7% of maximum
(at 159.3%).
The Committee carefully considered this
outcome in the context of broader
performance and a quality of earnings
assessment, noting input from the Audit
and Risk Committees, to ensure the
scorecard outcome was reflective of
overall performance and aligned with the
experience of shareholders. The
Committee determined that no
adjustments were required to the
formulaic bonus scorecard outcome.
In line with the Policy the Committee also
considered the individual performance of
the Group CEO and Group CFO to
determine whether individual
adjustments to the scorecard outcome
were required.
Amanda Blanc’s performance as Group
CEO continues to be exceptional. Aviva’s
share price has performed strongly
against both our sector and the broader
FTSE 100, reflecting strong execution
of the clear strategy which Amanda has
set out.
From an external perspective, Amanda
has continued to enhance Aviva's profile
across multiple industry and public
forums and has been recognised as an
influential business and financial services
leader. This performance is reflected in
Amanda’s annual bonus for 2022 of 97.2%
of maximum (at 194.3% of salary).
Since joining Aviva as Group CFO in
September 2022, Charlotte Jones has
made an impressive start, quickly
building relationships and credibility with
stakeholders. Charlotte has provided
effective leadership through a period of
external volatility while developing an
ambitious business plan for the Group
and creating a long-term vision and
strategy for the Finance function.
Charlotte’s annual bonus for 2022 was
86.4% of maximum (at 129.7% of salary).
2020-22 LTIP
The formulaic vesting outcome was
80.2%, reflecting strong performance
against the Solvency II return on equity
(Solvency II RoE) and relative Total
Shareholder Return (TSR) targets.
Consistent with our commitments, the
Committee carefully reviewed whether
this vesting outcome was appropriate,
being mindful of the guidance from proxy
agencies and investors around the issue
of ‘windfall gains’. This assessment,
detailed within the report, resulted in a
10% downward adjustment in the vesting
outcome.
Aviva plc
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4. Other Information
Remuneration Committee report continued
Appointment of Charlotte Jones
As announced, Charlotte Jones was
appointed as Group CFO on 5 September
2022. On appointment, Charlotte’s
remuneration package was in line with that
of her predecessor. I have been particularly
impressed with how quickly Charlotte has
built relationships with our stakeholders.
Further details can be found within the DRR.
Shareholder consultation
The Chair and Executive Directors (EDs)
meet with institutional shareholders during
the year. Topics raised during 2022 included
Aviva’s dividend policy, capital returns,
climate risk and progress against our
strategic plan. A shareholder newsletter is
published quarterly on aviva.com.
I look forward to continued constructive
engagement with shareholders this year as
we prepare a revised Policy for approval at
the 2024 AGM.
Remuneration in 2023
Salary
Amanda will receive a salary increase of
4.85%. Charlotte will receive a salary
increase of 4.81%.
The percentage increases for our Executive
Directors are significantly below the overall
increase in the UK salary budget of 7%.
2023 annual bonus and
2023-25 LTIP
For Amanda and Charlotte, the
opportunities are unchanged from the
awards made for the prior year. Charlotte's
award opportunities are consistent with
those of her predecessor.
Annual bonus
Target
opportunity
Maximum
opportunity
LTIP
opportunity
Group CEO
Group CFO
100%
100%
200%
150%
350%
225%
Opportunities are in line with the Policy.
2023 focus areas
The Committee will continue to focus on
ensuring that remuneration fairly rewards,
and is aligned with, business performance.
In addition, the Committee will perform a
comprehensive review of the Directors’
Remuneration Policy in 2023. I look forward
to engaging with shareholders as part of the
review ahead of the 2024 AGM vote.
Finally, the Committee took a number of
actions to support colleagues through cost
of living challenges during 2022. In 2023, we
will continue to closely monitor the ongoing
impacts to colleagues.
Conclusion
Aviva has again delivered very strong results
in a challenging and volatile economic
environment, demonstrating the benefits of
our diversified business. As a Committee, we
have sought to make decisions which
effectively drive and reward results, while
continuing to align with UK best practice
remuneration and governance expectations.
I hope that this report is clear and
informative and I look forward to seeing
shareholders at the forthcoming AGM.
Pippa Lambert
Chair of the Remuneration Committee
8 March 2023
Aviva plc
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Annual Report and Accounts 2022
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Remuneration at a glance
1. What are the elements of our Executive Directors' remuneration?
Short-term
Pension
and other
benefits
Bonus:
Cash
Salary
Fixed
Long-term
Bonus :
Deferred into
shares released
annually over
three years
Variable
LTIP
Total
remuneration
2. How remuneration is linked to our purpose and strategy
Our purpose
Our strategic priorities
Measuring outcomes
Pay for performance
2023 Annual Bonus Plan (ABP) Linked to
2023-2025 LTIP
Linked to
Customer focus (1)
TNPS, RNPS and OES ensure
our remuneration outcomes
are linked to our continued
focus on customers.
Targeted growth (2)
Financial measures
assess value created
and incentivise growth.
Top quartile efficiency (3)
Cost reduction and
return measures reflect
focus on efficiency.
Leading on sustainability
(4)
LTIP award includes both
environmental and DE&I
measures.
Transactional Net Promoter
Score (TNPS)
Online experience score (OES)
1
1
Relationship Net Promoter Score
(RNPS) gap to competition
Relative total shareholder
return
Solvency II OFG
2, 3
Cumulative cash remittances
Group adjusted operating profit
2, 3
Solvency II RoE
Ethnically diverse employees
in senior leadership roles
Females in senior
leadership roles
Reduction in carbon intensity
of shareholder assets
Gross cash remittances
2, 3
Cost reduction
Employee engagement
Risk scorecard
3
4
4
2.36
1
2
2, 3
2, 3
4
4
4
Remuneration outcomes
We are committed to ensuring that
remuneration outcomes for EDs
reflect performance and are
aligned to strategic priorities
and shareholders’ interests.
Variable pay, subject to the
achievement of stretching
performance targets, makes up
a significant portion of total
remuneration, largely delivered
in shares to create further
shareholder alignment.
Annual Report and Accounts 2022
To be
with you
today, for
a better
tomorrow.
Aviva plc
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Remuneration at a glance continued
3. How did we determine performance-based pay in 2022?
4. How much did we pay our Executive Directors in 2022?
Component Measure
Maximum
Outcome
% Outcome Achieved
A significant proportion of EDs' remuneration is long-term, performance-based,
and remains 'at risk' by virtue of malus and clawback conditions.
Solvency II OFG
Gross cash remittances
Group adjusted operating profit
Cumulative cost savings
Risk scorecard
Transactional NPS
MyAviva online experience score
Employee engagement
s
u
n
o
b
l
a
u
n
n
A
2
2
0
2
40%
50%
30%
20%
30%
10%
10%
10%
40%
50%
30%
11%
19%
0%
0%
10%
Total scorecard outturn1
200%
159.3%
Component Measure
Relative total shareholder return
Solvency II RoE
2
2
-
0
2
0
2
P
I
T
L
% Outcome Achieved
Maximum
Outcome
50%
50%
30%
50%
2020 LTIP vesting outcome1
100%
80.2%
Chief Executive Officer –
Amanda Blanc
Chief Financial Officer –
Charlotte Jones2
£5.52m
£0.53m
n Salary, pension and other benefits
n Bonus
n LTIP1
n Salary, pension and other benefits
n Bonus
n LTIP
1. Amanda Blanc's 2020 LTIP vesting was subject to a downwards adjustment of 10% as a result of a review of potential 'windfall gains', please see
description after table 4 for further details
2. Charlotte Jones joined Aviva on 5th September 2022; her salary and bonus are pro-rated for the four months worked in 2022. She did not receive a
buyout award upon joining Aviva.
1. No discretion was exercised by the Committee in the outturn of the Annual bonus
Aviva plc
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Remuneration at a glance continued
5. How does our remuneration policy operate throughout the wider workforce?
Salary
Our principle is of pay equity for performing the same, or broadly similar, work, accounting for local market benchmarks and union/collective agreements, where applicable.
Executive Directors
Executive Committee
Senior Management
Wider workforce
Salaries are reviewed annually and increases are typically in line with or less than the wider employee population.
Salaries are reviewed annually subject
to engagement with employee
representatives/unions where applicable.
It is important that all colleagues enjoy a
reasonable standard of living and we are
proud to be both a Real Living Wage and
a Living Hours employer in the UK.
Benefits
Eligible for a range of voluntary benefits and wellbeing support available to all colleagues in respective markets.
Colleagues can participate in a share matching plan (Aviva matches two shares for every one bought up to £50 per month) and, in the UK, the Aviva Savings Related Share Option
Scheme 2020 (SAYE).
UK benefits include 8 times’ salary death-in-service. In addition, flexible benefits allow colleagues to add to and/or supplement where Company provisions differ, e.g. private
health benefit.
Private medical insurance.
Essential health support in lieu of
private medical insurance.
Eligible to participate in Aviva’s UK defined contribution pension scheme with a 14% contribution (or where applicable receive cash in lieu).
Rates in Ireland are 14 %, different rates apply in Canada in line with market.
Pension
Bonus basis
Bonus deferral
Annual performance-related bonus based on Group, business unit (where applicable) and individual performance against goals.
⅔ into shares
½ into shares
⅓ into shares
Long-term incentive
LTIP share awards are subject to strategic performance measures over three years.
Additional two-year holding period post-
vesting applies to EDs.
Additional holding period post-vesting not
applicable to ExCo.
Eligible for Restricted Share Awards
aligned with shareholder interests, long-
term Aviva performance and retention of
key talent.
All paid in cash
Not eligible
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Remuneration at a glance continued
Alignment with the UK Corporate Governance Code
The Committee is mindful of the UK Corporate Governance Code’s six principles when it determines remuneration policy. The Committee’s view is that the Remuneration Framework
at Aviva is well-aligned with these areas.
Simplicity
• We operate a simple
remuneration framework,
comprising fixed
pay elements, along
with short-and long-term
variable elements.
• This structure provides
clear line of sight for
both executives and
shareholders.
• The annual bonus and
LTIP are focused on our
strategic priorities,
rewarding performance
against key measures of
success for the business.
Proportionality
• There is clear alignment
between the performance
of the Group and the
rewards available to EDs.
• Incentive elements are
closely aligned to our
strategic goals, transparent
and robustly assessed, with
the Committee having full
discretion to adjust
outcomes to ensure they
align with overall Aviva
performance.
Predictability
• The Policy sets out the
possible future value of
remuneration which EDs
could receive, including the
impact of share
price appreciation of 50% –
see the illustration of the
Policy for further details.
Alignment to culture
• We are committed to
effective stakeholder and
colleague engagement.
• As part of this, the
Committee regularly
reviews data and insights
relating to pay and broader
employment conditions in
the workforce, and takes
these into account when
considering executive
remuneration.
Clarity
• Our remuneration
framework is structured to
support the financial and
strategic objectives of the
Group, aligning the interests
of our EDs with those of
shareholders and wider
stakeholders.
• We are committed
to transparent
communication with
all our stakeholders,
including shareholders –
further details of our
engagement process
for the Policy are set
out under the 'Views'
section on the next page.
Risk
Our reward structure
ensures risk events are
reflected in remuneration
outcomes through:
• Opinion from Risk
on appropriate
performance measures and
targets; risk, performance
management and
consequence management
inputs are considered
before awards are made.
• Overarching discretion
is retained to adjust
formulaic outcomes
to properly reflect any
risk events.
• Deferral of annual
bonus (over three years)
and LTIP (five years,
including an additional two-
year holding period for
EDs), subject to malus and
clawback provisions which
mitigates against future risk.
• Our within- and post-
employment shareholding
guidelines align to the
successful delivery of the
Group's long-term strategy.
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Remuneration at a glance continued
Views
Shareholders
In its ongoing dialogue with shareholders and proxy advisory bodies, the Committee
actively seeks their views, ensuring that feedback received is discussed at Committee
meetings and ultimately feeds into the development of new proposals. We will consult with
shareholders during 2023 in preparation for presenting our Policy to shareholders at the
2024 Annual General Meeting.
Our colleagues
The Committee has sight of colleague views through the colleague engagement survey
(Voice of Aviva), input from the People function during Committee meetings, colleague
forums and the Evolution Council, chaired by the Board Chair. Specifically for the last two
channels:
• The Committee Chair met with Your Forum (a fully elected employee forum representing
UK colleagues) as well as members of Unite the Union in June 2022. Discussion included
matters of interest to colleagues and members covering areas such as colleagues' return
to the office and hybrid working; recruitment and retention; the Group's ongoing response
to the cost of living challenges as well as our ESG goals and strategy for the future.
• The Evolution Council consists of a diverse group of high calibre leaders from across the
business who discuss a range of topics related to the Group's strategy, values, culture and
performance.
When determining the Policy and arrangements for EDs, the Committee also reviews:
• Pay and employment conditions elsewhere in the Group to ensure reward structures are
suitably aligned and that levels of remuneration remain appropriate, as set out below
table 12. Other considerations include:
– Changes in remuneration (salary, benefits and bonus) of UK employees compared with
that of directors (see table 8).
– The ratio of CEO pay to that of employees (see tables 11 and 12).
– Gender and ethnicity pay gaps. We released our UK Pay Gap Report 2022 in February
2023. This was the sixth year that we published our gender pay gap and the second time
we published our ethnicity pay gap. The report also included details of actions we are
taking to drive change and close the gap. The report can be found at www.aviva.com/
about-us/uk-pay-gap-report.
– Any material changes to benefit and pension provision for colleagues more widely.
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4. Other Information
Annual report on remuneration
This section of the report sets out how Aviva has implemented
its Policy during 2022.
During the year, the Committee received assistance in considering executive remuneration
from a number of senior managers, who attended certain meetings (or parts thereof) by
invitation during the year, including:
This is in accordance with the requirements of the Large & Medium Sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended).
• the Group CEO;
• the Group CFO;
Committee membership
The members of the Committee during the year are shown below. Patricia Cross retired
from the Committee at the AGM on 9 May 2022 and Michael Mire retired from the Committee
on 12 September 2022. Jim McConville joined the Committee in February 2023 so is not
included in the table.
• the Group Chief People Officer;
• the Group Reward and Performance Director;
• the Chief Financial Controller;
• the Chief Audit Officer;
• the Group Chief Risk Officer; and
Pippa Lambert1
Patricia Cross2
Michael Mire3
Patrick Flynn
Andrea Blance
1. Became Chair of the Committee on 14 September 2021
2. Retired from the Committee on 9 May 2022
3. Retired from the Committee on 12 September 2022
Appointed
01-01-21
01-12-13
14-05-15
15-06-20
21-02-22
The Committee met six times during 2022, all of which were scheduled meetings. Details of
Committee members' experience, qualifications and attendance at Committee meetings
during the year are shown in the 'Our Board of Directors' and 'Governance at a glance'
sections of the Governance report.
The Group Chair attended all meetings of the Committee. The Group General Counsel and
Company Secretary acted as secretary to the Committee. The Chair of the Committee
reported to subsequent meetings of the Board on the Committee’s work and the Board
received a copy of the minutes of each Committee meeting.
Years on the
Committee
• the Remuneration Committee Chair of Aviva Investors.
2
N/A
N/A
3
1
No person was present during any discussion relating to their own remuneration.
During the year, the Committee received advice on executive remuneration matters from
Deloitte LLP. Deloitte LLP were approved by the Committee and appointed as their advisers
in 2012 following a competitive tender process. The Committee regularly reviews and
satisfies itself that the advice received from Deloitte LLP is independent and objective.
The Committee notes Deloitte LLP is a member of the Remuneration Consultants Group
and adheres to its Code of Conduct. During the year, Deloitte LLP also provided advice to
the Group on various taxation, risk, compliance and other consulting advisory services.
Tapestry Compliance Limited, appointed by the Company, provided legal and regulatory
advice on share incentive plan related matters, including on senior executive remuneration
matters and views on shareholder perspectives.
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Annual report on remuneration continued
During the year, Deloitte LLP were paid fees totalling £165,850 and Tapestry Compliance
Limited were paid fees totalling £40,811 for their advice to the Committee on these matters.
Fees were charged on a time plus expenses basis.
The Committee reflects on the quality of the advice provided and whether it properly
addresses the issues under consideration as part of its normal deliberations.
The Committee is satisfied that the advice received during the year was objective
and independent.
Committee effectiveness review
The Committee undertakes a review of its effectiveness annually as part of the Board
Evaluation. More information can be found in the 'Governance in action' section of the
Governance report.
Committee activities during 2022
Governance, regulatory issues and reporting policy
• Reviewed updates from external advisers on the regulatory environment and on
benchmarking the Group’s remuneration policies and practices against industry
best practice.
• Reviewed and approved the Company’s annual remuneration regulatory reporting
and disclosures.
• Discussed and approved the annual bonus targets for 2023.
• Reviewed and approved the proposed individual remuneration for each member of the
ExCo in relation to their performance.
• Agreed an appropriate approach to remuneration packages for incoming and outgoing
ExCo members in line with policy.
• Reviewed wider workforce pay and employment terms and conditions.
• Concluded its review of 2021 performance:
– Reviewed the Risk and Internal Audit 2021 Performance Opinion in relation
to remuneration.
– Discussed and approved the overall maximum bonus pool available to senior managers
for the 2021 performance year, taking into account measures on culture and risk as well
as on financial performance.
Share plan operation and performance testing
• Reviewed performance testing of all existing LTIP awards, and approved targets for the
2022 LTIP awards.
• Approved vesting outcomes for the 2019 LTIP and noted the interim testing for the 2020,
2021 and 2022 awards, including consideration of potential windfall gains on the 2020
LTIP awards.
• Reviewed and approved the Reward Governance Framework Policies.
• Reviewed and approved any application of malus and clawback.
• Approved the list of in scope staff in respect of the different regulatory regimes to which
• Approved the terms of the SAYE, the Aviva Ireland Save as You Earn Scheme, the Ireland
the Company is subject.
Senior management objectives, pay decisions and bonus and
LTIP target setting
• Determined appropriate levels of discretion to be applied to ED and ExCo remuneration
outcomes, taking into account the potential impact of windfall gains, shareholder
experience and the risk and control environment.
Profit Share Scheme, and the invitation terms for eligible employees.
The Committee’s decisions were taken in the context of the Reward Governance Framework,
which sets out the key policies, guidelines and internal controls and is summarised on the
next page.
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2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Reward Governance Framework
Terms of reference, policies and guidelines
Control and assurance
Terms of reference
Remuneration Committee terms of reference
Sets out the Committee’s scope and responsibilities, including authorities which may be delegated
but which still retain Committee oversight
Overarching policy
Supporting policies
Internal guidelines and non-
Remuneration Committee
approved policies (examples)
Subsidiary board remuneration committee terms of reference
Sets out the subsidiary remuneration committees' scopes and responsibilities
Aviva Remuneration Policy
Approved by the Committee, applies to all
employees in entities within Aviva Group
Directors' Remuneration Policy
Approved by shareholders, applies to directors of
Aviva Group plc
Identification of
remuneration
regulated employees
Variable pay and risk adjustment
(includes bonus, LTIPs, buyout, retention,
recognition awards and funding)
Malus and clawback
Benchmarking
Bonus deferral
Buyouts and guarantees
Global mobility
Retention awards
Specialist incentive schemes
Key
Element of the Reward Governance Framework managed as part of the business of the Committee
Element of the Reward Governance Framework managed mainly under delegated authority from the Committee
Remuneration
business standard
Assurance framework
to attest reward
operations are
conducted within the
Aviva Remuneration
Policy, Directors’
Remuneration Policy
and supporting policies
Reward approvals
framework
Approval requirements
to ensure Reward
operations are
conducted within the
Aviva Remuneration
Policy, Directors’
Remuneration Policy
and supporting policies
Aviva plc
2.43
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2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Single total figures of remuneration for 2022
The table below sets out the total remuneration for 2022 and 2021 for each of our EDs.
Table 1 Total 2022 remuneration – Executive Directors (audited information)
Basic salary1
Benefits2
Pension3
Total fixed pay
Annual bonus4
LTIP5
Total variable pay
Total9
Amanda Blanc
2021
£000
1,000
Executive Directors
Charlotte Jones6
2021
£000
—
2022
£000
220
Former Executive Directors
Jason Windsor7
2021
£000
675
2022
£000
354
121
123
1,244
1,766
—
1,766
3,010
2
27
249
283
—
283
532
—
—
—
—
—
—
—
5
43
402
—
—
—
7
83
765
—
—
—
402
765
2022
£000
1,023
59
125
1,206
2,001
2,315
4,317
5,523
Total emoluments of
Executive Directors8
2022
£000
1,596
66
195
1,857
2,284
2,315
4,599
6,457
2021
£000
1,675
128
206
2,009
1,766
—
1,766
3,775
1. Basic salary received during the relevant year
2. The benefits disclosure includes the cost, where relevant, of private medical insurance, life insurance, accommodation, travel and car benefits. All numbers disclosed include the tax charged on the benefits, where applicable. Year-on-year decrease in Amanda's benefits is because she did not receive taxable
relocation assistance after 2021.
3. Pension contributions consist of employer defined contribution benefits, excluding salary exchange contributions made by the employees, plus cash payments in lieu of pension. Amanda, Charlotte and Jason received cash payments equivalent to a pension contribution of 14%, reduced for the effect of
employers’ National Insurance contributions when paid as cash. No ED has a prospective entitlement to benefit in a defined benefit scheme.
4. Bonus payable in respect of the financial year including any deferred element at the face value at the date of award. EDs are required to defer two-thirds of any bonus awarded into Aviva shares. The deferred share element is granted under the ABP and will vest in equal tranches on the first, second and third
anniversary of the award date, subject to continued employment. No discretion was exercised in determining the 2021 annual bonus outturn.
5. The value of Amanda Blanc's LTIP for 2022 relates to the 2020 award, which has a three-year performance period ending 31 December 2022. As a result of the downwards adjustment of 10%, as disclosed in the description below table 4, 72.18 % of the award will vest in March 2023. An assumed share price of
429.65 pence has been used to determine the value of the award based on the average share price over the final quarter of the 2022 financial year. The amount of the value of the LTIP that is attributable to share price appreciation (the appreciation being the difference between the face value at the date of award
and the vested value of the award) is £1,081k. The nil LTIP amount in 2021 reflects the fact that neither Amanda Blanc nor Jason Windsor received an LTIP award in 2019, which had a three-year performance period ending 31 December 2021. 0% of the award vested in March 2022.
6. Charlotte Jones was appointed as Group CFO on 5 September 2022; the figures for 2022 reflect the period since her appointment
7. Jason Windsor gave notice of his resignation on 12 January 2022 and resigned as CFO on 10 July 2022. During this period, Jason continued to receive his contractual salary and benefits. Deferred awards for Jason Windsor under the ABP and LTIP did not vest and lapsed on termination of his employment.
8. Year-on-year decrease in total fixed pay is primarily due to 2022 figures only reflecting part-year remuneration for Jason Windsor and Charlotte Jones. Year-on-year increase in total emoluments of Executive Directors is primarily due to Amanda Blanc's eligibility for LTIP in 2022.
9. The EDs have not received any items in the nature of remuneration other than those disclosed in table 1
Aviva plc
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4. Other Information
Annual report on remuneration continued
2022 Annual bonus outcomes
The chart below summarises how our annual bonus1 operated for 2022.
Performance
against financial
measures
subject to a
quality of
earnings
assessment.
Step I
25% Gross cash
remittances
20% Solvency II OFG
15% Group adjusted
operating profit
10% Cumulative cost
reduction
5%
Transactional NPS
5%
MyAviva online
experience score
5% Employee
engagement
15% Risk scorecard
s
e
r
u
s
a
e
m
l
a
i
c
n
a
n
i
F
s
e
r
u
s
a
e
m
c
i
g
e
t
a
r
t
S
Performance is assessed against defined minimum,
target and maximum targets
Step II – Individual performance
The bonus scorecard outcome from
step I may then be modified based on:
• Individual contribution and
achievements;
• How the individual has assisted the
Group achieve progress against its
strategic objectives;
• The leadership they have exhibited; and
• How the individual has demonstrated
Aviva’s values.
Individual adjustments are not determined
in a formulaic manner. The Committee
reviews overall performance against each
individual’s objectives and applies
judgement as to whether any adjustment is
warranted. In recent years adjustments
have ranged from -17.5% to +25%.
1. This approach also used as the basis for determining bonuses for colleagues across the Group. For Aviva Investors, bonus funding is primarily based
on profitability.
Step I – Bonus scorecard
The table below sets out performance against financial and non-financial targets under the
bonus scorecard. The overall scorecard outcome percentage applies to all EDs.
Table 2 2022 performance against bonus scorecard for Executive Directors’
bonuses (audited information)
Measure
Financial measures (70% of total)
Weighting
Minimum
(50 %)
Target
(100 %)
Maximum
(200 %)
Actual
Outcome
Gross cash remittances
25.0%
£1,700m
£1,750m
£1,800m
£1,845m
50.0%
Solvency II OFG
20.0%
£1,140m
£1,230m
£1,320m
£1,623m
40.0%
Group adjusted operating profit
15.0%
£1,615m
£1,745m
£1,875m
£2,213m
30.0%
Cumulative cost reduction
10.0%
£300m
£325m
£350m
£327m
10.8%
Total financial measures
70.0%
Strategic measures (30% of total)
Transaction NPS
MyAviva online experience score
Employee engagement
Risk scorecard1
Total strategic measures
Scorecard outcome
5.0%
5.0%
5.0%
15.0%
30.0%
100.0%
130.8%
41.0
44.0
47.0
50.0%
52.5%
55.0%
40.5
45.5%
0%
0%
70.0%
73.0%
76.0%
86%
10.0%
7.5%
15.0%
30.0%
18.5%
18.5%
28.5%
159.3%
1. The Risk Scorecard objectively assesses and reports on how effectively first line Aviva employees and senior management manage risk and controls.
The Risk Scorecard considered risk behaviours, outcomes and a second line check and challenge. The Group outturn rating reflects ongoing progress
with strengthening the Risk and Control environment and desired Risk Culture throughout Aviva.
Aviva plc
2.45
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3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Step II – Individual performance
The Committee assessed Amanda on her individual performance in the year which is set out
below. The Committee also assessed Charlotte on her individual performance from the
period of joining Aviva in September 2022 to the end of the year. This assessment is set out
to the right.
Amanda Blanc
Amanda’s strong leadership continues to have a significant impact on the performance and
transformation of the Aviva Group. Key achievements include:
Charlotte Jones
Key achievements include:
• Building relationships and credibility with colleagues, analysts, shareholders
and regulators.
• Maintaining the financial strength of the Group, with strong capital and liquidity
positions, despite market volatility and political uncertainty.
• Partnering with the Group CEO on delivering key updates to the market, including an
update on IFRS 17 implementation.
• Delivery of a robust set of financial results, meeting or exceeding targets for: Cash
remittances, Solvency II OFG, Group adjusted operating profit and cost savings.
• Leading on the development of a stretching and ambitious three-year business plan,
which is aligned to the Group’s strategic priorities and commitments to investors.
• Completion of the £4.75 billion capital return, with an additional capital return
• Creating a long-term vision and strategy for Finance and reshaping the function to deliver
scheduled for the 2022 results announcement.
transformative commercial partnering to the business.
• Completion of strategic bolt-on acquisitions, namely Succession Wealth and Azur.
• Playing a significant role in lobbying for Solvency II reforms, which would enable Aviva
to invest in a wider range of asset classes, most notably, Infrastructure.
• Disciplined and active management of pricing and underwriting to mitigate
inflationary pressures.
• Employee engagement 5% above Financial Services (FS) norms1, employees feeling
safe to speak up 10% above FS norms, and trust in senior leadership has increased
14% year on year.
• Continued strengthening of the senior leadership team through the appointment of
Charlotte Jones as Group CFO.
• Enhancement of customer digital journeys with 200+ changes made this year.
• Significant progress towards Aviva’s ambition to be Net Zero by 2040 and continuing to
shape the future financial architecture for climate change through work with GFANZ
and attendance at COP15.
• Enhancing Aviva’s brand through her media activity. Amanda was named as
The Sunday Times Business Person of the Year and Insurance Personality of the Year at
the British Insurance Awards. She was also included in The Financial Times' 25 most
influential women of 2022 and Forbes – The World’s 100 Most Powerful Women in 2022.
• Amanda is the Women in Finance Charter Champion and helped to issue a blueprint of
best practice to help all organisations in progressing the female agenda.
Table 3 2022 bonus outcomes for Executive Directors (audited information)2
The Committee considered that in light of Amanda's outstanding performance during the year,
it was appropriate to apply an individual adjustment of 35% to her bonus outcome. As Charlotte
was newly appointed, the Committee did not make any adjustment to her bonus outcome.
Bonus scorecard (0% – 200%)
Committee discretion
Sub total
Individual adjustment
Final outcome
Target opportunity (% of salary)
Maximum opportunity for 20222 (% of salary)
Final bonus outcomes
% of salary3
% of maximum
£ amount
Amanda Blanc
159.3%
Charlotte Jones
159.3%
—%
159.3%
35.0%
194.3%
100.0%
200.0%
194.3%
97.2%
—%
159.3%
—%
159.3%
100.0%
150.0%
129.7%
86.4%
£2,001,290
£282,921
1. FS norms are provided by Perceptyx. The benchmark is composed of 53 global financial services organisations
2. The Group CEO has a maximum bonus opportunity, inclusive of any individual adjustment, of two times target (i.e. 200% of salary) while the Group
CFO has a maximum opportunity, inclusive of any individual adjustment, of one and a half times target (150% of salary)
3. The bonus scorecard for EDs can range from 0 to 200 %. When the final outcome is above 100%, the resulting final bonus outcome, as a percentage of
salary, is on a ‘1% for 1%’ basis for the Group CEO and on a ‘2% for 1%’ basis for other EDs; e.g. a final outcome of 140% would result in a bonus of
140% of salary for the Group CEO and 120% of salary for other EDs. When below 100%, scaling is ‘1% for 1%’, such that a final outcome of 80% would
result in a bonus of 80 % of salary for all EDs, including the Group CEO.
Aviva plc
2.46
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Discretion
The Committee is conscious of the provisions of the 2018 Code, with remuneration
committees being encouraged to review incentive outcomes against individual and company
performance, together with any wider circumstances, and to exercise independent judgement
and discretion in relation to remuneration outcomes. Taking into account the impact of the
outcome of the quality of earnings assessment (see opposite), the Committee is of the view
that these outcomes appropriately reflect the overall performance of Aviva during the year
and align with the experience of shareholders and no discretion was exercised.
2020 LTIP vesting in respect of performance period 2020-2022
(audited information)
The Solvency II RoE and TSR outcomes for the 2020 LTIP are detailed in the table below.
Table 4 2020 LTIP award – performance conditions
Measure
Solvency II RoE - 50%
Relative TSR2 - 50%
Threshold
(20 % vest)1
10.5%
Median
Aviva
performance
Aviva
performance
Maximum
(100 % of vest)
Vesting (% of
maximum)
12.5%
13.2%
Upper quintile
and above
100%
60%
5.2 out of 14
1. Threshold vesting is 20% for each performance measure independently
2. For the purposes of measuring the TSR performance condition, the Company's TSR and that of the comparator group will be based on the 90-day
average TSR for the period immediately preceding the start and end of the performance period. The comparator group is provided in footnote 4 to
table 16.
Amanda was granted 641,921 conditional shares under the LTIP on 6 August 2020 for the three-
year performance period from 1 January 2020 to 31 December 2022. An additional 104,637 shares
have accrued as dividend equivalents. Amanda was appointed as Group CEO on 6 July 2020 and
her 2020 LTIP award was pro-rated to represent period of time worked in 2020.
On a formulaic basis, the 2020 LTIP award vested at 80.2% of maximum. This reflected
strong performance against the financial Solvency II RoE target, with favourable economic
movements over the period not affecting the vesting outcome, and above median relative
TSR performance. Consistent with our commitments in the 2020 DRR, the Committee
carefully reviewed whether this vesting outcome was appropriate, being mindful of the
guidance from proxy agencies and investors around the issue of ‘windfall gains’.
In doing so, the Committee recognised three key factors:
• Firstly, there was a fall in the share price in the period prior to grant. The extent to which
this fall was driven by COVID-19 is ultimately a subjective judgement, but the overall
magnitude was not wholly out of line with that seen in the wider market or sectoral peers.
• Secondly, Aviva’s performance over the last three years, and particularly in the period
since Amanda Blanc’s appointment in July 2020, has been outstanding. From a total
shareholder return perspective, we outperformed our sector1 median by c.14 percentage
points and the broader FTSE 100 by c.13 percentage points. The strategy which Amanda
announced with our Half Year 2020 results has delivered strong financial performance –
we have seen robust growth across targeted areas, while continued progress on our cost
base has driven greater efficiencies throughout the business. We also sold businesses in
continental Europe (France, Poland and Italy) and Asia (Singapore and Vietnam). This
strong performance allowed us to return £4.75 billion to shareholders, and we have
announced a new share buyback scheme beginning in March 2023.
• Thirdly, in determining the LTIP award made to Amanda on joining Aviva, the Committee
at that time decided on an extremely conservative approach, resulting in an award of
147% of salary. This represented 49% of a full award despite Amanda being in role for 83%
of the performance period.
Taking all of the above into consideration, the Committee concluded that a downwards
adjustment of 10% was appropriate. This reflects the Committee view that there had been
an impact from COVID-19 on the share price at the time of grant, but also recognises both
the outstanding performance delivered over the last three years and the significant
reduction which had already been applied to Amanda’s award. The Committee considered
that this adjustment provided a reasonable final vesting outcome, aligned with Aviva’s
performance and circumstances over the period.
1. Based on the median of Aviva's 2020 LTIP comparator group, which can be found in footnote 4 to table 16.
Quality of earnings assessment – 2022 remuneration decisions
The Committee discussed those items that impacted the overall results in 2022 e.g. foreign
exchange, acquisitions and disposals, life assumption and modelling changes, prior year
reserve development, and other items that are non-recurring in nature. This process
provides the Committee with an understanding of the core profitability of the business
taking these factors into account.
Malus and clawback
As part of the annual pay review process, the Committee has considered whether any
recovery or withholding under the malus and clawback provisions of Aviva’s incentive
plans is required by any current circumstances.
Aviva plc
2.47
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
No incidents concerning the EDs are currently subject to action under Aviva’s Malus
and Clawback policy.
Table 5 Awards granted during the year (audited information)
Share and option awards granted to EDs during the year are set out below.
Targets for LTIP awards made in 2022
Three-year targets are set annually within the context of the Company’s strategic plan.
The 2022 targets are provided below.
Table 6 2022 LTIP performance targets (audited information)
Date of
award
21 Mar
2022
21 Mar
2022
5 Sep
2022
Amanda
Blanc
Charlotte
Jones
Award
type1
LTIP
Face value
(% of basic
salary)2
Face value
(£)2
Threshold
performance
(% of face
value)3
Maximum
performance
(% of face
value)
End of
performance
period
350% £3,500,000
20%
100%
31 Dec
2024
ABP
118% £1,177,333
N/A
N/A
N/A
LTIP
225% £1,518,750
20%
100%
31 Dec
2024
End of
vesting/
holding
period
21 Mar
2027
21 Mar
2025
21 Mar
2027
1. ABP and LTIP awards have been granted as conditional share awards. The LTIP is a conditional right to receive shares, which vest at the end of a
three-year performance period, with an additional two-year holding period. ABP represents two-thirds of the 2021 bonus, which is deferred into shares
and vests in three equal annual tranches. Shares issued in lieu of dividends accrue on ABP and LTIP awards during the ABP deferral period and the
LTIP performance period.
2. Face values for the awards granted on 21 March 2022 and 5 September 2022 have been calculated using the average of the middle-market closing
price of an Aviva ordinary share on the three consecutive business days immediately preceding the date of the main grant for employees, 21 March
2022, of 424 pence
3. Threshold vesting is 20% for each performance measure independently. This means less than 20% may vest overall.
Below
Vesting
threshold Threshold
Maximum
Above
maximum
Measure
Weighting
0%
Solvency II RoE1
Cumulative cash
remittances1
Relative TSR2
Reduction in CO2
intensity of
shareholders’ assets
and with-profit funds3
RNPS gap to
competition4
Females in senior
leadership roles5
Ethnically diverse
employees in senior
leadership roles6
15%
25%
40%
7.5%
7.5%
2.5%
2.5%
20%
11%
£5.3bn
Median
25%
11.0
37.0%
10.0%
20-100 %
100 %
100 %
13%
£5.8bn
Upper quintile
27.5%
14.0
40.0%
13.0%
1. Any vesting of the Solvency II RoE and Cumulative cash remittances elements of the LTIP are subject to a Solvency II shareholder cover ratio that
meets or exceeds the minimum of the stated working range (in 2022, this was 160%)
2. Aviva’s TSR performance will be assessed against that of the following companies: Admiral, Allianz, AXA, Direct Line Group, Hargreaves Lansdown,
Hiscox, Intact, Legal & General, Lloyds Banking Group, M&G, Phoenix, Quilter and Zurich Insurance Group. The performance period for the TSR
performance condition is the three years beginning 1 January 2022. For the purposes of measuring the TSR performance condition, the Company’s
TSR and that of the comparator group will be based on the 90-day average TSR for the period immediately preceding the start and end of the
performance period.
3. Reduction in CO2 intensity of shareholder assets and with-profit funds over the three-year performance period is aligned to Aviva Group’s target of
being Net Zero by 2040
4. RNPS is calculated on gap to competition over a three-year average
5. Calculated as the percentage of colleagues in senior leadership roles in the UK, Ireland, Canada and Group functions who identify as female
6. Calculated as the percentage of colleagues in senior leadership roles in the UK who identify their ethnicity as anything other than ‘white’
Payments to past directors (audited information)
There were no payments made to past directors during the year.
Payments for loss of office (audited information)
There were no payments for loss of office made during the year.
Aviva plc
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2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Table 7 Total 2022 remuneration for Non-Executive Directors (audited information)
The table below sets out the total remuneration earned by each NED who served during 2022 for Group-related activities.
Fees
Aviva plc
Benefits1
Total
Fees
Subsidiaries
Benefits1
Total
Group total
2022
£000
2021
£000
2022
£000
2021
£000
2022
£000
2021
£000
2022
£000
2021
£000
2022
£000
2021
£000
2022
£000
2021
£000
2022
£000
2021
£000
Chair
George Culmer
NEDs
Andrea Blance2
Mike Craston2
Patricia Cross3
Patrick Flynn
Belén Romana García3
Shonaid Jemmett-Page2
Mohit Joshi
Pippa Lambert4
Jim McConville
Michael Mire
Martin Strobel2
550
550
144
74
42
210
62
156
105
145
151
125
125
—
—
141
210
175
3
105
124
170
135
23
Total emoluments of NEDs
1,889
1,636
14
4
6
—
9
—
4
2
2
19
4
16
80
8
564
558
—
—
—
—
1
—
—
1
—
1
1
—
12
148
80
43
219
62
160
107
147
170
128
141
—
—
141
211
175
3
106
124
171
136
23
—
129
—
—
—
—
—
—
113
—
84
1,969
1,648
326
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
12
—
22
37
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
564
558
—
132
—
—
—
—
—
—
125
—
106
363
—
—
—
—
—
—
—
—
—
—
—
—
148
212
43
219
62
160
107
147
295
128
247
—
—
141
211
175
3
106
124
171
136
23
2,332
1,648
1. Benefits include the gross taxable value of expenses relating to accommodation, travel and other expenses incurred on Company business in accordance with our expense policy and may vary year-on-year dependent on the time required to be spent in the UK
2. Martin Strobel was appointed to the Board on 22 October 2021, Shonaid Jemmett-Page on 20 December 2021, Andrea Blance on 21 February 2022 and Mike Craston on 17 May 2022
3. Patricia Cross and Belén Romana García retired from the Board on 9 May 2022. Patricia Cross received benefits with a gross taxable value of £472.
4. Pippa Lambert was appointed as Chair of the Remuneration Committee effective 14 September 2021. Her Chair fees in 2021 are pro-rated to reflect this.
The Aviva plc total fees paid to NEDs in 2022 was £1,889,000, which is within the limits set in
the Company’s Articles of Association, as previously approved by shareholders.
Subsidiary company board memberships
During the year, the following NEDs were appointed to subsidiary companies and received
emoluments in respect of those appointments:
• Mike Craston received an additional fee of £205,000 in respect of his duties as Chair of
Aviva Investors Holdings Ltd, Chair of Aviva Investors Canada Inc. and as a director of two
Aviva Investors subsidiary companies, all positions which he held before his appointment
as a NED of Aviva plc. Only the fees payable during his time as a director of Aviva plc are
disclosed here, equating to £128,616. While he received fees in 2021 for these
appointments, these fees are not included as he was not a director of Aviva plc at the time.
• Jim McConville received an additional fee of £112,500 (2021: N/A) in respect of his duties as
Chair of both Aviva Life Holdings UK Ltd and Aviva Life & Pensions UK Ltd, positions to
which he was appointed on 27 April 2022.
• Martin Strobel received an additional fee of £84,462 (2021: N/A) in respect of his duties as a
NED and then Chair of Aviva Insurance Ltd. He was appointed as a NED on 5 May 2022 and
took on the role of Chair from 30 June 2022.
Aviva plc
2.49
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3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Percentage change in remuneration of the directors
Table 8 sets out the change in the basic salary, bonus and benefits of each of the directors and that of the wider workforce. The regulations require a comparison between the
remuneration of each director and that of all employees of the parent company on a full-time equivalent basis. As Aviva plc has no direct employees, and in line with our approach in prior
years, we have voluntarily disclosed for the UK employee workforce. The Group CEO and CFO are based in the UK (albeit with global responsibilities) and pay changes across the Group
vary widely depending on local market conditions.
Table 8 Percentage change in remuneration of the directors
Salary/Fees
Bonus
Benefits9,10 Salary/Fees
Bonus
Benefits10 Salary/Fees
Bonus
Benefits
2021-22
2020-21
2019-20
—
—
—
—
-
—
0.0 %
0.0%
2.3%
74.8%
13.3%
(51.4) %
(47.5) %
47.2 % (23.9) %
0.0 % (100.0) % (82.6) %
Group CEO1
Amanda Blanc
Group CFO1
Charlotte Jones
Jason Windsor
Chair1
George Culmer
NEDs2
Andrea Blance4
Mike Craston4
Patricia Cross1,7
Patrick Flynn1,3
Belén Romana García1,7
Shonaid Jemmett-Page1,5
Mohit Joshi
Pippa Lambert1
Jim McConville6
Michael Mire8
Martin Strobel1
All UK-based employees
1. Salary/fees, annual bonus and benefit amounts for the EDs, the Chair and the NEDs have been annualised where applicable to reflect what they would have been over a full 12-month period to aid comparison. The decrease in benefits for EDs reflects lower relocation and taxable travel and subsistence.
2. The increase in fee levels for NEDs in 2020 are mainly driven by increases in fees effective July 2020
3. Patrick Flynn was appointed as Senior Independent Director of Aviva plc and a Remuneration Committee member on 15 June and 7 September 2020 respectively
4. Andrea Blance was appointed to the Board on 21 February 2022 and Mike Craston on 17 May 2022
5. Shonaid Jemmett-Page joined the Audit Committee and the Risk Committee on 14 February 2022; she became chair of the Customer and Sustainability Committee on 17 May 2022
6. Jim McConville stood down as Chair of the Customer and Sustainability Committee, remaining a member, on 17 May 2022
7. Belén Romana García and Patricia Cross stepped down from the Board on 9 May 2022
8. Michael Mire stood down from the Risk Committee and Remuneration Committee on 14 September 2022
9. The increase in taxable benefits for UK based employees in 2021, and subsequent decrease in 2022 has been mainly driven by the one-off recognition in 2021 of colleagues for their hard work during the pandemic. The taxable benefits also increased in 2021 due to the increase in the cost of private medical
—
—
— 1433.4%
— 660.1%
—
—
—
69.8%
— 350.7%
— 4997.8%
— 484.0%
—
—
(14.2) %
-
-
(14.9) %
0 %
0%
83.0%
0%
17.0%
(11.1) %
(7.8) %
0%
6.5%
— %
(39.4) %
(47.9) %
—
—
—
—
(82.8) %
—
10.7%
(75.0) %
(98.0) %
—
—
—
—
10.5%
—
34.8%
—
—
—
—
—
—
—
—
—
47.4%
10.4%
44.8%
18.9%
—
—
—
—
9.6%
—
3.3%
0.2%
5.0%
6.1%
—
—
—
—
4.9%
—
3.8%
—
—
—
—
—
—
—
— %
—
0.5%
263.6%
(26.3) %
57.7%
11.1%
(0.6) %
2.1%
0.0%
0.0 %
—
—
insurance. Without these items, benefits would have increased by 8.4 % in 2021 reflecting greater use of our online recognition platform.
10. The increase in benefits for NEDs in 2022 compared to 2021 is largely reflective of the return of taxable travel and subsistence costs after the pandemic. The reduction in benefits in 2021 compared to 2020 is largely reflective of reduced taxable travel and subsistence costs due to the pandemic.
Aviva plc
2.50
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Historical TSR performance and Group CEO remuneration outcomes
The table below compares the TSR performance of the Company over the past ten years
against the TSR of the FTSE 100. This index has been chosen because it is a recognised
equity market index of which Aviva plc is a member.
For additional context, the chart below also shows on a three-year basis the performance
against the FTSE 100 and median TSR performance for the LTIP comparator group. The
companies that comprise the 2022 LTIP group for TSR purposes are listed below table 6.
Table 9
Aviva plc ten-year TSR performance against the FTSE 100
Three-year TSR performance against the FTSE 100 and the median of the 2022
LTIP comparator group
)
0
0
1
o
t
d
e
s
a
b
e
r
(
R
S
T
300
200
100
0
2012
2013
Aviva FTSE 100
h
t
w
o
r
G
R
S
T
30%
20%
10%
0%
2014
2015
2016
2017
2018
2019
2020
2021
2022
TSR group median
FTSE 100
Aviva
The table below summarises the historical Group CEO single figure for total remuneration, and annual bonus and LTIP outcomes as a percentage of maximum over this period.
Table 10 Historical Group CEO remuneration outcomes
Annual bonus payout
(as a % of maximum
opportunity)
LTIP vesting (as a % of
maximum opportunity)
Group CEO single figure
of remuneration (£000)
Group CEO
Amanda Blanc1
Maurice Tulloch2
Mark Wilson3
Amanda Blanc
Maurice Tulloch
Mark Wilson
Amanda Blanc
Maurice Tulloch
Mark Wilson
2013
—
—
2014
—
—
2015
—
—
2016
—
—
2017
—
—
2018
—
—
75.0%
86.7%
91.0%
91.0%
94.0%
42.0%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
53.0%
41.3%
36.9%
—
—
—
—
—
—
—
—
—
—
—
2,615
2,600
5,438
4,523
4,318
1,836
2019
—
48.1%
—
—
50.0%
—
—
2,352
—
2020
60.0%
0.0%
—
—
0.0%
—
1,205
1,030
—
2021
88.3%
—
—
—
—
—
2022
97.2%
— %
— %
72.2%
0
0
3,010
5,523
—
—
—
—
1. Amanda Blanc was appointed Group CEO on 6 July 2020
2. Maurice Tulloch was appointed Group CEO on 4 March 2019. Maurice stepped down as Group CEO and retired from the Board on 6 July 2020.
3. Mark Wilson joined the Board as an ED with effect from 1 December 2012 and became Group CEO on 1 January 2013. Mark stepped down as Group CEO and left the Board on 9 October 2018.
Aviva plc
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4. Other Information
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CEO Pay ratio reporting
The table below sets out the ratio at median, 25th and 75th percentile of the total
remuneration received by the Group CEO compared to the total remuneration received by
our UK employees. Total remuneration reflects all remuneration received by an individual
in respect of the relevant years, and includes salary, benefits, bonus, pension, and value
received from incentive plans.
Table 11 CEO Pay ratio table
Year
2022
2021
2020
2019
Method
Option A
Option A
Option A
Option A
P25
(lower quartile)
P50
(median)
P75
(upper quartile)
181:1
102:1
80:1
90:1
127:1
70:1
56:1
63:1
76:1
42:1
34:1
37:1
We would highlight the following in terms of the approach taken.
• In calculating the ratio for 2020, the single figure for both Amanda Blanc and Maurice
Tulloch in respect of their services as Group CEO were aggregated
• In 2019, the single figure for Maurice Tulloch was aggregated with the pro rata fees for
Sir Adrian Montague as Executive Chairman
• The P25, P50 and P75 employees were calculated based on full-time equivalent data as at
31 December of the relevant years
• Out of the three alternatives available for calculating the ratio, we chose to use Option A
as it is considered to be the most accurate way of identifying employees at P25, P50 and
P75, and is aligned with shareholder expectations. Under this approach we calculate
total remuneration on a full-time equivalent basis for all of our UK employees and rank
them accordingly.
The increase in the ratio reflects the fact that Amanda Blanc’s first LTIP since becoming
Group CEO vested during the year. The ratio for 2021 was therefore lower as no LTIP was
due to vest for the CEO in respect of that year. Executive Directors receive a greater
proportion of their remuneration in elements tied to performance, including participation in
the LTIP. This means that the pay ratio will vary in large part due to incentive outcomes
each year.
Although the CEO pay ratio has increased, the total remuneration for each quartile
employee has increased. This reflects the measures taken by Aviva to support our
colleagues through the rising cost of living.
Table 12 provides further information on the total remuneration figure for each quartile
employee, and the salary component within this.
Table 12 Salary and total remuneration used in the CEO pay ratio calculations
Year
2022
Pay element
Salary
Total remuneration
P25
(lower quartile)
P50
(median)
P75
(upper quartile)
£25,667
£30,583
£33,875
£43,603
£55,506
£72,530
In reviewing the employee pay data, the Committee is comfortable that the P25, P50 and
P75 individuals identified appropriately reflect the employee pay profile at those quartiles,
and that the overall picture presented by the ratios is consistent with our pay, reward and
progression policies for UK employees.
At Aviva, we are equally focused on our colleagues as we are on our customers. We
recognise the individual needs of colleagues and we are proud of the reward, benefits and
overall career packages that we offer our colleagues:
• In the UK, we have been an accredited Real Living Wage employer since April 2014 and a
Real Living Hours employer since October 2020. Our salaries are set above Real Living
Wage to allow colleagues to save for their retirement and benefit from an employer
pension contribution up to 14% whilst still earning the Real Living Wage.
• We have a structured salary progression scheme for our frontline colleagues, providing
salary increases to recognise colleagues as they develop and gain experience.
• We conduct regular market reviews of our salary ranges in order to maintain
competitiveness to market rates, and we move everyone who is below a band to at least
the minimum of that range each year.
• Our comprehensive, flexible benefits offering provides colleagues with the opportunity to
select the benefits that matter most to them, and our range of inclusive colleague policies
support life's big moments, including equal parental leave.
• UK colleagues are eligible to participate in our SAYE and AESOP offerings with similar
plans operating for many of our overseas colleagues. We are proud of the participation
rates in these plans, with over 60% participating in the SAYE and over 70% in the AESOP,
meaning colleagues both share in Aviva's success and benefit from tax-efficient savings.
Aviva plc
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Annual report on remuneration continued
Relative importance of spend on pay
Table 13 outlines Group adjusted operating profit, dividends paid to shareholders and
share buybacks, compared to overall spend on pay in total. This measure of profit has been
chosen as it is used for decision-making and the internal performance management of the
Group’s operating segments.
Table 13 Relative importance of spend on pay
Group adjusted operating profit from continuing operations1
Ordinary dividends paid to shareholders
Share buybacks2
Capital return3
Total staff costs from continuing operations4
%
change
between
2021 – 2022
35%
(25) %
(49) %
100%
5%
2021
£m
1,634
1,110
663
—
1,580
2022
£m
2,213
828
336
3,750
1,658
1. Group adjusted operating profit for 2021 is from continuing operations and therefore excludes operating profit from discontinued operations totalling
£631 million
2. On 31 March 2022, Aviva completed the share buyback programme originally announced on 12 August 2021, and extended to an aggregate purchase
of up to £1 billion on 16 December 2021. During the period £336 million (2021: £663 million) of shares were purchased and shares with a nominal value
of £19 million (2021: £42 million) were cancelled, giving rise to an additional capital redemption reserve of an equivalent amount. See note 31 for
further details.
3. On 2 March 2022, Aviva announced a proposed return of capital, including a £3,750 million B Share Scheme for the holders of ordinary shares. The capital
return was completed on 16 May 2022. The capital return is included here as it was a material distribution to shareholders. The value stated aligns with
the value attributed to the capital return in the Consolidated statement of changes in equity. See note 31 for further details.
4. 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 termination benefits. The average number of employees in continuing operations was 23,701 (2021: 22,312).
Statement of Directors’ shareholdings and share interests
EDs share ownership requirements
Under our Shareholding Policy applicable to 2022, the Company requires the Group CEO
to build a shareholding in the Company equivalent to 300% of basic salary and each ED to
build a shareholding in the Company equivalent to 225% of basic salary.
• The EDs are required to retain 50% of the net shares released from ABP and LTIP awards
until the shareholding requirement is met.
• The shareholding requirement needs to be built up over a period not exceeding five years.
• Unvested share awards, including shares held in connection with bonus deferrals, are not
taken into account in applying this test.
• A post-cessation holding period of two years applies. This is at the same level as the
current (within employment) guideline. The Committee retains the discretion to waive part
or all of the guideline where considered appropriate, for example in exceptional or
compassionate circumstances.
• EDs are required to retain shares vesting from incentive plans within the Company-
sponsored nominee account, and are not permitted to transfer them, e.g. into their own
brokerage accounts, unless otherwise agreed by the Committee. In this manner, the
Committee is able to retain oversight of the shares and is comfortable that this provides
the ability to enforce the post-cessation guidelines in practice and helps with the
enforcement of malus and clawback.
Table 14 Executive Directors – share ownership requirement (audited information)
Shares held
Options held
Executive Directors
Amanda Blanc
Charlotte Jones6
Jason Windsor7
Unvested and
subject to
performance
conditions2
Unvested and
subject to
continued
employment3
Unvested
and subject
to continued
employment4
Owned
outright1
Vested
but not
exercised
Shareholding
requirement
(% of salary)
Current
shareholding5
(% of salary)
Requirement
met
407,880 2,226,885
343,715
—
358,195
373,500
—
—
—
—
—
—
—
—
—
300
225
225
175
—
245
No
No
Yes
1. Directors’ beneficial holdings in the ordinary shares of the Company. This information includes holdings of any connected persons.
2. Awards granted under the Aviva LTIPs, which vest only if the performance conditions are achieved
3. Awards arising through the ABP. Under this plan, some of the earned bonuses are paid in the form of conditional shares which are deferred for three
years and released in three equal annual tranches. The transfer of the shares to the director at the end of the period is not subject to the attainment
of performance conditions but the shares can be forfeited if the ED leaves service before the end of the period.
4. Savings-related options (without performance conditions) over shares granted under the SAYE plan
5. Based on the closing middle-market price of an ordinary share of the Company on 31 December 2022 of 442.8 pence. The closing middle-market
price of an ordinary share of the Company during the year ranged from 373.8 pence to 467.9 pence.
6. Charlotte Jones was appointed on 5 September 2022
7. Jason Windsor left on 10 July 2022. Deferred awards under the ABP and LTIP lapsed on departure.
There were no changes to the EDs interests in Aviva shares during the period 1 January 2023
to 8 March 2023.
Aviva plc
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Table 15 Non-Executive Directors’ shareholdings1 (audited information)
1 January 2022
31 December 20222
George Culmer
Andrea Blance3
Mike Craston3
Patricia Cross4
Patrick Flynn
Belén Romana García4
Shonaid Jemmett-Page
Mohit Joshi
Pippa Lambert
Jim McConville
Michael Mire
Martin Strobel
130,922
N/A
N/A
32,903
10,000
27,509
—
7,618
2,903
18,667
50,000
40,000
99,500
15,000
30,771
N/A
7,600
N/A
4,565
5,789
6,985
14,186
38,000
30,400
1. This information includes holdings of any connected persons
2. On 16 May 2022, the Company’s share capital was consolidated (see note 31 for more information), which led to a reduction in the number of shares
held at that date
3. Andrea Blance was appointed to the Board on 21 February 2022 and Mike Craston on 17 May 2022
4. Patricia Cross and Belén Romana García retired from the Board on 9 May 2022
There were no changes to the NEDs interests in Aviva shares during the period 1 January
2023 to 8 March 2023.
Share awards and share options
Details of the EDs who were in office for any part of the 2022 financial year and hold or held
outstanding share awards or options over ordinary shares of the Company pursuant to
the Company’s share based incentive plans are set out in the table on the next page. EDs
are eligible to participate in the Company’s broad-based employee share plans on the same
basis as other eligible employees. Details of awards and options granted to EDs under these
plans are also included in tables 1, 5 and 14 (and SAYE options are included in table 16).
More information around HMRC tax-advantaged plans can also be found in note 32. EDs are
restricted from entering into any form of hedging arrangement or remuneration and
liability-related insurance policies which might undermine the risk alignment features of
share awards (such as delivery in shares, performance conditions, malus and
clawback provisions).
Aviva plc
2.54
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4. Other Information
Annual report on remuneration continued
Table 16 LTIP, ABP and options over Aviva shares (audited information)
At 1 January 2022
(number)
Options/awards
granted during year1
(number)
Options/awards
exercised/vesting
during year
(number)
Options/awards
lapsing during year
(number)
At 31 December 2022
(number)
Market price at date
awards granted2
(pence)
SAYE exercise price
(options) (pence)
Market price at date
awards vested/
option exercised
(pence)
Vesting date(s)/
exercise period(s)3
Amanda Blanc
LTIP4,5
2020
2021
2022
ABP
2021
2022
Charlotte Jones
LTIP4,5
2022
Jason Windsor7
LTIP4,5
20198
2020
2021
ABP
2019
2020
2021
SAYE9
2019
641,921
759,493
—
99,064
—
—
825,471
—
—
—
—
34,7696
—
277,672
—
358,195
73,634
663,209
384,493
10,770
85,123
113,924
6,338
—
—
—
—
—
—
0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
641,921
759,493
825,471
66,043
277,672
297.50
412.50
426.30
412.50
426.30
—
358,195
425.30
73,634
663,209
384,493
10,770
85,123
113,924
6,338
—
—
—
—
—
—
—
409.00
211.00
412.50
409.00
211.00
412.50
—
—
—
—
—
—
—
—
—
—
—
—
—
—
284.00
—
—
—
437.80
—
—
—
—
—
—
—
—
—
Mar-23
Mar-24
Mar-25
1/2: Mar-23
1/2: Mar-24
1/3: Mar-23
1/3: Mar-24
1/3: Mar-25
Mar-25
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1. The aggregate net value of share awards granted to the EDs in the period was £6.2 million (2021: £5.4 million). The net value has been calculated by
reference to the closing middle-market price of an ordinary share of the Company at the date of grant (2021: date of main grant to employees).
2. The actual price used to calculate the ABP and LTIP awards is based on a three-day average closing middle-market price of an ordinary share of the
Company, prior to the date of main grant to employees. These were in 2019: 421 pence, 2020: 229 pence, 2021: 395 pence and 2022: 424 pence.
3. Vesting date(s)/exercise period(s) for awards outstanding at 31 December 2022. ABP awards are deferred and released in three equal annual tranches.
4. For the 2019 LTIP, the comparator group is: Aegon, Allianz, Assicurazioni Generali, AXA, CNP Assurances, Direct Line Group, Legal & General,
Lloyds Banking Group, Old Mutual, Phoenix, Prudential, RSA, Standard Life Aberdeen and Zurich Insurance Group. For the 2020 LTIP, the TSR
comparator group is: Aegon, Allianz, Assicurazioni Generali, AXA, Direct Line Group, Intact, Legal & General, Lloyds Banking Group, M&G, Phoenix, RSA,
Standard Life Aberdeen and Zurich Insurance Group. For the 2021 LTIP, the TSR comparator group is: Aegon, Allianz, AXA, Direct Line, Generali, Intact,
Legal & General, Lloyds Banking Group, M&G, Phoenix and Zurich. For the 2022 LTIP, the TSR comparator group is: Admiral, Allianz, AXA, Direct Line
Group, Hargreaves Lansdown, Hiscox, Intact, Legal & General, Lloyds Banking Group, M&G, Phoenix, Quilter and Zurich Insurance Group.
5. The performance periods for these awards begin at the commencement of the financial year in which the award is granted and run for a three-year
period
6. The shares comprised in these vested awards include shares issued in lieu of dividends accrued during the deferral period
7. Deferred awards under the ABP and LTIP lapsed on departure. Any options under the SAYE also lapsed.
8. LTIP awards for Jason Windsor comprised RSUs and were granted prior to his appointment to the Board. The transfer of the shares at the end of the
period was not subject to the attainment of performance conditions but the shares were forfeited when he left service.
9. Options are not subject to performance conditions. The option price was fixed by reference to a three-day average closing middle-market price of an
ordinary share of the Company, prior to invitation date, with a discount of 20% as permitted under the SAYE plan.
Aviva plc
2.55
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2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Dilution
Awards granted under Aviva employee share plans, apart from SAYE options, have
historically been satisfied primarily through shares purchased in the market. SAYE options
have historically been satisfied primarily through new issue shares. In future, all awards
granted under Aviva employee share plans, including SAYE options will be satisfied
primarily through shares purchased in the market. Shares are held in employee trusts,
details of which are set out in note 33.
The Company monitors the number of shares issued under the Aviva employee share
plans and their impact on dilution limits. The Company’s usage of shares compared to the
relevant dilution limits set by the Investment Association in respect of all share plans (10%
in any rolling ten-year period) and executive share plans (5% in any rolling ten-year period)
was 3.94% and 1.46% respectively on 31 December 2022.
Governance Regulatory Remuneration Code
Aviva Investors Global Services Limited (AIGSL) and a number of small ‘firms’ (as defined
by the FCA) within the UK Life Insurance business are subject to the Investment Firms
Prudential Regime (IFPR) and the Markets in Financial Instruments Directive II (MiFID II).
Aviva Investors UK Funds Services Ltd and Aviva Investors Luxembourg are subject to the
Alternative Investment Fund Management Directive (AIFMD) and the Undertakings for
Collective Investments in Transferable Securities (UCITS V) directive.
Remuneration Code requirements include an annual disclosure. For AIFMD and UCITS V
the disclosure is part of the Financial Statements and/or Annual accounts of the Alternative
Investment Funds or UCITS. For IFPR the 2022 AIGSL disclosure will be found, when
published, at www.avivainvestors.com/en-gb/capabilities/regulatory/ and a link to the
disclosure for the UK Insurance firms can be found at www.aviva.com/about-us/
remuneration-committee/
Solvency II remuneration
Remuneration Requirements (PRA PS22/16 & SS10/16) apply to the Aviva Group.
Our remuneration structures have been designed in a way that is compliant with these
requirements for all senior managers across the Group, not just those identified as being
specifically covered by the requirements of the regulation. Such employees at Aviva are
termed ‘Covered Employees’. We are required to complete a Remuneration Policy
Statement, which outlines how we have complied with each of the requirements.
This document is approved annually by the Group Remuneration Committee.
The Solvency II reporting requirements for the year ended 31 December 2022 necessitate
firms to produce the Solvency and Financial Condition Report (SFCR) which contains
remuneration information and is publicly available. Aviva’s reward principles and
arrangements are designed to incentivise and reward employees for achieving stated
business goals in a manner that is consistent with the Company’s approach to sound
and effective risk management.
Aviva plc
2.56
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Annual report on remuneration continued
Statement of voting at AGM
The results of the shareholder votes at the Company’s 2021 AGM in respect of the Policy
and at the 2022 AGM in respect of the 2021 DRR are set out in table 17. The Committee
was pleased with the level of support received from shareholders for the resolutions.
Approach to NED fees for 2023
NED fees are reviewed annually and were last increased with effect from 1 July 2020,
the first such increase since 1 April 2014.
Table 17 Results of votes at AGM
Table 18 Non-Executive Directors’ fees
Policy
DRR
Year of
AGM
2021
2022
Percentage of votes cast
Number of votes cast
For
Against
For
Against
Votes withheld
96.93%
3.07%
2,374,520,911
75,190,042
2,529,266
95.17%
4.83%
2,312,723,155
117,286,675
2,225,918
Directors' Remuneration Policy
Directors' Remuneration Report
n For
n Against
96.93 %
3.07 %
n For
n Against
95.17 %
4.83 %
Role
Chair of the Company1
Board membership fee
Additional fees are paid as follows:
Senior Independent Director
Committee Chair (inclusive of committee membership fee):
Audit
Customer and Sustainability
Remuneration
Risk
Committee membership:
Audit
Customer and Sustainability
Nomination and Governance
Remuneration
Risk
Fee from
1 January 2023
£550,000
£75,000
Fee from
1 January 2022
£550,000
£75,000
£35,000
£35,000
£55,000
£45,000
£45,000
£55,000
£20,000
£15,000
£10,000
£15,000
£20,000
£55,000
£45,000
£45,000
£55,000
£20,000
£15,000
£10,000
£15,000
£20,000
1.
Inclusive of Board membership fee and any committee membership fees, and committee chair of the Nomination and Governance Committee
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Table 19 How will our Policy be implemented in 2023?
The implementation of the Policy will be consistent with that outlined in table 20.
Key element
Implementation in 2023
Fixed Pay
Group CEO
Group CFO
• Salary1: £1,080,000 per annum
• Salary1: £707,500 per annum
• Pension: 14 % of salary in line with wider workforce
• Benefits: As outlined in the Policy
Phasing
2023
2024
2025
2026
2027
2028
Annual
Bonus2
• Group CEO – 200 % of salary
• Group CFO - 150 % of salary
• One-year performance assessed against financial and non-financial performance measures
Performance
period
1/3 paid
in cash
– Financial measures (70 % of total)
– Non-financial strategic measures (30 % of total)
– 15 % – Group adjusted operating profit
– 15 % – Risk scorecard
– 25 % – Gross cash remittances
– 5 % – Transactional NPS
– 20 % – Solvency II OFG
– 10 % – Cost reduction3
– 5 % – Online experience score
– 5 % – Employee engagement
• A quality of earnings assessment will be undertaken by the Committee to provide assurance that bonus payouts
appropriately reflect underlying performance and the shareholder experience
• Individual performance during the year will be taken into account
LTIP
• Group CEO – 350 % of salary
• Group CFO - 225 % of salary
2/3 deferred into shares vesting in
three equal tranches over three years
1/3 released
after 1 year
1/3 released
after 2 years
1/3 released
after 3 years
• Performance assessed over three years against financial (80 %) and non-financial (20 %) performance measures
Performance period
2 year holding period
Released
• Performance measures (please reference LTIP measures and weightings for 2023 on next page)
• Group CEO – 300 % of salary
• Group CFO - 225 % of salary
• To be built up over a period not exceeding five years
Share
ownership
guidelines
• Post-cessation shareholding requirements also apply to EDs being the guideline or the holding on termination of
employment, for two years post-cessation
1. Group CEO and Group CFO's salaries will be effective from 1 April 2023
2. The target ranges are considered by the Board to be commercially sensitive and disclosure of these would put the Company at a disadvantage compared to its competitors. Target ranges will be disclosed in the 2023 DRR.
3. Cumulative gross of inflation savings versus 2018 baseline assuming on target bonus
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LTIP measures and weightings for 2023
Below
Vesting
threshold Threshold
Measure
Solvency II RoE1,2
Cumulative cash
remittances
Relative TSR3
Reduction in CO2
intensity of
shareholders'
assets and with-
profit funds
RNPS gap to
competition4
Females in senior
leadership roles5
Ethnically diverse
employees in
senior leadership
roles5
Weighting
0%
15%
25%
40%
7.5%
7.5%
2.5%
2.5%
Approval by the Board
This Directors’ Remuneration Report was reviewed and approved by the
Board on 8 March 2023.
Pippa Lambert
Chair, Remuneration Committee
Above
maximum
100%
20-100%
Maximum
100%
17%
£6.0bn
Upper quintile
17.5%
11.0
41.0%
20%
15%
£5.5bn
Median
12.5%
8.0
38.0%
12.0%
14.0%
1. For 2023 awards, the Solvency II shareholder cover ratio is to meet or exceed the minimum of the stated working range (currently 160%)
2. The Committee is mindful of the volatile economic environment and the impact of significant changes in key external variables such as interest rates
on RoE outcomes. The Committee therefore will keep the economic assumptions and environment under review.
3. Aviva’s TSR performance will be assessed against that of the following companies: Admiral, Allianz, AXA, Direct Line Group, Hargreaves Lansdown,
Hiscox, Intact, Legal & General, Lloyds Banking Group, M&G, Phoenix, Quilter and Zurich Insurance Group. 2023 TSR comparator group is unchanged
from that used for the 2022 awards. The performance period for the TSR performance condition is the three years beginning 1 January 2023. For the
purposes of measuring the TSR performance condition, the Company’s TSR and that of the comparator group will be based on the 90-day average
TSR for the period immediately preceding the start and end of the performance period.
4. RNPS is calculated on gap to competition over a three-year average
5. Senior leadership in the UK, Ireland and Canada
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Directors’ Remuneration Policy
Our Directors' Remuneration Policy was approved by shareholders at our
AGM on 6 May 2021 and will apply for a period of up to three years.
The full and definitive Policy is set out in our 2020 Annual report and accounts, which can
be found on our website at www.aviva.com/reports/
Although reproduced here for convenience, the 2021 Policy is our formally approved Policy
and should be consulted where required. Please note the updates to the scenario charts
to reflect 2023 remuneration arrangements for our EDs, as well as appointment end dates
for NEDs.
Alignment of Group strategy with executive remuneration
The Committee considers that alignment between Group strategy and ED remuneration
is critical. The Policy provides market competitive remuneration, and incentivises EDs to
achieve the annual business plan and the Group's longer-term strategic objectives.
Significant levels of deferral and shareholding requirements align EDs’ interests with those
of shareholders and aid retention of key personnel. Variable remuneration can be zero
if performance thresholds are not met. Remuneration payments to directors can only
be made if they are consistent with the approved Policy.
Table 20 provides an overview of the Policy for EDs. The Policy for NEDs is in table 22.
Table 20 Key aspects of the Policy for Executive Directors
Element
Basic salary
Purpose
To provide core market related pay
to attract and retain the required level
of talent.
Operation
Annual review, with changes normally
taking effect from 1 April each year.
The review is informed by:
• Individual and business performance
• Levels of increase for the broader
employee population
• Relevant pay data including market
practice among relevant FTSE listed
companies of comparable size to
Aviva in terms of market
capitalisation, large European and
global insurers, and UK financial
services companies
Maximum opportunity
There is no maximum increase within
the Policy. However, basic salary
increases take account of the average
basic salary increase awarded to the
broader employee population.
Different levels of increase may be
agreed in certain circumstances at the
Committee’s discretion, such as:
• An increase in job scope and
responsibility
• Development of the individual in
the role
• A significant increase in the size,
value or complexity of the Group
Assessment of performance
Any movement in basic salary takes
account of the performance of the
individual and the Group.
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Element
Annual bonus
Purpose
To reward EDs for achievement against
the Company’s strategic objectives
and for demonstrating the Aviva values
and behaviours.
Deferral provides alignment with
shareholder interests and aids
retention of key personnel.
Operation
Awards are based on performance in
the year. Targets are normally set
annually and pay-out levels are
determined by the Committee based
on performance against those targets
and a quality of earnings assessment
and risk review.
Form and timing of payment
• One-third of any bonus is payable in
cash at the end of the year
• Two-thirds of any bonus awarded is
deferred into shares which vest in
three equal annual tranches
Additional shares are awarded at
vesting in lieu of dividends paid on the
deferred shares.
Malus and clawback
Cash and deferred awards are subject
to malus and clawback. Details of
when these may be applied are set
out in the notes below.
Maximum opportunity
200% of basic salary for Group CEO
150% of basic salary for other EDs
Outcome at threshold and on target
Performance is assessed against
multiple measures. Threshold
performance against a single measure
would result in a bonus payment of no
more than 25% of basic salary.
100% of basic salary is payable for on
target performance.
Assessment of performance
Performance is assessed against a
range of relevant financial, employee,
customer and risk targets designed to
incentivise the achievement of our
strategy, as well as individual strategic
objectives as set by the Committee.
Although financial performance is the
major factor in considering overall
expenditure on bonuses, performance
against non-financial measures
including progress towards our
strategic priorities and behaviours in
line with our values will also be taken
into consideration.
Discretion
See notes to this table.
Element
Long-term
incentive plan
Purpose
To reward EDs for achievement against
the Company’s longer-term objectives;
to align EDs’ interests with those of
shareholders and to aid the retention
of key personnel and to encourage
focus on long-term growth in
enterprise value.
Operation
Shares are awarded annually which
vest dependent on the achievement
of performance conditions. Vesting is
subject to an assessment of quality of
earnings, the stewardship of capital
and risk review.
Performance period
Three years. Additional shares are
awarded at vesting in lieu of dividends
on any shares which vest.
Additional holding period
Two years.
Malus and clawback
Awards are subject to malus and
clawback. Details of when these
may be applied are set out in the
notes below.
Maximum opportunity
350% of basic salary.
Performance measures
Awards will vest based on a
combination of financial, TSR and
strategic performance measures.
The Policy provides for a minimum
aggregate weighting of 80% for
financial measures and TSR and for
up to 20% to be based on strategic
performance measures. We would
engage with shareholders before
changing measures or weighting in
future years.
For the 2023 awards the measures
and weightings will be:
• 15% Solvency II RoE
• 25% Cumulative cash remittances
• 40% Relative TSR
• 20% Non-financial measures:
– 7.5% Environment
– 7.5% Customer
– 5% DE&I
Vesting at threshold
Threshold vesting for all measures
is 20%.
Discretion
See notes to this table.
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Element
Pension
Purpose
To give a market competitive level of
provision for post-retirement income.
Operation
EDs are eligible to participate in a
defined contribution plan up to the
annual limit.
Any amounts above annual or lifetime
limits are paid in cash.
Element
Benefits
Maximum opportunity
If suitable employee contributions are
made, the Company contributes 14 %
of basic salary for all EDs, aligned to
the rate available to the majority of
the UK workforce.
Maximum opportunity
Set at a level which the Committee
considers appropriate against
comparable roles in companies of
a similar size and complexity to
provide a reasonable level of benefit.
Costs would normally be limited
to providing a cash car allowance,
private medical insurance, life
insurance, and reasonable travel
benefits (including the tax cost where
applicable). In addition, there may
be one-off or exceptional items on a
case by case basis, which would be
disclosed in the DRR.
Purpose
To provide EDs with a suitable but
reasonable package of benefits as
part of a competitive remuneration
package. This involves both core
executive benefits, and the
opportunity to participate in flexible
benefits programmes offered by the
Company (via salary sacrifice).
This enables us to attract and retain
the right level of talent necessary to
deliver the Company’s strategy.
Operation
Benefits are provided on a market
related basis. The Company reserves
the right to deliver benefits to EDs
depending on their individual
circumstances, which may include
a cash car allowance, life insurance,
private medical insurance and access
to a company car and driver for
business use. In the case of non-UK
executives, the Committee may
consider additional allowances
in line with standard relevant
market practice.
EDs are eligible to participate in the
Company’s broad based employee
share plans on the same basis as other
eligible employees.
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Element
Relocation
and mobility
Purpose
To assist with mobility across the
Group to ensure the appropriate talent
is available to execute strategy locally.
Operation
EDs who are relocated or reassigned
from one location to another receive
relevant benefits to assist them and
their dependants in moving home and
settling into the new location.
Maximum opportunity
Dependent on location and family size,
benefits are market related and time
bound. They are not compensated for
performing the role but to defray costs
of a relocation or residence outside
the home country.
The Committee would reward no
more than it judged reasonably
necessary, in the light of all applicable
circumstances.
Shareholding
requirements
Purpose
To align EDs’ interests with those
of shareholders.
Operation
A requirement to build a shareholding
in the Company equivalent to 300%
of basic salary for the Group CEO and
225% for other EDs.
This shareholding is normally to be
built up over a period not exceeding
five years (subject to the Committee’s
discretion where personal
circumstances dictate).
Post-cessation shareholding
requirements also apply to EDs
being the lower of 300% of basic
salary for the Group CEO and 225%
for other EDs, or the holding on
termination of employment, for
two years post-cessation.
Notes to the table:
Performance measures
For the annual bonus, performance measures are chosen to align to the Group’s key
performance indicators and include financial, strategic, risk, employee and customer
measures. Achievement against individual strategic objectives is also taken into account.
LTIP performance measures are chosen to provide an indication of both absolute and
relative return generated for shareholders. In terms of target setting, a number of reference
points are taken into account each year including, but not limited to, the Group’s business
plan and external market expectations of the Company. Maximum payouts require
performance that significantly exceeds expected performance under both the annual bonus
and the LTIP.
Quality of earnings assessments
Throughout the year, the Committee engages in a regular quality of earnings assessment.
A quality of earnings assessment sign-off is the final step in determining annual bonus
scorecard outcomes, and is performed before vesting is determined against financial
measures under the LTIP.
As a minimum, at any Committee meeting where LTIP vesting or annual bonus scorecard
decisions are considered, the Chief Financial Controller prepares a report to the Committee
on the quality of earnings reflected in the results being assessed, against performance
targets. Extensive information from the audited accounts is used to explain the vesting and
scorecard outcomes – ranging from movements in reserves, capital management decisions,
consistency of accounting treatment and period to period comparability. The Chief
Financial Controller attends the Committee meeting to answer any questions that any
member of the Committee may choose to ask. Any vesting decision or confirmation of
awards is made after this process has been undertaken.
Malus and clawback
The circumstances when malus (the forfeiture or reduction of unvested shares awarded
under the ABP and LTIP) and clawback (the recovery of cash and share awards after release)
may apply include (but are not limited to) where the Committee considers that the
employee concerned has been involved in or partially/wholly responsible for:
• A materially adverse misstatement (as defined by the Board) of the Company’s financial
statements, or a misleading representation of performance;
• A significant failure of risk management and/or controls;
• A scenario or event which causes material reputational damage to the Company;
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• A scenario or event which causes material corporate failure;
• Any regulatory investigation or breach of laws, rules or codes of conduct;
• Misconduct which, in the opinion of the Committee, ought to result in the complete or
partial lapse of an award;
• Conduct which resulted in significant loss(es) or summary termination of employment;
• Failure to meet appropriate standards of fitness and propriety;
• A material error (as defined by the Board) in the calculation of a financial or non-financial
performance measure used to determine the outcome of variable pay, or any other error
or material misstatement that results in overpayment to employees;
• Any circumstances determined by the Board that mean the underlying financial health of
the Group or member of the Group has significantly deteriorated, resulting in severe
financial constraints which preclude or limit the ability to fund variable pay; and
• Any other circumstance required by local regulatory obligations or that, in the Board’s
opinion, justifies the reduction or repayment of variable pay.
The clawback period runs for two years from the date of payment in the case of the cash
element of any annual bonus award.
For deferred bonus elements and LTIP awards, the overall malus and clawback period is five
years from the date of grant.
Discretions
The discretions the Committee has in relation to the operation of the ABP and LTIP are set
out in the plan rules. In relation to the outcomes under these plans, the Committee has
unfettered discretion to adjust upward or downward (including to nil) the mechanical
outcome where it considers that:
• The outcome does not reflect the underlying financial or non-financial performance of the
participant or the Group over the relevant period;
• The outcome is not appropriate in the context of circumstances that were unexpected or
unforeseen at the award date;
• There exists any other reason why an adjustment is appropriate; and/or
• It is appropriate to do so, taking into account a range of factors, including the
management of risk and good governance and, in all cases, the experience of
shareholders.
Other discretions include, but are not limited to, the ability to set additional conditions
and the discretion to change or waive those conditions. Such discretions would only be
applied in exceptional circumstances, to ensure that awards properly reflect underlying
business performance. Any use of the discretions and how they were exercised will be
disclosed, where relevant, in the DRR and, where appropriate, be subject to consultation
with Aviva’s shareholders.
Change in control
In the event of a change in control, unless a new award is granted in exchange for an
existing award, or if there is a significant corporate event like a demerger, awards under the
LTIP would normally vest to the extent that the performance conditions have been satisfied
as at the date of the change in control, and unless the Committee decides otherwise, would
be pro-rated to reflect the time between the date of grant and the change in control event.
Awards under the ABP would normally vest on the date of the change in control and may
vest if there is a significant corporate event.
Consistency of executive Policy across the Group
The Policy for our EDs is designed as part of the remuneration philosophy and principles
that underpin remuneration for the wider Group. Remuneration arrangements for
employees below the EDs take account of the seniority and nature of the role, individual
performance and local market practice. The components and levels of remuneration for
different employees may therefore differ from the Policy for EDs.
Any such elements are reviewed against market practice and approved in line with internal
guidelines and frameworks.
Differentiation in reward outcomes based on performance and behaviour that is consistent
with the Aviva values is a feature of how Aviva operates its annual bonus plan for its senior
leaders and managers globally.
A disciplined approach is taken to moderation across the Company in order to recognise
and reward the key contributors. The allocation of LTIP awards also involves strong
differentiation, with expected contribution and ability to collaborate effectively in
implementation of the strategy driving award levels.
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Directors’ Remuneration Policy continued
Legacy payments
The Committee reserves the right to make any remuneration payments and payments for
loss of office (including exercising any discretions available to it in connection with such
payments) notwithstanding that they are not in line with the Policy set out above, where the
terms of the payment were agreed (i) before May 2014 (the date the Company’s first Policy
came into effect), (ii) before the Policy set out above came into effect, provided that the
terms of the payment were consistent with the Policy in force at the time they were agreed,
or (iii) at a time when the relevant individual was not a director of the Company and, in the
opinion of the Committee, the payment was not in consideration for the individual
becoming a director of the Company. For these purposes, ‘payments’ includes
the Committee satisfying awards of variable remuneration and, in relation to an award over
shares, the terms of the payment are ‘agreed’ at the time the award is granted.
Approach to recruitment remuneration
On hiring a new ED, the Committee would align the proposed remuneration package with
the Policy in place for EDs at the time of the appointment.
In determining the actual remuneration for a new ED, the Committee would consider the
package in totality, taking into account elements such as the skills and experience of the
individual, local market benchmarks, remuneration practice, and the existing remuneration
of other senior executives. The Committee would ensure any arrangements agreed would
be in the best interests of Aviva and its shareholders. It would seek not to pay more than
necessary to secure the right candidate.
Where considered appropriate the Committee may make awards on hiring an external
candidate to ‘buyout’ remuneration arrangements forfeited on leaving a previous employer.
In doing so, the Committee would take account of relevant factors including any
performance conditions attached to these awards, the form in which it was paid (e.g. cash
or shares) and the timeframe of awards.
Buyout awards would be awarded on a ‘like for like’ basis compared to remuneration being
forfeited, and would be capped to reflect the value being forfeited. The Committee
considers that a buyout award is a significant investment in human capital by Aviva, and
any buyout decision will involve careful consideration of the contribution that is expected
from the individual.
The maximum level of variable pay which could be awarded to a new ED, excluding any
buyouts, would be in line with the Policy set out above and would therefore be no more
than 550% of basic salary for the Group CEO (200% of basic salary annual bonus
opportunity and 350% of basic salary as the face value of a LTIP grant) and 500% of basic
salary for other EDs (150% of basic salary annual bonus opportunity and 350% of basic
salary as the face value of a LTIP grant).
All other elements of remuneration will also be in line with the Policy set out above.
Should the Company have any prior commitments outside of this Policy in respect of
an employee promoted internally to an ED position, the Committee may continue to
honour these for a period of time. Where an ED is appointed from within the organisation,
the normal policy of the Company is that any legacy arrangements would be honoured
in line with the original terms and conditions. Similarly, if an ED is appointed following
Aviva’s acquisition of, or merger with, another company, legacy terms and conditions
may be honoured.
On appointing a new NED, the Committee would align the remuneration package with
the Policy for NEDs, outlined in table 22, including fees and travel benefits.
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Directors’ Remuneration Policy continued
Illustration of the Policy
The charts below illustrate how much EDs could earn under different performance
scenarios in one financial year:
• Minimum – basic salary, pension or cash
in lieu of pension and benefits, no bonus
and no vesting of the LTIP
• Target - basic salary, pension or cash in lieu
of pension, benefits, and:
– A bonus of 100 % and a LTIP of 350 % of
basic salary (with notional LTIP vesting
at 50 % of maximum) for the Group CEO
– A bonus of 100 % and a LTIP of 225 % of
basic salary (with notional LTIP vesting
at 50 % of maximum) for the Group CFO
• Maximum – basic salary, pension or cash
• Maximum with share price appreciation –
in lieu of pension, benefits, and:
– A bonus of 200 % and a LTIP of 350 % of
basic salary (with notional LTIP vesting
at maximum) for the Group CEO
– A bonus of 150 % and a LTIP of 225 % of
basic salary (with notional LTIP vesting
at maximum) for the Group CFO
indicative maximum remuneration,
assuming a notional LTIP vesting at
maximum and share price appreciation
of 50 % on the LTIP
Potential earnings by pay element - Amanda Blanc
10.00
m
£
5.00
0.00
£1.2m
100%
£4.1m
45%
25%
30%
£6.9m
53%
29%
18%
2022 Minimum
2022 Target
2022 Maximum
n Fixed n Annual Bonus n LTIP
Potential earnings by pay element - Charlotte Jones
5.0
m
£
2.5
0.0
£0.8m
100%
£2.2m
33%
30%
34%
£3.3m
45%
30%
24%
2022 Minimum
2022 Target
2022 Maximum
n Fixed n Annual Bonus n LTIP
£8.7m
63%
23%
14%
2022 Maximum
with share price
appreciation
£4.1m
56%
24%
19%
2022 Maximum
with share price
appreciation
Employment contracts and letters of appointment
ED employment contracts and NED letters of appointment are available for inspection at
the Company’s registered office during normal hours of business, and at the place of the
Company’s 2023 AGM on 4 May 2023 from 10.15am until the close of the meeting.
The key employment terms and conditions of the current EDs, and those who served during
the year, as stipulated in their employment contracts, are set out in the table below.
Notes to the charts
1. The charts are illustrative only and the actual value EDs could earn is subject to business performance and share price movement to the date of
vesting of the LTIP and of the deferred share element of the annual bonus
2. Fixed pay consists of basic salary, pension as described in table 1, and estimated value of benefits provided under the Policy, excluding any one offs.
Actual figures may vary in future years.
3. The value of the deferred element of the annual bonus assumes a constant share price and does not include additional shares awarded in lieu of
dividends that may accrue during the vesting period
4. The value of the LTIP assumes a constant share price (with the exception of the maximum with share price increase scenario) and does not include
additional shares awarded in lieu of dividends that may accrue during the vesting period
5. The LTIP is as proposed to be awarded in 2023, which would vest in 2026, subject to the satisfaction of performance conditions. The shares would
then be subject to a further two-year holding period.
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Directors’ Remuneration Policy continued
Table 21 Executive Directors’ key conditions of employment
Provision
Policy
Notice period
By the ED
By the Company
Termination
payment
Remuneration
and benefits
Expenses
Holiday
entitlement
Private medical
insurance
Other benefits
Sickness
Non-compete
Contract dates
6 months.
12 months, rolling. No notice or payment in lieu of notice to be paid where
the Company terminates for cause.
Pay in lieu of notice up to a maximum of 12 months’ basic salary.
Any payment is subject to phasing and mitigation requirements. An ED
would be expected to mitigate the loss of office by seeking alternative
employment. Any payments in lieu of notice would be reduced, potentially
to zero, by any salary received from such employment.
The operation of the annual bonus and LTIP is at the Company’s discretion.
Reimbursement of expenses reasonably incurred in accordance with
their duties.
30 working days plus public holidays.
Private medical insurance is provided for the ED and their family. The ED
can choose to opt out of this benefit or take a lower level of cover. However,
no payments are made in lieu of reduced or no cover.
Other benefits include participation in the Company’s staff pension scheme,
life insurance and, where applicable, access to a Company car and driver for
business related use.
100 % of salary for the first 52 weeks and up to £150,000 per annum for
a further 5 years.
During employment and for nine months after leaving (less any period
of garden leave) without the prior written consent of the Company.
Director
Amanda Blanc
Date current contract commenced
6 July 2020
Charlotte Jones
5 September 2022
Policy on payment for loss of office
There are no pre-determined ED special provisions for compensation for loss of office.
The Committee has the ability to exercise its discretion on the final amount actually paid.
Any compensation would be based on basic salary, pension entitlement and other
contractual benefits during the notice period, or a payment made in lieu of notice,
depending on whether the notice is worked.
Where notice of termination of a contract is given, payments to the ED would continue for
the period worked during the notice period. Alternatively, the contract may be terminated,
and phased monthly payments made in lieu of notice for, or for the balance of, the 12
months’ notice period. During this period, EDs would be expected to mitigate their loss by
seeking alternative employment. Payments in lieu of notice would be reduced by the salary
received from any alternative employment, potentially to zero. The Company would
typically make a reasonable contribution towards an ED’s legal fees in connection with
advice on the terms of their departure.
There is no automatic entitlement to an annual bonus for the year in which loss of office
occurs. The Committee may determine that an ED may receive a pro rata bonus in respect
of the period of employment during the year loss of office occurs based on an assessment
of performance. Where an ED leaves the Company by reason of death, disability or ill health,
or any other reason determined by the Committee, there may be a payment of a pro rata
bonus for the relevant year at the discretion of the Committee.
The treatment of leavers under the ABP and LTIP is determined by the rules of the relevant
plans. Good leaver status under these plans would be granted in the event of, for example,
the death of an ED. Good leaver status for other leaving reasons is at the discretion of the
Committee, taking into account the circumstances of the individual’s departure, but would
typically include planned retirement, or their departure on ill health grounds.
In circumstances where good leaver status has been granted, awards may still be subject to
malus and clawback in the event that inappropriate conduct of the ED is subsequently
discovered post departure, and retirees are subject to post-activity restrictions which allow
the Committee to reduce or recover awards if certain employment is taken elsewhere.
If good leaver status is not granted, all outstanding awards will lapse.
In the case of LTIP awards, where the Committee determines an ED to be a good leaver,
vesting is normally based on the extent to which performance conditions have been met at
the end of the relevant performance period, and the proportion of the award that vests is
pro-rated for the time from the date of grant to final date of service (unless the Committee
decides otherwise). Any decision not to apply this would only be made in exceptional
circumstances and would be fully disclosed. It is not the practice to allow such treatment.
Aviva plc
2.67
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ Remuneration Policy continued
Consideration of wider employee pay and shareholder views
When determining the Policy and arrangements for our EDs, the Committee considers:
Non-Executive Directors
The table below sets out details of our Policy for NEDs.
• Pay and employment conditions elsewhere in the Group to ensure that pay structures
Table 22 Key aspects of the Policy for Non-Executive Directors
are suitably aligned and that levels of remuneration remain appropriate. The Committee
reviews levels of basic salary increases for other employees and executives based on their
respective locations. It reviews changes in overall bonus pool funding and long-term
incentive grants. The Committee considers feedback on pay matters from sources
including the employee opinion survey and employee forums. The Committee also
takes into account information provided by the people function and external advisers
and the Committee Chair has in place a programme of consultation and meetings with
employee forums including trade unions, Your Forum and the Evolution Council to discuss
remuneration.
• In its ongoing dialogue with shareholders, the Committee seeks shareholder views
and takes them into account when any significant changes are being proposed to
remuneration arrangements and when formulating and implementing the Policy. For
example, there was detailed engagement with our largest shareholders regarding the
proposed Policy during 2020, continuing into 2021.
Element
Chair and
NEDs’ fees
Maximum opportunity
The Company’s Articles of Association
provide that the total aggregate
remuneration paid to the Chair of
the Company and NEDs will be
determined by the Board within
the limits set by shareholders and
detailed in the Company’s Articles
of Association.
Purpose
To attract individuals with the
required range of skills and
experience to serve as a Chair
or as a NED.
Operation
NEDs receive a basic annual fee in
respect of their Board duties. Further
fees are paid for membership and,
where appropriate, chairing Board
committees.
The Chair receives a fixed annual fee.
Fees are reviewed annually taking into
account market data and trends and
the scope of specific Board duties.
NEDs are able to use up to 100 % of
their post-tax base fees to acquire
shares in Aviva plc.
The Chair and NEDs do not
participate in any incentive or
performance plans or pension
arrangements and do not receive an
expense allowance.
NEDs are reimbursed for reasonable
expenses, and any tax arising on those
expenses is settled directly by Aviva.
To the extent that these are deemed
taxable benefits, they will be included
in the DRR, as required.
Chair’s travel
benefits
Purpose
To provide the Chair with suitable
travel arrangements for them to
discharge their duties effectively.
The Chair has access to a company
car and driver for business use. Where
these are deemed a taxable benefit,
the tax is paid by the Company.
Aviva plc
2.68
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ Remuneration Policy continued
Element
NED travel and
accommodation
Purpose
To reimburse NEDs for appropriate
business travel and accommodation,
including attending Board and
committee meetings.
Operation
Reasonable costs of travel and
accommodation for business
purposes are reimbursed to NEDs.
On the limited occasions when it is
appropriate for a NED’s spouse or
partner to attend, such as a business
event, the Company will meet these
costs. The Company will meet any
tax liabilities that may arise on
such expenses.
The NEDs, including the Chair of the Company, have letters of appointment which set
out their duties and responsibilities. The key terms of the appointments are set out in the
table below.
Table 23 Non-Executive Directors’ key terms of appointment
Provision
Policy
Period
Termination
Fees
Expenses
In line with the requirement of the Code, all NEDs, including the Chair, are
subject to annual re-election by shareholders at each AGM.
By the director or the Company at their discretion without compensation upon
giving one month’s written notice for NEDs and three months written notice for
the Chair of the Company.
As set out in table 18.
Reimbursement of travel and other expenses reasonably incurred in the
performance of their duties.
Time
commitment
Each director must be able to devote sufficient time to the role in order to
discharge his or her responsibilities effectively.
Committee
C
C
C
C
C
AGM 2023
AGM 2023
AGM 2023
AGM 2023
AGM 2023
AGM 2023
AGM 2023
AGM 2023
AGM 2023
AGM 2023
Director
George Culmer
Andrea Blance
Mike Craston
Patrick Flynn
Appointment date1
Appointment end date2
25 September 2019
21 February 2022
17 May 2022
16 July 2019
Shonaid Jemmett-Page
20 December 2021
Mohit Joshi
Pippa Lambert
Jim McConville
Michael Mire
Martin Strobel
1 December 2020
1 January 2021
1 December 2020
12 September 2013
22 October 2021
1. The dates shown reflect the date the individual was appointed to the Aviva plc Board
2. All appointment end dates are the 2023 AGM, in accordance with the NEDs' letters of appointment
Committee membership key
Audit Committee
Customer and Sustainability Committee
Nomination and Governance Committee
Remuneration Committee
Risk Committee
C
Chair
Aviva plc
2.69
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report
The directors submit their Annual Report
and Accounts for Aviva plc, together with the
consolidated financial statements of the
Aviva group of companies, for the year
ended 31 December 2022.
The Directors’ report required under the
Companies Act 2006 comprises the
Governance section, which includes this
Directors' report, the Directors’
Remuneration report, any notes to the IFRS
Financial Statements incorporated by
reference into this report and the following
disclosures in the Strategic report:
• Corporate responsibility – disclosure of our
energy consumption included in climate-
related financial disclosure and
greenhouse gas emissions in line with the
Streamlined Energy and Carbon Reporting
(SECR) framework
• Our people – inclusive diversity – details
of our employment policies
• Our people – engaging with our people –
details of employee engagement
• Our business relationships – suppliers,
customers and others
• Our strategy – delivering on a clear
plan of action
• Our business model
• Our risks and risk management
• Social matters - respect for human rights,
anti-corruption and anti-bribery rights
Details of significant post balance
sheet events that have occurred after
31 December 2022 are disclosed in note 65
to the IFRS Financial Statements.
The management report required under
Disclosure Guidance and Transparency
Rule 4.1.5R comprises the Strategic report
(which includes the principal risks relating to
our business) and details of material
acquisitions and disposals made by the
Group during the year which are included in
note 2 and certain other disclosures referred
to in this section. This Governance section,
including the Directors’ Remuneration Report,
fulfils the requirements of the corporate
governance statement under Disclosure
Guidance and Transparency Rule 7.2.1.
Our policy on hedging
The hedging policy is disclosed in note 58(c)
to the IFRS Financial Statements.
Related party transactions
Related party transactions are disclosed
in note 61 to the IFRS Financial Statements.
Dividends
Dividends for ordinary shareholders of
Aviva plc are as follows:
• Paid interim dividend of 10.3 pence per
32 17/19 pence ordinary share
(2021: 7.35 pence per 25 pence
ordinary share)
• Important events since the financial
• Proposed final dividend of 20.7 pence per
year end
• Future developments
32 17/19 pence ordinary share
(2021: 14.7 pence per 25 pence
ordinary share)
• Total ordinary dividend of 31.00 pence
per 32 17/19 pence ordinary share
(2021: 22.05 pence per 25 pence
ordinary share)
• Total cost of ordinary dividends
paid in 2022 was £828 million
(2021: £1,110 million)
Subject to shareholder approval at the 2023
AGM, the final dividend for 2022 will become
due and payable on 18 May 2023 to all holders
of ordinary shares on the Register of Members
at the close of business on 31 March 2023, by
reference to the number and nominal value of
ordinary shares in issue at that time. (The
payment date is approximately four business
days later for holders of the Company’s
American Depositary Shares). In compliance
with the rules issued by the Prudential
Regulation Authority and other regulatory
requirements to which the Group is subject,
any final dividend declared by the Company is
required to remain cancellable at any point
prior to becoming due and payable and to be
cancelled if, prior to payment, the Group
ceases to hold capital resources equal to or in
excess of its Solvency Capital Requirement, or if
that would be the case if the dividend was paid.
The directors have no intention of exercising
this cancellation right, other than where they
determine it may be necessary or appropriate
to do so as a result of legal or regulatory
requirements (including without limitation if,
prior to payment, the Group ceases to hold
capital resources equal to or in excess of its
Solvency Capital Requirement, or if that would
be the case if the dividend were paid). Details of
any dividend waivers are disclosed in note 33
to the IFRS Financial Statements.
Dividend policy
In light of our 2022 performance and resilient
capital and liquidity, the Board has
recommended a final dividend of 20.7 pence
per 32 17/19 pence ordinary share
(2021: 14.7 pence per 25 pence ordinary
share), bringing the full year dividend in
respect of 2022 financial year to 31.00 pence
per 32 17/19 pence ordinary share
(2021: 22.05 pence per 25 pence ordinary
share). We recognise that dividends are
important to our shareholders, with
sustainable growth in cash generation an
important driver of dividend capacity and in
March 2022 Aviva provided clear guidance on
dividends for the 2022 and 2023 financial
years. For the period thereafter we anticipate
low to mid-single digit growth in the cash
cost of the dividend. This guidance is subject
to market conditions and Board approval.
Under UK company law, we may only pay
dividends if the Company has ‘distributable
profits’ available. ‘Distributable profits’ are
accumulated, realised profits/(losses) not
previously distributed or capitalised, less
accumulated, unrealised losses not
previously written off based on IFRS. Even if
distributable profits are available, we pay
dividends only if the amount of our net
assets is not less than the aggregate of our
called-up share capital and non-
distributable reserves and the payment
of the dividend does not reduce the amount
of our net assets to less than that aggregate.
As a holding company, the Company is
dependent upon dividends and interest
from our subsidiaries to pay cash dividends.
Aviva plc
2.70
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report continued
Many of the Company’s subsidiaries are
subject to insurance regulations that restrict
the amount of dividends that they can pay
to us.
Historically, the Company has declared
an interim and a final dividend for each
year (with the final dividend being paid
in the following year).
Subject to the restrictions set out above, the
payment of interim dividends on ordinary
shares is made at the discretion of the
Board, while payment of any final dividend
requires the approval of the Company’s
shareholders at a general meeting.
Dividends on preference shares are made
at the discretion of the Board.
The Company pays cash dividends in
pounds sterling and euros, although the
Articles of Association permit payment of
dividends on ordinary shares in any
currency and in forms other than cash,
such as ordinary shares.
Table 1 Dividend information
Interim dividends are typically paid in
September/October, subject to declaration
by the Board. A final dividend is typically
proposed by the Company’s Board after the
end of the relevant year and generally paid
in May. Table 1 shows certain information
regarding the dividends that we paid on the
Company's ordinary shares.
While the UK insurance regulatory laws
applicable to UK Life and our other UK
subsidiaries impose no statutory restrictions
on an insurer’s ability to declare a dividend,
the rules require maintenance of each
insurance company’s solvency margin,
which might impact their ability to pay
dividends to the parent company.
Distributable reserves
At 31 December 2022, Aviva plc itself had
sufficient distributable reserves to support
the paid and proposed dividends during the
period of our business plan. In Aviva Life &
Pensions UK Limited, our largest operating
subsidiary, distributable reserves, which
could be paid to Aviva plc via its
intermediate holding company, are based
on the updated Companies Act 2006
(Distributions of Insurance Companies)
Regulations 2016 which uses an adjusted
Solvency II Own Funds measure in
determining profits available for
distribution.
Our other life insurance, general insurance,
and fund management subsidiaries’ ability
to pay dividends and make loans to the
parent company is similarly restricted by
local corporate or insurance laws and
regulations. In all jurisdictions, when paying
dividends, the relevant subsidiary must take
into account its capital position and must
set the level of dividend to maintain
sufficient capital to meet minimum solvency
requirements and any additional target
capital expected by local regulators.
Acquisition of own shares
On 31 March 2022, Aviva completed the
share buyback programme of ordinary
shares originally announced on 12 August
2021 for an aggregate purchase price of up
to £750 million and later increased and
extended on 16 December 2021 to an
aggregate purchase of up to £1 billion. In
total, 245,225,489 ordinary shares of 25
pence each were repurchased for an
aggregate consideration of £1 billion and a
nominal value of £61 million.
At 31 March 2022, 79,587,629 ordinary shares
with the nominal value of £19,896,907.25
(representing 2.154 % of the called up
ordinary share capital as at 31 December
2022) were repurchased and cancelled
during 2022, for an aggregate total
consideration of £336,617,822.69. All
repurchased shares have been cancelled.
Year
2017
2018
2019
2020
2021
2022
Interim dividend
per share (pence)
Interim Dividend
per share (cents)1
Final dividend per
share (pence)
Final dividend per
share (cents)1
8.40
9.25
15.50 2
7.00
7.35
10.30
9.50
10.25
17.35
7.75
8.60
11.89
19.00
20.75
0.00 3
14.00
14.70
20.70
21.77
24.12
0.00
16.15
17.46
—
1. Euro dividend rate per share
2.
3. On 8 April 2020 the Board withdrew its recommendation to pay the 2019 final dividend, referencing the unprecedented challenges COVID-19
Interim dividend in respect of 2019 paid in September 2019, second interim in respect of 2019 paid in September 2020
presented for businesses, households and customers and the adverse and highly uncertain impact on the global economy
Aviva plc
2.71
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report continued
Overall, the number of shares in issue is
reduced by 245 million in respect of shares
acquired and cancelled under the buyback
programme. Net of new shares issued, in
respect of the Company's employee share
plans, during the period from 13 August to
31 March 2022, the number of shares in
issue reduced by 242 million. Details of
shares purchased, held or disposed by
employee share plan trusts on the
recommendation of the Company in 2022
for use in conjunction with the Company's
employees' share plans are set out in note
33 to the IFRS Financial Statements.
Share class and listing
All the Company’s shares in issue are fully
paid up and the ordinary and preference
shares have a Premium and Standard listing
respectively on the London Stock Exchange.
Details of the Company’s share capital and
shares under option at 31 December 2022
and shares issued during the year are given
in notes 31 to 34 to the IFRS Financial
Statements. The calculation of earnings per
share is included in note 13 to the IFRS
Financial Statements.
Share capital
During the year, 79,587,629 ordinary shares
were cancelled following re-purchase by the
Company as outlined above. On 9 May 2022,
shareholders approved a return of capital
and share consolidation. Through the return
of capital, 3,687,322,000 B shares were
issued and immediately redeemed. Through
the share consolidation, 3,687,322,000
ordinary shares of 25 pence each were
cancelled and replaced with 2,802,364,720
ordinary shares of 32 17/19 pence each. This
resulted in a reduction of 884,957,280
ordinary shares. A total of 6,814,159 ordinary
shares were allotted to satisfy amounts
under the Group’s employee share and
incentive plans which comprised of
1,214,203 ordinary shares of 25 pence each
and 5,599,956 ordinary shares of 32 17/19
pence each. At 31 December 2022:
• Issued ordinary share capital totalled
2,807,964,676 shares of 32 17/19 pence
each (82% of total share capital)
• Issued preference share capital totalled
200,000,000 shares of £1 each (18% of total
share capital)
Further details on the ordinary share capital
of the Company are shown in note 31 to the
IFRS Financial Statements.
Rights and obligations attaching
to the Company’s ordinary shares
and preference shares
Rights and obligations attaching to the
Company’s shares together with the powers
of the Company’s directors are set out in the
Company’s Articles of Association (the
Articles), copies of which can be obtained
from Companies House and the Company’s
website at www.aviva.com/articles, or by
writing to the Group Company Secretary.
The powers of the Company’s directors are
subject to relevant legislation and, in certain
circumstances (including in relation to the
issue or buying back by the Company of its
shares), are subject to authority being given
to the directors by shareholders at a general
meeting. At the 2023 AGM, shareholders will
be asked to renew the directors’ authority to
allot new securities. Details will be
contained in the Notice of 2023 Annual
General Meeting (Notice of AGM) due to be
published at the end of March 2023.
Restrictions on transfer of
securities/ voting rights
With the exception of restrictions under
the Company’s employee share incentive
plans, where the shares are subject to the
plan rules, there are no restrictions on the
voting rights attaching to the Company’s
ordinary shares or the transfer of securities
in the Company.
Where, under an employee share incentive
plan operated by the Company, participants
are the beneficial owners of shares but
not the registered owners, the voting
rights are normally exercised at the
discretion of the participants. No person
holds securities in the Company carrying
special rights with regard to control of the
Company. The Company is not aware of
any agreements between holders of
securities that may result in restrictions on
the transfer of securities or voting rights.
Significant agreements –
change of control
There are a number of agreements that take
effect, alter or terminate upon a change of
control of the Company following a takeover
bid, such as commercial contracts and joint
venture agreements.
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 a change of control, subject
to the satisfaction of any performance
conditions and pro rata reduction as may be
applicable under the rules of the employee
share incentive plans.
Authority to purchase own shares
Details of shares purchased during 2022
are outlined above (under 'Acquisition of
own shares'). At the 2022 AGM, shareholders
renewed the Company’s authorities to
make market purchases of up to 392
million ordinary shares, up to 100 million
preference shares of 8¾% each and up to
100 million preference shares of 8⅜% each.
No shares have been purchased under
this authority.
At the 2023 AGM, shareholders will be
asked to renew the authorities to buy the
Company's shares for another year and
the resolution in relation to the ordinary
shares will once again propose a maximum
aggregate number of ordinary shares which
the Company can purchase of less than
10% of the issued ordinary share capital.
Details are contained in the Notice of
AGM available at www.aviva.com/agm.
The Company held no treasury shares during
the year or up to the date of this report.
Aviva plc
2.72
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report continued
Disclosure guidance and
transparency rule 5 – major
shareholders
The table 2 shows the holdings of major
shareholders in the Company’s issued ordinary
share capital in accordance with the Disclosure
Guidance and Transparency Rules (DTRs)
notified to the Company as at 31 December
2022 and 3 March 2023. Information provided
to the Company under the DTRs is publicly
available via the regulatory information
services and on the Company’s website.
Directors
The directors as at the date of this report,
together with their biographical details and
details of Board appointments, resignations
and retirements are shown earlier in the 'Our
Board of Directors' section.
The rules regarding the appointment and
removal of directors are contained in the
Company’s Articles. Under the Articles, the
Board can appoint additional directors or
appoint a director to fill a casual vacancy.
The new Director must retire at the first AGM
following their appointment and can only
continue as a Director if they are elected by
shareholders at the AGM.
At no time during the year did any director hold
a material interest in any contract of
significance with the Company or any of its
subsidiary undertakings other than an
indemnity provision between each director
and the Company and employment contracts
between each executive director and a Group
company. The Company has purchased and
maintained throughout the year directors’ and
officers’ liability insurance in respect of itself, its
directors and others.
The Company has also executed deeds of
indemnity for the benefit of each director of the
Company, and each person who was a director
of the Company during the year, in respect of
liabilities that may attach to them in their
capacity as Directors of the Company or of
associated companies. The Articles allow such
indemnities to be granted. These indemnities
are qualifying third-party indemnity provisions
as defined by section 234 of the Companies
Act 2006.
These indemnities are currently in force. Details
of Directors’ remuneration, service contracts,
employment contracts and interests in the
shares of the Company are set out in the
Directors’ Remuneration report.
The Company has also granted indemnities by
way of a deed poll to the directors of the
Group’s subsidiary companies, including
former directors who retired during the year
and directors appointed during the year, which
is a ‘qualifying third party indemnity’ for the
purposes of the applicable sections 309A to
309C of the Companies Act 1985. The deed poll
indemnity was in force throughout the year
and remains in force.
Financial instruments
Group companies use financial instruments to
manage certain types 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 ‘Our risks and risk
management’ section and in note 58 on risk
management to the IFRS Financial Statements.
Political donations
Aviva did not make any political donations
during 2022.
Disclosure of information
to the auditor
In accordance with section 418 of the
Companies Act 2006, the directors in office at
the date of approval of this Annual Report and
Accounts confirm that, so far as they are each
aware, there is no relevant audit information of
which the Company’s external auditor, PwC, is
unaware and each Director has taken all steps
that ought to have been taken as a Director in
order to make themselves aware of any
relevant audit information and to establish that
PwC is aware of that information.
Table 2 Shareholding interest
Shareholder
BlackRock, Inc2
Cevian Capital II G.P. Limited
1. Percentage as at date of notification
2. Holding includes holdings of subsidiaries
At 31 December 2022
At 3 March 2023
Notified holdings1
Nature of holding
Notified holdings1
Nature of holding
5.01%
5.01%
Indirect
Indirect
5%
Below 5%
Indirect
Indirect
Aviva plc
2.73
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report continued
Annual General Meeting (AGM)
The 2023 AGM of the Company will be held
at Norwich City Football Club, Carrow Road,
Norwich, NR1 1JE, on Thursday, 4 May 2023,
at 10.30am with facilities to attend
electronically. The Notice of AGM convening
the meeting describes the business to be
conducted thereat. Any proxy voting
instruction, whether provided online, by
post or via CREST or Proximity voting, must
be received by our Registrar,
Computershare Investor Services PLC, by no
later than 10.30am on Tuesday, 2 May 2023.
Further details can be found in the
shareholder information section of the
Notice of AGM.
• Comprehensive reviews of drafts of
the Annual Report and Accounts are
undertaken by members of the Aviva
Executive Committee and other members
of senior management and, in relation to
certain parts of the report, external legal
advisers and the external auditor
• An advanced draft is considered and
reviewed by the Disclosure Committee
• The final draft is reviewed by the Audit
Committee prior to consideration by
the Board
• Board members receive drafts of the
Annual Report and Accounts for their
review and input. This includes the
opportunity to discuss the drafts with
both management and the external
auditor, challenging the disclosures
where appropriate.
Articles of association
Unless expressly stated to the contrary in
the Articles, the Company’s Articles may
only be amended by special resolution of
the shareholders. The Company’s current
Articles were adopted on 9 May 2022.
Fair, balanced and
understandable
To support the directors’ statement below
that the Annual Report and Accounts, taken
as a whole, is fair, balanced and
understandable, the Board considered the
process followed to draft the Annual Report
and Accounts:
• Each section of the Annual Report and
Accounts is prepared by a member
of management with appropriate
knowledge, seniority and experience.
Each preparer receives guidance on the
requirement for content included in the
Annual Report and Accounts to be fair,
balanced and understandable
• The overall co-ordination of the
production of the Annual Report and
Accounts is overseen by the Chief Financial
Controller to ensure consistency across
the document
• An extensive verification process is
undertaken to ensure factual accuracy
Aviva plc
2.74
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report continued
Going concern and longer-term
viability
A detailed going concern and longer-term
viability review has been undertaken as
part of the 2022 reporting process. The
Group’s business activities, together with
the factors likely to affect its future
development, performance and position
are set out in the Strategic report, along
with the Group’s approach to risk and risk
management. In addition, the ‘Financial
statements’ sections include notes on the
Group’s borrowings (note 51); its
contingent liabilities and other risk factors
(note 54); its capital management (note
56); management of its risks including
market, climate, credit and liquidity risk
(note 58); and derivative financial
instruments (note 59).
The going concern and longer-term
viability review includes consideration of
the Group’s current and forecast solvency
and liquidity positions over a three-year
period which aligns to management’s
2023-2025 business plan and evaluates
the results of stress and scenario testing.
Stress and scenario testing (including
reverse stress testing) is used to test the
resilience of business plans and to inform
decision-making.
Longer-term viability statement
The directors have assessed the prospects
of the Group in accordance with Provision
31 of the 2018 UK Corporate Governance
Code, with reference to the Group’s
current position and prospects, its
strategy, risk appetite, and the potential
impact of the principal risks and how
these are managed. Based on this
assessment, the directors have a
reasonable expectation that the Group
will be able to continue in operation and
meet its liabilities as they fall due over the
three-year assessment period to 31
December 2025.
These tests are driven by the Group's
risk profile at a range of severities, as
well as a range of other scenarios as part
of the Group solvency and liquidity
management processes.
The Group continues to maintain strong
solvency and liquidity positions through
a range of scenarios and stress testing.
Particular areas of uncertainty include
credit downgrades where a specific focus
has been our commercial mortgage
portfolio which we continue to monitor
closely and have taken several actions
including debt restructuring. The Group’s
balance sheet exposure has been
reviewed and actions taken to reduce
the sensitivity to economic shocks.
Even in severe downside scenarios, no
material uncertainty in relation to going
concern and longer-term viability has
been identified, due to the Group’s strong
solvency and liquidity positions providing
considerable resilience to external shocks,
underpinned by the Group’s approach to
risk management (see note 58).
It is fundamental to the Group’s longer-
term strategy that the directors manage
and monitor risk, considering all key risks
the Group faces, including longer-term
insurance risks, so that it can continue to
meet its obligations to policyholders. The
Group is also subject to extensive
regulation and supervision under the UK
Solvency II regulatory framework.
Going concern
After making enquiries, the directors
have a reasonable expectation that
the Company and the Group as a whole
have adequate resources to continue
in operational existence for a period
of at least 12 months from the date of
approval of the financial statements.
For this reason, they continue to
adopt, and to consider appropriate,
the going concern basis in preparing
the financial statements.
Aviva plc
2.75
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Directors’ report continued
Directors’ responsibilities
The directors are responsible for
preparing the Annual Report and
Accounts, the Directors’ Remuneration
report and the financial statements
in accordance with applicable law
and regulations.
Company law required the directors to
prepare financial statements for each
financial year. Under that law the directors
have prepared the Group and parent
financial statements in accordance with
UK-adopted international accounting
standards. Under company law the
directors must not approve the financial
statements unless they are satisfied that
they give a true and fair view of the state of
affairs of the Group and Company and of
the profit or loss for that period. In
preparing these financial statements, the
directors are required to:
• select suitable accounting policies and
apply them consistently;
• make reasonable and prudent
judgements and accounting estimates;
• state where applicable the directors
have prepared the Group and parent
company financial statements in
accordance with UK-adopted
international accounting standards; and
• prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
Company and Group will continue in
business.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company’s transactions and disclose with
reasonable accuracy at any time the
financial position of the Company and
Group, enable them to ensure that the
financial statements and the Directors’
Remuneration report comply with the
Companies Act 2006 and,
as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the
Company and Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for making, and
continuing to make, the Company’s Annual
Report and Accounts available on the
Company’s website. The directors are
responsible for the maintenance and
integrity of the company’s website.
Legislation in the UK governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.
The directors consider that the Annual
Report and Accounts, taken as a whole, is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s and the
Company’s position, performance, business
model and strategy.
Each of the current directors whose
names and functions are detailed in
the ‘Our Board of Directors’ section
and in the Directors’ and Corporate
Governance report confirm that, to the
best of their knowledge: the Group
financial statements, which have been
prepared in accordance with UK-adopted
international accounting standards, give a
true and fair view of the assets, liabilities,
financial position and profit of the Group;
and the Strategic report and the Directors’
and Corporate Governance report in this
Annual report include a fair review of the
development and performance of the
business and the position of the Group,
together with a description of the principal
risks and uncertainties that it faces.
Listing Rules requirements
For the purposes of Listing Rule (LR) 9.8.4C R, the information required to be disclosed
by LR 9.8.4 R can be found in the following locations:
Section in LR 9.8.4C R
Topic
Location in the Annual Report
and Accounts
12
13
Shareholder waivers of dividends
IFRS Financial Statements – note 33
Shareholder waivers of future dividends
IFRS Financial Statements – note 33
By order of the Board on 8 March 2023.
Amanda Blanc
Group Chief Executive Officer
Aviva plc
2.76
Annual Report and Accounts 2022
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Aviva plc
St Helen’s, 1 Undershaft
London EC3P 3DQ
+44 (0)20 7283 2000
www.aviva.com
Registered in England
Number 2468686
Search for Aviva plc on:
Aviva plc
Annual Report and Accounts 2022
Part 2
Make the most out of life. Plan for
your future. Have the confidence that if
things go wrong, we’ll be there to help
put them right.
It takes Aviva
As a reminder
Reporting currency:
We use £ sterling. Unless otherwise
stated, all figures referenced in this
report relate to Group.
Explanations of key terms used
in this report are available on:
www.aviva.com/glossary
www.aviva.com/climate-goals-
glossary
The Company’s registered office:
St Helen’s
1 Undershaft
London
EC3P 3DQ
Foreword
The Strategic report contains
information about Aviva, how we
create value and how we run our
business. It includes our strategy,
our business model, key performance
indicators, overview of our businesses,
our approach to risk and our
responsibility to our people, our
communities and the planet.
The Strategic report is only part of the
Annual Report and Accounts 2022,
which was approved by the Board on
8 March 2023 and signed on its behalf
by Amanda Blanc, Chief Executive
Officer. The Directors' Report required
under the Companies Act 2006
comprises the ‘Governance’ section
of the Annual Report.
The Strategic report and Governance
pages form part 1 of the Annual Report
and Accounts. The IFRS Financial
Statements and Other Information
form part 2 of the Annual Report and
Accounts. Parts 1 and 2 together
comprise the Aviva plc Annual Report
and Accounts 2022. More information
about Aviva can be found at
www.aviva.com.
Alternative Performance Measures:
Throughout the Annual Report and
Accounts we use a range of financial
metrics to measure our performance
and financial strength. These metrics
include Alternative Performance
Measures (APMs), which are non-
Generally Accepted Accounting
Principles (GAAP) measures that are
not bound by the requirements of
IFRS or Solvency II.
A complete list of the APMs used
by the Group, and further guidance
in respect of their use, can be found in
the 'Other information' section in part 2
of the Annual Report and Accounts.
This guidance includes definitions
and, where possible, reconciliations
to relevant line items or sub-totals in
the financial statements.
Aviva plc
3.01
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
IFRS Financial Statements
In this section
Independent auditors’ report to the members of
Aviva plc
Accounting policies
3.03
3.14
Consolidated financial statements
Consolidated income statement
3.30
Consolidated statement of comprehensive income 3.31
Reconciliation of Group adjusted operating profit to
3.32
(loss)/profit for the year
Consolidated statement of changes in equity
Consolidated statement of financial position
Consolidated statement of cash flows
3.34
3.36
3.37
Notes to the consolidated financial statements
1
2
3
4
5
6
7
Exchange rates
Strategic transactions
Segmental information
Details of income
Details of expenses
Finance costs
Life business investment variances and
economic assumption changes
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Non-life business: short-term fluctuations
in return on investments
Employee information
Directors
Auditors’ remuneration
Tax
Earnings per share
Dividends and appropriations
Goodwill
Acquired value of in-force business (AVIF)
and intangible assets
Interests in, and loans to, joint ventures
Interests in, and loans to, associates
Property and equipment
Investment property
Lease assets and liabilities
Fair value methodology
Loans
Securitised mortgages and related assets
Interest in structured entities
Financial investments
Receivables
Deferred acquisition costs
Pension surpluses, other assets,
prepayments and accrued income
3.38
3.38
3.42
3.47
3.48
3.49
3.49
3.51
3.52
3.53
3.54
3.55
3.57
3.58
3.59
3.61
3.62
3.63
3.64
3.65
3.65
3.66
3.74
3.75
3.76
3.78
3.80
3.81
3.82
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
Assets held to cover linked liabilities
Ordinary share capital
Group’s share plans
Treasury shares
Preference share capital
Tier 1 notes
Merger reserve
Currency translation and other reserves
Retained earnings
Non-controlling interests
Contract liabilities and associated
Insurance liabilities
Insurance liabilities methodology
and assumptions
Liability for investment contracts
Financial guarantees and options
Reinsurance assets
Effect of changes in assumptions and
estimates during the year
3.82
3.82
3.83
3.85
3.86
3.86
3.86
3.87
3.88
3.88
3.88
3.90
3.95
3.98
3.100
3.101
3.103
Unallocated divisible surplus
3.104
Tax assets and liabilities
3.104
Pension deficits and other provisions
3.105
Pension obligations
3.106
Borrowings
3.111
Payables and other financial liabilities
3.115
Other liabilities
3.115
Contingent liabilities and other risk factors
3.115
Commitments
3.117
Group capital management
3.117
Statement of cash flows
3.119
Risk management
3.120
Derivative financial instruments and hedging 3.135
Financial assets and liabilities subject
3.137
to offsetting, enforceable master netting
arrangements and similar agreements
Related party transactions
IFRS 17 Transition
Organisational structure
Related undertakings
Subsequent events
Financial statements of the Company
Income statement
Statement of comprehensive income
Statement of changes in equity
Statement of financial position
Statement of cash flows
Notes to the Company’s financial statements
3.138
3.139
3.145
3.146
3.157
3.158
3.158
3.159
3.160
3.161
3.161
Aviva plc
3.02
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc
Report on the audit of the financial statements
Opinion
In our opinion, Aviva plc’s Group financial statements and Company financial statements (the "financial statements"):
• Give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2022 and of the Group’s loss, the
Company’s profit and the Group's and Company's cash flows for the year then ended;
• Have been properly prepared in accordance with UK-adopted international accounting standards; and
• Have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2022 (the "Annual Report"), which comprise: the
Consolidated and Company statements of financial position as at 31 December 2022; the Consolidated and Company income statements
and statements of comprehensive income for the year then ended; the Reconciliation of Group adjusted operating profit to (loss)/profit for
the year then ended; the Consolidated and Company statements of cash flows for the year then ended; the Consolidated and Company
statements of changes in equity for the year then ended; the principal accounting policies adopted in the preparation of financial
statements; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note 11, we have provided no non-audit services to the Company or its controlled undertakings in the period
under audit.
Our audit approach
Context
In addition to forming this opinion, in this report we have also provided information on how we approached the audit, how it has changed
from the previous year and details of the significant discussions that we have had with the Audit Committee.
Overview
Audit scope
• Our audit scope has been determined to provide coverage of all material financial statement line items; and
• In designing our audit, we have considered the impacts that climate change could have on the Group, including the physical or transitional
risks which could arise. In particular, we have assessed the impacts on reporting of the commitments related to climate change which the
Group has made.
Key audit matters
• Valuation of life insurance liabilities (Group)
• Annuitant mortality assumptions (Group)
• Credit default assumptions for: illiquid assets (commercial mortgages and equity release mortgages) and corporate bonds (Group)
• Expense assumptions (Group)
• Valuation of general insurance liabilities (Group)
• Valuation of hard to value investments (Group)
• Disclosure of the impact of adopting IFRS 17 (Group)
• Valuation of investments in subsidiaries (Company)
Materiality
• Overall Group materiality: £93,000,000 (2021: £143,000,000) based on 5% of three-year average of the Group adjusted operating profit
before tax attributable to shareholders’ profits from continuing operations.
• Overall Company materiality: £65,900,000 (2021: £88,000,000) based on 0.5% of total equity.
• Performance materiality: £69,000,000 (2021: £107,000,000) (Group) and £49,400,000 (2021: £65,990,000) (Company).
Aviva plc
3.03
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The asset class of corporate bonds has been added to the credit default assumption key audit matter this year. Furthermore, the disclosures
in Note 62 in accordance with International Accounting Standard ("IAS") 8 'Accounting Policies, Changes in Accounting Estimates and Errors'
in relation to the impact on the opening balance sheet as a result of adopting IFRS 17 'Insurance Contracts' for the period beginning 1
January 2023 is a new key audit matter this year. Otherwise the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Valuation of life insurance liabilities (Group)
Refer to Accounting policy (L) 'Insurance and participating investment contract liabilities - Long-term business provisions' and Note 41 -
Insurance liabilities (b) Long-term business liabilities.
For UK Life insurance liabilities, the valuation of the long-term
business provision for the settlement of future claims involves
complex and subjective judgements about future events, both
internal and external to the business, for which small changes in
assumptions can result in material impacts to the valuation of these
liabilities.
As part of our consideration of the entire set of assumptions,
we focused particularly on the following three assumptions given
the level of judgement involved in their determination, and the
sensitivity of the valuation of the insurance liabilities to them:
• The mortality assumptions used in the valuation of annuity
business insurance liabilities ("annuitant mortality");
• Credit default assumptions for illiquid assets and corporate
bonds; and
• Expense assumptions.
The work to address the valuation of the life insurance liabilities
included the following procedures:
• Understood and evaluated the process and the design and
implementation of controls in place to determine the life
insurance liabilities;
• Tested the design and operating effectiveness of controls in
place over life insurance liabilities, including those covering the
approval of assumptions, and the completeness and accuracy of
the data used;
• Using our actuarial specialist team members, applied industry
knowledge and experience and compared the methodology,
models and assumptions used against recognised actuarial
practice. This included consideration of the reasonableness
of assumptions against actual historical experience, and the
appropriateness of any judgements applied, including if there
was any indication of management bias;
We provide more detailed consideration of each of these below.
• Tested the key judgements over the preparation of the life
insurance liabilities, including manual calculation of components
focusing on the consistency in treatment and methodology year-
on-year and with reference to recognised actuarial practice;
• Used the results of an independent PwC annual benchmarking
survey of assumptions to further challenge the assumption setting
process by comparing certain assumptions used relative to the
Group’s industry peers; and
• Assessed the disclosures in the financial statements.
As part of our consideration of the entire set of assumptions,
we focused particularly on annuitant mortality, credit default
for illiquid assets and corporate bonds, and expense assumptions
given their significance to the Group’s result and the level of
judgement involved.
These aspects of our work have been considered in more
detail below.
Aviva plc
3.04
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Annuitant mortality assumptions (Group)
Refer to Accounting policy (L) 'Insurance and participating investment contract liabilities - Long-term business provisions' and Note 42 - Insurance
liabilities methodology and assumptions (a) Long-term business.
Annuitant mortality assumptions used to value life insurance
liabilities for the UK Life insurance business require a high degree of
judgement due to the number of factors which may influence
mortality experience. The differing factors which affect the
assumptions are underlying mortality experience (in the portfolio),
industry and management's views on the future rate of mortality
improvements, and external factors arising from developments in
the annuity market.
There are two main components to the annuitant mortality
assumptions:
• Mortality base assumption: this component is typically less
subjective as it is derived using the external Continuous Mortality
Investigation ("CMI") tables for individual annuities and Club Vita 3
("CV3") tables for Bulk Purchase Annuities ("BPA"), adjusted for
internal experience. However, judgement is required in choosing
the appropriate table and fitting Aviva's own experience to this
table. In setting this assumption, management opted to exclude
2020 and 2021 experience from the analysis, as a result of the
distorting impact of the COVID-19 pandemic, and maintained the
same external mortality tables as at 31 December 2021;and
• Rate of mortality improvements: this component is more
subjective given the uncertainty over how life expectancy will
change in the future and the lack of available data to support
judgements made in respect of this. In setting this assumption,
management has adopted the latest CMI model (CMI 2021) and
dataset, whilst maintaining the specific parameters for the long-
term rate and adjustments to reflect the profile of the portfolio.
In respect of the annuitant mortality assumptions we performed
the following:
• Tested the methodology used by management to derive the
assumptions with reference to relevant rules and actuarial guidance
and by applying our industry knowledge and experience. This included
evaluating management's decision to retain the existing base tables,
published in mid-2020, as well as to move to the latest CMI model (CMI
2021) and dataset for determining both improvements and the margin
for prudence;
• Assessed the reasonableness of the base mortality assumptions. This
included assessing the judgement applied by management in
excluding 2020 and 2021 data from the experience investigation due to
the distorting impact of the COVID-19 pandemic; and
• Considered the reasonableness of other assumptions, including those
unchanged, such as the socio-economic group adjustments, following
the move to the latest CMI model. We performed this by assessing the
continued appropriateness of these elements of the mortality
improvement basis against the impact arising from the change in the
CMI model.
Based on the work performed and the evidence obtained, we consider
the assumptions used for annuitant mortality to be appropriate.
Credit default assumptions for illiquid assets (commercial mortgages and equity release mortgages) and corporate bonds
(Group)
Refer to Accounting policy (L) 'Insurance and participating investment contract liabilities - Long-term business provisions' and Note 42 - Insurance
liabilities methodology and assumptions (a) Long-term business.
Life Insurance liabilities are valued by discounting expected future cash
flows at an interest rate based on the yield of assets backing the
liabilities, allowing for a prudent deduction for the credit risk associated
with holding these assets.
UK Life has substantial holdings in asset classes with significant credit
risk. For illiquid assets, the underlying asset valuation requires a number
of different assumptions. Internally developed models are then used to
project the associated cash flows for the assets, using these
assumptions, to calculate the asset value and associated credit risk.
There is a heightened risk around the corporate bonds credit default
assumptions for the year ended 31 December 2022, relating to the
methodology and judgements applied in the calculation of credit
default allowances being no longer materially appropriate given the
current heightened economic uncertainty. We have consequently
included this asset class within this key audit matter.
The calculated credit risk for illiquid assets and corporate bonds is
converted into credit default assumptions for each asset type.
These assumptions are then uplifted by a prudence margin and used,
alongside credit default assumptions for other assets, in the calculation
of the valuation interest rate used to value life insurance liabilities.
In respect of the credit default assumptions for illiquid assets,
we performed the following:
• Tested the methodology and the credit risk pricing models used
by management to derive the assumptions for commercial and equity
release mortgages. This included consideration of the relevant rules
and actuarial guidance, such as the adoption of an appropriate
prudence margin, and by applying our industry knowledge and
experience; and
• Validated the significant assumptions used by management by
ensuring consistency with the assumptions used for the valuation of the
illiquid assets, and by considering any additional judgements applied,
market observable data (to the extent available and relevant) and our
experience of market practice.
In respect of the credit default assumptions for corporate bonds,
we performed the following:
• Tested the appropriateness of the methodology used by management.
This included consideration of the relevant rules and actuarial
guidance, such as the adoption of an appropriate prudence margin,
and by applying our industry knowledge and experience; and
• Assessed the reasonableness of the significant assumptions used in the
calculation of the credit default assumption, with a focus on recent
market volatility.
Based on the work performed and the evidence obtained, we consider
the assumptions used for credit default risk on illiquid assets
(commercial mortgages and equity release mortgages) and corporate
bonds to be appropriate.
Aviva plc
3.05
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Expense assumptions (Group)
Refer to Accounting policy (L) 'Insurance and participating investment contract liabilities - Long-term business provisions' and Note 42 -
Insurance liabilities methodology and assumptions (a) Long-term business.
Future maintenance expenses and expense inflation assumptions
are used in the measurement of life insurance liabilities and require
a significant amount of judgement. The assumptions reflect the
expected future expenses that will be required to maintain the in-
force policies at the balance sheet date, including an allowance for
project costs and a margin for prudence.
As at 31 December 2022, inflation is significantly higher than
historical rates. There is also significant uncertainty around future
inflation and how inflation will vary across the economy. This
increases the materiality and risk associated with judgements
applied in the calculation of expense inflation.
In respect of the expense assumptions, we performed the following:
• Tested the methodology used by management to derive the
assumptions with reference to relevant rules and actuarial guidance
and by applying our industry knowledge and experience. This
included testing the split of expenses between acquisition and
maintenance expenses by agreeing a sample to supporting evidence;
• Tested that the assumptions appropriately reflect the expected
future expenses for maintaining policies in force at the balance sheet
date, which includes consideration of the allowance for project costs
and planned controlled cost reduction; and
• Tested the actuarial reserving models to ensure that the expense
assumptions continue to be applied appropriately within the
models, and assessed the appropriateness of new and existing
maintenance expense manual provisions.
In respect of the excess inflation assumption, we performed the
following:
• Considered the reasonableness of the expense inflation assumption
with respect to market views of inflation as at 31 December 2022.
This included the reasonableness of any adjustments made to
market inflation to set the expense inflation assumption.
Based on the work performed and the evidence obtained, we consider
the expense assumptions to be appropriate.
Valuation of general insurance liabilities (Group)
Refer to Accounting policy (L) 'Insurance and participating investment contract liabilities - General insurance and health provisions' and
Note 41 - Insurance liabilities (c) General insurance and health liabilities.
General insurance liabilities include the provision for claims incurred
but not reported ("claims IBNR"). The estimation of these liabilities
involves a significant degree of judgement in determining the
valuation of the provision for claims IBNR as at 31 December 2022.
We focused particularly on the following:
• The methodologies and assumptions used in estimating the costs
of claims for general insurance products, in particular
assumptions relating to the expected settlement amount and
settlement patterns of claims, including personal injury lump sum
compensation amounts;
• The underlying volatility attached to estimates for the larger
classes of business such as the motor accounts, where small
changes in assumptions can lead to large changes in the level of
the estimate held and the reported combined operating ratio
("COR");
• The magnitude of uncertainty in respect of rising inflation in claims
costs and its impact on assumptions adopted in the
determination of claims IBNR; and
• The risk of inappropriate assumptions in determining the impact
of COVID-19 on the provision for claims IBNR.
Our work focused on the provision for claims IBNR in the UK General
Insurance and Canada General Insurance components, given their
size in relation to the consolidated Group and the subjectivity of the
judgements involved.
We assessed the calculation of the general insurance liabilities by
performing the following procedures:
• Understood and evaluated the process and the design and
implementation of controls in place to determine the provision for
claims IBNR. This included testing the design and operating
effectiveness of the relevant controls in place, and the
completeness and accuracy of data used;
• Tested the underlying data to source documentation;
• Using our actuarial specialist team members, applied our industry
knowledge and experience and compared the methodology,
models and assumptions used against recognised actuarial
practices. This included consideration of the reasonableness of
assumptions against actual historical experience and the
appropriateness of any judgements applied;
• Using our actuarial specialist team members, independently
estimated the provision for claims IBNR on selected classes of
business, particularly focusing on the reserves for larger and higher
risk classes. For these classes, we compared our estimates which
included assumptions in respect of inflation, that we determined
were appropriate, to those booked by management, to determine
whether the provision for claims IBNR represented a reasonable
estimate;
• For the remaining classes, which include business interruption
losses arising as a direct result of COVID-19 we evaluated the
methodology and assumptions applied, or performed key
indicator tests to identify and investigate any anomalies;
• Considered whether any of our audit procedures gave rise to an
indication of management bias in the estimates; and
• Assessed the disclosures in the financial statements.
Based on the work performed and evidence obtained, we consider the
methodology and assumptions used to value the general insurance
liabilities to be appropriate.
Aviva plc
3.06
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Valuation of hard to value investments (Group)
Refer to Accounting policy (V) 'Loans' and Note 23 - Loans.
The valuation of the investment portfolio involves judgement and
continues to be an area of inherent risk. The valuation risk is not
uniform for all investment types and is greatest for the following
assets in the UK Life business, categorised as level 3 under the fair
value methodology, given the level of judgement required in the
selection and application of significant assumptions and
unobservable inputs:
• Commercial mortgage loans;
• Equity release mortgage loans; and
• Infrastructure loans.
We assessed the valuation of hard to value investments by
performing the following procedures:
• Understood and evaluated the process and the design and
implementation of controls in place to determine the pricing and
oversight of the process;
• Evaluated the methodology and assumptions used by
management, including yield curves, discounted cash flows,
property growth rates, house prices, longevity, credit spread and
illiquidity premiums as relevant to each asset class and credit
rating through benchmarking these to market available data and
engaging valuation experts; including assessing if there was any
indication of management bias;
• Tested the operation of data integrity and change management
controls for the commercial and private finance initiative ("PFI")
mortgages and equity release valuation models;
• Using our valuation experts, performed independent valuations for
each different type of infrastructure loan model;
• Tested data inputs used in the valuation models to underlying
documentation on a sample basis;
• Using our property valuation experts, assessed the objectivity,
independence and competency of the surveyors used by
management to determine the collateral values input into the
commercial mortgage valuation models; and
• Assessed the disclosures in the financial statements.
Based on the work performed and the evidence obtained,
we consider the methodology and assumptions used by
management to value hard to value assets to be appropriate.
Aviva plc
3.07
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Disclosure of the impact of adopting IFRS 17 (Group)
Refer to Accounting policy (A(i)) 'Basis of preparation - IFRS 17, Insurance contracts' and Note 62 - IFRS 17 Transition.
In respect of our audit work over the valuation of the estimated
impact on the Group’s opening total equity position and the
recognition of the CSM as at 1 January 2022, we performed the
following procedures:
• Understood and evaluated the design effectiveness of controls in
place, and tested the operating effectiveness of relevant data
integrity and management controls, and substantively tested
relevant data inputs;
• Assessed whether the judgements applied by management in
determining their accounting policies are in accordance with
IFRS 17;
• Using our actuarial specialist team members, evaluated the
appropriateness of the methodology used to determine discount
rates as at 1 January 2022 and historic periods where the fully
retrospective approach is adopted;
• Applied industry knowledge and compared the methodology,
models and assumptions used in determining the risk adjustment,
CSM, fair value of annuity liabilities and IFRS 17 best estimate
liabilities against expected market practice. This included
consideration of the reasonableness of assumptions and the
appropriateness of any judgements applied, including whether or
not there was any indication of management bias;
• Tested the mathematical accuracy of the supporting calculations
and adjustments used to determine the impact on the Group’s
opening total equity position and the recognition of the CSM as at
1 January 2022; and
• Evaluated the reasonableness of the quantitative and qualitative
disclosures included in the financial statements in accordance
with the requirements of IAS 8.
Based on the audit procedures performed and evidence obtained,
we consider the disclosures related to the initial impact of IFRS 17,
and key judgements and assumptions to be appropriate.
International Accounting Standard 8 ‘Accounting Policies, Changes in
Accounting Estimates and Errors’ (“IAS 8”) requires the disclosure of
reasonably estimable information relevant to assessing the possible
impact of new accounting standards issued but not yet effective.
International Financial Reporting Standard 17 ‘Insurance Contracts’,
(“IFRS 17” or the “standard”) became effective for periods beginning
on or after 1 January 2023, replacing International Financial
Reporting Standard 4, Insurance Contracts. The related IAS 8
disclosures in section A of the Accounting Policies and in Note 62 of
these financial statements are intended to provide readers with an
understanding of the estimated impact of the new standard on the
transition date of 1 January 2022 and, as a result, are more limited
than the disclosures which will be required within the 2023 interim
and annual reports and accounts. Management has estimated the
impact of the transition to IFRS 17 on the Group’s opening total
equity position and the resultant recognition of the Contractual
Service Margin (“CSM”) as at the transition date, 1 January 2022, and
disclosed these impacts in accordance with IAS 8.
We determined the disclosure of the impact of IFRS 17 to be an
area of focus because of the significant changes introduced by
the standard, which includes a number of new estimates and
judgements, and because the impacts will be of particular
importance to the readers of these financial statements. In
particular, we have focused on the following key judgements
that management have taken in calculating the impact of
implementing IFRS 17:
• The determination of the transition approach adopted for each
group of insurance contracts;
• The methodology used by management to determine
discount rates;
• The methodology and assumptions in respect of determining
the risk adjustment;
• The methodology applied to the amortisation of the CSM for
annuities where the fully retrospective approach is being applied;
• The methodology that has been used to determine the fair value
CSM on transition for annuity and with-profits business;
• The assumptions made by management in determining the fair
value of annuity liabilities; and
• The calculations performed in management’s new models;
specifically models relating to annuities and with-profits business
for the fair value approach, annuities for the full retrospective
approach, and the risk adjustment models.
Valuation of investments in subsidiaries (Company)
Refer to Accounting policy (D) 'Consolidation principles - The Company's investments' and Note E to the Financial Statements of the
Company - Investments in subsidiaries and joint venture.
In the Company's statement of financial position, investments in
subsidiaries are reported at cost less impairment. The investments
in subsidiaries are the largest assets on the Company's statement of
financial position. There is a risk that the carrying value of the
investments in subsidiaries exceeds the recoverable amount and
therefore an impairment loss should be recognised.
In respect of the carrying value of investments in subsidiaries
we have:
• Obtained management’s assessment of impairment indicators
in investments in subsidiaries and tested relevant key inputs;
• Evaluated whether there is an impact on the carrying value of
the investment based on our understanding of the business and
accounting treatment; and
• Tested the disclosures made by management in the financial
statements.
Based on the work performed and the evidence obtained,
we consider the carrying value of investments in subsidiaries
to be appropriate.
Aviva plc
3.08
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as
a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which
they operate.
Based on the output of our risk assessment, along with our understanding of the Aviva Group structure, we performed full scope audits over
the following components: UK Life, UK General Insurance, Canada General Insurance and Aviva plc.
We identified an additional component: Aviva Investors, where one account balance was considered to be significant in size in relation to
the Group and scoped our audit to include detailed testing of the account balance. We also performed audit procedures over the corporate
centre operations and the consolidation process, as well as over certain other Group activities, including specific account balances in the
Aviva Employment Services, Aviva Central Services, and Aviva Group Holdings components.
We completed review procedures over the other components not subject to full scope audits.
As the Group audit team, we determined the level of involvement required at those components to be able to conclude whether sufficient
and appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. In our
role as Group auditors, we exercised oversight of the work performed by auditors of the components including performing the following
procedures:
• Issued Group instructions outlining areas requiring additional audit focus, including the key audit matters above;
• Maintained an active dialogue with reporting component audit teams throughout the year;
• Attended meetings with local management;
• Reviewed reporting requested from component teams, including those areas determined to be of heightened audit risk; and
• Met with all full scope components and reviewed the detailed working papers, where relevant.
The impact of climate risk on our audit
We have made enquiries of management (both within and outside of the Group’s finance functions) in order to understand the extent of
the impact of climate change risks and the commitments made by the Group on the Group’s financial statements. As part of this, we have
reviewed minutes of meetings of the Aviva Sustainability Ambition ("ASA") Steering Committee and reviewed the Group’s climate reporting
framework. We have also made enquiries to understand, and performed a risk assessment in respect of, the commitments made by the
Group and how these may affect the financial statements and the audit procedures that we perform. We have assessed the risks of material
misstatement to the financial statements as a result of climate change and concluded that for the year ended 31 December 2022, the main
audit risks are related to consistency of disclosures included within the Annual Report and ‘other information’ including the Task Force
on Climate-related Financial Disclosure ("TCFD") report. As a result of this assessment, we concluded that there was no impact on our key
audit matters.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Aviva plc
3.09
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£93,000,000 (2021: £143,000,000) .
Financial statements – Group
How we determined it
Rationale for benchmark
applied
5% of three-year average of the Group adjusted operating profit
before tax attributable to shareholders’ profits from continuing
operations.
In determining our materiality, we considered financial metrics
which we believed to be relevant and concluded that Group
adjusted operating profit before tax attributable to shareholders'
profits from continuing operations was the most relevant
benchmark. For the year ended 31 December 2022, we have
determined that a 3-year average of this metric is more
appropriate as it normalises both economic and non-economic
assumption changes and provides consistency which aligns
better with the trend in the primary metrics used to assess the
businesses performance and dividend capability such as capital
metrics. This benchmark has been changed from the prior year
audit in order to exclude the Group adjusted operating profit
before tax attributable to shareholders' profit from discontinued
operations. This allows comparability year-on-year of Group
adjusted operating profit and reduces the volatility resulting
from the reduction in total Group adjusted operating profit
following the completion of disposals in the prior year.
Financial statements – Company
£65,900,000 (2021: £88,000,000).
0.5% of total equity
In determining our materiality, we considered financial
metrics which we believed to be relevant and
concluded, consistent with prior year, that total equity
was the most appropriate benchmark. The primary use
of the financial statements is to determine the entity's
ability to pay dividends, and the users will therefore be
focused on a total equity benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was £34,000,000 - £88,000,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our
performance materiality was 75% (2021: 75%) of overall materiality, amounting to £69,000,000 (2021: £107,000,000) for the Group financial
statements and £49,400,000 (2021: £65,990,000) for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £4,600,000 (Group
audit) (2021: £7,000,000) and £3,200,000 (Company audit) (2021: £4,400,000) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going concern basis of
accounting included:
• Obtaining the directors’ Going Concern assessment and challenging the rationale for the downside scenarios adopted and material
assumptions made using our knowledge of Aviva’s business performance, review of regulatory correspondence and obtaining further
corroborating evidence;
• Considering the directors' assessment of the regulatory solvency coverage and liquidity position in the forward looking scenarios
considered, which have been derived from Aviva’s Own Risk and Solvency Assessment ("ORSA");
• Considering information obtained during the course of the audit and publicly available market information to identify any evidence that
would contradict the directors' assessment of going concern (including the impacts of COVID-19); and
• Enquiring and understanding the actions taken by the directors to mitigate the risks arising from the impacts of economic uncertainty,
including review of Board Risk Committee minutes and attendance of all Audit Committees.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group's and the Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's and the
Company's ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Aviva plc
3.10
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related
Financial Disclosures ("TCFD") recommendations. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report
for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Annual report on Remuneration to be audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group's and Company’s prospects, the period this assessment covers and why the
period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and
meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group and Company was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with
the financial statements and our knowledge and understanding of the Group and Company and their environment obtained in the course of
the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides
the information necessary for the members to assess the Group’s and Company's position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
Aviva plc
3.11
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s compliance
with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by
the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' responsibilities statement in the Directors' Report, the directors are responsible for the preparation
of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to breaches of UK and European regulatory principles, such as those governed by the Prudential Regulation Authority ("PRA") and
the Financial Conduct Authority ("FCA"), and we considered the extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as
Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls) and determined that the principal risks were related to management bias in accounting estimates
and judgmental areas of the financial statements as shown in our 'Key Audit Matters'. The Group engagement team shared this risk
assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work.
Audit procedures performed by the Group engagement team and/or component auditors included:
• Discussions with the Board, management, Internal Audit, senior management involved in the Risk and Compliance functions and Group
and Company’s legal function, including consideration of known or suspected instances of non-compliance with laws and regulation
and fraud;
• Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect irregularities;
• Assessment of matters reported on the Group and Company’s whistleblowing helpline and fraud register and the results of management’s
investigation of such matters;
• Meeting with the PRA periodically and reading key correspondence with the PRA and the FCA, including those in relation to compliance
with laws and regulations;
• Reviewing relevant meeting minutes including those of the Board of Directors, Audit, Remuneration and Disclosure Committees;
• Identifying and testing journal entries based on risk criteria;
• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
• Testing transactions entered into outside of the normal course of the Group and Company’s business;
• Reviewing the Group’s register of litigation and claims, Internal Audit reports, and Compliance reports in so far as they related to non-
compliance with laws and regulations and fraud; and
• Attendance at Audit and Risk Committee meetings.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Aviva plc
3.12
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Independent auditors’ report to the members of Aviva plc continued
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Company financial statements and the part of the Annual report on Remuneration to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 3 May 2012 to audit the financial
statements for the year ended 31 December 2012 and subsequent financial periods. The period of total uninterrupted engagement is 11
years, covering the years ended 31 December 2012 to 31 December 2022.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements will form part of the UKSEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the UKSEF Regulatory Technical Standard ("UKSEF RTS"). This auditors’ report provides no assurance over
whether the annual financial report will be prepared using the single electronic format specified in the UKSEF RTS.
Philip Watson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
8 March 2023
Aviva plc
3.13
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
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 classes of general insurance and health business through
its subsidiaries, joint ventures, associates and branches in the UK,
Ireland, Canada and Asia.
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all years presented, unless
otherwise stated.
(A) Basis of preparation
The consolidated financial statements and those of the Company
have been prepared and approved by the directors in accordance
with UK-adopted international accounting standards and the legal
requirements of the Companies Act 2006.
On 31 December 2020, IFRS as adopted by the EU at that date
was brought into UK law and became UK-adopted International
Accounting Standards, with future changes being subject to
endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted international accounting standards
on 1 January 2021.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by the revaluation of
land and buildings, investment property, available-for-sale financial
assets, and financial assets and financial liabilities (including
derivative instruments) at fair value through profit or loss.
In accordance with IFRS 4 Insurance Contracts, the Group has
applied existing accounting practices for insurance and
participating investment contracts, modified as appropriate to
comply with the IFRS framework and applicable standards. Further
details are given in accounting policy L.
Items included in the financial statements of each of the Group’s
entities are measured in the currency of the primary economic
environment in which that entity operates (the functional currency).
The consolidated financial statements are stated in pounds sterling,
which is the Company’s functional and presentational currency.
Unless otherwise noted, the amounts shown in these financial
statements are in millions of pounds sterling (£m).
New standards, interpretations and amendments to published
standards that have been adopted by the Group and/or the
Company
The Group and/or the Company has adopted the following
amendments to standards which became effective for the annual
reporting period beginning on 1 January 2022. The amendments
have been issued and endorsed by the UK and do not have a
significant impact on the Group’s consolidated financial
statements.
• Annual Improvements to IFRS 2018-2020 Cycle: Amendments
to IFRS 1 Presentation of Financial Statements, IFRS 9 Financial
Instruments, IFRS 16 Leases and IAS 41 Agriculture (published by
the IASB in May 2020)
• Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use (published by the IASB in May 2020)
• Amendments to IFRS 3 Business Combinations: Reference to the
Conceptual Framework (published by the IASB in May 2020)
• Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts – Costs of Fulfilling a
Contract (published by the IASB in May 2020)
• Amendments to IFRS 16 Leases: COVID-19 Related Rent
Concessions beyond 30 June 2021 (published by the IASB in
March 2021)
Standards, interpretations and amendments to published
standards that are not yet effective and have not been adopted
early by the Group or the Company
The following new standards and amendments to existing
standards have been issued, are not yet effective for the Group
and have not been adopted early by the Group:
(i) IFRS 17, Insurance Contracts
In May 2017, the IASB published IFRS 17 Insurance Contracts, a
comprehensive new accounting standard for insurance
contracts. Amendments to the standard were published in June
2020 and December 2021 (Initial Application of IFRS 17 and IFRS 9
—Comparative Information). In May 2022, the UK endorsed both
IFRS 17 and the amendments, all of which apply to annual
reporting periods beginning on or after 1 January 2023. IFRS 17
replaces IFRS 4 Insurance Contracts, which was issued in 2005. In
contrast to the requirements in IFRS 4, which are largely based on
grandfathering of previous local accounting policies, IFRS 17
provides a comprehensive and consistent approach to
accounting for insurance contracts.
The measurement and presentation of insurance contracts,
reinsurance contracts and investment contracts with
discretionary participating features are significantly impacted by
the transition to IFRS 17. Further details, including the expected
financial impacts on Group equity at the transition date of 1
January 2022, are given in note 62.
(ii) IFRS 9, Financial Instruments
In September 2016, the IASB published amendments to IFRS 4
Insurance Contracts that addressed the accounting consequences
of the application of IFRS 9 to insurers prior to implementing IFRS
17. Under the deferral approach set out in the amendments, the
Group has elected to apply the temporary exemption from
applying IFRS 9 from 1 January 2018. The Group has however
been required to apply the additional disclosure requirements
of IFRS 4 which are set out in notes 22 and 58. Eligibility for the
deferral approach was based on an assessment of the Group’s
liabilities as at 31 December 2015, in accordance with the date
specified in the amendments to IFRS 4. At this date the Group’s
liabilities connected with insurance exceeded 90% of the carrying
amount of the Group’s total liabilities. The Group’s total liabilities
were £369,642 million and liabilities connected with insurance in
the statement of financial position at this date primarily included
insurance and participating investment contracts within the scope
of IFRS 4 (£218,604 million), non-participating investment contract
liabilities (£103,125 million), unallocated divisible surplus (£8,811
million), borrowings (£8,770 million), and certain amounts within
payables and other financial liabilities which arise in the course of
writing insurance business (£10,285 million).
In November 2016, the EU endorsed IFRS 9, followed by the
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 in
December 2020, which extends the fixed expiry date for the
temporary exemption for insurers from applying IFRS 9 from
1 January 2021 until 1 January 2023, to align the effective dates
with IFRS 17 Insurance contracts.
IFRS 9 incorporates new classification and measurement
requirements for financial assets, the introduction of an expected
credit loss impairment model which will replace the incurred loss
model of IAS 39, and new hedge accounting requirements. Under
IFRS 9, all financial assets will be measured at either amortised
cost or fair value.
Aviva plc
3.14
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
The basis of classification will depend on the business model
and the contractual cash flow characteristics of the financial
assets. The standard retains most of IAS 39’s requirements for
financial liabilities except for those designated at fair value
through profit or loss whereby that part of the fair value
changes attributable to own credit is to be recognised in other
comprehensive income instead of the income statement.
Under IFRS 9, entities have the option to restate prior periods
on transition. The Group will elect to restate comparatives in
line with the IFRS 17 approach for restatement. We have
assessed the interaction of IFRS 9 with IFRS 17 and intend to
continue to apply the Group's current policy of measuring the
majority of its financial instruments at fair value through profit
or loss, hence we do not expect any significant measurement
differences on adoption of IFRS 9. There will be changes to
presentation and disclosures, including reflecting the business
model assessment required for classification of financial
investments under IFRS 9.
The Company is not eligible to apply the deferral approach
and has adopted IFRS 9 from 1 January 2018. IFRS 9
information relating to entities within the Group which have
applied IFRS 9 from 1 January 2018 can be found in the
entities’ publicly available individual financial statements.
(iii) Amendments to IAS 1 Presentation of Financial
Statements: Disclosure of Accounting Policies
Published by the IASB in January 2020. The amendments
are effective for annual reporting beginning on or after
1 January 2023 and have been endorsed by the UK.
(iv) Amendments to IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors: Definition of
Accounting Estimates
Published by the IASB in February 2021. The amendments
are effective for annual reporting beginning on or after
1 January 2023 and have been endorsed by the UK.
(v) Amendments to IAS 12 Income Taxes: Deferred Tax
related to Assets and Liabilities arising from a Single
Transaction
Published by the IASB in May 2021. The amendments
are effective for annual reporting beginning on or after
1 January 2023 and have been endorsed by the UK.
(vi) Amendments to IAS 1 Presentation of Financial
Statements: Classification of Liabilities as Current or
Non-current
Published by the IASB in January 2020. The amendments
are effective for annual reporting beginning on or after
1 January 2024 and have yet to be endorsed by the UK.
(vii) Amendments to IAS 1 Presentation of Financial
Statements: Non-current Liabilities with Covenants
Published by the IASB in October 2022. The amendments
are effective for annual reporting beginning on or after
1 January 2024 and have yet to be endorsed by the UK.
(viii) Amendments to IFRS 16: Lease Liability in a Sale and
Leaseback
Published by the IASB in September 2022. The amendments
are effective for annual reporting beginning on or after
1 January 2024 and have yet to be endorsed by the UK.
(B) Group adjusted operating profit
The long-term nature of much of the Group’s operations means
that, for management’s decision-making and internal performance
management of our operating segments, the Group focuses on
Group adjusted operating profit, a non-GAAP alternative
performance measure (APM) which is not bound by IFRS. The APM
incorporates the expected return on investments which supports its
long-term and non-long-term businesses.
Group adjusted operating profit for long-term business is based on
expected investment returns on financial investments backing
shareholder and policyholder funds over the reporting period, with
allowance for the corresponding expected movements in liabilities.
Variances between actual and expected investment returns, and the
impact of changes in economic assumptions on liabilities, are
disclosed separately outside Group adjusted 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 and short-term fluctuations from that
level. The exclusion of short-term realised and unrealised
investment gains and losses from the Group adjusted operating
profit APM reflects the long-term nature of much of our business
and presents separately the operating profit APM which is used in
managing the performance of our operating segments from the
impact of economic factors. Further details of this analysis and the
assumptions used are given in notes 7 and 8.
Group adjusted operating profit excludes impairment of goodwill,
associates and joint ventures; amortisation and impairment of
intangibles acquired in business combinations; amortisation and
impairment of acquired value of in-force business; and the profit or
loss on disposal and remeasurement of subsidiaries, joint ventures
and associates. These items principally relate to mergers and
acquisition activity which we view as strategic in nature, hence they
are excluded from the operating profit APM as this is principally
used to manage the performance of our operating segments when
reporting to the Group’s chief operating decision maker.
Group adjusted operating profit also excludes other items, which
are those items that, in the directors’ view, are required to be
separately disclosed by virtue of their nature or incidence to enable
a full understanding of the Group’s financial performance. Details of
these items, including an explanation of the rationale for their
exclusion, are provided in the Alternative Performance Measures
section within ‘Other information’.
The Group adjusted operating profit APM should be viewed as
complementary to IFRS GAAP measures. It is important to consider
Group adjusted operating profit and profit before tax together to
understand the performance of the business in the period.
(C) Critical accounting policies and the
use of estimates
The preparation of financial statements requires the Group to select
accounting policies and make estimates and assumptions that
affect items reported in the consolidated income statement,
consolidated statement of financial position, other primary
statements and notes to the consolidated financial statements.
The Audit Committee reviews the reasonableness of judgements
and assumptions applied and the appropriateness of
significant accounting policies. The significant judgements
considered by the Committee in the year are included within the
Audit Committee Report and summarised in the following table.
Aviva plc
3.15
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
Critical accounting judgement
Consolidation (accounting policy - D)
Assessment of whether the Group controls the underlying entities
including consideration of its decision making authority and rights
to the variable returns from the entity.
As part of this assessment Aviva applies a corridor approach to
consolidation thresholds, where the Group’s percentage ownership
in certain investment vehicles fluctuates daily.
Classification of insurance and investment contracts (accounting
policy - G)
Assessment of the significance of insurance risk transferred to the
Group and discretionary participation features in determining
whether a contract should be accounted for as an insurance or
investment contract. Insurance contracts are defined as those
containing significant insurance risk. Contracts that transfer
financial risks, but not significant insurance risk are classified as
investment contracts. Judgement is required to assess whether
insurance risk is significant at inception of the contract.
Some insurance and investment contracts contain a discretionary
participation feature which is a supplement to guaranteed benefits.
Judgement is required to determine whether discretionary
additional benefits are likely to be a significant portion of the total
contractual payments.
Financial Investments (accounting policy - T)
Classification of investments including the application of the fair
value option.
The Group classifies its investments as either fair value through
profit or loss (FVTPL) or available for sale (AFS). The classification
depends on the purpose for which the investments were acquired
and is determined by local management at initial recognition.
All estimates are based on management’s knowledge of current
facts and circumstances, assumptions based on that knowledge
and their predictions of future events and actions. Actual results
may differ from those estimates, possibly significantly.
The table below sets out those estimates considered particularly
susceptible to changes in assumptions, that have a significant risk
of resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, and the relevant
accounting policy and note disclosures.
Assumptions
Carrying
values
Sensitivity
note
58(h)
note
41(b)
note
40(a),
Note
43(a)
note
42(b)
note
41(c)
note
42(b)
note
22(g)
note
22(g)
note
22(g)
Significant accounting estimates
Measurement of insurance and participating
investment contract liabilities (accounting
policy – L)
Principal assumptions used in the calculation
of life insurance and participating investment
contract liabilities include those in respect of
annuitant mortality, expenses, valuation
interest rates and credit default allowances
on corporate bonds and other non-sovereign
credit assets.
Principal assumptions used in the calculation
of general insurance and health liabilities
include the discount rates used in
determining latent claim and structured
settlements liabilities, and the assumption
that past claims experience can be used as a
basis to project future claims (estimated
using a range of standard actuarial claims
projection techniques).
Fair value of financial instruments and
investment property (accounting policy – F,
T, U)
Where quoted market prices are not
available, valuation techniques are used to
value financial instruments and investment
property. These include broker quotes and
models using both observable and
unobservable market inputs. The valuation
techniques involve judgement with regard to
the valuation models used and the inputs to
these models can lead to a range of plausible
valuations for financial investments.
During the year management reassessed the critical accounting
policies and estimates previously provided and, based on their
assessment of qualitative and quantitative risk factors, resolved
that no change was required.
Aviva plc
3.16
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
(D) Consolidation principles
Subsidiaries
Subsidiaries are those entities over which the Group has control.
The Group controls an investee if and only if the Group has all of
the following:
• power over the investee;
• exposure, or rights, to variable returns from its involvement with
the investee, and
• the ability to use its power over the investee to affect its returns.
The Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including: the
purpose and design of an investee, relevant activities, substantive
and protective rights, and voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if facts
and circumstances indicate that there are changes to one or more
of the three elements of control.
Investment vehicles
In several countries, the Group has invested in a number of
specialised investment vehicles such as Open-ended Investment
Companies (OEICs) and unit trusts. These invest mainly in equities,
bonds, cash and cash equivalents, and properties, and distribute
most of their income.
In determining whether the Group controls such vehicles, primary
considerations include whether the Group is acting as a principal
or an agent (including an assessment of the substantive removal
rights of third parties) and the variability in the returns associated
with the Group’s aggregate economic interest in the fund (direct
interest and expected management fees) relative to the total
variability of returns.
Additionally, the Group’s percentage ownership in these vehicles
can fluctuate on a daily basis according to the level of participation
of the Group and third-parties. To avoid transitory or minor changes
in fund holdings (which do not reflect the wider facts and
circumstances of the Group’s involvement) resulting in binary
changes in the consolidation conclusions, the Group takes into
account the trend of ownership over a period of time. This is
performed in line with the following principles:
• Where the entity is managed by a Group asset manager, and the
Group’s ownership holding in the entity exceeds 40%, the Group is
judged to have control over the entity;
• Where the entity is managed by a Group asset manager, and the
Group’s ownership holding in the entity is between 30% and 40%,
the facts and circumstances of the Group’s involvement in the
entity are considered, in forming a judgement as to whether the
Group has control over the entity. Considerations include the
rights held by other parties, the Group’s rights to fees from the
entity, the variability in the returns associated with the Group’s
aggregate economic interest in the fund and the nature of the
Group’s exposure to variability compared with that of other
investors; and
• Where the entity is managed by a Group asset manager, and the
Group’s ownership holding in the entity is less than 30%, the
Group is judged to not have control over the entity.
Where the Group is deemed to control such vehicles, they are
consolidated, with the interests of parties other than Aviva being
classified as liabilities. These appear as ‘Net asset value attributable
to unitholders’ in the consolidated statement of financial position.
The interest of parties other than Aviva in the investment return on
these funds appear as ‘Investment expense/(income) attributable to
unitholders’ in the income statement.
Where the Group does not control such vehicles, and these
investments are held by its insurance or investment funds, they
are carried at fair value through profit or loss within financial
investments in the consolidated statement of financial position,
in accordance with IAS 39 Financial Instruments: Recognition and
Measurement.
As part of their investment strategy, long-term business
policyholder funds have invested in a number of property limited
partnerships (PLPs), either directly or via property unit trusts (PUTs),
through a mix of capital and loans. The PLPs are managed by
general partners (GPs), in which the long-term business shareholder
companies hold equity stakes and which themselves hold nominal
stakes in the PLPs. The PUTs are managed by a Group subsidiary.
Accounting for the PUTs and PLPs as subsidiaries, joint ventures,
associates or other financial investments depends on whether the
Group is deemed to have control or joint control over the PUTs and
PLPs’ shareholdings in the GPs and the terms of each partnership
agreement are considered along with other factors that determine
control, as outlined above.
Where the Group exerts control over a PUT or a PLP, it has been
treated as a subsidiary and its results, assets and liabilities have
been consolidated.
Where the partnership is managed by an agreement such that there
is joint control between the parties, notwithstanding that the
Group’s partnership share in the PLP (including its indirect stake via
the relevant PUT and GP) may be lower or higher than 50%, such
PUTs and PLPs have been classified as joint ventures (see below).
Where the Group has significant influence over the PUT or PLP, as
defined in the following section, the PUT or PLP is classified as an
associate. Where the Group holds non-controlling interests in PLPs,
with no significant influence or control over their associated GPs,
the relevant investments are carried at fair value through profit or
loss within financial investments.
Consolidation procedure
Subsidiaries are consolidated from the date the Group obtains
control and are excluded from consolidation from the date the
Group loses control. All intercompany transactions, balances
and unrealised surpluses and deficits on transactions between
Group companies have been eliminated. Accounting policies of
subsidiaries are aligned on acquisition to ensure consistency with
Group policies.
The Group is required to use the acquisition method of accounting
for business combinations. Under this method, the Group
recognises identifiable assets, liabilities and contingent liabilities
at fair value, and any non-controlling interest in the acquiree. For
each business combination, the Group has the option to measure
the non-controlling interest in the acquiree either at fair value or
at the proportionate share of the acquiree’s identifiable net assets.
The excess of the consideration transferred over the fair value of
the net assets of the subsidiary acquired is recorded as goodwill
(see accounting policy O below). Acquisition-related costs are
expensed as incurred.
Transactions with non-controlling interests that lead to changes in
the ownership interests in a subsidiary but do not result in a loss of
control are treated as equity transactions.
Merger accounting and the merger reserve
Prior to 1 January 2004, the date of first time adoption of IFRS,
certain significant business combinations were accounted for
using the ‘pooling of interests method’ (or merger accounting),
which treats the merged groups as if they had been combined
throughout the current and comparative accounting periods.
Aviva plc
3.17
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
Merger accounting principles for these combinations gave rise to a
merger reserve in the consolidated statement of financial position,
being the difference between the nominal value of new shares
issued by the Parent Company for the acquisition of the shares
of the subsidiary and the subsidiary’s own share capital and share
premium account. These transactions have not been restated,
as permitted by the IFRS 1 transitional arrangements.
The merger reserve is also used where more than 90% of the shares
in a subsidiary are acquired and the consideration includes the
issue of new shares by the Company, thereby attracting merger
relief under the Companies Act 1985 and, from 1 October 2009,
the Companies Act 2006.
Associates and joint ventures
Associates are entities over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is not
control or joint control. Generally, it is presumed that the Group has
significant influence if it has between 20% and 50% of voting rights.
Joint ventures are joint arrangements whereby the Group and other
parties that have joint control of the arrangement have rights to the
net assets of the joint venture.
Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
In a number of these, the Group’s share of the underlying assets
and liabilities may be greater or less than 50% but the terms of
the relevant agreements make it clear that control is not exercised.
Such jointly controlled entities are referred to as joint ventures in
these financial statements.
Gains on transactions between the Group and its associates and
joint ventures are eliminated to the extent of the Group’s interest in
the associates and joint ventures. Losses are also eliminated, unless
the transaction provides evidence of an impairment of the asset
transferred between entities.
Other than investments in investment vehicles which are carried at
fair value through profit or loss, investments in associates and joint
ventures are accounted for using the equity method of accounting.
Under this method, the cost of the investment in a given associate
or joint venture, together with the Group’s share of that entity’s
post-acquisition changes to shareholders’ funds, is included as
an asset in the consolidated statement of financial position.
As explained in accounting policy O, the cost includes goodwill
recognised on acquisition. The Group’s share of their post-
acquisition profit or losses is recognised in the income statement
and its share of post-acquisition movements in reserves is
recognised in reserves. Equity accounting is discontinued when
the Group no longer has significant influence or joint control
over the investment.
If the Group’s share of losses in an associate or joint venture
equals or exceeds its interest in the undertaking, the Group does
not recognise further losses unless it has incurred obligations or
made payments on behalf of the entity.
The Company’s investments
In the Company’s statement of financial position, subsidiaries,
associates and joint ventures are stated at cost less impairment.
Investments are reviewed annually to test whether any indicators of
impairment exist. Where there is objective evidence of such an asset
being impaired the investment is impaired to its recoverable value
and any unrealised loss is recorded in the income statement.
(E) Foreign currency translation
Income statements and cash flows of foreign entities are translated
into the Group’s presentation currency at average exchange rates
for the year while their statements of financial position are
translated at the year-end exchange rates. Exchange differences
arising from the translation of the net investment in foreign
subsidiaries and of borrowings and other currency instruments
designated as hedges of such investments, are recognised in other
comprehensive income and taken to the currency translation
reserve or the hedging instrument reserve within equity. On
disposal of a foreign entity, such exchange differences are
transferred out of this reserve and are recognised in the income
statement as part of the gain or loss on sale. The cumulative
translation differences were deemed to be zero at the transition
date to IFRS.
Foreign currency transactions are accounted for at the exchange
rates prevailing at the date of the transactions. Gains and losses
resulting from the settlement of such transactions, and from the
translation of monetary assets and liabilities denominated in
foreign currencies, are recognised in the income statement.
Translation differences on debt securities and other monetary
financial assets measured at fair value and designated as held at
FVTPL (see accounting policy T) are included in foreign exchange
gains and losses in the income statement. For monetary financial
assets designated as AFS, translation differences are calculated as
if they were carried at amortised cost and so are recognised in the
income statement, while foreign exchange differences arising from
fair value gains and losses are recognised in other comprehensive
income and included in the investment valuation reserve within
equity. Translation differences on non-monetary items, such as
equities which are designated as FVTPL, are reported as part of
the fair value gain or loss, whereas such differences on AFS
equities are included in the investment valuation reserve.
(F) Fair value measurement
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation
technique. This presumes that the transaction takes place in the
principal (or most advantageous) market under current market
conditions. Fair value is a market-based measure and in the
absence of observable market prices in an active market, it is
measured using the assumptions that market participants
would use when pricing the asset or liability.
The fair value of a non-financial asset is determined based on
its highest and best use from a market participant’s perspective.
When using this approach, the Group takes into account the
asset’s use that is physically possible, legally permissible and
financially feasible.
The best evidence of the fair value of a financial instrument at initial
recognition is normally the transaction price i.e. the fair value of the
consideration given or received. In certain circumstances, the fair
value at initial recognition may differ from the transaction price.
If the fair value is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without
modification or repackaging), or is based on a valuation technique
whose variables include only data from observable markets, then
the difference between the fair value at initial recognition and
the transaction price is recognised as a gain or loss in the income
statement.
Aviva plc
3.18
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
When unobservable market data has a significant impact on the
valuation of financial instruments, the difference between the fair
value at initial recognition and the transaction price is not
recognised immediately in the income statement, but deferred and
recognised in the income statement on an appropriate basis over
the life of the instrument but no later than when the valuation is
supported wholly by observable market data or the transaction is
closed out or otherwise matured.
If an asset or a liability measured at fair value has a bid price and an ask
price, the price within the bid-ask spread that is most representative of
fair value in the circumstances is used to measure fair value.
(G) Product classification
Insurance contracts are defined as those containing significant
insurance risk if, and only if, an insured event could cause an insurer
to make significant additional payments in any scenario, excluding
scenarios that lack commercial substance, at the inception of
the contract.
Such contracts remain insurance contracts until all rights and
obligations are extinguished or expire. Contracts can be reclassified
as insurance contracts after inception if insurance risk becomes
significant. Contracts that transfer financial risks, but not significant
insurance risk are classified as investment contracts.
Some insurance and investment contracts contain a discretionary
participation feature, which is a contractual right to receive
additional benefits as a supplement to guaranteed benefits
(i) that are likely to be a significant portion of the total contractual
payments; (ii) whose amount or timing is at the discretion of the
issuer; and (iii) that are based on the performance of a specified
pool of assets, company, or other entity that issues the contracts.
Investment contracts with discretionary participation features,
referred to as participating investment contracts, are accounted
for under IFRS 4. Investment contracts without discretionary
participation features, referred to as non-participating investment
contracts, are accounted for as financial instruments under IAS 39.
The classification of the Group’s main contracts is
summarised below:
Type of contract
Annuities
Unit-linked with significant
insurance risk
Unit-linked without significant
insurance risk
Protection
General insurance (e.g. motor,
property, liability)
Health
With-profits
Classification
Insurance contract
Insurance contract
Investment contract
Insurance contract
Insurance contract
Insurance contract
Insurance contract / Participating
investment contract
As noted in accounting policy A, insurance contracts and participating
investment contracts in general continue to be measured and
accounted for under existing accounting practices at the later of the
date of transition to IFRS (‘grandfathered’) or the date of the
acquisition of the entity, in accordance with IFRS 4. IFRS accounting
for insurance contracts in UK companies was grandfathered at the
date of transition to IFRS and determined in accordance with the
Statement of Recommended Practice issued by the Association of
British Insurers (subsequently withdrawn by the ABI in 2015).
In certain businesses, the accounting policies or accounting
estimates have been changed, as permitted by IFRS 4 and IAS 8
respectively, to remeasure designated insurance liabilities to reflect
current market interest rates and changes to regulatory capital
requirements. When accounting policies or accounting estimates
have been changed, and adjustments to the measurement basis
have occurred, the financial statements of that year will have
disclosed the impacts accordingly. One such example is our
adoption of Financial Reporting Standard 27 Life Assurance (FRS 27)
which was issued by the UK’s Accounting Standards Board (ASB) in
December 2004 (subsequently withdrawn by the ASB in 2015).
(H) Premiums earned
Premiums on long-term insurance contracts and participating
investment contracts are recognised as income when receivable,
except for investment-linked premiums which are accounted for
when the corresponding liabilities are recognised. For single
premium business, this is the date from which the policy is effective.
For regular premium contracts, receivables are recognised at the
date when payments are due.
Premiums are shown before deduction of commission and before
any sales-based taxes or duties. Where policies lapse due to non-
receipt of premiums, then all the related premium income accrued
but not received from the date they are deemed to have lapsed is
offset against premiums.
General insurance and health premiums written reflect business
incepted during the year, and exclude any sales-based taxes or
duties. Unearned premiums are those proportions of the premiums
written in a year that relate to periods of risk after the statement
of financial position date. Unearned premiums are calculated on
either a daily or monthly pro rata basis. Premiums collected by
intermediaries, but not yet received, are assessed based on
estimates from underwriting or past experience, and are
included in premiums written.
Deposits collected under investment contracts without a
discretionary participation feature (non-participating contracts) are
not accounted for through the income statement, except for the fee
income (covered in accounting policy I) and the investment income
attributable to those contracts, but are accounted for directly
through the statement of financial position as an adjustment to
the investment contract liability.
(I) Other investment contract fee revenue
Investment contract policyholders are charged fees for policy
administration, investment management, surrenders or other
contract services. The fees may be for fixed amounts or vary
with the amounts being managed, and will generally be charged
as an adjustment to the policyholder’s balance. Fees related to
investment management services are recognised as revenue over
time, as performance obligations are satisfied. In most cases this
revenue is recognised in the same period in which the fees are
charged to the policyholder. Fees that are related to services to
be provided in future periods are deferred and recognised when
the performance obligation is fulfilled. Variable consideration,
such as performance fees and commission subject to clawback
arrangements, is not recognised as revenue until it is reasonably
certain that no significant reversal of amounts recognised
would occur.
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Accounting Policies continued
Initiation and other ‘front-end’ fees (fees that are assessed against
the policyholder balance as consideration for origination of the
contract) are charged on some non-participating investment and
investment fund management contracts. Where the investment
contract is recorded at amortised cost, these fees are deferred and
recognised over the expected term of the policy by an adjustment
to the effective yield. Where the investment contract is measured
at fair value, the front-end fees that relate to the provision of
investment management services are deferred and recognised
as the services are provided. Origination fees are recognised
immediately where the sale of fund interests represent a separate
performance obligation.
(J) Other fee and commission income
Other fee and commission income consists primarily of fund
management fees, distribution fees from mutual funds,
commissions on reinsurance ceded, commission revenue from the
sale of mutual fund shares and transfer agent fees for shareholder
record keeping. Reinsurance commissions receivable are deferred
in the same way as acquisition costs, as described in accounting
policy X. All other fee and commission income is recognised over
time as the services are provided.
(K) Net investment income
Investment income consists of dividends, interest and rents
receivable for the year, movements in amortised cost on debt
securities, realised gains and losses, and unrealised gains and
losses on FVTPL investments (as defined in accounting policy T).
Dividends on equity securities are recorded as revenue on the ex-
dividend date. Interest income is recognised as it accrues, taking
into account the effective yield on the investment. It includes the
interest rate differential on forward foreign exchange contracts.
Rental income is recognised on an accruals basis, and is recognised
on a straight line basis unless there is compelling evidence that
benefits do not accrue evenly over the period of the lease.
A gain or loss on a financial investment is only realised on disposal
or transfer, and is the difference between the proceeds received, net
of transaction costs, and its original cost or amortised cost, as
appropriate.
Unrealised gains and losses, arising on investments which have not
been derecognised as a result of disposal or transfer, represent the
difference between the carrying value at the year end and the
carrying value at the previous year end or purchase value during the
year, less the reversal of previously recognised unrealised gains and
losses in respect of disposals made during the year. Realised gains
or losses on investment property represent the difference between
the net disposal proceeds and the carrying amount of the property.
(L) Insurance and participating investment
contract liabilities
Claims
Long-term business claims reflect the cost of all claims arising
during the year, including claims handling costs, as well as
policyholder bonuses accrued in anticipation of bonus
declarations.
General insurance and health claims incurred include all losses
occurring during the year, whether reported or not, related handling
costs, a reduction for the value of salvage and other recoveries, and
any adjustments to claims outstanding from previous years.
Claims handling costs include internal and external costs incurred
in connection with the negotiation and settlement of claims.
Internal costs include all direct expenses of the claims department
and any part of the general administrative costs directly
attributable to the claims function.
Long-term business provisions
Under current IFRS requirements, insurance and participating
investment contract liabilities are measured using accounting
policies consistent with those adopted previously under existing
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-profits and non-
profit contracts.
The long-term business provisions are calculated separately for
each life operation, based either on local regulatory requirements
or existing local GAAP (at the later of the date of transition to IFRS or
the date of the acquisition of the entity); and actuarial principles
consistent with those applied in each local market. Each calculation
represents a determination within a range of possible outcomes,
where the assumptions used in the calculations depend on the
circumstances prevailing in each life operation. The principal
assumptions are disclosed in note 42(a). For the UK with-profits
funds, FRS 27 required liabilities to be calculated on the realistic
basis adjusted to remove the shareholders’ share of future bonuses.
FRS 27 was grandfathered from UK regulatory requirements prior to
the adoption of Solvency II. For UK non-profit insurance contracts,
the liabilities are calculated using the gross premium valuation
method. This method uses the amount of contractual premiums
payable and includes explicit assumptions for interest and discount
rates, mortality and morbidity, persistency and future expenses.
These assumptions are set on a prudent basis and can vary by
contract type and reflect current and expected future experience.
These estimates depend upon the outcome of future events and
may need to be revised as circumstances change. The liabilities are
based on the UK regulatory requirements prior to the adoption of
Solvency II, adjusted to remove certain regulatory reserves and
margins in assumptions, notably for annuity business.
Unallocated divisible surplus
In certain participating long-term insurance and investment
business, the nature of the policy benefits is such that the division
between shareholder reserves and policyholder liabilities is
uncertain. Amounts whose allocation to either policyholders or
shareholders has not been determined by the end of the financial
year are held within liabilities as an unallocated divisible surplus.
If the aggregate carrying value of liabilities for a particular
participating business fund is in excess of the aggregate carrying
value of its assets, then the difference is held as a negative
unallocated divisible surplus balance, subject to recoverability
from margins in that fund’s participating business. Any excess of
this difference over the recoverable amount is charged to net
income in the reporting period.
Embedded derivatives
Embedded derivatives that meet the definition of an insurance
contract or correspond to options to surrender insurance contracts
for a set amount (or based on a fixed amount and an interest rate)
are not separately measured. All other embedded derivatives are
separated and measured at fair value if they are not considered
closely related to the host insurance contract or do not meet the
definition of an insurance contract. Fair value reflects own credit
risk to the extent the embedded derivative is not fully collateralised.
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Accounting Policies continued
Liability adequacy
At each reporting date, an assessment is made of whether the
recognised long-term business provisions are adequate, using
current estimates of future cash flows. If that assessment shows
that the carrying amount of the liabilities (less related assets) is
insufficient in light of the estimated future cash flows, the deficiency
is recognised in the income statement by setting up an additional
provision in the statement of financial position.
General insurance and health provisions
Outstanding claims provisions
General insurance and health outstanding claims provisions are
based on the estimated ultimate cost of all claims incurred but not
settled at the statement of financial position date, whether reported
or not, together with related claims handling costs. Significant
delays are experienced in the notification and settlement of certain
types of general insurance claims, particularly in respect of liability
business, including environmental and pollution exposures, the
ultimate cost of which cannot be known with certainty at the
statement of financial position date. As such, booked claim
provisions for general insurance and health insurance are based
on the best estimate of the cost of future claim payments plus an
explicit allowance for risk and uncertainty. Any estimate represents
a determination within a range of possible outcomes. Further
details of estimation techniques are given in note 42(b).
Provisions for latent claims and claims that are settled on an
annuity type basis such as structured settlements are discounted,
in the relevant currency at the reporting date, having regard to
the expected settlement dates of the claims and the nature of
the liabilities.
The discount rate is set at the start of the accounting period with
any change in rates between the start and end of the accounting
period being reflected below operating profit as an economic
assumption change. The range of discount rates used is described
in note 42(b). Outstanding claims provisions are valued net of an
allowance for expected future recoveries. Recoveries include non-
insurance assets that have been acquired by exercising rights to
salvage and subrogation under the terms of insurance contracts.
Provision for unearned premiums
The proportion of written premiums, gross of commission payable
to intermediaries, attributable to subsequent periods is deferred as
a provision for unearned premiums. The change in this provision is
taken to the income statement as recognition of revenue over the
period of risk.
Liability adequacy
At each reporting date, the Group reviews its unexpired risks and
carries out a liability adequacy test for any overall excess of
expected claims and deferred acquisition costs over unearned
premiums, using the current estimates of future cash flows under its
contracts after taking account of the investment return expected to
arise on assets relating to the relevant general business provisions.
If these estimates show that the carrying amount of its insurance
liabilities (less related deferred acquisition costs) is insufficient in
light of the estimated future cash flows, the deficiency is recognised
in the income statement by setting up a provision in the statement
of financial position.
Other assessments and levies
The Group is subject to various periodic insurance-related
assessments or guarantee fund levies. Related provisions
are established where there is a present obligation (legal or
constructive) as a result of a past event. Such amounts are not
included in insurance liabilities but are included under ‘Pension
deficits and other provisions’ in the statement of financial position.
(M) Non-participating investment
contract liabilities
Claims
For non-participating investment contracts with an account
balance, claims reflect the excess of amounts paid over the account
balance released.
Contract liabilities
Deposits collected under non-participating investment contracts
are not accounted for through the income statement, except for
the investment income attributable to those contracts, but are
accounted for directly through the statement of financial position
as an adjustment to the investment contract liability.
The majority of the Group’s contracts classified as non-participating
investment contracts are unit-linked contracts and are measured at
fair value.
The liability’s fair value is determined using a valuation technique
to provide a reliable estimate of the amount for which the liability
could be transferred in an orderly transaction between market
participants at the measurement date, subject to a minimum
equal to the surrender value. For unit-linked contracts, the fair
value liability is equal to the current unit fund value, including
any unfunded units. In addition, if required, non-unit reserves
are held based on a discounted cash flow analysis.
For non-linked contracts, the fair value liability is based on a
discounted cash flow analysis, with allowance for risk calibrated
to match the market price for risk.
(N) Reinsurance
The Group assumes and cedes reinsurance in the normal course of
business, with retention limits varying by line of business. Premiums
on reinsurance assumed are recognised as revenue in the same
manner as they would be if the reinsurance were considered direct
business, taking into account the product classification of the
reinsured business.
The cost of reinsurance related to long-duration contracts is
accounted for over the life of the underlying reinsured policies,
using assumptions consistent with those used to account for
these policies.
Where general insurance liabilities are discounted, any
corresponding reinsurance assets are also discounted using
consistent assumptions.
Gains or losses on buying retroactive reinsurance are recognised in
the income statement immediately at the date of purchase and are
not amortised. Premiums ceded and claims reimbursed are
presented on a gross basis in the consolidated income statement
and statement of financial position as appropriate.
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Accounting Policies continued
Reinsurance assets primarily include balances due from both
insurance and reinsurance companies for ceded insurance and
investment contract liabilities. This includes balances in respect of
investment contracts which are legally reinsurance contracts but
do not meet the definition of a reinsurance contract under IFRS.
Amounts recoverable from reinsurers are estimated in a manner
consistent with the underlying contract liabilities, outstanding
claims provisions or settled claims associated with the reinsured
policies and in accordance with the relevant reinsurance contract.
Reinsurance of non-participating investment contracts and
reinsurance contracts that principally transfer financial risk are
accounted for directly through the statement of financial position.
A deposit asset or liability is recognised, based on the consideration
paid or received less any explicitly identified premiums or fees to
be retained by the reinsured. These deposit assets or liabilities are
shown within reinsurance assets in the consolidated statement of
financial position.
If a reinsurance asset is impaired, the Group reduces the carrying
amount accordingly and recognises that impairment loss in the
income statement. A reinsurance asset is impaired if there is
objective evidence, as a result of an event that occurred after initial
recognition of the reinsurance asset, that the Group may not receive
all amounts due to it under the terms of the contract, and the event
has a reliably measurable impact on the amounts that the Group
will receive from the reinsurer.
(O) Goodwill, AVIF and intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the Group’s share of the net assets of the acquired
subsidiary, associate or joint venture at the date of acquisition.
Goodwill arising on the Group’s investments in subsidiaries is
shown as a separate asset, while that on associates and joint
ventures is included within the carrying value of those investments.
Goodwill on acquisitions prior to 1 January 2004 (the date of
transition to IFRS) is carried at its book value (original cost less
cumulative amortisation) on that date, less any impairment
subsequently incurred. Goodwill arising before 1 January 1998
was eliminated against reserves and has not been reinstated.
Where negative goodwill arises on an acquisition, this is recognised
immediately in the consolidated income statement.
Acquired value of in-force business (AVIF)
The present value of future profits on a portfolio of long-term
insurance and investment contracts, acquired either directly or
through the purchase of a subsidiary, is recognised as an asset.
If the AVIF results from the acquisition of an investment in a joint
venture or an associate, it is held within the carrying amount of
that investment. In all cases, the AVIF is amortised over the useful
lifetime of the related contracts in the portfolio on a systematic
basis. The rate of amortisation is chosen by considering the profile
of the additional value of in-force business acquired and the
expected depletion in its value.
Non-participating investment contract AVIF is reviewed for evidence
of impairment, consistent with reviews conducted for other finite
life intangible assets. Insurance and participating investment
contract AVIF is reviewed for impairment at each reporting date
as part of the liability adequacy requirements of IFRS 4 (see
accounting policy L). AVIF is reviewed for evidence of impairment
and impairment tested at product portfolio level by reference to
a projection of future profits arising from the portfolio.
Intangible assets
Intangible assets consist primarily of contractual relationships
such as access to distribution networks, customer lists and
software. The economic lives of these are determined by
considering relevant factors such as usage of the asset, typical
product life cycles, potential obsolescence, maintenance costs,
the stability of the industry, competitive position and the period
of control over the assets. Finite life intangibles are amortised over
their useful lives, which range from three to 30 years, using the
straight-line method.
The amortisation charge for the year is included in the income
statement under ‘Other expenses’. For intangibles with finite lives,
impairment charges will be recognised in the income statement
where evidence of such impairment is observed.
Intangibles with indefinite lives are subject to regular impairment
testing, as described below.
Impairment testing
For impairment testing, goodwill and intangible assets with
indefinite useful lives have been allocated to cash-generating
units. The carrying amount of goodwill and intangible assets
with indefinite useful lives is reviewed at least annually or when
circumstances or events indicate there may be uncertainty over this
value. Goodwill and indefinite life intangibles are written down for
impairment where the recoverable amount is insufficient to support
its carrying value. Further details on goodwill allocation and
impairment testing are given in note 15. Any impairments are
charged as expenses in the income statement.
(P) Property and equipment
Owner-occupied properties are carried at their revalued amounts,
and movements are recognised in other comprehensive income
and taken to a separate reserve within equity. When such properties
are sold, the accumulated revaluation surpluses are transferred
from this reserve to retained earnings. These properties are
depreciated down to their estimated residual values over their
useful lives.
This excludes owner-occupied properties held under lease
arrangements, which are measured at amortised cost. Refer
to accounting policy Z for further information.
All other items classed as property and equipment within the
statement of financial position are carried at historical cost less
accumulated depreciation.
Investment properties under construction are included within
property and equipment until completion, and are stated at cost
less any provision for impairment in their values until construction
is completed or fair value becomes reliably measurable.
Depreciation is calculated on a straight-line basis to write down the
cost of other assets to their residual values over their estimated
useful lives as follows:
• Properties under construction No depreciation
• Owner-occupied properties,
and related mechanical and
electrical equipment
• Motor vehicles
25 years
Three years, or lease term
(up to useful life) if longer
• Computer equipment
• Other assets
Three to five years
Three to five years
Aviva plc
3.22
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Accounting Policies continued
The assets’ residual values, useful lives and method of depreciation
are reviewed regularly, and at least at each financial year end, and
adjusted if appropriate. Where the carrying amount of an asset is
greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount. Gains and losses on
disposal of property and equipment are determined by reference
to their carrying amount.
Borrowing costs directly attributable to the acquisition and
construction of property and equipment are capitalised. All repair
and maintenance costs are charged to the income statement
during the financial period in which they are incurred. The cost of
major renovations is included in the carrying amount of the asset
when it is probable that future economic benefits in excess of the
most recently assessed standard of performance of the existing
asset will flow to the Group and the renovation replaces an
identifiable part of the asset. Major renovations are depreciated
over the remaining useful life of the related asset.
(Q) Investment 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, as assessed by qualified external valuers or by
qualified staff of the Group. Changes in fair values are recorded in
the income statement in net investment income.
As described in accounting policy P above, investment properties
under construction are included within property and equipment,
and are stated at cost less any impairment in their values until
construction is completed or fair value becomes reliably
measurable.
(R) Impairment of non-financial assets
Property and equipment and other non-financial assets are
reviewed for impairment losses whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised in the income
statement for the amount by which the carrying amount of the
asset exceeds its recoverable amount, which is the higher of an
asset’s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest
level for which there are separately identifiable cash flows. Non-
financial assets, except goodwill which have suffered an
impairment, are reviewed annually for possible reversal of
the impairment.
(S) Derecognition and offset of financial assets
and financial liabilities
A financial asset (or, where applicable, a part of a financial asset or
part of a group of similar financial assets) is derecognised where:
• The rights to receive cash flows from the asset have expired;
• The Group retains the right to receive cash flows from the asset,
but has assumed an obligation to pay them in full without
material delay to a third party under a ‘pass-through’
arrangement; or
• The Group has transferred its rights to receive cash flows from
the asset and has either transferred substantially all the risks
and rewards of the asset, or has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset.
A financial liability is derecognised when the obligation under the
liability is discharged or cancelled or expires.
Financial assets and liabilities are offset and the net amount
reported in the statement of financial position when there is a
currently enforceable legal right to set off the recognised amounts
and there is the ability and intention to settle on a net basis, or
realise the asset and settle the liability simultaneously.
(T) Financial investments
The Group classifies its investments as either FVTPL or AFS.
The classification depends on the purpose for which the
investments were acquired, and is determined by management at
initial recognition. The FVTPL category has two subcategories –
those that meet the definition as being held for trading and those
the Group chooses to designate as FVTPL (referred to in this
accounting policy as ‘other than trading’) upon initial recognition.
In general, the other than trading category is used as, in most cases,
the Group’s investment or risk management strategy is to manage
its financial investments on a fair value basis. Debt securities and
equity securities, which the Group acquires with the intention to
resell in the short term, are classified as trading, as are non-hedge
derivatives (see accounting policy U below). The AFS category is
used where the relevant long-term business liability (including
shareholders’ funds) is passively managed, as well as in certain fund
management and non-insurance operations.
Purchases and sales of investments are recognised on the trade
date, which is the date that the Group commits to purchase or sell
the assets, at their fair values.
Debt securities are initially recorded at their fair value, which is
taken to be amortised cost, with amortisation credited or charged
to the income statement. Investments classified as trading, other
than trading and AFS, are subsequently carried at fair value.
Changes in the fair value of trading and other than trading
investments are included in the income statement in the period in
which they arise.
Changes in the fair value of securities classified as AFS are
recognised in other comprehensive income and recorded in a
separate investment valuation reserve within equity. When
securities classified as AFS are sold or impaired, the accumulated
fair value adjustments are transferred out of the investment
valuation reserve to the income statement with a corresponding
movement through other comprehensive income.
Impairment
The Group reviews the carrying value of its AFS investments on a
regular basis. If the carrying value of an AFS investment is greater
than the recoverable amount, the carrying value is reduced through
a charge to the income statement in the period of impairment.
The following policies are used to determine the level of any
impairment, some of which involve considerable judgement.
AFS debt securities
An AFS debt security is impaired if there is objective evidence that
a loss event has occurred which has impaired the expected cash
flows, i.e. where all amounts due according to the contractual terms
of the security are not considered collectible. An impairment
charge, measured as the difference between the security’s fair value
and amortised cost, is recognised when the issuer is known to be
either in default or in financial difficulty. Determining when an
issuer is in financial difficulty requires the use of judgement, and
we consider a number of factors including industry risk factors,
financial condition, liquidity position and near-term prospects of
the issuer, credit rating declines and a breach of contract.
Aviva plc
3.23
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Accounting Policies continued
A decline in fair value below amortised cost due to changes in risk-
free interest rates does not necessarily represent objective evidence
of a loss event.
For securities identified as being impaired, the cumulative
unrealised loss previously recognised within the investment
valuation reserve is transferred to realised losses for the year, with
a corresponding movement through other comprehensive income.
Any subsequent increase in fair value of these impaired securities is
recognised in other comprehensive income and recorded in the
investment valuation reserve unless this increase represents a
decrease in the impairment loss that can be objectively related to
an event occurring after the impairment loss was recognised in the
income statement. In such an event, the reversal of the impairment
loss is recognised as a gain in the income statement.
financial position at the date of purchase, representing their fair
value at that date.
Derivative contracts may be traded on an exchange or over-the-
counter (OTC). Exchange-traded derivatives are standardised and
include certain futures and option contracts. OTC derivative
contracts are individually negotiated between contracting parties
and include forwards, swaps, caps and floors. Derivatives are
subject to various risks including market, liquidity and credit risk,
similar to those related to the underlying financial instruments.
Many OTC transactions are contracted and documented under
International Swaps and Derivatives Association master
agreements or their equivalent, which are designed to provide
legally enforceable set-off in the event of default, reducing the
Group’s exposure to credit risk.
AFS equity securities
An AFS equity security is considered impaired if there is objective
evidence that the cost may not be recovered. In addition to
qualitative impairment criteria, such evidence includes a significant
or prolonged decline in fair value below cost. Unless there is
evidence to the contrary, an equity security is considered impaired
if the decline in fair value relative to cost has been either at least
20% for a continuous six-month period or more than 40% at the
end of the reporting period, or been in an unrealised loss position
for a continuous period of more than 12 months at the end of the
reporting period. We also review our largest equity holdings for
evidence of impairment, as well as individual equity holdings in
industry sectors known to be in difficulty. Where there is objective
evidence that impairment exists, the security is written down
regardless of the size of the unrealised loss.
For securities identified as being impaired, the cumulative
unrealised loss previously recognised within the investment
valuation reserve is transferred to realised losses for the year with a
corresponding movement through other comprehensive income.
Any subsequent increase in fair value of these impaired securities is
recognised in other comprehensive income and recorded in the
investment valuation reserve.
Reversals of impairments on any of these assets are only recognised
where the decrease in the impairment can be objectively related to
an event occurring after the write-down (such as an improvement in
the debtor’s credit rating), and are not recognised in respect of
equity instruments.
(U) Derivative financial instruments
and hedging
Derivative financial instruments include foreign exchange contracts,
interest rate futures, currency and interest rate swaps, currency
and interest rate options (both written and purchased) and other
financial instruments that derive their value mainly from underlying
interest rates, foreign exchange rates, credit or equity indices,
commodity values or equity instruments.
All derivatives are initially recognised in the statement of financial
position at their fair value, which usually represents their cost. They
are subsequently remeasured at their fair value, with the method of
recognising movements in this value depending on whether they
are designated as hedging instruments and, if so, the nature of the
item being hedged. Fair values are obtained from quoted market
prices or, if these are not available, by using valuation techniques
such as discounted cash flow models or option pricing models. All
derivatives are carried as assets when the fair values are positive
and as liabilities when the fair values are negative. Premiums paid
for derivatives are recorded as an asset on the statement of
The notional or contractual amounts associated with derivative
financial instruments are not recorded as assets or liabilities on the
statement of financial position as they do not represent the fair
value of these transactions. These amounts are disclosed in
note 59(b).
The Group has collateral agreements in place between the
individual Group entities and relevant counterparties. Accounting
policy W covers collateral, both received and pledged, in respect of
these derivatives.
Interest rate and currency swaps
Interest rate swaps are contractual agreements between two
parties to exchange fixed rate and floating rate interest by means of
periodic payments, calculated on a specified notional amount and
defined interest rates. Most interest rate swap payments are netted
against each other, with the difference between the fixed and
floating rate interest payments paid by one party. Currency swaps,
in their simplest form, are contractual agreements that involve the
exchange of both periodic and final amounts in two different
currencies. Both types of swap contracts may include the net
exchange of principal. Exposure to gain or loss on these contracts
will increase or decrease over their respective lives as a function of
maturity dates, interest and foreign exchange rates, and the timing
of payments.
Interest rate futures, forwards and options contracts
Interest rate futures are exchange-traded instruments and
represent commitments to purchase or sell a designated security or
money market instrument at a specified future date and price.
Interest rate forward agreements are OTC contracts in which two
parties agree on an interest rate and other terms that will become a
reference point in determining, in concert with an agreed notional
principal amount, a net payment to be made by one party to the
other, depending upon what rate prevails at a future point in time.
Interest rate options, which consist primarily of caps and floors, are
interest rate protection instruments that involve the potential
obligation of the seller to pay the buyer an interest rate differential
in exchange for a premium paid by the buyer. This differential
represents the difference between current rate and an agreed rate
applied to a notional amount. Exposure to gain or loss on all
interest rate contracts will increase or decrease over their respective
lives as interest rates fluctuate. Certain contracts, known as
swaptions, contain features which can act as swaps or options.
Foreign exchange contracts
Foreign exchange contracts, which include spot, forward and
futures contracts, represent agreements to exchange the currency
of one country for the currency of another country at an agreed
price and settlement date.
Aviva plc
3.24
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4. Other Information
Accounting Policies continued
Foreign exchange option contracts are similar to interest rate
option contracts, except that they are based on currencies, rather
than interest rates.
Hedge accounting
Hedge accounting is applied to certain transactions which meet the
criteria set out in IAS 39, in order to mitigate the Group’s exposure
to risk. At the inception of the transaction, the Group documents
the relationship between the hedging instrument and the hedged
item, as well as the risk management objective and the strategy for
undertaking the hedge transaction. The Group also documents its
assessment of whether the hedge is expected to be, and has been,
highly effective in offsetting the risk in the hedged item, both at
inception and on an ongoing basis.
Changes in the fair value of hedging instruments that are
designated and qualify as a hedge of a net investment in a foreign
operation (net investment hedges) or a hedge of a future cash flow,
attributable to a recognised asset or liability, a highly probable
forecast transaction or a firm commitment (cash flow hedges), and
that prove to be highly effective in relation to the hedged risk, are
recognised in other comprehensive income and a separate reserve
within equity. Gains and losses accumulated in this reserve are
included in the income statement on disposal of the relevant
hedged item.
Changes in the fair value of hedging instruments that are
designated and qualify as a hedge of the fair value of a recognised
asset or liability (fair value hedges) are recognised in the income
statement. The gain or loss on the hedged item that is attributable
to the hedged risk is recognised in the income statement.
This applies even if the hedged item is an available for sale financial
asset or is measured at amortised cost. If a hedging relationship no
longer meets the criteria for hedge accounting, the cumulative
adjustment made to the carrying amount of the hedged item is
amortised to the income statement, based on a recalculated
effective interest rate over the residual period to maturity. In cases
where the hedged item has been derecognised, the cumulative
adjustment is released to the income statement immediately.
The Group does not currently apply the specific hedge accounting
rules to its derivative transactions which are treated as derivatives
held for trading. The fair value gains and losses on these derivatives
are recognised immediately in net investment income.
(V) Loans
Loans with fixed maturities, including policyholder loans, mortgage
loans on investment property, securitised mortgages and collateral
loans, are recognised when cash is advanced to borrowers.
Certain loans are carried at their unpaid principal balances and
adjusted for amortisation of premium or discount, non-refundable
loan fees and related direct costs. These amounts are deferred and
amortised over the life of the loan as an adjustment to loan yield
using the effective interest rate method.
However, for the majority of mortgage loans, the Group has taken
advantage of the fair value option under IAS 39 to present the
mortgages, associated borrowings and derivative 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 that would
otherwise arise from using different measurement bases for these
three items. The fair values of these mortgages are estimated using
discounted cash flow models, based on a risk-adjusted discount
rate which reflects the risks associated with these products. They
are revalued at each period end, with movements in their fair values
being taken to the income statement.
At each reporting date, we review loans carried at amortised cost
for objective evidence that they are impaired and uncollectable,
either at the level of an individual security or collectively within a
group of loans with similar credit risk characteristics. To the extent
that a loan is uncollectable, it is written down as impaired to its
recoverable amount, measured as the present value of expected
future cash flows discounted at the original effective interest rate
of the loan, taking into account the fair value of the underlying
collateral through an impairment provision account. Subsequent
recoveries in excess of the loan’s written-down carrying value are
credited to the income statement.
The Company classifies and measures loans at either amortised
cost, fair value through other comprehensive income, or fair value
through profit or loss based on the outcome of an assessment of
the Company’s business model for managing financial assets and
the extent to which the financial assets’ contractual cash flows are
solely payment of principal and interest.
The Company calculates expected credit losses for all financial
assets held at either amortised cost or fair value through other
comprehensive income. Expected credit losses are calculated on
either a 12-month or lifetime basis depending on the extent to
which credit risk has increased significantly since initial recognition.
(W) Collateral
The Group receives and pledges collateral in the form of cash or
non-cash assets in respect of stock lending transactions, certain
derivative contracts and loans, in order to reduce the credit risk of
these transactions. Collateral is also pledged as security for bank
letters of credit. The amount and type of collateral required
depends on an assessment of the credit risk of the counterparty.
Collateral received in the form of cash, which is not legally
segregated from the Group, is recognised as an asset in the
statement of financial position with a corresponding liability for
the repayment in financial liabilities (note 60). However, where
the Group has a currently enforceable legal right of set-off and the
ability and intent to net settle, the collateral liability and associated
derivative balances are shown net.
Non-cash collateral received is not recognised in the statement of
financial position unless the transfer of the collateral meets the
derecognition criteria from the perspective of the transferor. Such
collateral is typically recognised when the Group either (a) sells or
repledges these assets in the absence of default, at which point the
obligation to return this collateral is recognised as a liability; or
(b) the counterparty to the arrangement defaults, at which point
the collateral is seized and recognised as an asset.
Collateral pledged in the form of cash, which is legally segregated
from the Group, is derecognised from the statement of financial
position with a corresponding receivable recognised for its return.
Non-cash collateral pledged is not derecognised from the
statement of financial position unless the Group defaults on its
obligations under the relevant agreement, and therefore continues
to be recognised in the statement of financial position within
financial investments.
Aviva plc
3.25
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
(X) Deferred acquisition costs and other assets
Costs relating to the acquisition of new business for insurance and
participating investment contracts are deferred in line with existing
local accounting practices, to the extent that they are expected to
be recovered out of future margins in revenues on these contracts.
For participating contracts written in the UK, acquisition costs are
generally not deferred as the liability for these contracts is
calculated on a realistic basis which was grandfathered from UK
regulatory requirements prior to the adoption of Solvency II (see
accounting policy L). For non-participating investment and
investment fund management contracts, incremental acquisition
costs and sales enhancements that are directly attributable to
securing an investment management service are also deferred.
Long-term business deferred acquisition costs are amortised
systematically over a period no longer than that in which they are
expected to be recoverable out of these future margins. Deferred
acquisition 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 deferred acquisition
costs is amortised in the same manner as the underlying asset.
Deferred acquisition costs are reviewed by category of business at
the end of each reporting period and are written-off where they are
no longer considered to be recoverable.
Where such business is reinsured, an appropriate proportion
of the deferred acquisition costs is attributed to the reinsurer.
Recoverability is assessed net of reinsurance, and may result
in deferred acquisition costs being written-off if any liability
recognised for the reinsurer’s share is insufficient.
Other receivables and payables are initially recognised at cost,
being fair value. Subsequent to initial measurement they are
measured at amortised cost.
(Y) Statement of cash flows
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand,
deposits held at call with banks, treasury bills and other short-term
highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of
change in value. Such investments are those with less than three
months’ maturity from the date of acquisition, or which are
redeemable on demand with only an insignificant change in
their fair values.
For the purposes of the statement of cash flows, cash and cash
equivalents also include bank overdrafts, which are included in
payables and other financial liabilities on the statement of financial
position.
Operating cash flows
Purchases and sales of investment property, loans and financial
investments are included within operating cash flows as the
purchases are funded from cash flows associated with the
origination of insurance and investment contracts, net of payments
of related benefits and claims.
(Z) Leases
Where the Group is the lessee, a lease liability equal to the present
value of outstanding lease payments and a corresponding right-of-
use asset equal to cost are initially recognised. The right-of-use
asset is subsequently measured at amortised cost and depreciated
on a straight-line basis over the length of the lease term.
Depreciation on lease assets and interest on lease liabilities is
recognised in the income statement.
The Group has made use of the election available under IFRS 16 to
not recognise any amounts on the balance sheet associated with
leases that are either deemed to be short-term, or where the
underlying asset is of low value. A short-term lease in this context
is defined as any arrangement which has a lease term of 12 months
or less. Lease payments associated with such arrangements are
recognised in the income statement as an expense on a straight-
line basis. The Group’s total short-term and low value lease
portfolio is not material.
Where the Group is the lessor, leases are classified as finance leases
if the risks and rewards of ownership are substantially transferred to
the lessee and operating leases if they are not substantially
transferred. Lease income from operating leases is recognised in
the income statement on a straight-line basis over the lease term.
When assets are subject to finance leases, the present value of the
lease payments, together with any unguaranteed residual value, is
recognised as a receivable.
(AA) Provisions and contingent liabilities
Provisions are recognised when the Group has a present obligation
as a result of past events, it is more probable than not that the
Group will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made.
The Group recognises provisions under a variety of circumstances
including for product governance rectification, which may include
customer redress, and for onerous contracts when the expected
benefits to be derived from a contract are less than the unavoidable
costs of meeting the obligations under the contract.
The amount recorded as a provision is the best estimate of the
expenditure required to settle the present obligation at the balance
sheet date. Discounting is applied to the provision where the effect
of the time value of money is material. Provisions are not
recognised for future operating losses.
Restructuring provisions are recognised when the Group has a
detailed formal plan and has raised a valid expectation that the
restructure will be carried out, for example by announcing its main
features to those affected. Costs included in restructuring
provisions comprise only the direct expenditures arising from the
restructuring. Costs associated with the ongoing activities of the
entity are excluded.
Where the Group expects a provision to be reimbursed, for example
under an insurance contract, the reimbursement is only recognised
as a separate asset when virtually certain.
Contingent liabilities are disclosed if there is a possible future
obligation as a result of a past event, or if there is a present
obligation as a result of a past event but either a payment is not
probable or the amount cannot be reasonably estimated.
Aviva plc
3.26
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
(AB) Employee benefits
Pension obligations
The Group operates a number of pension schemes, whose
members receive benefits on either a defined benefit or defined
contribution basis. Under a defined contribution plan, the Group’s
legal or constructive obligation is limited to the amount it agrees
to contribute to a fund and there is no obligation to pay further
contributions if the fund does not hold sufficient assets to pay
benefits. A defined benefit pension plan is a pension plan that is
not a defined contribution plan and typically defines the amount
of pension benefit that an employee will receive on retirement.
The defined benefit obligation is calculated by independent
actuaries using the projected unit credit method. The pension
obligation is measured as the present value of the estimated future
cash outflows, using a discount rate based on market yields for
high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid and that have terms to maturity
approximating to the terms of the related pension liability. The
resultant net surplus or deficit recognised as an asset or liability
on the statement of financial position is the present value of the
defined benefit obligation at the end of the reporting period less
the fair value of plan assets.
Plan assets exclude unpaid contributions due from Group entities
to the schemes, and any non-transferrable financial instruments
issued by a Group entity and held by the schemes. If the fair value
of plan assets exceeds the present value of the defined benefit
obligation, the resultant asset is limited to the asset ceiling defined
as present value of economic benefits available in the form of future
refunds from the plan or reductions in contributions to the plan.
In order to calculate the present value of economic benefits,
consideration is given to any minimum funding requirements
that apply to any plan in the Group.
Remeasurements of defined benefit plans comprise actuarial gains
and losses arising from experience adjustments and changes in
actuarial assumptions, the return on plan assets (excluding net
interest) and the effect of the asset ceiling (if any). The Group
recognises remeasurements immediately in other comprehensive
income and does not reclassify them to the income statement in
subsequent periods.
Service costs comprising current service costs, past service costs,
gains and losses on curtailments and net interest expense/income
are charged or credited to the income statement.
Equity compensation plans
The Group offers share award and option plans over the Company’s
ordinary shares for certain employees, including a Save As You Earn
plan (SAYE plan), details of which are given in the Directors’
Remuneration Report and in note 33.
The Group accounts for options and awards under equity
compensation plans, which were granted after 7 November 2002,
until such time as they are fully vested, using the fair value based
method of accounting (the ‘fair value method’). Under this method,
the cost of providing equity compensation plans is based on the fair
value of the share awards or option plans at date of grant, which is
recognised in the income statement over the expected vesting
period of the related employees and credited to the equity
compensation reserve, part of shareholders’ funds. In certain
jurisdictions, awards must be settled in cash instead of shares,
and the credit is taken to liabilities rather than reserves.
The fair value of these cash-settled awards is recalculated each
year, with the income statement charge and liability being adjusted
accordingly.
Shares purchased by employee share trusts to fund these awards
are shown as deduction from shareholders’ equity at their weighted
average cost.
When the options are exercised and new shares are issued, the
proceeds received, net of any transaction costs, are credited to
share capital (par value) and the balance to share premium. Where
the shares are already held by employee trusts, the net proceeds
are credited against the cost of these shares, with the difference
between cost and proceeds being taken to retained earnings. In
both cases, the relevant amount in the equity compensation
reserve is then credited to retained earnings.
(AC) Income taxes
The current tax expense is based on the taxable profits for the year,
after any adjustments in respect of prior years. Tax, including tax
relief for losses if applicable, is allocated over profits before taxation
and amounts charged or credited to components of other
comprehensive income and equity, as appropriate.
Provision is made for deferred tax liabilities, or credit taken for
deferred tax assets, using the liability method, on all material
temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements.
Past service costs are recognised at the earlier of the date the plan
amendment or curtailment occurs or when related restructuring
costs are recognised.
The rates enacted or substantively enacted at the statement of
financial position date are used to value the deferred tax assets
and liabilities.
The Group determines the net interest expense/income on the net
defined benefit liability/asset for the period by applying the
discount rate used to measure the defined benefit obligation at the
beginning of the year to the net defined benefit liability/asset. Net
interest expense is charged to finance costs, whereas, net interest
income is credited to investment income.
Deferred tax assets are recognised to the extent that it is probable
that future taxable profit will be available against which the
temporary differences can be utilised. Where there is a history of tax
losses, deferred tax assets are only recognised in excess of deferred
tax liabilities if there is convincing evidence that future profits will
be available.
The Group pays contributions to the defined contribution pension
plans. Once the contributions have been paid, the Group, as
employer, has no further payment obligations. The Group’s
contributions are charged to the income statement in the year to
which they relate and are included in staff costs.
Deferred tax is provided on any temporary differences arising from
investments in subsidiaries, associates and joint ventures, except
where the timing of the reversal of the temporary difference can be
controlled and it is probable that the difference will not reverse in
the foreseeable future.
Aviva plc
3.27
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
Deferred taxes are not provided in respect of temporary differences
arising from the initial recognition of goodwill, or from the initial
recognition of an asset or liability in a transaction which is not a
business combination and affects neither accounting profit nor
taxable profit or loss at the time of the transaction.
Current and deferred tax relating to items recognised in other
comprehensive income and directly in equity are similarly
recognised in other comprehensive income and directly in
equity respectively.
Deferred tax related to fair value re-measurement of available for
sale investments, pensions and other post-retirement obligations
and other amounts charged or credited directly to other
comprehensive income is recognised in the statement of financial
position as a deferred tax asset or liability. Current tax on interest
paid on subordinated debt instruments is credited to the income
statement.
Current and deferred tax includes amounts provided in respect of
uncertain tax positions, where management expects it is more
likely than not that an economic outflow will occur as a result of
examination by a relevant tax authority.
Provisions reflect management’s best estimate of the ultimate
liability based on their interpretation of tax law, precedent and
guidance, informed by external tax advice as necessary. The final
amounts of tax due may ultimately differ from management’s
best estimate at the balance sheet date. Changes in facts and
circumstances underlying these provisions are reassessed at each
balance sheet date, and the provisions are re-measured as required
to reflect current information.
In addition 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 policyholder’s investment return.
In jurisdictions where policyholder tax is applicable, the total tax
charge in the income statement is allocated between shareholder
tax and policyholder tax. The shareholder tax is calculated by
applying the corporate tax rate to the shareholder profit. The
difference between the total tax charge and shareholder tax is
allocated to policyholder tax. This calculation methodology is
consistent with the legislation relating to the calculation of tax on
shareholder profits. The Group has decided to show separately the
amounts of policyholder tax to provide a meaningful measure of the
tax the Group pays on its profit. In the reconciliation, the Group
adjusted operating profit has been calculated after charging
policyholder tax.
(AD) Borrowings
Borrowings are classified as being for either core structural or
operational purposes. They are recognised initially at their issue
proceeds less transaction costs incurred. Subsequently, most
borrowings are stated at amortised cost, and any difference
between net proceeds and the redemption value is recognised in
the income statement over the period of the borrowings using the
effective interest rate method. All borrowing costs are expensed as
they are incurred except where they are directly attributable to the
acquisition or construction of property and equipment as described
in accounting policy P.
Where loan notes have been issued in connection with certain
securitised mortgage loans, the Group has taken advantage of the
fair value option under IAS 39 to present the mortgages, associated
liabilities and derivative 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 which would otherwise arise from using
different measurement bases for these three items.
(AE) Share capital and treasury shares
Equity instruments
An equity instrument is a contract that evidences a residual interest
in the assets of an entity after deducting all its liabilities.
Accordingly, a financial instrument is treated as equity if:
(i) there is no contractual obligation to deliver cash or other
financial assets or to exchange financial assets or liabilities on
terms that may be unfavourable; and
(ii) the instrument is a non-derivative that contains no contractual
obligation to deliver a variable number of shares or is a
derivative that will be settled only by the Group exchanging a
fixed amount of cash or other assets for a fixed number of the
Group’s own equity instruments.
Share issue costs
Incremental external costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the
proceeds of the issue and disclosed where material.
Dividends
Interim dividends on ordinary shares are recognised in equity in the
period in which they are paid. Final dividends on these shares are
recognised when they have been approved by shareholders.
Dividends on preference shares are recognised in the period in
which they are declared and appropriately approved.
Treasury shares
Where the Company or its subsidiaries purchase the Company’s
share capital or obtain rights to purchase its share capital, the
consideration paid (including any attributable transaction costs net
of income taxes) is shown as a deduction from total shareholders’
equity. Gains and losses on own shares are charged or credited to
the treasury share account in equity.
(AF) Fiduciary activities
Assets and income arising from fiduciary activities, together with
related undertakings to return such assets to customers, are
excluded from these financial statements where the Group has no
contractual rights in the assets and acts in a fiduciary capacity such
as nominee, trustee or agent.
Aviva plc
3.28
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Accounting Policies continued
(AG) Earnings per share
Basic earnings per share is calculated by dividing profit attributable
to ordinary shareholders by the weighted average number of
ordinary shares in issue during the year, excluding the weighted
average number of treasury shares.
Earnings per share has also been calculated on Group adjusted
operating profit attributable to ordinary shareholders, net of tax,
non-controlling interests, preference dividends and Tier 1 notes as
the directors believe this figure provides a better indication of
operating performance. Details are given in note 13.
For the diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares, such as convertible debt and
share options granted to employees. No adjustments are made if
the impact of the conversion of potential ordinary shares is
antidilutive, which would decrease loss per share.
Potential or contingent share issuances are treated as dilutive when
their conversion to shares would decrease net earnings per share.
(AH) Discontinued operations
Discontinued operations comprise those activities that were
disposed of or classified as held for sale at the end of the period
and represent a separate major line of business or geographical
area that can clearly be distinguished for operational and financial
reporting purposes.
The results of discontinued operations are presented separately in
the consolidated income statement, disaggregated between the
profit on disposal of discontinued operations and profit from
discontinued operations. Similarly, results of discontinued
operations are presented separately in the consolidated statement
of cash flows. Notes to the consolidated statement of financial
position are presented on a total group basis and, as a result,
income statement and cash flow movements included within these
notes may not reconcile to those presented in the consolidated
income statement and the consolidated statement of cash flows.
Aviva plc
3.29
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Consolidated income statement
For the year ended 31 December 2022
Continuing operations
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 (expense)/income
Share of (loss)/profit after tax of joint ventures and associates
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Expenses
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Change in unallocated divisible surplus
Fee and commission expense
Investment income/(expense) attributable to unitholders
Other expenses
Other net foreign exchange (losses)/gains
Finance costs
(Loss)/profit before tax from continuing operations
Tax attributable to policyholders’ returns
(Loss)/profit before tax attributable to shareholders’ profits from continuing operations
Tax credit/(expense)
Less: tax attributable to policyholders’ returns
Tax attributable to shareholders’ profits
(Loss)/profit from continuing operations
Profit for the year from discontinued operations
Profit on disposal of discontinued operations
Profit from discontinued operations
(Loss)/profit for the year
Attributable to:
Equity holders of Aviva plc
Non-controlling interests
(Loss)/profit for the year
Earnings per share
Basic (pence per share)
Diluted (pence per share)
Continuing operations - basic (pence per share)
Continuing operations - diluted (pence per share)
Note
4
H
I & J
K
5
40(b)
6
12(d)
AC & 12
12(d)
2(c)
39
AG & 13
2022
£m
2021
£m
18,919
(3,585)
15,334
(356)
14,978
1,453
(37,673)
(2)
—
(21,244)
(13,201)
22,342
15,449
(13)
(3,489)
531
(2,211)
(73)
(470)
18,865
(2,379)
774
(1,605)
1,240
(774)
466
(1,139)
—
—
—
(1,139)
(1,160)
21
(1,139)
(38.2)
(38.2)
(38.2)
(38.2)
19,398
(4,701)
14,697
(307)
14,390
1,488
17,138
146
22
33,184
(12,493)
1,699
(15,304)
(175)
(3,172)
(224)
(2,412)
201
(503)
(32,383)
801
(245)
556
(465)
245
(220)
336
150
1,550
1,700
2,036
1,966
70
2,036
50.1
49.7
7.7
7.6
The above consolidated income statement should be read in conjunction with the accounting policies and accompanying notes to the
financial statements.
Aviva plc
3.30
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Consolidated statement of comprehensive income
For the year ended 31 December 2022
(Loss)/profit for the year from continuing operations
Other comprehensive income from continuing operations:
Items that may be reclassified subsequently to income statement
Share of other comprehensive (loss)/income of joint ventures and associates
Foreign exchange rate gains/(losses)
Aggregate tax effect – shareholder tax on items that may be reclassified subsequently to income statement
Items that will not be reclassified to income statement
Remeasurements of pension schemes
Aggregate tax effect – shareholder tax on items that will not be reclassified subsequently to income statement
Total other comprehensive loss, net of tax from continuing operations
Total comprehensive (loss)/income for the year from continuing operations
Profit for the year from discontinued operations
Other comprehensive loss, net of tax from discontinued operations
Total comprehensive income for the year from discontinued operations
Total comprehensive (loss)/income for the year
Attributable to:
Equity holders of Aviva plc
From continuing operations
From discontinued operations
Non-controlling interests
From continuing operations
From discontinued operations
Note
2022
£m
(1,139)
2021
£m
336
37
37, 39
12(b)
50
12(b)
2(c)
2(c)
(38)
145
6
5
(34)
(7)
(1,542)
412
(1,017)
(2,156)
—
—
—
(2,156)
(2,169)
—
13
—
(2,156)
59
(159)
(136)
200
1,700
(241)
1,459
1,659
178
1,444
22
15
1,659
The above consolidated statement of comprehensive income should be read in conjunction with the accounting policies and
accompanying notes to the financial statements.
Aviva plc
3.31
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Reconciliation of Group adjusted operating profit to (loss)/profit for the year
For the year ended 31 December 2022
Group adjusted operating profit before tax attributable to shareholders’ profits from continuing operations
Group adjusted operating profit before tax attributable to shareholders’ profits from discontinued operations
Group adjusted operating profit before tax attributable to shareholders’ profits
Adjusted for the following:
Life business: Investment variances and economic assumption changes
Non-life business: Short-term fluctuation in return on investments
General insurance and health business: Economic assumption changes
Impairment of goodwill, joint ventures, associates and other amounts expensed
Amortisation and impairment of intangibles acquired in business combinations
Amortisation and impairment of acquired value of in-force business1
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Other2
Adjusting items before tax
(Loss)/profit before tax attributable to shareholders’ profits from continuing operations and discontinued
operations
Tax on group adjusted operating profit
Tax on other activities
(Loss)/profit for the year
Note
7
8(a)
8(a)
15(a),18
16
16
2(b)
2022
£m
2,213
—
2,213
(2,387)
(1,375)
147
(8)
(54)
(182)
—
41
(3,818)
(1,605)
(289)
755
466
(1,139)
2021
£m
1,634
631
2,265
(805)
(149)
(85)
—
(66)
(199)
1,572
(204)
64
2,329
(470)
177
(293)
2,036
Includes £13 million (2021: £9 million) attributable to the Group’s joint venture shareholding in Singapore Life Holdings Pte Limited
1.
2. Other in 2022 primarily includes £77 million negative goodwill on the India acquisition partially offset by £15 million charge associated with reinsurance accepted from the former Aviva France general insurance entity
and charges in relation to our historic divestments, share buybacks and acquisitions in the period. Other in 2021 primarily includes net charges of £67 million from onerous contracts and indemnity provisions arising
from acquisition and disposal activity, a £76 million charge associated with reinsurance accepted from the former Aviva France general insurance entity and a charge of £51 million relating to the redemption payment in
excess of the market value of debt repaid.
The above reconciliation of group adjusted operating profit to (loss)/profit for the year should be read in conjunction with the accounting
policies and accompanying notes to the financial statements.
Aviva plc
3.32
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Reconciliation of Group adjusted operating profit to (loss)/profit for the year continued
Group adjusted operating profit can be further analysed into the following segments and by product and services (details of segments can
be found in note 3):
For the year ended 31 December 2022
Operating segments
UK & Ireland Life
General Insurance
UK & Ireland GI
Canada
Aviva Investors
International investments
Other operations
Corporate centre costs
Group debt costs and other interest
Group adjusted operating profit before tax attributable to shareholders' profits from
continuing operations (note 3)
Group adjusted operating profit before tax attributable to shareholders' profits from
discontinued operations
Group adjusted operating profit before tax attributable to shareholders' profits
For the year ended 31 December 2021
Operating segments
UK & Ireland Life
General Insurance
UK & Ireland GI
Canada
Aviva Investors
International investments
Other operations
Corporate centre costs
Group debt costs and other interest
Group adjusted operating profit before tax attributable to shareholders' profits from
continuing operations (note 3)
Group adjusted operating profit before tax attributable to shareholders' profits from
discontinued operations (note 2(c))
Group adjusted operating profit before tax attributable to shareholders' profits
Long-term
business
£m
General
insurance and
health
£m
Fund
management
£m
Other
operations
£m
Total
£m
Products and services
1,840
70
—
(2)
1,908
—
—
—
61
(13)
1,888
337
432
—
(6)
—
833
—
—
25
(1)
—
24
1
1
—
(2)
26
24
338
433
25
52
13
2,769
(310)
(246)
2,213
—
2,213
Long-term
business
£m
General
insurance and
health
£m
Fund
management
£m
Other
operations
£m
Total
£m
Products and services
1,384
—
—
—
92
(10)
1,466
47
350
405
—
5
—
807
—
—
—
41
—
—
41
(3)
1,428
6
1
—
—
(9)
(5)
356
406
41
97
(19)
2,309
(360)
(315)
1,634
631
2,265
The above reconciliation of group adjusted operating profit to (loss)/profit for the year should be read in conjunction with the accounting
policies and accompanying notes to the financial statements.
Aviva plc
3.33
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Consolidated statement of changes in equity
For the year ended 31 December 2022
Ordinary
share
capital
Note 31
£m
Preference
share
capital
Note 34
£m
Capital
reserves¹
Notes 31
and 36
£m
Treasury
shares
Note 33
£m
Currency
translation
reserve
Note 37
£m
Other
reserves
Note 37
£m
Retained
earnings
Note 38
£m
Tier 1
notes
Note 35
£m
Balance at 1 January
(Loss)/profit for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the
year
Dividends and appropriations
Non-controlling interests share of dividends
declared in the year
Reserves credit for equity compensation
plans
Shares purchased under equity
compensation plans
Shares purchased in buyback2
Return of capital to ordinary shareholders
via B share scheme3
Issue of tier 1 notes4
Non-controlling interests in acquired
subsidiaries5
Changes in non-controlling interests in
subsidiaries
Transfer to profit on disposal of subsidiaries,
joint ventures and associates
Owner-occupied properties fair value gains
transferred to retained earnings on disposals
941
—
—
—
—
—
—
2
(19)
—
—
—
—
—
—
200
—
—
10,308
—
—
(51)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15
19
—
—
—
—
—
—
—
—
—
—
(34)
—
—
—
—
—
—
—
314
—
197
197
—
—
—
—
—
—
—
—
—
—
—
(66) 7,556
—
(1,160)
(76) (1,130)
(76) (2,290)
—
—
58
(862)
—
—
(46)
—
9
(336)
—
—
—
—
—
—
(3,750)
—
—
—
—
—
Total
equity
excluding
non-
controlling
interests
£m
Non-
controlling
interests
Note 39
£m
Total
equity
£m
19,202
(1,160)
(1,009)
19,454
252
21
(1,139)
(8) (1,017)
(2,169)
13
(2,156)
(862)
—
(862)
—
58
(54)
(336)
(21)
(21)
—
—
—
58
(54)
(336)
—
—
—
—
—
—
—
—
—
—
496
(3,750)
496
—
—
(3,750)
496
—
—
—
—
—
—
—
—
66
66
—
—
—
—
—
—
Balance at 31 December
924
200
10,342
(85)
511
(130)
327
496
12,585
310
12,895
In the year ended 31 December 2022, £336 million of shares were purchased and shares with a nominal value of £19 million have been cancelled as part of the share buyback programme
1. Capital reserves consist of share premium of £1,263 million, a capital redemption reserve of £3,855 million and a merger reserve of £5,224 million
2.
3. On 2 March 2022, Aviva announced a proposed return of capital, via a £3,750 million B Share Scheme for the holders of ordinary shares. 3,687,322,000 B shares were issued for nil consideration with a nominal value of
101.69 pence per share on 16 May 2022, resulting in a total of £3,750 million being credited to the B share capital account. At the same time, the merger reserve was reduced by £3,750 million. On 17 May 2022, the B
shares were redeemed at 101.69 pence per share, which resulted in a £3,750 million reduction in the B share capital account and a corresponding increase in the capital redemption reserve. Retained earnings reduced
by £3,750 million on payment of the return of capital to ordinary shareholders.
4. On 15 June 2022, the Group issued £500 million of 6.875% fixed rate reset perpetual Restricted Tier 1 contingent convertible notes (the RT1 notes). These RT1 notes are treated as equity and any coupon payments are
recognised directly in equity as they arise (see note 35).
5. On 28 September 2022, Aviva acquired an additional 25% or the ordinary shares of Aviva Life Insurance Company India Limited giving Aviva a controlling interest in the entity (see note 2(a))
The above consolidated statement of changes in equity should be read in conjunction with the accounting policies and accompanying
notes to the financial statements.
Aviva plc
3.34
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Consolidated statement of changes in equity continued
For the year ended 31 December 2021
Balance at 1 January
Profit for the year
Other comprehensive loss
Total comprehensive (loss)/income for the
year
Dividends and appropriations
Non-controlling interests share of dividends
declared in the year
Reserves credit for equity compensation
plans
Shares purchased under equity
compensation plans
Shares purchased in buyback2
Return of capital to ordinary shareholders
via B share scheme
Issue of tier 1 notes
Non-controlling interests in acquired
subsidiaries
Changes in non-controlling interests in
subsidiaries
Transfer to profit on disposal of subsidiaries,
joint ventures and associates
Owner-occupied properties fair value gains
transferred to retained earnings on disposals
Ordinary
share
capital
Note 31
£m
Preference
share
capital
Note 34
£m
Capital
reserves¹
Notes 31
and 36
£m
Treasury
shares
Note 33
£m
Currency
translation
reserve
Note 37
£m
Other
reserves
Note 37
£m
Retained
earnings
Note 38
£m
Tier 1 notes
Note 35
£m
982
—
—
200
—
—
10,260
—
—
(6)
—
—
862
—
(221)
(212) 7,468
1,966
—
(23)
(100)
—
—
—
Total
equity
excluding
non-
controlling
interests
£m
19,554
1,966
(344)
Non-
controlling
interests
Note 39
£m
Total
equity
£m
1,006
70
(33)
20,560
2,036
(377)
—
—
—
—
1
(42)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
42
—
—
—
—
—
—
—
—
—
—
(45)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(221)
(23) 1,866
—
1,622
37
1,659
—
(1,127)
—
(1,127)
—
(1,127)
—
24
(29)
—
—
—
—
—
—
—
3
(663)
—
—
—
—
—
9
—
—
—
—
—
—
—
—
—
—
—
24
(64)
(663)
—
—
—
—
(60)
(60)
—
—
—
—
—
—
24
(64)
(663)
—
—
—
(9)
(9)
(144)
(722)
(866)
—
—
—
(327)
183
—
(9)
Balance at 31 December
941
200
10,308
(51)
314
(66) 7,556
—
19,202
252
19,454
1. Capital reserves consist of share premium of £1,248 million, a capital redemption reserve of £86 million and a merger reserve of £8,974 million
2. On 12 August 2021, the Group announced a share buyback of ordinary shares for an aggregate purchase price of up to £750 million. On 16 December 2021 Aviva announced the increase and extension of the share
buyback programme to £1 billion. In the year ended 31 December 2021, £663 million of shares had been purchased and shares with a nominal value of £42 million were cancelled.
The above consolidated statement of changes in equity should be read in conjunction with the accounting policies and accompanying
notes to the financial statements.
Aviva plc
3.35
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Consolidated statement of financial position
As at 31 December 2022
Note
2022
£m
2021
£m
Assets
Goodwill
Acquired value of in-force business and intangible assets
Interests in, and loans to, joint ventures
Interests in, and loans to, associates
Property and equipment
Investment property
Loans
Financial investments
Reinsurance assets
Deferred tax assets
Current tax assets
Receivables
Deferred acquisition costs
Pension surpluses and other assets
Prepayments and accrued income
Cash and cash equivalents
Total assets
Equity
Capital
Ordinary share capital
Preference share capital
Capital reserves
Share premium
Capital redemption reserve
Merger reserve
Treasury shares
Currency translation reserve
Other reserves
Retained earnings
Equity attributable to shareholders of Aviva plc
Tier 1 notes
Equity excluding non-controlling interests
Non-controlling interests
Total equity
Liabilities
Gross insurance liabilities
Gross liabilities for investment contracts
Unallocated divisible surplus
Net asset value attributable to unitholders
Pension deficits and other provisions
Deferred tax liabilities
Current tax liabilities
Borrowings
Payables and other financial liabilities
Other liabilities
Total liabilities
Total equity and liabilities
Approved by the Board on 8 March 2023
Charlotte Jones
Chief Financial Officer
Company number: 2468686
O & 15
O & 16
D & 17
D & 18
P & 19
Q & 20
V & 23
2,072
2,089
1,933
41
350
5,899
29,647
S, T, U & 26 224,086
13,056
611
336
6,043
2,592
1,234
2,822
22,505
315,316
27
X & 28
X & 29
29(b)
N & 45
AC & 48
Y & 57(d)
AE
31(c)
34
31(d)
31(d)
D & 36
33
37
37
38
35
39
924
200
1,124
1,263
3,855
5,224
10,342
(85)
511
(130)
327
12,089
496
12,585
310
12,895
L & 41
99,685
M & 43 158,999
1,990
L & 47
14,080
D
761
AA, AB & 49
825
AC & 48
40
6,755
16,442
2,844
302,421
AD & 51
S & 52
53
315,316
1,741
1,950
1,855
118
428
7,003
38,624
264,961
15,032
138
170
6,088
2,721
2,769
2,391
12,485
358,474
941
200
1,141
1,248
86
8,974
10,308
(51)
314
(66)
7,556
19,202
—
19,202
252
19,454
122,250
172,452
1,960
16,427
1,001
1,983
35
7,344
12,609
2,959
339,020
358,474
The above consolidated statement of financial position should be read in conjunction with the accounting policies and accompanying
notes to the financial statements.
Aviva plc
3.36
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Consolidated statement of cash flows
For the year ended 31 December 2022
The cash flows presented in this statement cover all the Group’s activities and include flows from both policyholder and shareholder
activities. All cash and cash equivalents are available for use by the Group.
Continuing operations
Cash flows from operating activities
Cash generated from/(used in) operating activities1
Tax paid
Total net cash from/(used in) operating activities
Cash flows from investing activities
Acquisitions of, and additions to, subsidiaries, joint ventures and associates, net of cash acquired2
Disposals of subsidiaries, joint ventures and associates, net of cash transferred
Purchases of property and equipment
Proceeds on sale of property and equipment
Purchases of intangible assets
Total net cash (used in)/from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Return of capital to ordinary shareholders via B share scheme
Shares purchased in buyback
Treasury shares purchased for employee trusts
New borrowings drawn down, net of expenses
Repayment of borrowings3
Net repayment of borrowings
Interest paid on borrowings
Repayment of leases
Preference dividends paid
Ordinary dividends paid
Coupon payments on tier 1 notes
Issue of tier 1 notes4
Dividends paid to non-controlling interests of subsidiaries
Total net cash used in financing activities
Total net increase/(decrease) in cash and cash equivalents from continuing operations
Cash flows used in discontinued operations
Cash flow on disposals from discontinued operations
Net cash flows from discontinued operations
Cash and cash equivalents at 1 January
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at 31 December
Note
2022
£m
2021
£m
57(a)
16,093
(210)
15,883
(2,554)
(304)
(2,858)
57(b)
57(c)
31(d)
31(b)
31(a)
51(e)
51(e)
14
14
14
35
57(c)
2(c)
57(d)
(275)
—
(16)
35
(83)
(339)
17
(3,750)
(336)
(75)
659
(1,554)
(895)
(450)
(63)
(17)
(828)
(17)
496
(21)
(5,939)
9,605
—
—
—
11,878
93
21,576
—
23
(86)
159
(22)
74
6
—
(663)
(69)
229
(2,197)
(1,968)
(489)
(71)
(17)
(1,110)
—
—
(21)
(4,402)
(7,186)
(286)
3,364
3,078
16,182
(196)
11,878
1. Cash flows from operating activities include interest received of £4,335 million (2021: £3,605 million) and dividends received of £4,347 million (2021: £4,461 million). Cash flows from operating activities include impacts
from the investment of proceeds from the disposal of discontinued operations into financial investments during 2021, and subsequent disinvestment from those financial investments in 2022 ahead of the return of
capital to ordinary shareholders. This activity is reflected as an increase in cash generated from operating activities in 2022.
2. Acquisitions of, and additions to, subsidiaries, joint ventures and associates net of cash acquired relates to the acquisition of Succession Wealth and Aviva Life Insurance Company India Limited (see note 2a)
3. Repayment of borrowings includes the redemption of £1,002 million (2021: £1,878 million) subordinated debt and senior notes (see note 51(e))
4. On 15 June 2022, the Group issued £500 million of 6.875% fixed rate reset perpetual restricted tier 1 contingent convertible notes (the RT1 notes). The RT1 notes are callable at par between 15 December 2031 and
15 June 2032 (the First Reset Date) inclusive and thereafter every five years after the First Reset Date. If not called, the coupon from 15 June 2032 will be reset to the prevailing five year benchmark gilt yield plus 4.649%.
The notes have no fixed maturity date. Optional cancellation of coupon payments is at the discretion of the Group and mandatory cancellation is upon the occurrence of certain conditions. The RT1 notes are therefore
treated as equity and the coupon payment is recognised directly in equity. On the occurrence of certain conversion trigger events the notes are convertible into ordinary shares of the Group.
The above consolidated statement of cash flows should be read in conjunction with the accounting policies and accompanying notes to the
financial statements.
Aviva plc
3.37
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements
1 – Exchange rates
The Group’s principal overseas operations during the year were located within Canada and the eurozone. The results and cash flows of
these operations have been translated into sterling at the average rates for the year, and the assets and liabilities have been translated at
the year end rates as follows:
Canada
Average rate ($CAD1 equals)
Year end rate ($CAD1 equals)
Eurozone
Average rate (€1 equals)
Year end rate (€1 equals)
Poland
Average rate (PLN1 equals)
Year end rate (PLN1 equals)
2022
2021
£0.62
£0.61
£0.85
£0.89
N/A
N/A
£0.58
£0.58
£0.86
£0.84
£0.19
£0.18
Profits/(losses) attributable to discontinued operations which have been disposed of, have been translated using the period average rate up
until their disposal date. Closing balance sheets of operations disposed of have been translated using the closing rate on the date of
disposal for the purpose of calculating the profit/(loss) on disposal.
2 – Strategic transactions
This note provides details of the acquisitions and disposals of subsidiaries, joint ventures and associates, and on discontinued operations.
(a) Acquisitions
Succession Wealth
On 11 August 2022 the Group acquired 100% of the ordinary share capital and preference share capital of Succession Jersey Limited
(“Succession Wealth”) for an initial cash consideration of £385 million.
Succession Wealth is a leading national independent financial advice firm. The acquisition significantly enhances our position in the fast-
growing UK wealth market and accelerates our ability to offer high-quality financial advice to our workplace and individual pension and
savings customers.
Of the total consideration of £392 million (including contingent consideration of £7 million), £139 million of the cash transferred to the
shareholders of Succession Wealth was used to settle Succession Wealth's existing external debt. The remaining £253 million represents the
consideration paid to acquire £71 million of net liabilities of Succession Wealth offset by £324 million of goodwill recognised on acquisition,
as follows:
Assets
Intangible assets
Other assets
Cash and cash equivalents
Total identifiable assets
Liabilities
Borrowings
Deferred tax liabilities
Other liabilities
Total identifiable liabilities
Net identifiable liabilities acquired
Goodwill arising on acquisition
Consideration paid for net liabilities
Contingent consideration
Total consideration paid for net liabilities
Borrowings settlement
Total Consideration
Fair Value
£m
191
12
6
209
139
48
93
280
(71)
324
246
7
253
139
392
Aviva plc
3.38
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
2 – Strategic transactions continued
An intangible asset of £191 million was recognised upon acquisition representing the value attributable to the existing business from
Succession Wealth’s existing customer base. This will be amortised over its estimated useful life in accordance with the Group’s accounting
policies along with the corresponding release of the deferred tax provision. The residual goodwill on acquisition of £324 million, none of
which is expected to be deductible for tax purposes, represents future synergies expected to arise from combining the operations of
Succession Wealth with those of the Group as well as the value of the workforce in place and other future business value.
In the period from 11 August 2022 to 31 December 2022 the acquired Succession Wealth subsidiaries contributed net income of £35 million
and a profit before tax of £3 million to the consolidated results of the Group. If the acquisition had been effective on 1 January 2022, on a
pro-forma basis the Group’s net income is estimated at £84 million and loss before tax is estimated at £40 million. These pro-forma results
are provided for information purposes only and do not necessarily reflect the actual results that would have occurred had the acquisition
taken place on 1 January 2022, nor are they necessarily indicative of the future results of the combined Group. Acquisition costs of £7 million
related to legal and professional fees incurred to support the transaction have been recognised within other expenses in the income
statement.
Aviva Life Insurance Company India Limited ("Aviva India")
On 28 September 2022 the Group acquired an additional 25% of the ordinary share capital of Aviva Life Insurance Company India Limited
(“Aviva India”) for cash consideration of £37 million, increasing the Group’s total shareholding from 49% to 74% and giving Aviva a
controlling interest in the entity. On that date, Aviva derecognised its investment in associate and recognised Aviva India as a consolidated
subsidiary.
Immediately prior to the acquisition, Aviva's 49% interest in Aviva India was remeasured to its fair value of £73 million, resulting in a reversal
of historic impairment of £15 million, recognised within share of profit/(loss) after tax from joint ventures and associates in the income
statement. The investment in associate was subsequently derecognised at its revalued amount.
The following table summarises the consideration for the acquisition, the fair value of the assets acquired, liabilities assumed and resulting
allocation to goodwill. The opening balance sheet of Aviva India was recorded at the prevailing rate of exchange on the date of acquisition.
Assets
Acquired value of in-force business and intangible assets
Financial investments
Other Assets
Cash and cash equivalents
Total identifiable assets
Liabilities
Gross insurance liabilities
Payables and other financial liabilities
Deferred tax liabilities
Other liabilities
Total identifiable liabilities
Net identifiable assets acquired
Non-controlling interests
Shareholder equity retained by the Group
Cash consideration
Fair value of existing investment in Aviva India
Negative goodwill
Fair Value
£m
228
1,297
47
2
1,574
1,240
30
32
19
1,321
253
(66)
187
37
73
77
An asset of £228 million in respect of AVIF was recognised upon acquisition representing the margins in Aviva India's statutory reserves
of the in-force business. The acquisition resulted in a gain from negative goodwill of £77 million, as the fair value of the net assets acquired
exceeded the total value of the cash consideration and the fair value of the previous investment in associate. The gain has been recognised
immediately in the income statement as required by IFRS 3 Business combinations.
In the period from 30 September 2022 to 31 December 2022 the acquired Aviva India business contributed net income of £62 million and
a profit before tax of £6 million to the consolidated results of the Group. If the acquisition had been effective on 1 January 2022, on a
pro-forma basis the Group’s net revenue is estimated at £236 million and profit before tax is estimated at £14 million. These pro-forma
results are provided for information purposes only and do not necessarily reflect the actual results that would have occurred had the
acquisition taken place on 1 January 2022, nor are they necessarily indicative of the future results of the combined Group. Acquisition costs
of £nil million related to legal and professional fees incurred to support the transaction have been recognised within other expenses in the
income statement.
Aviva plc
3.39
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
2 – Strategic transactions continued
(b) Disposals and remeasurements
There were no significant disposals during the year . The gain on the disposal and remeasurement of subsidiaries, joint ventures and
associates for the year ended 2022 was £nil.
The following operations were disposed during 2021:
• The entire shareholding in Aviva France was sold to Aéma Group for cash consideration of €3,200 million (approximately £2,752 million).
At 30 June 2021 the Group's holding in France was classified as held for sale resulting in a remeasurement loss of £538 million. The
transaction completed on 30 September 2021, resulting in a profit on disposal of £128 million and a net £410 million charge over the year.
• The entire 80% shareholding in the Italian Life Insurer Aviva Vita S.p.A. (Aviva Vita) was sold to its partner UBI Banca. The transaction
completed on 1 April 2021 and resulted in a profit on disposal of £65 million.
• The entire shareholdings of the remaining Italian General Insurance and Life businesses (Aviva Italy) were sold on 1 October 2021 and
1 December 2021 respectively, with a total profit on disposal of £233 million.
• The entire shareholding in Aviva's life insurance business in Poland and Lithuania, and its Polish general insurance, asset management
and pensions businesses were sold to Allianz for net cash consideration of €2,369 million (approximately £2,034 million). The transaction
completed on 30 November 2021 resulting in a profit on disposal of £1,671 million.
• The entire 40% shareholding in Aviva's joint venture in Turkey (AvivaSA Emeklilik ve Hayat AS) was sold on 6 May 2021 resulting in a loss
on disposal of £41 million and the entire shareholding in Aviva Vietnam Life Insurance Limited was sold on 29 December 2021 resulting
in a profit on disposal of £32 million.
The total gain on the disposal and remeasurement of subsidiaries, joint ventures and associates in 2021 comprised:
Disposals of discontinued operations
Aviva France1
Aviva Vita
Aviva Italy2
Aviva Poland
Other
Total gain on disposals
Held for sale remeasurements of discontinued operations
Aviva France1
Total gain on disposals and remeasurements of discontinued operations
Profit on disposal from continuing operations
Total gain on disposals and remeasurements
2021
£m
128
65
233
1,671
(9)
2,088
(538)
1,550
22
1,572
1. A £538 million loss on remeasurement in respect of Aviva France was recognised at 30 June 2021, with a subsequent £128 million gain upon disposal recognised when the disposal completed on 30 September 2021
2. Aviva Italy excludes Aviva Vita, which is disclosed separately
For further information on these disposals see note 3 of the Group's 2021 Annual Report and Accounts.
(c) Discontinued operations
In accordance with IFRS 5 Non-current assets held for sale and discontinued operations, the results of the operations specified in note 2(b) were
included as discontinued operations in the Group's 2021 Annual Report and Accounts. There were no operations classified as discontinued
operations at 31 December 2022 and no operations classified as held for sale at either 31 December 2021 or 31 December 2022.
Profit from discontinued operations for the comparative periods has been shown as a single line in the consolidated income statement and
net cash flows from discontinued operations for the comparative period has been shown as a single line in the consolidated statement of
cash flows. Notes to the consolidated statement of financial position are presented on a total Group basis and, as a result, comparative
income statement and cash flow movements included within these notes may not reconcile to the corresponding comparatives presented
in the consolidated income statement and the consolidated statement of cash flows.
Further analysis of the results and cash flows for the discontinued operations presented in the consolidated financial statements for the
comparative periods is provided below.
Aviva plc
3.40
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
2 – Strategic transactions continued
Income Statement
Discontinued operations
Gross written premiums
Premiums ceded to reinsurers
Net written premiums
Net change in provision for unearned premiums
Net earned premiums
Net investment income
Other income
Share of profit after tax of joint ventures and associates
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Total income
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Change in unallocated divisible surplus
Other expenses
Total expenses
Profit before tax from discontinued operations
Tax attributable to policyholders' returns
Profit before tax attributable to shareholders' profits from discontinued operations
Tax attributable to shareholders’ profits
Profit for the year from discontinued operations
Reconciliation of Group adjusted operating profit to profit for the year
Discontinued operations
Group adjusted operating profit from discontinued operations
Adjusted for the following:
Reclassification of unallocated interest
Life business: Investment variances and economic assumption changes
Non-life business: Short-term fluctuation in return on investments
General insurance and health business: Economic assumption changes
Impairment of goodwill, joint ventures, associates and other amounts expensed
Amortisation and impairment of intangibles acquired in business combinations
Amortisation and impairment of acquired value of in-force business
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Other1
Adjusting items before tax
Profit before tax attributable to shareholders' profits from discontinued operations
2021
£m
10,194
(115)
10,079
(41)
10,038
1,430
500
10
1,550
13,528
(6,426)
(3,732)
(2,207)
2,074
(1,464)
(11,755)
1,773
—
1,773
(73)
1,700
2021
£m
631
(37)
(171)
(28)
(5)
—
(12)
(1)
1,550
(154)
1,142
1,773
1. Other in 2021 comprise net charges of £78 million from onerous contracts and indemnity provisions arising from acquisition and disposal activity and a £76 million charge associated with reinsurance accepted from the
former Aviva France general insurance entity
Other Comprehensive Income
Discontinued operations
Other comprehensive income from discontinued operations:
Items that may be reclassified subsequently to income statement
Investments classified as available for sale
Fair value losses
Fair value losses transferred to profit on disposals
Share of other comprehensive income of joint venture and associates
Foreign exchange rate movements
Aggregate tax effect - shareholder tax on items that may be reclassified
Total other comprehensive loss for the year from discontinued operations
Cash flows
Discontinued operations
Total net cash used in operating activities
Cash proceeds from disposal of subsidiaries, joint ventures and associates
Less: Net cash and cash equivalents divested with subsidiaries
Other investing activities
Total net cash from investing activities
Total net cash used in financing activities
Net cash flows from discontinued operations
2021
£m
(62)
(16)
—
(182)
19
(241)
2021
£m
(232)
6,136
(2,772)
(14)
3,350
(40)
3,078
Aviva plc
3.41
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
2 – Strategic transactions continued
(d) Significant restrictions
In certain jurisdictions the ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans and advances
is subject to local corporate or insurance laws and regulations and solvency requirements. There are no protective rights of non-controlling
interests which significantly restrict the Group’s ability to access or use the assets and settle the liabilities of the Group.
3 – Segmental information
The Group’s results can be segmented either by activity or by geography. Our primary reporting format is along market reporting lines,
with supplementary information being given by business activity. This note provides segmental information on the consolidated income
statement.
Financial performance of our key markets are presented as UK & Ireland Life, General Insurance (which brings together our UK & Ireland GI
businesses and Canada) and Aviva Investors. Our international businesses are presented as International investments (consisting of our
interest in India, China and Singapore).
In 2021, we completed disposals of all discontinued operations which concluded our divestment programme. Segmental information is
presented for continuing operations only, an analysis of results from 2021 discontinued operations is presented in note 2(c).
(a) Operating segments
UK & Ireland Life
The principal activities of our UK & Ireland Life operations are life insurance, long-term health and accident insurance, savings, pensions and
annuity business. This segment also now includes Succession Wealth following the acquisition on 11 August 2022 (see note 2(a)).
General Insurance
UK & Ireland
The principal activities of our UK & Ireland General Insurance operations are the provision of insurance cover to individuals and businesses,
for risks associated mainly with motor vehicles, property and liability (such as employers’ liability and professional indemnity liability) and
medical expenses.
Canada
The principal activity of our Canada General Insurance operation is the provision of personal and commercial lines insurance products, for
risks associated mainly with motor, property and liability principally distributed through insurance brokers.
Aviva Investors
Aviva Investors operates in a number of international markets, in particular the UK, North America and Asia Pacific. Aviva Investors manages
policyholders' and shareholders' invested funds, provides investment management services for institutional pension fund mandates and
manages a range of retail investment products. These include investment funds, unit trusts, open-ended investment companies and
individual savings accounts.
International investments
International investments comprise our long-term business operations in India, China and Singapore. In China, Aviva plc have a 50%
shareholding in Aviva-COFCO Life Insurance Company Limited. In Singapore, Aviva plc has a 26% shareholding in Aviva Singlife. On
1 April 2022, Aviva plc agreed to acquire an additional 25% shareholding in Aviva India. The transaction completed on 28 September 2022
taking Aviva's shareholding to 74%. Aviva India is now a subsidiary of the Aviva Group. The Group results include 49% of Aviva India's results
until the date of acquisition and 100% of Aviva India's results from this date (see note 2(a)). These have been aggregated into a single
reporting segment in line with IFRS 8 Operating segments.
Other Group activities
Other Group activities includes investment return on centrally held assets, head office (Corporate Centre) expenses such as Group treasury
and finance functions, financing costs arising on central borrowings, the elimination entries for certain inter-segment transactions and
group consolidation adjustments.
Measurement basis
The accounting policies of the segments are the same as those for the Group as a whole. Any transactions between the business segments
are subject to normal commercial terms and market conditions. The Group evaluates performance of operating segments on the basis of:
(i) profit or loss from operations before tax attributable to shareholders and;
(ii) profit or loss from operations before tax attributable to shareholders, adjusted for non-operating items, including investment market
performance.
Aviva plc
3.42
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
3 – Segmental information continued
(i) Segmental income statement for the year ended 31 December 2022
General Insurance
Continuing operations
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 (expense)/income
Inter-segment revenue
Share of (loss)/profit after tax of joint ventures and associates
Profit on the disposal and remeasurement of subsidiaries, joint
ventures and associates
Segmental income1
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Change in unallocated divisible surplus
Fee and commission expense
Investment income attributable to unitholders
Other expenses
Other net foreign exchange (losses)/gains
Inter-segment expenses
Finance costs
Segmental expenses
(Loss)/profit before tax
Tax attributable to policyholders’ returns
(Loss)/profit before tax attributable to shareholders’ profits
from continuing operations
Adjusting items:
Reclassification of unallocated interest
Life business: Investment variances and economic assumption
changes
Non-life business: Short-term fluctuation in return on
investments
General insurance and health business: Economic assumption
changes
Impairment of goodwill, joint ventures, associates and other
amounts expensed
Amortisation and impairment of intangibles acquired in
business combinations
Amortisation and impairment of acquired value of in-force
business
Profit on the disposal and remeasurement of subsidiaries, joint
ventures and associates
Other2
Group adjusted operating profit/(loss) before tax attributable
to shareholders' profits from continuing operations
UK & Ireland
Life
£m
9,140
(2,751)
6,389
(23)
6,366
1,116
7,482
(36,130)
—
(124)
UK & Ireland
GI
£m
5,740
(578)
5,162
(185)
4,977
106
5,083
(605)
—
—
Aviva Investors
£m
—
—
—
—
—
160
160
Canada
£m
4,009
(254)
3,755
(148)
3,607
43
3,650
(239)
—
1
International
investments
£m
30
(2)
28
—
28
—
28
35
—
8
Other Group
activities
£m
—
—
—
—
—
28
28
(733)
—
113
—
—
—
(28,772)
(8,319)
22,780
15,445
(13)
(1,116)
—
(1,050)
—
(222)
(176)
27,329
(1,443)
774
4,478
(2,830)
(225)
—
—
(1,346)
—
(336)
(48)
(6)
(2)
(4,793)
(315)
—
(669)
(315)
(8)
(17)
2,347
—
3,412
(2,011)
(191)
—
—
(999)
—
(182)
—
(7)
(5)
(3,395)
17
—
17
34
—
—
—
21
43
170
—
4
809
380
(139)
(9)
—
—
—
—
—
—
11
—
—
—
(1)
240
—
—
399
—
—
4
—
(24)
—
(354)
1
—
(1)
(374)
25
—
25
—
—
—
—
—
—
—
—
—
—
71
(27)
(22)
—
—
—
—
70
—
—
—
21
92
—
92
—
40
—
—
(15)
—
12
—
(77)
Total
continuing
operations
£m
18,919
(3,585)
15,334
(356)
14,978
1,453
16,431
(37,673)
240
(2)
—
(21,004)
(13,201)
22,342
15,449
(13)
(3,489)
531
(2,211)
(73)
(240)
(470)
18,625
(2,379)
774
—
(592)
(14)
—
—
—
(4)
531
(359)
(26)
(5)
(286)
(163)
(755)
—
(755)
(1,605)
(9)
—
—
2,387
186
1,375
1
2
—
—
—
32
(147)
8
54
182
—
(41)
1,908
338
433
25
52
(543)
2,213
1. Total reported income, excluding inter-segment revenue, includes £23,193 million from the United Kingdom (Aviva plc’s country of domicile). Income is attributed on the basis of geographical origin which does not
differ materially from revenue by geographical destination, as most risks are located in the countries where the contracts were written.
2. Other in 2022 primarily includes £77 million negative goodwill on the Aviva India acquisition partially offset by £15 million charge associated with reinsurance accepted from former Aviva France general insurance entity
and charges in relation to our historic divestments, share buybacks and acquisitions in the period
Aviva plc
3.43
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
3 – Segmental information continued
(ii) Segmental income statement for the year ended 31 December 2021
General Insurance
Continuing operations
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/(expense)
Inter-segment revenue
Share of profit/(loss) after tax of joint ventures and associates
Profit on the disposal and remeasurement of subsidiaries, joint
ventures and associates
Segmental income1
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Change in unallocated divisible surplus
Fee and commission expense
Investment expense attributable to unitholders
Other expenses
Other net foreign exchange gains
Inter-segment expenses
Finance costs
Segmental expenses
Profit/(loss) before tax
Tax attributable to policyholders’ returns
Profit/(loss) before tax attributable to shareholders’ profits
from continuing operations
Adjusting items:
Reclassification of unallocated interest
Life business: Investment variances and economic assumption
changes
Non-life business: Short-term fluctuation in return on
investments
General insurance and health business: Economic assumption
changes
Impairment of goodwill, joint ventures, associates and other
amounts expensed
Amortisation and impairment of intangibles acquired in
business combinations
Amortisation and impairment of acquired value of in-force
business
Profit on the disposal and remeasurement of subsidiaries, joint
ventures and associates
Other2
Group adjusted operating profit/(loss) before tax attributable
to shareholders’ profits from continuing operations
UK & Ireland
Life
£m
10,591
(3,944)
6,647
(20)
6,627
1,150
7,777
16,778
—
94
UK & Ireland
GI
£m
5,352
(558)
4,794
(178)
4,616
102
4,718
9
—
—
Canada
£m
3,455
(199)
3,256
(109)
3,147
31
3,178
(23)
—
1
Aviva Investors
£m
—
—
—
—
—
186
186
138
235
—
International
investments
£m
—
—
—
—
—
—
—
—
—
76
Other Group
activities
£m
—
—
—
—
—
19
19
236
—
(25)
5
24,654
(8,396)
2,219
(15,174)
(175)
(845)
—
(1,063)
—
(219)
(185)
(23,838)
816
(245)
11
4,738
(2,520)
(321)
—
—
(1,334)
—
(357)
48
(5)
(2)
(4,491)
247
—
6
3,162
(1,577)
(199)
—
—
(968)
—
(147)
—
(7)
(5)
(2,903)
259
—
—
559
—
—
(130)
—
(21)
—
(367)
—
—
—
(518)
41
—
571
13
622
—
—
—
44
189
(5)
(6)
247
259
41
(11)
—
48
83
—
—
—
(11)
—
25
—
122
(4)
—
10
—
(6)
—
—
—
—
—
—
—
—
—
—
—
76
—
—
—
—
—
—
—
—
—
—
—
76
—
76
—
12
—
—
—
—
9
—
—
Total
continuing
operations
£m
19,398
(4,701)
14,697
(307)
14,390
1,488
15,878
17,138
235
146
22
33,419
(12,493)
1,699
(15,304)
(175)
(3,172)
(224)
(2,412)
201
(235)
(503)
(32,618)
801
(245)
—
230
—
—
—
—
(4)
(224)
(478)
153
(4)
(311)
(868)
(638)
—
(638)
556
(64)
(37)
—
(49)
1
—
—
—
—
56
634
121
80
—
54
198
(22)
50
1,428
356
406
41
97
(694)
1,634
1. Total reported income, excluding inter-segment revenue, includes £28,320 million from the United Kingdom (Aviva plc’s country of domicile). Income is attributed on the basis of geographical origin which does not
differ materially from revenue by geographical destination, as most risks are located in the countries where the contracts were written.
2. Other in 2021 includes a charge of £51 million in relation to the redemption payment in excess of the market values of debt repaid as part of the Group's deleveraging strategy, a net release of £8 million of certain
provisions assumed as part of historic acquisition activities, a charge of £7 million relating to the cost of voluntary amendments to a small proportion of ground rent leases, release of a £6 million provision relating to a
tax indemnity associated with a historical disposal, a charge of £3 million relating to stamp duty on share buybacks and a charge of £3 million related to costs associated with disposal activity
Aviva plc
3.44
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
3 – Segmental information continued
(b) Further analysis by products and services
The Group’s results can be further analysed by products and services which comprise long-term business, general insurance and health,
fund management and other activities.
Long-term business
Our long-term business comprises life insurance, long-term health and accident insurance, savings, pensions and annuity business written
by our life insurance subsidiaries, including managed savings and pension fund business. Long-term business also includes our share of
the other life and related business written in our associates and joint ventures, as well as lifetime mortgage business written in the UK.
General insurance and health
Our general insurance and health business provides insurance cover to individuals and to small and medium-sized businesses, for risks
associated mainly with motor vehicles, property and liability, such as employers’ liability and professional indemnity liability, and medical
expenses.
Fund management
Our fund management business invests policyholders’ and shareholders’ funds and provides investment management services for
institutional pension fund mandates. It manages a range of retail investment products, including investment funds, unit trusts, open-ended
investment companies and individual savings accounts. Clients include Aviva Group businesses and third-party financial institutions,
pension funds, public sector organisations, investment professionals and private investors.
Other
Other includes service companies, head office expenses such as Group treasury and finance functions, and certain financing costs and taxes
not allocated to business segments and elimination entries for certain inter-segment transactions and group consolidation adjustments.
(i) Segmental income statement – products and services for the year ended 31 December 2022
Continuing operations
Gross written premiums2
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 (expense)/income
Inter-segment revenue
Share of (loss)/profit after tax of joint ventures and associates
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Segmental income
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Change in unallocated divisible surplus
Fee and commission expense
Investment income attributable to unitholders
Other expenses
Other net foreign exchange (losses)/gains
Inter-segment expenses
Finance costs
Segmental expenses
(Loss)/profit before tax
Tax attributable to policyholders’ returns
(Loss)/profit before tax attributable to shareholders’ profits from continuing operations
Adjusting items
Group adjusted operating profit/(loss) before tax attributable to shareholders’ profits
from continuing operations
Long-term
business
£m
8,591
(2,753)
5,838
—
5,838
1,114
6,952
(36,117)
—
(107)
—
(29,272)
(7,974)
22,754
15,449
(13)
(1,057)
—
(930)
—
(222)
(169)
27,838
(1,434)
774
(660)
2,548
General
insurance and
health¹
£m
10,328
(832)
9,496
(356)
9,140
144
9,284
(841)
—
(6)
—
8,437
(5,213)
(412)
—
—
(2,404)
—
(585)
(48)
(13)
(7)
(8,682)
(245)
—
(245)
1,078
Fund
management
£m
—
—
—
—
—
160
160
3
240
(1)
—
402
—
—
—
—
(24)
—
(354)
1
—
(1)
(378)
24
—
24
—
Total
continuing
operations
£m
18,919
(3,585)
15,334
(356)
14,978
1,453
16,431
(37,673)
240
(2)
—
(21,004)
(13,201)
22,342
15,449
(13)
(3,489)
531
(2,211)
(73)
(240)
(470)
18,625
(2,379)
774
(1,605)
3,818
Other
£m
—
—
—
—
—
35
35
(718)
—
112
—
(571)
(14)
—
—
—
(4)
531
(342)
(26)
(5)
(293)
(153)
(724)
—
(724)
192
1,888
833
24
(532)
2,213
1. General insurance and health business segment includes gross written premiums of £579 million relating to health business. The remaining business relates to property and liability insurance.
2. Gross written premiums include inward reinsurance premiums assumed from other companies amounting to £349 million, which all relates to property and liability insurance
Aviva plc
3.45
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
3 – Segmental information continued
(ii) Segmental income statement – products and services for the year ended 31 December 2021
Continuing operations
Gross written premiums2
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/(expense)
Inter-segment revenue
Share of profit/(loss) after tax of joint ventures and associates
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Segmental income
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Change in unallocated divisible surplus
Fee and commission expense
Investment expense attributable to unitholders
Other expenses
Other net foreign exchange gains
Inter-segment expenses
Finance costs
Segmental expenses
Profit/(loss) before tax
Tax attributable to policyholders’ returns
Profit/(loss) before tax attributable to shareholders’ profits from continuing operations
Adjusting items
Group adjusted operating profit/(loss) before tax attributable to shareholders’ profits
from continuing operations
Long-term
business
£m
10,081
(3,944)
6,137
—
6,137
1,152
7,289
16,864
—
165
5
24,323
(8,070)
2,230
(15,304)
(175)
(799)
—
(1,007)
—
(221)
(160)
(23,506)
817
(245)
572
894
General
insurance and
health1
£m
Fund
management
£m
9,317
(757)
8,560
(307)
8,253
125
8,378
(9)
—
5
17
8,391
(4,423)
(531)
—
—
(2,348)
—
(569)
48
(13)
(7)
(7,843)
548
—
548
259
—
—
—
—
—
183
183
4
237
—
—
424
—
—
—
—
(21)
—
(362)
—
—
—
(383)
41
—
41
—
Total
continuing
operations
£m
19,398
(4,701)
14,697
(307)
14,390
1,488
15,878
17,138
237
146
22
33,421
(12,493)
1,699
(15,304)
(175)
(3,172)
(224)
(2,412)
201
(237)
(503)
(32,620)
801
(245)
556
1,078
Other
£m
—
—
—
—
—
28
28
279
—
(24)
—
283
—
—
—
—
(4)
(224)
(474)
153
(3)
(336)
(888)
(605)
—
(605)
(75)
1,466
807
41
(680)
1,634
1. General insurance and health business segment includes gross written premiums of £510 million relating to health business. The remaining business relates to property and liability insurance.
2. Gross written premiums include inward reinsurance premiums assumed from other companies amounting to £208 million, which all relates to property and liability insurance
Aviva plc
3.46
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
4 – Details of income
This note gives further detail on the items appearing in the income section of the income statement.
Continuing operations
Gross written premiums
Long-term:
Insurance contracts
Participating investment contracts
General insurance and health
Less: premiums ceded to reinsurers
Gross change in provision for unearned premiums
Reinsurers’ share of change in provision for unearned premiums
Net change in provision for unearned premiums
Net earned premiums
Fee and commission income
Fee income from investment contract business
Fund management fee income
Other fee income
Reinsurance commissions receivable
Other commission income
Net change in deferred revenue
Total revenue
Net investment income
Interest and similar income
From financial instruments designated as trading and other than trading
From AFS investments and financial instruments at amortised cost
Dividend income
Other income from investments designated as trading
Realised (losses)/gains on disposals
Unrealised gains and losses
Losses arising in the year
Gains/(losses) recognised now realised
Other income from investments designated as other than trading
Realised gains on disposals
Unrealised gains and losses
(Losses)/gains arising in the year
Losses recognised now realised
Net income from investment properties
Rent
Expenses relating to these properties
Realised losses on disposal
Fair value (losses)/gains on investment properties
Realised loss on external debt redemption
Foreign exchange gains/(losses) on investments other than trading
Other investment expenses
Net investment (expense)/income
Share of profit after tax of joint ventures
Share of loss after tax of associates
Share of (loss)/profit after tax of joint ventures and associates
Profit on disposal and remeasurement of subsidiaries, joint ventures and associates
(Expense)/income from continuing operations
Income from discontinued operations
Total income
2022
£m
2021
£m
8,581
10
10,328
18,919
(3,585)
(384)
28
(356)
14,978
788
163
330
54
110
8
1,453
16,431
4,751
44
4,795
4,347
9,922
159
9,317
19,398
(4,701)
(340)
33
(307)
14,390
845
185
297
39
113
9
1,488
15,878
3,940
29
3,969
4,461
(739)
552
(5,759)
739
(5,020)
(5,759)
(1,929)
(552)
(2,481)
(1,929)
2,648
2,733
(41,015)
(2,648)
(43,663)
(41,015)
316
(17)
(8)
(1,150)
(859)
—
850
(32)
(37,673)
17
(19)
(2)
—
(21,244)
—
(21,244)
9,595
(2,733)
6,862
9,595
307
(7)
(32)
1,069
1,337
(51)
(192)
(52)
17,138
170
(24)
146
22
33,184
13,528
46,712
In 2022, total income is a net loss primarily due to unrealised losses on financial investments (see note 26), which is largely offset by the
corresponding change in insurance liabilities and investment contract provisions (see note 5).
Aviva plc
3.47
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
5 – Details of expenses
This note gives further detail on the items appearing in the expenses section of the income statement.
Continuing operations
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
Less: Claim recoveries from reinsurers
Insurance contracts
Non-participating Life investment contracts
Claims and benefits paid, net of recoveries from reinsurers
Change in insurance liabilities
Change in insurance liabilities (note 40(b))
Change in reinsurance asset for insurance provisions (note 40(b))
Change in insurance liabilities, net of reinsurance
Change in investment contract provisions
Investment (income)/expense allocated to investment contracts
Other changes in provisions
Participating investment contracts
Non-participating investment contracts
Change in reinsurance asset for investment contract provisions
Change in investment contract provisions
Change in unallocated divisible surplus
Fee and commission expense
Acquisition costs
Commission expenses for insurance and participating investment contracts
Change in deferred acquisition costs for insurance and participating investment contracts
Deferrable costs for non-participating investment contracts
Other acquisition costs
Change in deferred acquisition costs for non-participating investment contracts
Reinsurance commissions and other fee and commission expense
Fee and commission expense
Investment (income)/expense attributable to unitholders
Other expenses
Staff costs (note 9(b))
Central costs
Depreciation
Amortisation of acquired value of in-force business on insurance/investment contracts
Amortisation of intangible assets
Impairment of intangible assets
Other operating expenses (note 5(a))
Other expenses
Other net foreign exchange losses/(gains)
Finance costs (note 6)
Expenses from continuing operations
Expenses from discontinued operations
Total expenses
2022
£m
2021
£m
8,965
1,295
41
5,443
15,744
8,899
1,334
2
4,668
14,903
(2,502)
(41)
13,201
(2,410)
—
12,493
(24,594)
2,252
(22,342)
(868)
(831)
(1,699)
(10,278)
14,192
(3,345)
(1,820)
(6)
(15,449)
13
(360)
1,471
1
15,304
175
2,191
86
25
987
83
117
3,489
(531)
936
310
57
170
142
4
592
2,211
73
470
(18,865)
—
(18,865)
2,160
(151)
23
929
60
151
3,172
224
923
360
74
189
146
1
719
2,412
(201)
503
32,383
11,755
44,138
In 2022, total expenses is a net gain primarily due to the impact of economic assumption changes on insurance liabilities and investment
contract provisions (see note 41(b)(iii) and note 43), which is offset by the corresponding change in asset values (see note 4).
(a) Other operating expenses
Other operating expenses were £592 million (2021: £719 million) and mainly included costs relating to property and IT which were partially
offset by a gain of £77 million relating to negative goodwill on the acquisition of Aviva India (see note 2a)).
Aviva plc
3.48
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
6 – Finance costs
This note analyses the interest costs on our borrowings (which are described in note 51) and similar charges. Finance costs comprise:
Continuing operations
Interest expense on core structural borrowings
Subordinated debt
Long term senior debt
Commercial paper
Interest expense on operational borrowings
Amounts owed to financial institutions
Securitised mortgage loan notes at fair value
Interest on collateral received
Net finance charge on pension schemes (note 50(b)(i))
Interest on lease liabilities
Other similar charges
Finance costs from continuing operations
Finance costs from discontinued operations
Total finance costs
2022
£m
253
10
1
264
5
79
84
12
20
9
81
470
—
470
2021
£m
304
11
—
315
11
88
99
2
13
11
63
503
3
506
7 – Life business investment variances and economic assumption changes
(a) Definitions
Group adjusted operating profit for life business is based on expected long-term investment returns on financial investments backing
shareholder funds over the period, with consistent allowance for the corresponding expected movements in liabilities. Group adjusted
operating profit includes the effect of variances in experience for operating items, such as mortality, persistency and expenses, and the
effect of changes in operating assumptions. Changes due to economic items, such as market value movements and interest rate changes,
which give rise to variances between actual and expected investment returns, and the impact of changes in economic assumptions on
liabilities, are disclosed separately outside Group adjusted operating profit, in investment variances and economic assumption changes.
(b) Methodology
The expected investment returns and corresponding expected movements in life business liabilities are calculated separately for each
principal life business unit.
The expected return on investments for both policyholders’ and shareholders’ funds is based on opening economic assumptions applied to
the expected funds under management over the reporting period. Expected investment return assumptions are derived actively, based on
market yields on risk-free fixed interest assets at the end of each financial year. The same margins are applied on a consistent basis across
the Group to gross risk-free yields, to obtain investment return assumptions for equity and property. Expected funds under management
are equal to the opening value of funds under management, adjusted for sales and purchases during the period arising from expected
operating experience.
The actual investment return is affected by differences between the actual and expected funds under management and changes in asset
mix, as well as other market movements. To the extent that these differences arise from the operating experience of the life business, or
management decisions to change asset mix, the effect is included in the Group adjusted operating profit. The residual difference between
actual and expected investment return is included in investment variances, outside Group adjusted operating profit but included in profit
before tax attributable to shareholders' profits.
The movement in liabilities included in Group adjusted operating profit reflects both the change in liabilities due to the expected return on
investments, and the impact of experience variances and assumption changes for non-economic items. This would include movements in
liabilities due to changes in the discount rate arising from discretionary management decisions that impact on product profitability over
the lifetime of products.
The effect of differences between actual and expected economic experience on liabilities, and changes to economic assumptions used to
value liabilities, are taken outside Group adjusted operating profit. For many types of life business, including unit-linked and with-profits
funds, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit. The profit impact of
economic volatility on other life business depends on the degree of matching of assets and liabilities, and exposure to financial options
and guarantees.
Aviva plc
3.49
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
7 – Life business investment variances and economic assumption changes continued
(c) Assumptions
The expected rate of investment return is determined using consistent assumptions at the start of the period between operations, having
regard to local economic and market forecasts of investment return and asset classification under IFRS.
The principal assumptions underlying the calculation of the expected investment return for equity and property are:
United Kingdom
Ireland
2022
4.4%
3.8%
Equity
2021
3.9%
3.2%
2022
2.9%
2.3%
Property
2021
2.4%
1.7%
The expected return on equity and property has been calculated by reference to the ten-year mid-price swap rate for an AA rated bank in
the relevant currency plus a risk premium. The use of risk premium reflects management’s long-term expectations of asset return in excess
of the swap yield from investing in different asset classes. The asset risk premia are set out in the table below:
All territories
Equity risk premium
Property risk premium
The ten-year mid-price swap rates at the start of the period are set out in the table below:
Territories
United Kingdom
Ireland
2022
3.5%
2.0%
2022
0.9%
0.3%
2021
3.5%
2.0%
2021
0.4%
(0.3%)
For fixed interest securities classified as fair value through profit or loss, the expected investment returns are based on average prospective
yields for the actual assets held less an adjustment for credit risk (assessed on a best estimate basis). This includes an adjustment for credit
risk on all eurozone sovereign debt. Where such securities are classified as available for sale, the expected investment return comprises the
expected interest or dividend payments and amortisation of the premium or discount at purchase.
(d) Investment variances and economic assumption changes
The investment variances and economic assumption changes excluded from the life adjusted operating profit are as follows:
Life business
Investment variances and economic assumptions
2022
£m
(2,387)
2021
£m
(805)
The loss of £2,387 million (2021: loss of £805 million) in relation to investment variances and economic assumption changes was primarily
driven by the significant increase in UK interest rates, with the rate on 10-year swaps increasing by 280bps during 2022. This resulted in a
reduction in the value of fixed income securities and loans (see notes 23 and 26) which was not fully offset by a reduction in the valuation of
long-term insurance liabilities from the increase in the valuation interest rate (see note 46). Other components of investment variances and
economic assumption changes were smaller and broadly offset. These include positive impacts from hedging negative global equity returns
and a reduction in the allowance for risk of default on assets backing annuities due to reduced asset values; and negative impacts from
foreign exchange losses and widening of spreads on corporate bonds.
The adverse impact of interest rate rises and the beneficial impact from equity falls reflect the fact that we hedge on a Solvency II basis as
that drives the ability of markets to remit cash, rather than an IFRS basis. For example, when equity markets increase we gain from the
increase in the value of future annual management charges on unit-linked products on an economic basis which are not recognised under
IFRS, however, the loss from hedges in place is recognised on both Solvency II and IFRS bases.
Further information on the sensitivity of the Group’s long-term business to economic factors is provided in note 58(h)(iv).
The negative variance for 2021 was primarily driven by an increase in interest rates and positive global equity returns, partially offset by
narrowing of credit spreads.
Aviva plc
3.50
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
8 – Non-life business: short-term fluctuations in return on investments
(a) Definitions
Group adjusted operating profit for non-life business is based on an expected long-term investment return over the period. Any variance
between the total investment return (including realised and unrealised gains) and the expected return over the period is disclosed
separately outside Group adjusted operating profit, in short-term fluctuations.
The short-term fluctuations in investment return and economic assumption changes attributable to the non-life business result and
reported outside Group adjusted operating profit were as follows:
Non-life business
Short-term fluctuations in investment return (see (d) below)
Economic assumption changes (see (e) below)
2022
£m
(1,375)
147
(1,228)
2021
£m
(149)
(85)
(234)
(b) Methodology
The long-term investment return is calculated separately for each principal non-life market. In respect of equities and investment properties,
the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the year, by the
long-term rate of investment return.
The long-term rate of investment return is determined using consistent assumptions between operations, having regard to local economic
and market forecasts of investment return. The allocated long-term return for other investments (including debt securities) is the actual
income receivable for the year. Actual income and long-term investment return both contain the amortisation of the discounts/premium
arising on the acquisition of fixed income securities. For other operations, the long-term return reflects assets backing non-life business
held in Group centre investments.
Market value movements which give rise to variances between actual and long-term investment returns are disclosed separately in short-
term fluctuations outside Group adjusted operating profit.
The impact of realised and unrealised gains and losses on Group centre investments is included in short-term fluctuations on
other operations.
(c) Assumptions
The principal assumptions underlying the calculation of the long-term investment return are:
Long-term rates
of return on equities
Long-term rates
of return on property
United Kingdom
Ireland
Canada
2022
4.4%
3.8%
5.5%
2021
3.9%
3.2%
4.7%
2022
2.9%
2.3%
4.0%
The long-term rates of return on equities and properties have been calculated by reference to the ten-year mid-price swap rate for an
AA rated bank in the relevant currency plus a risk premium. The asset risk premia are set out in the table below:
All territories
Equity risk premium
Property risk premium
The ten-year mid-price swap rates at the start of the period are set out in the table below:
Territories
United Kingdom
Ireland
Canada
2022
3.5%
2.0%
2022
0.9%
0.3%
2.0%
2021
2.4%
1.7%
3.2%
2021
3.5%
2.0%
2021
0.4%
(0.3%)
1.2%
Aviva plc
3.51
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
8 – Non-life business: short-term fluctuations in return on investments continued
(d) Analysis of investment return
The total investment income on our non-life business, including short-term fluctuations, is as follows:
Non-life business
Analysis of investment (losses)/income:
Net investment (losses)/income
Foreign exchange (losses)/gains and other charges
Analysed between:
Long-term investment return, reported within Group adjusted operating profit
Short-term fluctuation in investment return, reported outside Group adjusted operating profit
General insurance and health
Other operations1
2022
£m
(982)
(45)
(1,027)
348
(1,198)
(177)
(1,375)
(1,027)
2021
£m
86
47
133
282
(199)
50
(149)
133
1. Other operations represents short-term fluctuations on assets backing non-life business in Group centre investments, including the centre hedging programme.
Short-term fluctuation losses of £1,375 million (2021: loss of £149 million), were primarily driven by falls in the value of fixed income
securities in the UK and Canada due to the significant increase in interest rates during 2022 (UK: 291bps for seven year term; Canada: 240bps
for three year term). The increase in interest rates resulted in a reduction in the value of fixed income securities (see note 26). Additionally
there were further losses from equity market falls, foreign exchange losses and credit spreads widening.
The short-term fluctuations during 2021 were primarily due to rising interest rates reducing the value of fixed income securities, partially
offset by foreign exchange gains.
Further information on the sensitivity of the general insurance and health business to economic factors is provided in note 58(h)(iv).
(e) Economic assumption changes
In the general insurance and health business, there is a beneficial impact of £147 million (2021: loss of £85 million) which has arisen
primarily as a result of a material increase in the interest rates used to discount claims reserves for periodic payment orders (PPOs) and
latent claims.
As explained in accounting policy L, provisions for latent claims are discounted, using rates based on the relevant swap curve, in the relevant
currency at the reporting date, having regard to the duration of the expected settlement of the claims. The discount rate is set at the start of
the accounting period, with any change in rates between the start and end of the accounting period being reflected outside Group adjusted
operating profit as an economic assumption change. The range of discount rates used is disclosed in note 42.
9 – Employee information
This note shows where our staff are employed, excluding staff employed by our joint ventures and associates, and analyses the total
staff costs.
(a) Employee numbers
The number of persons employed by the Group, including directors under a service contract, was:
Continuing operations
UK & Ireland Life
UK & Ireland General Insurance
Canada
Aviva Investors
International investments
Other Group activities
Employees in continuing operations
Employees in discontinued operations
Total employee numbers
At 31 December
2021
Number
2022
Number
Average for the year1
2021
2022
Number
Number
9,163
7,858
4,471
997
1,334
541
24,364
—
24,364
8,629
7,521
4,321
1,118
—
473
22,062
—
22,062
8,717
7,680
4,439
1,069
1,294
502
23,701
—
23,701
8,687
7,781
4,219
1,118
—
507
22,312
5,151
27,463
1. Average employee numbers have been calculated using a monthly average that takes into account recruitment, leavers, transfers, acquisitions and disposals of businesses during the year. International investments
were reported as nil in 2021 as India was recognised as an associate for the full year. On 28 September 2022, Aviva acquired an additional 25% of the ordinary shares of Aviva Life Insurance Company India Limited giving
Aviva a controlling interest in the entity (see note 2(a)).
Aviva plc
3.52
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
9 – Employee information continued
(b) Staff costs
Continuing operations
Wages and salaries
Social security costs
Post-retirement obligations
Defined benefit schemes (note 50(d))
Defined contribution schemes (note 50(d))
Profit sharing and incentive plans
Equity compensation plans
Termination benefits
Staff costs from continuing operations
Staff costs from discontinued operations
Total staff costs
Staff costs are charged within:
Continuing operations
Acquisition costs
Claims handling expenses
Central costs (note 5)
Staff costs (note 5)
Staff costs from continuing operations
Staff costs from discontinued operations
Total staff costs
2022
£m
2021
£m
1,042
126
23
172
220
58
17
1,658
—
1,658
1,014
116
21
169
183
44
33
1,580
259
1,839
2022
£m
2021
£m
459
204
59
936
1,658
—
1,658
421
186
50
923
1,580
259
1,839
10 – Directors
Information concerning individual directors’ emoluments, interests and transactions is given in the Directors’ Remuneration report in the
‘Corporate governance’ section of this report. For the purposes of the disclosure required by Schedule 5 to the Companies Act 2006, the
total aggregate emoluments of the directors in respect of 2022 was £6.5 million (2021: £5.4 million). Employer contributions to pensions
for executive directors for qualifying periods were £nil (2021: £nil). The aggregate net value of share awards granted to the directors in the
period was £nil (2021: £nil). During the year, no share options were exercised by directors (2021: no share options).
Aviva plc
3.53
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
11 – Auditors’ remuneration
This note shows the total remuneration payable by the Group, excluding VAT and any overseas equivalent thereof, to our auditors.
Continuing operations
Fees payable to PwC LLP and its associates for the statutory audit of the Aviva Group and Company financial statements
Fees payable to PwC LLP and its associates for other audit services
Audit of Group subsidiaries
Additional fees related to the prior year audit of Group subsidiaries
Total audit fees
Audit related assurance
Other assurance services
Total audit and assurance fees
Tax compliance services
Tax advisory services
Services relating to corporate finance transactions
Other non-audit services not covered above
Fees payable to PwC LLP and its associates for services to Group companies
Fees payable to PwC LLP and its associates for Group occupational pensions scheme audits
Discontinued operations
Fees payable to PwC LLP and its associates for Audit of Group subsidiaries
Fees payable to PwC LLP and its associates for Audit related services
Total fees payable to PwC LLP and its associates for services to Group companies
2022
£m
3.4
21.8
0.7
25.9
4.5
1.7
32.1
—
—
—
—
32.1
0.1
2022
£m
—
—
—
2021
£m
2.2
10.1
0.4
12.7
3.8
1.3
17.8
—
—
—
—
17.8
0.1
2021
£m
0.7
0.3
1.0
Fees payable for the audit of the Group’s subsidiaries include fees for the statutory audit of the subsidiaries, both inside and outside the
UK, and for the work performed by the principal auditors in respect of the subsidiaries for the purpose of the consolidated financial
statements of the Group. Included in the statutory audit fees for the Group and its subsidiaries for 2022 are fees payable in respect of
adopting new accounting standards, most significantly, IFRS 17.
Audit related assurance comprises services in relation to statutory and regulatory filings. These include fees for the audit of the Group’s
Solvency II regulatory returns, services for the audit of other regulatory returns of the Group’s subsidiaries and review of interim financial
information under the Listing Rules of the UK Listing Authority. Total audit fees for continuing and discontinued operations (including
additional fees related to the prior year audit of Group subsidiaries) and audit-related assurance fees were £30.4 million
(2021: £17.5 million).
Other assurance services in 2022 of £1.7 million (2021: £1.3 million) mainly include assurance fees over a selection of Non-Financial
Reporting metrics and fees relating to providing an annual Audit and Assurance Faculty (AAF) report for Aviva Investors to give internal and
external clients and their auditors comfort over the operating effectiveness of internal controls and review of the information security
business protection standard and associated controls.
In addition to these fees, audit fees payable to PwC LLP in respect of investment funds consolidated in the Group financial statements were
£3.9 million (2021: £2.6 million). These fees are borne directly by the unitholders of the funds and are not borne by the Group.
Details of the Group’s process for safeguarding and supporting the independence and objectivity of the external auditors are given in the
Audit Committee report.
Aviva plc
3.54
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
12 – Tax
This note analyses the tax charge for the year and explains the factors that affect it.
(a) Tax (credited)/charged to the income statement
(i) The total tax (credit)/charge comprises:
Continuing operations
Current tax
For the period
Prior period adjustments
Total current tax from continuing operations
Deferred tax
Origination and reversal of temporary differences
Changes in tax rates or tax laws
Write back of deferred tax assets
Total deferred tax from continuing operations
Total tax (credited)/charged to income statement from continuing operations
Total tax charged to income statement from discontinued operations
Total tax (credited)/charged to income statement
2022
£m
2021
£m
89
(35)
54
(1,240)
—
(54)
(1,294)
(1,240)
—
(1,240)
228
33
261
133
88
(17)
204
465
73
538
(ii) The Group, as a proxy for policyholders in the UK and Ireland, is required to record taxes on investment income and gains each year.
Accordingly, the tax benefit or expenses attributable to UK and Ireland life insurance policyholder returns is included in the tax charge.
The tax credit attributable to policyholder returns included in the credit above is £774 million (2021: charge of £245 million).
(iii) The tax (credit)/charge for continuing operations above, comprising current and deferred tax, can be analysed as follows:
Continuing operations
UK tax
Overseas tax
2022
£m
(1,224)
(16)
(1,240)
2021
£m
366
99
465
(iv) Unrecognised tax losses and temporary differences of previous years were used to reduce the current tax expense and deferred tax
charge for continuing operations by £nil and £54 million (2021: £11 million and £17 million ), respectively.
(v) Deferred tax (credited)/charged to the income statement represents movements on the following items:
Continuing operations
Long-term business technical provisions and other insurance items
Deferred acquisition costs
Unrealised (losses)/gains on investments
Pensions and other post-retirement obligations
Unused losses and tax credits
Subsidiaries, associates and joint ventures
Intangibles and additional value of in-force long-term business
Provisions and other temporary differences
Total deferred tax (credited)/charged to income statement from continuing operations
Total deferred tax charged to income statement from discontinued operations
Total deferred tax (credited)/charged to income statement
(b) Tax (credited)/charged to other comprehensive income
(i) The total tax (credited)/charged comprises:
Current tax from continuing operations
In respect of pensions and other post-retirement obligations
In respect of foreign exchange movements
Deferred tax from continuing operations
In respect of pensions and other post-retirement obligations
Total tax (credited)/charged to other comprehensive income arising from continuing operations
Total tax credited to other comprehensive income from discontinued operations
Total tax (credited)/charged to other comprehensive income
(ii) There is no tax charge/(credit) attributable to policyholders’ return included above in either 2022 or 2021.
2022
£m
(145)
(29)
(300)
15
(276)
(28)
(46)
(485)
(1,294)
—
(1,294)
2022
£m
—
(6)
(6)
(412)
(418)
—
(418)
2021
£m
52
(1)
125
(21)
(3)
9
33
10
204
43
247
2021
£m
(17)
7
(10)
176
166
(19)
147
Aviva plc
3.55
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
12 – Tax continued
(c) Tax credited to equity
No tax was charged or credited directly to equity in either 2022 or 2021.
(d) Tax reconciliation
The tax on the Group’s (loss)/profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of
the Company as follows:
(Loss)/profit before tax from continuing operations
(Loss)/profit before tax from discontinued operations
Total (loss)/profit before tax
Shareholder
£m
(1,605)
—
(1,605)
Policyholder
£m
(774)
—
(774)
2022
£m
(2,379)
—
(2,379)
Shareholder
£m
556
1,773
2,329
Policyholder
£m
245
—
245
2021
£m
801
1,773
2,574
Tax calculated at standard UK corporation tax rate of 19.00% (2021: 19.00%)
Reconciling items
Different basis of tax – policyholders
Adjustment to tax charge in respect of prior periods
Non-assessable income and items not taxed at the full statutory rate
Non-taxable profit on sale of subsidiaries and associates
Disallowable expenses
Different local basis of tax on overseas profits
Change in future local statutory tax rates
Movement in valuation of deferred tax
Tax effect of profit from joint ventures and associates
Other
Total tax (credited)/charged to income statement
(305)
(147)
(452)
442
47
489
—
(28)
(31)
—
16
11
—
(125)
(4)
—
(466)
(628)
—
—
—
—
1
—
—
—
—
(774)
(628)
(28)
(31)
—
16
12
—
(125)
(4)
—
(1,240)
—
(13)
(19)
(314)
40
104
89
(22)
(16)
2
293
200
—
—
—
—
(2)
—
—
—
—
245
200
(13)
(19)
(314)
40
102
89
(22)
(16)
2
538
The tax (credit)/charge attributable to policyholder returns is removed from the Group’s total profit before tax in arriving at the Group’s
profit before tax attributable to shareholders’ profits. As the net of tax profits attributable to with-profits and unit-linked policyholders is
zero, the Group’s pre-tax profit attributable to policyholders is an amount equal and opposite to the tax charge/(credit) attributable to
policyholders included in the total tax charge.
The UK Government has enacted an increase in the UK corporation tax rate to 25% to take effect from 1 April 2023. This rate has been used
in the calculation of the UK’s deferred tax assets and liabilities as at 31 December 2021 and 31 December 2022 and increased the Group’s
deferred tax liabilities by £235 million in the year ended 31 December 2021.
On 20 July 2022 the UK government published draft legislation for consultation on The Organisation for Economic Co-operation and
Development proposals to reform the international tax system and introduce a global minimum rate of corporation tax. Final legislation is
expected to be enacted in 2023. The proposals are complex and there remains considerable uncertainty about the final form of the rules
and the accompanying guidance in all countries. Accordingly, the potential impact cannot yet be reliably estimated. The proposed
minimum tax rate of 15% is significantly below the statutory corporation tax rates in the UK and Canada. The Group continues to monitor
the progress of proposed legislation.
(e) Tax paid reconciliation
The tax on the Group's loss/profit before tax differs from the tax paid per the consolidated statement of cash flows as follows:
Total tax (credited)/charged to income statement from continuing operations
Accounts adjustments
Deferred tax
Prior period adjustments
Current tax recorded in other comprehensive income
Payment timing differences
Current year tax to be repaid in later accounting periods
Current year tax (repaid)/paid relating to prior accounting periods
Tax paid by continuing operations
Tax paid by discontinued operations
Total tax paid
2022
£m
(1,240)
1,294
35
(6)
1,323
131
(4)
127
210
—
210
2021
£m
465
(204)
(33)
(10)
(247)
31
55
86
304
79
383
Deferred tax represents the tax on profits or losses, which are required by legislation to be taxed in a different period to which they impact
the Group's financial statements.
Prior period adjustments arise where the final tax liability payable to tax authorities is different from the tax charge for the period reported
in the Annual Report and Accounts.
Aviva plc
3.56
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
12 – Tax continued
The timing of tax payments to national tax authorities is determined by the local tax legislation in each jurisdiction. In our core businesses,
the Group is required to pay an estimate of its total tax liability in the year in which profits are earned, with any difference to the final tax
liability being paid in the following year.
13 – Earnings per share
This note shows how to calculate earnings per share on profit attributable to ordinary shareholders, based both on the present shares in
issue (the basic earnings per share) and the potential future shares in issue, including conversion of share options granted to employees
(the diluted earnings per share).
We have also shown the same calculations based on our Group adjusted operating profit as we believe this gives an important indication of
operating performance. Consideration of both these measures gives a full picture of the performance of the business during the year.
(a) Basic earnings per share
(i) The profit attributable to ordinary shareholders is:
Continuing operations
Profit/(loss) before tax attributable to shareholders’ profits
Tax attributable to shareholders’ profits
Profit/(loss) from continuing operations
Amount attributable to non-controlling interests
Cumulative preference dividends for the year
Coupon payments in respect of tier 1 notes
Profit/(loss) attributable to ordinary shareholders from continuing
operations
Profit attributable to ordinary shareholders from discontinued operations
Profit/(loss) attributable to ordinary shareholders
(ii) Basic earnings per share is calculated as follows:
Continuing operations
Group adjusted operating profit attributable to ordinary shareholders1
Adjusting items:
Reclassification of unallocated interest
Life business: Investment variances and economic assumption changes
Non-life business: Short-term fluctuation in return on investments
General insurance and health business: Economic assumption changes
Impairment of goodwill, joint ventures, associates and other amounts
expensed
Amortisation and impairment of intangibles acquired in business
combinations
Amortisation and impairment of acquired value of in-force business
Profit/(loss) on disposal and remeasurement of subsidiaries, joint
ventures and associates
Other
(Loss)/profit attributable to ordinary shareholders from continuing
operations
Discontinued operations
Group adjusted operating profit attributable to ordinary shareholders1
Adjusting items
Profit attributable to ordinary shareholders from discontinued operations
Group
adjusted
operating
profit
£m
2,213
(289)
1,924
(21)
(17)
(17)
1,869
—
1,869
2022
Total
£m
(1,605)
466
(1,139)
(21)
(17)
(17)
Adjusting
items
£m
(3,818)
755
(3,063)
—
—
—
(3,063)
(1,194)
—
—
(3,063)
(1,194)
Group
adjusted
operating
profit
£m
1,634
(330)
1,304
(21)
(17)
—
1,266
441
1,707
Adjusting
items
£m
(1,078)
110
(968)
—
—
—
(968)
1,209
241
2022
Net of tax, NCI,
preference
dividends and
tier 1 notes
£m
Before tax
£m
Per share
p
Before tax
£m
Net of tax, NCI
and
preference
dividends
£m
2021
Total
£m
556
(220)
336
(21)
(17)
—
298
1,650
1,948
2021
Per share
p
2,213
1,869
59.8
1,634
1,266
32.5
—
(2,387)
(1,375)
147
—
(1,924)
(1,101)
119
—
(61.5)
(35.2)
3.8
37
(634)
(121)
(80)
37
(549)
(76)
(65)
(8)
(8)
(0.3)
—
—
(54)
(182)
(45)
(150)
—
41
—
46
(1.4)
(4.8)
—
1.4
(54)
(198)
22
(50)
(47)
(234)
(6)
(28)
(1,605)
(1,194)
(38.2)
556
298
—
—
—
—
—
—
—
—
—
(38.2)
631
1,142
1,773
2,329
441
1,209
1,650
1,948
1.0
(14.1)
(1.9)
(1.7)
—
(1.2)
(6.0)
(0.2)
(0.7)
7.7
11.3
31.1
42.4
50.1
(Loss)/profit attributable to ordinary shareholders
(1,605)
(1,194)
1. Group adjusted operating earnings per share from continuing operations and discontinued operations is 59.8p (2021: 43.8p)
(iii) The calculation of basic earnings per share uses a weighted average of 3,126 million (2021: 3,889 million) ordinary shares in issue,
after deducting treasury shares. The actual number of shares in issue at 31 December 2022 was 2,808 million (2021: 3,766 million) or
2,788 million (2021: £3,754 million) excluding treasury shares. See note 31 for further information on the movements in share capital
during the year.
Aviva plc
3.57
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
13 – Earnings per share continued
(b) Diluted earnings per share
(i) Diluted earnings per share is calculated as follows:
Continuing operations
(Loss)/profit attributable to ordinary shareholders
Dilutive effect of share awards and options1
Diluted earnings per share from continuing operations
Discontinued operations
Profit attributable to ordinary shareholders
Dilutive effect of share awards and options
Diluted earnings per share from discontinued operations
Diluted earnings per share
Weighted
average
number of
shares
million
Total
£m
(1,194)
(1,194)
3,126
—
3,126
—
—
—
—
—
(1,194)
3,126
2022
Per share
p
(38.2)
—
(38.2)
—
—
—
(38.2)
Weighted
average
number of
shares
million
3,889
33
3,922
3,889
33
3,922
3,922
Total
£m
298
298
1,650
1,650
1,948
2021
Per share
p
7.7
(0.1)
7.6
42.4
(0.3)
42.1
49.7
1. Excluded from the diluted (pence per share) figures are £39 million ordinary shares issued during the year ended 31 December 2022. If exercised, these would have a 0.5 pence per share and are excluded in accordance
with IAS 33 Earnings per share. The Group expects these share awards and options to be exercised.
(ii) Diluted earnings per share on Group adjusted operating profit attributable to ordinary shareholders is calculated as follows:
Continuing operations
Group adjusted operating profit attributable to ordinary shareholders
Dilutive effect of share awards and options
Diluted Group adjusted operating profit per share from continuing
operations
Discontinued operations
Group adjusted operating profit attributable to ordinary shareholders
Dilutive effect of share awards and options
Diluted Group adjusted operating profit per share from discontinued
operations
Total
£m
1,869
Weighted
average
number of
shares
million
3,126
—
1,869
3,126
—
—
—
—
—
2022
Per share
p
59.8
—
59.8
—
—
—
Diluted Group adjusted operating profit per share
1,869
3,126
59.8
Total
£m
1,266
Weighted
average
number of
shares
million
3,889
33
2021
Per share
p
32.5
(0.2)
1,266
3,922
32.3
441
441
1,707
3,889
33
3,922
3,922
11.3
(0.1)
11.2
43.5
If the share consolidation (see note 31) had taken place on 1 January 2022, this would have resulted in operating earnings per share of
66.8 pence.
14 – Dividends and appropriations
This note analyses the total dividends and other appropriations paid during the year, as set out in the table below. Details are also provided
of the proposed final dividend for 2022, which is not accrued in these financial statements and is therefore excluded from the table.
Ordinary dividends declared and charged to equity in the year
Interim 2022 – 10.30 pence per share, paid on 28 September 2022
Final 2021 – 14.70 pence per share, paid on 19 May 2022
Interim 2021 – 7.35 pence per share, paid on 7 October 2021
Final 2020 – 14.00 pence per share, paid on 14 May 2021
Interim 2020 – 7.00 pence per share, paid on 21 January 2021
Preference dividends declared and charged to equity in the year
Coupon payments on tier 1 notes
2022
£m
287
541
—
—
—
828
17
17
862
2021
£m
—
—
286
549
275
1,110
17
—
1,127
Subsequent to 31 December 2022, the directors proposed a final dividend for 2022 of 20.7 pence per ordinary share, amounting to
£581 million in total. The cash value of dividend is calculated using 2,808,826,524 million shares as at 2 March 2023 representing issued
shares eligible for dividend payment. Subject to approval by shareholders at the AGM, the dividend will be paid on 18 May 2023 and will be
accounted for as an appropriation of retained earnings in the year ending 31 December 2022.
Aviva plc
3.58
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
15 – Goodwill
This note analyses the changes to the carrying amount of goodwill during the year and details the results of our impairment testing on both
goodwill and intangible assets with indefinite lives.
(a) Carrying amount
Gross amount
At 1 January
Acquisitions and additions
Disposals1
Foreign exchange rate movements
At 31 December
Accumulated impairment
At 1 January
Impairment charges
Disposals1
Foreign exchange rate movements
At 31 December
Carrying amount at 1 January
Carrying amount at 31 December
2022
£m
2021
£m
1,836
324
—
10
2,170
(95)
—
—
(3)
(98)
1,741
2,072
1,921
—
(75)
(10)
1,836
(116)
—
18
3
(95)
1,805
1,741
1. Disposals in 2021 related to Aviva Italy, Aviva Poland, Aviva Vietnam and a small disposal in the UK General Insurance segment
Goodwill from acquisitions and additions arose on the acquisition of Succession Wealth (see note 2(a)).
Impairment tests on goodwill were conducted as described in note 15(b) below.
(b) Goodwill allocation and impairment testing
A summary of the goodwill and intangibles with indefinite useful lives allocated to groups of cash generating units (CGUs) is
presented below.
United Kingdom – long-term business
United Kingdom – fund management business
United Kingdom – general insurance and health
Ireland – general insurance and health
Canada – general insurance
Carrying amount of goodwill
Carrying amount of intangibles
with indefinite useful lives
(detailed in note 16)
2022
£m
663
324
924
98
63
2,072
2021
£m
663
—
924
93
61
1,741
2022
£m
—
—
1
—
—
1
2021
£m
—
—
1
—
—
1
2022
£m
663
324
925
98
63
2,073
Total
2021
£m
663
—
925
93
61
1,742
Goodwill in all business units is tested for impairment by comparing the carrying value of the cash generating unit to which the goodwill
relates, to the recoverable value of that CGU. The recoverable amount is the value in use of the CGU unless otherwise stated.
Long-term business
Value in use has been calculated based on a shareholder value of the business calculated in accordance with Solvency II principles,
adjusted where Solvency II does not represent a best estimate of shareholders’ interests. The principal adjustments relate to the exclusion
of the benefit of transitional measures on technical provisions and the volatility adjustment under Solvency II, modification of the Solvency
II risk margin to an economic view and removal of restrictions on contract boundaries or business scope.
The present value of expected profits arising from future new business may be included within the shareholder value and is calculated on
an adjusted Solvency II basis, using profit projections based on the most recent three-year business plans approved by management.
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, mortality,
morbidity and persistency.
Future new business profits beyond the initial three years are extrapolated using a steady growth rate. Growth rates and expected future
profits are set with regards to management estimates, past experience and relevant available market statistics.
Expected profits from future new business are discounted using a risk adjusted discount rate. The discount rate is a combination of a
risk-free rate and a risk margin to make prudent allowance for the risk that experience in future years for new business may differ from
that assumed.
Aviva plc
3.59
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
15 – Goodwill continued
Key assumptions
The Solvency II non-economic assumptions in relation to mortality, morbidity, persistency and expenses and other items are based on
management’s best estimate assumptions. Economic assumptions are based on market data as at the end of each reporting period.
The basic risk-free rate curves used to value the technical provisions reflect the curves, credit risk adjustment and fundamental spread for
the matching adjustment published by the European Insurance and Occupational Pensions Authority (EIOPA) and the Bank of England on
their websites. For the purposes of calculating value in use, the Solvency II risk margin has been modified to an economic view, with a cost
of capital rate of 2%.
General insurance, health, fund management and other businesses
Value in use is calculated as the discounted value of expected future profits of each business. The calculation uses cash flow projections
based on business plans approved by management covering a three-year period. 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 inflation and commission rates.
Cash flows beyond that three-year period are extrapolated using a steady growth rate. Growth rates and expected future profits are set with
regards to past experience and relevant available market statistics.
Future profits are discounted using a risk adjusted discount rate which is based on the Capital Asset Pricing Model (CAPM). The inputs
include the risk-free rate of interest appropriate to the geographic location of the cash flows related to each CGU being tested, market risk
premium, beta and other adjustments to factor local market risks and risks specific to each CGU.
Key assumptions
United Kingdom general insurance and health
Ireland general insurance and health
Canada general insurance
Extrapolated future
profits growth rate
Future profits
discount rate
2022
%
1.0
Nil
5.0
2021
%
1.0
Nil
5.0
2022
(Pre-tax)
%
12.4
9.6
10.8
2021
(Pre-tax)
%
8.8
8.9
10.6
Results of impairment testing
Management’s impairment review of the Group’s cash generating units did not identify any necessary impairments to goodwill. There were
no impairments in 2021.
Aviva plc
3.60
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
16 – Acquired value of in-force business (AVIF) and intangible assets
This note shows the movements in cost, amortisation and impairment of the acquired value of in-force business and intangible assets
during the year.
Gross amount
At 1 January 2021
Additions and transfers
Disposals3
Foreign exchange rate movements
At 31 December 2021
Additions and transfers
Disposals
Foreign exchange rate movements
At 31 December 2022
Accumulated amortisation
At 1 January 2021
Amortisation for the year
Disposals and transfers3
Foreign exchange rate movements
At 31 December 2021
Amortisation for the year4
Acquisitions and disposals
Foreign exchange rate movements
At 31 December 2022
Accumulated Impairment
At 1 January 2021
Impairment losses charged to expenses
Disposals3
Foreign exchange rate movements
At 31 December 2021
Impairment charges
Disposals
Foreign exchange rate movements
At 31 December 2022
Carrying amount
At 1 January 2021
At 31 December 2021
At 31 December 2022
Recoverable in more than 1 year
AVIF on
insurance
contracts¹ (a)
£m
AVIF on
investment
contracts² (a)
£m
Other
intangible
assets with
finite useful
lives (b)
£m
Intangible
assets with
indefinite
useful lives
£m
2,581
7
(290)
(16)
2,282
228
—
(20)
2,490
(1,484)
(115)
279
13
(1,307)
(102)
—
(2)
(1,411)
(19)
—
—
—
(19)
—
—
—
(19)
1,078
956
1,060
979
1,432
—
—
(2)
1,430
—
—
2
1,432
(744)
(75)
—
1
(818)
(68)
—
—
(886)
(24)
—
—
—
(24)
—
—
(1)
(25)
664
588
521
464
1,607
50
(213)
(1)
1,443
245
(108)
18
1,598
(905)
(166)
78
(2)
(995)
(142)
102
(9)
(1,044)
(61)
(3)
21
—
(43)
(4)
—
—
(47)
641
405
507
134
—
(128)
(5)
1
—
—
—
1
—
—
—
—
—
—
—
—
—
(71)
—
68
3
—
—
—
—
—
63
1
1
Total
£m
5,754
57
(631)
(24)
5,156
473
(108)
—
5,521
(3,133)
(356)
357
12
(3,120)
(312)
102
(11)
(3,341)
(175)
(3)
89
3
(86)
(4)
—
(1)
(91)
2,446
1,950
2,089
1. On insurance and participating investment contracts
2. On non-participating investment contracts
3. Disposals in 2021 relate to the disposals of Aviva France, Aviva Italy, Aviva Poland and Aviva Vietnam
4. Amortisation of other intangible assets with finite useful lives includes £54 million (2021: £66 million) of amortisation in respect of intangible assets acquired in business combinations
(a) Acquired value of in-force business
AVIF on insurance and investment contracts is generally recoverable in more than one year. Of the total of £1,581 million, £1,443 million
(2021: £1,357 million) is expected to be recoverable more than one year after the statement of financial position date.
Non-participating investment contract AVIF is reviewed for evidence of impairment, consistent with reviews conducted for other finite life
intangible assets. Insurance and participating investment contract AVIF is reviewed for impairment at each reporting date as part of the
liability adequacy requirements in IFRS 4. AVIF is reviewed for evidence of impairment and impairment tested at product portfolio level
by reference to the value of future profits in accordance with Solvency II principles, adjusted where Solvency II does not represent a best
estimate of shareholders’ interests, consistent with the impairment test for goodwill for long-term business (see note 15(b)).
Additions of £228 million relate to AVIF recognised upon acquisition of Aviva India (see note 2(a)). There were no impairments in 2022
(2021: £nil) in relation to the AVIF on insurance contracts or investment contracts.
(b) Other intangible assets with finite useful lives
Other intangible assets with finite useful lives consist mainly of the value of bancassurance and other distribution agreements and
capitalised software. Additions of intangible assets with finite lives in 2022 relate to an intangible attributable to the existing business of
Succession Wealth acquired on 11 August 2022 (see note 2(a)) and capitalisation of software costs in relation to the Group’s digital
initiatives. Impairments totalling £4 million (2021: £3 million) have been recognised in 2022 in relation to capitalised software.
Aviva plc
3.61
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
17 – Interests in, and loans to, joint ventures
In several businesses, Group companies and other parties jointly control certain entities. This note analyses these interests and describes
the principal joint ventures in which we are involved.
(a) Carrying amount and details of joint ventures
(i) The movements in the carrying amount comprised:
At 1 January
Share of results before tax
Share of tax
Share of results after tax
Amortisation of intangibles
Share of profit after tax
Reclassification from subsidiary
Additions
Disposals
Share of (losses)/gains taken to other comprehensive income
Dividends received from joint ventures
Foreign exchange rate movements
At 31 December
Goodwill and
intangibles
£m
Equity
interests
£m
200
—
—
—
(13)
(13)
—
—
—
—
—
(1)
186
1,655
30
—
30
—
30
—
94
(12)
(38)
(46)
64
1,747
2022
Total
£m
1,855
30
—
30
(13)
17
—
94
(12)
(38)
(46)
63
1,933
Goodwill and
intangibles
£m
221
—
—
—
(9)
(9)
—
—
(12)
—
—
—
200
Equity
interests
£m
1,481
195
(8)
187
—
187
32
31
(39)
5
(37)
(5)
1,655
2021
Total
£m
1,702
195
(8)
187
(9)
178
32
31
(51)
5
(37)
(5)
1,855
Additions of £94 million (2021: £31 million) in 2022 relate to the Group's holdings in property undertakings.
Disposals of £12 million in 2022 relate to the Group's holdings in property management undertakings. Disposals of £51 million in 2021
include the disposal of the Group's interest in its joint venture in Turkey (see note 2(b)).
The Group’s share of total comprehensive income related to joint venture entities is £(21) million (2021: £183 million).
(ii) The carrying amount at 31 December comprised:
Property management undertakings
Long-term business undertakings
Total
Goodwill and
intangibles
£m
—
186
186
Equity
interests
£m
982
765
1,747
2022
Total
£m
982
951
1,933
Goodwill and
intangibles
£m
—
200
200
Equity
interests
£m
916
739
2021
Total
£m
916
939
1,655
1,855
The property management undertakings perform property ownership and management activities, and are incorporated and operate in the
UK. All such investments are held by subsidiary entities.
The long-term business undertakings perform life insurance activities. All investments in such undertakings are unlisted. All investments in
such undertakings are held by subsidiaries, except for the shares in the Chinese joint venture, Aviva-COFCO Life Insurance Company Limited,
which are held by Aviva plc. The Group’s share of net assets of that company is £381 million (2021: £437 million) and the carrying value in
Aviva plc is at cost of £123 million (2021: £123 million).
(iii) No joint ventures are considered to be material from a Group perspective (2021: none). The Group’s principal joint ventures are as
follows:
Name
Ascot Real Estate Investments LP
2-10 Mortimer Street Limited Partnership
Aviva-COFCO Life Insurance Company Limited
Singapore Life Holdings Pte Limited (formerly
known as Aviva Singlife Holdings Pte. Ltd)
Nature of activities
Property management
Property management
Life insurance
Principal place of business
UK
UK
China
Insurance holding company
Singapore
Proportion of
ownership interest
2022
50.00%
50.00%
50.00%
2021
50.00%
50.00%
50.00%
25.95%
25.95%
The Group has no joint ventures whose non-controlling interest (NCI) is material on the basis of their share of profit/(loss).
(iv) From time to time group joint ventures may receive liability claims or become involved in actual or threatened related litigation.
The joint ventures have no contingent liabilities at 31 December 2022 (2021: £65 million) to which the Group has significant exposure.
The Group has no commitments to provide funding to property management joint ventures (2021: £20 million).
In certain jurisdictions the ability of joint ventures to transfer funds in the form of cash dividends or to repay loans and advances made by
the Group is subject to local corporate or insurance laws and regulations and solvency requirements.
Aviva plc
3.62
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
17 – Interests in, and loans to, joint ventures continued
(b) Impairment testing
Interests in joint ventures are tested for impairment of goodwill and intangibles when there is an indicator of impairment. They are tested
for impairment by comparing the carrying value of the cash generating unit to which the goodwill or intangible relates to the recoverable
value of that cash generating unit. Recoverable amounts for long-term and general insurance businesses are calculated on a consistent
basis with that used for impairment testing of goodwill, as set out in note 15(b). The recoverable amount of property management
undertakings is the fair value less costs to sell off the joint venture, measured in accordance with the Group’s accounting policy for
investment property (see accounting policy Q).
18 – Interests in, and loans to, associates
This note analyses our interests in entities which we do not control but where we have significant influence.
(a) Carrying amount and details of associates
(i) The movements in the carrying amount comprised:
At 1 January
Share of results before tax
Share of tax
Share of results after tax
Impairment
Reversal of impairment
Share of loss after tax
Reclassification to subsidiary
Additions
Disposals
Reduction in group interest
Reclassification to investment
Dividends received from associates
Foreign exchange rate movements
At 31 December
2022
Equity
interests
£m
2021
Equity
interests
£m
118
(11)
—
(11)
(23)
15
(19)
(73)
7
—
(1)
—
(1)
10
41
263
(22)
—
(22)
—
—
(22)
—
—
(77)
(5)
—
(36)
(5)
118
On 28 September 2022 the Group acquired an additional 25% of the ordinary share capital of Aviva India (see note 2(a)), increasing the
Group’s total shareholding from 49% to 74% giving Aviva a controlling interest in the entity. On that date, Aviva derecognised its investment
in associate and recognised Aviva India as a consolidated subsidiary. Immediately prior to the acquisition, the fair value of Aviva's 49%
interest in Aviva India was £73 million. The investment was remeasured to fair value in accordance with IFRS 3 Business combinations,
resulting in a reversal of historic impairment of £15 million. The investment in associate was subsequently derecognised at its revalued
amount.
Disposals of £77 million in 2021 relate to the Group's interest in SCPI Ufifrance Immobilier and SCPI Logipierre 1 which were disposed of as
part of the disposal of Aviva France (see note 2(b)).
The Group’s share of total comprehensive income related to associates is £(19) million (2021: £(22) million).
(ii) No associates are considered to be material from a Group perspective (2021: none). All investments in principal associates are held by
subsidiaries. The Group’s principal associates are as follows:
Name
Aviva Life Insurance Company India Limited
AI UK Commercial Real Estate Debt Fund
Nature of activities
Life insurance
Property Management
Principal place of business
India
UK
Proportion of
ownership interest
2022
—
20.86%
2021
49.00%
20.90%
(iii) The associates have no contingent liabilities to which the Group has significant exposure. The Group has commitments to provide
funding to property management associates of £2 million (2021: £2 million).
In certain jurisdictions the ability of associates to transfer funds in the form of cash dividends or to repay loans and advances made by the
Group is subject to local corporate or insurance laws and regulations and solvency requirements.
(b) Impairment testing
The recoverable amount of property management undertakings is the fair value less costs to sell off the associate, measured in accordance
with the Group’s accounting policy for investment property (see accounting policy Q). An impairment charge of £23 million (2021: £nil) has
been recognised in the income statement and primarily relates to the full impairment of an investment held by the UK & Ireland Life business.
Aviva plc
3.63
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
19 – Property and equipment
This note analyses our property and equipment, the total of which primarily consists of properties occupied by Group companies.
Cost or valuation
At 1 January 2021
Additions
Disposals1
Fair value losses
Modification of right-of-use assets
Foreign exchange rate movements
At 31 December 2021
Additions
Disposals
Fair value losses
Modification of right-of-use assets
Foreign exchange rate movements
At 31 December 2022
Depreciation and impairment
At 1 January 2021
Charge for the year
Disposals
Impairment charge
Foreign exchange rate movements
At 31 December 2021
Depreciation charge for the year
Disposals
Impairment charge
Foreign exchange rate movements
At 31 December 2022
Carrying amount
At 31 December 2021
At 31 December 2022
Owner occupied properties
Freehold
£m
Leasehold
£m
Motor vehicles
£m
Computer
equipment
£m
Other assets
£m
Total
£m
371
2
(334)
(3)
—
(9)
27
—
(17)
—
—
(1)
9
(36)
—
25
(1)
—
(12)
—
11
—
—
(1)
1,216
74
(133)
—
—
(8)
1,149
6
(2)
—
(36)
8
1,125
(879)
(52)
78
(6)
4
(855)
(33)
1
—
(8)
(895)
15
8
294
230
14
—
(7)
—
—
—
7
—
(1)
—
—
—
6
(7)
(1)
4
—
1
(3)
—
—
—
—
(3)
4
3
101
9
(42)
—
—
—
68
14
(19)
—
—
1
64
(75)
(11)
37
(2)
1
(50)
(14)
18
—
(2)
(48)
268
5
(88)
—
—
(7)
178
8
(11)
—
—
6
181
(136)
(17)
68
—
4
(81)
(10)
4
—
(1)
(88)
1,970
90
(604)
(3)
—
(24)
1,429
28
(50)
—
(36)
14
1,385
(1,133)
(81)
212
(9)
10
(1,001)
(57)
34
—
(11)
(1,035)
18
16
97
93
428
350
1.
In 2021, property and equipment of £157 million was disposed of as part of the disposal of operations in France and Poland
Owner-occupied properties, excluding £230 million (2021: £294 million) held under lease arrangements, are stated at their revalued
amounts, as assessed by qualified external valuers. The valuation assessment adopts market-based evidence and is in line with guidance
from the International Valuation Standards Committee and the requirements of IAS 16 Property, Plant and Equipment.
Owner-occupied properties held under lease arrangements are stated at amortised cost and are amortised on a straight-line basis over the
lease term, unless the carrying value of the leased asset exceeds the recoverable amount. Where this is the case, the asset is impaired to its
recoverable amount and the impaired carrying value is amortised on a straight-line basis over the remainder of the lease term. For further
information on the Group’s lease arrangements see note 21.
If owner-occupied properties (freehold and leasehold) were stated on a historical cost basis, the carrying amount would be £134 million
(2021: £184 million).
Aviva plc
3.64
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
20 – Investment property
This note gives details of the properties we hold for long-term rental yields or capital appreciation.
Carrying value
At 1 January
Additions
Capitalised expenditure on existing properties
Fair value (losses)/gains
Disposals1
Foreign exchange rate movements
At 31 December
Freehold
£m
Leasehold
£m
5,333
313
56
(923)
(319)
16
4,476
1,670
14
51
(227)
(97)
12
1,423
2022
Total
£m
7,003
327
107
(1,150)
(416)
28
5,899
Freehold
£m
Leasehold
£m
9,906
1,252
84
1,062
(6,620)
(351)
5,333
1,463
148
21
127
(72)
(17)
1,670
2021
Total
£m
11,369
1,400
105
1,189
(6,692)
(368)
7,003
1.
In 2021, Investment property of £5,155 million was disposed of as part of the disposal of Aviva France
See note 22 for further information on the fair value measurement and valuation techniques of investment property.
The fair value of investment properties leased to third parties under operating leases at 31 December 2022 was £5,676 million
(2021: £6,712 million). Future contractual aggregate minimum lease rentals receivable under the non-cancellable portion of these leases are
given in note 21.
21 – Lease assets and liabilities
The Group’s leased assets primarily consist of properties occupied by Group companies carried at amortised cost (see note 19), leasehold
investment properties carried at fair value (see note 20) which are sublet to third parties and real estate long income finance leases
(see note 27). Leasehold investment properties are measured in accordance with IAS 40 Investment Property (see accounting policy Q).
Although the Group is exposed to changes in the residual value at the end of the current leases to third parties on investment property, the
Group typically enters into new operating leases and therefore is not expected to immediately realise any reduction in residual value at the
end of these leases. Expectations about the future residual values are reflected in the fair value of the properties.
(i) The following amounts in respect of leased assets have been recognised in the Group’s consolidated income statement.
Interest expense on lease liabilities
Total lease expenses recognised in the income statement
2022
£m
9
9
2021
£m
11
11
Total cash outflows recognised in the period in relation to leases were £63 million (2021: £71 million). Expenses recognised in the Group
consolidated income statement in relation to short-term and low-value leases were £nil (2021: £nil). Variable lease payments not included in
the measurement of lease liabilities were £nil (2021: £nil).
(ii) The following table analyses the right-of-use assets relating to leased properties occupied by Group companies.
Balance at 1 January
Additions
Disposals
Foreign exchange rate movements
Impairment of right-of-use assets
Depreciation
Modification of right-of-use assets
Balance at 31 December
2022
£m
294
6
(1)
—
—
(33)
(36)
230
2021
£m
338
74
(56)
(4)
(6)
(52)
—
294
There were no gains arising from sale and leaseback transactions during the year. Included within the income statement is £3 million
(2021: £3 million) of income in respect of sublets of right-of-use assets. There was no impairment of right-of-use assets in 2022. In 2021,
£7 million impairment arose from the reduction in the Group's property footprint.
(iii) Lease liabilities included within note 52 total £386 million (2021: £472 million). Future contractual aggregate minimum lease payments
are as follows:
Within 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2022
£m
70
196
165
431
2021
£m
67
187
182
436
Aviva plc
3.65
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
21 – Lease assets and liabilities continued
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and
adjusted against the right-of-use asset.
The lease agreements do not impose any covenants other than the security interest in the leased assets that are held by the lessor.
(iv) Future contractual aggregate minimum lease rentals receivable under non-cancellable operating leases are as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Later than 5 years
(v) Future contractual aggregate minimum lease rentals receivable under non-cancellable finance leases are as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Later than 5 years
2022
£m
227
198
175
154
128
1,162
2,044
2022
£m
4
4
4
4
4
157
177
2021
£m
229
206
178
153
130
1,136
2,032
2021
£m
4
3
3
3
3
145
161
Finance income on the net investment in finance leases during the period was £nil (2021: £nil).
Unearned finance income in respect of finance leases at 31 December 2022, representing the difference between the gross and net
investment in the leases, was £34 million (2021: £32 million). Unguaranteed residual value in respect of finance leases was £nil (2021: £nil).
22 – Fair value methodology
This note explains the methodology for valuing our assets and liabilities measured at fair value and for fair value disclosures. It also provides
an analysis of these according to a fair value hierarchy, determined by the market observability of valuation inputs.
(a) Basis for determining fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.
Level 1
Inputs to Level 1 fair values are quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can access at
the measurement date. Level 1 inputs already reflect market participant views of climate change impacts and no further adjustments are
made to these values.
Level 2
Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full
term of the instrument. Level 2 inputs include the following:
• Quoted prices for similar assets and liabilities in active markets;
• Quoted prices for identical or similar assets and liabilities in markets that are not active, the prices are not current, or price quotations
vary substantially either over time or among market makers, or in which little information is released publicly;
• Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable
at commonly quoted intervals, implied volatilities and credit spreads); and
• Market corroborated inputs.
Where we use broker quotes and no information as to the observability of inputs is provided by the broker, the investments are classified
as follows:
• Where the broker price is validated by using internal models with market observable inputs and the values are similar, we classify
the investment as Level 2; and
• In circumstances where internal models are not used to validate broker prices, or the observability of inputs used by brokers is
unavailable, the investment is classified as Level 3.
Aviva plc
3.66
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
22 – Fair value methodology continued
Level 3
Inputs to Level 3 fair values are unobservable inputs for the asset or liability. Unobservable inputs may have been used to measure fair value
to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the
asset or liability at the measurement date. However, the fair value measurement objective remains the same, i.e. an exit price at the
measurement date from the perspective of a market participant that holds the asset or owes the liability. Unobservable inputs reflect the
assumptions the business unit considers that market participants would use in pricing the asset or liability. Examples are investment
properties and commercial and equity release mortgage loans.
The majority of the Group’s assets and liabilities measured at fair value are based on quoted market information or observable market data.
Of the total assets and liabilities measured at fair value 15.9% (2021: 15.7%) of assets and 0.9% (2021: 0.9%) of liabilities are based on
estimates and recorded as Level 3. Where estimates are used, these are based on a combination of independent third-party evidence and
internally developed models, calibrated to market observable data where possible. Third-party valuations using significant unobservable
inputs validated against Level 2 internally modelled valuations are classified as Level 3, where there is a significant difference between the
third-party price and the internally modelled value. Where the difference is insignificant, the instrument would be classified as Level 2.
(b) Changes to valuation techniques
There were no changes in the valuation techniques during the year compared to those described in the Group's 2021 Annual Report
and Accounts.
(c) Comparison of the carrying amount and fair values of financial instruments
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities, excluding those classified as held for
sale. These amounts may differ where the assets or liabilities are carried on a measurement basis other than fair value, e.g. amortised cost.
Financial assets
Loans (note 23(a))1
Financial investments (note 26(a))
Fixed maturity securities
Equity securities
Other investments (including derivatives)
Financial liabilities
Non-participating investment contract (note 43(a))
Net asset value attributable to unitholders
Borrowings (note 51(a))1
Derivative liabilities (note 59(b))
2022
Carrying
amount
£m
Fair value
£m
29,646
224,086
103,776
85,790
34,520
29,647
224,086
103,776
85,790
34,520
2021
Carrying
amount
£m
38,624
264,961
133,251
95,169
36,541
Fair value
£m
38,622
264,961
133,251
95,169
36,541
140,990
14,080
6,499
9,541
140,990
14,080
6,755
9,541
151,115
16,427
8,375
5,763
151,115
16,427
7,344
5,763
1. Within the fair value total, the estimated fair value has been provided for the portion of loans and borrowings that are carried at amortised cost
Fair value of the following assets and liabilities is approximate to their carrying amounts
• Receivables
• Cash and cash equivalents
• Loans at amortised cost
• Payables and other financial liabilities
As set out in accounting policy A, the Group has chosen to defer application of IFRS 9 Financial instruments due to its activities being
predominantly connected with insurance. To facilitate comparison with entities applying IFRS 9 in full, the table below splits the Group’s
financial instruments between those which are considered to have contractual terms which are solely payments of principal and interest
(SPPI) on the principal amount outstanding and all other instruments (non-SPPI). The SPPI category excludes instruments held for trading
or managed and evaluated on a fair value basis.
Fixed maturity securities
Equity securities
Loans
Receivables
Cash and cash equivalents
Accrued income and interest
Other investments
Total
SPPI –
Fair value
£m
—
—
3,726
4,750
21,441
163
1
30,081
2022
Non-SPPI –
Fair value¹
£m
103,776
85,790
25,920
1,293
1,064
2,324
34,519
254,686
SPPI –
Fair value
£m
—
—
8,642
4,640
10,100
284
—
23,666
2021
Non-SPPI –
Fair value¹
£m
133,251
95,169
29,980
1,448
2,385
1,833
36,541
300,607
1.
Instruments within this category include financial assets that meet the definition of held for trading, financial assets that are managed and evaluated on a fair value basis, and instruments with contractual terms that do
not give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding
Aviva plc
3.67
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
22 – Fair value methodology continued
There has been no change (2021: £2 million increase) in the fair value of SPPI instruments and a £47,608 million decrease
(2021: £3,838 million decrease) in the fair value of non-SPPI instruments during the reporting period, primarily driven by a significant
increase in interest rates reducing the value of the fixed maturity securities.
(d) Fair value hierarchy analysis
An analysis of assets and liabilities measured at amortised cost and fair value categorised by fair value hierarchy is given below.
2022
Recurring fair value measurements
Investment property (note 20)
Loans (note 23(a))
Financial investments measured at fair value (note 26(a))
Fixed maturity securities
Equity securities
Other investments (including derivatives)
Financial assets classified as held for sale
Total
Financial liabilities measured at fair value
Non-participating investment contracts (note 43(a))1
Net asset value attributable to unit holders
Borrowings (note 51(a))
Derivative liabilities (note 59(b))
Financial liabilities classified as held for sale
Total
Fair value hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
Sub-total
Fair value
£m
Amortised
cost
£m
Total carrying
value
£m
—
—
—
—
5,899
25,920
5,899
25,920
—
3,727
5,899
29,647
22,140
85,459
28,192
—
135,791
140,990
14,070
—
200
—
155,260
74,448
—
5,021
—
79,469
—
—
—
8,986
—
8,986
7,188
331
1,307
—
40,645
103,776
85,790
34,520
—
255,905
—
10
1,091
355
—
1,456
140,990
14,080
1,091
9,541
—
165,702
—
—
—
—
3,727
103,776
85,790
34,520
—
259,632
—
—
5,664
—
—
5,664
140,990
14,080
6,755
9,541
—
171,366
1.
In addition to the balances in this table, included within reinsurance assets in the consolidated statement of financial position and note 45 are £5,254 million of non-participating 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.
2022
Non-recurring fair value measurement
Properties occupied by group companies
Total
Fair value hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
Total
fair value
£m
—
—
—
—
8
8
8
8
IFRS 13 Fair Value Measurement permits assets and liabilities to be measured at fair value on either a recurring or non-recurring basis.
Recurring fair value measurements are those that other IFRSs require or permit in the statement of financial position at the end of each
reporting period, whereas non-recurring fair value measurements of assets or liabilities are those that other IFRSs require or permit in the
statement of financial position in particular circumstances. The value of freehold owner-occupied properties measured on a non-recurring
basis at 31 December 2022 was £8 million (2021: £15 million), stated at their revalued amounts in line with the requirements of IAS 16
Property, Plant and Equipment.
2021
Recurring fair value measurements
Investment property (note 20)
Loans (note 23(a))
Financial investments measured at fair value (note 26(a))
Fixed maturity securities
Equity securities
Other investments (including derivatives)
Financial assets classified as held for sale
Total
Financial liabilities measured at fair value
Non-participating investment contracts (note 43(a))1
Net asset value attributable to unit holders
Borrowings (note 51(a))
Derivative liabilities (note 59(b))
Financial liabilities classified as held for sale
Total
Fair value hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
Sub-total
Fair value
£m
Amortised cost
£m
Total carrying
value
£m
—
—
34,520
94,819
29,043
—
158,382
151,115
16,417
—
410
—
167,942
—
—
90,254
—
5,968
—
96,222
—
—
—
4,908
—
4,908
7,003
29,980
8,477
350
1,530
—
47,340
—
10
1,140
445
—
1,595
7,003
29,980
133,251
95,169
36,541
—
301,944
151,115
16,427
1,140
5,763
—
174,445
—
8,644
—
—
—
—
8,644
—
—
6,204
—
—
6,204
7,003
38,624
133,251
95,169
36,541
—
310,588
151,115
16,427
7,344
5,763
—
180,649
1.
In addition to the balances in this table, included within reinsurance assets in the consolidated statement of financial position and note 45 are £5,132 million of non-participating 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.
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22 – Fair value methodology continued
2021
Non-recurring fair value measurement
Properties occupied by group companies
Total
Fair value hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
—
—
—
—
15
15
Total
fair value
£m
15
15
(e) Valuation approach for fair value assets and liabilities classified as Level 2
Please see note 22(a) for a description of typical Level 2 inputs.
Fixed maturity securities, in line with market practice, are generally valued using an independent pricing service. These valuations are
determined using independent external quotations from multiple sources and are subject to a number of monitoring controls, such as
monthly price variances, stale price reviews and variance analysis. Pricing services, where available, are used to obtain the third-party
broker quotes. Where pricing services providers are used, a single valuation is obtained and applied. When prices are not available from
pricing services, quotes are sourced from brokers.
Over-the-counter derivatives are valued using broker quotes or models such as option pricing models, simulation models or a combination
of models. The inputs for these models include a range of factors which are deemed to be observable, including current market and
contractual prices for underlying instruments, period to maturity, correlations, yield curves and volatility of the underlying instruments.
Unit Trusts and other investment funds (included under the other investments category) are valued using net asset values which are not
subject to a significant adjustment for restrictions on redemption or for limited trading activity.
(f) Transfers between levels of the fair value hierarchy
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred
between levels of the fair value hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of the reporting period.
Transfers between Level 1 and Level 2
There were no significant transfers between Level 1 and Level 2 (2021: no significant transfers).
Transfers to/from Level 3
£698 million (2021: £189 million) of assets transferred into Level 3 and £509 million (2021: £1,370 million) of assets transferred out of Level 3
relate principally to fixed maturity securities held by our business in the UK. These are transferred between Levels 2 and 3 depending on the
availability of observable inputs and whether the counterparty and broker quotes are corroborated using valuation models with observable
inputs.
£297 million (2021: £nil) of liabilities transferred into Level 3 relate to derivatives held by our business in the UK. These have been transferred
into Level 3 following a change to using an internally-derived valuation model from the previous counterparty supplied valuations to ensure
consistency of approach with the associated assets and liabilities held at fair value.
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22 – Fair value methodology continued
(g) Further information on Level 3 assets and liabilities:
The table below shows movement in the Level 3 assets and liabilities measured at fair value.
Investment
Property
£m
Fixed
maturity
securities
£m
Equity
securities
£m
Loans
£m
Assets
Other
investments
(including
derivatives)
£m
Financial
assets
classified
as held for
sale
£m
Net asset
value
attributable
to
unitholders
£m
Derivative
liabilities
£m
Borrowings
£m
Liabilities
Financial
liabilities
classified
as held for
sale
£m
2022
Opening balance at 1 January 2022
Total net (losses)/gains recognised in the income
statement1
Purchases
Issuances
Disposals
Settlements
Transfers into Level 3
Transfers out of Level 3
Foreign exchange rate movements
Balance at 31 December 2022
7,003
29,980
8,477
350
1,530
434
—
2,274
—
(1,159) (6,691) (2,053)
4,979
139
(407) (2,496) (1,681)
—
—
—
9
25,920
—
666
(508)
13
7,188
—
—
—
28
5,899
11
18
—
(64)
—
5
—
11
331
(214)
190
—
(233)
—
27
(1)
8
1,307
1. Total net (losses)/gains recognised in the income statement includes realised (losses)/gains on disposals
(10)
(445) (1,140)
—
—
—
—
—
—
—
—
(10)
280
(1)
—
74
34
(297)
—
—
(22)
—
—
71
—
—
—
—
(355) (1,091)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Assets
2021
Opening balance at 1 January 2021
Total net gains/(losses) recognised in the income
statement1
Purchases
Issuances
Disposals
Settlements
Transfers into Level 3
Transfers out of Level 3
Foreign exchange rate movements
Balance at 31 December 2021
Liabilities
Financial
liabilities
classified
as held for
sale
£m
Investment
Property
£m
Fixed
maturity
securities
£m
Equity
securities
£m
Loans
£m
Other
investments
(including
derivatives)
£m
Financial
assets
classified
as held for
sale
£m
Net asset
value
attributable
to
unitholders
£m
Derivative
liabilities
£m
Borrowings
£m
11,369
29,839
19,053
407
6,659
1,033
(150)
(571)
(1,166)
(98)
1,206
1,505
—
(1,252)
3,639
142
1,288
—
(648)
(6,709) (2,374) (9,681)
—
—
—
(368)
—
—
—
(14)
—
189
(1,361)
(363)
7,003
29,980
8,477
19
18
—
(91)
—
—
(3)
—
350
(102)
170
—
17
13
—
(5,001) (1,043)
—
—
(6)
(190)
1,530
—
—
—
(20)
—
—
—
—
140
—
—
—
—
(10)
34
(9)
—
6
16
—
79
—
(445)
(52)
—
—
78
—
—
—
—
(1,140)
44
—
—
52
—
—
—
2
—
1. Total net gains/(losses) recognised in the income statement includes realised gains/(losses) on disposals
Total net losses recognised in the income statement in the year ended 31 December 2022 in respect of Level 3 assets measured at fair
value amounted to £10,106 million (2021: net losses of £760 million) with net gains in respect of liabilities of £258 million
(2021: net gains of £26 million). Net losses of £10,203 million (2021: net losses of £852 million) attributable to assets and net gains of
£258 million (2021: net losses of £18 million) attributable to liabilities relate to those still held at the end of the year.
The principal assets classified as Level 3, and the valuation techniques applied to them, are described below.
(i) Investment property
• Investment property is valued in the UK at least annually by external chartered surveyors in accordance with guidance issued by The Royal
Institution of Chartered Surveyors and using estimates during the intervening period. Outside the UK, valuations are produced by external
qualified professional appraisers in the countries concerned. The Group’s methodology requires external valuers in the UK to apply the
‘Sustainability and ESG in commercial property valuation and strategic advice’ guidance note issued by The Royal Institution of Chartered
Surveyors in December 2021. In a valuation context, sustainability encompasses a wide range of physical, social, environmental, and
economic factors that can affect value. The range of issues includes key environmental risks, such as flooding, energy efficiency and
climate, as well as matters of design, configuration, accessibility, legislation, management and fiscal considerations.
• Investment properties are valued on an income approach that is based on current rental income plus anticipated uplifts at the next rent
review, lease expiry, or break option taking into consideration lease incentives and assuming no further growth in the estimated rental
value of the property. The uplift and discount rates are derived from rates implied by recent market transactions on similar properties.
These inputs are deemed unobservable. The yield used to value investment property can vary significantly depending on a number of
factors including location, type of property and sector. The yield used to value the portfolio ranges from 100bps to 2160bps
(2021: 113bps to 2094bps) with higher yields predominately relating to properties in the retail and leisure sectors. Over 95% of the portfolio
is valued using spreads within the range from 100bps to 810bps (2021: 113bps to 870bps).
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(ii) Loans
• Commercial mortgage loans and Primary Healthcare loans held by our UK Life business are valued using a Portfolio Credit Risk Model.
This model calculates a Credit Risk Adjusted Value for each loan. The risk adjusted cash flows are discounted using a yield curve plus an
allowance for illiquidity. Loans valued using the Portfolio Credit Risk Model have been classified as Level 3 as the liquidity premium is
deemed to be non-market observable. At 31 December 2022 the liquidity premium used in the discount rate was 110 bps (2021: 150 bps).
Future capital expenditure costs of 0.9% per annum (2021: 0.6%) are included in the modelling of the Credit Risk Adjusted Value of the
loans to address climate change actions, including potential climate-related legislation changes. The impact is a reduction in the fair value
of the properties securing the loans.
• Equity release mortgage loans held by our UK Life business are valued using an internal model, with fair value initially being equal to the
transaction price. The value of these loans is dependent on the expected term of the mortgage and the forecast property value at the end
of the term and is calculated by adjusting future cash flows for credit risk and discounting using a yield curve plus an allowance for
illiquidity. At 31 December 2022 the illiquidity premium used in the discount rate was 155 bps (2021: 180 bps).
• The equity release mortgages have a no negative equity guarantee (‘NNEG’) such that the cost of any potential shortfall between the value
of the loan and the realised value of the property at the end of the term is recognised by a deduction to the value of the loan. Property
valuations at the reporting date are obtained by taking the most recent valuation for the property and indexing using an internal house
price index based on published Land Registry data. NNEG is calculated using base property growth rates reduced for the cost of potential
dilapidations, using a stochastic model. In addition, a cost of capital charge is applied to reflect the variability in these cash flows. The
base property growth rate assumption is RPI +0.75% (2021: RPI +0.75%) which includes a reduction to the growth rate of 0.5% per annum
for the potential impact of climate change actions. The modelled growth rates include an adjustment for the 5-year period 2023-2027 to
reflect the market view of short-term growth being lower than long-term growth. The combination of the adjusted rate over the first five
years and the base property growth rate equates to a long-term average growth rate of 3.1% per annum at 31 December 2022 (2021: 3.9%)
over a twenty five year projection. After applying the cost of capital charge, dilapidations and the stochastic distribution, the effective net
long-term growth rate equates to 0.4% per annum (2021: 0.6%).
• Infrastructure and Private Finance Initiative (PFI) loans held by our UK Life business are valued using a discounted cash flow model.
This adds spreads for credit and illiquidity to a risk-free discount rate. Credit spreads used in the discount rate are calculated using an
internally developed methodology which depends on the credit rating of each loan, credit spreads on publicly traded bonds and an
estimated recovery rate in event of default and are deemed to be unobservable. At 31 December 2022, the illiquidity premium used in
the discount rate was 115bps (2021: 95bps) for the PFI loans and ranged from 25bps to 210bps (2021: 25bps to 210bps) for the
infrastructure loans.
(iii) Fixed maturity securities
• Structured bond-type, non-standard debt products and privately placed notes held by our life business in the UK do not trade in an
active market. These fixed maturity securities are valued using discounted cash flow model, designed to appropriately reflect the credit
and illiquidity risk of the instrument. These bonds have been classified as Level 3 because the valuation approach includes significant
unobservable inputs and an element of subjectivity in determining appropriate credit and illiquidity spreads.
• Other fixed maturity securities held by our life business in the UK which are not traded in an active market have been valued using third-
party or counterparty valuations. These prices are considered to be unobservable due to infrequent market transaction.
• The unobservable credit and illiquidity spreads used in the discount rate range from 25bps to 604bps (2021: 24bps to 822bps) with 99%
of the modelled assets valued using spreads within the range from 25bps to 344bps (2021: 24bps to 297bps).
(iv) Equity securities
• Equity securities which primarily comprise private equity holdings held in the UK are valued by a number of third-party specialists.
These are valued using a range of techniques including earnings multiples, forecast cash flows and price/earnings ratios which are
deemed to be unobservable.
(v) Other investments (including derivatives)
• Other investments are held for index-linked, unit-linked and with-profit funds and are valued based on external valuation reports
received from fund managers. The investments consist of:
– Unit trusts;
– Other Investment funds including property funds; and
– Derivatives.
• Where valuations are at a date other than the balance sheet date, as is the case for private equity funds, adjustments are made for items
such as subsequent draw-downs and distributions and the fund manager's carried interest.
(vi) Liabilities
• The principal liabilities classified as Level 3 are securitised mortgage loan notes, presented within Borrowings, which are valued using
a similar technique to the related Level 3 securitised mortgage assets. These liabilities are included within the relevant liability category
within the sensitivity table below.
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Sensitivities
The valuation of level 3 assets involves a high degree of judgement and estimation uncertainty due to the reliance of valuation models
on unobservable inputs. Where possible, the Group tests the sensitivity of the fair values of Level 3 assets and liabilities to changes in
unobservable inputs to reasonable alternatives. Level 3 valuations are sourced from independent third parties when available and,
where appropriate, validated against internally-modelled valuations, third-party models or broker quotes. Where third-party pricing
sources are unwilling to provide a sensitivity analysis for their valuations, the Group undertakes, where feasible, sensitivity analysis on
the following basis:
• For third-party valuations validated against internally-modelled valuations using significant unobservable inputs, the sensitivity of the
internally-modelled valuation to changes in unobservable inputs to a reasonable alternative is determined.
• For third-party valuations either not validated or validated against a third-party model or broker quote, the third-party valuation in its
entirety is considered an unobservable input. Sensitivities are determined by flexing inputs of internal models to a reasonable alternative,
including the yield, NAV multiple or other suitable valuation multiples of the financial instrument implied by the third-party valuation.
For example, for a fixed income security the implied yield would be the rate of return which discounts the security’s contractual cash flows
to equal the third-party valuation.
The tables below show the sensitivity of the fair value of Level 3 assets and liabilities to changes in unobservable inputs to a reasonable
alternative:
2022
Investment property
Loans
Commercial mortgage loans and Primary Healthcare
loans
Equity release mortgage loans
Infrastructure and Private Finance Initiative (PFI) loans
Other
Fixed maturity securities
Structured bond-type and non-standard debt products
Privately placed notes
Other fixed maturity securities
Equity securities
Other investments
Property Funds
Other investments (including derivatives)
Liabilities
Borrowings
Other liabilities (including derivatives)
Total Level 3 investments
1. On discount rate spreads
2. Dependent on investment category
Fair value
£bn Most significant unobservable input
5.9 Equivalent rental yields
Illiquidity premium
9.4
Base property growth rate
9.6 Base property growth rate
Current property market values
5.3 Illiquidity premium
1.6 Illiquidity premium
Reasonable alternative
+/-5-10%
+/-20 bps
+/-100 bps p.a.
+/-40 bps p.a.
+/-10%
+/-25 bps1
+/-25 bps1
0.4 Market spread (credit, liquidity and other)
2.9 Credit spreads
3.9 Credit and liquidity spreads
0.3 Market multiples applied to net asset values
+/-25 bps
+/-25 bps1
+/-20-25 bps
+/-25%
0.2 Market multiples applied to net asset values
1.1 Market multiples applied to net asset values
+/-15-20%
+/-10-40%2
(1.1) Illiquidity premium
(0.4) Independent valuation vs counterparty
39.1
+/-50 bps
N/A
Sensitivities
Negative
impact
£bn
Positive
impact
£bn
0.3
(0.3)
0.1
0.1
0.2
0.2
0.2
—
—
0.1
0.1
0.1
—
0.1
—
—
1.5
(0.1)
(0.1)
(0.2)
(0.2)
(0.2)
—
—
(0.1)
(0.1)
(0.1)
—
(0.1)
—
—
(1.5)
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2021
£bn Most significant unobservable input
Reasonable alternative
Fair value
Sensitivities
Negative
impact
£bn
Positive
impact
£bn
Investment property
Loans
Commercial mortgage loans and Primary Healthcare
loans
Equity release mortgage loans
Infrastructure and Private Finance Initiative (PFI) loans
Other
Fixed maturity securities
Structured bond-type and non-standard debt products
Privately placed notes
Other fixed maturity securities
Equity securities
Other investments
Property Funds
Other investments (including derivatives)
Liabilities
Borrowings
Other liabilities (including derivatives)
Total Level 3 investments
1. On discount rate spreads
2. Dependent on investment category
7.0 Equivalent rental yields
+/-5-10%
0.4
(0.4)
11.7 Illiquidity premium
Base property growth rate
11.9 Base property growth rate
Current property market values
6.1 Illiquidity premium
0.3 Illiquidity premium
+/-20 bps
+/-100 bps p.a.
+/-40 bps p.a.
+/-10%
+/-25 bps1
+/-25 bps1
0.5 Market spread (credit, liquidity and other)
3.7 Credit spreads
4.3 Credit and liquidity spreads
0.3 Market multiples applied to net asset values
+/-25 bps
+/-25 bps1
+/-20-25 bps
+/-25%
0.2 Market multiples applied to net asset values
1.3 Market multiples applied to net asset values
+/-15-20%
+/-10-40%2
(1.1) Illiquidity premium
(0.5) Independent valuation vs counterparty
45.7
+/-50 bps
N/A
0.1
0.1
0.2
0.3
0.2
—
—
0.1
0.1
0.1
—
0.2
0.1
—
1.9
(0.1)
(0.1)
(0.2)
(0.3)
(0.2)
—
—
(0.1)
(0.1)
(0.1)
—
(0.2)
(0.1)
—
(1.9)
The above tables demonstrate the effect of a change in one unobservable input while other assumptions remain unchanged. In reality,
there may be a correlation between the unobservable inputs and other factors. It should also be noted that some of these sensitivities
are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results.
(h) Liabilities not carried at fair value for which fair value is disclosed
The table below shows the fair value and fair value hierarchy for those liabilities not carried at fair value.
2022
Liabilities not carried at fair value
Borrowings
2021
Liabilities not carried at fair value
Borrowings
Fair value hierarchy
As recognised
in the
consolidated
statement of
financial
position line
item
£m
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total fair
value
£m
51(a)
5,664
5,212
52
144
5,408
Fair value hierarchy
As recognised
in the
consolidated
statement of
financial
position line
item
£m
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total fair
value
£m
51(a)
6,204
7,012
204
19
7,235
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23 – Loans
This note analyses the loans our Group companies have made, the majority of which are mortgage loans.
(a) Carrying amounts
The carrying amounts of loans were as follows:
Policy loans
Loans to banks
Healthcare, infrastructure & PFI other loans
UK securitised mortgage loans (see note 24)
Non-securitised mortgage loans
Other loans
Total
2022
2021
At fair value
through profit
or loss other
than trading
£m
1
1,568
6,837
1,759
15,755
—
25,920
At amortised
cost
£m
13
2,913
—
—
—
801
3,727
At fair value
through profit
or loss other
than trading
£m
1
301
7,994
2,231
19,453
—
29,980
Total
£m
14
4,481
6,837
1,759
15,755
801
29,647
At amortised
cost
£m
13
7,996
—
—
—
635
8,644
Total
£m
14
8,297
7,994
2,231
19,453
635
38,624
Of the above total loans, £24,259 million (2021: £29,783 million) are due to be recovered in more than one year after the statement of
financial position date.
Loans at fair value
Fair values have been calculated by using cash flow models appropriate for each portfolio of loans. Further details of the fair value
methodology and models utilised are given in note 22 (g).
The cumulative change in fair value of loans attributable to changes in credit risk to 31 December 2022 was a £98 million loss
(2021: £475 million loss).
Healthcare, infrastructure and PFI other loans of £6,837 million (2021: £7,994 million) are secured against the income from healthcare and
educational premises.
Non-securitised mortgage loans include £7,784 million (2021: £9,699 million) of residential equity release mortgages, £5,971 million
(2021: £7,246 million) of commercial mortgages and £2,000 million (2021: £2,508 million) relating to UK primary healthcare and PFI
businesses. The healthcare and PFI mortgage loans 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 to the tenants to meet income service and provide for the debt to be reduced substantially over the
term of the loan. Although the loan principal is not government-guaranteed, the nature of these businesses and premises provides
considerable comfort of an ongoing business model and low risk of default.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets
mentioned above.
Loans at amortised cost
The carrying amount of these loans at both 31 December 2022 and 31 December 2021 was a reasonable approximation for their fair value.
(b) Analysis of loans carried at amortised cost
Policy loans
Loans to banks
Non-securitised mortgage loans
Other loans
Total
Amortised
Cost
£m
13
2,913
—
801
3,727
Impairment
£m
—
—
—
—
—
2022
Carrying
Value
£m
13
2,913
—
801
3,727
Amortised
Cost
£m
13
7,996
—
635
8,644
Impairment
£m
—
—
—
—
—
The movements in the impairment provisions on these loans were as follows:
At 1 January
Increase during the year
Foreign exchange rate movements
Write back following sale or reimbursement
At 31 December
2022
£m
—
—
—
—
—
2021
Carrying
Value
£m
13
7,996
—
635
8,644
2021
£m
(16)
(2)
1
17
—
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Notes to the consolidated financial statements continued
23 – Loans continued
(c) Collateral
Loans to banks include cash collateral received under stock lending arrangements (see note 60 for further information regarding these
collateral positions). The obligation to repay this collateral is included in payables and other financial liabilities (see note 52).
The Group holds collateral in respect of loans where it is considered appropriate in order to reduce the risk of non-recovery. This collateral
generally takes the form of liens or charges over properties and, in the case of policy loans, the underlying policy for the majority of the
loan balances above. In all other situations, the collateral must be in a readily realisable form, such as listed securities, and is held in
segregated accounts.
24 – Securitised mortgages and related assets
The Group, in its UK Life business, has loans receivable, secured by mortgages, which have then been securitised through non-recourse
borrowings. This note gives details of the relevant transactions.
(a) Description of current arrangements
In a UK long-term business subsidiary, Aviva Equity Release UK Limited (AER), the beneficial interest in certain portfolios of lifetime
mortgages has been transferred to five special purpose securitisation companies (the ERF companies), in return for initial consideration
and, at later dates, deferred consideration. The deferred consideration represents receipts accrued within the ERF companies after meeting
all their obligations to the note holders, loan providers and other third parties in the priority of payments. The purchases of the mortgages
were funded by the issue of fixed and floating rate notes by the ERF companies.
All the shares in the ERF companies are held by independent companies, whose shares are held on trust. Although AER does not own,
directly or indirectly, any of the share capital of the ERF companies or their parent companies, it has control of the securitisation companies,
and they have therefore been treated as subsidiaries in the consolidated financial statements. AER has no right to repurchase the benefit of
any of the securitised mortgage loans, other than in certain circumstances where AER is in breach of warranty or loans are substituted in
order to effect a further advance.
AER has purchased subordinated notes and granted subordinated loans to some of the ERF companies. In addition, Group companies have
invested £208 million (2021: £213 million) in loan notes issued by the ERF companies. These have been eliminated on consolidation through
offset against the borrowings of the ERF companies in the statement of financial position.
In all of the above transactions, the Company and its subsidiaries are not obliged to support any losses that may be suffered by the note
holders and do not intend to provide such support. Additionally, the notes were issued on the basis that note holders are only entitled to
obtain payment, of both principal and interest, to the extent that the available resources of the respective special purpose securitisation
companies, including funds due from customers in respect of the securitised loans, are sufficient and that note holders have no recourse
whatsoever to other companies in the Aviva Group.
(b) Carrying values
The following table summarises the securitisation arrangements:
Securitised mortgage loans (note 23) and loan notes issued
Other securitisation assets/(liabilities)
Loan notes held by third parties are as follows:
Total loan notes issued, as above
Less: Loan notes held by Group companies
Loan notes held by third parties (note 51(c)(i))
Securitised
assets
£m
1,759
286
2,045
2022
Securitised
liabilities
£m
(1,299)
(746)
(2,045)
Securitised
assets
£m
2,231
302
2,533
2021
Securitised
liabilities
£m
(1,353)
(1,180)
(2,533)
2022
£m
1,299
(208)
1,091
2021
£m
1,353
(213)
1,140
Aviva plc
3.75
Annual Report and Accounts 2022
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3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
25 – Interests in structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity, such as when 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 vehicles, which consist of:
• Debt securities comprising of securitisation vehicles that Aviva does not originate. These investments are comprised of a variety of debt
instruments, including asset-backed securities and other structured securities.
• Investment funds which include: hedge funds, liquidity funds, private equity funds, unit trusts, mutual funds and Private Finance Initiatives
(PFIs).
• Specialised investment vehicles include Open Ended Investment Companies (OEICs), Property Limited Partnerships (PLPs), Sociétés
d’Investissement a Capital Variable (SICAVs), Tax Transparent Funds (TTFs) and other investment vehicles.
The Group’s holdings in investment vehicles are subject to the terms and conditions of the respective investment vehicle’s offering
documentation and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles.
The investment manager makes investment decisions after extensive due diligence of the underlying investment vehicle including
consideration of its strategy and the overall quality of the underlying investment vehicle’s manager.
All of the investment vehicles in the investment portfolio are managed by portfolio managers who are compensated by the respective
investment vehicles for their services. Such compensation generally consists of an asset-based fee and a performance-based incentive fee,
and is reflected in the valuation of the investment vehicles.
(a) Interests in consolidated structured entities
The Group has determined that where it has control over investment vehicles, these investments are consolidated structured entities. As at
31 December 2022 the Group has granted loans to consolidated PLPs for a total of £82 million (2021: £77 million). The purpose of these
loans is to assist the consolidated PLPs to purchase or construct properties. The Group has also provided support, without having a
contractual obligation to do so, to certain consolidated PLPs via letters of support amounting to £73 million (2021: £73 million). The Group
has commitments to provide funding to consolidated structured entities of £311 million (2021: £372 million), primarily relating to a
commitment to provide funding to the Aviva Investors Climate Transition Real Assets fund.
The Group has also given support to five special purpose securitisation companies (the ERF companies) that are consolidated structured
entities. As set out in note 24 , at the inception of the securitisation vehicles, the UK subsidiary, Aviva Equity Release UK Limited (AER), has
granted subordinated loan facilities to some of the ERF companies. AER receives various fees in return for the services provided to the
entities. AER receives cash management fees based on the outstanding loan balance at the start of each quarter for the administration of
the loan note liabilities. AER receives portfolio administration fees as compensation for managing the mortgage assets. See note 24 for
details of securitised mortgages and related assets as at 31 December 2022.
As at the reporting date, the Group has no intentions to provide financial or other support in relation to any other investment vehicles.
(b) Interests in unconsolidated structured entities
As part of its investment activities, the Group invests in unconsolidated structured entities. As at 31 December 2022, the Group’s total
interest in unconsolidated structured entities was £42,153 million (2021: £45,511 million) on the Group’s statement of financial position. The
Group’s total interest in unconsolidated structured entities is classified as ‘Interests in and loans to joint ventures and associates’ and
‘financial investments held at fair value through profit or loss’. The Group does not sponsor any of the unconsolidated structured entities.
As at 31 December 2022, a summary of the Group’s interest in unconsolidated structured entities is as follows:
Structured debt securities1
Other investments and equity securities
Analysed as:
Unit trust and other investment vehicles
PLPs and property funds
Other (Including other funds and equity securities)2
Loans2
Total
Interest in,
and loans
to, joint
ventures
£m
Interest in,
and loans
to,
associates
£m
Financial
investments
£m
Loans
£m
2022
Total
assets
£m
Interest in,
and loans
to, joint
ventures
£m
Interest in,
and loans
to,
associates
£m
Financial
investments
£m
Loans
£m
2021
Total
assets
£m
—
980
—
980
—
—
980
—
40
3,726
29,450
—
—
3,726
30,470
—
40
—
—
40
29,211
222
17
—
33,176
—
—
—
7,957
7,957
29,211
1,242
17
7,957
42,153
—
916
—
916
—
—
916
—
55
4,454
30,627
—
—
4,454
31,598
—
55
—
—
55
30,380
246
1
—
35,081
—
—
—
9,459
9,459
30,380
1,217
1
9,459
45,511
1. Primarily reported within ‘other debt securities’ in note 26(a)
2. Loans include Healthcare, Infrastructure & PFI other loans along with certain non-securitised mortgage loans
The Group’s maximum exposure to loss related to the interests in unconsolidated structured entities is £42,153 million
(2021: £45,511 million).
Aviva plc
3.76
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
25 – Interests in structured entities continued
The majority of debt securities above are investment grade securities held by the UK business. In some cases, the Group may be required to
absorb losses from an unconsolidated structured entity before other parties when and if Aviva’s interest is more subordinated with respect
to other owners of the same security.
For commitments to property management joint ventures and associates, please see notes 17 and 18, respectively. The Group has not
provided any other financial or other support in addition to that described above as at the reporting date, and there are no intentions to
provide support in relation to any other unconsolidated structured entities in the foreseeable future.
In relation to risk management, disclosures on debt securities and investment vehicles are given in note 58(b) ‘Risk management’. In relation
to other guarantees and commitments that the Group provides in the course of its business, please see note 54(f) ‘Contingent liabilities and
other risk factors’.
Aviva’s interest in unconsolidated structured entities that it also manages at 31 December 2022 is £1,648 million (2021: £1,502 million) and
the total funds under management relating to these investments at 31 December 2022 is £17,381 million (2021: £16,843 million).
(c) Other interests in unconsolidated structured entities
The Group receives management fees and other fees in respect of its asset management businesses. The Group does not sponsor any of the
funds or investment vehicles from which it receives fees. Management fees received for investments that the Group manages, but does not
have a holding in, also represent an interest in unconsolidated structured entities. As these investments are not held by the Group, the
investment risk is borne by the external investors and therefore the Group’s maximum exposure to loss relates to future management fees.
The table below shows the assets under management of entities that the Group manages but does not have a holding in and the fees
earned from those entities.
Specialised investment vehicles:
Analysed as:
OEICs
PLPs
SICAVs
Total
2022
Investment
management
fees
£m
22
1
17
4
22
Assets under
management
£m
5,623
398
4,165
1,060
5,623
2021
Investment
management
fees
£m
24
2
16
6
24
Assets under
management
£m
6,036
253
4,257
1,526
6,036
Aviva plc
3.77
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
26 – Financial investments
This note analyses our financial investments by type and shows their cost and fair value. These will change from one period to the next
as a result of new business written, claims paid and market movements.
(a) Carrying amount
Financial investments comprise:
At fair value through
profit or loss
Trading
£m
Other than
trading
£m
2022
At fair value through
profit or loss
Total
£m
Trading
£m
Other than
trading
£m
2021
Total
£m
Fixed maturity securities
Debt securities
UK government
UK local authorities
Non-UK government (note 26(d))
Corporate bonds
Public utilities
Other corporate
Convertibles and bonds with warrants attached
Other
Certificates of deposit
Equity securities
Ordinary shares
Public utilities
Banks, trusts and insurance companies
Industrial miscellaneous and all other
Non-redeemable preference shares
Other investments
Unit trusts and other investment vehicles
Derivative financial instruments (note 59)
Deposits with credit institutions
Minority holdings in property management undertakings
Other investments – long-term
Other investments – short-term
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,916
—
—
—
—
4,916
19,570
88
24,038
19,570
88
24,038
5,536
42,245
—
2,240
93,717
10,059
103,776
5,536
42,245
—
2,240
93,717
10,059
103,776
5,047
16,215
64,369
85,631
159
85,790
29,211
—
56
222
114
1
29,604
5,047
16,215
64,369
85,631
159
85,790
29,211
4,916
56
222
114
1
34,520
Total financial investments
4,916
219,170
224,086
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,734
—
—
—
—
5,734
5,734
32,547
194
25,144
7,563
44,886
—
3,115
113,449
19,802
133,251
3,240
17,380
74,330
94,950
219
95,169
30,380
—
84
246
96
1
30,807
32,547
194
25,144
7,563
44,886
—
3,115
113,449
19,802
133,251
3,240
17,380
74,330
94,950
219
95,169
30,380
5,734
84
246
96
1
36,541
259,227
264,961
Of the above total, £88,793 million (2021: £95,373 million) is due to be recovered in more than one year after the statement of financial
position date.
Other debt securities of £2,240 million (2021: £3,115 million) include residential and commercial mortgage-backed securities, as well as
other structured credit securities.
Financial investments include £3,970 million (2021: £832 million) in respect of non-cash collateral pledged to third parties where the
economic rights are retained by the Group.
Aviva plc
3.78
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
26 – Financial investments continued
(b) Cost, unrealised gains and fair value
The following is a summary of the cost/amortised cost, gross unrealised gains and losses and fair value of financial investments:
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
Other investments – short-term
These are further analysed as follows:
At fair value through profit or loss
Available for sale
Cost/
amortised
cost
£m
110,029
75,981
33,737
300
56
228
137
1
220,469
220,469
—
220,469
2022
Unrealised
losses and
impairments
£m
Fair value
£m
Cost/amortised
cost
£m
(14,728) 103,776
85,790
(6,801)
122,852
74,371
(8,433)
(642)
—
29,211
4,916
56
(34)
(26)
—
222
114
1
(30,664) 224,086
(30,664) 224,086
—
(30,664) 224,086
—
23,152
4,966
84
242
101
1
225,769
225,769
—
225,769
Unrealised
gains
£m
8,475
16,610
3,907
5,258
—
28
3
—
34,281
34,281
—
34,281
Unrealised
losses and
impairments
£m
2021
Fair value
£m
(2,521)
(5,583)
133,251
95,169
(395)
(1,883)
—
30,380
5,734
84
(30)
(5)
—
(10,417)
246
96
1
264,961
(10,417)
—
(10,417)
264,961
—
264,961
Unrealised
gains
£m
12,920
26,381
7,623
2,651
—
34
—
—
49,609
49,609
—
49,609
All unrealised gains and losses and impairments on financial investments classified as fair value through profit or loss have been recognised
in the income statement.
Unrealised gains and losses on all financial instruments classified as fair value through profit or loss, recognised in the income statement in
the year, were a net loss of £48,683 million (2021: £4,381 million net gain). Of this net loss, £43,663 million net loss (2021: £6,862 million net
gain) related to investments designated as other than trading and £5,020 million net loss (2021: £2,481 million net loss) related to financial
investments designated as trading. The net loss is primarily driven by a significant increase in interest rates reducing the value of the fixed
maturity securities.
The movement in the unrealised gain/loss position reported in the statement of financial position during the year, shown in the table above,
includes foreign exchange movements on the translation of unrealised gains and losses on financial investments held by foreign
subsidiaries, which are recognised in other comprehensive income, as well as transfers due to the realisation of gains and losses on disposal
and the recognition of impairment losses.
(c) Financial investment arrangements
(i) Stock lending arrangements
The Group has entered into stock lending arrangements in the UK and overseas in accordance with established market conventions.
The majority of the Group’s stock lending transactions occur in the UK, where investments are lent to EEA-regulated, locally domiciled
counterparties and governed by agreements written under English law.
The Group receives collateral in order to reduce the credit risk of these arrangements, either in the form of securities or cash. See note 60
for further information regarding collateral positions held by the Group.
(ii) Other arrangements
In carrying on its Bulk Purchase Annuity business, the Group’s UK Life operation is required to place certain investments in trust on behalf
of the policyholders. Amounts become payable from the trust funds to the trustees if the Group were to be in breach of its payment
obligations in respect of policyholder benefits. At 31 December 2022, £1,778 million (2021: £2,425 million) of financial investments were
restricted in this way.
Certain financial investments are also required to be deposited under local laws in various overseas countries as security for the holders
of policies issued in those countries. Other investments are pledged as security collateral for bank letters of credit.
Aviva plc
3.79
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
26 – Financial investments continued
(d) Non-UK government fixed maturity securities (gross of non-controlling interests)
The following is a summary of non-UK government debt by issuer as at 31 December 2022, analysed by policyholder, participating
and shareholder funds.
Non-UK government fixed maturity securities
Austria
Belgium
France
Germany
Ireland
Italy
Netherlands
Norway
European supranational debt
Other European countries
Europe
Canada
United States
North America
Chile
China
India
Indonesia
Japan
Mexico
South Africa
South Korea
Other supranational debt
Other
Asia Pacific and other
Total
2022
£m
54
79
343
536
17
275
81
4
830
534
2,753
180
2,536
2,716
68
343
91
230
951
335
247
179
—
1,349
3,793
9,262
Policyholder
2021
£m
29
74
441
265
17
277
83
—
682
636
2,504
130
1,810
1,940
92
257
—
199
1,524
161
78
50
—
1,402
3,763
8,207
2022
£m
102
149
175
330
176
68
49
3
218
513
1,783
40
645
685
24
140
—
82
404
118
88
211
211
598
1,876
4,344
Participating
2021
£m
61
41
420
358
241
72
65
4
273
564
2,099
33
433
466
35
115
—
73
1,108
56
27
373
310
761
2,858
5,423
2022
£m
120
261
395
326
171
14
193
298
1,467
312
3,557
3,666
1,084
4,750
229
7
688
5
275
7
5
159
53
697
2,125
Shareholder
2021
£m
128
301
783
443
141
14
327
392
2,217
385
5,131
3,679
1,484
5,163
50
1
—
1
277
1
—
99
151
640
1,220
2022
£m
276
489
913
1,192
364
357
323
305
2,515
1,359
8,093
3,886
4,265
8,151
321
490
779
317
1,630
460
340
549
264
2,644
7,794
Total
2021
£m
218
416
1,644
1,066
399
363
475
396
3,172
1,585
9,734
3,842
3,727
7,569
177
373
—
273
2,909
218
105
522
461
2,803
7,841
10,432
11,514
24,038
25,144
Our direct shareholder asset exposure to government (non-UK) fixed maturity securities amounts to £10,432 million (2021: £11,514 million).
The primary exposures, relative to total shareholder (non-UK) government debt exposure, are to Canadian (35%), US (10%), Indian (7%),
French (4%) and German (3%) government fixed maturity securities.
27 – Receivables
This note analyses our total receivables.
Amounts owed by contract holders
Amounts owed by intermediaries
Deposits with ceding undertakings
Amounts due from reinsurers
Amounts due from brokers for investment sales
Amounts receivable for collateral pledged
Amounts due from government, social security and taxes
Finance lease receivables
Other receivables
Total
Expected to be recovered in less than one year
Expected to be recovered in more than one year
2022
£m
2,217
1,128
—
518
460
266
545
143
766
6,043
5,857
186
6,043
2021
£m
2,053
982
—
438
149
1,083
430
129
824
6,088
5,945
143
6,088
Exposure to significant concentrations of credit risk is limited due to the regulations applicable in most markets and the Group credit policy
and limits framework, which limits investments in individual assets and asset classes.
Finance lease receivables consist of long income finance leases on property.
Aviva plc
3.80
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
28 – Deferred acquisition costs
(a) Deferred acquisition costs – carrying amount
The carrying amount of deferred acquisition costs was as follows:
Deferred acquisition costs in respect of:
Insurance contracts – long-term business
Insurance contracts – general insurance and health business
Participating investment contracts – long-term business
Non-participating investment contracts – long-term business
Total
2022
£m
2021
£m
520
1,183
38
851
2,592
710
1,078
41
892
2,721
Deferred acquisition costs (DAC) on long-term business are generally recoverable in more than one year whereas such costs on general
insurance and health business are generally recoverable within one year. Of the above total, £1,239 million (2021: £1,524 million) is expected
to be recovered in more than one year after the statement of financial position date. For long-term business where amortisation of the DAC
balance depends on projected profits, the amount expected to be recovered is estimated and actual experience will differ.
(b) Deferred acquisition costs – movements in the year
The movements in deferred acquisition costs during the year were:
2022
Carrying amount at 1 January
Acquisition costs deferred during the year
Amortisation
Impact of assumption changes
Effect of portfolio transfers, acquisitions and disposals
Foreign exchange rate movements
Other movements
Carrying amount at 31 December
2021
Carrying amount at 1 January
Acquisition costs deferred during the year
Amortisation
Impact of assumption changes
Effect of portfolio transfers, acquisitions and disposals1
Foreign exchange rate movements
Carrying amount at 31 December
Long-term business
Insurance
contracts
£m
Participating
investment
contracts
£m
Non-
participating
investment
contracts
£m
710
78
(231)
(43)
—
4
2
520
41
1
(6)
2
—
—
—
38
892
70
(103)
(16)
—
8
—
851
Long-term business
General
insurance
and health
business
£m
1,078
2,450
(2,369)
—
—
24
—
1,183
Insurance
contracts
£m
Participating
investment
contracts
£m
Non-
participating
investment
contracts
£m
General
insurance
and health
business
£m
1,075
244
(224)
41
(401)
(25)
710
118
13
(3)
—
(84)
(3)
41
950
72
(87)
(1)
(32)
(10)
892
1,146
2,613
(2,514)
—
(166)
(1)
1,078
Total
£m
2,721
2,599
(2,709)
(57)
—
36
2
2,592
Total
£m
3,289
2,942
(2,828)
40
(683)
(39)
2,721
1. The movement during 2021 includes the disposal of operations in France, Italy and Poland including a £341 million remeasurement loss recognised at 30 June 2021 on reclassification of Aviva France to held for sale
(see note 2)
DAC for long-term business decreased overall over 2022 as increases from new business sales were more than offset by amortisation. DAC
for general insurance and health business increased over 2022.
Where amortisation of the DAC balance depends on projected profits, changes to economic conditions may lead to a movement in the DAC
balance and a corresponding impact on profit. It is estimated that the movement in the DAC balance would reduce profit by £41 million
(2021: £69 million) if market yields on fixed income investments were to increase by 1% and increase profit by £48 million (2021: £68 million)
if yields were to reduce by 1%.
At both 31 December 2022 and 31 December 2021 the DAC balance has been restricted by the value of projected future profits.
Aviva plc
3.81
Annual Report and Accounts 2022
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3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
29 – Pension surpluses, other assets, prepayments and accrued income
(a) Pension surpluses and other assets – carrying amount
The carrying amount comprises:
Surpluses in the staff pension schemes (note 50(a))
Other assets
Total
2022
£m
1,192
42
1,234
2021
£m
2,754
15
2,769
Surpluses in the staff pension schemes and £14 million (2021: £1 million) of other assets are recoverable more than one year after the
statement of financial position date.
(b) Prepayments and accrued income
Prepayments and accrued income of £2,822 million (2021: £2,391 million) includes £nil (2021: £17 million) that is expected to be recovered
more than one year after the statement of financial position date.
30 – Assets held to cover linked liabilities
The assets which back unit-linked liabilities are included within the relevant balances in the statement of financial position, while the
liabilities are included within insurance and investment contract provisions. This note analyses the carrying values of assets backing
these liabilities.
Loans
Fixed maturity securities
Equity securities
Reinsurance assets
Cash and cash equivalents
Units trusts and other investment vehicles
Other
Total
2022
£m
643
36,967
77,560
5,254
8,141
26,962
5,316
160,843
2021
£m
1,777
42,407
85,186
5,132
5,474
28,521
6,012
174,509
The reinsurance assets balance in the table above includes £5,254 million (2021: £5,132 million) of non-participating 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.
31 – Ordinary share capital
This note gives details of Aviva plc’s ordinary share capital and shows the movements during the year.
(a) Share buyback
On 31 March 2022, Aviva completed the share buyback programme originally announced on 12 August 2021, and extended to an aggregate
purchase of up to £1 billion on 16 December 2021. In total, 245,225,489 shares were purchased with a nominal value of £61 million and were
subsequently cancelled, giving rise to an additional capital redemption reserve of an equivalent amount. The 245,225,489 shares were
acquired at an average price of 408 pence per share. 79,587,629 shares were purchased during 2022, had a nominal value of £19 million, for
total consideration of £336 million and were acquired at an average price of 423 pence per share. 165,237,860 ordinary shares were
purchased and cancelled during 2021, had a nominal value of £42 million, for a total consideration of £663 million and were acquired at an
average price of 401 pence per share.
(b) Return of capital to ordinary shareholders via B share scheme
On 2 March 2022, Aviva announced a proposed return of capital, including a £3,750 million B Share Scheme for the holders of ordinary
shares. 3,687,322,000 B shares were issued for nil consideration with a nominal value of 101.69 pence per share on 16 May 2022, resulting in
a total of £3,750 million being credited to the B share capital account. At the same time, the merger reserve was reduced by £3,750 million.
On 17 May 2022, the B shares were redeemed at 101.69 pence per share, which resulted in a £3,750 million reduction in the B share capital
account and a corresponding increase in the capital redemption reserve. Retained earnings reduced by £3,750 million on payment of the
return of capital to ordinary shareholders.
Aviva plc
3.82
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
31 – Ordinary share capital continued
(c) Details of the Company’s ordinary share capital
On 16 May 2022, the Company’s share capital was consolidated whereby 76 new ordinary shares of 32 17/19 pence were issued for each
holding of 100 ordinary shares of 25 pence each. The number of ordinary shares in issue reduced by 884,957,280 from 3,687,322,000 to
2,802,364,720.
The allotted, called up and fully paid share capital of the Company at 31 December 2022 was: 2,807,964,676 ordinary shares of
32 17/19 pence each ( 31 December 2021: 3,766,095,426 ordinary shares of 25 pence each)
2022
£m
924
2021
£m
941
At the General Meeting that took place on 9 May 2022, the Company was authorised to allot up to a further maximum nominal amount of:
• £614,553,667 of which £307,276,833 can be in connection with an offer by way of a rights issue
• £150,000,000 of new ordinary shares in relation to any issue of Solvency II compliant capital instruments
(d) Movement in issued share capital
25p each
3,766,095,426
Number of shares
32 17/19p each
—
B shares
—
Share capital
£m
Capital
redemption
reserve
£m
2022
Share
premium
£m
941
86
1,248
At 1 January
Shares issued under the Group’s Employee and Executive
Share Option Schemes
Shares cancelled through buyback
Shares issued under the B share scheme
Shares cancelled following B share scheme redemption
Share consolidation
At 31 December
1,214,203
(79,987,629)
5,599,956
—
—
—
(3,687,322,000) 2,802,364,720
2,807,964,676
—
—
—
—
—
3,687,322,000
(3,687,322,000)
—
—
2
(19)
3,750
(3,750)
—
924
—
19
—
3,750
—
3,855
Number of
shares
25p each
3,928,490,420
2,842,866
(165,237,860)
3,766,095,426
Share capital
£m
982
1
(42)
941
Capital
redemption
reserve
£m
44
—
42
86
15
—
—
—
—
1,263
2021
Share
premium
£m
1,242
6
—
1,248
At 1 January
Shares issued under the Group’s Employee and Executive Share Option Schemes
Shares cancelled through buyback
At 31 December
Ordinary shares in issue in the Company rank pari passu with any new ordinary shares issued in the Company. All the ordinary shares in
issue carry the same right to receive all dividends and other distributions declared, made or paid by the Company.
(e) Subsequent events
On 8 March 2023, Aviva plc approved a share buyback of its ordinary shares for up to a maximum aggregate consideration of £300 million
which is expected to commence on 10 March 2023.
The buyback will reduce IFRS net asset value and Solvency II own funds by £300 million.
32 – Group’s share plans
This note describes various equity compensation plans operated by the Group, and shows how the Group values the options and awards
of shares in the Company.
(a) Description of the plans
The Group maintains a number of active share option and award plans and schemes (the Group’s share plans). These are as follows:
(i) Savings-related options
These are options granted under the tax-advantaged Save As You Earn (SAYE) share option scheme in the UK and prior to 2021 the Irish
revenue-approved SAYE share option scheme in Ireland. From 2021 options in Ireland are granted under the Irish non-revenue approved
SAYE share option scheme. The SAYE allows eligible employees to acquire options over the Company’s shares at a discount of up to 20% of
their market value at the date of grant.
Options are normally exercisable during the six month period following either the third or fifth anniversary of the start of the relevant savings
contract. Savings contracts are subject to the statutory savings limits of £500 per month in the UK and €500 per month in Ireland. A limit of
£250 per month was applied to contracts in the UK prior to 2016.
(ii) Aviva long-term incentive plan awards
These awards have been made under the Aviva Long-Term Incentive Plan (LTIP) and are described in the Directors’ Remuneration Report
(DRR).
Aviva plc
3.83
Annual Report and Accounts 2022
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4. Other Information
Notes to the consolidated financial statements continued
32 – Group’s share plans continued
(iii) Aviva annual bonus plan awards
These awards have been made under the Aviva Annual Bonus Plan (ABP) and are described in the DRR.
(iv) Aviva recruitment and retention share plan awards
These are conditional awards granted under 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 not having served notice of resignation. Some awards can be subject
to performance conditions. If a participant’s employment is terminated due to resignation or dismissal, any tranche of the award which has
vested within the 12 months prior to the termination date may be subject to clawback and any unvested tranches of the award will lapse in
full.
(v) Aviva Investors deferred share award plan awards
These awards have been made under the Aviva Investors Deferred Share Award Plan (AI DSAP), where employees could choose to have the
deferred element of their bonus deferred into awards over Aviva shares. The awards vest in three equal tranches on the first, second and
third anniversaries of grant. No further awards are expected to be made under the AI DSAP.
(vi) Various all employee share plans
The Company maintains a number of active stock option and share award voluntary schemes:
• The global matching share plan
• Aviva Group employee share ownership scheme
No new Aviva plc ordinary shares will be issued to satisfy awards made under plans (iv) and (v).
(b) Outstanding options
The following table summarises information about options outstanding at 31 December and 2022 and 2021:
Range of exercise prices
£2.20 – £3.16
£3.17 – £3.67
£3.68 – £4.19
Outstanding
options
Number
32,596,283
10,898,433
470,831
Weighted average
remaining
contractual life
Years
2
3
1
2022
Weighted average
exercise price
p
227.63
333.46
393.31
Outstanding
options
Number
40,415,471
5,743,442
1,642,237
Weighted average
remaining
contractual life
Years
3
4
1
2021
Weighted average
exercise price
p
233.88
331.53
390.83
(c) Movements in the year
A summary of the status of the option and share plans as at 31 December 2022 and 2021, and changes during the years ended on those
dates, is shown below.
Outstanding at 1 January
Granted during the year
Exercised during the year
Forfeited during the year
Cancelled during the year
Expired during the year
Outstanding at 31 December
Exercisable at 31 December
2022
2021
Number of options
47,801,150
6,369,795
(6,238,086)
(2,801,326)
(713,427)
(452,559)
43,965,547
2,676,882
Weighted average
exercise price
p
251.00
336.00
298.73
259.10
238.30
308.98
255.64
278.95
Number of awards
40,303,963
18,158,925
(11,416,602)
(7,015,305)
—
—
40,030,981
—
Number of options
50,137,784
5,438,302
(1,888,154)
(3,375,371)
(564,984)
(1,946,427)
47,801,150
1,383,467
Weighted average
exercise price
p
251.31
330.00
357.55
252.12
244.48
372.26
251.00
376.17
Number of awards
45,946,328
18,767,398
(13,192,824)
(11,216,939)
—
—
40,303,963
—
The weighted average share price at the date of exercise for share options exercised during the year ended 31 December 2022 was £4.39
(2021: £4.00).
(d) Expense charged to the income statement
The total expense recognised for the year arising from equity compensation plans was as follows:
Equity-settled expense
Total
2022
£m
58
58
2021
£m
47
47
(e) Fair value of options and awards granted after 7 November 2002
The weighted average fair values of options and awards granted during the year, estimated by using the Binomial option pricing model and
Monte Carlo Simulation model, were £0.84 and £3.95 (2021: £0.80 and £3.57) respectively.
Aviva plc
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Annual Report and Accounts 2022
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4. Other Information
Notes to the consolidated financial statements continued
32 – Group’s share plans continued
(i) Share options
The fair value of the options was estimated on the date of grant, based on the following weighted average assumptions:
Weighted average assumption
Share price
Exercise price
Expected volatility
Expected life
Expected dividend yield
Risk-free interest rate
2022
388p
336p
31.76%
2021
404p
330p
30.52%
4.08 years 3.70 years
5.28%
0.54%
6.44%
4.23%
The expected volatility used was based on the historical volatility of the share price over a period equivalent to the expected life of the
option 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 options. 6,238,086 options granted after 7 November
2002 were exercised during the year (2021: 1,888,154).
(ii) Share awards
The fair value of the awards was estimated on the date of grant based on the following weighted average assumptions:
Weighted average assumption
Share price
Expected volatility¹
Expected volatility of comparator companies’ share price¹
Correlation between Aviva and comparator competitors’ share price¹
Expected life¹
Expected dividend yield
Risk-free interest rate¹
1. For awards with market-based performance conditions only
2022
404p
33%
35%
51%
2021
386p
34%
34%
63%
3.00 years 3.00 years
0.00%
0.13%
0.00%
1.49%
The expected volatility used was based on the historical volatility of the share price over a period equivalent to the expected life of the 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.
33 – Treasury shares
The following table summarises information about treasury shares at 31 December 2022:
Shares held by employee trusts
Number
19,986,626
19,986,626
2022
£m
85
85
Number
12,363,684
12,363,684
2021
£m
51
51
(a) Shares held by employee trusts
Prior to 2021, we primarily issued new shares, except where it is necessary to use shares held by an employee share trust, to satisfy any
awards granted under the Group’s share plans. From 2021, we satisfied awards primarily through shares purchased in the market and held
by employee share trusts. This note gives details of the shares held in these trusts. Movements in the carrying value of shares held by
employee trusts comprise:
Cost debited to shareholders’ funds
At 1 January
Acquired in the year
Distributed in the year
Share consolidation
Balance at 31 December
Number
2022
£m
Number
12,363,684
23,539,378
(9,850,409)
(6,066,027)
19,986,626
51
101
(41)
(26)
85
1,737,038
17,164,538
(6,537,892)
—
12,363,684
2021
£m
6
69
(24)
—
51
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 DRR and in note 32.
These shares were purchased in the market. At 31 December 2022, they had an aggregate nominal value of £6,575,548 (2021: £3,090,921)
and a market value of £88,500,780 (2021: £50,740,559). The trustees have waived their rights to dividends on the shares held in the trusts.
Aviva plc
3.85
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
34 – Preference share capital
This note gives details of Aviva plc’s preference share capital.
The preference share capital of the Company at 31 December was:
Issued and paid up
100,000,000 8.375% cumulative irredeemable preference shares of £1 each
100,000,000 8.75% cumulative irredeemable preference shares of £1 each
2022
£m
100
100
200
2021
£m
100
100
200
The issued preference shares are non-voting except where their dividends are in arrears, where their rights are altered or on a winding up or
capital reduction of the Company.
On a winding up, they carry a preferential right of return of capital ahead of the ordinary shares. Holders are entitled to receive dividends out
of the profits available for distribution and resolved to be distributed in priority to the payment of dividends to holders of ordinary shares.
The Company does not have a contractual obligation to deliver cash or other financial assets to the preference shareholders and therefore
the directors may make dividend payments at their discretion.
At the end of 2022, the fair value of Aviva plc’s preference share capital was £247 million (2021: £304.5 million).
35 – Tier 1 notes
On 15 June 2022, the Group issued £500 million of 6.875% fixed rate reset perpetual Restricted Tier 1 contingent convertible notes (the RT1
notes) (2021: £nil).
The RT1 notes are callable at par between 15 December 2031 and 15 June 2032 (the First Reset Date) inclusive and thereafter every five
years after the First Reset Date. If not called, the coupon from 15 June 2032 will be reset to the prevailing five year benchmark gilt yield plus
4.649%. The notes have no fixed maturity date. Optional cancellation of coupon payments is at the discretion of the Group and mandatory
cancellation is upon the occurrence of certain conditions. The RT1 notes are therefore treated as equity and the coupon payment is
recognised directly in equity. During the year coupon payments of £17 million were made (2021: £nil). On the occurrence of certain
conversion trigger events the notes are convertible into ordinary shares of the Group.
36 – Merger reserve
This note analyses the movement in the merger reserve during the year.
At 1 January
Issue of B share capital
At 31 December
2022
£m
8,974
(3,750)
5,224
2021
£m
8,974
—
8,974
Prior to 1 January 2004, certain significant business combinations were accounted for using the ‘pooling of interests method’ (or merger
accounting), which treats the merged groups as if they had been combined throughout the current and comparative accounting periods.
Merger accounting principles for these combinations gave rise to a merger reserve in the consolidated statement of financial position,
being the difference between the nominal value of new shares issued by the Parent Company for the acquisition of the shares of the
subsidiary and the subsidiary’s own share capital and share premium account.
The merger reserve is also used where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue
of new shares by the Company, thereby attracting merger relief under the Companies Act 1985 and, from 1 October 2009, the Companies
Act 2006.
On 16 May 2022 the Company issued 3,687,322,000 B shares reducing the Company's merger reserve by £3,750 million (see note 31(b)).
Aviva plc
3.86
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
37 – Currency translation and other reserves
This note gives details of the currency translation and other reserves forming part of the Group’s consolidated equity and shows the
movements during the year net of non-controlling interests:
Balance at 1 January 2021
Arising in the year through other comprehensive income:
Fair value losses
Fair value gains transferred to profit on disposals
Share of other comprehensive income of joint ventures and associates
Foreign exchange rate movements
Aggregate tax effect – shareholders’ tax
Total other comprehensive (loss)/income for the year
Fair value gains transferred to retained earnings on disposals
Transfer to profit on disposal of subsidiaries, joint ventures and associates1
Reserves credit for equity compensation plans
Shares issued under equity compensation plans
Balance at 31 December 2021
Arising in the year through other comprehensive income:
Fair value losses
Fair value gains transferred to profit on disposals
Share of other comprehensive income of joint ventures and associates
Foreign exchange rate movements
Aggregate tax effect – shareholders’ tax
Total other comprehensive income/(loss) for the year
Fair value gains transferred to retained earnings on disposals
Transfer to profit on disposal of subsidiaries, joint ventures and associates
Reserves credit for equity compensation plans
Shares issued under equity compensation plans
Balance at 31 December 2022
Other reserves
Currency
translation
reserve (see
accounting
policy E)
£m
862
Owner
occupied
properties
reserve (see
accounting
policy P)
£m
31
Investment
valuation
reserve (see
accounting
policy T)
£m
108
Hedging
instruments
reserve (see
accounting
policy U)
£m
(457)
Equity
compensation
reserve (see
accounting
policy AB)
£m
106
—
—
—
(222)
1
(221)
—
(327)
—
—
314
—
—
—
200
(3)
197
—
—
—
—
511
—
—
—
—
—
—
(9)
—
—
—
22
—
—
—
—
—
—
—
—
—
—
22
(62)
(16)
5
—
19
(54)
—
(19)
—
—
35
—
—
(38)
—
—
(38)
—
—
—
—
(3)
—
—
—
39
(8)
31
—
202
—
—
(224)
—
—
—
(47)
9
(38)
—
—
—
—
(262)
—
—
—
—
—
—
—
—
24
(29)
101
—
—
—
—
—
—
—
—
58
(46)
113
Total
£m
(212)
(62)
(16)
5
39
11
(23)
(9)
183
24
(29)
(66)
—
—
(38)
(47)
9
(76)
—
—
58
(46)
(130)
1.
In 2021, the transfer to profit on disposal of subsidiaries, joint ventures and associates relates to the recycling of reserves to the income statement on disposal of discontinued operations (see note 2(b))
Foreign exchange rate movements recorded in the consolidated statement of comprehensive income of £145 million for continuing
operations (2021: £(34) million) and nil (2021: £(182) million) for discontinued operations (see note 2(c)) relate to foreign exchange rate
movements on the currency translation reserve of £200 million (2021: £(222) million), the hedging instrument reserve of £(47) million
(2021: £39 million) and non-controlling interests (see note 39) of £(8) million (2021: £(33) million).
Aviva plc
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Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
38 – Retained earnings
This note analyses the movements in the consolidated retained earnings during the year.
Balance at 1 January
(Loss)/profit for the year attributable to equity shareholders
Remeasurements of pension schemes (note 50)
Dividends and appropriations (note 14)
Shares purchased in buyback (note 31(a))
Return of capital to ordinary shareholders via B share scheme (note 31(b))
Net shares issued under equity compensation plans
Fair value gains realised from other reserves (note 37)
Aggregate tax effect
Balance at 31 December
2022
£m
7,556
(1,160)
(1,542)
(862)
(336)
(3,750)
9
—
412
327
2021
£m
7,468
1,966
59
(1,127)
(663)
—
3
9
(159)
7,556
Retained earnings of Aviva plc, the Company, are £5,248 million at 31 December 2022 (see note H of the Company financial statements).
The Group’s regulated subsidiaries are required to hold sufficient capital to meet acceptable solvency levels based on applicable local
regulations. Their ability to transfer retained earnings to the UK parent companies is therefore restricted to the extent these earnings form
part of local regulatory capital.
39 – Non-controlling interests
This note gives details of the Group’s non-controlling interests and shows the movements during the year.
Non-controlling interests at 31 December comprised:
Equity shares in subsidiaries
Share of earnings
Share of other reserves
Preference shares in General Accident plc
Movements in the year comprised:
Balance at 1 January
Profit for the year attributable to non-controlling interests
Foreign exchange rate movements
Total comprehensive income attributable to non-controlling interests
Non-controlling interests share of dividends declared in the year
Non-controlling interests in acquired subsidiaries¹
Disposals of non-controlling interests in subsidiaries2
Changes in non-controlling interests in subsidiaries
Balance at 31 December
2022
£m
60
—
—
60
250
310
2022
£m
252
21
(8)
13
(21)
66
—
—
310
2021
£m
—
2
—
2
250
252
2021
£m
1,006
70
(33)
37
(60)
—
(722)
(9)
252
1. On 28 September 2022, Aviva acquired an additional 25% or the ordinary shares of Aviva Life Insurance Company India Limited giving Aviva a controlling interest in the entity (see note 2(a))
2.
In 2021, the disposals of non-controlling interests included £(717) million related to discontinued operations (see note 2(b))
The Group has no subsidiaries whose non-controlling interest is material on the basis of their share of profit or loss.
40 – Contract liabilities and associated reinsurance
The Group’s liabilities for insurance and investment contracts it has sold, and the associated reinsurance, is covered in the following notes:
• Note 41 covers insurance liabilities;
• Note 42 covers the methodology and assumptions used in calculating the insurance liabilities;
• Note 43 covers liabilities for investment contracts;
• Note 44 details the financial guarantees and options on certain contracts;
• Note 45 details the associated reinsurance assets on these liabilities; and
• Note 46 shows the effects of changes in the assumptions on the liabilities.
Aviva plc
3.88
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
40 – Contract liabilities and associated reinsurance continued
(a) Carrying amount
The following is a summary of the contract liabilities and related reinsurance assets as at 31 December.
Long-term business
Insurance liabilities
Liabilities for participating investment contracts
Liabilities for non-participating investment contracts
Outstanding claims provisions
General insurance and health
Outstanding claims provisions
Provisions for claims incurred but not reported
Provision for unearned premiums
Provision arising from liability adequacy tests
Total
Gross
provisions
£m
Reinsurance
assets
£m
2022
Net
£m
Gross
provisions
£m
Reinsurance
assets
£m
(81,898)
(18,009)
(140,990)
(240,897)
(1,405)
(242,302)
(8,112)
(3,077)
(11,189)
(5,193)
—
(16,382)
(258,684)
5,662
—
5,254
10,916
68
10,984
(76,236)
(18,009)
(135,736)
(229,981)
(1,337)
(231,318)
(105,783)
(21,337)
(151,115)
(278,235)
(1,288)
(279,523)
964
763
1,727
345
—
2,072
13,056
(7,148)
(2,314)
(9,462)
(4,848)
—
(14,310)
(245,628)
(7,304)
(3,156)
(10,460)
(4,718)
(1)
(15,179)
(294,702)
7,887
—
5,132
13,019
61
13,080
637
999
1,636
316
—
1,952
15,032
2021
Net
£m
(97,896)
(21,337)
(145,983)
(265,216)
(1,227)
(266,443)
(6,667)
(2,157)
(8,824)
(4,402)
(1)
(13,227)
(279,670)
(b) Change in contract liabilities, net of reinsurance, recognised as an expense
The purpose of the following table is to reconcile the change in insurance liabilities, net of reinsurance, shown on the consolidated
income statement, to the change in insurance liabilities recognised as an expense in the relevant movement tables in the following notes.
The components of the reconciliation are the change in provision for outstanding claims on long-term business (which is not included
in a separate movement table), and the unwind of discounting on general insurance reserves (which is included within finance costs in
the income statement). For general insurance and health, the change in the provision for unearned premiums is not included in the
reconciliation as, within the income statement, this is included within earned premiums.
2022
Long-term business
Change in insurance liabilities (note 41(b)(iii))
Change in provision for outstanding claims
General insurance and health
Change in insurance liabilities (note 41(c)(iv) and 45(c)(ii))
Change in provision arising from liability adequacy tests
Less: Unwind of discount
Total change in insurance liabilities from continued operations (note 5)
2021
Long-term business
Change in insurance liabilities (note 41(b)(iii))
Change in provision for outstanding claims
General insurance and health
Change in insurance liabilities (note 41(c)(iv) and 45(c)(ii))
Change in provision arising from liability adequacy tests
Less: Unwind of discount
Total change in insurance liabilities
Less: Change in insurance liabilities from discontinued operations
Total change in insurance liabilities from continued operations (note 5)
Gross
£m
Reinsurance
£m
Net
£m
(25,175)
108
(25,067)
2,316
(3)
2,313
(22,859)
105
(22,754)
482
(2)
(7)
473
(24,594)
(66)
—
5
(61)
2,252
416
(2)
(2)
412
(22,342)
Gross
£m
Reinsurance
£m
Net
£m
2,521
(291)
2,230
641
(1)
(2)
638
2,868
(3,736)
(868)
(951)
1
(950)
114
—
1
115
(835)
4
(831)
1,570
(290)
1,280
755
(1)
(1)
753
2,033
(3,732)
(1,699)
For non-participating investment contracts, deposits collected and amounts withdrawn are not shown on the income statement, but
are accounted for directly through the statement of financial position as an adjustment to the gross liabilities for investment contracts.
The associated change in investment contract provisions shown on the income statement consists of the attributed investment return.
For participating investment contracts, the change in investment contract provisions on the income statement primarily consists of the
movement in participating investment contract liabilities (net of reinsurance) over the reporting period.
Aviva plc
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Notes to the consolidated financial statements continued
41 – Insurance liabilities
This note analyses the Group’s gross insurance contract liabilities for the long-term and general insurance and health business, describes
how the Group calculates these liabilities and presents the movement in these liabilities during the year.
(a) Carrying amount
Insurance liabilities (gross of reinsurance) at 31 December comprised:
Long-term business
Participating insurance liabilities
Unit-linked non-participating insurance liabilities
Other non-participating insurance liabilities
Outstanding claims provisions
General insurance and health
Outstanding claims provisions
Provision for claims incurred but not reported
Provision for unearned premiums
Provision arising from liability adequacy tests
Total
2022
£m
2021
£m
16,543
7,813
57,542
81,898
1,405
83,303
8,112
3,077
11,189
5,193
—
16,382
99,685
21,570
8,703
75,510
105,783
1,288
107,071
7,304
3,156
10,460
4,718
1
15,179
122,250
(b) Long-term business liabilities
(i) Business description
The Group underwrites long-term business primarily in the UK and Ireland. This is mainly written in the ‘Non-Profit’ funds and in a number of
‘With-Profits’ sub-funds. In the ‘Non-Profit’ funds shareholders are entitled to 100% of the distributed profits. In the ‘With-Profits’ sub-funds
the with-profits policyholders are entitled to between 40% and 100% of distributed profits, depending on the fund rules. There is also the
Reattributed Inherited Estate External Support Account (RIEESA) in the UK, which does not itself underwrite any business, but provides
capital support to one of the 'With-Profits' sub-funds and receives any surplus or deficit emerging from it. In the RIEESA, shareholders are
entitled to 100% of the distributed profits, but these can only be distributed in line with the criteria set by the Reattribution Scheme.
(ii) Group practice
The long-term business liabilities are calculated separately for each of the Group’s life operations. The provisions for overseas subsidiaries
have generally been included on the basis of local regulatory requirements, modified where necessary to reflect the requirements of the
Companies Act 2006.
Material judgement is required in calculating the liabilities and is exercised particularly through the choice of assumptions where discretion
is permitted. In turn, the assumptions used depend on the circumstances prevailing in each of the life operations. Provisions are most
sensitive to assumptions regarding discount rates, mortality and morbidity rates. Where discount rate assumptions are based on current
market yields on fixed interest securities, allowance is made for default risk implicit in the yields on the underlying assets.
Bonuses paid during the year are reflected in claims paid, whereas those allocated as part of the bonus declaration are included in the
movements in the long-term business liabilities.
A description of the main methodology and most material valuation assumptions has been provided (see note 42).
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Notes to the consolidated financial statements continued
41 – Insurance liabilities continued
(iii) Movements in long-term business liabilities
The following movements have occurred in the gross long-term business liabilities during the year:
Carrying amount at 1 January
Liabilities in respect of new business
Expected change in existing business
Variance between actual and expected experience
Impact of operating assumption changes
Impact of economic assumption changes
Other movements recognised as an expense¹
Change in liability recognised as an expense (note 40(b))
Effect of portfolio transfers, acquisitions and disposals²
Foreign exchange rate movements
Other movements3
Carrying amount at 31 December
2022
£m
105,783
4,797
(5,488)
(2,096)
(1,307)
(21,125)
44
(25,175)
1,236
31
23
81,898
2021
£m
135,409
10,420
(6,884)
2,209
(898)
(2,427)
101
2,521
(30,570)
(1,565)
(12)
105,783
1. Other movements recognised as an expense in 2022 and 2021 relate primarily to provisions for bonus distribution to with-profits policyholders and legacy unclaimed assets
2. The movement in 2022 relates to the acquisition of an additional 25% of the ordinary shares of Aviva Life Insurance Company India Limited giving Aviva a controlling interest in the entity (see note 2(a)). The movement
in 2021 relates to the disposal of the France, Italy, Poland and Vietnam businesses.
3. The movement in 2022 primarily relates to a reallocation between non-par investment contracts and insurance contracts for UK Life
For many types of long-term business, including unit-linked and participating insurance liabilities, movements in asset values are offset
by corresponding changes in liabilities, limiting the net impact on profit. The gross long-term business liabilities decreased by £23.9 billion
during 2022 (2021: £29.6 billion decrease) due to:
• Expected change on existing business of £(5.5) billion, largely offset by £4.8 billion increase due to new business which is primarily due to
bulk purchase annuities sales in the UK;
• Variance between actual and expected experience of £(2.1) billion, which was mainly due to lower than expected equity returns for the UK
and material increases in yields in the UK;
• Impact of operating assumption changes of £(1.3) billion, mainly due to longevity assumptions applying to annuity business in the UK; and
• Economic assumption changes of £(21.1) billion, which reflects an increase in valuation interest rates in response to increasing interest
rates and widening of credit spreads primarily in respect of annuity contracts.
For participating insurance liabilities, a movement in liabilities is generally offset by a corresponding adjustment to the unallocated divisible
surplus and does not impact profit. Where assumption changes impact profit, these are included in the effect of changes in assumptions
and estimates during the year (see note 46), together with the impact of movements in related non-financial assets.
(c) General insurance and health liabilities
(i) Business description
The Group underwrites:
• General insurance and health business in the UK and Ireland, providing individual and corporate customers with a wide range of insurance
products;
• General insurance business in Canada, providing a range of personal and commercial lines products.
(ii) Group practice
Delays occur in the notification and settlement of claims and a substantial measure of experience and judgement is involved in assessing
outstanding liabilities, the ultimate cost of which cannot be known with certainty at the statement of financial position date. The liabilities
for general insurance and health business are based on information currently available. However, it is inherent in the nature of the business
written that the ultimate liabilities may vary as a result of subsequent developments.
Provisions for outstanding claims are established to cover the outstanding expected ultimate liability for losses and loss adjustment
expenses (LAE) in respect of all claims that have already occurred. The provisions established cover reported claims and associated LAE,
as well as claims incurred but not yet reported and associated LAE.
The Group only establishes reserves for losses that have already occurred. When calculating reserves, the Group takes into account
estimated future recoveries from salvage and subrogation. A separate asset is recorded for expected future recoveries from reinsurers after
considering their collectability.
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Notes to the consolidated financial statements continued
41 – Insurance liabilities continued
(iii) Provisions for Outstanding Claims
The table below shows the total general insurance and health liabilities split by outstanding claim provisions and provision for claims
incurred but not reported (IBNR provisions), gross of reinsurance, by major line of business.
Motor
Property
Liability
Creditor
Other
As at 31 December 2022
As at 31 December 2021
Outstanding
claim
provisions
£m
4,514
1,458
1,889
2
249
8,112
IBNR
provisions
£m
544
773
1,571
3
186
3,077
Total claim
provisions
£m
5,058
2,231
3,460
5
435
11,189
Outstanding
claim
provisions
£m
4,012
1,336
1,756
2
198
7,304
IBNR
provisions
£m
1,232
336
1,434
3
151
3,156
Total claim
provisions
£m
5,244
1,672
3,190
5
349
10,460
The gross outstanding claims provision before discounting was £11,878 million (2021: £10,711 million). Details of the range of discount rates
used along with other material assumptions are available (see note 42(b)).
(iv) Movements in general insurance and health claims liabilities
The following changes have occurred in the general insurance and health claims liabilities during the year:
Carrying amount at 1 January
Impact of changes in assumptions
Claim losses and expenses incurred in the current year
Increase/(decrease) in estimated claim losses and expenses incurred in prior periods
Incurred claims losses and expenses
Less:
Payments made on claims incurred in the current year
Payments made on claims incurred in prior periods
Recoveries on claim payments
Claims payments made in the period, net of recoveries
Unwind of discounting
Changes in claims reserve recognised as an expense (note 40(b))
Effect of portfolio transfers, acquisitions and disposals¹
Foreign exchange rate movements
Carrying amount at 31 December
1. The movement in 2021 relates to disposal of the France, Italy and Poland businesses and includes the termination of reinsurance accepted from the former France general insurance entity
(v) Movements in general insurance and health unearned premiums
The following changes have occurred in the liabilities for unearned premiums (UPR) during the year:
Carrying amount at 1 January
Premiums written during the year
Less: Premiums earned during the year
Changes in UPR recognised as an expense
Gross portfolio transfers and acquisitions¹
Foreign exchange rate movements
Carrying amount at 31 December
1. The movement in 2021 relates to disposals of the France, Italy and Poland businesses and includes the termination of reinsurance accepted from the former France general insurance entity
2022
£m
10,460
(353)
6,253
5
5,905
(2,945)
(2,854)
369
(5,430)
7
482
—
247
11,189
2021
£m
12,384
39
6,333
(41)
6,331
(3,029)
(2,980)
317
(5,692)
2
641
(2,476)
(89)
10,460
2022
£m
4,718
10,328
(9,944)
384
—
91
5,193
2021
£m
5,210
11,044
(10,661)
383
(861)
(14)
4,718
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Notes to the consolidated financial statements continued
41 – Insurance liabilities continued
(vi) Analysis of general insurance and health claims development
The tables that follow present the development of claims payments and the estimated ultimate cost of claims for the accident years 2013 to
2022. The upper half of the tables shows the cumulative amounts paid during successive years related to each accident year, while the lower
section of the tables shows the original estimated ultimate cost of claims and how these original estimates have increased or decreased, as
more information becomes known about the individual claims and overall claim frequency and severity.
Key elements of the development of prior accident year general insurance and health net provisions during 2022 were:
• £64 million strengthening from the UK due to adverse experience and additional provisioning in property and higher inflation. These were
partially offset by motor releases.
• £32 million release from Ireland due to motor releases and favourable liability experience.
• £85 million release from Canada primarily due to favourable experience in both personal and commercial motor; partially offset by
strengthening of commercial liability reserves.
Key elements of the development of prior accident year general insurance and health net provisions during 2021 were:
• £51 million release from the UK and Ireland primarily due to releases across motor due to favourable large claims experience partially
offset by adverse experience with commercial liability and personal property;
• £52 million release from Canada primarily due to favourable experience in commercial property and commercial motor, partially offset by
commercial liability strengthening from large loss development and adverse latent claims; and
• £54 million strengthening from discontinued markets mainly from adverse claims development in France.
Gross of reinsurance
Before the effect of reinsurance, the loss development table is:
Accident year
Gross cumulative claim payments
At end of accident year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Estimate of gross ultimate claims
At end of accident year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Estimate of gross ultimate claims
Cumulative payments
Effect of discounting
Present value
Cumulative effect of foreign exchange
movements
Effect of acquisitions
Present value recognised in the
statement of financial position
All prior
years
£m
2013
£m
2014
£m
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
2021
£m
2022
£m
Total
£m
(3,068) (3,102) (2,991) (3,534) (3,517) (3,769) (3,617) (3,240) (3,350) (2,759)
(4,476) (4,295) (4,285) (4,972) (4,952) (5,239) (4,986) (4,968) (4,449)
(4,916) (4,681) (4,710) (5,435) (5,388) (5,681) (5,646) (5,327)
(5,221) (4,974) (4,997) (5,781) (5,699) (6,240) (5,946)
(5,467) (5,244) (5,198) (6,020) (6,150) (6,551)
(5,645) (5,406) (5,364) (6,375) (6,318)
(5,739) (5,507) (5,570) (6,512)
(5,785) (5,630) (5,626)
(5,881) (5,653)
(5,897)
6,228
6,310
6,324
6,896
6,925
6,897
6,979
6,935
6,956
6,915
7,185
7,175
7,220
7,250
7,215
6,894
6,796
6,756
6,751
6,741
6,707
6,947
6,931
6,864
6,817
6,836
6,821
6,821
5,851
5,930
5,912
5,814
5,785
5,760
5,759
5,761
5,896
5,833
5,865
5,842
5,772
5,756
5,735
5,732
5,732
6,122
6,039
6,029
6,067
6,034
5,996
5,956
5,950
5,949
5,955
6,228
5,955
(5,897) (5,653) (5,626) (6,512) (6,318) (6,551) (5,946) (5,327) (4,449) (2,759)
3,469
—
3,469
1,875
—
1,875
1,570
—
1,570
58
(2)
56
969
—
969
309
—
309
664
—
664
135
—
135
389
—
389
79
—
79
5,732
6,821
7,215
5,761
6,707
6,915
6,897
6,324
2,164
(687)
1,477
11,681
(689)
10,992
—
3
3
4
6
6
25
15
3
11
6
—
19
—
24
—
35
—
37
—
—
—
158
39
1,480
63
91
175
323
395
683
993
1,605
1,912
3,469
11,189
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Notes to the consolidated financial statements continued
41 – Insurance liabilities continued
Net of reinsurance
After the effect of reinsurance, the loss development table is:
Accident year
Net cumulative claim payments
At end of accident year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Estimate of net ultimate claims
At end of accident year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Estimate of net ultimate claims
Cumulative payments
Effect of discounting
Present value
Cumulative effect of foreign exchange
movements
Effect of acquisitions
Present value recognised in the
statement of financial position
All prior
years
£m
2013
£m
2014
£m
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
2021
£m
2022
£m
Total
£m
(2,905) (2,972) (2,867) (3,309) (3,483) (3,718) (3,565) (3,090) (3,308) (2,726)
(4,240) (4,079) (4,061) (4,591) (4,843) (5,117) (4,873) (4,673) (4,336)
(4,649) (4,432) (4,452) (5,012) (5,255) (5,514) (5,506) (5,002)
(4,918) (4,720) (4,725) (5,329) (5,560) (6,044) (5,799)
(5,159) (4,973) (4,919) (5,564) (5,980) (6,347)
(5,324) (5,132) (5,085) (5,900) (6,144)
(5,417) (5,222) (5,268) (6,034)
(5,459) (5,343) (5,297)
(5,553) (5,368)
(5,572)
5,950
6,119
5,991
6,378
6,321
6,298
6,774
6,729
6,764
6,722
6,997
6,944
6,983
7,018
6,995
6,714
6,591
6,569
6,560
6,552
6,522
6,489
6,458
6,377
6,334
6,335
6,323
6,322
5,548
5,635
5,608
5,517
5,495
5,469
5,456
5,427
5,613
5,575
5,591
5,559
5,490
5,472
5,449
5,440
5,446
5,838
5,745
5,752
5,733
5,689
5,653
5,612
5,612
5,611
5,616
5,616
5,950
(5,572) (5,368) (5,297) (6,034) (6,144) (6,347) (5,799) (5,002) (4,336) (2,726)
3,224
—
3,224
1,296
—
1,296
1,655
—
1,655
130
—
130
923
—
923
288
—
288
378
—
378
648
—
648
44
5
49
78
—
78
5,446
6,995
6,322
5,427
6,522
6,722
6,298
5,991
943
(343)
600
9,607
(338)
9,269
—
5
3
4
7
6
24
15
3
11
7
—
18
—
23
—
32
—
35
—
—
—
152
41
605
56
91
169
302
385
666
946
1,328
1,690
3,224
9,462
In the loss development tables shown above, the cumulative claim payments and estimates of cumulative claims for each accident year
are translated into sterling at the exchange rates that applied at the end of that accident year. The impact of using varying exchange rates is
shown at the bottom of each table. Disposals are dealt with by treating all outstanding and IBNR claims of the disposed entity as ‘paid’ at
the date of disposal.
The loss development tables above include information on asbestos and environmental pollution claims provisions from business written
more than 10 years ago. The undiscounted claim provisions, net of reinsurance, in respect of this business at 31 December 2022 were
£86 million (2021: £87 million). The movement in asbestos and environmental pollution liabilities in the year reflects an increase of
£2 million due to adverse large claims experience and claims development offset by claims payments net of reinsurance recoveries.
Aviva plc
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Notes to the consolidated financial statements continued
42 – Insurance liabilities methodology and assumptions
(a) Long-term business
i) UK
The main method used for the actuarial valuation of long-term insurance liabilities is the gross premium method which involves the
discounting of projected future cash flows. The cash flows are calculated using the contractual premiums payable together with explicit
assumptions for investment returns, discount rates, inflation, mortality, morbidity, persistency and future expenses. These assumptions can
vary by contract type and reflect current and expected future experience with an allowance for prudence.
Non-profit business
The valuation of non-profit business is based on grandfathered regulatory requirements under IFRS 4 prior to the adoption of Solvency II,
adjusted to remove certain regulatory reserves and margins in assumptions, notably for annuity business. Conventional non-profit
contracts, including those written in the with-profits funds, are valued using the gross premium method.
For unit-linked and some unitised with-profits business, the provisions are valued by adding a prospective non-unit reserve to the bid value
of units. The prospective non-unit reserve is calculated by projecting the future non-unit cash flows using prudent assumptions and on the
assumption that future premiums cease, unless it is more onerous to assume that they continue.
Discount rates
Valuation discount rate assumptions are set with regard to yields on the supporting assets and the general level of long-term interest rates
as measured by gilt yields. An explicit allowance for risk is included by making a deduction from the yields on corporate bonds, mortgages
and deposits, based on historical default experience of each asset class. For equity release assets, the risk allowances are consistent with
those used in the fair value asset methodology (see note 22). A further margin for risk is then deducted for all asset classes.
Valuation discount rates for business in the non-profit funds are as follows:
Valuation discount rates
(Gross of investment expenses)
Assurances
Life conventional non-profit
Pensions conventional non-profit
Annuities
Conventional immediate and deferred annuities
Non-unit reserves on unit-linked business
Life
Pensions
Income Protection
Active lives
Claims in payment (level and index linked)
2022
2021
3.5%
3.5%
1.1%
1.1%
3.5% to 5% 1.1% to 2%
2.8%
3.5%
3.5%
3.5%
0.9%
1.1%
1.1%
1.1%
The valuation discount rates are after a reduction for risk, but before allowance for investment expenses. For conventional immediate
annuity business, the allowance for risk comprises long-term assumptions on a prudent basis for defaults or, in the case of equity release
assets, expected losses arising from the No-Negative-Equity Guarantee. These allowances vary by asset category and for some asset classes
by rating.
The risk allowances made for corporate bonds (including overseas government bonds and structured finance assets), mortgages (including
healthcare mortgages, commercial mortgages and infrastructure assets), and equity release equated to 34 bps, 28 bps, and 98 bps
respectively at 31 December 2022 (2021: 44 bps, 30 bps, and 91 bps respectively).
The total valuation allowance in respect of corporate bonds was £0.7 billion (2021: £1.4 billion) over the remaining term of the portfolio at
31 December 2022. The total valuation allowance in respect of mortgages (including healthcare mortgages but excluding equity release)
was £0.3 billion at 31 December 2022 (2021: £0.5 billion). The total valuation allowance in respect of equity release mortgages was
£0.8 billion at 31 December 2022 (2021: £1.2 billion). Total liabilities for the annuity business were £48.5 billion at 31 December 2022
(2021: £63.0 billion).
Expenses
Maintenance expense assumptions for non-profit business are generally expressed as a per policy charge set with regards to an allocation
of current year expense levels by broad category of business and using the policy counts for in-force business. The assumptions also include
an allowance for prudence and increase by future expense inflation over the lifetime of each contract. Expense inflation is assumed to be
in line with RPI. An additional liability is held if projected per policy expenses in future years are expected to exceed current assumptions.
A further allowance is made for non-discretionary project costs that typically relate to mandatory requirements. Expense-related liabilities
are not held where expenses are covered by anticipated future profits in the liability methodology, notably for unit-linked contracts.
Investment expense assumptions are generally expressed as a proportion of the assets backing the liabilities.
Aviva plc
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Annual Report and Accounts 2022
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4. Other Information
Notes to the consolidated financial statements continued
42 – Insurance liabilities methodology and assumptions continued
Mortality
Mortality assumptions for non-profit business are set with regard to recent Company experience and general industry trends. The mortality
tables used in the valuation are summarised below:
Mortality tables used
Assurances
Non-profit
Pure endowments and deferred annuities before vesting
Annuities in payment
Pensions business and general annuity business
Bulk purchase annuities
2022
2021
AM00/AF00 or TM16/TF16 adjusted for
smoker status and age/sex specific factors
with allowance for future mortality
improvements
AM00/AF00 or TM08/TF08 adjusted for
smoker status and age/sex specific factors
with allowance for future mortality
improvements
AM00/AF00 adjusted with allowance for
improvements
AM00/AF00 adjusted with allowance for
improvements
PMA16_IND/PFA16_IND or
PMA16_IND_INT/PFA16_IND_INT plus
allowance for future mortality
improvements
PMA16_IND/PFA16_IND or PMA16_IND_INT/
PFA16_IND_INT plus allowance for future
mortality improvements
CV3 plus allowance for future mortality
improvements
CV3 plus allowance for future mortality
improvements
For the largest portfolio of pensions annuity business, the underlying mortality assumptions for males are 102.0% of PMA16_IND with base
year 2016 (2021: 102.0% of PMA16_IND with base year 2016); for females the underlying mortality assumptions are 98.3% of PFA16_IND with
base year 2016 (2021: 98.3% of PFA16_IND with base year 2016).
Improvements are based on ‘CMI_2021 (S=7.25) Advanced with adjustments’ (2021: ‘CMI_2019 (S=7.25) Advanced with adjustments’) with
a long-term improvement rate of 1.5% (2021: 1.5%) for males and 1.5% (2021: 1.5%) for females, both with an additional improvement for
prudence of 0.5% (2021: 0.5%) to all future annual improvement adjustments. An allowance has been made to allow for greater mortality
improvements in the annuitant population relative to the general population on which CMI_2021 is based using 'Parameter A', which is set
to 0.15% for males and 0.20% for females, tapering to zero between ages 90 and 110 (for 2021 the same approach was taken with respect to
CMI_2019). Long-term improvement rates are set to taper to zero between ages 85 and 110 (2021: between 90 and 115). In addition, on a
significant proportion of individual annuity business, year-specific adjustments are made to allow for potential selection effects due to the
development of the Enhanced Annuity market and covering possible selection effects from pension freedom reforms (unchanged from
2021).
With-profits business
The Group’s UK with-profits funds are evaluated by reference to FRS 27, which was grandfathered under IFRS 4, prior to the adoption of
Solvency II. This uses an approach of calculating the realistic liabilities for the contracts. The realistic liabilities include the with-profits
benefit reserve (WPBR), and an additional provision for the expected cost of any guarantees and options in excess of the WPBR.
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 return, taxation, expenses and any other charges levied on the contract.
Provisions for guarantees and options within realistic liabilities are measured using market-consistent stochastic models. A stochastic
approach includes measuring the time value of guarantees and options, which represents the additional cost arising from uncertainty
surrounding future economic conditions. Non-market-related assumptions (for example, persistency, mortality and expenses) are assessed
on a best estimate basis with reference to Company and wider industry experience, adjusted to take into account future trends.
The with-profits business is valued by adjusting Solvency II Best Estimate Liabilities and results in a valuation in accordance with FRS 27.
Future investment return
A risk-free rate equal to the spot yield on UK swaps is used for the valuation of with-profits business. The rates vary according to the
outstanding term of the policy, with a typical rate as at 31 December 2022 of 3.71% (2021: 0.95%) for a policy with ten years outstanding.
Volatility of investment return
Volatility assumptions are set with reference to implied volatility data on traded market instruments, where available, or on a best estimate
basis where not.
Volatility
Equity returns
Property returns
2022
19.3%
15.0%
2021
19.4%
15.4%
The equity volatility used depends on term, moneyness and region. The figure shown is for a sample UK equity, at the money, with a ten-
year term.
Future regular bonuses
Annual bonus assumptions for 2023 have been set consistently with the year-end 2022 declaration. Future annual bonus rates reflect
the principles and practices of each fund. In particular, the level is set with regard to the projected margin for final bonus and the change
from one year to the next is limited to a level consistent with past practice.
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Notes to the consolidated financial statements continued
42 – Insurance liabilities methodology and assumptions continued
Mortality
Mortality assumptions for with-profits business are set with regard to recent Company experience and general industry trends. The mortality
tables used in the valuation are summarised below:
Mortality table used
Assurances, pure endowments and deferred annuities before vesting
2022
Nil or Axx00 adjusted
2021
Nil or Axx00 adjusted
Pensions business after vesting and pensions annuities in payment
PMA16_IND/PFA16_IND or
PMA16_IND_INT/PFA16_IND_INT
plus allowance for future mortality
improvement
PMA16_IND/PFA16_IND or
PMA16_IND_INT/PFA16_IND_INT
plus allowance for future mortality
improvement
Allowance for future mortality improvement is in line with the rates for non-profit business.
Expenses
Maintenance fee assumptions for with-profits business are generally expressed as a fixed per policy charge in line with a memorandum of
understanding between the with-profits funds and the non-profit fund within the company. The memorandum of understanding specifies
the charges for a five-year period ending in 2023, and specifies a level of charge inflation during that period of CPI+2% or CPI+3% depending
on the product type. After the end of the period covered by the memorandum of understanding we assume that the charges will remain
unchanged, and a level of charge inflation of RPI+1% for all products will apply. Any difference of expenses charged by Aviva Life Services UK
Limited (UKLS) to Aviva Life & Pensions UK Limited (AVLAP) over the charges specified by the memorandum of understanding accrues to the
non-profit fund.
Guarantees and options
The provisions held in respect of guaranteed annuity options for the with-profits and the non-profit business are a prudent assessment of
the additional liability incurred under the option on a basis and method consistent with that used to value basic policy liabilities, and
includes a prudent assessment of the proportion of policyholders who will choose to exercise the option. For further details see note 44.
ii) Ireland Life
Non linked business is valued using a Gross Premium Valuation method. Mortality assumptions for non-profit business are set with regard to
recent Company experience and general industry trends. The mortality tables used in the valuation are summarised below. The valuation
discount rates are after a reduction for risk of default and an allowance for investment expenses. These credit default allowances vary by
asset category and rating.
Mortality table used
Assurances
Life
Pensions
Annuities
Non unit reserves for unit-linked
Income protection
Active lives
Claims in payment
Discount rates used
2022
2021
Mortality tables used
2021 & 2022
1.2% to 3.7% -0.9% to-0.3%
1.7% to 3.7% -0.8% to 0.7%
TMS08/TMN08/TFS08/TFN08 adjusted
3.7 % -0.3% to 0.8%
3.7 % -0.3% to -0.2%
PMA08/PFA08 (conventional) adjusted plus allowance for future
mortality improvement
AMN00/AMS00/AFN00/AFS00 adjusted
2.2% to 3.7% -0.3% to -0.2%
2.2% to 3.7% -0.3% to -0.2%
AM80 / AF80
A67/70
(b) General insurance and health
Outstanding claims provisions are estimated based on known facts at the date of estimation. Case estimates are set by skilled claims
technicians and established case setting procedures. Claims above certain limits are referred to senior claims handlers for estimate
authorisation.
No adjustments are made to the claims technicians’ case estimates included in booked claim provisions, except for rare occasions when the
estimated ultimate cost of individual large or unusual claims may be adjusted, subject to internal reserve committee approval, to allow for
uncertainty regarding, for example, the outcome of a court case. The ultimate cost of outstanding claims is then estimated by using a range
of standard actuarial claims projection techniques, such as the Chain Ladder and Bornhuetter-Ferguson methods. Historical claims
development is mainly analysed by accident period, although underwriting or notification period is also used where this is considered
appropriate.
The assumptions used in most non-life actuarial projection techniques, including future rates of claims inflation or loss ratio assumptions,
are implicit in the historical claims development data on which the projections are based. Additional qualitative judgement is used to assess
the extent to which past trends may not apply in the future in order to arrive at a point estimate for the ultimate cost of claims that
represents the likely outcome, from a range of possible outcomes, taking account of all the uncertainties involved. The range of possible
outcomes does not, however, result in the quantification of a reserve range.
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Notes to the consolidated financial statements continued
42 – Insurance liabilities methodology and assumptions continued
The following explicit assumptions are made which could materially impact the level of booked net reserves:
Discounting
Outstanding claims provisions are based on undiscounted estimates of future claim payments, except for the following classes of business
for which discounted provisions are held. Note assumptions below are for continuing markets only so comparatives have been updated to
exclude disposed markets:
Class
Reinsured London Market business
Latent claims
Structured settlements
2022
Discount rate
2021
2022
3.0% to 5.2% 0.5% to 1.8%
8 years
3.1% to 4.6% 0.7% to 1.9% 7 to 10 years
2.9% to 4.5% 0.9% to 2.3%
34 years
Mean term of liabilities
2021
8 years
8 to 11 years
35 years
The period of time which will elapse before the liabilities are settled has been estimated by modelling the settlement patterns of the
underlying claims.
The discount rate that has been applied to latent claims reserves, structured settlements and reinsured London Market business is based on
the swap curve in the relevant currency at the reporting date, having regard to the duration of the expected settlement dates of the claims.
The range of discount rates used depends on the duration of the claims and is given in the table above.
At 31 December 2022, it is estimated that a 1% fall in the discount rates used would increase net claim reserves by approximately £37 million
(2021: £80 million), excluding the offsetting effect on asset values as assets are not hypothecated across classes of business.
UK mesothelioma claims
The level of uncertainty associated with latent claims is considerable due to the relatively small number of claims and the long-tail nature of
the liabilities. UK mesothelioma claims account for a large proportion of the Group’s latent claims. The key assumptions underlying the
estimation of these claims include claim numbers, the base average cost per claim, future inflation in the average cost of claims and legal
fees. The best estimate of the liabilities considers the latest available market information and studies and how these might impact Aviva’s
liabilities.
Allowance for risk and uncertainty
The uncertainties involved in estimating loss reserves are allowed for in the reserving process and by the estimation of explicit reserve
uncertainty distributions. The reserve estimation basis requires all non-life businesses to calculate booked claim provisions as the best
estimate of the cost of future claim payments, plus an explicit allowance for risk and uncertainty. The allowance for risk and uncertainty is
calculated by each business unit in accordance with the requirements of the Group non-life reserving policy, taking into account the risks
and uncertainties specific to each line of business and type of claim in that territory. The requirements of the Group non-life reserving policy
also seek to ensure that the allowance for risk and uncertainty is set consistently across both business units and reporting periods.
Lump sum payments in settlement of bodily injury claims that are decided by the UK courts are calculated in accordance with the Ogden
Tables and discount rate. The Ogden discount rate is set by the Lord Chancellor and is applied when calculating the present value of future
care costs and loss of earnings for claims settlement purposes. The balance sheet reserves in the UK have been calculated using the current
Ogden discount rate of -0.25%, as this is the enacted legislative rate that was announced by the Lord Chancellor in August 2019. The Ogden
discount rate is expected to be reviewed by the Lord Chancellor by summer 2024.
43 – Liabilities for investment contracts
This note analyses our gross liabilities for investment contracts by type of product and describes the calculation of these liabilities.
(a) Carrying amount
The liabilities for investment contracts (gross of reinsurance) at 31 December 2022 comprised:
Long-term business
Liabilities for participating investment contracts
Liabilities for non-participating investment contracts
Total
2022
£m
2021
£m
18,009
140,990
158,999
21,337
151,115
172,452
(b) Group practice
Investment contracts are those that do not transfer significant insurance risk from the contract holder to the issuer and are therefore treated
as financial instruments under IFRS.
Many investment contracts contain a discretionary participation feature in which the contract holder has a contractual right to receive
additional benefits as a supplement to guaranteed benefits. These are referred to as participating contracts and are measured according
to the methodology for long-term business liabilities (see note 42). They are not measured at fair value as there is currently no agreed
definition of fair valuation for discretionary participation features under IFRS. In the absence of such a definition, it is not possible to provide
a range of estimates within which a fair value is likely to fall. The IASB deferred consideration of participating contracts to the IFRS 17
insurance standard, which will apply to annual reporting periods beginning on or after 1 January 2023.
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Notes to the consolidated financial statements continued
43 – Liabilities for investment contracts continued
For participating business, the discretionary participation feature is recognised separately from the guaranteed element and is classified as
a liability, referred to as unallocated divisible surplus, except for the with-profits sub-fund supported by the RIEESA. Guarantees on long-
term investment products are discussed in note 44.
Investment contracts that do not contain a discretionary participation feature are referred to as non-participating contracts and the liability
is measured at either fair value or amortised cost. We currently have no non-participating investment contracts measured at amortised cost.
Of the non-participating investment contracts measured at fair value, £140,949 million at 31 December 2022 (2021: £151,016 million) are
unit-linked in structure and the fair value liability is equal to the current unit fund value, including any unfunded units, plus if required,
additional non-unit reserves based on a discounted cash flow analysis. These contracts are generally classified as Level 1 in the fair value
hierarchy, as the unit reserve is calculated as the publicly quoted unit price multiplied by the number of units in issue, and any non-unit
reserve is insignificant.
For unit-linked business, a deferred acquisition cost asset and deferred income reserve liability are recognised in respect of transaction
costs and front-end fees respectively, that relate to the provision of investment management services, and which are amortised on a
systematic basis over the contract term. The amount of the related deferred acquisition cost asset is shown in note 28 and the deferred
income liability is shown in note 53.
For non-participating investment contracts acquired in a business combination, an acquired value of in-force business asset is recognised in
respect of the fair value of the investment management services component of the contracts, which is amortised on a systematic basis over
the useful lifetime of the related contracts. The amount of the acquired value of in-force business asset is shown in note 16, which relates
primarily to the acquisition of Friends Life in 2015 and Friends First in 2018.
(c) Movements in the year
The following movements have occurred in the gross provisions for investment contracts in the year:
(i) Participating investment contracts
Carrying amount at 1 January
Liabilities in respect of new business
Expected change in existing business
Variance between actual and expected experience
Impact of operating assumption changes
Impact of economic assumption changes
Other movements recognised as an expense1
Change in liability recognised as an expense2
Effect of portfolio transfers, acquisitions and disposals3
Foreign exchange rate movements
Carrying amount at 31 December
2022
£m
21,337
10
(1,479)
(1,287)
21
(657)
47
(3,345)
—
17
18,009
2021
£m
97,073
3,621
(4,196)
2,499
(31)
(132)
(49)
1,712
(74,179)
(3,269)
21,337
1. Other movements recognised as an expense in 2022 and 2021 relate to changes in liabilities for special bonus distributions to with-profits policyholders in UK Life
2. Total interest expense for participating investment contracts recognised in the consolidated income statement is £(2,061) million (2021: £2,362 million)
3. The movement in 2021 relates to disposal of the France, Italy and Poland businesses
For many 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 variance between actual and expected experience in 2022 of £(1.3) billion is primarily due to decreases in global equity markets and
lower bond and gilt values as a result of increasing interest rates.
The impact of assumption changes in the analysis shows the resulting movement in the carrying value of participating investment contract
liabilities. For participating business, a movement in liabilities is generally offset by a corresponding adjustment to the unallocated divisible
surplus and does not impact profit. Where assumption changes do impact profit, these are included in the effect of changes in assumptions
and estimates during the year shown in note 46, together with the impact of movements in related non-financial assets.
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Notes to the consolidated financial statements continued
43 – Liabilities for investment contracts continued
(ii) Non-participating investment contracts
Carrying amount at 1 January
Liabilities in respect of new business
Expected change in existing business
Variance between actual and expected experience
Impact of operating assumption changes
Impact of economic assumption changes
Other movements recognised as an expense
Change in liability
Effect of portfolio transfers, acquisitions and disposals1
Foreign exchange rate movements
Other movements2
Carrying amount at 31 December
2022
£m
151,115
4,122
(3,194)
(11,346)
(9)
(111)
25
(10,513)
—
422
(34)
140,990
2021
£m
138,183
5,089
(3,436)
15,786
(57)
33
1
17,416
(3,862)
(622)
—
151,115
1. The movement in 2021 relates to disposal of the France, Italy and Poland businesses
2. The movement in 2022 relates to a reallocation between non-par investment contracts and insurance contracts for UK Life
For unit-linked investment contracts, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact
on profit. The variance between actual and expected experience in 2022 of £(11.3) billion is due to decreases in global equity markets and
lower bond and gilt values as a result of materially increasing interest rates.
The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of non-participating
investment contract liabilities. The impacts of assumption changes on profit are included in the effect of changes in assumptions and
estimates during the year shown in note 46, which combines participating and non-participating investment contracts together with
the impact of movements in related non-financial assets.
44 – Financial guarantees and options
This note details the financial guarantees and options inherent in some of our insurance and investment contracts.
(a) UK non-profit business
The Group’s UK non-profit funds are evaluated by reference to statutory reserving rules, which are based on the UK regulatory requirements
(grandfathered under IFRS 4), prior to the adoption of Solvency II, adjusted to remove certain regulatory reserves and margins in
assumptions, notably for annuity business.
(i) Guaranteed annuity options
The Group’s UK non-profit funds have the liability for certain guaranteed annuity rate options (GAOs), where the policyholder has the option
to take the benefits from a policy in the form of an annuity based on guaranteed conversion rates. Provision for these guarantees do not
materially differ from a provision based on a market-consistent stochastic model, and amounts to £35 million at 31 December 2022 (2021:
£63 million).
(ii) Guaranteed unit price on certain products
Certain pension products linked to long-term life insurance funds provide policyholders with guaranteed benefits at retirement or death.
No additional provision is made for this guarantee as the investment management strategy for these funds is designed to ensure that the
guarantee can be met from the fund, mitigating the impact of large falls in investment values and interest rates.
(iii) Return of Premium guarantees
Certain German pension products sold in Friends Life between 2006 and 2014 are subject to a return of premium guarantee whereby the
product guarantees to return the maximum of the unit fund value or total premiums paid (before deductions). Provisions for this guarantee
are calculated using a market-consistent stochastic model and amount to £92 million at 31 December 2022 (2021: £164 million).
(b) UK with-profits business
The Group’s UK with-profits liabilities are evaluated by reference to FRS 27, which was grandfathered under IFRS 4, prior to the adoption
of Solvency II. Under the PRA’s rules, provisions for guarantees and options within realistic liabilities are measured using market-consistent
stochastic models. A stochastic approach includes measuring the time value of guarantees and options, which represents the additional
cost arising from uncertainty surrounding future economic conditions.
The material guarantees and options relating to this provision are:
(i) Maturity value and death benefit guarantees
Significant conventional and unitised with-profits business have minimum maturity (and in some cases death benefit) values reflecting the
sum assured plus declared annual bonus. For some unitised with-profits 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 retail price index (RPI) or consumer price index (CPI).
(ii) No market valuation reduction (MVR) guarantees
For unitised business, there are circumstances where a ‘no MVR’ guarantee is applied, for example on certain policy anniversaries,
guaranteeing that no market value reduction will be applied to reflect the difference between the accumulated value of units and the
market value of the underlying assets.
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Notes to the consolidated financial statements continued
44 – Financial guarantees and options continued
(iii) Guaranteed annuity options
The Group’s UK with-profits funds have written individual and group pension contracts which contain GAOs, where the policyholder has the
option to take the benefits from a policy in the form of an annuity based on guaranteed conversion rates. The Group also has exposure to
GAOs and similar options on deferred annuities.
Realistic liabilities for GAOs in the UK with-profits funds were £556 million at 31 December 2022 (2021: £1,293 million). With the exception of
the with-profits sub-fund supported by the RIEESA, movements in the realistic liabilities in the with-profits funds are offset by a
corresponding movement in the unallocated divisible surplus, with no net impact on IFRS profit. Realistic liabilities for GAOs in the
with-profits sub-fund supported by the RIEESA were £50 million at 31 December 2022 (2021: £109 million).
(iv) Guaranteed minimum pension
The Group’s UK with-profits funds also have certain policies that contain a guaranteed minimum level of pension as part of the condition
of the original transfer from state benefits to the policy.
(v) Guaranteed minimum maturity payments on mortgage endowments
The with-profits funds made promises to certain policyholders in relation to their with-profits mortgage endowments. Top-up payments will
be made on these policies at maturity to meet the mortgage value up to a maximum of the 31 December 1999 illustrated shortfall.
(c) Ireland
Guaranteed annuity options and guaranteed maturity values
As in the UK, the Group’s with-profits liabilities in Ireland are measured on a realistic basis, including realistic liabilities for guarantees and
options. Guarantees and options in Ireland include GAOs, minimum maturity values on conventional with-profits business, guaranteed
minimum bonus rates on unitised with profits business, and a ‘no MVR’ guarantee that may apply at certain policy anniversaries.
45 – Reinsurance assets
This note details the reinsurance assets on our insurance and investment contract liabilities.
(a) Carrying amount
The reinsurance assets at 31 December comprised:
Long-term business
Insurance contracts
Non-participating investment contracts¹
Outstanding claims provisions
General insurance and health
Outstanding claims provisions
Provisions for claims incurred but not reported
Provisions for unearned premiums
Total
2022
£m
2021
£m
5,662
5,254
10,916
68
10,984
964
763
1,727
345
2,072
7,887
5,132
13,019
61
13,080
637
999
1,636
316
1,952
13,056
15,032
1. Amounts in respect of all reinsurance treaties are included under reinsurance assets, regardless of whether 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.
Of the above total, £12,044 million (2021: £13,701 million) is expected to be recovered more than one year after this statement of financial
position.
(b) Assumptions
The assumptions, including discount rates, used for reinsurance contracts follow those used for insurance liabilities. Reinsurance assets
are valued net of an allowance for recoverability.
(c) Movements
The following movements have occurred in the reinsurance assets during the year:
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Notes to the consolidated financial statements continued
45 – Reinsurance assets continued
(i) Long-term business
Carrying amount at 1 January
Assets in respect of new business
Expected change in existing business assets
Variance between actual and expected experience
Impact of non-economic assumption changes
Impact of economic assumption changes
Other movements recognised as an expense¹
Change in assets²
Effect of portfolio transfers, acquisitions and disposals³
Foreign exchange rate movements
Other movements4
Carrying amount at 31 December
2022
£m
13,019
795
(376)
113
(643)
(2,179)
144
(2,146)
—
43
—
10,916
2021
£m
11,037
1,987
(411)
920
(517)
(367)
183
1,795
(158)
(62)
407
13,019
1. Other movements recognised as an expense during 2022 and 2021 primarily relate to reinsurance ceded for annuity business in Ireland life. The movement in 2022 also includes model changes in Ireland life.
2. Change in assets does not reconcile with values in note 40(b) due to the inclusion of reinsurance assets classified as non-participating investment contracts where, for such contracts, deposit accounting is applied on
the consolidated income statement
3. Movement in 2021 relates to the disposal of the France, Italy and Poland businesses
4. Following a review in 2021 £407 million of assets were reclassified from financial investments to reinsurance assets
The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of reinsurance assets, with
corresponding movements in gross insurance contract liabilities. For participating businesses, a movement in reinsurance assets is
generally offset by a corresponding adjustment to the unallocated divisible surplus and does not impact profit. Where assumption changes
impact profit, these are included in the effect of changes in assumptions and estimates during the year (see note 46), together with the
impact of movements in related liabilities and other non-financial assets.
(ii) General insurance and health claims liabilities
Carrying amount at 1 January
Impact of changes in assumptions
Reinsurers’ share of claim losses and expenses
Incurred in current year
Incurred in prior years
Reinsurers’ share of incurred claim losses and expenses
Less:
Reinsurance recoveries received on claims
Incurred in current year
Incurred in prior years
Reinsurance recoveries received in the year
Unwind of discounting
Change in reinsurance asset recognised as income/(expense) (note 40(b))
Effect of portfolio transfers, acquisitions and disposals1
Foreign exchange rate movements
Carrying amount at 31 December
2022
£m
1,636
(206)
281
202
483
(34)
(182)
(216)
5
66
—
25
1,727
1. The movement in 2021 relates to the disposal of the France, Italy and Poland businesses and the termination of reinsurance treaty accepted from the former Aviva France general insurance entity
(iii) General insurance and health unearned premiums
Carrying amount at 1 January
Premiums ceded to reinsurers in the year
Less: Reinsurers’ share of premiums earned during the year
Changes in reinsurance asset recognised as income
Reinsurers’ share of portfolio transfers and acquisitions¹
Foreign exchange rate movements
Carrying amount at 31 December
1. The movement during 2021 relates to disposal of the France, Italy and Poland businesses
2022
£m
316
832
(804)
28
—
1
345
2021
£m
1,933
(46)
191
6
197
(24)
(242)
(266)
1
(114)
(181)
(2)
1,636
2021
£m
300
725
(691)
34
(18)
—
316
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Notes to the consolidated financial statements continued
46 – Effect of changes in assumptions and estimates during the year
This note analyses the impact of changes in estimates and assumptions from 2021 to 2022, on liabilities for insurance and investment
contracts, and related assets and liabilities, such as unallocated divisible surplus, reinsurance, deferred acquisition costs and acquired value
of in-force business and does not allow for offsetting movements in the value of backing financial assets.
Assumptions
Long-term insurance business
Interest rates and inflation
Expenses
Persistency rates
Mortality and morbidity for assurance contracts
Mortality for annuity contracts
Tax and other assumptions
Long-term investment business
Expenses
General insurance and health business
Change in discount rate assumptions inclusive of inflation
Total
Effect on profit
2022
£m
Effect on profit
2021
£m
15,533
(4)
(4)
25
537
—
1,264
31
9
45
269
20
—
2
147
16,234
(85)
1,555
The impact of interest rates on long-term insurance business relates primarily to annuities in the UK (including any change in credit default
and reinvestment risk provisions), where an increase in the valuation interest rate, in response to materially increasing interest rates, has
decreased liabilities. This line also includes changes to liabilities in respect of annuity contracts linked to inflation.
The impact of change in mortality and morbidity assumptions for assurance contracts relates mainly to the UK following a review of recent
experience and moving onto the latest CMI series mortality tables.
The impact of mortality for annuitant contracts on long-term business relates primarily to the UK. In 2022, there has been a reduction in
reserves due to longevity assumptions arising from:
• Updates to base mortality to reflect methodology and process refinements on BPA business, totalling £54 million;
• Updates to the rate of mortality improvements for a change to the long-term-rate rate used to taper improvements at the oldest ages from
between ages 90 to 115 to between ages 85 to 110, which gave a reduction of £382 million and
• Updates to mortality improvements moving onto the latest CMI_2021 model from CMI_2019, which gave a reduction of £101 million.
In 2021 there was a reduction in reserves due to longevity assumptions arising from:
• Updates to base mortality to reflect experience and updated assumptions for anti-selection on individual annuities totalling
£112 million; and
• Updates to the rate of mortality improvements, consisting of a change to the allowance for differences in mortality improvements in
the annuitant population compared to the general population on which CMI_2019 is based of £195 million and other adjustments of
£(41) million.
In the general insurance and health business, an impact of £147 million (2021: £(85) million) has arisen primarily as a result of a material
increase in the interest rates used to discount claim reserves for both periodic payment orders (PPOs) and latent claims.
Aviva plc
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
47 – Unallocated divisible surplus
An unallocated divisible surplus (UDS) is established where the nature of policy benefits is such that the division between shareholder
reserves and policyholder liabilities is uncertain at the reporting date. Therefore, the expected duration for settlement of the UDS is
undefined.
This note shows the movements in the UDS during the year.
Carrying amount at 1 January
Change in participating fund assets
Change in participating fund liabilities
Other movements¹
Change in liability recognised as an expense
Effect of portfolio transfers, acquisition and disposals²
Foreign exchange rate movements
Carrying amount at 31 December
2022
£m
1,960
(5,718)
5,731
—
13
11
6
1,990
2021
£m
10,970
(2,591)
700
(8)
(1,899)
(6,724)
(387)
1,960
1. Other movements in 2021 relate to the release of additional liabilities arising from the liability adequacy test for France that was established in 2020
2. The movement in 2022 relates to the acquisition of an additional 25% or the ordinary shares of Aviva Life Insurance Company India Limited giving Aviva a controlling interest in the entity (see note 2a). The movement in
2021 relates to disposal of the France, Italy and Poland businesses.
The amount of UDS at 31 December 2022 has remained broadly unchanged at £1,990 million (2021: £1,960 million). Market movements
primarily due to a material increase in interest rates (and reduction in global equity) have reduced the participating fund assets but these
changes are broadly offset by an equivalent reduction in participating fund liabilities.
Where the aggregate amount of participating assets is less than the participating liabilities within a fund then the shortfall may be held as
negative UDS, subject to recoverability testing as part of the liability adequacy requirements of IFRS 4. There are no material negative UDS
balances at the participating fund-level within each life entity in the current period (2021: no material negative UDS ).
48 – Tax assets and liabilities
This note analyses the tax assets and liabilities that appear in the statement of financial position and explains the movements in these
balances in the year.
(a) Current tax
Current tax assets recoverable and liabilities payable in more than one year are £116 million and £10 million (2021: £116 million and
£1 million), respectively.
The Group is party to the CFC & Dividend Group Litigation, which challenged the tax treatment of dividends received from non-UK entities
before 2009. The Group is attempting to recover claims from HMRC covered by this judgement. A recoverable balance of £106 million is
included within current tax assets.
(b) Deferred tax
(i) The balances at 31 December comprise:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
Deferred tax attributable to policyholder returns included above at 31 December 2022 was an asset of £340 million
(2021: liability of £433 million).
(ii) The net deferred tax liability arises on the following items:
Long-term business technical provisions and other insurance items
Deferred acquisition costs
Unrealised gains on investments
Pensions and other post-retirement obligations
Unused losses and tax credits
Subsidiaries, associates and joint ventures
Intangibles and additional value of in-force long-term business
Provisions and other temporary differences
Net deferred tax liability
2022
£m
611
(825)
(214)
2021
£m
138
(1,983)
(1,845)
2022
£m
(205)
(71)
(187)
(250)
402
—
(465)
562
(214)
2021
£m
(351)
(100)
(486)
(641)
118
(27)
(433)
75
(1,845)
Aviva plc
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Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
48 – Tax assets and liabilities continued
(iii) The movement in the net deferred tax liability was as follows:
Net liability at 1 January
Acquisition and disposal of subsidiaries
Amounts credited/(charged) to income statement (note 12(a))
Amounts credited/(charged) to other comprehensive income
Foreign exchange rate movements
Other movements
Net liability at 31 December
2022
£m
(1,845)
(79)
1,294
412
4
—
(214)
2021
£m
(1,761)
305
(247)
(157)
11
4
(1,845)
Net deferred tax assets in respect of policyholder investments arose as a result of significant market volatility during the year. These
positions are expected to reverse as the market recovers. The deferred tax asset relates to UK tax losses which carry forward indefinitely and
is recognised based on probable future taxable investment income and gains within 5 years. Assumed investment returns are consistent
with actuarial assumptions used in reserving and alternative assumptions modelled by the Group also show full recovery of the deferred tax
asset over this period.
Where shareholder deferred tax assets are not supported by deferred tax liabilities, they are recognised to the extent that it is probable that
future taxable profits will be available against which the tax losses can be utilised. In assessing future profitability, the directors have relied
on board approved business plans and profit forecasts for up to 5 years and the Group's history of taxable profits in the relevant
jurisdictions.
The Group has unrecognised gross tax losses (excluding capital losses) and other temporary differences of £568 million (2021: £819 million)
to carry forward against future taxable income of the necessary category in the companies concerned. Of these, trading losses of £26 million
(2021: £11 million) will expire within the next 8 years. The remaining losses have no expiry date.
In addition, the Group has unrecognised gross capital losses of £579 million (2021: £575 million). These have no expiry date.
At 31 December 2022, a potential deferred tax liability of £24 million (2021: £26 million) is not recognised on temporary differences relating
to reserves of overseas subsidiaries which are not expected to be distributed.
49 – Pension deficits and other provisions
This note details the non-insurance provisions that the Group holds and shows the movements in these during the year.
(a) Carrying amounts
Total IAS 19 obligations to staff pension schemes (note 50(a))
Restructuring provisions
Other provisions
Total provisions
2022
£m
360
70
331
761
2021
£m
485
119
397
1,001
Other provisions includes amounts set aside throughout the Group relating to product governance rectification.
(b) Movements in restructuring and other provisions
At 1 January
Additional provisions
Provisions released during the year
Charge to income statement
Utilised during the year
Acquisition/disposal of subsidiaries
Foreign exchange rate movements
At 31 December
Restructuring
provisions
£m
Other
provisions
£m
119
—
—
—
(49)
—
—
70
397
132
(91)
41
(163)
55
1
331
2022
Total
£m
516
132
(91)
41
(212)
55
1
401
Restructuring
provisions
£m
Other
provisions
£m
48
79
—
79
(8)
—
—
119
565
235
(193)
42
(147)
(60)
(3)
397
2021
Total
£m
613
314
(193)
121
(155)
(60)
(3)
516
Of the total restructuring and other provisions, £119 million (2021: £43 million) is expected to be settled more than one year after the
statement of financial position date.
Restructuring provisions include amounts for separation costs and onerous contracts arising as a result of disposal transactions completed
in 2020 and 2021.
Aviva plc
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Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
49 – Pension deficits and other provisions continued
Other provisions include a £1 million provision (2021: £42 million) in respect of past communications to a specific sub-set of pension
policyholders, that may not have been adequately informed of switching options into with-profit funds that were available to them. The
reduction in the value of the provision during 2022 of £41 million is due to utilisation in the period of £14 million and a release of £27 million.
50 – Pension obligations
(a) Introduction
The Group operates a number of defined benefit and defined contribution pension schemes. The defined benefit schemes are in the UK,
Ireland and Canada. The assets and liabilities of these defined benefit schemes as at 31 December 2022 are shown below.
Total fair value of scheme assets (see b(ii) below)
Present value of defined benefit obligation
IAS 19 surpluses/(deficits) in the schemes
Surpluses included in other assets (note 29)
Deficits included in provisions (note 49)
IAS 19 surpluses/(deficits) in the schemes
UK
£m
10,877
(10,002)
875
1,166
(291)
875
Ireland
£m
689
(670)
19
26
(7)
19
Canada
£m
2022
Total
£m
UK
£m
197
(259)
(62)
11,763
(10,931)
832
18,195
(15,764)
2,431
—
(62)
(62)
1,192
(360)
832
2,754
(323)
2,431
Ireland
£m
898
(988)
(90)
—
(90)
(90)
Canada
£m
244
(316)
(72)
2021
Total
£m
19,337
(17,068)
2,269
—
(72)
(72)
2,754
(485)
2,269
This note relates to the defined benefit pension schemes included in the table above. The charges to the income statement for the main
schemes are shown in section (b)(i) below, whilst the total charges for all pension schemes are disclosed in section (d) below.
Under the IAS 19 valuation basis, the Group applies the principles of IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction, whereby a surplus is only recognised to the extent that the company is able to access the
surplus either through an unconditional right of refund to the surplus or through reduced future contributions relating to ongoing service,
which have been substantively enacted or contractually agreed. The Group has determined that it can derive economic benefit from the
surplus in the Aviva Staff Pension Scheme (ASPS) via a reduction to future employer contributions for defined contribution (DC) members,
which could theoretically be paid from the surplus funds in the ASPS. In the RAC (2003) Pension Scheme and Friends Provident Pension
Scheme (FPPS), in the UK and in the Aviva Ireland Staff Pension Fund (AISPF) in Ireland, the Group has determined that the rules set out in
the schemes’ governing documentation provide for an unconditional right to a refund from any future surplus funds in the schemes.
The assets of the UK, Irish and Canadian schemes are held in separate trustee-administered funds to meet long-term pension liabilities to
past 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 the assets failing to meet the liabilities of the schemes over the long term, and to maximise returns consistent with an
acceptable level of risk so as to control the long-term costs of these schemes.
A funding actuarial valuation of each of the defined benefit schemes is carried out at least every three years for the benefit of scheme
trustees and members. Actuarial reports have been submitted for each scheme within this period, using appropriate methods for the
respective countries on local funding bases.
The number of scheme members was as follows:
Deferred members
Pensioners
Total members
United Kingdom
2021
Number
41,816
39,907
81,723
2022
Number
39,843
40,501
80,344
2022
Number
2,200
982
3,182
Ireland
2021
Number
2,402
861
3,263
2022
Number
344
1,261
1,605
Canada
2021
Number
382
1,276
1,658
All schemes are closed to future accrual. Closure of the schemes has removed the volatility associated with additional future accrual for
active members.
(i) UK schemes
In the UK, the Group operates three main pension schemes, the ASPS, the RAC Scheme which was retained after the sale of RAC Limited in
September 2011 and the FPPS, which was acquired as part of the Friends Life acquisition in 2015. As the defined benefit sections of the UK
schemes are now closed to both new members and future accrual, existing deferred members in active service and new entrants participate
in the defined contribution section of the ASPS. The UK schemes operate within the UK pensions’ regulatory framework.
(ii) Other schemes
In Ireland, the Group operates two main pension schemes, the AISPF and the Friends First Group Retirement and Death Benefits Scheme
(FFPS) which was acquired as part of the Friends First acquisition in June 2018. Future accruals for the AISPF and FFPS schemes ceased with
effect from 30 April 2013 and 1 April 2014 respectively. The Irish schemes are regulated by the Pensions Authority in Ireland.
Aviva plc
3.106
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
50 – Pension obligations continued
The Canadian defined benefit schemes ceased accruals with effect from 31 December 2011. The main Canadian plan is a Registered
Pension Plan in Canada and as such is registered with the Canada Revenue Agency and Financial Services Regulatory Authority of Ontario
and is required to comply with the Income Tax Act of Canada and the various provincial Pension Acts within Canada.
(b) IAS 19 disclosures
Disclosures under IAS 19 for the material defined benefit schemes in the UK, Ireland and Canada, are given below. Where schemes
provide both defined benefit and defined contribution pensions, the assets and liabilities shown exclude those relating to defined
contribution pensions.
(i) Movements in the scheme surpluses and deficits
Movements in the pension schemes’ surpluses and deficits comprise:
IAS 19 surplus in the schemes at 1 January
Administrative expenses
Total pension cost charged to net operating expenses
Net interest credited/(charged) to investment income/(finance costs)1
Total recognised in income
Remeasurements:
Actual return on these assets
Less: Interest income on scheme assets
Return on scheme assets excluding amounts in interest income
Gains from change in financial assumptions
Gains from change in demographic assumptions
Experience losses
Total recognised in other comprehensive income
Employer contributions
Plan participant contributions
Benefits paid
Administrative expenses paid from scheme assets
Foreign exchange rate movements
IAS 19 surplus in the schemes at 31 December
Fair Value of
Scheme Assets
£m
19,337
—
—
352
352
Present Value
of defined
benefit
obligation
£m
(17,068)
(20)
(20)
(310)
(330)
(7,125)
(352)
(7,477)
—
—
—
(7,477)
89
2
(572)
(20)
52
11,763
—
—
—
5,724
540
(329)
5,935
—
(2)
572
20
(58)
(10,931)
2022
IAS 19
Pensions
surplus/
(deficits)
£m
2,269
(20)
(20)
42
22
(7,125)
(352)
(7,477)
5,724
540
(329)
(1,542)
89
—
—
—
(6)
Fair Value of
Scheme Assets
£m
20,125
—
—
260
260
Present Value
of defined
benefit
obligation
£m
(18,091)
(19)
(19)
(233)
(252)
(315)
(260)
(575)
—
—
—
(575)
161
3
(564)
(19)
(54)
—
—
—
549
235
(150)
634
—
(3)
564
19
61
832
19,337
(17,068)
2021
IAS 19
Pensions
surplus/
(deficits)
£m
2,034
(19)
(19)
27
8
(315)
(260)
(575)
549
235
(150)
59
161
—
—
—
7
2,269
1. Net interest income of £62 million (2021: £40 million) has been credited to investment income and net interest expense of £20 million (2021: £13 million) has been charged to finance costs (see note 6)
The present value of unfunded post-retirement benefit obligations included in the table above is £88 million at 31 December 2022
(2021: £110 million).
Remeasurement losses of £1,542 million (2021: gain of £59 million) recorded in the statement of comprehensive income for the period are
largely driven by:
• A significant increase in UK interest rates, with the rate on 15-year swaps increasing by c.270bps during 2022. This has resulted in a
reduction of the fair value of fixed income securities, not fully offset by the reduction in the valuation of the defined benefit obligation from
the increase in the valuation interest rate. Further information on the sensitivity of the IAS 19 surplus to interest rates is provided in note
50(b)(iii).
• During the period the ASPS completed two further bulk annuity buy-in transactions with Aviva Life & Pensions UK Limited, a Group
Company. Due to different measurement bases applying for accounting purposes, the premium paid by the scheme exceeded the
valuation of the scheme asset recognised. In the table above, this has been recognised as a loss in the actual return on assets (see note 61
Related party transactions for further information). The scheme assets recognised are transferable and so have not been subject to
consolidation within the Group’s financial statements.
• Experience losses on the pension schemes' liabilities which includes the impact of higher than expected inflation increases.
• The losses were partially offset by actuarial gains relating to updated demographic assumptions (including longevity assumptions).
Aviva plc
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Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
50 – Pension obligations continued
(ii) Scheme assets
Scheme assets are stated at their fair values at 31 December 2022
Total scheme assets are comprised by country as follows:
UK
£m
Ireland
£m
Canada
£m
Bonds
Equities
Property
Pooled investment vehicles
Derivatives
Insurance policies
Repurchase agreements
Cash and other1
Total fair value of scheme assets
Less: consolidation elimination for non-transferable
Group insurance policy2
Total IAS 19 fair value of scheme assets
7,969
—
74
1,710
(158)
3,423
(646)
(1,063)
11,309
(432)
10,877
530
18
—
273
56
—
(191)
3
689
—
689
63
—
—
132
—
—
—
2
197
—
197
UK
£m
Ireland
£m
Canada
£m
2022
Total
£m
8,562
18
74
2,115
(102)
3,423
(837)
(1,058)
12,195
17,503
—
153
4,153
46
4,343
(4,376)
(3,002)
18,820
(432)
(625)
11,763
18,195
842
25
—
347
17
—
(331)
(2)
898
—
898
97
—
—
145
—
—
—
2
244
—
244
2021
Total
£m
18,442
25
153
4,645
63
4,343
(4,707)
(3,002)
19,962
(625)
19,337
1. Cash and other assets comprise cash at bank, receivables, payables, and longevity swaps. At 31 December 2022, cash and other assets primarily consist of short positions of £(2,675) million (2021: £(3,098) million).
2. As at 31 December 2022, the FPPS asset includes an insurance policy of £432 million (2021: £625 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. Insurance policies issued by other Group companies of £2,991 million as at 31 December 2022 (2021: £3,718 million) included in the ASPS assets are transferable and so are not subject to
consolidation.
Total scheme assets are analysed by those that have a quoted market price in an active market and other as follows:
Bonds
Equities
Property
Pooled investment vehicles
Derivatives
Insurance policies
Repurchase agreements
Cash and other1
Total fair value of scheme assets
Less: consolidation elimination for non-transferable Group insurance policy2
Quoted in an
active market
£m
7,078
18
—
31
64
—
—
(717)
6,474
—
2022
Total
£m
Quoted in an
active market
£m
8,562
18
74
2,115
(102)
3,423
(837)
(1,058)
12,195
(432)
14,633
25
—
207
15
—
—
(2,354)
12,526
—
Other
£m
1,484
—
74
2,084
(166)
3,423
(837)
(341)
5,721
(432)
Other
£m
3,809
—
153
4,438
48
4,343
(4,707)
(648)
7,436
(625)
Total IAS 19 fair value of scheme assets
6,474
5,289
11,763
12,526
6,811
2021
Total
£m
18,442
25
153
4,645
63
4,343
(4,707)
(3,002)
19,962
(625)
19,337
1. Cash and other assets comprise cash at bank, receivables, payables, and longevity swaps. At 31 December 2022, cash and other assets primarily consist of short positions of £(2,675) million (2021: £(3,098) million).
2. As at 31 December 2022, the FPPS asset includes an insurance policy of £432 million (2021: £625 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. Insurance policies issued by other Group companies of £2,991 million as at 31 December 2022 (2021: £3,718 million) included in the ASPS asset are transferable and so are not subject to
consolidation.
IAS 19 plan assets include investments in Group-managed funds of £1,468 million (2021: £2,351 million) and transferable insurance policies
with other Group companies of £2,991 million (2021: £3,718 million) in the ASPS. Where the investments are in segregated funds with
specific asset allocations, they are included in the appropriate line in the table above, otherwise they appear in ‘Cash and other’. There are
no significant judgements involved in the valuation of the scheme assets. Insurance policies are valued on the same basis as the pension
scheme liabilities, as required by IAS 19.
(iii) Assumptions on scheme liabilities
The valuations used for accounting under IAS 19 have been based on the most recent funding actuarial valuations, updated to take account
of the standard’s requirements in order to assess the liabilities of the material schemes at 31 December 2022
The projected unit credit method
The inherent uncertainties affecting the measurement of scheme liabilities require these to be measured on an actuarial basis. This involves
discounting the best estimate of future cash flows to be paid out by the scheme using the projected unit credit method. This is an accrued
benefits valuation method which calculates the past service liability to members and makes allowance for their projected future earnings. It
is based on a number of actuarial assumptions, which vary according to the economic conditions of the countries in which the relevant
businesses are situated, and changes in these assumptions can materially affect the measurement of the pension obligations.
Aviva plc
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
50 – Pension obligations continued
Financial assumptions
The main financial assumptions used to calculate scheme liabilities under IAS 19 are:
Inflation rate1
General salary increases2
Pension increases3
Deferred pension increases3
Discount rate4, 5
Basis of discount rate
2022
3.5 %
5.3 %
3.6 %
3.6 %
4.81 %/4.80 %/4.78 %
(non-insured members)
4.79 %/4.82 %
(insured members)
UK
2021
3.5 %
5.3 %
3.5 %
3.3 %
1.84 %/1.86 %/1.89 %
(non-insured members)
1.87 %/1.80 %
(insured members)
AA-rated corporate bonds
Ireland
2021
2.0 %
3.5 %
0.55 %
2.0 %
3.65%/3.60% 1.2 %/1.25 %
2022
2.6 %
4.1 %
0.8 %
2.3 %
2022
2.75 %
3.25 %
—
—
5.05 %
Canada
2021
2.0 %
2.5 %
—
—
2.85 %
AA-rated corporate bonds AA-rated corporate bonds
1. For the UK schemes relevant RPI/CPI swap curves are used; the rate shown is the equivalent single RPI rate for ASPS. In 2022, CPI is derived as RPI less 100 bps pre 2030 and RPI less 0bps post 2030 (2021: RPI less 80 bps
pre 2030 and RPI less 0bps post 2030).
In the UK, the only remaining linkage between pension benefits and general salary increases is in respect of a small amount of Guaranteed Minimum Pension benefits, in line with National Average Earnings
2.
3. For the UK schemes relevant RPI/CPI swap curves are used, adjusted to reflect the appropriate caps/floors and the inflation volatility. The rates shown are the single equivalent rates for the biggest groups of pensions in
payment and deferment respectively in the ASPS. The rates shown are for future indexation and so include allowance for the impact of known inflation experience that falls within the reference period for pension and
deferred pension increases due in 2023.
4. To calculate scheme liabilities in the UK, a discount rate of 4.81 % is used for ASPS, 4.80 % for RAC and 4.78 % for FPPS members not included in annuity policies held by the scheme. A discount rate of 4.79 % is used for
ASPS members and 4.82 % for FPPS members included in annuity policies held by the scheme. The different rates reflect the differences in the duration of the liabilities between the schemes.
5. For the Irish schemes, a discount rate of 3.65 % and 3.60 % is used for AISPF and FFPS respectively, reflecting the differences in the duration of the liabilities between the two schemes.
The discount rate and pension increase rate are the two assumptions that have the largest impact on the value of the liabilities, with the
difference between them being known as the net discount rate. For each country, the discount rate is based on current average yields of
high-quality debt instruments taking account of the maturities of the defined benefit obligations.
Mortality assumptions
Mortality assumptions are material in measuring the Group’s obligations under its defined benefit schemes. The assumptions used are
summarised in the table below and have been selected to reflect the characteristics and experience of the membership of these schemes.
The mortality tables, average life expectancy and pension duration used at 31 December 2022 for scheme members are as follows:
Mortality table
UK
– ASPS
SAPS tables as a proxy for Club Vita pooled experience, including an
allowance for future improvements
– RAC
SAPS, including allowances for future improvement
– FPPS
SAPS, including allowances for future improvement
Ireland
– AISPF
98 % / 84 % S3PA_L with allowance for future improvements
– FFPS
98 % / 84 % S3PA_L with allowance for future improvements
Canada
Canadian Pensioners’ Mortality 2014 Private Table, including
allowance for future improvements
Life expectancy/(pension
duration) at NRA of a male
Life expectancy/(pension
duration) at NRA of a female
Normal
retirement age
(NRA)
Currently aged
NRA
20 years
younger than
NRA
Currently aged
NRA
20 years
younger than
NRA
60
65
60
61
65
65
87.9
27.9
86.9
21.9
87.7
27.7
88.9
27.9
89.0
24.0
87.3
22.3
89.3
29.3
88.6
23.6
89.6
29.6
90.6
29.6
90.5
25.5
88.7
23.7
89.6
29.6
88.9
23.9
90.1
30.1
91.7
30.7
91.6
26.6
89.7
24.7
91.4
31.4
90.6
25.6
91.8
31.8
93.3
32.3
93.2
28.2
91.1
26.1
The assumptions above are based on commonly used mortality tables. The tables make allowance for observed variations in such factors
as age, gender, pension amount, salary and postcode-based lifestyle group, and have been adjusted to reflect recent research into mortality
experience. However, the extent of future improvements in longevity is subject to considerable uncertainty and judgement is required in
setting this assumption. For the ASPS, which is the most material scheme to the Group, the allowance for mortality improvement is per the
actuarial profession’s CMI_2021 (S=7.25) Advanced with adjustments model (2021: CMI_2019 (S=7.25) Advanced with adjustments), with a
long-term improvement rate of 1.50 % (2021: 1.50 %) for males and 1.50 % (2021: 1.50 %) for females. The CMI_2021 tables have been
adjusted to allow for greater mortality improvements in the annuitant population relative to the general population on which CMI_2021 is
based by setting 'Parameter A' to 0.15 % per annum for males and 0.20 % per annum for females (2021: Parameter A was set to 0.15 % per
annum for males and 0.20 % per annum for females), and uses the core parameters to taper the long-term improvement rates to zero
between ages 85 and 110 (2021: advanced parameters were used to taper the long-term improvement rates to zero between ages 90
and 115).
Aviva plc
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Notes to the consolidated financial statements continued
50 – Pension obligations continued
Illustrative sensitivity analysis
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, inflation rate and mortality.
Movements in the defined benefit obligation are mitigated by the impact on the assets from economic movements including interest rates
and price inflation, as well as the longevity sensitivity impact due to the insurance policy and longevity swap assets held by the UK pension
schemes. The sensitivity analysis below has been determined by changing the respective assumptions while holding all other assumptions
constant. The following table illustrates how the IAS 19 surplus would have increased/(decreased) as a result of changes in interest rates,
price inflation and mortality:
Illustrative impact on IAS 19 surplus
Impact on present value of defined benefit obligation at 31 December 2022
Impact on fair value of scheme assets at 31 December 2022
Impact on IAS 19 surplus at 31 December 2022
Impact on present value of defined benefit obligation at 31 December 2021
Impact on fair value of scheme assets at 31 December 2021
Impact on IAS 19 surplus at 31 December 2021
1. The effect of assuming all members in the schemes were one year younger
Increase in
interest rates
+1%
£m
Decrease in
interest rates
-1%
£m
Increase in
inflation rate
+1%
£m
Decrease in
inflation rate
-1%
£m
1,299
(1,573)
(274)
2,650
(3,308)
(658)
(1,613)
1,995
382
(3,465)
4,350
885
(1,078)
1,316
238
(2,337)
2,816
479
872
(1,133)
(261)
1,895
(2,413)
(518)
1 year
younger1
£m
(308)
293
(15)
(680)
510
(170)
It is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
It should also be noted that these sensitivities are non-linear, and larger or smaller impacts should not be interpolated or extrapolated
from these results.
Maturity profile of the defined benefit obligation
Due to the increase of the discount rate over the period, the average duration of the discounted liabilities has reduced in each scheme.
The discounted scheme liabilities have an average duration of 13 years (2021: 17 years) in ASPS, 15 years (2021: 19 years) in FPPS, 14 years
(2021: 18 years) in the RAC scheme, 15 years (2021: 19 years) in AISPF, 23 years (2021: 26 years) in FFPS and 9 years (2021: 11 years) in the
Canadian scheme. The expected undiscounted benefits payable from the main UK defined benefit scheme, ASPS, is shown in the chart below:
Undiscounted benefit payments (£m)
500
400
300
200
100
0
2023
2038
2053
2068
2083
n Deferred member cash flows n Pensioner cash flows
(iv) Risk management and asset allocation strategy
The investment objectives of the trustees and the employers are to limit the risk of the assets failing to meet the liabilities of the schemes
over the long-term, and to maximise returns consistent with an acceptable level of risk so as to control the long-term costs of these
schemes. To meet these objectives, the schemes’ assets are invested in a portfolio, consisting primarily of debt securities as detailed in
section (b)(ii). The investment strategy continues to evolve over time and is expected to match the liability profile closely with swap overlays
to improve interest rate and inflation matching. The schemes are generally matched to interest rate risk relative to the funding bases.
Main UK scheme
The Company works closely with the trustee, who is required to consult with the Company on the investment strategy.
Interest rate and inflation rate risks are managed using a combination of liability-matching assets and swaps. Exposure to equity risk has
been reducing over time and credit risk is managed within risk appetite. Currency risk is relatively small and is largely hedged. The other
principal risk is longevity risk. This risk has reduced due to the ASPS entering into a longevity swap in 2014 covering approximately
£3.5 billion of pensioner in payment scheme liabilities.
Since October 2019 the ASPS has completed seven bulk annuity buy-in transactions with Aviva Life & Pensions UK Limited, a Group
Company. These transactions have covered approximately £2.9 billion of liabilities related to deferred pensioners and current pensioners,
removing the investment and longevity risk for these members from the scheme.
Other schemes
The other schemes are considerably less material but their risks are managed in a similar way to those in the main UK scheme. In 2015,
the RAC pension scheme entered into a longevity swap covering approximately £0.4 billion of pensioner in payment scheme liabilities.
Aviva plc
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Notes to the consolidated financial statements continued
50 – Pension obligations continued
(v) Funding
Formal actuarial valuations normally take place every three years and where there is a deficit, the Group and the trustees would agree a
deficit recovery plan. The assumptions adopted for triennial actuarial valuations are determined by the trustees and agreed with the Group
and are normally more prudent than the assumptions adopted for IAS 19 purposes, which are best estimate.
For the ASPS, the latest formal actuarial valuation was completed with an effective date of 31 March 2021 and showed that the ASPS was
fully funded on its technical provisions basis consistent with the requirements of the UK pension regulations.
Other than small amounts to meet some administrative expenses and death benefits, and deficit contributions in Canada, there are no
employer contributions expected in 2023.
(c) Defined contribution (money purchase) section of the ASPS
The trustees have responsibility for selecting a range of suitable funds in which the members can choose to invest and for monitoring the
performance of the available investment funds. Members are responsible for reviewing the level of contributions they pay and the choice of
investment fund to ensure these are appropriate to their risk appetite and their retirement plans. Members of this section contribute at least
2 % of their pensionable salaries, and depending on the percentage chosen, the Group contributes up to a maximum 14 %, together with
the cost of the death-in-service benefits. These contribution rates remained unchanged until June 2017. From 1 July 2017, for every 1 %
additional employee contribution, the Group will contribute an additional 0.1 % employer contribution. The amount recognised as an
expense for defined contribution schemes is shown in section (d) below.
(d) Charge to staff costs in the income statement
The total pension charge to staff costs for all of the Group’s defined benefit and defined contribution schemes were:
Continuing operations
UK defined benefit schemes
Overseas defined benefit schemes
Total defined benefit schemes from continuing operations (note 9(b))
UK defined contribution schemes
Overseas defined contribution schemes
Total defined contribution schemes from continuing operations (note 9(b))
Charge for pension schemes from discontinued operations
Total charge for pension schemes
2022
£m
22
1
23
152
20
172
—
195
2021
£m
20
1
21
150
19
169
1
191
There were no significant contributions payable or prepaid in the consolidated statement of financial position as at either 31 December
2022 or 2021
51 – Borrowings
Our borrowings are classified as either core structural borrowings, which are included within the Group’s capital employed, or operational
borrowings drawn by operating subsidiaries. This note shows the carrying values of each type.
(a) Analysis of total borrowings
Total borrowings comprise:
Core structural borrowings, at amortised cost
Operational borrowings, at amortised cost
Operational borrowings, at fair value
Total
2022
£m
5,469
195
1,091
1,286
6,755
2021
£m
6,133
71
1,140
1,211
7,344
Aviva plc
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Notes to the consolidated financial statements continued
51 – Borrowings continued
(b) Core structural borrowings
(i) The carrying amounts of these borrowings are:
Subordinated debt
6.125% £700 million subordinated notes 2036
6.125% £800 million undated subordinated notes
6.875% £600 million subordinated notes 2058
8.250% £500 million subordinated notes 2022
6.125% €650 million subordinated notes 2043
3.875% €700 million subordinated notes 2044
5.125% £400 million subordinated notes 2050
3.375% €900 million subordinated notes 2045
4.375% £400 million subordinated notes 2049
4.000% £500 million subordinated notes 2055
4.000% $CAD450 million subordinated notes 2030
Senior notes
0.625% €500 million senior notes 2023
1.875% €750 million senior notes 2027
Commercial paper
Total
2022
£m
2021
£m
697
—
595
—
267
619
396
793
396
493
274
4,530
278
409
687
252
5,469
696
502
595
506
252
586
396
751
395
493
260
5,432
264
387
651
50
6,133
The Group has redeemed £1 billion of subordinated debt during 2022. On 21 April 2022 the Group's 8.250% £500 million Tier 2 subordinated
notes reached their final maturity date and were redeemed. On 29 September 2022 the remaining £502 million of the Group's 6.125%
£800 million fixed rate reset perpetual Restricted Tier 1 notes reached their optional first all date and were redeemed.
All borrowings are stated at amortised cost.
(ii) The contractual maturity dates of undiscounted cash flows for these borrowings are:
Within one year
1 to 5 years
5 to 10 years
10 to 15 years
Over 15 years
Total contractual undiscounted cash flows
Principal
£m
531
411
275
700
3,583
5,500
Interest
£m
229
912
1,077
999
2,111
5,328
2022
Total
£m
760
1,323
1,352
1,699
5,694
10,828
Principal
£m
550
265
652
700
4,000
6,167
Interest
£m
269
1,020
1,229
1,178
2,274
5,970
2021
Total
£m
819
1,285
1,881
1,878
6,274
12,137
Borrowings are considered current if the contractual maturity dates are within a year. Where subordinated debt is undated or loan notes are
perpetual, the interest payments have not been included beyond 15 years. Annual interest payments in future years for these borrowings are
£nil (2021: £31 million).
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.
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Notes to the consolidated financial statements continued
51 – Borrowings continued
(c) Operational borrowings
(i) The carrying amounts of these borrowings are:
Amounts owed to financial institutions
Loans
Securitised mortgage loan notes
UK lifetime mortgage business (note 24(b))
Total
2022
£m
195
2021
£m
71
1,091
1,286
1,140
1,211
All the above borrowings are stated at amortised cost, except for the loan notes issued in connection with the UK lifetime mortgage
business of £1,091 million (2021: £1,140 million). These loan notes are carried at fair value. Their values are modelled on risk-adjusted cash
flows for defaults discounted at a risk-free rate plus a market-determined liquidity premium, and are therefore classified as ‘Level 3’ in the
fair value hierarchy. The risk allowances are consistent with those used in the fair value asset methodology, as described in note 22. These
have been designated at fair value through profit and loss in order to present the relevant mortgages, borrowings and derivative 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 about these notes are given in
note 24.
(ii) The contractual maturity dates of undiscounted cash flows for these borrowings are:
Within one year
1 to 5 years
5 to 10 years
10 to 15 years
Over 15 years
Total contractual undiscounted cash flows
Principal
£m
260
306
370
145
29
1,110
Interest
£m
60
194
197
151
43
645
2022
Total
£m
320
500
567
296
72
1,755
Principal
£m
104
418
374
197
69
1,162
Interest
£m
48
144
157
117
36
502
2021
Total
£m
152
562
531
314
105
1,664
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.
(d) Description and features
(i) Subordinated debt
A description of each of the subordinated notes is set out in the table below:
Notional amount
£700 million
£600 million
€650 million
€700 million
£400 million
€900 million
£400 million
£500 million
$CAD450 million
Issue date
14 Nov 2001
20 May 2008
5 July 2013
3 July 2014
4 June 2015
4 June 2015
12 September 2016
3 June 2020
2 October 2020
Redemption date
14 Nov 2036
20 May 2058
5 July 2043
3 July 2044
4 June 2050
4 December 2045
12 September 2049
3 June 2055
2 October 2030
Callable at par at option of the
Company from
16 Nov 2026
20 May 2038
5 July 2023
3 July 2024
4 December 2030
4 December 2025
12 September 2029
3 March 2035
N/A
In the event the Company does not call the notes, the coupon will reset
at each applicable reset date to
5 year Benchmark Gilt + 2.85%
Daily Compounded SONIA + 0.1193% + 3.26%
5 year EUR mid-swaps + 5.13%
5 year EUR mid-swaps + 3.48%
Daily Compounded SONIA + 0.1193% + 4.022%
3 month Euribor + 3.55%
Daily Compounded SONIA + 0.1193% + 4.721%
Benchmark Gilt Rate + 4.70%
N/A
Subordinated notes issued by the Company rank below its senior obligations and ahead of its preference shares and ordinary share
capital. The dated subordinated notes rank ahead of the undated subordinated notes. The fair value of notes at 31 December 2022 was
£4,314 million (2021: £6,262 million), calculated with reference to quoted prices.
(ii) Senior notes
All senior notes are at fixed rates and their total fair value at 31 December 2022 was £646 million (2021: £698 million).
(iii) Commercial paper
The commercial paper consists of £252 million issued by the Company (2021: £50 million) and is considered core structural funding.
The fair value of the commercial paper is considered to be the same as its carrying value and all issuances are repayable within one year.
Aviva plc
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Notes to the consolidated financial statements continued
51 – Borrowings continued
(iv) Loans
Loans owed to financial institutions comprise:
Non-recourse
Loans to property partnerships
Other non-recourse loans
2022
£m
143
52
195
2021
£m
19
52
71
As explained in accounting policy D, the UK long-term business policyholder funds have invested in a number of property funds and
structures (the ‘Property Funds’), some of which have raised external debt, secured on the relevant Property Fund’s property portfolio. The
lenders are only entitled to obtain payment of interest and principal to the extent there are sufficient resources in the relevant Property
Fund and they have no recourse whatsoever to the policyholder or shareholders’ funds of any companies in the Group. Loans of
£143 million (2021: £19 million) included in the table above relate to Property Funds.
Other non-recourse loans primarily include external debt raised by special purpose vehicles in the UK long-term business. The lenders have
no recourse whatsoever to the shareholders’ funds of any companies in the Group. The outstanding balance of these loans at
31 December 2022 was £52 million (2021: £52 million).
(v) Securitised mortgage loan notes
Loan notes have been issued by special purpose securitisation companies in the UK. Details are given in note 24.
(e) Movements during the year
Movements in borrowings during the year were:
New borrowings drawn down, excluding commercial paper, net of expenses
Repayment of borrowings, excluding commercial paper
Movement in commercial paper1
Net cash (outflow)/inflow
Borrowings acquired in business combinations2
Foreign exchange rate movements
Borrowings reclassified/(loans repaid) for non-cash consideration
Fair value movements
Amortisation of discounts and other non-cash items
Movements in the year
Balance at 1 January
Balance at 31 December
Core
Structural
£m
Operational
£m
—
(1,002)
189
(813)
—
150
—
—
(1)
(664)
6,133
5,469
122
(204)
—
(82)
139
2
—
16
—
75
1,211
1,286
2022
Total
£m
122
(1,206)
189
(895)
139
152
—
16
(1)
(589)
7,344
6,755
Core
Structural
£m
Operational
£m
—
(1,878)
(54)
(1,932)
—
(177)
—
—
(11)
(2,120)
8,253
6,133
24
(60)
—
(36)
—
(2)
(259)
34
—
(263)
1,474
1,211
2021
Total
£m
24
(1,938)
(54)
(1,968)
—
(179)
(259)
34
(11)
(2,383)
9,727
7,344
1. Gross issuances of commercial paper were £537 million in 2022 (2021: £205 million), offset by repayments of £348 million (2021: £259 million)
2. Borrowings acquired in business combinations relate to the acquisition of Succession Wealth on 11 August 2022 (see note 2(a)). The borrowings were repaid immediately, with the repayment included in the £204 million
repayment of operational borrowings shown above.
All movements in fair value in 2021 and 2022 on securitised mortgage loan notes designated as fair value through profit or loss were
attributable to changes in market conditions.
(f) Undrawn borrowings
The Group has the following undrawn committed central borrowing facilities available to them, which are used to support the commercial
paper programme:
Expiring within one year
Expiring beyond one year
Total
2022
£m
—
1,700
1,700
2021
£m
—
1,700
1,700
Aviva plc
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Notes to the consolidated financial statements continued
52 – Payables and other financial liabilities
This note analyses our payables and other financial liabilities at the end of the year.
Payables arising out of direct insurance
Payables arising out of reinsurance operations
Deposits and advances received from reinsurers
Bank customer accounts liability
Bank overdrafts1
Derivative liabilities (note 59)
Amounts due to brokers for investment purchases
Obligations for repayment of cash collateral received
Lease liabilities (note 21)
Other financial liabilities
Total
Expected to be settled within one year
Expected to be settled in more than one year
2022
£m
1,264
404
19
2
929
9,541
539
1,991
386
1,367
16,442
12,381
4,061
16,442
2021
£m
1,220
322
18
—
607
5,763
150
2,963
472
1,094
12,609
7,974
4,635
12,609
1. Bank overdrafts amount to £250 million (2021: £204 million) in life business operations and £679 million (2021: £403 million) in general insurance business and other operations.
All payables and other financial liabilities are carried at cost, which approximates to fair value, except for derivative liabilities, which are
carried at their fair values and lease liabilities which are carried at the present value of the outstanding lease payments.
53 – Other liabilities
This note analyses our other liabilities at the end of the year.
Deferred income
Reinsurers’ share of deferred acquisition costs
Accruals
Interest payable on borrowings
Other liabilities
Total
Expected to be settled within one year
Expected to be settled in more than one year
2022
£m
68
34
1,043
877
822
2,844
2,591
253
2,844
2021
£m
76
28
1,249
949
657
2,959
2,641
318
2,959
54 – Contingent liabilities and other risk factors
This note sets out the main areas of uncertainty over the calculation of our liabilities.
(a) Uncertainty over claims provisions
Note 42 gives details of the estimation techniques used by the Group to determine the general insurance business outstanding claims
provisions and of the methodology and assumptions used in determining the long-term business provisions. These approaches are
designed to allow for the appropriate cost of policy-related liabilities, with a degree of prudence, to give a result within the normal range of
outcomes. However, the actual cost of settling these liabilities may differ, for example because experience may be worse than that assumed,
or future general insurance business claims inflation may differ from that expected, and hence there is uncertainty in respect of these
liabilities.
Business Interruption
The removal of the majority of government restrictions related to COVID-19 across the Group’s markets has led to claims frequency
increasing to and stabilising at more normal levels, but there continues to be a significant degree of uncertainty in relation to business
interruption claims arising from COVID-19.
On 17 October 2022, the High Court handed down its judgment on the preliminary issues trial of Stonegate Pub Co Ltd vs MS Amlin Corp
Member Ltd (and others) and related cases. Aviva was not a party to the cases but will be affected by the final rulings. The Court ruled in
favour of the parties on different issues, and all parties have appealed the majority of the decisions. The judgment has been carefully
considered and the potential impact on claims related to business interruption policies assessed, noting that significant uncertainty
remains due to the appeals made to the Court of Appeal.
In Canada, we are party to a number of litigation proceedings challenging coverage under certain policies; however, we believe we have a
strong argument that there is no pandemic coverage under these policies. In the opinion of management, adequate provisions have been
established for such claims based on information available at the reporting date. The Group purchases reinsurance protection on its
property portfolio that includes coverage for business interruption and is collecting or seeking reinsurance recoveries of business
interruption losses that are covered by reinsurance.
Aviva plc
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Notes to the consolidated financial statements continued
54 – Contingent liabilities and other risk factors continued
For further information on our general insurance risk management see note 58(f).
(b) Asbestos, pollution and social environmental hazards
In the course of conducting insurance business, various companies within the Group receive general insurance liability claims, and become
involved in actual or threatened related litigation arising therefrom, including claims in respect of pollution and other environmental
hazards. Amongst these are claims in respect of asbestos production and handling in the UK, Ireland and Canada. Given the significant
delays that are experienced in the notification of these claims, the potential number of incidents they cover and the uncertainties associated
with establishing liability, the ultimate cost cannot be determined with certainty. However, on the basis of current information having regard
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 a normal part of their operating activities, various Group companies have given guarantees and options, including interest rate
guarantees, in respect of certain long-term insurance and investment products. Note 44 gives details of these guarantees and options.
Interest rate guaranteed returns, such as those available on guaranteed annuity options, are sensitive to interest rates falling below the
guaranteed level. The directors continue to believe that the existing provisions for such guarantees and options are sufficient.
(d) Regulatory compliance
The Group’s insurance and investment business is subject to local regulation in each of the countries in which it operates. A number of the
Group’s UK subsidiaries are dual regulated (directly authorised by both the PRA (for prudential regulation) and the FCA (for conduct
regulation)) while others are solo regulated (regulated solely by the FCA for both prudential and conduct regulation). Between them, the
PRA and FCA have broad powers including the authority to grant, vary the terms of, or cancel a regulated firm’s authorisation; to investigate
marketing and sales practices; and to require the maintenance of adequate financial resources.
The Group’s regulated businesses have compliance resources to respond to regulatory enquiries in a constructive way, and take corrective
action when warranted. However, all regulated financial services companies face the risk that their regulator could find that they have failed
to comply with applicable regulations or have not undertaken corrective action as required.
The impact of any such finding (whether in the UK or overseas) could have a negative impact on the Group’s reported results or on its
relations with current and potential customers. Regulatory action against a member of the Group could result in adverse publicity for, or
negative perceptions regarding, the Group, or could have a material adverse effect on the business of the Group, its results, operations and/
or financial condition and divert management’s attention from the day-to-day management of the business.
(e) Structured settlements
The Group has purchased annuities from licensed Canadian life insurers to provide for fixed and recurring payments to claimants. As a result
of these arrangements, the Group is exposed to credit risk to the extent that any of the life insurers fail to fulfil their obligations. The Group’s
maximum exposure to credit risk for these types of arrangements is approximately £641 million as at 31 December 2022 (2021: £807 million).
Credit risk is managed by acquiring annuities from a diverse portfolio of life insurers with proven financial stability. This risk is reduced to the
extent of coverage provided by Assuris, the Canadian life insurance industry compensation plan. As at 31 December 2022, no information
has come to the Group’s attention that would suggest any weakness or failure in life insurers from which it has purchased annuities and
consequently no provision for credit risk is required.
(f) Other
In the course of conducting insurance and investment business, various Group companies receive liability claims, and become involved
in actual or threatened related litigation. In the opinion of the directors, adequate provisions have been established for such claims and
no material loss will arise in this respect.
In addition, in line with standard business practice, various Group companies have given guarantees, indemnities and warranties in
connection with disposals in recent years of subsidiaries and associates to parties outside the Aviva Group. In the opinion of the directors,
no material unprovisioned loss will arise in respect of these guarantees, indemnities and warranties.
There are a number of charges registered over the assets of Group companies in favour of other Group companies or third parties.
In addition, certain of the Company’s assets are charged in favour of certain of its subsidiaries as security for intra-Group loans.
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Notes to the consolidated financial statements continued
55 – Commitments
This note gives details of our commitments to capital expenditure. See note 21 for further information on lease commitments.
Contractual commitments for acquisitions or capital expenditures of infrastructure loans, equity funds, investment property and property
and equipment, which have not been recognised in the financial statements, are as follows:
Infrastructure loan advances
Investment property
Property and equipment
Other investment vehicles¹
2022
£m
384
361
70
246
1,061
2021
£m
628
507
45
138
1,318
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 of its investment.
Notes 17 and 18 set out the commitments the Group has to its joint ventures and associates.
56 – Group capital management
(a) Group capital
The Group is required to measure and monitor its capital resources on a regulatory basis and to comply with minimum capital requirements
of regulators in each territory it operates in. At a Group level, we have to comply with the requirements established by the PRA.
The Group Solvency II capital requirements are calculated using a Partial Internal Model (PIM) which assesses the risks on an Internal Model
basis approved by the PRA. The Solvency II capital regime requires insurers to calculate regulatory capital adequacy at both individual
regulated subsidiaries and an aggregate Group level. Non-UK entities have been included in Group solvency in line with Solvency II
requirements. Other financial sector entities (including fund management) are included at their proportional share of the capital
requirement according to the relevant sectoral values. In addition, non-UK businesses including Canada, are subject to the locally
applicable capital requirements in the jurisdictions in which they operate.
Group capital is represented by Solvency II own funds. The Solvency II position disclosed is based on a ‘shareholder view’. The shareholder
view is considered by management to be more representative of the shareholders’ risk exposure and the Group’s ability to cover
the Solvency Capital Requirement (SCR) with eligible own funds and aligns with management’s approach to dynamically manage its
capital position.
In arriving at the shareholder position, the following adjustments are typically made to the regulatory Solvency II own funds:
• The contribution to the Group’s SCR and own funds of the most material fully ring fenced with-profits funds of £1,369 million at
31 December 2022 (2021: £2,205 million) and staff pension schemes in surplus of £394 million at 31 December 2022 (2021: £1,218 million)
are excluded. These exclusions have no impact on Solvency II surplus as these funds are self-supporting on a Solvency II capital basis with
any surplus capital above SCR not recognised;
• A notional reset of the transitional measure on technical provisions (TMTP), calculated using the same method as used for formal TMTP
resets. This presentation avoids step changes to the Solvency II position that arise only when the formal TMTP reset points are triggered.
The 31 December 2022 Solvency II position includes a notional reset (£437 million decrease in own funds) (an application for a formal reset
has been submitted to the regulator and will be reflected in our regulatory position once approved) while the 31 December 2021 Solvency
II position included a formal, rather than notional, reset of the TMTP in line with the regulatory requirement to reset the TMTP at least
every two years and hence no adjustment was required. In addition, due to interest rate rises over the period, a formal reset of TMTP
as at 30 June 2022 was approved and is included in the estimated 31 December 2022 regulatory Solvency II position;
Estimated Solvency II regulatory own funds as at 31 December
Adjustments for:
Fully ring-fenced with-profits funds
Staff pension schemes in surplus
Notional reset of TMTP
Estimated Solvency II shareholder own funds at 31 December
2022
£m
2021
£m
18,668
25,573
(1,369)
(394)
(437)
16,468
(2,205)
(1,218)
—
22,150
Solvency II own funds are comprised of a combination of shareholders’ funds, preference share capital, subordinated debt, and deferred tax
assets measured on a Solvency II basis. During the year, the Group redeemed £1 billion of subordinated debt (see note 51) and issued
£0.5 billion of of Restricted Tier 1 subordinated debt .
Solvency II surplus at the Group level represents the excess of eligible Solvency II own funds over the Group’s solvency capital requirements
calculated in accordance with Solvency II requirements. The Group maintained capital in excess of the SCR at all times during 2022.
All regulated subsidiaries complied with their capital requirements throughout the year, with the exception of a temporary breach in a small
entity in Canada where solvency coverage was promptly restored.
Further information on the Group’s Solvency II position, shareholder view, including a reconciliation between IFRS equity and own funds
can be found in the Other information section. This information is estimated and is therefore subject to change. It is also unaudited.
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Notes to the consolidated financial statements continued
56 – Group capital management continued
(b) Risks and capital management objectives
The primary objective of capital management is to maintain an efficient capital structure, in a manner consistent with our risk profile and
the regulatory and market requirements of our business. Capital is a primary consideration across a wide range of business activities,
including product development, pricing, business planning, merger and acquisition transactions and asset and liability management.
A Capital Management Standard, applicable Group-wide, sets out minimum standards and guidelines over responsibility for capital
management including considerations for capital management decisions and requirements for management information, capital
monitoring, reporting, forecasting, planning and overall governance.
The Group manages capital in conjunction with solvency capital requirements and in line with the dividend policy and capital framework.
• We aim to deliver sustainable dividends at a level that is resilient in times of stress and is covered by the capital and cash generated from
our businesses;
• At the core of our capital framework is financial strength in accordance with risk appetite and efficient deployment of capital. See note 58
for more information about the Group’s risk management approach;
• Key elements of our capital framework are as follows:
– Solvency II shareholder cover ratio working range of 160%-180%
– Centre liquid assets of c.£1.5 billion
– Solvency II debt leverage ratio below 30%
– To maintain our AA credit rating metrics;
• After the payment of our regular dividend, surplus capital is available for investment in the business to support growth and top quartile
efficiency objectives, bolt-on M&A where this delivers attractive risk adjusted returns and the opportunity is in line with our strategy, and
any additional returns to shareholders releasing excess capital over time;
• The Group seeks to retain financial flexibility by maintaining strong liquidity, access to a range of capital markets and significant unutilised
committed credit lines; and
• Our businesses are capitalised based on their regulatory minimum levels with further prudent volatility buffers specific to each entity.
Subsidiary capital appetites and working ranges are reviewed regularly by subsidiary boards.
Intra-group capital arrangements
Consistent with our capital management framework, the Group has in place intra-group arrangements to provide additional capital support
to its regulated subsidiaries. In the normal course of business, the Group will provide additional capital support to its regulated subsidiaries
in certain circumstances. While the Group considers it unlikely that such support will be required, the arrangements are intended to provide
additional comfort to its regulated subsidiaries and its policyholders.
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Notes to the consolidated financial statements continued
57 – Statement of cash flows
This note gives further detail behind the figures in the statement of cash flows.
(a) The reconciliation of (loss)/profit before tax to the net cash inflow from operating activities is:
Continuing operations
(Loss)/profit before tax
Adjustments for:
Share of loss/(profit) of joint ventures and associates
Dividends received from joint ventures and associates
Loss/(profit) on sale of:
Investment property
Subsidiaries, joint ventures and associates
Investments
Fair value losses/(gains) on:
Investment property
Investments
Borrowings
Depreciation of property and equipment
Equity compensation plans, equity settled expense
Impairment and expensing of:
Goodwill on subsidiaries
Acquired value of in-force business and intangibles
Non-financial assets
Amortisation of:
Premium/discount on debt securities
Premium/discount on borrowings
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 income on pension schemes
Foreign currency exchange gains
Changes in working capital
Decrease/(increase) in reinsurance assets
Decrease/(increase) in deferred acquisition costs
(Decrease)/increase in insurance liabilities and investment contracts
Increase in other assets1
Net purchases of operating assets
Net purchases of investment property
Net proceeds on sale of investment property
Net sales/(purchase) of financial investments
Total cash generated from/(used in) operating activities from continuing operations
2022
£m
(2,379)
2
47
8
—
(1,909)
(1,901)
1,150
48,667
16
49,833
57
58
(77)
4
—
(73)
68
(1)
68
260
244
639
13
450
(42)
(778)
2021
£m
801
(146)
32
32
(22)
(3,233)
(3,223)
(1,069)
(4,416)
34
(5,451)
74
24
—
—
7
7
64
(11)
75
130
259
517
175
490
(27)
(11)
2,052
167
(38,062)
(5,457)
(41,300)
(434)
408
11,493
11,467
16,093
(1,709)
(90)
16,333
(3,701)
10,833
(717)
1,047
(6,979)
(6,649)
(2,554)
1.
In 2022, increase in other assets excludes £60 million (202: £nil) for costs relating to internally generated intangible assets under development which are presented within net cash flows (used in)/from investing activities
The cash flows presented in this statement cover all the Group’s activities and include flows from both policyholder and shareholder
activities. Operating cash flows reflect the movement in both policyholder and shareholder controlled cash and cash equivalent balances.
During the year the net operating cash inflow reflects a number of factors, including the level of premium income, payments of claims,
creditors and surrenders and purchases and sales of operating assets including financial investments. It also includes changes in the size
and value of consolidated cash investment funds and changes in the Group participation in these funds.
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Notes to the consolidated financial statements continued
57 – Statement of cash flows continued
(b) Cash flows in respect of the acquisition of, and additions to, subsidiaries, joint ventures and associates comprised:
Continuing operations
Cash consideration for subsidiaries, joint ventures and associates acquired and additions1
Total cash flow on acquisitions and additions from continuing operations
2022
£m
(275)
(275)
1. Cash consideration for subsidiaries, joint ventures and associates acquired and additions relates to the acquisition of Succession Wealth and Aviva Life Insurance Company India Limited (see note 2a)
(c) Cash flows in respect of the disposal of subsidiaries, joint ventures and associates comprised:
Continuing operations
Cash proceeds from disposal of subsidiaries, joint ventures and associates
Less: Net cash and cash equivalents divested with subsidiaries
Cash flow on disposals from continuing operations
Discontinued operations
Cash proceeds from disposal of subsidiaries, joint ventures and associates1
Less: Net cash and cash equivalents divested with subsidiaries
Cash flow on disposals from discontinued operations
Total cash flow on disposals
1. Cash proceeds from disposal of subsidiaries, joint ventures and associates are net of £nil (2021: £19 million) transaction costs paid during the year
The above figures in (b) and (c) form part of cash flows from investing activities.
(d) Cash and cash equivalents in the statement of cash flows at 31 December comprised:
Cash at bank and in hand
Cash equivalents
Bank overdrafts
Cash and cash equivalents reconciles to the statement of financial position as follows:
Cash and cash equivalents (excluding bank overdrafts)
2021
£m
—
—
2021
£m
24
(1)
23
6,136
(2,772)
3,364
3,387
2022
£m
—
—
—
—
—
—
—
2022
£m
5,371
17,134
22,505
(929)
21,576
2021
£m
4,833
7,652
12,485
(607)
11,878
2022
£m
22,505
22,505
2021
£m
12,485
12,485
58 – Risk management
Risk management is key to Aviva’s success. We accept the risks inherent to our core business lines of life, general insurance and health, and
asset management. We diversify these risks through our scale, geographic spread, the variety of the products and services we offer and the
channels through which we sell them. We receive premiums which we invest to maximise risk-adjusted returns, so that we can fulfil our
promises to customers while providing a return to our shareholders. In doing so we have a preference for retaining those risks we believe we
are capable of managing to generate a return.
Our sustainability and financial strength are underpinned by an effective risk management process and risk intelligent culture, which helps
us identify major risks to which we may be exposed, establish appropriate controls and take mitigating actions for the benefit of our
customers and investors. The Group’s risk strategy is to invest its available capital to optimise the balance between return and risk while
maintaining an appropriate level of economic (i.e. risk-based) and regulatory capital.
The key elements of our risk management framework comprise: our risk strategy and risk management forward plans; risk governance,
including risk policies and business standards, risk oversight committees and roles and responsibilities; and the processes we use to
identify, measure, manage, monitor and report risks, including the use of our risk models and stress and scenario testing.
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Notes to the consolidated financial statements continued
58 – Risk management continued
Risk Environment
During the year, the global economy has experienced elevated inflation, rising interest rates and stagnating economic growth. Expectations
for 2023 are that interest rates will see further rises. The Bank of England expects the UK economy to be at risk to recession throughout 2023
and the first half 2024, with GDP expected to recover gradually thereafter. This will increase the risk of credit defaults and rating downgrades,
which we are monitoring closely . Affordability remains a concern to trading because of the economic climate, and will impact all
customers, including relatively affluent customers. Customer experience and retention will continue to require close monitoring. Continued
heightened geo-political tensions, specifically over the conflict in Ukraine, and the potential for further disruption to energy supplies are an
additional source of uncertainty for financial and commodity markets and as a trigger for inflation.
There remains uncertainty over the outcome from continuing COVID-19 business interruption claims litigation and the impact on the Group,
as well as the long-term impact of the COVID-19 pandemic on mortality and morbidity, and consequential strains on UK public healthcare
and customer demand for private medical insurance.
We expect continued and heightened regulatory change in 2023 and beyond. In 2023 the UK Government and PRA are expected to conclude
their review of Solvency II impacting how much prudential capital the Group is required to hold and how the Group invests the funds
backing its annuity business. By July 2023, the Group’s UK business will be required to have implemented the FCA’s Consumer Duty for open
products and by July 2024 for closed products. The FCA Consumer Duty, combined with the cost of living crisis, is expected to increase
regulatory scrutiny on the fair value of products provided by the insurance industry. August 2023 will see the first wave of large pension
providers and schemes connecting to the UK pensions dashboard.
The Group continues to maintain strong solvency and liquidity positions through a range of scenarios and stress testing. Our capital and
liquidity positions have been tested by recent market conditions and have been shown to be robust and resilient.
There has been an increased threat of malware and ransomware attacks across the world. In response we have increased the protection
level of anti-malware security controls. We continue to monitor threat intelligence data and update our security controls to maintain
protection against new and emerging ransomware variants.
Aviva remains committed to supporting a low carbon economy that will improve the resilience of our economy, society and the financial
system in line with the 2015 Paris Agreement target on climate change. In March 2021, we set an ambition to become a Net Zero carbon
company by 2040 and we are acting now to mitigate and manage the impact of climate change on our business. We calculate a Climate
Value at Risk (VaR) against Intergovernmental Panel on Climate Change (IPCC) scenarios to assess the climate-related risks and
opportunities under different emission projections and associated temperature pathways. A range of different financial indicators are
used to assess the impact on our investments and insurance liabilities. As part of our actions to mitigate climate risks, Aviva originates
assets for their climate credentials. Aviva has defined an Investment in Sustainable assets metric, which is implemented with reference to
external frameworks and is set out in our climate reporting policies in the Aviva plc Climate-related Financial Disclosure report 2022.
The Group is implementing IFRS 17 insurance contracts retrospectively from 1 January 2023. The adoption of IFRS 17 significantly impacts
the measurement and presentation of the contracts in scope of the standard. IFRS 17 introduces the concept of a contractual service
margin (CSM) liability that defers future unearned profit on insurance contracts. The recognition of a CSM for our life businesses is expected
to result in a material reduction in the IFRS net asset value of the Group on transition to IFRS 17, with a stock of future profits held on the
balance sheet as a liability and released over time. The cash flows and underlying capital generation of our businesses are unaffected by
IFRS 17, and the standard will have no impact on our Solvency II performance metrics or the Group financial targets we have announced.
Furthermore, we do not expect IFRS 17 to impact on the dividend policy and dividend guidance. Further information on IFRS 17, including
the expected financial impacts on the Group net asset value at the transition date of 1 January 2022, is provided in note 62.
(a) Risk management framework (RMF)
Aviva’s RMF is at the heart of every business decision and is key to a robust control environment and the Group’s sustainable success.
The key components of our RMF are risk appetite; risk governance, including risk policies and business standards, risk oversight committees
and roles and responsibilities; and the processes we use to identify, measure, manage, monitor and report risks, including the use of our risk
models and stress and scenario testing. A risk taxonomy is maintained for a consistent approach to risk identification, measurement and
reporting, and to determine application of the Group Risk Appetite Framework and the risks for which a Risk Policy is required.
The taxonomy is arranged in a hierarchy with more granular risk types grouped into the following principal risk categories: credit and
market, liquidity, life insurance, general insurance (including health), operational and strategic risk. Risks falling within these types may
affect a number of outcomes including those relating to solvency, liquidity, profit, reputation and conduct.
To promote a consistent and rigorous approach to risk management across all businesses we have a set of risk policies and business
standards which set out the risk strategy/forward plan, appetite, framework, key controls, and minimum requirements for the Group’s
worldwide operations. The business unit’s chief executive officers make an annual declaration supported by an opinion from the business
unit chief risk officers that the system of governance and internal controls was effective and fit for purpose for their business throughout the
year.
The Group’s Risk Appetite Framework was refreshed during the year, with revised and new risk appetites, preferences and tolerances
considered and approved by the Risk Committee. Climate Risk was integrated and defined within the risk appetite framework to be
incorporated into risk-based decision-making.
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
58 – Risk management continued
A regular top-down key risk identification and assessment process is carried out by the Risk function. This includes the consideration of
emerging risks and is supported by deeper thematic reviews. This process is replicated at the business unit level. The risk assessment
processes are used to generate risk reports which are shared with the relevant risk committees.
Risk models are an important tool in our measurement of risks and are used to support the monitoring and reporting of the risk profile and
in the consideration of the risk management actions available. We carry out a range of stress (where one risk factor, such as equity returns,
is assumed to vary) and scenario (where combinations of risk factors are assumed to vary) tests to evaluate their impact on the business
and the management actions available to respond to the conditions envisaged. For those risk types managed through the holding of
capital, being our principal risk types except for liquidity risk, we measure and monitor our risk profile based on the Solvency Capital
Requirement (SCR).
Roles and responsibilities for risk management in Aviva are based around the ‘three lines of defence’ risk governance model where
ownership for risk is taken at all levels in the Group. Line management in the business is accountable for risk ownership and management,
including the implementation and embedding of the RMF. The risk function is accountable for quantitative and qualitative oversight and
challenge of the risk identification, measurement, monitoring, management, and reporting processes and for developing the RMF, as well as
providing advisory support to the business on risk innovation. Internal audit provides an independent assessment of the risk management
framework and internal control processes.
Board oversight of risk and its management across the Group is maintained on a regular basis through its Risk Committee and Customer
and Sustainability Committee. The Board has overall responsibility for determining risk appetite, which is an expression of the risk the
business is willing to take. Three Group-level management committees (Group Executive Risk Committee, Group Asset Liability Committee
and the Disclosure Committee) exist to assist members of the Aviva Executive Committee in the discharge of their delegated authorities and
their accountabilities within the Aviva Governance Framework and in relation to their defined regulatory responsibilities.
In September 2022, we acquired an additional 25% stake in our joint venture in India, Aviva Life Insurance Company India Limited,
increasing Aviva’s shareholding to 74%. As a result of this transaction, we became the majority shareholder and have applied the Aviva RMF
to this business.
The RMF of a small number of our joint ventures and strategic equity holdings differs from the Aviva RMF outlined in this note. We work with
these entities to understand how their risks are managed and to align them, where possible, with Aviva’s RMF so not to unduly increase the
overall risk exposure of the Group.
The types of risks to which the Group is exposed have not changed significantly during the year and remain credit, market, liquidity, life
insurance, general insurance and health, asset management and operational risks. These risks are described below.
(b) Credit risk
Credit risk is the risk of financial loss as a result of the default or failure of third parties to meet their payment obligations to Aviva, or
variations in market values as a result of changes in expectations related to these risks. Credit risk is taken so that Aviva can provide the
returns required to satisfy policyholder liabilities and to generate returns for our shareholders. In general we prefer to take credit risk over
equity and property risks, because of the better expected risk adjusted return, our credit risk analysis capability and the structural
investment advantages conferred to insurers with long-dated, relatively illiquid liabilities.
Our approach to managing credit risk recognises that there is a risk of adverse financial impact resulting from fluctuations in credit quality
of third parties including default, rating transition and credit spread movements. Our credit risks arise principally through exposures to debt
security investments, structured asset investments, bank deposits, derivative counterparties, mortgage lending and reinsurance
counterparties.
The Group manages its credit risk at business unit and Group level. All business units are required to implement credit risk management
processes (including limits frameworks), operate specific risk management committees, and report and monitor their exposures against
detailed pre-established risk criteria. At Group level, we manage and monitor all exposures across our business units on a consolidated
basis, and operate a Group limit framework that must be adhered to by all.
The Group has minimal direct investment exposure to Russia and Ukraine, and no exposure to Belarus.
We did not experience a material increase in credit defaults in 2022. We continue to monitor closely any deterioration in the credit markets.
Our capital position includes an allowance for the expected potential impacts from downgrades and defaults.
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4. Other Information
Notes to the consolidated financial statements continued
58 – Risk management continued
A detailed breakdown of the Group’s current credit exposure by credit quality is shown below.
(i) Financial exposures by credit ratings
Financial assets are graded according to current external credit ratings issued. AAA is the highest possible rating. Investment grade financial
assets are classified within the range of AAA to BBB ratings. Financial assets which fall outside this range are classified as sub-investment
grade. The following table provides information regarding the aggregated credit risk exposure of the Group for financial assets with external
credit ratings. ‘Not rated’ assets capture assets not rated by external ratings agencies.
As at 31 December 2022
Fixed maturity securities
Reinsurance assets
Other investments
Loans
Total
As at 31 December 2021
Fixed maturity securities
Reinsurance assets
Other investments
Loans
Total
AAA
18.0 %
— %
— %
— %
AA
37.6 %
66.5 %
— %
9.0 %
A
21.9 %
30.3 %
0.1 %
1.0 %
BBB
13.0 %
3.1 %
— %
0.4 %
Below BBB
3.8 %
— %
— %
— %
AAA
13.3 %
— %
— %
16.4 %
AA
43.2 %
76.7 %
0.1 %
4.3 %
A
22.2 %
18.9 %
— %
— %
BBB
12.1 %
3.8 %
— %
0.5 %
Below BBB
3.7 %
— %
— %
— %
Not rated
Carrying value
including held
for sale
£m
5.7 % 103,776
13,056
0.1 %
34,520
99.9 %
29,647
89.6 %
180,999
Not rated
Carrying value
including held
for sale
£m
5.5 % 133,251
15,032
0.6 %
36,541
99.9 %
38,624
78.8 %
223,448
Less: Assets
classified as
held for sale
£m
—
—
—
—
—
Less: Assets
classified as
held for sale
£m
—
—
—
—
—
Carrying value
£m
103,776
13,056
34,520
29,647
180,999
Carrying value
£m
133,251
15,032
36,541
38,624
223,448
The majority of non-rated fixed maturity securities within shareholder assets are held by our businesses in the UK. Of these securities most
are allocated an internal rating using a methodology largely consistent with that adopted by an external rating agency, and are considered
to be of investment grade credit quality; these include £3.6 billion (2021: £4.3 billion) of debt securities held in our UK Life business,
predominantly made up of private placements and other corporate bonds, which have been internally rated as investment grade.
The following table provides information on the Group’s exposure by credit ratings to financial assets that meet the definition of ‘solely
payment of principal and interest’ (SPPI).
As at 31 December 2022
Loans
Receivables
Accrued income & interest
Other investments
Total
As at 31 December 2021
Loans
Receivables
Accrued income & interest
Other investments
Total
AAA
£m
—
—
—
—
—
AAA
£m
6,318
—
—
—
6,318
AA
£m
2,663
62
—
—
2,725
AA
£m
1,678
165
—
—
1,843
A
£m
250
419
—
—
669
A
£m
—
670
—
—
670
BBB
£m
—
94
—
—
94
BBB
£m
—
89
—
—
89
Not rated
£m
814
4,175
163
1
5,153
Not rated
£m
648
3,715
284
—
4,647
At the period end, the Group held cash and cash equivalents of £21,441 million (2021: £10,100 million) that met the SPPI criteria, of which all
is placed with financial institutions with issuer ratings within the range of AAA to BBB. Further information on the extent to which unrated
receivables, including those that meet the SPPI criteria, are past due may be found in section (ix) of this note.
The Group continues to hold a series of macro credit hedges to reduce the overall credit risk exposure. The Group’s maximum exposure to
credit risk of financial assets, without taking collateral or these hedges into account, is represented by the carrying value of the financial
instruments in the statement of financial position. These comprise debt securities, reinsurance assets, derivative assets, loans and
receivables. The carrying values of these assets are disclosed in the relevant notes: financial investments (note 26), reinsurance assets (note
45), loans (note 23) and receivables (note 27). The collateral in place for these credit exposures is disclosed in note 60 Financial assets and
liabilities subject to offsetting, enforceable master netting agreements and similar agreements.
(ii) Other investments
Other investments include unit trusts and other investment vehicles; derivative financial instruments, representing positions to mitigate the
impact of adverse market movements; and other assets, including deposits with credit institutions and minority holdings in property
management undertakings.
The credit quality of the underlying debt securities within investment vehicles is managed by the safeguards built into the investment
mandates for these funds which determine the funds’ risk profiles. At the Group level, we also monitor the asset quality of unit trusts and
other investment vehicles against Group set limits.
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4. Other Information
Notes to the consolidated financial statements continued
58 – Risk management continued
A proportion of the assets underlying these investments are represented by equities and so credit ratings are not generally applicable.
Equity exposures are managed against agreed benchmarks that are set with reference to overall appetite for market risk.
(iii) Loans
The Group loan portfolio principally comprises:
• 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 are fully
collateralised by other securities;
• Healthcare, infrastructure and PFI loans secured against healthcare, education, social housing and emergency services related premises; and
• Mortgage loans collateralised by property assets.
We use loan to value, interest and debt service cover, and diversity and quality of the tenant base metrics to internally monitor our
exposures to mortgage loans. We use credit quality, based on dynamic market measures, and collateralisation rules to manage our stock
lending activities. Policy loans are loans and advances made to policyholders, and are collateralised by the underlying policies.
(iv) Credit concentration risk
The long-term and general insurance businesses are generally not individually exposed to significant concentrations of credit risk due to the
regulations applicable in most markets and the Group credit policy and limits framework, which limit investments in individual assets and
asset classes. Credit concentrations are monitored as part of the regular credit monitoring process and are reported to the Group Asset
Liability Committee (ALCO). With the exception of government bonds the largest aggregated counterparty exposure within shareholder
assets is to the Legal and General Group plc (including subsidiaries), representing approximately 1.7% of the total shareholder assets.
(v) Reinsurance credit exposures
The Group is exposed to concentrations of risk with individual reinsurers due to the nature of the reinsurance market and the restricted
range of reinsurers that have acceptable credit ratings. The Group operates a policy to manage its reinsurance counterparty exposures, by
limiting the reinsurers that may be used and applying strict limits to each reinsurer. Reinsurance exposures are aggregated with other
exposures to ensure that the overall risk is within appetite. The Group Capital and Group Risk teams have an active monitoring role with
escalation to the Chief Financial Officer (CFO), Chief Risk Officer (CRO), Group ALCO and the Board Risk Committee as appropriate.
(vi) Securities finance
The Group has significant securities financing operations within the UK and smaller operations in some other businesses. The risks within
this activity are mitigated by collateralisation and minimum counterparty credit quality requirements.
(vii) Derivative credit exposures
The Group is exposed to counterparty credit risk through derivative trades. This risk is generally mitigated through holding collateral for
most trades. Residual exposures are captured within the Group’s credit management framework.
(viii) Unit-linked business
In unit-linked business the policyholder bears the direct market risk and credit risk on investment assets in the unit funds and the
shareholders’ exposure to credit risk is limited to the extent of the income arising from asset management charges based on the value
of assets in the fund.
(ix) Impairment of financial assets
In assessing whether financial assets carried at amortised cost or classified as available for sale are impaired, due consideration is given
to the factors outlined in accounting policies (T) and (V). The following table provides information regarding the carrying value of financial
assets subject to impairment testing that have been impaired and the ageing of those assets that are past due but not impaired. The table
excludes assets carried at fair value through profit or loss and held for sale.
As at 31 December 2022
Fixed maturity securities
Reinsurance assets
Other investments
Loans
Receivables and other financial assets
Financial assets that are past due but not impaired
Neither past
due nor
impaired
£m
—
7,832
—
3,727
5,778
0–3 months
£m
3–6 months
£m
6 months–
1 year
£m
Greater than
1 year
£m
—
—
—
—
133
—
—
—
—
71
—
—
—
—
26
—
—
—
—
35
Financial
assets that
have been
impaired
£m
—
—
—
—
—
Carrying value
£m
—
7,832
—
3,727
6,043
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Notes to the consolidated financial statements continued
58 – Risk management continued
As at 31 December 2021
Fixed maturity securities
Reinsurance assets
Other investments
Loans
Receivables and other financial assets
Financial assets that are past due but not impaired
Neither past
due nor
impaired
£m
—
9,924
—
8,644
6,073
0–3 months
£m
3–6 months
£m
6 months–
1 year
£m
Greater than
1 year
£m
—
—
—
—
15
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Financial
assets that
have been
impaired
£m
—
—
—
—
—
Carrying value
£m
—
9,924
—
8,644
6,088
Excluded from the tables above are financial and reinsurance assets carried at fair value through profit or loss that are not subject to
impairment testing, as follows: £97.3 billion of fixed maturity securities (2021: £113.4 billion), £34.5 billion of other investments
(2021: £30.8 billion), £25.9 billion of loans (2021: £30.0 billion) and £5.2 billion of reinsurance assets (2021: £5.1 billion).
Where assets have been classed as ‘past due and impaired’, an analysis is made of the risk of default and a decision is made whether to seek
to mitigate the risk. There were no material financial assets that would have been past due or impaired had the terms not been
renegotiated.
(c) Market risk
Market risk is the risk of adverse financial impact resulting, directly or indirectly from fluctuations in interest rates, inflation, foreign currency
exchange rates, equity and property prices. Market risk arises in business units because of fluctuations in both the value of liabilities and the
value of investments held. At Group level, it also arises in relation to the overall portfolio of international businesses and in the value of
investment assets owned directly by the shareholders. We actively seek some market risks as part of our investment and product strategy.
The management of market risk is undertaken at business unit and at Group level. Businesses manage market risks locally using the Group
market risk framework and within local regulatory constraints. Group Capital is responsible for monitoring and managing market risk at
Group level and has established criteria for matching assets and liabilities to limit the impact of mismatches because of market movements.
In addition, where the Group’s long-term savings businesses have written insurance and investment products where most investment risks
are borne by its policyholders, these risks are managed in line with local regulations and marketing literature, so to satisfy the
policyholders’ risk and reward objectives. The Group writes unit-linked business, primarily in the UK. The shareholders’ exposure to market
risk on this business is limited to the extent that income arising from asset management charges is based on the value of assets in the fund.
Aviva launched a formal Group-wide programme of change activity in 2019 to manage the transition to alternative risk-free rates from LIBOR
settings. Three sub programmes were established covering the UK insurance business, Aviva Investors and other Group activities, reporting
into a Group Steering Committee. The majority of Aviva’s exposure to IBOR rates existed within the UK insurance business and Aviva
Investors, where Aviva has reviewed all financial instruments, engaged with counterparties to either transition to alternative risk-free rates or
have exited positions where required. Significant progress has been made, with a substantive majority of Aviva’s original IBOR exposure
already resolved. Aviva’s only remaining exposure to GBP LIBOR relates to a small number of currently fixed-rate public bonds that would
revert to LIBOR-referencing floating rates in the event of a non-call by the issuer at the next call date. We continue to assess the likelihood of
this event. Aviva has adhered to the ISDA Fallback Protocol for all its in-scope USD LIBOR exposures and we continue to work with borrowers
on the transition of our remaining direct USD LIBOR loan exposures in advance of the discontinuation of these benchmarks after 30 June
2023. Aviva’s exposure to CDOR relates to a small number of interest rate swaps whose transition will be planned prior to CDOR’s
termination after 28th June 2024. Aviva has worked closely with UK regulators, impacted clients, industry experts and industry associations
to ensure a smooth and transparent transition of the exposures. The programme continues to address all risks posed by the transition,
including the risk of non-transition of outstanding exposures. No change to the Company’s risk management strategy has been required in
response to the transition. At 30 December 2022, £506 million of non-derivative financial assets, £29 million of derivative financial assets and
£30 million of derivative financial liabilities had yet to transition to an alternative risk-free rate.
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Notes to the consolidated financial statements continued
58 – Risk management continued
The most material types of market risk that the Group is exposed to are described below.
(i) Equity price risk
The Group is subject to direct equity price risk arising from changes in the market values of its equity securities portfolio. Our most material
indirect equity price risk exposures are to policyholder unit-linked funds, which are exposed to a fall in the value of the fund thereby
reducing the fees we earn on those funds, and participating contracts, which are exposed to a fall in the value of the funds thereby
increasing our costs for policyholder guarantees. We also have some equity exposure in shareholder funds through equities held to match
inflation-linked liabilities.
We continue to limit our direct equity exposure in line with our risk preferences. At a business unit level, investment limits and local
investment regulations require that business units hold diversified portfolios of assets thereby reducing exposure to individual equities.
The Group does not have material holdings of unquoted equity securities.
Equity risk is also managed using a variety of derivative instruments, including futures and options. Businesses actively model the
performance of equities through the use of risk models, in particular to understand the impact of equity performance on guarantees,
options and bonus rates. An equity hedging strategy remains in place to help control the Group’s overall direct and indirect exposure
to equities.
Sensitivity to changes in equity prices is given in section (h) Risk and capital management, below.
(ii) Property price risk
The Group is subject to property price risk directly because of holdings of investment properties in a variety of locations worldwide and
indirectly through investments in mortgages and mortgage backed securities. Investment in property is managed at business unit level,
and is subject to local regulations on investments, liquidity requirements and the expectations of policyholders.
As at 31 December 2022, no material derivative contracts had been entered into to mitigate the effects of changes in property prices.
We maintain a conservative loan-to-value on our commercial mortgage portfolio. Exposure to property risk on equity release mortgages
from sustained underperformance in the UK House Price Index (HPI) is mitigated by capping loan to value on origination at low levels and
regularly monitoring the performance of the mortgage portfolio.
Sensitivity to changes in property prices is given in section (h) Risk and capital management, below.
(iii) Interest rate risk
Interest rate risk arises primarily from the Group’s investments in 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, and minimum surrender and maturity values. Details
of material guarantees and options are given in note 44.
We have limited appetite for interest rate risk as we do not believe it is adequately rewarded. We manage and hedge our interest rate
exposure through setting risk tolerance levels on a Solvency II cover ratio basis. Exposure to interest rate risk is monitored through several
measures that include duration, capital modelling, sensitivity testing and stress and scenario testing.
Increasing interest rates as a result of the monetary policy response to inflationary pressures will positively impact the Group’s regulatory
capital cover ratio. This could be offset by the negative impact of credit downgrades, counterparty defaults, claims and maintenance
expenses and lapse rates if high inflation persists and the economy stagnates or falls. Conversely, rising credit spreads will adversely impact
IFRS shareholders’ equity, see section (h) sensitivity test analysis.
The Group typically manages interest rate risk by investing in fixed interest securities which closely match the interest rate sensitivity of the
liabilities where such investments are available. In particular, a key objective is to at least match the duration of our annuity liabilities with
assets of the same duration, and in some cases where appropriate cash flow matching has been used. These assets include corporate
bonds, residential mortgages and commercial mortgages. Should they default before maturity, it is assumed that the Group can reinvest in
assets of a similar risk and return profile, which is subject to market conditions. Interest rate risk is also managed in some business units
using a variety of derivative instruments, including futures, options, swaps, caps and floors.
Other product lines of the Group, such as protection, are not significantly sensitive to interest rate or market movements. For unit-linked
business, the shareholder margins emerging are typically a mixture of annual management fees and risk/expense charges. Risk and expense
margins are largely unaffected by low interest rates. Annual management fees could increase if there was a move towards low interest rates
which increases the value of unit funds. For the UK annuities business interest rate exposure is mitigated by closely matching the duration of
liabilities with assets of the same duration.
Some of the Group’s products in UK and Ireland, principally participating contracts, expose us to the risk that changes in interest rates will
impact on profits through a change in the interest spread (the difference between the amounts that we are required to pay under the
contracts and the investment income we are able to earn on the investments supporting our obligations under those contracts). The UK
participating business includes contracts with features such as guaranteed surrender values, guaranteed annuity options, and minimum
surrender and maturity values. These liabilities are managed through duration matching of assets and liabilities and the use of derivatives,
including swaptions. As a result, the Group’s exposure to sustained low interest rates on this portfolio is not material. Details of material
guarantees and options are given in note 44.
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Notes to the consolidated financial statements continued
58 – Risk management continued
Profit before tax on General Insurance and Health Insurance business is generally a mixture of insurance, expense and investment returns.
The asset portfolio is invested primarily in fixed income securities. The portfolio investment yield and average total invested assets in our
general insurance and health business are set out in the table below.
2020
2021
2022
1. Before realised and unrealised gains and losses and investment expenses
Portfolio
investment
yield¹
1.88 %
1.88 %
2.33 %
Average
assets
£m
15,024
14,390
13,082
The nature of the business means that prices in certain circumstances can be increased to maintain overall profitability. This is subject to
the competitive environment in each market. If there are future falls in interest rates the investment yield would be expected to decrease in
future periods.
Sensitivity to changes in interest rates is given in section (h) Risk and capital management, below.
(iv) Inflation risk
Inflation risk arises primarily from the Group’s exposure to general insurance claims inflation, to inflation linked benefits within the defined
benefit staff pension schemes and within the UK annuity portfolio and to expense inflation. Increases in long-term inflation expectations are
closely linked to long-term interest rates and so are frequently considered with interest rate risk. Exposure to inflation risk is monitored
through capital modelling, sensitivity testing and stress and scenario testing. The Group typically manages inflation risk through its
investment strategy and, in particular, by investing in inflation linked securities and through a variety of derivative instruments, including
inflation linked swaps. Inflation risk is a rising concern and we are monitoring the potential impact on the profits and margins of the Group
and our counterparties which could impact their credit quality.
(v) Currency risk
The Group has minimal exposure to currency risk from financial instruments held by business units in currencies other than their functional
currencies, as nearly all such holdings are backing either unit-linked or with-profits contract liabilities or are hedged. As a result the foreign
exchange gains and losses on investments are largely offset by changes in unit-linked and with-profits liabilities and fair value changes in
derivatives attributable to changes in foreign exchange rates recognised in the income statement.
The Group operates internationally and as a result is exposed to foreign currency exchange risk arising from fluctuations in exchange rates
of various currencies. Approximately 25% of the Group’s gross written premium income from continuing operations arises in currencies
other than sterling. The Group’s net assets are denominated in a variety of currencies, of which the largest are sterling, euro and Canadian
dollars (CAD$). The Group does not hedge foreign currency revenues as these are substantially retained locally to support the growth of the
Group’s business and meet local regulatory and market requirements. However, the Group does use foreign currency forward contracts to
hedge planned dividends from its subsidiaries.
Businesses aim to maintain sufficient assets in local currency to meet local currency liabilities, however movements may impact the value of
the Group’s consolidated shareholders’ equity which is expressed in sterling. This aspect of foreign exchange risk is monitored and managed
centrally, against pre-determined limits. These exposures are managed by aligning the deployment of regulatory capital by currency with
the Group’s regulatory capital requirements by currency. Currency borrowings and derivatives are used to manage exposures within the
limits that have been set. Except where the Group has applied net investment hedge accounting (see note 59(a)), foreign exchange gains
and losses on foreign currency borrowings are recognised in the income statement, whereas foreign exchange gains and losses arising on
consolidation from the translation of assets and liabilities of foreign subsidiaries are recognised in other comprehensive income. At
31 December 2022 and 2021, the Group’s net assets by currency including assets held for sale was:
Net Assets at 31 December 2022
Net Assets at 31 December 2021
Sterling
£m
12,806
19,300
Euro
£m
(507)
(769)
CAD$
£m
12
222
Other
£m
584
701
Total
£m
12,895
19,454
A 10% change in sterling to euro/CAD$ period-end foreign exchange rates would have had the following impact on net assets:
Net assets at 31 December 2022
Net assets at 31 December 2021
10% increase in
sterling/euro
rate
£m
10% decrease
in sterling/euro
rate
£m
10% increase in
sterling/CAD$
rate
£m
10% decrease
in sterling/
CAD$ rate
£m
51
77
(51)
(77)
(1)
(22)
1
22
A 10% change in sterling to euro/$ average foreign exchange rates applied to translate foreign currency profits would have had the following
impact on profit before tax, including resulting gains and losses on foreign exchange hedges.
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58 – Risk management continued
Impact on profit before tax 31 December 2022
Impact on profit before tax 31 December 2021
10% increase in
sterling/euro
rate
£m
10% decrease
in sterling/euro
rate
£m
10% increase in
sterling/CAD$
rate
£m
10% decrease
in sterling/
CAD$ rate
£m
5
206
(6)
(252)
(1)
(23)
1
28
The balance sheet changes arise from retranslation of business unit statements of financial position from their functional currencies
into sterling, with above movements being taken through the currency translation reserve. These balance sheet movements in exchange
rates therefore have no impact on profit. Net asset and profit before tax figures are stated after taking account of the effect of currency
hedging activities.
(vi) Derivatives risk
Derivatives are used by a number of the businesses. Derivatives are primarily used for efficient investment management, risk hedging
purposes, or to structure specific retail savings products. Activity is overseen by the Group Capital and Group Risk teams, which monitor
exposure levels and approve large or complex transactions.
The Group applies strict requirements to the administration and valuation processes it uses, and has a control framework that is consistent
with market and industry practice for the activity that is undertaken.
(vii) Correlation risk
The Group recognises that lapse behaviour and potential increases in consumer expectations are sensitive to and interdependent
with market movements and interest rates. These interdependencies are taken into consideration in the internal capital model and
in scenario analysis.
(d) Liquidity risk
Liquidity risk is the risk of not being able to make payments as they become due because there are insufficient assets in cash form. The
relatively illiquid nature of insurance liabilities is a potential source of additional investment return by allowing us to invest in higher
yielding, and less liquid assets such as commercial mortgages and infrastructure loans. The Group seeks to maintain sufficient financial
resources to meet its obligations as they fall due through the application of a Group liquidity risk policy and business standard and through
the development of its liquidity risk management plan. At Group and business unit level, there is a liquidity risk appetite which requires that
sufficient liquid resources be maintained to cover net outflows in a stress scenario. In addition to the existing liquid resources and expected
inflows, the Group maintains significant undrawn committed borrowing facilities (£1,700 million) from a range of leading international
banks to further mitigate this risk.
In the Group we use derivative contracts to manage interest rate, inflation and foreign-exchange risks. Following the sharp and rapid rise in
interest rates at the end of Q3 2022 the value of these instruments moved significantly. This required sizeable collateral flows which we were
able to meet due to the sufficient liquidity buffers and intergroup funding.
Maturity analysis
The following tables show the maturities of our insurance and investment contract liabilities, and of the financial and reinsurance assets
held to meet them. A maturity analysis of the contractual amounts payable for borrowings and non-hedge derivatives is given in notes 51
and 59, respectively. Contractual obligations under leases and capital commitments are given in note 21 and note 55.
(i) Analysis of maturity of insurance and investment contract liabilities
For non-linked insurance business, the following table shows the gross liability at 31 December 2022 and 2021 analysed by remaining
duration. The total liability is split by remaining duration in proportion to the cash-flows expected to arise during that period, as permitted
under IFRS 4, Insurance Contracts.
Almost all linked business and non-linked investment contracts may be surrendered or transferred on demand. For such contracts, the
earliest contractual maturity date is therefore the current statement of financial position date, for a surrender amount approximately equal
to the current statement of financial position liability. However, we expect surrenders, transfers and maturities to occur over many years,
and accordingly tables below reflect the expected cash flows for these contracts, rather than their contractual maturity date.
As at 31 December 2022
Long-term business
Insurance contracts – non-linked
Investment contracts – non-linked
Linked business
General insurance and health
Total contract liabilities
Total
£m
On demand or
within 1 year
£m
1-5 years
£m
5-15 years
£m
Over 15 years
£m
74,790
15,138
152,374
16,382
258,684
6,158
2,526
5,027
6,785
20,496
19,972
4,517
17,719
7,330
49,538
30,507
6,492
48,042
2,017
87,058
18,153
1,603
81,586
250
101,592
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Notes to the consolidated financial statements continued
58 – Risk management continued
As at 31 December 2021
Long-term business
Insurance contracts – non-linked
Investment contracts – non-linked
Linked business
General insurance and health
Total contract liabilities
Total
£m
On demand or
within 1 year
£m
1-5 years
£m
5-15 years
£m
Over 15 years
£m
98,412
16,893
164,218
15,179
294,702
7,382
1,645
5,359
6,010
20,396
22,148
5,367
19,197
6,716
53,428
37,916
7,654
51,443
1,908
98,921
30,966
2,227
88,219
545
121,957
The following table provides an analysis, by maturity date of the principal, of the carrying value of financial assets which are available to
fund the repayment of liabilities as they crystallise. This table excludes assets held for sale.
As at 31 December 2022
Fixed maturity securities
Equity securities
Other investments
Loans
Cash and cash equivalents
Total
As at 31 December 2021
Fixed maturity securities
Equity securities
Other investments
Loans
Cash and cash equivalents
Total
Total
£m
103,776
85,790
34,520
29,647
22,505
276,238
On demand or
within 1 year
£m
18,961
—
30,894
5,388
22,505
77,748
Total
£m
On demand or
within 1 year
£m
133,251
95,169
36,541
38,624
12,485
316,070
43,432
—
30,949
8,840
12,485
95,706
1-5 years
£m
33,075
—
582
4,634
—
38,291
1-5 years
£m
27,187
—
489
4,636
—
32,312
Over 5 years
£m
51,740
—
2,863
19,625
—
74,228
No fixed term
£m
—
85,790
181
—
—
85,971
Over 5 years
£m
No fixed term
£m
62,632
—
4,748
25,148
—
92,528
—
95,169
355
—
—
95,524
The assets above are analysed in accordance with the earliest possible redemption date of the instrument at the initiation of the Group.
Where an instrument is transferable back to the issuer on demand, such as most unit trusts or similar types of investment vehicle, it is
included in the ‘On demand or within 1 year’ column. Debt securities with no fixed contractual maturity date are generally callable at the
option of the issuer at the date the coupon rate is reset under the contractual terms of the instrument. The terms for resetting the coupon
are such that we expect the securities to be redeemed at this date, as it would be uneconomic for the issuer not to do so, and for liquidity
management purposes we manage these securities on this basis. The first repricing and call date is normally ten years or more after the
date of issuance. Most of the Group’s investments in equity securities and fixed maturity securities are market traded and therefore, if
required, can be liquidated for cash at short notice.
(e) Life insurance risk
Life insurance risk in the Group arises through its exposure to mortality risk and exposure to worse than anticipated operating experience on
factors such as persistency levels, exercising of policyholder options and management and administration expenses.
The Group chooses to take measured amounts of life insurance risk provided that the relevant business has the appropriate core skills to
assess and price the risk and adequate returns are available. The Group’s underwriting strategy and appetite is communicated via specific
policy statements, related business standards and guidelines. Life insurance risk is managed primarily at business unit level with oversight
at the Group level.
The overall impact of COVID-19 on the assumptions of our life insurance risks, primarily longevity, persistency, mortality, morbidity and
expense risk has been limited. The Group also tracks the potential longer-term impacts from the pandemic (e.g. morbidity impacts).
Underwriting procedures on Individual Life Protection products limit our exposure to cohorts of the population at the highest risk of
COVID-19.
We have reinsurance in place across all our businesses to reduce our net exposure to potential losses. In the UK we have extensive quota
share reinsurance in place on Individual Protection business and for UK Group Life Protection we use surplus reinsurance for very large
individual claims.
The Group's life insurance risk continues to be dominated by exposure from our UK business. COVID-19 has continued to present additional
uncertainty, but we expect limited future impact to our business. We have seen heavier mortality throughout the summer months of 2022,
which is in contrast to the historical trend of lighter experience over this period, with causes attributed to reduced NHS capacity and long-
term health impairments prior to the pandemic.
Current persistency experience is not showing any significant deterioration in the short term, despite cost of living pressures, but there
remains some uncertainty about the potential for future deterioration, which is being monitored closely. External factors that may impact
future persistency experience include the continued increasing levels of inflation, increased stock-market volatility, changes in legislation
and the growing threat of a prolonged recession in the markets in which we operate.
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Notes to the consolidated financial statements continued
58 – Risk management continued
We are exposed to longevity risk through the Aviva Staff Pension Scheme, to which our economic exposure has been reduced since 2014 by
entering into a longevity swap covering the majority of pensioner in-payment scheme liabilities in force at the time. We purchase
reinsurance for some of the longevity risk relating to our annuity business, which includes a series of bulk annuity buy-in transactions with
the Aviva Staff Pension scheme, where a further tranche was executed in 2022 (see note 50). The Group has continued to write considerable
volumes of life protection business, and to utilise reinsurance to reduce exposure to potential losses. More generally, life insurance risks are
believed to provide a significant diversification against other risks in the portfolio. Life insurance risks are modelled within the internal
capital model and are subject to sensitivity and stress and scenario testing.
The assumption setting and management of life insurance risks is governed by the Group-wide business standards covering underwriting,
pricing, product design and management, in-force management, claims handling, and reinsurance. The individual life insurance risks are
managed as follows:
• Mortality and morbidity risks are managed through comprehensive medical underwriting, input and advice from medical experts, as well
as frequent monitoring and analysis of company experience. Reinsurance treaties are in place to provide further mitigation.
• Longevity risk is managed through monitoring and analysis of the Group’s experience, as well as considering the latest external industry
data and emerging trends. While individual businesses are responsible for reserving and pricing for annuity business, the Group monitors
the exposure to this risk and any associated capital implications. The Group has used reinsurance solutions to reduce the risks from
longevity and continually monitors and evaluates emerging market solutions to mitigate this risk further.
• Persistency risk is managed at a business unit level through frequent monitoring of company experience, and benchmarking against local
market information. Generally, persistency risk arises from customers lapsing their policies earlier than has been assumed. Lapses and
their associated financial impact are reduced through appropriate design of products to meet current and, where possible, future
customer needs. Businesses also implement specific initiatives to improve the retention of policies which may otherwise lapse.
• Expense risk is primarily managed by the business units through robust cost controls and efficiency targets, together with frequent
monitoring of expense levels.
Embedded derivatives
The Group is exposed to the risk of changes in policyholder behaviour due to the exercise of options, guarantees and other product features
embedded in its long-term savings products. These product features offer policyholders varying degrees of guaranteed benefits at maturity
or on early surrender, along with options to convert their benefits into different products on pre-agreed terms. The extent of the impact of
these embedded derivatives differs considerably between business units and exposes Aviva to changes in policyholder behaviour in the
exercise of options as well as market risk.
Examples of each type of embedded derivative affecting the Group are:
• Options: call, put, surrender and maturity options, guaranteed annuity options, options to cease premium payment, options for
withdrawals free of market value adjustment, annuity options, and guaranteed insurability options.
• Guarantees: embedded floor (guaranteed return), maturity guarantee, guaranteed death benefit, guaranteed minimum rate of annuity
payment and the 'no negative equity' associated with the Equity Release business; and
• Other: indexed interest or principal payments, maturity value, loyalty bonus.
The impact of these is reflected in the capital model and managed as part of the asset liability framework. Further disclosure on financial
guarantees and options embedded in contracts and their inclusion in insurance and investment contract liabilities is provided in note 43.
(f) General insurance risk and health risk
The Group writes a balanced portfolio of general insurance risk (including personal motor; household; commercial motor; property and
liability), as well as global exposure to corporate specialty risks. This risk is taken on, in line with our underwriting and pricing expertise, to
provide an appropriate level of return for an acceptable level of risk. Underwriting discipline and a robust governance process is at the core
of the Group’s underwriting strategy.
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 corporate healthcare products) exposes the Group to morbidity risk (the proportion of our customers falling
sick) and medical expense inflation.
Provisions made for insurance liabilities are inherently uncertain. Due to this uncertainty, general and health insurance reserves are
regularly reviewed by qualified and experienced actuaries at the business unit and Group level in accordance with the Group’s reserving
framework. These and other key risks, including the occurrence of unexpected claims from a single source or cause and inadequate
reinsurance protection/risk transfer, are subject to an overarching risk management framework and various mechanisms to govern and
control our risks and exposures.
We recognise that the severity and frequency of weather-related events has the potential to adversely impact provisions for insurance
liabilities and our earnings, with the result that there is some seasonality in our results from period to period. Large catastrophic (CAT) losses
arising as a result of these events are explicitly considered in our economic capital modelling to ensure we are resilient to such CAT
scenarios. The impact of actual weather-related losses compared to the expected losses based on the long-term average was 12% worse
(2021: 5% worse) for UK and Ireland general insurance and 35% lower (2021: 16% lower) for Canada general insurance.
The removal of the majority of government restrictions related to COVID-19 across the Group’s markets has led to claims frequency
increasing to and stabilising at more normal levels, but there continues to be a significant degree of uncertainty in relation to business
interruption claims arising from COVID-19.
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Notes to the consolidated financial statements continued
58 – Risk management continued
On 17 October 2022, the High Court in the UK handed down its judgment on the preliminary issues trial of Stonegate Pub Co Ltd vs MS Amlin
Corp Member Ltd (and others) and related cases. Aviva was not a party to the cases but will be affected by the final rulings. The Court ruled
in favour of the parties on different issues, and all parties have appealed the majority of the decisions. The judgment has been carefully
considered and the potential impact on claims related to business interruption policies assessed, noting that significant uncertainty
remains due to the appeals made to the Court of Appeal.
In Canada, we are party to a number of litigation proceedings, including class actions that challenge coverage under our commercial
property policies; however, we believe we have a strong argument that there is no pandemic coverage under these policies. The Group
purchases reinsurance protection on its property portfolio that includes coverage for business interruption and is collecting or seeking
reinsurance recoveries of business interruption losses that are covered by reinsurance.
The Group's general insurance business does not have material underwriting exposure to Russia and the Ukraine, and does not conduct
operations in the affected region. All commercial underwriting lines with exposures above £1 million have been reviewed and all have clear
war exclusions.
The conflict in Ukraine and ongoing disruption to global supply chains has resulted in heightened claims inflation during 2022 which is
expected to persist into 2023 and has increased the uncertainty associated with the cost of settling general insurance claims. While the
impacts of heightened claims inflation are being mitigated via new business pricing actions, our ability to price for inflation is dependent on
market, competitor and customer behaviour. The time lag between premium earning and claims emergence means that some adverse
impact on profitability is expected.
Reinsurance strategy
Significant reinsurance purchases are reviewed annually at both business unit and Group level to verify that the levels of protection being
bought reflect any developments in exposure and the risk appetite of the Group. The basis of these purchases is underpinned by analysis of
capital, earnings and capital volatility, cash flow and liquidity and the Group’s franchise value.
Detailed actuarial analysis is used to calculate the Group’s extreme risk profile and then design cost and capital efficient reinsurance
programmes to mitigate these risks to within agreed appetites. For businesses writing general insurance we analyse the natural catastrophe
exposure using our own internal probabilistic catastrophe model which is benchmarked against external catastrophe models widely used
by the rest of the (re)insurance industry.
The Group cedes much of its worldwide catastrophe risk to third-party reinsurers through excess of loss and aggregate excess of loss
structures. The Group purchases a Group-wide catastrophe reinsurance programme to protect against catastrophe losses up to a 1 in
250 year return period (1 in 500 year return period in Canada). The total Group potential retained loss from its most concentrated
catastrophe exposure peril (Northern Europe Windstorm) is approximately £200 million on a per occurrence basis and £350 million on an
annual aggregate basis. The Group purchases a number of general insurance business line specific reinsurance programmes with various
retention levels to protect both capital and earnings, and has reinsured 100% of its latent exposures to its historic UK employers’ liability
and public liability business written prior to 31 December 2000.
(g) Operational risk (including conduct 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 appetite for operational risk and aim to reduce these risks as far as
is commercially sensible.
The Group continues to operate, validate and enhance its key operational controls and purchase insurance to minimise losses arising from
inadequate or ineffective internal processes, people and systems or from external events. The Group maintains constructive relationships
with its regulators around the world and responds appropriately to developments in relation to key regulatory changes. The Operational
Risk Appetite framework enables management and the Board to assess the overall quality of the operational risk environment relative to
risk appetite and, where a Business Unit (or the Group) are outside of appetite, require clear and robust plans to be put in place in order to
return to appetite. As part of our continual improvements of or risk management approach to keep pace with the business, increasing
regulatory expectations, and the macroeconomic and geo-political environment, we have recently implemented risk improvements. Those
improvements have strengthened and enhanced our risk management capabilities throughout the organisation and enabled us to operate
a stronger control environment, improve understanding and accountabilities of risks, reduce the complexity of how the business thinks
about and manages risks and create greater collaboration across the first and second lines of defence to provide higher quality advice and
challenge.
We have implemented measures to improve the Group's operational resilience in response to new PRA and FCA operational resilience
regulations (including outsourcing and third-party risk management) which took effect on 31 March 2022. This includes a programme of
resilience and crisis response testing to ensure the continued financial safety and soundness of Aviva’s business and our ability to support
approved operating tolerances for the most important business services that our customers rely upon. Operational resilience disciplines
and assessments have been used in response to global events, including: changes to the geo-political environment; financial market
instability; and the continuity of Winter power supplies.
We rely on several outsourcing providers for critical business processes, customer servicing, investment operations and IT support. To
manage the risk of failure of a critical outsourcing provider, businesses are required to identify business critical outsourced functions
(internal and external) and for each to have exit and termination plans, and business continuity and disaster recovery plans in place in the
event of supplier failure, which are reviewed annually. We also carry out supplier financial stability reviews at least annually.
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58 – Risk management continued
The Russia-Ukraine conflict and increasing geo-political tensions more generally have heightened the risk of cyber security attacks on the
Group or its suppliers, with the potential to cause business service interruption and/or data or intellectual property theft. In response Aviva
continues to actively monitor the threat environment and enhance its IT infrastructure and cyber controls to identify, detect and prevent
attacks. Aviva’s cyber defences are regularly tested using our own ‘ethical hacking’ team and we have engaged our suppliers to put in place
all reasonable measures so that services to Aviva and our customers are protected.
The Group actively monitors social and other media in order to manage misinformation about our business, products, colleagues and
customers should we be targeted by a hostile actor in the context of the situation in Ukraine or elsewhere, taking corrective media action if
necessary.
We are exposed to the risk that litigation, employee misconduct, operational failures, the outcome of regulatory investigations,
media speculation and negative publicity, disclosure of confidential client information, inadequate services, whether or not founded,
could impact our brands or reputation. Any of our brands or our reputation could also be affected if products or services recommended by
us (or any of our intermediaries) do not perform as expected (whether or not the expectations are founded) or customers’ expectations of
the product change.
We have designed our products and business processes so that we treat our customers fairly and we make use of various metrics to assess
our own performance, including customer advocacy, retention and complaints. Failure to treat our customers fairly is counter to our
purpose, values and culture and could result in regulatory action and penalties, as well as impact our brands and/or reputation. The FCA
stated that by the end of October 2022, firms’ boards (or equivalent management body) should agree Consumer Duty implementation
plans. All implementation plans for Aviva in scope regulated entities have gone through the agreed governance process and have been
signed off by the appropriate boards. Our Consumer Duty Framework, includes guidance on what represents a good customer outcome in
the context of our products and services.
Aviva is directly exposed to the risks associated with operating an asset management business through its ownership of Aviva Investors. The
underlying risk profile of our asset management risk is derived from investment performance, specialist investment professionals and
leadership, product development capabilities, fund liquidity, margin, client retention, regulatory developments, fiduciary and contractual
responsibilities. Funds invested in illiquid assets such as commercial property are particularly exposed to liquidity risk. The risk profile is
regularly monitored.
A client relationship team is in place to manage client retention risk, while all new asset management products undergo a review and
approval process at each stage of the product development process, including approvals from legal, compliance and risk functions.
Investment performance against client objectives relative to agreed benchmarks is monitored as part of our investment performance and
risk management process, and subject to further independent oversight and challenge by a specialist risk team, reporting directly to the
Aviva Investors’ Chief Risk Officer.
(h) Risk and capital management
(i) Sensitivity test analysis
The Group uses a number of sensitivity tests to understand the volatility of earnings, the volatility of its capital requirements, and to manage
its capital more efficiently. Sensitivities to economic and operating experience are regularly produced on the Group’s key financial
performance metrics to inform the Group’s decision making and planning processes, and as part of the framework for identifying and
quantifying the risks to which each of its business units, and the Group as a whole, are exposed.
(ii) Life insurance and investment contracts
The nature of long-term business is such that a number of assumptions are made in compiling these financial statements. Assumptions are
made about investment returns, expenses, mortality rates and persistency in connection with the in-force policies for each business unit.
Assumptions are best estimates based on historic and expected experience of the business. A number of the key assumptions for the
Group’s central scenario are disclosed elsewhere in these statements.
(iii) General insurance and health business
General insurance and health claim liabilities are estimated by using standard actuarial claims projection techniques. These methods
extrapolate the claims development for each accident year based on the observed development of earlier years. In most cases, no explicit
assumptions are made as projections are based on assumptions implicit in the historic claims.
(iv) Sensitivity test results
Illustrative results of sensitivity testing for long-term business, general insurance and health business and the fund management and non-
insurance business are set out below. For each sensitivity test the impact of a reasonably possible change in a single factor is shown, with
other assumptions left unchanged. Each test allows for any consequential impact on the asset and liability valuations. See below for further
details on the limitations of the sensitivity analysis. The sensitivity of the net IAS 19 surplus to interest rates is provided in note 50(b)(iii).
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58 – Risk management continued
Sensitivity factor
Description of sensitivity factor applied
Interest rate and investment return
Credit spreads
The impact of a change in market interest rates by a 1% increase or decrease. The test allows
consistently for similar changes to investment returns and movements in the market value of
backing fixed interest securities.
The impact of a 0.5% increase in credit spreads over risk-free interest rates on corporate bonds and
other non-sovereign credit assets. The test allows for any consequential impact on liability valuations.
Equity/property market values
The impact of a change in equity/property market values by ± 10%.
Expenses
The impact of an increase in maintenance expenses by 10%.
Assurance mortality/morbidity (life insurance only) The impact of an increase in mortality/morbidity rates for assurance contracts by 5%.
Annuitant mortality (long-term insurance only)
The impact of a reduction in mortality rates for annuity contracts by 5%.
Gross loss ratios (non-long-term insurance only)
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 2022
31 December 2022 Impact on profit/loss before tax £m
Insurance participating
Insurance non-participating
Investment participating
Investment non-participating
Assets backing life shareholders’ funds
Total
31 December 2022 Impact on shareholders’ equity before tax £m
Insurance participating
Insurance non-participating
Investment participating
Investment non-participating
Assets backing life shareholders’ funds
Total
Sensitivities as at 31 December 2021
31 December 2021 Impact on profit/loss before tax £m
Insurance participating
Insurance non-participating
Investment participating
Investment non-participating
Assets backing life shareholders’ funds
Total
31 December 2021 Impact on shareholders’ equity before tax £m
Insurance participating
Insurance non-participating
Investment participating
Investment non-participating
Assets backing life shareholders’ funds
Total
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
Equity/
property
+10%
Equity/
property
-10%
Expenses
+10%
Assurance
mortality
+5%
Annuitant
mortality
-5%
(70)
(705)
(40)
—
(40)
(855)
100
885
20
—
40
1,045
(15)
(570)
—
—
(30)
(615)
(80)
(85)
(30)
5
5
(185)
55
60
30
(5)
(5)
135
(25)
(175)
(35)
(5)
—
(240)
—
(120)
—
—
—
(120)
—
(540)
—
—
—
(540)
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
Equity/
property
+10%
Equity/
property
-10%
Expenses
+10%
Assurance
mortality
+5%
Annuitant
mortality
-5%
(70)
(705)
(40)
—
(40)
(855)
100
885
20
—
40
1,045
(15)
(570)
—
—
(30)
(615)
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
(115)
(1,175)
(50)
—
(50)
(1,390)
135
1,410
65
—
55
1,665
(10)
(640)
—
—
(45)
(695)
Interest rates
+1%
(115)
(1,175)
(50)
—
(40)
Interest rates
-1%
135
1,410
65
—
40
Credit spreads
+0.5%
(10)
(640)
—
—
(30)
(1,380)
1,650
(680)
(80)
(85)
(30)
5
5
(185)
Equity/
property
+10%
(65)
(155)
(25)
5
—
(240)
Equity/
property
+10%
(65)
(155)
(25)
5
5
(235)
55
60
30
(5)
(5)
135
(25)
(175)
(35)
(5)
—
(240)
—
(120)
—
—
—
(120)
—
(540)
—
—
—
(540)
Expenses +10%
(35)
(220)
(40)
—
—
(295)
Equity/
property
-10%
40
135
25
(10)
—
190
Equity/
property
-10% Expenses +10%
40
135
25
(10)
(5)
(35)
(220)
(40)
—
—
Assurance
mortality
+5%
10
(145)
—
—
—
Annuitant
mortality
-5%
(5)
(900)
—
—
—
(135)
(905)
Assurance
mortality
+5%
10
(145)
—
—
—
Annuitant
mortality
-5%
(5)
(900)
—
—
—
185
(295)
(135)
(905)
Changes in sensitivities between 2022 and 2021 reflect underlying movements in the value of assets and liabilities, including the relative
duration of assets and liabilities and asset liability management actions. The sensitivities to economic and demographic movements relate
mainly to business in the UK.
General insurance and health business sensitivities as at 31 December 2022
31 December 2022 Impact on profit/loss before tax £m
Gross of reinsurance
Net of reinsurance
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
(195)
(225)
220
240
(80)
(80)
Equity/
property
+10%
105
105
Equity/
property
-10%
(105)
(105)
Expenses
+10%
(125)
(125)
Gross loss
ratios
+5%
(295)
(270)
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Notes to the consolidated financial statements continued
58 – Risk management continued
31 December 2022 Impact on shareholders’ equity before tax £m
Gross of reinsurance
Net of reinsurance
Sensitivities as at 31 December 2021
31 December 2021 Impact on profit/loss before tax £m
Gross of reinsurance
Net of reinsurance
31 December 2021 Impact on shareholders’ equity before tax £m
Gross of reinsurance
Net of reinsurance
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
(195)
(225)
220
240
(80)
(80)
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
(400)
(415)
480
470
(80)
(80)
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
(400)
(415)
480
470
(80)
(80)
Equity/
property
+10%
105
105
Equity/
property
+10%
105
105
Equity/
property
+10%
105
105
Equity/
property
-10%
(105)
(105)
Expenses
+10%
(20)
(20)
Equity/property
-10%
Expenses
+10%
(105)
(105)
(120)
(120)
Equity/
property
-10%
(105)
(105)
Expenses
+10%
(20)
(20)
Gross loss
ratios
+5%
(295)
(270)
Gross loss
ratios
+5%
(230)
(225)
Gross loss
ratios
+5%
(230)
(225)
For general insurance and health, the increase in interest rates over the period and asset liability management actions have reduced the
impact of interest rate sensitivities. The impact of the expense sensitivity on profit/loss also includes the increase in ongoing administration
expenses, in addition to the increase in the claims handling expense provision.
Fund management and non-insurance business sensitivities as at 31 December 2022
31 December 2022 Impact on profit/loss before tax £m
Total
31 December 2022 Impact on shareholders’ equity before tax £m
Total
Sensitivities as at 31 December 2021
31 December 2021 Impact on profit/loss before tax £m
Total
31 December 2021 Impact on shareholders’ equity before tax £m
Total
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
—
—
—
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
—
—
—
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
—
—
35
Interest rates
+1%
Interest rates
-1%
Credit spreads
+0.5%
—
—
35
Equity/
property
+10%
—
Equity/
property
+10%
—
Equity/
property
+10%
—
Equity/
property
+10%
—
Equity/
property
-10%
—
Equity/
property
-10%
—
Equity/
property
-10%
—
Equity/
property
-10%
—
Limitations of sensitivity analysis
The tables above demonstrate the effect of an instantaneous change in a key assumption while other assumptions remain unchanged.
In reality, changes may occur over a period of time and there is a correlation between the assumptions and other factors. It should also be
noted that these sensitivities are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results.
The sensitivity analysis does not take into consideration that the Group’s assets and liabilities are actively managed. Additionally, the
financial position of the Group may vary at the time that any actual market movement occurs. For example, the Group’s financial risk
management strategy aims to manage the exposure to market fluctuations.
As investment markets move past various trigger levels, management actions could include selling investments, changing investment
portfolio allocations and taking other protective action.
Other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential risks that
only represent the Group’s view of possible near-term market changes that cannot be predicted with any certainty and the assumption that
all parameters move in an identical fashion. Specific examples:
a. The sensitivity analysis assumes a parallel shift in interest rates at all terms. These results should not be used to calculate the impact of
non-parallel yield movements.
b. The sensitivity analysis assumes equivalent assumption changes across all markets i.e. UK and non-UK yield curves move by the same
amounts, equity markets across the world rise or fall identically
Additionally, the movements observed by assets held by Aviva will not be identical to market indices so caution is required when applying
the sensitivities to observed index movements.
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Notes to the consolidated financial statements continued
59 – Derivative financial instruments and hedging
This note gives details of the various financial instruments the Group uses to mitigate risk.
The Group uses a variety of derivative financial instruments, including both exchange traded and over-the-counter instruments, in line with
the Group’s overall risk management strategy. The objectives include managing exposure to market, foreign currency and/or interest rate
risk on existing assets or liabilities, as well as planned or anticipated investment purchases.
In the narrative and tables below, figures are given for both the notional amounts and fair values of these instruments. The notional
amounts reflect the aggregate of individual derivative positions on a gross basis and so give an indication of the overall scale of the
derivative transaction. The fair values represent the gross carrying values at the year end for each class of derivative contract held (or issued)
by the Group.
The fair values do not provide an indication of credit risk, as many over-the-counter transactions are contracted and documented under
ISDA (International Swaps and Derivatives Association, Inc.) master agreements or their equivalent. Such agreements are designed to
provide a legally enforceable set-off in the event of default, which reduces credit exposure. In addition, the Group has collateral agreements
in place between the individual Group entities and relevant counterparties. See note 60 for further information on collateral and net credit
risk of derivative instruments.
(a) Instruments designated for hedge accounting
The Group has formally assessed and documented the hedge effectiveness for financial instruments designated as hedging instruments in
accordance with IAS 39.
Net investment hedges
To reduce its exposure to foreign currency risk, the Group has designated a portion of its euro and Canadian dollar denominated debt as
hedging instruments to hedge the net investment in its Irish and Canadian subsidiaries. The carrying value of the debt designated in net
investment hedges at 31 December 2022 was £964 million (2021: £917 million). The fair value of the debt at that date was £891 million
(2021: £984 million).
Foreign exchange loss of £38 million (2021: gains of £31 million) on translation of the debt to sterling at the statement of financial position
date in respect of the effective portion have been recognised in the hedging instruments reserve in shareholders’ equity.
Hedge accounting applied to the Group’s net investment in Aviva France and Aviva Italy was terminated at 31 December 2020. The amounts
previously recognised in the hedging instruments reserve were recycled to the income statement on completion of the disposals during
2021 (see note 37).
Cash flow hedges
The Group did not apply cash flow hedging during the year. In 2021, the Group terminated the cash flow hedges used for hedging the
currency forward contracts on completion of the disposal of Aviva France and Aviva Poland.
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59 – Derivative financial instruments and hedging continued
(b) Derivatives
The Group did not apply hedge accounting to derivatives at 31 December 2022 and 31 December 2021.
(i) The Group’s derivatives at 31 December 2022 and 2021 were as follows:
Foreign exchange contracts
OTC
Forwards
Interest rate and currency swaps
Total
Interest rate contracts
OTC
Forwards
Swaps
Options
Swaptions
Exchange traded
Futures
Total
Equity/Index contracts
OTC
Options
Exchange traded
Futures
Options
Total
Credit contracts
Other
Total at 31 December
Contract/
notional
amount
£m
44,705
11,316
56,021
—
53,758
150
842
8,829
63,579
2022
Fair value
asset
£m
Fair value
liability
£m
Contract/
notional
amount
£m
Fair value
asset
£m
1,027
200
1,227
—
2,483
1
41
89
2,614
(561)
(1,223)
(1,784)
41,999
9,503
51,502
—
(6,053)
—
(8)
—
63,457
162
147
(141)
(6,202)
7,934
71,700
334
494
828
—
3,811
1
66
19
3,897
2021
Fair value
liability
£m
(266)
(357)
(623)
—
(2,346)
—
(1)
(57)
(2,404)
6,707
162
(90)
12,884
87
(48)
11,527
1,469
19,703
5,418
14,770
159,491
180
158
500
30
545
4,916
(55)
(6)
(151)
(74)
(1,330)
(9,541)
11,424
1,627
25,935
8,919
11,548
169,604
102
207
396
11
602
5,734
(97)
(11)
(156)
(307)
(2,273)
(5,763)
Fair value assets of £4,916 million (2021: £5,734 million) are recognised as ‘Derivative financial instruments’ in note 26(a), while fair value
liabilities of £9,541 million (2021: £5,763 million) are recognised as ‘Derivative liabilities’ in note 52.
The Group’s derivative risk management policies are outlined in note 58.
(ii) The contractual undiscounted cash flows in relation to derivative liabilities have the following maturities:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
After 5 years
2022
£m
1,973
965
747
693
658
8,009
13,045
2021
£m
1,136
496
406
373
333
3,326
6,070
(c) Collateral
Certain derivative contracts, primarily interest rate and currency swaps, involve the receipt or pledging of cash and non-cash collateral.
The amounts of cash collateral receivable or repayable are included in notes 27 and 52 respectively. Collateral received and pledged by the
Group is detailed in note 60.
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Notes to the consolidated financial statements continued
60 – Financial assets and liabilities subject to offsetting, enforceable master netting
agreements and similar arrangements
(a) Offsetting arrangements
Financial assets and liabilities are offset in the statement of financial position when the Group has a legally enforceable right to offset and
has the intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
Aviva mitigates credit risk in derivative contracts by entering into collateral agreements, where practical, and into ISDA master netting
agreements for each of the legal entities to facilitate its right to offset credit risk exposure. The credit support agreement will normally
dictate the threshold over which collateral needs to be pledged by Aviva or its counterparty.
Derivative transactions requiring Aviva or its counterparty to post collateral are typically the result of over-the-counter derivative trades,
comprised mostly of interest rate swaps, currency swaps and credit default swaps. These transactions are conducted under terms that are
usual and customary to standard long-term borrowing, derivative, securities lending and securities borrowing activities. The derivative
assets and liabilities in the table below are made up of the contracts described in detail in note 59.
Aviva participates in a number of stock lending and repurchase arrangements. In some of these arrangements cash is exchanged by Aviva
for securities and a related receivable is recognised within ‘Loans to banks’ in note 23. These arrangements are reflected in the tables below.
In instances where the collateral is recognised in the statement of financial position, the obligation for its return is included within ‘Payables
and other financial liabilities’ in note 52.
In other arrangements, securities are exchanged for other securities. The collateral received must be in a readily realisable form, such as
listed securities, and is held in segregated accounts. Transfer of title always occurs for the collateral received. In many instances, however,
no market risk or economic benefit is exchanged and these transactions are not recognised in the statement of financial position in
accordance with our accounting policies, and accordingly not included in the tables below.
2022
Financial assets
Derivative financial assets
Loans to banks and repurchase arrangements
Total financial assets
Financial liabilities
Derivative financial liabilities
Total financial liabilities
2021
Financial assets
Derivative financial assets
Loans to banks and repurchase arrangements
Total financial assets
Financial liabilities
Derivative financial liabilities
Total financial liabilities
Offset under IAS 32
Amounts subject to enforceable netting arrangements
Amounts under a master netting agreement
but not offset under IAS 32
Gross
amounts
£m
Amounts
offset
£m
Net amounts
reported in
the statement
of financial
position
£m
Financial
instruments
£m
Cash collateral
£m
Securities
collateral
received/
pledged
£m
Net amount
£m
3,404
4,481
7,885
(6,404)
(6,404)
Gross
amounts
£m
4,593
8,297
12,890
(4,521)
(4,521)
—
—
—
—
—
3,404
4,481
7,885
(1,797)
—
(1,797)
(272)
(300)
(572)
(55)
(4,181)
(4,236)
1,280
—
1,280
(6,404)
(6,404)
2,281
2,281
72
72
3,358
3,358
(693)
(693)
Offset under IAS 32
Net amounts
reported in
the statement
of financial
position
£m
Amounts
offset
£m
Amounts subject to enforceable netting arrangements
Amounts under a master netting agreement
but not offset under IAS 32
Financial
instruments
£m
Cash collateral
£m
Securities
collateral
received/
pledged
£m
Net amount
£m
—
—
—
—
—
4,593
8,297
12,890
(2,839)
—
(2,839)
(1,053)
(300)
(1,353)
(177)
(5,285)
(5,462)
524
2,712
3,236
(4,521)
(4,521)
3,060
3,060
117
117
821
821
(523)
(523)
Derivative assets are recognised as ‘Derivative financial instruments’ in note 26(a), while fair value liabilities are recognised as ‘Derivative
liabilities’ in note 52. £1,512 million (2021: £1,141 million) of derivative assets and £3,137 million (2021: £1,242 million) of derivative liabilities
are not subject to master netting agreements and are therefore excluded from the table above.
Amounts receivable related to securities lending and reverse-repurchase arrangements totalling £4,481 million (2021: £8,297 million) are
recognised within ‘Loans to banks’ in note 23.
Other financial liabilities presented above represent liabilities related to repurchase arrangements recognised within ‘Obligations for
repayment of cash collateral received’ in note 52.
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Notes to the consolidated financial statements continued
60 – Financial assets and liabilities subject to offsetting, enforceable master netting
agreements and similar arrangements continued
(b) Collateral
In the tables above, the amounts of assets or liabilities presented in the consolidated statement of financial position are offset first by
financial instruments that have the right of offset under master netting or similar arrangements with any remaining amount reduced by the
amount of cash and securities collateral. The actual amount of collateral may be greater than amounts presented in the tables above in the
case of over-collateralisation.
The total amount of collateral received which the Group is permitted to sell or repledge in the absence of default, excluding collateral
related to balances recognised within ‘Loans to banks’ disclosed in note 23, was £4,877 million (2021: £13,385 million), all of which other
than £322 million (2021: £1,190 million) is related to securities lending arrangements. Collateral of £1,568 million (2021: £1,318 million) has
been received related to balances recognised within ‘Loans to banks’ in note 23. The value of collateral that was actually sold or repledged
in the absence of default was £nil (2021: £nil).
The level of collateral held is monitored regularly, with further collateral obtained where this is considered necessary to manage the Group’s
risk exposure. The fair values of collateral received approximate to their carrying amounts.
61 – Related party transactions
This note gives details of the transactions between Group companies and related parties which comprise our joint ventures, associates and
staff pension schemes.
The Group undertakes transactions with related parties in the normal course of business. Loans to related parties are made on normal
arm’s-length commercial terms.
Services provided to, and by related parties
Associates
Joint ventures1
Employee pension schemes
2022
2021
Income earned
in the year
£m
Expenses
incurred in
the year
£m
Payable at
year end
£m
Receivable at
year end
£m
Income earned
in the year
£m
Expenses
incurred in
the year
£m
Payable at
year end
£m
Receivable at
year end
£m
39
34
10
83
—
—
—
—
—
—
—
—
9
135
5
149
36
50
12
98
—
—
—
—
—
—
—
—
9
1
6
16
1. Following a review of 2021, comparative amounts have been amended from those previously reported to include transactions between Aviva Investors Singapore and Aviva Singlife Holdings Pte. Limited. The effect of
this change is £13 million in Income earned in the year.
Transactions with joint ventures in UK relate to the property management undertakings, the most material of which are listed in note
17(a)(iii). The Group has equity interests in these joint ventures, together with the provision of administration services and financial
management to many of them. Our fund management companies also charge fees to these joint ventures for administration services and
for arranging external finance.
Key management personnel of the Company may from time to time purchase insurance, savings, asset management or annuity products
marketed by group companies on equivalent terms to those available to all employees of the Group. In 2022, other transactions with key
management personnel were not deemed to be significant either by size or in the context of their 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 Group-managed funds and insurance
policies with other group companies, as explained in note 50(b)(ii). As at 31 December 2022, the Friends Provident Pension Scheme (‘FPPS’),
acquired in 2015 as part of the acquisition of the Friends Life business, held an insurance policy of £432 million (2021: £625 million) issued by
a group company, which eliminates on consolidation. During the year, Aviva Group Holdings Limited provided a short term loan of £88
million to FPPS. As at 31 December 2022 £26 million remained outstanding, which is included within the Group’s loan assets and as a
deduction from FPPS plan assets, and does not eliminate on consolidation.
The related parties’ receivables are not secured and no guarantees were received in respect thereof. The receivables will be settled in
accordance with normal credit terms.
.
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Notes to the consolidated financial statements continued
61 – Related party transactions continued
During the year, the Aviva Staff Pension Scheme (ASPS) completed two (2021: three) bulk annuity buy-in transactions with Aviva Life &
Pensions UK Limited (AVLAP). Total premiums of £1,324 million (2021: £2,456 million) were paid by the scheme to AVLAP, with AVLAP
recognising total gross liabilities of £1,001 million (2021: £2,184 million). The difference between the premiums and the gross liabilities
implies profit2 of £323 million (2021: £272 million), which does not include costs incurred by the Group associated with the transactions,
and is driven primarily by differences between the measurement bases used to calculate the premium and the accounting value of the
associated gross liabilities. The ASPS recognised the total plan assets of £891 million (2021: £1,760 million), with the difference between
the plan assets recognised and the premiums paid being recognised as an actuarial loss through Other Comprehensive Income. As at
31 December 2022, AVLAP recognised cumulative technical provisions of £3,342 million (2021: £4,264 million) in relation to buy-in
transactions with the ASPS which have been included within the Group's gross liabilities, and the ASPS held a transferable plan asset of
£2,875 million (2021: £3,543 million) which does not eliminate on consolidation.
Key management compensation
The total compensation to those employees classified as key management, being those having authority and responsibility for planning,
directing and controlling the activities of the Group, including the executive and non-executive directors is as follows:
Salary and other short-term benefits
Post-employment benefits
Equity compensation plans
Termination benefits
Total
2022
£m
8.3
0.9
18.9
—
28.1
2021
£m
9.0
1.1
14.9
1.5
26.5
In 2022, roles within the management structure were reviewed and certain positions were determined to no longer be persons with decision
making responsibility. As a result, the number of individuals classified as key management personnel has reduced as at 31 December 2022.
Information concerning individual directors’ emoluments, interests and transactions is given in the Directors’ Remuneration Report.
62 – IFRS 17 Transition
IFRS 17 Insurance Contracts, is a new accounting standard that provides a comprehensive and consistent approach to accounting for
insurance contracts. IFRS 17 is effective for the Group for the annual reporting period beginning 1 January 2023 and replaces IFRS 4, which
was issued in 2005 and was largely based on grandfathering of previous local accounting policies. The Group is implementing IFRS 17
retrospectively as of 1 January 2023. The opening balance sheet date for comparative information is 1 January 2022, which is also known as
the transition date.
IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts, reinsurance contracts
and investment contracts with discretionary participation features (participating investment contracts). It introduces a model that measures
groups of contracts based on the present value of future cash flows with an explicit risk adjustment for non-financial risk (the fulfilment cash
flows); and a contractual service margin (CSM), representing the unearned profit to be recognised in profit or loss over the service period
(coverage period). Losses on contracts that are onerous at inception are recognised immediately. The core of IFRS 17 is the general
measurement model (GMM), supplemented by a specific adaptation for contracts with direct participation features (the variable fee
approach (VFA)), and a simplified approach (the premium allocation approach (PAA)) for short-duration contracts.
The application of IFRS 17 significantly impacts the measurement and presentation of insurance contracts, reinsurance contracts and
participating investment contracts. The financial impact of measurement changes will be more significant for life insurance than non-life
insurance contracts, however there will be significant changes to presentation and disclosures for all insurance contracts. Investment
contracts with no significant insurance risk or discretionary participating features, equity release mortgage loans, and investment
management business are out of scope and therefore not impacted by the new standard.
Under IFRS 17 the presentation of insurance revenue and insurance service expenses in the statement of comprehensive income is based on
the concept of insurance services provided during the period; and extensive disclosures provide information on the recognised amounts
from insurance contracts and the nature and extent of risks arising from these contracts. We expect to align disclosure to three major
groupings: Life Risk, Life Participating and Non-life (general insurance and health) which broadly align with the IFRS 17 measurement
models GMM, VFA and PAA respectively.
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Notes to the consolidated financial statements continued
62 – IFRS 17 Transition continued
(a) IFRS 17 Measurement Models
The three measurement models apply to Aviva's business as follows:
Model
GMM
VFA
PAA
Model Applicable business
• Bulk purchase annuities
• Individual immediate and deferred annuities
• Individual and Group protection
• With-profits contracts with guaranteed annuity terms
• Reinsurance contracts held, including non-life reinsurance contracts that are not eligible for PAA
• Participating investment contracts
• Unit linked or with-profits contracts with significant insurance risk
• Short duration non-life insurance contracts
• Longer duration non-life insurance contracts which meet PAA eligibility requirements
• Reinsurance contracts held which meet PAA eligibility requirements
The Group applies judgement when determining eligibility criteria for the VFA and PAA measurement models (see section (b)(i) below).
Under each measurement model insurance contract liabilities are measured as the sum of the liability for remaining coverage (LRC) and the
liability for incurred claims (LIC). The LRC represents the obligation under the insurance contract for insured events that have not yet
occurred i.e., the obligation that relates to the unexpired portion of the coverage period, including the CSM. The LIC reflects the obligation to
investigate and pay valid claims for insured events that have already occurred, including events that have already occurred but for which
claims have not been reported. The key features of each measurement model are set out below. As the LIC is most relevant for non-life
insurance contracts, the descriptions of the GMM and VFA measurement models focus on the LRC.
i. GMM
The GMM is the default IFRS 17 measurement model. The fulfilment cash flows comprise the present value of future cash flows within the
boundary of the contract, discounted at current rates, and an explicit risk adjustment for non-financial risk.
At inception, a CSM is recognised for each new group of contracts which represents the unearned profit to be recognised over the coverage
period of the contract. Except for reinsurance contracts held, losses on groups of contracts that are onerous at inception are recognised
immediately.
The CSM is subsequently remeasured for changes in the fulfilment cash flows relating to non-financial risk, applying locked in financial
assumptions. Interest is accreted on the CSM using the locked-in discount rate and the CSM is amortised over the coverage period of the
contract. The coverage period is determined based on the service provided to customers including both insurance and investment services.
Losses on groups of contracts that are profitable at inception but subsequently become onerous, are recognised immediately.
In contrast to insurance contracts, the CSM for groups of reinsurance contracts held can be an asset or liability. If reinsurance is in place
when underlying groups of insurance contracts become onerous the reinsurance CSM recognised is adjusted to offset the gross losses
arising. Where the net cost of purchasing reinsurance contracts held relates to events that occurred prior to purchase (for example adverse
development cover) no CSM is recognised, and the net cost is recognised immediately in the income statement.
ii. VFA
The VFA is a modified approach to the GMM that is applied to groups of insurance and investment contracts with direct participating
features which meet eligibility requirements that demonstrate they provide substantial investment related services to policyholders.
Fulfilment cash flows for VFA contracts comprise the obligation to pay policyholders an amount equal to the fair value of underlying items,
less the variable fee for future service. The variable fee includes the present value of the shareholders' share of the fair value of underlying
items adjusted for cash flows that do not vary with those underlying items. The risk adjustment reflects the compensation for non-financial
risk in relation to the variable fee only.
The CSM is subsequently remeasured for changes in the variable fee due to both financial and non-financial risks using current market
discount rates. Consistent with the GMM, the CSM is recognised in profit or loss over the coverage period in line with the insurance and
investment services provided to customers.
iii. PAA
The PAA is a simplified measurement model which can be applied to all short duration contracts and to longer duration contracts that meet
PAA eligibility criteria. It is applied to all of the Group's non-life insurance and reinsurance contracts except for contracts that reinsure
adverse development of incurred claims.
The LRC is measured as the amount of premium received net of acquisition cash flows, less the amount of premiums and acquisition cash
flows that have been recognised in profit or loss over the expired portion of the coverage period. Premium receipts and acquisition
cashflows are recognised in profit or loss over the life of the contract, based on the expected timing of incurred claims. This approach is
similar to the Group's previous approach for measuring non-life insurance contracts under IFRS 4.
If facts and circumstances indicate that a group of contracts may be onerous, the LRC is measured using GMM principles and losses for
onerous contracts are recognised immediately in the income statement.
For most contracts applying PAA, the measurement of the LIC aligns to the GMM, with an explicit risk adjustment for non-financial risk, and
discounting applied to expected cash-flows. For Health contracts a PAA exemption is applied to measure the LIC on an undiscounted basis.
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Notes to the consolidated financial statements continued
62 – IFRS 17 Transition continued
(b) Significant accounting policies, judgements and estimates
The implementation of IFRS 17 will require the Group to apply new accounting policies, replacing those previously applied under IFRS 4,
and make estimates and assumptions that will affect items reported in the consolidated income statement and statement of financial
position. The significant accounting policies, judgements and estimates that will be applied by the Group on transition to IFRS 17 are
summarised below.
i. Choice of measurement model
VFA eligibility
Life business is considered eligible for the VFA measurement model where:
· Contractual terms evidence that policyholders participate in a pool of clearly identified underlying items, for example unit-linked or with-
profits funds;
· The policyholders expect to receive a substantial share of the returns on underlying items (defined by the Group as greater than 50%); and
· A substantial proportion of changes in amounts payable to policyholders varies with returns on the underlying items (defined by the Group
as a correlation coefficient of greater than 50%).
Reinsurance contracts held are not eligible to apply the VFA.
PAA eligibility
The vast majority of the Group’s direct non-life business has a duration of one year or less and is automatically eligible for the PAA model.
For the remainder, financial modelling is performed to compare the value of the LRC measured under GMM and PAA. Where the LRC does
not materially differ between the two measurement models (over the duration of the contract and in a range of reasonably foreseeable
scenarios) the contract group is PAA eligible.
The Group has multiple non-life reinsurance contracts which are greater than one year in duration. These are assessed for PAA eligibility
by applying the same financial modelling approach and are all PAA eligible except for treaties reinsuring the adverse development of
incurred claims.
ii. Level of aggregation
IFRS 17 specifies the unit of account is a group of contracts and provides guidance on the level at which insurance contracts can be
aggregated into groups for measurement purposes. Discrete CSM's are determined for each group of insurance contracts applying GMM or
VFA. Groups of insurance contracts have been determined by identifying portfolios of insurance contracts, comprising contracts subject to
similar risks that are managed together, and dividing each portfolio into annual cohorts by year of issue. Each annual cohort is then further
subdivided into three groups based on the profitability of contracts determined at initial recognition and comprising:
• contracts that are onerous;
• contracts that have no significant possibility of becoming onerous; (based on the probability that changes in assumptions would
result in contracts becoming onerous); and
• all remaining contracts.
Reinsurance contracts held are also subdivided into three profitability groups, determined by reference to net gains/losses on initial
recognition, and comprising:
• contracts that have a net gain at initial recognition;
• contracts that have no significant possibility of a net gain arising subsequently; and
• all remaining contracts.
The approach to profitability grouping makes use of sets. Where it can be demonstrated that all contracts within a set are sufficiently
homogeneous, they are allocated to the same profitability group without performing an individual contract assessment. For Life product
lines, sets of contracts usually correspond to policyholder pricing groups. The likelihood of changes in insurance, financial and other
exposures resulting in contracts becoming onerous is monitored at the level of these pricing groups.
For contracts measured under the PAA, IFRS 17 permits a simplification whereby contract groups are assumed not to be onerous unless
facts and circumstances indicate otherwise. The Group has used internal management information to identify facts and circumstances that
may indicate that a group is onerous.
iii. Estimate of future cash flows
The estimate of future cash flows is assessed at the level of profitability groups and represents the best estimate of the Group's cost to fulfil
a contract incorporating current estimates of non-financial assumptions. The estimate allows for all the cash inflows and outflows expected
to occur within the contract boundary. Cash flows are modelled separately for gross and reinsurance contracts.
Principal non-financial assumptions
Principal non-financial assumptions used in the calculation of life insurance and participating investment contract fulfilment cash flows
include those in respect of annuitant and assurance mortality and future expenses. Expenses must be directly attributable to fulfilling
insurance contracts, including an allocation of overheads to the extent that they can be allocated to groups of contracts in a systematic
and rational way.
Principal non-financial assumptions used in the calculation of the non-life LIC use past claims experience to project future claims
(estimated using a range of standard actuarial claims projection techniques).
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Notes to the consolidated financial statements continued
62 – IFRS 17 Transition continued
iv. Financial assumptions
Discount rates
Discounting is applied to the estimate of future cash flows. The Group uses a bottom-up discount rate for all life and non-life insurance
contracts except for annuities. A top-down discount rate is applied to annuities to reflect more appropriately the characteristics of the
annuity liabilities. For other contracts where liabilities are subject to lapse risk or where cashflows depend on underlying asset performance
(such as unit-linked and with-profits), the characteristics of the liability can be reflected using the bottom-up method which requires the
application of less judgement.
Top-down Discount rates
The discount rate is determined from the yield implicit in the fair value of an appropriate reference portfolio of assets that reflects the
characteristics of the liability. Adjustments are made for differences between the reference portfolio and liability cash flows, including an
allowance for defaults which reflects the compensation a market participant would require for credit risk.
The CSM for annuity contracts is measured using a locked-in discount rate based on assets expected to be originated for new business at
initial recognition of the contracts. On subsequent measurement of the fulfilment cash flows the reference portfolio is based on the assets
held to match the portfolio of liabilities. For recently written contracts, an adjustment is made to liabilities where appropriate assets are
yet to be sourced.
Bottom-up Discount rates
The discount rate is determined as the risk-free yield, adjusted for differences in liquidity characteristics between the financial assets used
to derive the risk-free yield and the relevant liability cash flows (known as an ‘illiquidity premium’).
The illiquidity premium is determined as a percentage of the current spread over the risk-free yield on an index of covered bonds.
The percentage applied reflects the liquidity characteristics of the liabilities including the propensity and ability of policyholders to lapse or
surrender their contracts; for example, 100% for structured settlements where surrenders are not possible, and 0% for unit-linked contracts
where policyholders can normally immediately surrender their contract for the unit value. An intermediate percentage is applied for other
types of business.
Inflation assumptions
Future inflation assumptions are treated as a financial assumption when applied to policyholder benefits or outsourced maintenance
expenses that are contractually linked to an inflation index.
Presentation of financial assumption changes
The impact of changes in financial assumptions can be presented in the income statement or in the statement of comprehensive income
as a matter of accounting policy choice. The Group has elected to recognise these impacts in the income statement, consistent with the
approach to the presentation of fair value movements on assets in accordance with IFRS 9, thus eliminating accounting mismatches.
v. Risk Adjustment
The risk adjustment reflects the compensation required by the Group to accept the uncertainty about the amount and timing of future cash
flows that arises from non-financial risk. The calculation of the risk adjustment is calibrated to the Group’s pricing and capital allocation
framework, leveraging the Solvency II view of non-financial risk, considering a lifetime view, and including diversification between risks.
vi. CSM
The CSM represents a liability for unearned profit measured at inception and recognised in the income statement over the life of the
contract as insurance and investment related services are provided to the customer. The amount of CSM amortisation recognised in profit
or loss each year is determined by considering, for each group of contracts, coverage units that reflect the quantity of the benefits provided
in each period and the expected coverage period.
The coverage units used by major product lines are:
Product line
Immediate annuities
Deferred annuities
Coverage units
Annuity outgo
Annuity outgo for insurance service post retirement and weighted expected investment return for the
investment return service provided prior to retirement
Individual and Group Protection
Sum assured
Individual and Group Income Protection Benefit amount payable
Unit linked insurance
Sum assured including unit value
With-profits
Cost of guarantees plus asset share
For deferred annuities the weighting between insurance and investment return services targets equivalence at retirement with the CSM
for an immediate annuity that only provides post-retirement insurance services, after allowing for expected retirement date, transfers
and commutations.
Coverage units for reinsurance contracts held are typically consistent with the underlying gross contracts, adjusted for differences in the
services provided.
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Notes to the consolidated financial statements continued
62 – IFRS 17 Transition continued
vii. Insurance acquisition cashflows
Insurance acquisition cashflows are initially deferred on the balance sheet as an insurance acquisition cashflow asset and then allocated
against groups of insurance contracts to which they are directly attributable. This includes instances where insurance acquisition cashflows
are directly attributable to the future renewal of existing contract groups for some products in the Group’s non-life business. For contract
groups applying PAA, the Group has chosen not to apply an exemption to recognise insurance acquisition cashflows as an expense at the
point they are incurred.
Where insurance acquisition cashflows are allocated to contract groups applying GMM or VFA, they are included within the measurement
of the CSM and recognised in the income statement over the period which services are provided to the customer. Insurance acquisition
cashflows allocated to contract groups applying PAA are recognised in the income statement over the life of the contract based on the
expected timing of incurred claims.
Insurance acquisition cashflow assets are assessed for impairment where facts and circumstances indicate that they may be impaired.
The Group uses data on customer retention rates and the profitability of products to identify such facts and circumstances.
(c) IFRS 17 transition approach
Changes in accounting policies resulting from the implementation of IFRS 17 must be applied using the Fully Retrospective Approach (FRA)
where practicable, calculating the CSM at the date of transition as if the standard had always applied. Where FRA is not practicable for a
particular group of insurance contracts there is a choice to apply the Modified Retrospective Approach (MRA) to the extent that reasonable
and supportable information exists, or the Fair Value Approach (FVA). The choice between MRA and FVA can have a significant impact on
the valuation of the CSM on transition and has been made separately for each group of insurance contracts for which it is impracticable
to apply FRA.
For non-life business in scope of the PAA the FRA has been used.
For Life business and non-life adverse development reinsurance, the Group has applied judgement when determining whether the FRA is
practicable and whether reasonable and supportable information exists to apply the MRA. For this business the following approaches have
been applied on transition to IFRS 17:
• The FRA has been used for the majority of business written or acquired since 2016, as prior to this date the risk adjustment is
considered indeterminable without the benefit of hindsight due to the multiple views of risk that were reported at that time;
• The MRA has been used for certain portfolios of UK individual protection business written in the period 2012-2015 and for certain
portfolios of acquired UK VFA business; and
• The FVA has been used for all other business written prior to 2016, including annuities.
On transition, approximately 35% of the CSM is calculated under the FRA, 10% under the MRA and 55% under the FVA.
Application of the MRA
Where information is not available to undertake the FRA the MRA allows certain modifications to be applied provided reasonable and
supportable information is available to apply the modification. The aim is to achieve the closest possible outcome to the FRA.
For contracts transitioned under the FRA or MRA, the opening CSM balance at 1 January 2022 includes the effect of amortisation of the CSM
for the period of retrospective restatement.
Application of the FVA
Under the FVA the CSM recognised at the transition date is determined as the fair value of the portfolio of contracts at the transition
date less the fulfilment cash flows at the transition date. Unlike the FRA and MRA no pre-transition information is required to calculate
the FVA CSM.
Where FVA has been applied, the fair value has been derived in accordance with IFRS 13 Fair Value Measurement and represents the
price a market participant would require to assume the liabilities in an orderly transaction. As quoted market prices are not available
for portfolios of insurance contracts, valuation models have been used to calculate the fair value of each portfolio. The choice of model
and inputs to the model involves judgement and this gives rise to a range of plausible fair values.
Valuation inputs reference market information where available with unobservable inputs otherwise used. Inputs have been calibrated to
those Aviva would expect market participants would use when pricing the liabilities. The most significant judgements for each portfolio are
as follows:
• Identification of the principal market
• The return on assets backing the portfolio
• The level of regulatory capital required to support the portfolio
• The required rate of return on capital deployed
For business transitioning under the FVA, the Group has taken advantage of the simplification permitting contracts in different annual
cohorts to be placed into a single group of contracts.
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1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
62 – IFRS 17 Transition continued
(d) Financial impacts on transition to IFRS 17
On adoption of IFRS 17, Group consolidated equity attributable to shareholders of Aviva plc at the transition date of 1 January 2022 is
expected to be within the range of £16.3 billion - £17.0 billion including an estimated CSM (net of tax) within the range of £4.2 billion -
£4.9 billion. Group consolidated equity attributable to shareholders of Aviva plc reported on an IFRS 4 basis at 31 December 2021 was £19.2
billion. The drivers of differences between IFRS 4 and IFRS 17 total equity excluding non-controlling interests include the following:
Drivers
IFRS 4 margins
Description
Margins included in the IFRS 4 measurement of insurance contract liabilities are excluded from the IFRS 17
fulfilment cash flows, as the liabilities are measured on a best estimate basis with a separate explicit
adjustment for risk.
Differences in the valuation of future
cash flows
The primary differences in measurement of the future cash flows are:
• Inclusion of future shareholder profits from unit-linked and with-profits business, that are not fully
recognised under IFRS 4.
• Change in discount rate for life insurance business, most materially for annuities
• Introduction of discounting for all non-life insurance business (under IFRS 4 only longer duration claims
are discounted).
Deferred acquisition costs and acquired
value in-force business
Deferred acquisition costs and acquired value of in-force business are de-recognised for contracts in scope of
IFRS 17 and are instead included implicitly in the measurement of the LRC. The deferred acquisition costs
and acquired value of in-force business for non-IFRS 17 business are unaffected.
Contractual Service Margin
Risk Adjustment
Change in deferred tax due to increase
in liabilities
This IFRS 17 liability represents the unearned profit of the insurance contracts which will be recognised in
profit or loss over the coverage period in line with the service provided to customers.
The risk adjustment is an explicit allowance for risk recognised under IFRS 17, replacing some of the
IFRS 4 margins.
Taxable profits are generally based on an accounting profit and the adoption of IFRS 17 will impact current
tax liabilities.The principles of deferred tax mean that the total tax (current and deferred) remains aligned to
the reported profits. The transition CSM includes profits that were previously reported in accordance with
IFRS 4 and subject to tax.The reduction in net assets on adoption of IFRS 17, including the CSM recognition,
gives rise to a deferred tax asset as tax on profits is only paid once. The deferred tax asset will reverse as the
CSM unwinds and profits are recognised in future.
The impact on transition to IFRS 17 is most significant for the Group's annuity and protection business where the deferral of profit in the
CSM is the most material. A significant proportion of the CSM on transition arises from the Group's existing immediate annuity portfolio, the
unwind of which will become a material driver of the contribution to future profits by the UK & Ireland Life operating segment. Offsetting
this, the majority of profits on new annuity and protection business will now be deferred. In addition, under IFRS 17, the impact of changes
in non-financial assumptions on future cashflows will be adjusted through the CSM and spread forward rather than being recognised
immediately in profit as under IFRS 4.
There are more limited impacts from the Group's other lines of insurance business with no impact for business out of scope of IFRS 17
including Investment contracts with no significant insurance risk or discretionary participating features, equity release mortgage loans, and
investment management business.
At this stage the impacts of IFRS 17 on the Group's consolidated income statement and statement of financial position at 31 December 2022
cannot be reliably estimated pending full implementation and testing of systems, including the operational effectiveness of internal control
processes. The Group's IFRS 17 transition programme will conclude in the first half of 2023.
IFRS 17 will have no impact on our Solvency II performance measures or the Group financial targets. Furthermore, we do not expect IFRS 17
to impact on dividend policy and dividend guidance.
Aviva plc
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
63 – Organisational structure
The following chart shows, in simplified form, the organisational structure of the Group as at 31 December 2022. Aviva plc is the holding
company of the Group.
Parent company
Aviva plc
Subsidiaries
The principal subsidiaries of the Company at 31 December 2022 are listed below by country of incorporation.
A complete list of the Group’s related undertakings comprising of subsidiaries, joint ventures, associates and other significant holdings is
contained within note 64.
Aviva plc
Aviva - COFCO Life
Insurance Company Ltd2
Aviva Group Holdings Ltd1
General Accident plc1
Friends Life
Holdings Ltd1
Aviva Life
Holdings UK Ltd1
Aviva Investors
Holdings Ltd1
Aviva Central
Services UK Ltd1
Aviva
International
Holdings Ltd1
Aviva Insurance
Ltd3
Aviva
International
Insurance Ltd1
Singapore Life
Holdings PTE
Ltd5 and other
subsidiaries
UK & Ireland Life
Subsidiaries
Investment
Management
subsidiaries
Aviva
Employment
Services Ltd1
Aviva Life
Insurance
Company India
Ltd4 and other
subsidiaries
Aviva UK Digital
Ltd1
UK & Ireland
General
Insurance and
Ireland Health
Subsidiaries
Canada General
Insurance
Subsidiaries
1. Incorporated in England and Wales
2. Incorporated in People's Republic of China
3. Incorporated in Scotland
4. Incorporated in India
5. Incorporated in Singapore
United Kingdom
Aviva Administration 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
Aviva Investors UK Fund Services Limited
Aviva Life & Pensions UK Limited
Aviva Life Services UK Limited
Aviva Management Services UK Limited
Aviva Pension Trustees UK Limited
Aviva UK Digital Limited
Aviva Wrap UK Limited
Gresham Insurance Company Limited
Sesame Bankhall Group Limited
Succession Holdings Limited
The Ocean Marine Insurance Company Limited
Wealthify Group Limited
Canada
Aviva Canada Inc. and its principal subsidiaries:
Aviva Insurance Company of Canada
Aviva General Insurance Company
Elite Insurance Company
Pilot Insurance Company
Scottish & York Insurance Co. Limited
S&Y Insurance Company
Traders General Insurance Company
Ireland
Aviva Life and Pensions Ireland Designated Activity
Company
Aviva Insurance Ireland Designated Activity Company
India
Aviva Life Insurance Company India Limited
Aviva plc
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3. IFRS Financial Statements
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Notes to the consolidated financial statements continued
63 – Organisational structure continued
Associates and joint ventures
The Group has ongoing interests in the following operations that are classified as joint ventures or associates, as a complete list
of the Group’s related undertakings comprising of subsidiaries, joint ventures, associates and other significant holdings is contained within
note 64. Further details of those operations that were most significant in 2022 are set out in notes 17 and 18 to the financial
statements.
China
Aviva-COFCO Life Insurance Company Limited (50%)
Singapore
Singapore Life Holdings Pte Limited (26%)
United Kingdom
The Group has interests in several property limited
partnerships. Further details are provided in notes 17, 18,
25 and 63 to the financial statements.
64 – Related undertakings
The Companies Act 2006 requires disclosure of certain information about the Group’s related undertakings which is set out in this note.
Related undertakings comprise subsidiaries, joint ventures, associates and other significant holdings. Significant holdings are where the
Group either has a shareholding greater than or equal to 20% of the nominal value of any share class, or a book value greater than 20% of
the Group’s assets.
The definition of a subsidiary undertaking in accordance with the Companies Act 2006 is different from the definition under IFRS.
As a result, the related undertakings included within the list below may not be the same as the undertakings consolidated in the Group
IFRS financial statements. See accounting policies (D) Consolidation principles for further detail on principles of consolidation and
definition of joint ventures.
The Group’s related undertakings along with the country of incorporation, the registered address, the classes of shares held and the
effective percentage of equity owned at 31 December 2022 are disclosed below.
The direct related undertakings of the Company as at 31 December 2022 are listed below:
Country of incorporation Registered address
Name of undertaking
China
Aviva-COFCO Life Insurance
Company Limited
General Accident plc
Aviva Group Holdings Limited
United Kingdom Pitheavlis, Perth, Perthshire, PH2 0NH
United Kingdom St Helen’s, 1 Undershaft, London, EC3P 3DQ
12/F,Block A,Landgent Centre, 20 East Third Ring
Middle Road, Beijing, 100022
Share class
Ordinary shares
Ordinary shares
Ordinary shares
% held
50
100
100
The indirect related undertakings of the Company as at 31 December 2022 are listed below:
Company name
Australia
Share Class1
% held
Company name
Scottish & York Insurance Co. Limited
Traders General Insurance Company
Share Class1
% held
Common
Common
100
100
c/o TMF Corporate Services (Aust) Pty Limited, Suite 1 Level 11,
66 Goulburn Street, Sydney NSW 2000, Australia
Aviva Investors Pacific Pty Limited
Ordinary
100
Barbados
c/o USA Risk Group (Barbados) Limited, 6th Floor, CGI Tower, Warrens,
St. Michael, BB22026, Barbados
Victoria Reinsurance Company Limited.
Common
100
Canada
10 Aviva Way, Suite 100, Markham ON L6G0G1, Canada
2161605 Ontario Inc
9543864 Canada Inc.
Aviva Canada Inc.
Aviva General Insurance Company
Aviva Insurance Company of Canada
Aviva Warranty Services Inc.
Bay-Mill Specialty Insurance Adjusters Inc.
Elite Insurance Company
Insurance Agent Service Inc.
Nautimax Limited
OIS Ontario Insurance Service Limited
Pilot Insurance Company
S&Y Insurance Company
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
100
100
100
100
100
100
100
100
100
100
100
100
100
100 King Street West, Floor 49, Toronto ON M5X 2A2, Canada
Aviva Investors Canada Inc.
Common
100
150 King Street West, Suite #2401, P.O. Box 16, Toronto ON M5H 1J9,
Canada
Prolink Insurance Inc.
Common
34
555 Chabanel Ouest, Bureau 900, Montreal, QC H2N 2H8, Canada
Aviva Agency Services Inc.
Common Shares
100
Suite 1600, 925 W Georgia St, Vancouver BC V6C 3L2, Canada
Westmount West Services Inc
Ordinary Share
20
China
12F, 15F Block A, 27F Block B Landgent Centre, 20 East Third
Ring Middle Road, Beijing, 100022, China
Aviva-Cofco Life Insurance Co. Limited
Ordinary
50
Units 1805-1807, 18th Floor, Block H Office Building, Phoenix Land
Plaza, No. A5 Yard, Shuguangxili, Chaoyang District, Beijing, China
Aviva-Cofco Yi Li Asset Management
Co Limited
Czech Republic
Ordinary
21
5/482, Ve Svahu, Prague 4, 147 00, Czech Republic
AIEREF Renewable Energy s.r.o.
Ordinary
100
Denmark
Aviva plc
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Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
c/o TMF Denmark, H.C. Andersens Boulevard 38, 3. th, 1553,
Copenhagen V, Denmark
AICT EUR Real Estate (DS) GP ApS
AICT EUR Real Estate (DS) LP K/S
France
20 PL Vendôme, Paris 75001, France
Ordinary
Ordinary
100
100
AXA LBO Fund IV Feeder
Private Equity Fund
38
47 Rue du Faubourg Saint-Honoré ,75008, France
CGU Equilibre
Germany
FCP
99
c/o TMF Deutschland AG, Wiesenhüttenstrasse 11, 60329, Frankfurt am
Main, Germany
Reschop Carré Hattingen GmbH
Reschop Carré Marketing GmbH
Ferdinandstraße 75 · 20095 Hamburg, Germany
Warburg - Multi- Smart-Beta
Aktien Europa
Warburg Global Fixed Income Fund
Guernsey
Ordinary
Ordinary
95
100
OEIC
OEIC
40
24
PO Box 155 Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey
Paragon Insurance Company
Guernsey Limited
PO Box 255, Trafalgar Court, Les Banques, St Peter Port, GY1 3QL,
Guernsey
BMO Commercial Property Trust Limited
Ordinary
20
India
2nd floor, Prakash Deep Building, 7 Tolstoy Marg, New Delhi, 110001,
India
Aviva Life Insurance Company India
Limited
A-47 (L.G.F), Hauz Khas, New Delhi, Delhi, India
Ordinary
74
Sesame Group India Private Limited
Ordinary
100
Pune Office, Addresses 103/P3, Pentagon, Magarpatta City, Hadapsar,
Pune – 411013, India
Aviva DC Trustee Company Ireland
Designated Activity Company
Aviva Direct Ireland Limited
Aviva Driving School Ireland Limited
Aviva Group Services Ireland Limited
Aviva Insurance Ireland Designated
Activity Company
Aviva Life & Pensions Ireland Designated
Activity Company
Aviva Master Trust Ireland Designated
Activity Company
Aviva Retail Master Trust Ireland
Designated Activity Company
Share Class1
% held
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
Ordinary
100
Ordinary
100
Ordinary
100
Peak Re Designated Activity Company
Ordinary
100
Charlotte House, Charlemont Street, Dublin 2, Ireland
Mercer Diversified Retirement Fund
Mercer Multi Asset Defensive Fund
Mercer Multi Asset Growth Fund
MGI UK Equity
OEIC
OEIC
OEIC
OEIC
25
21
29
26
Friends First House, Cherrywood Science & Technology Park,
Loughlinstown, Dublin, Co. Dublin, Ireland
Georges Court, 54-62 Townsend Street, Dublin, DO2 R156, Ireland
FPPE Fund Public Limited Company
Ordinary
FPPE Private Equity
Private Equity Fund
IFSC House, International Financial Services Centre, Dublin, Ireland
Aviva Investors Euro Liquidity Fund
Aviva Investors Sterling Government
Liquidity Fund
Aviva Investors Sterling Liquidity Fund
Aviva Investors Sterling Liquidity
Plus Fund
Liquidity Fund
Liquidity Fund
Liquidity Fund
Liquidity Fund
Aviva Investors US Dollar Liquidity Fund
Liquidity Fund
International House, 3 Harbourmaster Place, Dublin 1, Ireland
100
100
76
99
71
71
97
Ordinary
49
Ashtown Management Company Limited
Ordinary
50
A.G.S. Customer Services (India)
Private Limited
Ireland
Ordinary
100
Merrion Managed Fund
Merrion Multi-Asset 30 Fund
Merrion Multi-Asset 50 Fund
Unit Trust
Unit Trust
Unit Trust
54
100
100
5 Georges Dock, IFSC, Dublin 1, Dublin, Ireland
Italy
CT Multi-Strategy Global Equity Fund
OEIC
100
Via Scarsellini 14, 20161, Milan, Italy
33/34 Sir John Rogerson’s Quay, Dublin 2, Ireland
Aviva Italia Holding S.p.A
Ordinary
100
Legal & General ICAV - L&G Europe ex UK
Equity Index Fund
Legal & General ICAV - L&G World Equity
Index Fund
78 Sir John Rogerson's Quay Dublin 2, Ireland
Russell Investment Company plc - Acadian
Multi-Asset Absolute Return UCITS
OEIC
OEIC
OEIC
SSgA GRU Euro Index Equity Fund
State Street IUT Balanced Fund S30
Unit Trust
Unit Trust
Building 12, Cherrywood Business Park, Loughlinstown, Co Dublin,
Ireland
45
52
41
24
24
Aviva DB Trustee Company Ireland
Designated Activity Company
Ordinary
100
Jersey
11–15 Seaton Place, St Helier, JE4 0QH, Jersey
1 Liverpool Street Unit Trust
101 Moorgate Unit Trust
22 Grenville Street, St. Helier, JE4 8PX, Jersey
Axa Sun Life Private Equity
Unit Trust
Unit Trust
Unit Trust
Slas Axa Private Equity
Private Equity Fund
26 New Street, St Helier, JE2 3TE, Jersey
Succession Finance Jersey Limited
Succession Jersey Limited
Succession Newco1 Jersey Limited
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
Aviva plc
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3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Succession Newco2 Jersey Limited
Ordinary
100
3rd Floor, One The Esplanade, St Helier, JE2 3QA, Jersey
Crieff Road Limited
FF UK Select Limited
IFC 5, St Helier, JF1 1S, Jersey
Cannock Designer Outlet Unit Trust
Aviva Investors REaLM Social Housing Unit
Trust
Gaspé House, 66-72 Esplanade, St Helier, JE1 3PB, Jersey
1 Fitzroy Place Unit Trust
2 Fitzroy Place Unit Trust
10 Station Road Unit Trust
Unit Trust
Unit Trust
Unit Trust
11-12 Hanover Square Unit Trust
Unit Trust
100
Ordinary
Ordinary
100
100
Unit Trust
Unit Trust
37
86
50
50
50
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Ordinary
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
Unit Trust
25
50
50
50
50
100
100
50
100
100
25
100
50
100
100
100
50
50
50
100
Aviva Investors Climate Transition EUR
Infra SARL
Aviva Investors Climate Transition EUR
Infrastructure Fund
Aviva Investors Climate Transition EUR
Real Estate Fund
Aviva Investors Climate Transition EUR
Real Estate SARL
Aviva Investors Climate Transition
European Equity Fund
Aviva Investors Climate Transition GBP
Infrastructure Fund
Aviva Investors Climate Transition GBP
Real Estate Fund
Aviva Investors Climate Transition Global
Equity Fund
Aviva Investors Emerging Markets
Bond Fund
Aviva Investors Emerging Markets
Corporate Bond Fund
Aviva Investors Emerging Local Currency
Bond Fund
Aviva Investors European Corporate
Bond Fund
Aviva Investors Global Convertibles
Absolute Return Fund
Aviva Investors Global Emerging Markets
Core Fund
Aviva Investors Global Emerging Markets
Equity Unconstrained Fund
Aviva Investors Global Emerging Markets
Index Fund
Aviva Investors Global Equity
Endurance Fund
Aviva Investors Global EUR ReturnPlus
Fund
Aviva Investors Global GBP ReturnPlus
Fund
Aviva Investors Global High Yield
Bond Fund
Aviva Investors Global Investment Grade
Corporate Bond Fund
Unit Trust
100
Unit Trust
100
Aviva Investors Global Sovereign
Bond Fund
Aviva Investors Luxembourg
Aviva Investors Multi-Strategy Target
Return
Aviva Investors Natural Capital Transition
Global Equity Fund
Aviva Investors Perpetual Acht NL SARL
Aviva Investors Renewable Energy S.A
Aviva Investors Social Transition Global
Equity Fund
Aviva Investors UK Equity
Unconstrained Fund
Ordinary
Ordinary
Ordinary
100
100
100
Fund
100
Galleri K (GP)
Share Class1
% held
Ordinary
100
Fund
100
Fund
100
Ordinary
100
SICAV
67
Fund
100
Fund
100
SICAV
SICAV
SICAV
SICAV
SICAV
SICAV
96
68
62
96
31
78
SICAV
100
SICAV
SICAV
SICAV
SICAV
SICAV
SICAV
SICAV
SICAV
85
86
50
83
97
70
85
90
Ordinary
SICAV
100
90
SICAV
78
Ordinary
SICAV
SICAV
100
100
71
SICAV
93
SICAV
100
SICAV
24
20 Gracechurch Unit Trust
20 Station Road Unit Trust
30 Station Road Unit Trust
30-31 Golden Square Unit Trust
50-60 Station Road Unit Trust
130 Fenchurch Street Unit Trust
Aviva Investors Jersey Unit Trusts
Management Limited
Barratt House Unit Trust
Bermondsey Yards Unit Trust
CCPF No.4 Unit Trust
Gracechurch Investment Unit Trust
Hams Hall Unit Trust
Irongate House Unit Trust
Lime Mayfair Unit Trust
Lime Property Fund Unit Trust
Longcross Jersey Unit Trust
New Broad Street House Unit Trust
Pegasus House and Nuffield House
Unit Trust
Southgate Property Unit Trust
The Designer Retail Outlet Centres
(Mansfield) Unit Trust
The Designer Retail Outlet Centres (York)
Unit Trust
The Designer Retail Outlet Centres
Unit Trust
Luxembourg
AICT EUR Real Estate (DS) SARL
AICT EUR Real Estate (Foz) SARL
Aviva Investors Alternative Income
Solutions Investments S.A.
Aviva Investors Alternative Income
Solutions SCSP
1c Rue Gabriel Lippmann l-5365, Munsbach Luxembourg
Patriarch Classic B&W Global Freestyle
FCP
45
2 Rue du Fort Bourbon, L1249, Luxembourg
Aviva Investors Asian Equity Income Fund
SICAV
97
2, Boulevard Konrad Adenauer, L1115 Luxembourg
Xtrackers II Eurozone Government Bond
15-30 UCITS ETF
Aviva plc
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Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Share Class1
% held
3 rue des Labours, L-1912 Luxembourg
Singapore
HASPA TRENDKONZEPT-V (HASTRDV)
Ordinary
53
1 Raffles Quay, #27-13, South Tower, 048583, Singapore
16 Avenue de la Gare, L1610, Luxembourg
Aviva Investors Asia Pte. Limited
Ordinary
100
AIEREF Holding 1
AIEREF Holding 2
Aviva Investors Alternative Income
Solutions General Partner S.à r.l.
Aviva Investors EBC S.à r.l.
Aviva Investors E-RELI (GP) SARL
Aviva Investors European Renewable
Energy S.A.
Aviva Investors Luxembourg Services
S.à r.l.
Aviva Investors Perpetual Capital (GP)
SARL
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
Ordinary
100
Ordinary
100
4 Shenton Way, 01 SGX Centre 2, 068807, Singapore
Singapore Life Holdings Pte Limited
Singapore Life Ltd.
Ordinary
Ordinary
26
26
6 Temasek Boulevard, #29-00 Suntec Tower Four, 038986, Singapore
Aviva Asia Management Pte. Limited
Aviva Global Services (Management
Services) Private Limited
Spain
Ordinary
Ordinary
100
100
1D, 13 Edificio América Av. de Bruselas, 28108, Alcobendas, Madrid,
Spain
Eólica Almatret S.L.
Ordinary
50
Victor Hugo 1 S.à r.l.
Ordinary
100
Switzerland
24-26, Avenue de la Liberte, L1930 Luxembourg
Leutschenbachstrasse 45, 8050 Zurich, Switzerland
Greenman Open Fund
SICAV
67
Aviva Investors Schweiz GmbH
Ordinary
100
28 Boulevard D’Avranches, L1160, Luxembourg
United Kingdom
Goodman European Business Park Fund
(Lux) S.àr.l.
33 Rue de Gasperich, L-5826, Hesperange, Luxembourg
Allspring (Lux) Worldwide Fund - Global
Small Cap Equity Fund
37A Avenue JF Kennedy, L-1855, Luxembourg
Invesco Funds - Invesco Sustainable
Global Structured Equity Fund
46a Avenue John F Kennedy, L1855, Luxembourg
Ordinary
50
1 Filament Walk, Suite 203, London, SW18 4GQ, United Kingdom
Freetricity South East Limited
Ordinary
100
1 London Wall Place, London EC2Y 5AU, United Kingdom
SICAV
67
Schroder QEP US Core Fund
Schroder Dynamic Multi Asset Z Acc.
Unit Trust
Unit Trust
41
24
SICAV
52
1st Floor, Finlay House, 10-14 West Nile Street, Glasgow, G1 2PP,
Scotland, United Kingdom
Aviva Investors Polish Retail S.à r.l.
Ordinary
100
47 Avenue J.F Kennedy, L-1855, Luxembourg
CT (Lux) Diversified Growth Fund
CT (Lux) European Growth & Income Fund
CT (Lux) Global Total Return Bond Fund
SICAV
SICAV
SICAV
96
100
66
Amundi Luxembourg S.A., 5 allée Scheffer L-2520 Luxembourg
Lyxor Net Zero 2050 S&P World Climate
PAB (DR) UCITS ETF - Acc
SICAV
71
RBC IS, 14 Porte de France, L-4360 Esch sur Alzette, Luxembourg
Aviva Inv Cd CoreFxdInc Pl Fd
Fund
25
Norway
MacKenzie Investment Strategies Ltd.
Ordinary
100
2nd Floor, 36 Broadway, London, SW1H 0BH, United Kingdom
Fred. Olsen CBH Limited
Ordinary
49
3a Dublin Meuse, Edinburgh, EH3 6NW, United Kingdom
PAR Forestry IV L.P.
Partnership
100
4th Floor, New London House, 6 London Street, London, EC3R 7LP,
United Kingdom
Polaris U.K. Limited
Ordinary
39
4th floor, Pountney Hill House, 6 Laurence Pountney Hill, London, EC4R
0BL, United Kingdom
ES Alliance Bernstein Low Volatility Global
Equity Fund
OEIC
71
5 Lister Hill, Horsforth, Leeds, LS18 5AZ, United Kingdom
c/o TMF Norway AS, Hagalokkveien 26, 1383, Asker, Norway
Aspire Financial Management Limited
Kongsgard Alle 20 AS
Poland
AI Jana Pawla II 25, 00-854, Warsaw, Poland
Wroclaw BC sp. z.o.o
Inflancka 4b, 00-189, Warsaw, Poland
Aviva Services Spółka z ograniczoną
odpowiedzialnością
Focus Mall Zielona Gora Sp zoo
Focus Park Piotrkow Trybunalski Sp zoo
PBC Lodz SP zoo
PBC Wroclaw Sp zoo
Aviva plc
Plac Piłsudskiego 1 Warszawa, MAZOWIECKIE, 00-078 Poland
Ordinary
100
Tenet & You Limited
Tenet Business Solutions Limited
Tenet Client Services Limited
Ordinary
100
Tenet Compliance Services Limited
Tenet Financial Services Limited
Ordinary
100
Unit Trust
Unit Trust
Unit Trust
Unit Trust
100
100
100
100
Tenet Group Limited
Tenet Limited
Tenet Mortgage Solutions
TenetConnect Limited
TenetConnect Services Limited
TenetLime Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary/
Redeemable
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
49
49
49
49
49
49
49
49
49
49
49
49
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Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Share Class1
% held
7 Lochside View, Edinburgh, EH12 9DH, United Kingdom
Aviva Investors GR SPV 1 Limited
Criterion Tec Holdings Limited
Criterion Tec Limited
Ordinary
Ordinary
8 Surrey Street, Norwich, Norfolk, NR1 3NG, United Kingdom
Aviva Central Services UK Limited
Aviva Health UK Limited
Aviva Insurance UK Limited
Aviva UKGI Investments Limited
Gresham Insurance Company Limited
Healthcare Purchasing Alliance Limited
London and Edinburgh Insurance
Company Limited
RAC Pension Trustees Limited
Solus (London) Limited
Synergy Sunrise (Broadlands) Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
12 Throgmorton Avenue, London EC2N 2DL, United Kingdom
24
24
100
100
100
100
100
50
100
100
100
100
Aviva Investors GR SPV 3 Limited
Aviva Investors GR SPV 4 Limited
Aviva Investors GR SPV 5 Limited
Aviva Investors GR SPV 6 Limited
Aviva Investors GR SPV 7 Limited
Aviva Investors GR SPV 8 Limited
Aviva Investors GR SPV 9 Limited
Aviva Investors GR SPV 10 Limited
Aviva Investors GR SPV 11 Limited
Aviva Investors GR SPV 12 Limited
Aviva Investors GR SPV 13 Limited
Aviva Investors GR SPV 14 Limited
Aviva Investors GR SPV 15 Limited
Aviva Investors GR SPV 16 Limited
Aviva Investors GR SPV 17 Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Blackrock ACS World ESG Insights
Equity Fund
BlackRock Market Advantage Fund
BlackRock Sterling Short Duration
Credit Fund
OEIC
96
Unit Trust
Unit Trust
50
100
15th Floor, 140 London Wall, EC2Y 5DN, United Kingdom
Houghton Regis Management
Company Limited
Ordinary
100
22 Bishopsgate, London, EC3A 6HX, United Kingdom
AXA Ethical Distribution Fund
OEIC
35
30 Finsbury Square, London, EC2A 1AG, United Kingdom
Aviva Investors GR SPV2 Limited
Ordinary
100
50 Stratton Street, London W1J, United Kingdom
Lazard Multicap UK Income Fund
OEIC
49
57-59 St James’s Street, London SW1A 1LD, United Kingdom
Artemis UK Special Situations Fund
Unit Trust
28
180 Great Portland Street, London, W1W 5QZ, United Kingdom
Quantum Property Partnership (General
Partner) Limited
Quantum Property Partnership (Nominee)
Limited
Ordinary
Ordinary
50
50
BMO Fund Management Limited, PO Box 9040, Chelmsford, Essex, CM99
2XH, United Kingdom
CT Global Total Return Bond (GBP Hdg)
Fund
CT North American Equity Fund
OEIC
OEIC
32
24
Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, United Kingdom
Baillie Gifford Investment Funds II ICVC-
Baillie Gifford UK Equity Core Fund
Baillie Gifford UK & Balanced Funds ICVC-
Baillie Gifford International Fund
OEIC
OEIC
c/o Harper MacLeod LLP, The Cadoro, 45 Gordon Street, Glasgow, G1
3PE, United Kingdom
Brockloch Rig Windfarm Limited
Crystal Rig III Limited
Ordinary
Ordinary
c/o James Fletcher, Mainstay, Whittington Hall, Whittington Road,
Worcester, England, WR5 2ZX, United Kingdom
26
26
49
49
Drake Building, 15 Davy Road, Plymouth Science Park, Plymouth,
Devon, PL6 8BY, United Kingdom
Pannells Financial Planning Ltd
Pannells Holdings Limited
Ordinary
Ordinary
100
100
Legal & General (Unit Trust Managers) Limited PO Box 6080
Wolverhampton WV1 9RB, United Kingdom
L&G Multi-Index Eur III-NEA
L&G Multi-Index Eur IV-NEA
L&G Multi-Index Eur V-NEA
OEIC
OEIC
OEIC
100
100
100
Liontrust Fund Partners LLP, 2 Savoy Court, London WC2R 0EZ, United
Kingdom
Liontrust Sustainable Future Corporate
Bond Fund
Liontrust Sustainable Future European
Growth Fund
Liontrust Sustainable Future Global
Growth Fund
Liontrust Sustainable Future
Managed Fund
Liontrust Sustainable Future Managed
Growth Fund
Liontrust Sustainable Future UK
Growth Fund
Liontrust UK Ethical Fund
OEIC
OEIC
OEIC
OEIC
OEIC
OEIC
OEIC
Nations House, 3rd Floor, 103 Wigmore Street, London W1U 1QS,
United Kingdom
Cannock Consortium LLP
Cannock Designer Outlet (GP Holdings)
Limited
Cannock Designer Outlet (GP) Limited
Cannock Designer Outlet (Nominee 1)
Limited
Cannock Designer Outlet (Nominee 2)
Limited
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Cannock Designer Outlet LP
Partnership
Old Bourchiers Hall New Road, Aldham, Colchester, Essex, C06 3QU
United Kingdom
27
36
22
39
25
24
50
43
37
37
37
37
37
County Broadband Holdings Limited
Ordinary
29
Aviva plc
3.150
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Share Class1
% held
Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire,
RG9 1HH, United Kingdom
Invesco Summit Responsible 2 Fund (UK)
Invesco Summit Responsible 5 Fund (UK)
OEIC
OEIC
30
72
30-31 Golden Square Nominee 1 Limited
30-31 Golden Square Nominee 2 Limited
41-42 Lowndes Square Management
Company Limited
Pitheavlis, Perth, Perthshire, PH2 0NH, United Kingdom
50-60 Station Road LP
AICT GBP Real Estate (Curtain House)
General Partner Limited
AICT GBP Real Estate (Curtain House)
Limited Partnership
Aviva (Peak No.1) UK Limited
Aviva Insurance Limited
Aviva Investors (FP) Limited
Aviva Investors (GP) Scotland Limited
Aviva Investors Climate Transition GBP
Real Estate General Partner Limited
Aviva Investors Climate Transition GBP
Real Estate Limited Partnership
General Accident plc
Ordinary
100
50-60 Station Road Nominee 1 Limited
Partnership
100
101 Moorgate GP Limited
50-60 Station Road Nominee 2 Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
101 Moorgate Nominee 1 Limited
101 Moorgate Nominee 2 Limited
130 Fenchurch Street General
Partner Limited
130 Fenchurch Street LP
Partnership
100
130 Fenchurch Street Nominee 1 Limited
130 Fenchurch Street Nominee 2 Limited
Ordinary/
Preference
100
2015 Sunbeam Limited
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Ordinary
TTF
101 Moorgate Limited Partnership
Partnership
Medium Scale Wind No.2 Limited
Ordinary
100
Shakespeare House, 42 Newmarket Road, Cambridge, CB5 8EP,
United Kingdom
Aviva Investors Pacific Equity Ex Japan
Core Fund
ALPF Single Family Homes General
Partner Ltd
Ordinary
100
Hillswood Management Limited
Ordinary
24
ALPF Single Family Homes LP
Partnership
100
St Albans House, 57-59 Haymarket, London, SW1Y 4QX, United Kingdom
Ascot Real Estate Investments GP LLP
Acre Platforms Limited
Ordinary
40
Ascot Real Estate Investments LP
Partnership
Partnership
Atlas Park Management Company Limited Company limited by
guarantee
St Helen’s, 1 Undershaft, London, EC3P 3DQ, United Kingdom
1 Fitzroy Place Limited Partnership
1 Liverpool Street GP Limited
1 Liverpool Street Limited Partnership
1 Liverpool Street Nominee 1 Limited
1 Liverpool Street Nominee 2 Limited
2 Fitzroy Place Limited Partnership
2-10 Mortimer Street (GP No 1) Limited
2-10 Mortimer Street GP Limited
2-10 Mortimer Street Limited Partnership
10 Station Road LP
10 Station Road Nominee 1 Limited
10 Station Road Nominee 2 Limited
10-11 GNS Limited
11-12 Hanover Square LP
11-12 Hanover Square Nominee 1 Limited
11-12 Hanover Square Nominee 2 Limited
20 Gracechurch (General Partner) Limited
20 Gracechurch Limited Partnership
20 Station Road LP
20 Station Road Nominee 1 Limited
20 Station Road Nominee 2 Limited
30 Station Road LP
30 Station Road Nominee 1 Limited
30 Station Road Nominee 2 Limited
Partnership
Ordinary
Partnership
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Partnership
Partnership
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Ordinary
Partnership
Partnership
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
30-31 Golden Square Limited Partnership
Partnership
50
100
30
100
100
50
50
50
50
50
100
100
100
50
50
50
50
25
50
100
100
50
100
100
50
Aviva Brands Limited
Aviva Capital Partners Limited
Aviva Commercial Finance Limited
Aviva Company Secretarial Services
Limited
Aviva Credit Services UK Limited
Aviva Employment Services Limited
Aviva Europe UK Societas
Aviva Group Holdings Limited
Aviva Insurance Services UK Limited
Aviva International Holdings Limited
Aviva International Insurance Limited
Aviva Investors 30 70 Global Eq Ccy
Hedged Ind Fund
Aviva Investors 40 60 Global Equity Index
Fund
Aviva Investors 40 Spring Gardens
(General Partner) Limited
Aviva Investors 50 50 Global Equity Index
Fund
Aviva Investors 60 40 Global Equity Index
Fund
Aviva Investors Asia Pacific Ex Japan Fund
Aviva Investors Balanced Life Fund
Aviva Investors Balanced Pension Fund
Aviva Investors Cautious Pension Fund
50
50
78
50
100
100
100
30
100
100
100
100
100
100
100
61
50
50
100
100
100
100
100
100
100
100
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
TTF
TTF
100
Ordinary
100
TTF
100
TTF
100
TTF
TTF
TTF
TTF
100
100
100
100
Aviva plc
3.151
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Aviva Investors Climate Transition Global
Equity Fund
Aviva Investors Climate Transition Real
Assets Fund
Aviva Investors Commercial Assets
GP Limited
Aviva Investors Commercial Assets
Nominee Limited
Aviva Investors Continental Euro Equity
Index Fund
Aviva Investors Corporate Bond Fund
Aviva Investors CTF Holdco1 Limited
Aviva Investors CTF Infrastructure
Midco 1 Limited
Aviva Investors Dev Asia Pacific Ex Japan
Equity Index Fund
Aviva Investors Dev Euro UK Equity Index
Fund
Aviva Investors Dev World Ex UK Equity
Index Fund
Aviva Investors Developed Overseas Gov
BD UK Ind Fd
Aviva Investors Distribution life Fund
Aviva Investors EBC GP Limited
Aviva Investors Energy Centres
No.1 GP Limited
Aviva Investors Energy Centres No.1
Limited Partnership
Aviva Investors Europe Equity Ex UK Core
Fund
Aviva Investors Europe Equity Ex UK Fund
Aviva Investors European Property Fund
Aviva Investors Global Equity Alpha Fund
Aviva Investors Global Equity
Endurance Fund
Aviva Investors Global Equity Fund
Aviva Investors Global Equity
Income Fund
Aviva Investors Global Services Limited
Aviva Investors Ground Rent GP Limited
Aviva Investors Ground Rent
Holdco Limited
Aviva Investors Holdings Limited
Aviva Investors Idx-Lkd Gilts ovr 5 Yrs Idx
Fd
Aviva Investors Index Linked Gilt Fund
Aviva Investors Infrastructure GP Limited
Aviva Investors Infrastructure Income B
Limited
Aviva Investors Infrastructure Income C
Limited
Aviva Investors Infrastructure Income C
No.4E Limited
Aviva Investors Infrastructure Income C
No.4F Limited
Aviva Investors Infrastructure Income
Limited Partnership
OEIC
76
TTF
100
Ordinary
100
Ordinary
100
TTF
100
OEIC
Ordinary
Ordinary
100
100
100
TTF
100
TTF
100
TTF
100
TTF
100
TTF
Ordinary
Ordinary
100
100
100
Partnership
100
TTF
48
TTF
OEIC
TTF
OEIC
TTF
OEIC
Ordinary
Ordinary
Ordinary
Ordinary
TTF
TTF
Ordinary
Ordinary
100
100
100
98
100
61
100
100
100
100
100
100
100
100
Aviva Investors Infrastructure Income M
Limited
Aviva Investors Infrastructure Income M
No.4C Limited
Aviva Investors Infrastructure Income M
No.4D Limited
Aviva Investors Infrastructure Income
No.1 Limited
Aviva Investors Infrastructure Income
No.2 Limited
Aviva Investors Infrastructure Income
No.2B Limited
Aviva Investors Infrastructure Income
No.3 Limited
Aviva Investors Infrastructure Income
No.3B Limited
Aviva Investors Infrastructure Income
No.4A Limited
Aviva Investors Infrastructure Income
No.4B Limited
Aviva Investors Infrastructure Income
No.5 Limited
Aviva Investors Infrastructure Income
No.6 Limited
Aviva Investors Infrastructure Income
No.6a1 Limited
Aviva Investors Infrastructure Income
No.6B Limited
Aviva Investors Infrastructure Income
No.6B1 Limited
Aviva Investors Infrastructure Income
No.6c Limited
Aviva Investors Infrastructure Income
No.6c1 Limited
Aviva Investors Infrastructure Income
No.7 Limited
Aviva Investors Infrastructure Income
No.8 Limited
Aviva Investors International Index
Tracking Fund
Aviva Investors Japan Equity Core Fund
Aviva Investors Japan Equity Fund
Aviva Investors Japan Equity Growth Fund
Aviva Investors Japanese Equity Index
Fund
Aviva Investors Managed High
Income Fund
Aviva Investors Japan Equity Growth Fund
Aviva Investors Money Market VNAV Fund
Aviva Investors Multi-asset 40 85 Shares
Index Fund
Ordinary
100
Aviva Investors Multi-Asset Core Fund II
Ordinary
100
Aviva Investors Multi-Asset Core Fund III
Aviva Investors Multi-Asset Core Fund IV
Ordinary
100
Aviva Investors Multi-asset Plus II Fund
Partnership
100
Aviva Investors Multi-asset Plus III Fund
Aviva Investors Multi-asset Plus IV Fund
Share Class1
% held
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
44
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
OEIC
TTF
TTF
OEIC
TTF
79
46
99
100
100
OEIC
70
OEIC
TTF
TTF
OEIC
OEIC
OEIC
OEIC
OEIC
OEIC
100
99
100
92
84
87
30
49
32
Aviva plc
3.152
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Aviva Investors Multi-asset Plus V Fund
Aviva Investors Multi-Manager 20-60%
Shares Fund
Aviva Investors Multi-Manager 40-85%
Shares Fund
Aviva Investors Multi-Manager
Flexible Fund
Aviva Investors Multi-Strategy Target
Return Fund
Aviva Investors Non-Gilt Bond All Stocks
Index Fund
Aviva Investors Non-Gilt Bond over 15 Yrs
Index Fund
Aviva Investors Non-Gilt Bond up to 5
Years Index Fund
Aviva Investors North American Equity
Core Fund
Aviva Investors North American Equity
Fund
Aviva Investors North American Equity
Index Fund
Aviva Investors Pacific Ex Japan Equity
Index Fund
Aviva Investors Pensions Limited
Aviva Investors PIP Solar PV (General
Partner) Limited
Aviva Investors PIP Solar PV Limited
Partnership
Aviva Investors PIP Solar PV N0.1 Limited
Aviva Investors Polish EBC LP
Aviva Investors Polish Retail GP Limited
Aviva Investors Polish Retail LP
Aviva Investors Pre Annuity Interest Fund
Aviva Investors Property Fund
Management Limited
Aviva Investors Real Estate Limited
Aviva Investors REALM Social Housing
Limited Partnership
Aviva Investors Secure Income
REIT Limited
Aviva Investors Social Housing GP Limited
Aviva Investors Social Housing Limited
Aviva Investors Sterling Corporate Bond
Fund
Aviva Investors Sterling Gilt Fund
Aviva Investors Stewardship Fixed Interest
Fund
Aviva Investors Stewardship Fixed Interest
Feeder Fund
Aviva Investors Stewardship International
Equity Fund
Aviva Investors Stewardship International
Equity Feeder Fund
Aviva Investors Stewardship UK Equity
Feeder Fund
Aviva Investors Stewardship UK Equity Inc
Feeder Fund
OEIC
OEIC
OEIC
OEIC
OEIC
34
80
79
81
87
Aviva Investors Stewardship UK Equity
Fund
Aviva Investors Stewardship UK Equity
Income Fund
Aviva Investors Strategic Bond Fund
Aviva Investors Strategic Global Equity
Fund
Aviva Investors UK Commercial Real
Estate Senior Debt LP
TTF
100
TTF
100
TTF
44
Aviva Investors UK EQ EX Aviva Inv Trusts
Index Fund
Aviva Investors UK Equity Alpha Fund
Aviva Investors UK Equity Core Fund
Aviva Investors UK Equity Dividend Fund
Aviva Investors UK Equity Fund
TTF
100
Aviva Investors UK Equity Index Fund
TTF
100
Aviva Investors UK CRESD GP Limited
Ordinary
TTF
100
TTF
100
Ordinary
Ordinary
100
100
Partnership
100
Ordinary
Partnership
Ordinary
Partnership
TTF
Ordinary
Ordinary
Partnership
100
100
100
100
100
100
100
86
Ordinary
100
Ordinary
Ordinary
TTF
TTF
TTF
100
100
100
100
99
OEIC
95
TTF
100
OEIC
OEIC
99
99
OEIC
100
Aviva Investors UK Fund Services Limited
Aviva Investors UK Gilts All Stock Index
Fund
Aviva Investors UK Gilts Over 15 Years
Index Fund
Aviva Investors UK Gilts Up To 5 Years
Index Fund
Aviva Investors UK Index Tracking Fund
Aviva Investors UK Listed Equity Ex
Tobacco Fund
Aviva Investors UK Listed Equity Fund
Aviva Investors UK Listed Equity Fund
Aviva Investors UK Listed Equity
Income Fund
Aviva Investors UK Listed Equity
Income Fund
Aviva Investors US Equity Index Fund
Aviva Investors US Large Cap Equity Fund
Aviva Overseas Holdings Limited
Aviva Public Private Finance Limited
Aviva Special PFI GP Limited
Aviva Special PFI Limited Partnership
Partnership
Aviva Staff Pension Trustee Limited
Aviva UK Digital Limited
Aviva UKLAP De-risking Limited
Axcess 10 Management Company Limited
Barratt House LP
Barratt House Nominee 1 Limited
Barratt House Nominee 2 Limited
Barwell Business Park Nominee Limited
Bermondsey Yards General Partner
Limited
Ordinary
Ordinary
Ordinary
Company Limited
by Guarantee
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Bermondsey Yards Limited Partnership
Partnership
Bermondsey Yards Nominee 1 Limited
Bermondsey Yards Nominee 2 Limited
Ordinary
Ordinary
Share Class1
% held
TTF
100
TTF
96
OEIC
TTF
60
100
Partnership
21
TTF
TTF
TTF
TTF
OEIC
TTF
Ordinary
TTF
TTF
100
TTF
100
OEIC
TTF
TTF
OEIC
OEIC
81
100
100
100
51
TTF
100
TTF
TTF
Ordinary
Ordinary
Ordinary
100
100
95
62
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
50
100
100
100
100
100
Aviva plc
3.153
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Company name
Share Class1
% held
Company name
Share Class1
% held
100
100
75
100
Irongate House Nominee 1 Limited
Irongate House Nominee 2 Limited
Jacks Lane Energy Limited
Lime Property Fund (General Partner)
Limited
100
Lime Property Fund (Nominee) Limited
Lime Property Fund Limited Partnership
Lombard (London) 1 Limited
Lombard (London) 2 Limited
Longcross General Partner Limited
Longcross Limited Partnership
Partnership
Bersey Warehouse Nominee 1 Limited
Bersey Warehouse Nominee 2 Limited
Biomass UK No.1 LLP
Biomass UK No.2 Limited
Biomass UK No. 3 Limited
Biomass UK No.4 Limited
Boston Biomass Limited
Boston Wood Recovery Limited
Building a Future (Newham Schools)
Limited
Cara Renewables Limited
CCPF No.4 LP
CGU International Holdings BV
Chesterford Park (General Partner)
Limited
Chesterford Park (Nominee) Limited
Chesterford Park Limited Partnership
Commercial Union Corporate
Member Limited
Commercial Union Life Assurance
Company Limited
Den Brook Energy Limited
Digital Garage Nominee 1 Limited
Digital Garage Nominee 2 Limited
EES Operations 1 Limited
Electric Avenue Limited
Fitzroy Place GP 2 Limited
Fitzroy Place Management Co Limited
Fitzroy Place Residential Limited
Free Solar (Stage 2) Limited
GES Solar2 Limited
GES Solar3 Limited
Gobafoss General Partner Limited
Gobafoss Partnership Nominee
No 1 Limited
Heath Farm Energy Limited
Hooton Bio Power Limited
Houlton Commercial Management
Company Limited
Houlton Community Management
Company Limited
Igloo Regeneration (General Partner)
Limited
Igloo Regeneration (Nominee) Limited
Igloo Regeneration Developments
(General Partner) Limited
Igloo Regeneration Developments Limited
Partnership
Igloo Regeneration Limited Partnership
Igloo Regeneration Property Unit Trust
Irongate House LP
Ordinary
Ordinary
Partnership
Ordinary
Deferred
Ordinary
Deferred
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
100
100
100
100
100
100
100
100
100
50
100
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
50
50
50
100
100
100
100
100
Ordinary
100
Ordinary
Company Limited
by Guarantee
Company Limited
by Guarantee
Ordinary
Ordinary
Ordinary
Partnership
Partnership
Unit Trust
Partnership
56
50
100
50
50
50
20
50
50
50
Longcross Nominee 1 Limited
Longcross Nominee 2 Limited
Mamhilad Solar Limited
Medium Scale Wind No.1 Limited
Minnygap Energy Limited
Mortimer Street Associated Co 1 Limited
Mortimer Street Associated Co 2 Limited
Mortimer Street Nominee 1 Limited
Mortimer Street Nominee 2 Limited
Mortimer Street Nominee 3 Limited
NCH Solar1 Limited
New Broad Street House LP
New Broad Street House Nominee 1
Limited
New Broad Street House Nominee 2
Limited
Norwich Union Public Private Partnership
Fund
Norwich Union (Shareholder GP) Limited
NU 3PS Limited
NU Developments (Brighton) Limited
NU Library For Brighton Limited
NU Local Care Centres (Bradford) Limited
NU Local Care Centres (Chichester No.1)
Limited
NU Local Care Centres (Chichester No.2)
Limited
NU Local Care Centres (Chichester No.3)
Limited
NU Local Care Centres (Chichester No.4)
Limited
NU Local Care Centres (Chichester No.5)
Limited
NU Local Care Centres (Chichester No.6)
Limited
NU Local Care Centres (Farnham) Limited
NU Offices for Redcar Limited
NU Schools for Redbridge Limited
NU Technology and Learning Centres
(Hackney) Limited
NUPPP (Care Technology and Learning
Centres) Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
50
50
50
Ordinary
100
Partnership
Ordinary
Ordinary
50
50
50
Partnership
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
Ordinary
100
Aviva plc
3.154
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Share Class1
% held
Company name
Rugby Radio Station (Nominee) Limited
Ordinary
Rugby Radio Station Limited Partnership
Partnership
Company name
NUPPP (GP) Limited
NUPPP Nominees Limited
Opus Park Management Limited
Pegasus House and Nuffield House LP
Pegasus House and Nuffield House
Nominee 1 Limited
Pegasus House and Nuffield House
Nominee 2 Limited
Porth Teigr Management
Company Limited
Quarryvale One Limited
RDF Energy No.1 Limited
Renewable Clean Energy 3 Limited
Renewable Clean Energy Limited
Ridge Road Energy Limited
Riley Factory Nominee 1 Limited
Riley Factory Nominee 2 Limited
Rugby Radio Station (General Partner)
Limited
SHR Bordon Limited
SHR Coventry Limited
SHR Ipswich Limited
SHR Linmere Limited
SHR Rudloe Limited
SHR Swindon Limited
SHR Telford Limited
Solar Clean Energy Limited
Southgate General Partner Limited
Southgate LP (Nominee 1) Limited
Southgate LP (Nominee 2) Limited
Spire Energy Limited
Station Road Cambridge LP
Station Road General Partner LLP
Stonebridge Cross Management Limited
SUE Developments Limited Partnership
SUE GP LLP
SUE GP Nominee Limited
Sustainable Housing Holdco Limited
Sustainable Housing Topco Limited
Sustainable Storage HoldCo Limited
Sustainable Storage Portfolio SPV Limited
Sustainable Storage Topco Limited
Swan Valley Management Limited
The Designer Retail Outlet Centres
(Mansfield) General Partner Limited
The Designer Retail Outlet Centres
(Mansfield) Limited Partnership
Ordinary
Ordinary
Company Limited
by Guarantee
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Partnership
Partnership
Company Limited
by Guarantee
Partnership
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
50
50
50
50
100
57
100
100
100
100
100
50
50
50
100
100
100
100
100
100
100
100
50
50
50
100
50
100
100
50
50
50
100
100
100
100
100
100
100
Partnership
97
The Designer Retail Outlet Centres (York)
General Partner Limited
The Designer Retail Outlet Centres (York)
Limited Partnership
The Gobafoss Partnership
The Ocean Marine Insurance
Company Limited
The Rutherford Nominee 1 Limited
The Rutherford Nominee 2 Limited
The Southgate Property Limited
Partnership
The Square Brighton Limited
Turncole Wind Farm Limited
Tyne Assets (No 2) Limited
Tyne Assets Limited
Undershaft Limited
Welsh Insurance Corporation Limited/The
Westcountry Solar Solutions Limited
Woolley Hill Electrical Energy Limited
WR 11 Solar Limited
Yorkshire Insurance Company Limited /
The
Share Class1
% held
Ordinary
100
Partnership
97
Partnership
Ordinary
Ordinary
Ordinary
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
Swan Court Waterman’s Business Park, Kingsbury Crescent, Staines,
Surrey, TW18 3BA, United Kingdom
Healthcode Limited
Ordinary
20
Tec Marina Terra Nova Way, Penarth, Cardiff, Wales, CF64 1SA, United
Kingdom
Wealthify Group Limited
Wealthify Limited
Ordinary
Ordinary
100
100
The Apex, Brest Road, Derriford Business Park, Derriford, Plymouth, PL6
5FL, United Kindgom
Bankhouse Financial Management
Limited
Investors Planning Associates Limited
JCF Financial Services Limited
KF Consulting
Succession Advisory Services Limited
Succession Employee Benefit Solutions
Limited
Succession Financial Management
Limited
Succession Group Ltd
Succession Holdings Ltd
Succession Wealth Management Limited
The Oxford Advisory Partnership Limited
The Green, Easter Park, Benyon Road, Reading, RG7 2P, United
Kingdom
ANESCO Mid Devon Limited
ANESCO South West Limited
Free Solar (Stage 1) Limited
Homesun 2 Limited
Homesun 3 Limited
Homesun 4 Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Aviva plc
3.155
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
Company name
Homesun 5 Limited
Homesun Limited
New Energy Residential Solar Limited
Norton Energy SLS Limited
TGHC Limited
Share Class1
% held
Company name
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
Friends Provident Investment
Holdings Limited
Friends Provident Life Assurance Limited
Friends’ Provident Managed Pension
Funds Limited
Friends Provident Pension Scheme
Trustees Limited
Friends SLUA Limited
Gateway Specialist Advice
Services Limited
Lancashire and Yorkshire Reversionary
Interest Company Limited /The
London and Manchester Group Limited
Premier Mortgage Service Limited
Sesame Bankhall Group Limited
Sesame Bankhall Valuation
Services Limited
Sesame General Insurance
Services Limited
Sesame Limited
Sesame Regulatory Services Limited
Sesame Services Limited
Suntrust Limited
Undershaft (NULLA) Limited
Undershaft FAL Limited
Undershaft FPLLA Limited
Undershaft SLPM Limited
Voyager Park South Management
Company Limited
Wealth Limited
United States
Share Class1
% held
Ordinary
100
Ordinary
Ordinary
100
100
Ordinary
100
Ordinary
Ordinary
100
100
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
75
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
52
Ordinary
100
251 Little Falls Drive, Wilmington DE 19808, United States
AI-RECAP Carry I, LP
AI-RECAP GP I, LLC
Partnership
Sole Member
82
100
1209 Orange Street, Wilmington, DE, 19801, United States
Aviva Investors Americas LLC
Sole Member
100
2222 Grand Avenue, Des Moines, IA, 50312, United States
Aviva Investors North America Holdings,
Inc
Common
100
2711 Centreville Road, Suite 400, Wilmington, New Castle, Delaware,
19808, United States
UKP Holdings Inc.
Common
100
Cogency Global Inc., 850 New Burton Road, Suite 201, Dover, Delaware,
Kent County, 19904, United States
Exeter Properties Inc.
Winslade Investments Inc.
Common
Common
95
100
1. Definitions
• Fond Common de Placement (‘FCP’)
• Société d ‘Investment à Capital Variable (‘SICAV’)
• Tax Transparent Fund ('TTF')
• Open Ended Investment Companies (‘OEIC’)
Triune Court, Monks Cross Drive, Huntington, York, England, YO32 9GZ,
United Kingdom
Oaklea Wealth Management Ltd
Ordinary
100
Unit 2, Arabesque House, Monks Cross Drive, Huntington, York, YO32
9GW, United Kingdom
A P Associates Financial Services Limited
G&E Private Wealth Limited
G&E Wealth Management (Holdings) Ltd
G&E Wealth Management Limited
HKA (F S) Limited
HKA Holdings Limited
Wellington Row, York, YO90 1WR, United Kingdom
Aviva (Peak No.2) UK Limited
Aviva Administration Limited
Aviva Client Nominees UK Limited
Aviva Equity Release UK Limited
Aviva ERFA 15 UK Limited
Aviva Investment Solutions UK Limited
Aviva Life & Pensions UK Limited
Aviva Life Holdings UK Limited
Aviva Life Investments International
(General Partner) Limited
Aviva Life Investments International
(Recovery) Limited
Aviva Life Services UK Limited
Aviva Management Services UK Limited
Aviva Pension Trustees UK Limited
Aviva Savings Limited
Aviva Trustees UK Limited
Aviva Wrap UK Limited
Bankhall Support Services Limited
CGNU Life Assurance Limited
Friends AEL Trustees Limited
Friends AELLAS Limited
Friends AELRIS Limited
Friends Life and Pensions Limited
Friends Life Assurance Society Limited
Friends Life Company Limited
Friends Life FPG Limited
Friends Life FPL Limited
Friends Life FPLMA Limited
Friends Life Holdings Limited
Friends Life Limited
Friends Life WL Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Ordinary
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Aviva plc
3.156
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the consolidated financial statements continued
65 – Subsequent events
For details of events relating to share buybacks see note 31(e).
Aviva plc
3.157
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Financial statements of the company
Income statement
For the year ended 31 December 2022
Income
Net investment income
Expenses
Operating expenses
Finance costs
Profit for the year before tax
Tax credit
Profit for the year after tax
Statement of comprehensive income
For the year ended 31 December 2022
Profit for the year
Remeasurements of pension schemes
Other comprehensive income, net of tax
Total comprehensive income for the year
Note
2022
£m
2021
£m
A
B
C
D
2,133
2,133
(325)
(351)
(676)
1,457
132
1,589
2022
£m
1,589
8
8
1,597
7,875
7,875
(379)
(492)
(871)
7,004
136
7,140
2021
£m
7,140
3
3
7,143
Where applicable, the accounting policies of the Company are the same as those of the Group. The Company notes identified alphabetically
are an integral part of these separate financial statements. Where the same items appear in the Group financial statements, reference is
made to the Group notes identified numerically.
Aviva plc
3.158
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Financial statements of the company continued
Statement of changes in equity
For the year ended 31 December 2022
Balance at 1 January
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends and appropriations
Reserves credit for equity compensation plans
Shares issued under equity compensation plans
Shares purchased in buyback1
Return of capital to shareholders via B share
scheme2
Redemption of fixed rate tier 1 notes
Forfeited dividend income
Issue of tier 1 notes3
Balance at 31 December
Ordinary
share
capital
£m
Preference
share
capital
£m
Note
941
—
—
—
—
—
2
(19)
—
—
—
—
924
200
—
—
—
—
—
—
—
—
—
—
—
200
14
32
32
31
31
35
H
L
Share
premium
£m
1,248
—
—
—
—
—
15
—
Capital
redemption
reserve
£m
Merger
reserve
£m
Equity
compensation
reserve
£m
Retained
earnings
£m
Tier 1
notes
£m
Total
equity
£m
86
—
—
—
—
—
—
19
6,438
—
—
—
—
—
—
—
101
—
—
—
—
58
(46)
—
8,591
1,589
8
1,597
(862)
—
8
(336)
—
—
—
—
—
—
—
—
17,605
1,589
8
1,597
(862)
58
(21)
(336)
—
3,750
(3,750)
—
(3,750)
—
(3,750)
—
—
—
1,263
—
—
—
3,855
—
—
—
2,688
—
—
—
113
—
—
—
5,248
—
—
496
496
—
—
496
14,787
In the year ended 31 December 2022, £337 million of shares were purchased and shares with a nominal value of £19 million have been cancelled as part of the share buyback programme
1.
2. On 2 March 2022, Aviva announced a proposed return of capital, via a £3,750 million B Share Scheme for the holders of ordinary shares. 3,687,322,000 B shares were issued for nil consideration with a nominal value of
101.69 pence per share on 16 May 2022, resulting in a total of £3,750 million being credited to the B share capital account. At the same time, the merger reserve was reduced by £3,750 million. On 17 May 2022, the B
shares were redeemed at 101.69 pence per share, which resulted in a £3,750 million reduction in the B share capital account and a corresponding increase in the capital redemption reserve. Retained earnings reduced
by £3,750 million on payment of the return of capital to ordinary shareholders.
3. On 15 June 2022, the Group issued £500 million of 6.875% fixed rate reset perpetual Restricted Tier 1 contingent convertible notes (the RT1 notes). These RT1 notes are treated as equity and any coupon payments are
recognised directly in equity as they arise (see note 35).
For the year ended 31 December 2021
Balance at 1 January
Profit for the year
Other comprehensive expense
Total comprehensive expense for the year
Dividends and appropriations
Reserves credit for equity compensation plans
Shares issued under equity compensation plans
Shares purchased in buyback
Balance at 31 December
Ordinary
share
capital
£m
982
—
—
—
—
—
1
(42)
941
Preference
share
capital
£m
200
—
—
—
—
—
—
—
200
Share
premium
£m
1,242
—
—
—
—
—
6
—
1,248
Capital
redemption
reserve
£m
44
—
—
—
—
—
—
42
86
Merger
reserve
£m
6,438
—
—
—
—
—
—
—
6,438
Note
14
32
32
31
Equity
compensation
reserve
£m
106
—
—
—
—
24
(29)
—
101
Retained
earnings
£m
3,235
7,140
3
7,143
(1,127)
—
3
(663)
8,591
Tier 1 notes
£m
—
—
—
—
—
—
—
—
—
Total
equity
£m
12,247
7,140
3
7,143
(1,127)
24
(19)
(663)
17,605
Where applicable, the accounting policies of the Company are the same as those of the Group. The Company notes identified alphabetically
are an integral part of these separate financial statements. Where the same items appear in the Group financial statements, reference is
made to the Group notes identified numerically.
Aviva plc
3.159
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Financial statements of the company continued
Statement of financial position
As at 31 December 2022
Note
2022
£m
2021
£m
E
E
F
G
G
F
31
34
31(d)
31(d)
H
H
H
L
J
K
I
J
K
31,793
123
2,118
142
—
34,176
1
799
112
320
35,408
924
200
1,124
1,263
3,855
2,688
113
5,248
496
14,787
4,939
10,470
34
15,443
530
4,560
88
20,621
35,408
31,788
123
4,461
12
137
36,521
—
245
54
702
37,522
941
200
1,141
1,248
86
6,438
101
8,591
—
17,605
5,577
9,632
46
15,255
50
4,532
80
19,917
37,522
Assets
Non-current assets
Investments in subsidiaries
Investment in joint venture
Receivables and other financial assets
Deferred tax assets
Current tax assets
Current assets
Financial investments
Receivables and other financial assets
Prepayments and accrued income
Cash and cash equivalents
Total assets
Equity
Ordinary share capital
Preference share capital
Called up capital
Share premium
Capital redemption reserve
Merger reserve
Equity compensation reserve
Retained earnings
Tier 1 notes
Total equity
Liabilities
Non-current liabilities
Borrowings
Payables and other financial liabilities
Pension deficits and other provisions
Current liabilities
Borrowings
Payables and other financial liabilities
Other liabilities
Total liabilities
Total equity and liabilities
Approved by the Board on 8 March 2023
Charlotte Jones
Chief Financial Officer
Company number: 2468686
Where applicable, the accounting policies of the Company are the same as those of the Group. The Company notes identified alphabetically
are an integral part of these separate financial statements. Where the same items appear in the Group financial statements, reference is
made to the Group notes identified numerically.
Aviva plc
3.160
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Financial statements of the company continued
Statement of cash flows
For the year ended 31 December 2022
All the Company’s operating cash requirements are met by subsidiary companies and settled through intercompany loan accounts. As the
direct method of presentation has been adopted for these activities, no further disclosure is required. In respect of financing and investing
activities, the following items pass through the Company’s own bank accounts.
Cash flows from investing activities
Dividends received from joint venture
Net disposal of financial investments
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Return of capital to ordinary shareholders via B share scheme
Shares purchased in buyback
Treasury shares purchased for employee trusts
New borrowings drawn down, net of expenses
Repayment of borrowings
Net repayment of borrowings
Interest paid on borrowings
Preference dividends paid
Ordinary dividends paid
Coupon payments on tier 1 notes
Issue of tier 1 notes1
Funding provided from subsidiaries
Other2
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
2022
£m
18
—
18
17
(3,750)
(336)
(75)
536
(849)
(313)
(264)
(17)
(828)
(17)
496
4,691
(4)
(400)
(382)
702
320
2021
£m
17
2
19
6
—
(663)
(69)
206
(1,975)
(1,769)
(401)
(17)
(1,110)
—
—
4,540
(25)
492
511
191
702
1. On 15 June 2022, the Group issued £500 million of 6.875% fixed rate reset perpetual restricted tier 1 contingent convertible notes (the RT1 notes). The RT1 notes are callable at par between 15 December 2031 and 15
June 2032 (the First Reset Date) inclusive and thereafter every five years after the First Reset Date. If not called, the coupon from 15 June 2032 will be reset to the prevailing five year benchmark gilt yield plus 4.649%.
The notes have no fixed maturity date. Optional cancellation of coupon payments is at the discretion of the Group and mandatory cancellation is upon the occurrence of certain conditions. The RT1 notes are therefore
treated as equity and the coupon payment is recognised directly in equity. On the occurrence of certain conversion trigger events the notes are convertible into ordinary shares of the Group.
2. 2022 includes £21 million (2021: £23 million) in respect of payments relating to equity compensation plans and £10 million (2021: £nil) receipt of forfeited shareholder distributions to be donated to a
charitable foundation
Where applicable, the accounting policies of the Company are the same as those of the Group. The Company notes identified alphabetically
are an integral part of these separate financial statements. Where the same items appear in the Group financial statements, reference is
made to the Group notes identified numerically.
Aviva plc
3.161
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the company financial statements
A – Net investment income
Dividends received from subsidiaries1
Dividends received from joint venture
Interest receivable from group company loans held at amortised cost
Other income
Unrealised gains on foreign exchange contracts
Total
1. 2022 includes £2,000 million (2021: £7,750 million) dividend income from Aviva Group Holdings Limited
B – Operating expenses
(i) Operating expenses
Operating expenses comprise:
Equity compensation plans (see (ii) below)
Other operating costs
Net foreign exchange losses
Total
2022
£m
2,045
19
67
1
1
2,133
2021
£m
7,795
11
66
—
3
7,875
2022
£m
18
301
6
325
2021
£m
18
342
19
379
(ii) Equity compensation plans
All transactions in the Group’s equity compensation plans, which involve options and awards for ordinary shares of the Company, are
included in other operating costs. Full disclosure of these plans is given in the Group consolidated financial statements, note 32. The cost of
such options and awards is borne by all participating businesses and, where relevant, the Company bears an appropriate charge. As the
majority of the charge to the Company relates to directors’ options and awards, for which full disclosure is made in the directors’
remuneration report, no further disclosure is given here.
C – Finance costs
Interest payable on borrowings
Interest payable on group loans held at amortised cost
Fees and charges on share buyback and return of capital
Realised loss on external debt redemption
Premium payments on external borrowings
Total
D – Tax
(i) Tax credited to the income statement
The total tax credit comprises:
Current tax
For this year
Total current tax
Deferred tax
Origination and reversal of temporary differences
Total deferred tax
Total tax credited to income statement
Note
O(ii)
2022
£m
261
80
10
—
—
351
2022
£m
(1)
(1)
133
133
132
2021
£m
295
92
3
51
51
492
2021
£m
136
136
—
—
136
(ii) Tax charged/credited to other comprehensive income
Tax charged to other comprehensive income in the year amounted to £3 million (2021: £3 million credited) in respect of obligations under
pension and post-retirement benefit schemes.
Aviva plc
3.162
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the company financial statements continued
D – Tax continued
(iii) Tax reconciliation
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the
Company as follows:
Profit before tax
Tax calculated at standard UK corporation tax rate of 19.00% (2021: 19.00%)
Reconciling items
Non-assessable dividend income
Disallowable expenses
Movement in valuation of deferred tax
Different local basis of tax on overseas profits
Losses surrendered intra-group for nil value
Tax on interest amounts charged directly to equity
Total tax credited to income statement
2022
£m
1,457
(277)
392
(3)
32
(1)
(14)
3
132
2021
£m
7,004
(1,331)
1,483
(1)
—
(1)
(14)
—
136
The UK Government has enacted an increase in the UK corporation tax rate to 25% to take effect from 1 April 2023. This rate has been used
in the calculation of the Company's deferred tax assets as at 31 December 2021 and 31 December 2022 and increased the Company's
deferred tax assets by £3 million in the year ended 31 December 2021. The £3 million was credited to other comprehensive income.
E – Investments in subsidiaries and joint venture
(i) Subsidiaries
At 31 December 2022 the Company has two wholly owned subsidiaries, both incorporated in the UK. These are General Accident plc and
Aviva Group Holdings Limited. Aviva Group Holdings Limited is an intermediate holding company, while General Accident plc has preference
shares listed on the London Stock Exchange. At 31 December 2022 the Company’s investments in subsidiaries have a cost of £31,793 million
(2021: £31,788 million). The principal subsidiaries of the Aviva Group at 31 December 2022 are set out in note 63 to the Group consolidated
financial statements.
(ii) Joint venture
At 31 December 2022 the Company’s investment in the joint venture, Aviva-COFCO Life Insurance Co. Limited has a cost of £123 million
(2021: £123 million).
F – Receivables and other financial assets
Loans due from subsidiaries held at amortised cost
Amounts due from subsidiaries held at amortised cost
Total
Expected to be recovered in less than one year
Expected to be recovered in more than one year
Note
O(i)
O(iii)
2022
£m
2,664
253
2,917
799
2,118
2,917
2021
£m
4,461
245
4,706
245
4,461
4,706
Fair value of these assets approximate to their carrying amounts.
G – Tax assets and liabilities
(i) Current tax
Current tax assets recoverable in more than one year are £nil million (2021: £137 million).
Assets for prior years’ tax settled by group relief of £137 million (2021: £108 million) are included within Receivables and other financial
assets (note F), of which £137 million are recoverable in less than one year.
(ii) Deferred tax
(a) The net deferred tax asset arises on the following items:
Pensions and other post retirement obligations
Unused losses and tax credits
Net deferred tax assets
2022
£m
9
133
142
2021
£m
12
—
12
Aviva plc
3.163
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the company financial statements continued
G – Tax assets and liabilities continued
(ii) Deferred tax continued
(b) The movement in the net deferred tax asset was as follows:
Net asset at 1 January
Amounts credited to income statement
Amounts (charged)/credited to other comprehensive income
Net deferred tax assets at 31 December
2022
£m
12
133
(3)
142
2021
£m
9
—
3
12
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. In assessing future profitability, the directors have relied on board approved business plans and profit forecasts
for up to 5 years and the Group's history of taxable profits in the UK.
H – Reserves
Balance at 1 January 2021
Arising in the year:
Profit for the year
Remeasurement of pension schemes
Dividends and appropriations
Shares purchased in buyback
Reserves credit for equity compensation plans
Issue of share capital under equity compensation scheme
Balance at 31 December 2021
Arising in the year:
Profit for the year
Remeasurement of pension schemes
Forfeited dividend income2
Dividends and appropriations
Shares purchased in buyback
Return of capital to ordinary shareholders via B share schemes
Reserves credit for equity compensation plans
Issue of share capital under equity compensation scheme
Balance at 31 December 2022
Merger
reserve
£m
6,438
—
—
—
—
—
—
6,438
—
—
—
—
—
(3,750)
—
—
2,688
Equity
compensation
reserve1
£m
106
—
—
—
—
24
(29)
101
—
—
—
—
—
—
58
(46)
113
Retained
earnings
£m
3,235
7,140
3
(1,127)
(663)
—
3
8,591
1,589
8
—
(862)
(336)
(3,750)
—
8
5,248
1. See notes 32(d) and 38 for further details of balances included in the equity compensation reserve
2. The Company has commenced a shareholder forfeiture programme, where the shares of shareholders who Aviva has lost contact with over the last 12 years will be forfeited and sold on. Any associated unclaimed
dividends will be reclaimed by the Company. After covering administration costs, the majority of the money will be put into a charitable foundation.
The vast majority of the retained earnings of the Company are distributable.
I – Pension deficits and other provisions
Total IAS 19 obligations to staff pension schemes
Total provisions
J – Borrowings
The Company’s borrowings comprise:
Subordinated debt
Senior notes
Commercial paper
Total
All the above borrowings are stated at amortised cost.
2022
£m
34
34
2021
£m
46
46
2022
£m
4,530
687
252
5,469
2021
£m
4,926
651
50
5,627
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the company financial statements continued
J – Borrowings continued
Maturity analysis of contractual undiscounted cash flows:
Within 1 year
1 – 5 years
5 – 10 years
10 – 15 years
Over 15 years
Total contractual undiscounted cash flows
Principal
£m
531
411
275
700
3,583
5,500
Interest
£m
229
912
1,077
999
2,111
5,328
2022
Total
£m
760
1,323
1,352
1,699
5,694
10,828
Principal
£m
50
265
652
700
4,000
5,667
Interest
£m
256
1,020
1,229
1,178
2,274
5,957
2021
Total
£m
306
1,285
1,881
1,878
6,274
11,624
Where subordinated debt is undated, the interest payments have not been included beyond 15 years. Annual interest payments in future
years for these borrowings are £nil (2021: £31 million).
The fair value of the subordinated debt at 31 December 2022 was £4,314 million (2021: £5,752 million), calculated with reference to quoted
prices. The fair value of the senior debt at 31 December 2022 was £646 million (2021: £698 million), calculated with reference to quoted
prices. The fair value of the commercial paper is considered to be the same as its carrying value.
Further details of these borrowings and undrawn committed facilities can be found in the Group consolidated financial statements, note 51,
with details of the fair value hierarchy in relation to these borrowings in note 22.
K – Payables and other financial liabilities
Loans due to subsidiaries
Amount due to subsidiaries
Total
Expected to be recovered in less than one year
Expected to be recovered in more than one year
Note
O(ii)
O(iii)
2022
£m
10,470
4,560
15,030
4,560
10,470
15,030
2021
£m
9,632
4,532
14,164
4,532
9,632
14,164
L – Tier 1 notes
On 15 June 2022, the Company issued £500 million of 6.875% fixed rate reset perpetual Restricted Tier 1 contingent convertible notes (the
RT1 Notes), see details in note 35. During the year coupon payments of £17 million were made (2021: £nil).
M – Contingent liabilities
Details of the Company’s contingent liabilities are given in the Group consolidated financial statements, note 54.
N – Risk and capital management
Risk and capital management in the context of the Group is considered in the Group consolidated financial statements, notes 56 and 58.
The business of the Company is managing its investments in subsidiaries and joint venture operations. Its risks are considered to be the
same as those in the operations themselves, and full details of the major risks and the Group’s approach to managing these are given in
the Group consolidated financial statements, note 58. Such investments are held by the Company at cost in accordance with accounting
policy D.
Financial assets, other than investments in subsidiaries and joint ventures, largely consist of amounts due from subsidiaries. As at the
balance sheet date, these receivable amounts were neither past due nor impaired. The credit quality of receivables and other financial
assets is monitored by the Company and provisions are made for expected credit losses. There are no material expected credit losses over
the lifetime of the financial assets.
Financial liabilities owed by the Company as at the balance sheet date are largely in respect of borrowings (details of which are provided in
note J and the Group consolidated financial statements, note 51) and loans owed to subsidiaries. Loans owed to subsidiaries were within
agreed credit terms as at the balance sheet date.
Interest rate risk
Loans to and from subsidiaries are at either fixed or floating rates of interest, with the latter being exposed to fluctuations in these rates.
The choice of rates is designed to match the characteristics of financial investments (which are also exposed to interest rate fluctuations)
held in both the Company and the relevant subsidiary, to mitigate as far as possible each company’s net exposure.
All of the Company’s long-term external borrowings are at fixed rates of interest and are therefore not exposed to changes in these rates.
However, for short-term commercial paper, the Company is affected by changes in these rates to the extent the redemption of these
borrowings is funded by the issuance of new commercial paper or other borrowings. Further details of the Company’s borrowings are
provided in note J and the Group consolidated financial statements, note 51.
Aviva plc
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4. Other Information
Notes to the company financial statements continued
N – Risk and capital management continued
Interest rate risk
The effect of a 100 basis point increase/decrease in interest rates on floating rate loans due to and from subsidiaries and on refinancing
short-term commercial paper as it matures would be a decrease/increase in profit before tax of £92 million (2021: decrease/increase of
£22 million). We manage and hedge our interest rate exposure through setting risk tolerance levels on a Solvency II cover ratio basis.
Exposure to interest rate risk is monitored through several measures that include duration, capital modelling, sensitivity testing and stress
and scenario testing.
Currency risk
The Company’s direct subsidiaries are exposed to foreign currency risk arising from fluctuations in exchange rates during the course of
providing insurance and asset management services around the world. The exposure of the subsidiaries to currency risk is considered from
a Group perspective in the Group consolidated financial statements, note 58(c)(v).
The Company faces exposure to foreign currency risk through some of its borrowings which are denominated in Euros and Canadian
dollars.
Liquidity risk
Liquidity risk is the risk of not being able to make payments as they become due because there are insufficient assets in cash form. The
Company’s main sources of liquidity are liquid assets held within the Company and its subsidiary Aviva Group Holdings Limited, and
dividends received from the Group’s insurance and asset management businesses. Sources of liquidity in normal markets also include a
variety of short and long-term instruments including commercial papers and medium and long-term debt. In addition to the existing liquid
resources and expected inflows, the Company maintains significant undrawn committed borrowing facilities from a range of leading
international banks to further mitigate this risk.
Maturity analysis of external borrowings and amounts due to and by subsidiaries are provided in notes J and F respectively.
Intra-group capital arrangement
Consistent with our capital management framework, the Group has in place intra-group arrangements to provide additional capital support
to its regulated subsidiaries. In the normal course of business, the Group will provide additional capital support to its regulated subsidiaries
in certain circumstances. While the Group considers it unlikely that such support will be required, the arrangements are intended to provide
additional comfort to its regulated subsidiaries and its policyholders. See note 56b for more detail on Risks and Capital Management
Objectives.
O – Related party transactions
The Company had the following related party transactions.
Loans to and from subsidiaries are made on normal arm’s-length commercial terms. The maturity analysis of the related party loans is
as follows:
(i) Loans owed by subsidiaries
Maturity analysis
Within 1 year
1 – 5 years
Over 5 years
Total
2022
£m
546
1,624
494
2,664
2021
£m
—
3,992
469
4,461
The interest received on these loans is £67 million (2021: £66 million). See note A.
On 1 January 2013, Aviva International Holdings Limited, an indirect subsidiary, transferred an unsecured loan with the Company of
€250 million to Aviva Group Holdings Limited, its direct subsidiary. The loan, originally entered into on 7 May 2003, accrues interest at a fixed
rate of 5.5% with settlement to be paid at maturity in May 2033. As at the statement of financial position date, the total amount drawn down
on the loan was £221 million (2021: £210 million).
On 23 December 2014, the Company provided an unsecured revolving credit facility of £2,000 million to Aviva Group Holdings Limited, its
subsidiary, with an initial maturity date of 3 September 2018, which was subsequently extended to 31 December 2023. The company intends
to renew this facility to further extend the maturity date to 31 December 2028. The loan accrues interest at a fixed rate of 0.895%. As at the
statement of financial position date, the total amount drawn down on the facility was £nil (2021: £1,935 million).
On 27 June 2016, the Company provided an unsecured loan of $CAD446 million to Aviva Group Holdings Limited, its subsidiary, with a
maturity date of 27 June 2046. The loan accrues interest at 348 basis points above 6 month CORRA with a basis compensation adjustment
of 49 basis points. As at the statement of financial position date, the total amount drawn on the loan was £273 million (2021: £259 million).
Aviva plc
3.166
Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the company financial statements continued
O – Related party transactions continued
(i) Loans owed by subsidiaries continued
On 30 September 2016, the Company provided the following loans to Aviva Group Holdings Limited, its subsidiary:
• An unsecured loan of €850 million with a maturity date of 30 September 2021 which was subsequently extended to 30 September 2026.
The loan accrues interest at 115 basis points above 12 month EURIBOR with settlement to be paid at maturity. As at the statement of
financial position date, the total amount drawn on the loan was £207 million (2021: £196 million).
• An unsecured loan of €650 million with a maturity date of 5 July 2023. The loan accrues interest at a fixed rate of 1.54% with settlement
to be paid at maturity. As at the statement of financial position date, the total amount drawn down on the loan was £267 million
(2021: £253 million).
• An unsecured loan of €700 million with a maturity date of 3 July 2024. The loan accrues interest at a fixed rate of 1.64% with settlement to
be paid at maturity. As at the statement of financial position date, the total amount drawn down on the loan was £620 million
(2021: £588 million).
• An unsecured loan of €900 million with a maturity date of 4 December 2025. The loan accrues interest at a fixed rate of 1.74% with
settlement to be paid at maturity. As at the statement of financial position date, the total amount drawn down on the loan was
£797 million (2021: £756 million).
On 21 November 2016, the Company provided an unsecured loan of €500 million to Aviva Group Holdings Limited, its subsidiary, with a
maturity date of 27 October 2023. The loan accrues interest at a fixed rate of 1.75% with settlement to be paid at maturity. As at the
statement of financial position date, the total amount drawn on the loan was £279 million (2021: £264 million).
(ii) Loans owed to subsidiaries
Maturity analysis of contractual undiscounted cash flows:
Within 1 year
1 – 5 years
Over 5 years
Total
Principal
£m
—
9,439
1,031
10,470
Interest
£m
453
1,811
9
2,273
2022
Total
£m
453
11,250
1,040
12,743
Principal
£m
—
147
9,485
9,632
Interest
£m
67
330
66
463
2021
Total
£m
67
477
9,551
10,095
The interest paid on these loans is £80 million (2021: £92 million). See note C.
On 3 September 2013 Aviva Group Holdings Limited, its subsidiary, provided an unsecured rolling credit facility of £1,000 million to the
Company, with an initial maturity date of 3 September 2018, which was subsequently extended to 31 December 2023. On 6 October 2016,
the facility increased to £5,000 million. The loan accrues interest at a fixed rate of 0.895%. The total amount drawn down on the facility at 31
December 2022 was £1,031 million (2021: £147 million). This loan has a maturity date of 31 December 2022, however it is the intention of
both parties that this will be renewed in full upon maturity and has been presented within over 5 years maturity in the table above.
On 14 December 2017, the Company renewed its facility with General Accident plc, its subsidiary, of £9,990 million and the Board approved
the extension of the maturity of the loan by five years from 31 December 2017 to 31 December 2022. The loan accrues interest at a fixed rate
of 0.695%. A subsequent loan amendment in December 2022 extended the loan maturity to 31 December 2027 and changed the interest
rate to a floating rate based on the SONIA swap rate effective from 1 January 2023. As at 31 December 2022, the loan balance outstanding
was £9,439 million (2021: £9,484 million). This loan is secured against the ordinary share capital of Aviva Group Holdings Limited.
(iii) Other transactions
Services provided to related parties
Subsidiaries and joint ventures
Income earned
in year
£m
2,064
2022
Receivable
at year end
£m
253
Income earned
in year
£m
7,806
2021
Receivable
at year end
£m
245
Income earned relates to dividends. The Company incurred expenses in the year of £0.8 million (2021: £0.7 million) representing audit fees
paid by the Company on behalf of subsidiaries. The Company did not recharge subsidiaries for these expenses.
The related parties’ receivables are not secured and no guarantees were received in respect thereof. The receivables will be settled in
accordance with normal credit terms.
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Annual Report and Accounts 2022
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2. Governance
3. IFRS Financial Statements
4. Other Information
Notes to the company financial statements continued
O – Related party transactions continued
(iii) Other transactions continued
Services provided by related parties
Subsidiaries
Expense
incurred
in year
£m
301
2022
Payable
at year end
£m
4,560
Expense
incurred
in year
£m
342
2021
Payable
at year end
£m
4,532
Expenses incurred relates to operating expenses. All the Company’s operating cash requirements are met by subsidiary companies and
settled through intercompany loans.
The Company has a prepayment of £85 million (2021: £50 million) relating to shares owned by an employee share trust to satisfy the
Company’s share awards.
The related parties’ payables and receivables are not secured and no guarantees were given or received in respect thereof. The payables will
be settled in accordance with normal credit terms. Details of guarantees, indemnities and warranties given by the Company on behalf of
related parties are given in note 54(f).
Key management
The directors and key management of the Company are considered to be the same as for the Group. Information on both the Company and
Group key management compensation can be found in note 61.
P – Subsequent events
For details of subsequent events please see note 65.
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2. Governance
3. IFRS Financial Statements
4. Other Information
Other information
In this section
4.02
4.16
4.17
Alternative performance measures
Shareholder services
Cautionary Statement
Aviva plc
4.01
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures
In order to fully explain the performance of our business, we discuss and analyse our results in terms of financial measures which include a
number of Alternative Performance Measures (APMs). APMs are non-GAAP measures which are used to supplement the disclosures prepared
in accordance with other regulations, such as International Financial Reporting Standards (IFRS) and Solvency II. We believe these measures
provide useful information to enhance the understanding of our financial performance. However, APMs should be viewed as
complementary to, rather than as a substitute for, the amounts determined according to other regulations.
The APMs utilised by Aviva may not be the same as those used by other insurers and may change over time. The calculation of APMs is
consistent with previous periods unless otherwise stated.
Further details on APMs derived from IFRS measures and APMs derived from Solvency II measures are provided in the following sections. A
further section describes Other APMs.
APMs derived from IFRS measures
A number of APMs relating to IFRS are utilised to measure and monitor the Group’s performance
• Group adjusted operating profit
• Combined operating ratio
• Claims, commission, and expense ratios
• Operating earnings per share
• Controllable costs
• IFRS return on equity
• IFRS net asset value per share
• Assets Under Management and Assets Under Administration
• Net flows
• Aviva Investors revenue
• Cost income ratio
Definitions and additional information, including reconciliation to the relevant amounts in the IFRS Financial Statements and, where
appropriate, commentary on the material reconciling items are included within this section.
Group adjusted operating profit
Group operating profit is an APM that supports decision making and internal performance management of the Group’s operating segments,
that incorporates an expected return on investments supporting the life and non-life insurance businesses. The Group considers this
measure meaningful to stakeholders as it enhances the understanding of the Group’s operating performance over time by separately
identifying non-operating items. The various items excluded from Group adjusted operating profit, but included in IFRS profit before tax,
are:
Investment variances, economic assumption changes and short-term fluctuation in return on investments
Group adjusted operating profit for the life insurance business is based on expected investment returns on financial investments backing
shareholder and policyholder funds over the reporting period, with allowance for the corresponding expected movements in liabilities. The
expected rate of return is determined using consistent assumptions between operations, having regard to local economic and market
forecasts of investment return and asset classification.
For fixed interest securities classified as fair value through profit or loss, the expected investment returns are based on average prospective
yields for the actual assets held less an adjustment for credit risk. Where such securities are classified as available for sale the expected
return comprises interest or dividend payments and amortisation of the premium or discount at purchase. The expected 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.
Group adjusted operating profit includes the effect of variances in experience for non-economic items, such as mortality, persistency and
expenses, and the effect of changes in non-economic assumptions. Changes due to economic items, such as market value movement and
interest rate changes, which give rise to variances between actual and expected investment returns, and the impact of changes in economic
assumptions on liabilities, are disclosed separately outside Group adjusted operating profit.
Group adjusted operating profit for the non-life insurance business is based on expected investment returns on financial investments
backing shareholder funds over the period. Expected investment returns are calculated for equities and properties by multiplying the
opening market value of the investments, adjusted for sales and purchases during the year, by the long-term rate of return. This rate of
return is the same as that applied for the long-term business expected returns. The long-term return for other investments (including debt
securities) is the actual income receivable for the period. Actual income and long-term investment return both contain the amortisation of
the discounts/premium arising on the acquisition of fixed income securities.
Changes due to market value movements and interest rate changes, which give rise to variances between actual and expected investment
returns, are disclosed separately outside Group adjusted operating profit. The impact of changes in the discount rate applied to claims
provisions is also disclosed outside Group adjusted operating profit.
The exclusion of short-term investment variances from this APM reflects the long-term nature of much of our business. The Group adjusted
operating profit, which is used in managing the performance of our operating segments, excludes the impact of economic variances, to
provide a comparable measure year-on-year.
Aviva plc
4.02
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
Impairment, amortisation and profit or loss on disposal
Group adjusted operating profit also excludes impairment of goodwill, associates and joint ventures; amortisation and impairment of other
intangible assets acquired in business combinations; amortisation and impairment of acquired value of in-force business; and the profit or
loss on disposal and remeasurement of subsidiaries, joint ventures and associates. These items principally relate to merger and acquisition
activity which we view as strategic in nature, hence they are excluded from the Group adjusted operating profit APM as this is principally
used to manage the performance of our operating segments when reporting to the Group chief operating decision maker.
Other items
These items are, in the directors’ view, required to be separately disclosed by virtue of their nature or incidence to enable a full
understanding of the Group’s financial performance. Other items at 2022 comprise:
• The following items which are disclosed outside of Group adjusted operating profit as they relate to acquisition and disposal activity that
we consider to be strategic in nature:
– A gain of £77 million relating to negative goodwill on the acquisition of Aviva India, which is excluded from Group adjusted operating
profit for consistency with the treatment of impairment of goodwill;
– A charge of £15 million arising from third party reinsurance, accepted by Aviva from the former Aviva France general insurance entity,
which was terminated on 31 December 2021;
– A net release of provisions relating to acquisition and disposal activity of £1 million;
– A charge of £7 million relating to costs directly associated with the acquisition of Succession Wealth;
• A charge of £10 million relating to fees and charges associated with the share buyback and return of capital to ordinary shareholders; and
• A charge of £5 million relating to the cost of the employee free share award, which recognises the contribution our employees have made
to the return of capital to ordinary shareholders.
Other items at 2021 comprised:
• The following items which were disclosed outside of Group adjusted operating profit as they relate to acquisition and disposal activity that
we consider to be strategic in nature:
– A charge of £76 million arising from third party reinsurance, accepted by Aviva from the former Aviva France general insurance entity,
which was terminated on 31 December 2021;
– A charge of £45 million relating to costs associated with the disposals of France, Italy, Aviva Vita, Poland, Singapore, Turkey and Vietnam,
comprising IT contracts that have become onerous, severance costs associated with senior management and relocation costs;
– Net charges of £22 million relating to provisions for indemnities entered into through acquisition and disposal activity.
• A charge of £51 million relating to the redemption payment in excess of the market value of debt repaid as part of the Group's deleveraging
strategy. This is disclosed outside of Group adjusted operating profit as the costs arise from a strategic decision relating to the financing of
the Group as a whole and not to the operating performance of the Group or its operating segments;
• A charge of £7 million relating to the cost of voluntary amendments to a small proportion of ground rent leases held by the Aviva Investors
REaLM Ground Rent Fund; and
• A charge of £3 million relating to stamp duty costs on share buybacks
The Group adjusted operating profit APM should be viewed as complementary to IFRS measures. It is important to consider Group adjusted
operating profit and profit for the year together to understand the performance of the business in the period.
Aviva plc
4.03
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
The table below presents a reconciliation between our consolidated operating profit and (loss)/profit before tax attributable to
shareholders’ profits.
UK & Ireland Life
UK & Ireland General Insurance
Canada
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Corporate centre costs and Other operations
Group debt costs and other interest
Group adjusted operating profit before tax attributable to shareholders' profits from continuing operations
Group adjusted operating profit before tax attributable to shareholders' profits from discontinued operations
Group adjusted operating profit before tax attributable to shareholders' profits
Adjusted for the following:
Life business: Investment variances and economic assumption changes
Non-life business: Short-term fluctuation in return on investments
General insurance and health business: Economic assumption changes
Impairment of goodwill, associates and joint ventures and other amounts expensed
Amortisation and impairment of intangibles acquired in business combinations
Amortisation and impairment of acquired value of in-force business
Profit on the disposal and remeasurement of subsidiaries, joint ventures and associates
Other
Adjusting items before tax
IFRS (loss)/profit before tax attributable to shareholders’ profits
Tax on Group adjusted operating profit
Tax on other activities
IFRS (loss)/profit for the year
2022
£m
1,908
338
433
25
2,704
52
2,756
(297)
(246)
2,213
—
2,213
(2,387)
(1,375)
147
(8)
(54)
(182)
—
41
(3,818)
(1,605)
(289)
755
466
(1,139)
2021
£m
1,428
356
406
41
2,231
97
2,328
(379)
(315)
1,634
631
2,265
(805)
(149)
(85)
—
(66)
(199)
1,572
(204)
64
2,329
(470)
177
(293)
2,036
Aviva plc
4.04
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
Combined operating ratio (COR)
COR is a useful financial measure of general insurance underwriting profitability calculated as total underwriting costs in our insurance
entities expressed as a percentage of net earned premiums. It is used to monitor the profitability of lines of business. A COR below 100%
indicates profitable underwriting. The Group COR is shown below.
Continuing operations
Incurred claims – GI & Health1
Adjusted for the following:
Incurred claims – Health
Change in discount rate assumptions
Total incurred claims (included in COR)
Commission and expenses – GI & Health2
Adjusted for the following:
Amortisation and impairment of intangibles acquired in business combinations
Foreign exchange (losses)/gains
Commission income
Other
Commission and expenses – Health & Other Non GI
Total commission and expenses (included in COR)3
Total underwriting costs from continuing operations
Total underwriting costs from discontinued operations
Total underwriting costs
Net earned premiums – GI & Health
Adjusted for:
Net earned premiums – Health
Net earned premiums (included in COR) from continuing operations
Net earned premiums (included in COR) from discontinued operations
Net earned premiums (included in COR)
Combined operating ratio - continuing operations
Combined operating ratio
2022
£m
2021
£m
(5,625)
(4,954)
368
(147)
(5,404)
338
77
(4,539)
(3,037)
(2,869)
11
48
19
36
208
(2,715)
(8,119)
—
(8,119)
9,140
(556)
8,584
—
8,584
94.6%
94.6%
10
(48)
16
22
199
(2,670)
(7,209)
(1,448)
(8,657)
8,253
(490)
7,763
1,430
9,193
92.9%
94.1%
Incurred claims - GI & Health corresponds to the sum of claims and benefits paid, net of recoveries from reinsurers and the change in insurance liabilities, net of reinsurance per note 3b(i)
1.
2. Commission and expenses - GI & Health corresponds to the sum of fee and commission expense, other expenses and other net foreign exchange (losses)/gains per note 3b(i)
3. Commission and expenses (included in COR) is comprised of £1,686 million earned commission (2021: £1,706 million ) and £1,029 million earned expenses ( 2021: £964 million)
Claims, commission, and expense ratios
Financial measures of the performance of our general insurance business which are calculated as incurred claims, earned commissions or
earned expenses expressed as a percentage of net earned premiums, which can be derived from the COR table above. The ratios are
meaningful to stakeholders because they enhance understanding of the profitability of the business sold.
Operating earnings per share (Operating EPS)
Operating EPS is calculated based on the Group adjusted operating profit attributable to ordinary shareholders net of tax, deducting
non-controlling interests, preference dividends and direct capital instrument coupons divided by the weighted average number of ordinary
shares in issue, after deducting treasury shares. Operating EPS is considered meaningful to stakeholders because it enhances the
understanding of the Group’s operating performance over time by adjusting for the effects of non-operating items. A reconciliation between
operating EPS and basic EPS can be found in note 13.
Controllable costs
Controllable costs is a useful measure of the controllable operational overheads associated with maintaining our businesses.
These predominantly consist of staff costs, central costs, property and IT related costs and other expenses. Controllable costs also
include indirect acquisition costs, such as underwriting overheads, and claims handling costs. These are considered to be controllable
by the operating segments.
Controllable costs excludes:
• Impairment of goodwill, associates and joint ventures; amortisation and impairment of other intangible assets acquired in business
combinations; and amortisation and impairment of acquired value of in-force business. These items relate to merger, acquisition and
disposal activity which we view as strategic in nature, hence they are excluded from controllable costs which is principally used to manage
the performance of our operating segments.
• Costs in relation to product governance and mis-selling. These costs represent compensation and redress payments made to
policyholders and are excluded from controllable costs because they have characteristics of claims payments.
• Premium based taxes, fees and levies that vary directly with premiums. These costs are by their nature a direct cost incurred as a result
of generating premium income, and therefore not a controllable operational overhead.
• Other amounts that, in management’s view, are not representative of underlying day-to-day expenses involved in running the business,
and that would distort the year-on-year controllable costs trend such as GI instalment income and charges reported as 'Other' outside
of Group adjusted operating profit.
Aviva plc
4.05
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
A reconciliation of other expenses in the IFRS condensed consolidated income statement to controllable costs is set out below:
Continuing operations
Other expenses (IFRS income statement)1
Add: other acquisition costs
Add: claims handling costs1
Less: amortisation and impairment of intangibles acquired in business combinations
Less: amortisation and impairment of acquired value of in-force business
Add/(less): product governance and mis-selling costs
Less: premium based income taxes, fees and levies
Add/(less): other costs
Controllable costs from continuing operations
Controllable costs from discontinued operations
Controllable costs
2022
£m
2021
£m
2,211
965
330
(54)
(170)
12
(216)
74
3,152
—
3,152
2,412
895
272
(54)
(189)
(12)
(195)
(33)
3,096
590
3,686
1. Following a review of other expenses, £52 million of costs associated with claims and benefits paid to policyholders on long-term business have been reclassified to claims handling costs in 2022. There is no impact on
total or baseline controllable costs.
Baseline controllable costs are controllable costs included in the scope of the 2018 cost saving target baseline. Baseline controllable
costs excludes:
• Cost reduction implementation and IFRS 17 costs. These costs are expected to cease by the end of 2023 and are excluded from baseline
controllable costs in line with the defined cost reduction target.
• Strategic investment on significant programmes supporting growth, customer experience, efficiency or agility to transform Group
performance. These costs are expected to cease by the end of 2025.
• Other costs relating to recently acquired entities, non-insurance operations relating to Europe and Asia and the impact of foreign
exchange movements which were not included in the 2018 cost savings target baseline.
Controllable costs from continuing operations
Less: Cost reduction implementation, IFRS 17 costs and other
Less: Strategic Investment
Baseline controllable costs from continuing operations
2022
£m
3,152
(287)
(94)
2,771
2021
£m
3,096
(242)
—
2,854
IFRS Return on Equity (RoE)
The IFRS RoE calculation is based on Group adjusted operating profit after tax attributable to ordinary shareholders expressed as
a percentage of weighted average ordinary shareholders’ equity (excluding non-controlling interests and preference share capital).
IFRS RoE is a useful measure of growth and performance of the business on an IFRS basis.
IFRS net asset value (NAV) per share
IFRS NAV per share is calculated as the equity attributable to shareholders of Aviva plc, less preference share capital (both within the
consolidated statement of financial position), divided by the actual number of shares in issue at the balance sheet date. IFRS NAV per share
is meaningful as a measure of the value generated by the Group in terms of the equity shareholders’ face value per share investment.
Equity attributable to shareholders of Aviva plc at 31 December1 (£m)
Number of shares in issue at 31 December (in millions)
IFRS NAV per share
1. Excluding preference shares of £200 million (2021: £200 million)
2022
11,889
2,808
423p
2021
19,002
3,766
505p
Aviva plc
4.06
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
Assets Under Management (AUM) and Assets Under Administration (AUA)
AUM represent all assets managed or administered by or on behalf of the Group's subsidiaries, including those assets managed by Aviva
Investors and by third parties. AUM include managed assets that are reported within the Group’s statement of financial position and those
assets belonging to external clients outside the Aviva Group which are therefore not included in the Group’s statement of financial position.
Consistent with previous years, Aviva Investors AUA comprises AUM plus £37,501 million (2021: £43,582 million) of assets managed by third
parties on platforms administered by Aviva Investors. Both AUM and AUA are monitored as they reflect the potential earnings arising from
investment returns and fee and commission income and measure the size and scale of the Group’s fund management business.
A reconciliation of amounts appearing in the Group’s statement of financial position to AUM is shown below:
Assets managed on behalf of the Group's subsidiaries
Assets included in statement of financial position
Financial investments
Investment property
Loans
Cash and cash equivalents
Other
Less: third-party funds and UK Platform included above
Assets managed on behalf of third parties1
Aviva Investors
UK Platform2
Other
Total AUM3
2022
£m
2021
£m
224,086
5,899
29,647
22,505
6,408
288,545
264,961
7,003
38,624
12,485
6,192
329,265
(19,511)
(22,836)
269,034
306,429
37,834
44,603
677
83,114
352,148
51,332
43,101
544
94,977
401,406
1. AUM managed on behalf of third parties cannot be directly reconciled to the financial statements
2. UK Platform relates to the assets under management in the UK Wealth business, including Succession Wealth
3.
Includes AUM of £222,671 million (2021: £267,780 million) managed by Aviva Investors
Net flows
Net flows is used by management as a key measure of growth in AUM, from which income is generated through asset management charges
(AMCs). This measure is predominantly used in Aviva Investors and the Wealth business within UK & Ireland Life.
It is the net position of inflows and outflows. Inflows include IFRS net written premiums, deposits made under investment contracts, and
other funds received from customers into AUM which are not included in the Group’s statement of financial position. Outflows include IFRS
net claims paid, redemptions and surrenders under investment contracts, and other funds withdrawn by customers from AUM which are not
included in the Group’s statement of financial position.
Aviva Investors net flows includes flows on internal assets which are managed on behalf of Group companies, and external flows on assets
belonging to clients outside the Group which are not included in the Group's statement of financial position.
Net flows excludes market and other movements. Net flows when positive in the period can be referred to as net inflows and when negative
as net outflows.
Aviva Investors revenue
Aviva Investors revenue includes AMCs received, plus transaction fees and other related income, and is stated net of fees and commissions
paid. It is a useful measure of revenue earned from fund management activities. Aviva Investors recognises fee income in the segmental
income statement within both fee and commission income and inter-segment revenue. Fees and commissions paid are classified in fee and
commission expense.
Cost income ratio (CIR)
Cost income ratio is used to monitor profitable growth in Aviva Investors and is useful as it gives a simple view of how efficiently the business
is being run, allowing management to clearly see how costs are moving in relation to income.
Cost income ratio is calculated as Aviva Investors' baseline controllable costs divided by Aviva Investors revenue.
Aviva Investors revenue
Baseline controllable costs
Cost income ratio
Aviva Investors
2021
£m
403
345
86%
2022
£m
379
331
87%
Aviva plc
4.07
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
APMs derived from Solvency II measures
The Group is a regulated entity under the Solvency II regulatory framework and therefore uses a number of APMs that are derived from
Solvency II measures in addition to those that are derived from IFRS based measures.
A number of key performance measures relating to Solvency II are utilised to measure and monitor the Group’s performance and
financial strength
• Solvency II shareholder cover ratio
• Value of new business on an adjusted Solvency II basis (VNB)
• Solvency II operating own funds generation (Solvency II OFG)
• Solvency II operating capital generation (Solvency II OCG)
• Solvency II future surplus emergence
• Solvency II return on capital (Solvency II RoC)
• Solvency II return on equity (Solvency II RoE)
• Solvency II net asset value per share (Solvency II NAV per share)
• Solvency II debt leverage ratio
The Solvency II regulatory framework requires insurers to hold own funds in excess of the Solvency Capital Requirement (SCR). Own funds
are available capital resources determined under Solvency II. This includes the excess of assets over liabilities in the Solvency II balance
sheet, calculated on best estimate, market consistent assumptions and includes transitional measures on technical provisions (TMTP),
subordinated liabilities that qualify as capital under Solvency II, and off-balance sheet own funds.
The SCR is calculated at Group level using a risk-based capital model which is calibrated to reflect the cost of mitigating the risk of
insolvency to a 99.5% confidence level over a one-year time horizon – equivalent to a 1 in 200 year event – against financial and non-
financial shocks. As a number of subsidiaries utilise the standard formula rather than a risk-based capital model to assess capital
requirements, the overall Group SCR is calculated using a partial internal model, and it is shown after the impact of diversification benefit.
The ‘shareholder view’ of Solvency II is considered by management to be more representative of the shareholders’ risk-exposure and the
Group’s ability to cover the SCR with eligible own funds and aligns with management’s approach to dynamically manage its capital
position. In arriving at the shareholder view, the following adjustments are typically made to the regulatory Solvency II position:
• The contribution to the Group’s SCR and own funds of the most material fully ring-fenced with-profits funds and staff pension schemes in
surplus are excluded. These exclusions have no impact on Solvency II surplus as these funds are self-supporting on a Solvency II capital
basis with any surplus capital above SCR not recognised;
• A notional reset of the TMTP, calculated using the same method as used for formal TMTP resets. This presentation avoids step changes to
the Solvency II position that arise only when the formal TMTP reset points are triggered. The 31 December 2022 Solvency II position
includes a notional reset (an application for a formal reset has been submitted to the regulator and will be reflected in our regulatory
position once approved) while the 31 December 2021 position included a formal, rather than notional, reset of the TMTP in line with the
regulatory requirement to reset the TMTP at least every two years and hence no adjustment was required. In addition, due to yield rises
over the period, a formal reset of TMTP as at 30 June 2022 was approved and is included in the estimated 31 December 2022 regulatory
Solvency II position;
• Adjustments are made if the Solvency II shareholder cover ratio does not fully reflect the effect of future regulatory changes that are known
as at each reporting date. These adjustments are made in order to show a more representative view of the Group’s solvency position. No
adjustments for future regulatory changes were made at 31 December 2022 or 31 December 2021.
The reconciliation presented below shows the key differences between Group equity on an IFRS basis and Solvency II own funds on a
shareholder view. Additional items bridging from Solvency II shareholder own funds to Solvency II regulatory own funds are presented
subsequently.
Aviva plc
4.08
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
Total Group equity on an IFRS basis
Elimination of goodwill and other intangible assets
Goodwill
Acquired value of in-force business
Deferred acquisition costs (net of deferred income)
Other intangibles
Liability valuation differences
Inclusion of risk margin
TMTP (on a notional reset basis)
Revaluation of subordinated liabilities
Other accounting differences
Net deferred tax
Exclude staff pension schemes in surplus (net of tax)1
Reallocate preference share capital and Tier 1 notes to restricted tier 1
Estimated Solvency II shareholder unrestricted tier 1 own funds
Restricted tier 1
Tier 2
Tier 32
Estimated Solvency II shareholder own funds
Adjustments for:
Fully ring-fenced with-profit funds
Staff pension schemes in surplus1
Regulatory vs. notional TMTP valuation differences
Estimated Solvency II regulatory own funds
2022
£m
2021
£m
12,895
19,454
(2,072)
(1,581)
(2,489)
(508)
8,028
(2,922)
2,319
265
10
(1,041)
(996)
(946)
10,962
946
4,264
296
16,468
1,369
394
437
18,668
(1,741)
(1,544)
(2,617)
(406)
7,351
(4,719)
4,309
(449)
(583)
(616)
(2,292)
(450)
15,697
967
5,363
123
22,150
2,205
1,218
—
25,573
1. Group Equity on an IFRS basis includes £996 million (2021: £2,292 million) in respect of pension schemes in surplus, net of tax. Pension schemes in surplus are excluded from the Solvency II shareholder own funds.
Within the Solvency II regulatory own funds, staff pension schemes in surplus are restricted to the level of its SCR.
2. Tier 3 own funds at 31 December 2022 consists of £296 million net deferred tax assets (2021: £123 million net deferred tax assets)
Estimated Solvency II regulatory own funds of £18,668 million (2021: £25,573 million) is £1,838 million (2021: £3,294 million) greater than
estimated Solvency II regulatory net assets of £16,830 million (2021: £22,279 million), primarily due to recognition of eligible subordinated
debt capital less adjustments for ring-fenced funds restrictions.
Solvency II shareholder cover ratio
The estimated Solvency II shareholder cover ratio, which is derived from own funds divided by the SCR using the ‘shareholder view’, is one of
the indicators of the Group’s balance sheet strength.
A reconciliation of the Solvency II regulatory surplus to the Solvency II shareholder surplus is provided below:
Estimated Solvency II regulatory surplus
Adjustments for:
Fully ring-fenced with-profit funds
Staff pension schemes in surplus
Notional reset of TMTP
Estimated Solvency II shareholder surplus
31 December 2022
Own funds
£m
18,668
(1,369)
(394)
(437)
16,468
SCR
£m
(9,441)
1,369
394
(96)
(7,774)
Surplus
£m
9,227
—
—
(533)
8,694
Own funds
£m
31 December 2021
SCR
£m
Surplus
£m
25,573
(12,499)
13,074
(2,205)
(1,218)
—
22,150
2,205
1,218
—
(9,076)
—
—
—
13,074
A summary of the shareholder view of the Group’s Solvency II position is shown in the table below:
Own Funds
Solvency Capital Requirement
Estimated Solvency II Surplus
Estimated Shareholder Cover Ratio
2022
£m
16,468
(7,774)
8,694
2021
£m
22,150
(9,076)
13,074
212%
244%
Value of new business on an adjusted Solvency II basis (VNB)
VNB measures the additional value to shareholders created through the writing of new life business in the period. It reflects Solvency II
assumptions and allowance for risk, and is defined as the increase in Solvency II own funds resulting from life business written in the period,
including the impact of interactions between in-force and new business, adjusted to:
• Remove the impact of the contract boundary restrictions under Solvency II;
• Include businesses which are not within the scope of Solvency II own funds (e.g. UK non-life Retail business and UK Equity Release); and
• Reflect a gross of tax and non-controlling interests basis, and other differences as set out in the footnote to the table below.
A reconciliation between VNB and the Solvency II own funds impact of new business is provided below:
Aviva plc
4.09
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
UK & Ireland
Life
£m
International
investments
£m
Discontinued
operations
£m
VNB (gross of tax and non-controlling interests)
Solvency II contract boundary restrictions – new
business
Solvency II contract boundary restrictions –
increments / renewals on in-force business
Businesses which are not in the scope of Solvency II
own funds
Tax and Other1
Solvency II own funds impact of new business (net
of tax and non-controlling interests)
767
(94)
128
(252)
(159)
84
—
—
—
(17)
390
67
—
—
—
—
—
—
2022
Group
£m
851
UK & Ireland
Life
£m
International
investments
£m
Discontinued
operations3
£m
2021
Group
£m
668
(94)
(91)
128
101
78
—
—
328
1,074
(151)
(242)
58
159
(252)
(176)
(204)
(114)
—
(15)
(1)
(144)
(205)
(273)
457
360
63
90
513
1. Other includes the impact of 'look-through profits’ in service companies (where not included in Solvency II) of £(20) million (2021: £(66) million), the reduction in value when moving to a net of non-controlling interests
basis of £nil (2021: £(42) million), the surplus from members options including transfers, early/late retirement and take up of tax-free lump sum payments at retirement (not included in Solvency II Own Funds) on BPAs
of £(37) million (2021: £(3) million) and the difference between locally applicable capital requirements for Vietnam and the value of new business on an adjusted Solvency II basis of £nil (2021: £(22) million). Aviva
Vietnam was sold during December 2021, so the Vietnam adjustment is only applied until then.
VNB is calculated using economic assumptions as at the point of sale, taken as those appropriate to the start of each quarter. For contracts
that are repriced more frequently, weekly or monthly economic assumptions have been used. The economic assumptions follow Solvency II
rules for risk-free rates, volatility adjustment and matching adjustment.
The operating assumptions are consistent with the Solvency II balance sheet. When these assumptions are updated, the year-to-date VNB
will capture the impact of the assumption change on all business sold that year.
Matching Adjustment (MA)
The MA is an addition to the rate used to discount Solvency II best-estimate liabilities, to reflect the return on the matching assets used.
An MA is applied to certain obligations based on the allocation of assets backing new business at each year-end date. This allocation
may be different to the MA applied at the portfolio level. Aviva applies an MA to certain obligations in UK Life, using methodology which is
set out in the Solvency and Financial Condition Report (SFCR). The MA used for 2022 UK new business (where applicable) was 125 bps
(2021: 85 bps).
Aviva plc
4.10
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
New business margin
New business margin is calculated as value of new business on an adjusted Solvency II basis (VNB) divided by the present value of new
business premiums (PVNBP) and expressed as a percentage.
Present value of new business premiums (PVNBP)
PVNBP measures sales in the Group’s life insurance business. PVNBP is derived from the present value of new regular premiums expected to
be received over the term of the new contracts plus 100% of single premiums from new business written in the financial period and is
expressed at the point of sale. The discounted value of regular premiums is calculated using the same methodology as for VNB. PVNBP also
includes any changes to existing contracts which were not anticipated at the outset of the contract that generate additional shareholder risk
and associated premium income of the nature of a new policy.
The table below presents a reconciliation of sales to IFRS net written premiums:
Present value of new business premiums1
General insurance and health net written premiums
Long-term health and collectives business
Effect of capitalisation factor on regular premium long-term business2
Joint ventures and associates3
Annualisation impact of regular premium long-term business4
Deposits5
IFRS gross written premiums from existing long-term business6
Long-term insurance and savings business premiums ceded to reinsurers
Total IFRS net written premiums
Analysed as:
IFRS net written premiums from continuing business
IFRS net written premiums from discontinued operations
Analysed as:
Long-term insurance and savings net written premiums
General insurance and health net written premiums
2022
£m
34,451
9,496
(2,713)
(14,965)
(653)
(229)
(10,111)
2,811
(2,753)
15,334
15,334
—
15,334
5,838
9,496
15,334
2021
£m
46,202
10,207
(3,274)
(15,555)
(625)
(361)
(11,561)
3,722
(3,979)
24,776
14,697
10,079
24,776
14,569
10,207
24,776
1. £33,279 million (2021: £35,625 million) relates to UK & Ireland Life, £1,172 million (2021: £1,122 million) relates to International investments and £nil (2021: £9,455 million) relates to discontinued operations
2. Discounted value of regular premiums expected to be received over the term of the new contract, adjusted for expected levels of persistency
3. Total long-term new business sales include our share of sales from joint ventures and associates. Under IFRS, premiums from these sales are excluded.
4. The impact of annualisation is removed in order to reconcile the non-GAAP new business sales to IFRS premiums
5. Under IFRS, only the margin earned from non-participating investment contracts is recognised in the IFRS income statement
6. The non-GAAP measure of sales focuses on new business written in the period under review while the IFRS income statement includes premiums received from all business, both new and existing
Annual Premium Equivalent (APE)
APE is a measure of sales in our life insurance business. APE is calculated as the sum of new regular premiums plus 10% of new single
premiums written in the period. This provides useful information on sales and new business when considered alongside VNB.
Solvency II operating own funds generation (Solvency II OFG)
Solvency II operating own funds generation measures the amount of Solvency II own funds generated from operating activities and
incorporates an expected return on investments supporting the life and non-life insurance businesses. Solvency II operating own funds
generation is used to assess sustainable growth. The Group considers this measure meaningful to stakeholders as it enhances the
understanding of the Group’s operating performance over time by separately identifying non-operating items.
The expected investment returns assumed within Solvency II OFG are consistent with the returns used for Group adjusted operating profit.
Solvency II OFG includes the effect of variances in experience for non-economic items, such as mortality, persistency and expenses, the
effect of changes in non-economic assumptions (for example, longevity) and model changes that are non-economic in nature.
Consistent with the Group adjusted operating profit APM, Solvency II OFG and Solvency II OCG exclude economic variances and economic
assumption changes.
Solvency II operating own funds generation is the own funds component of Solvency II OCG (see below).
Solvency II operating capital generation (Solvency II OCG)
Solvency II operating capital generation (Solvency II OCG) measures the amount of Solvency II capital the Group generates from operating
activities. Capital generated enhances Solvency II surplus which can be used to support sustainable cash remittances from our businesses,
which in turn, supports the Group’s dividend as well as funding further investment to provide sustainable growth.
Solvency II OCG reflects Solvency II OFG and operating movements in the SCR including the impact of capital actions, for example, strategic
changes in asset mix including changes in hedging exposure.
Aviva plc
4.11
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
An analysis of the components of Solvency II OCG is presented below:
Solvency II own funds impact of new business (net of tax and non-controlling interests)
Operating own funds generation from life existing business
Operating own funds generation from non-life
Management actions and other operating own funds generation1
Group centre & others
Group debt costs
Solvency II operating own funds generation
Solvency II operating SCR impact
Solvency II OCG
1. Management actions and other includes the impact of capital actions, non-economic assumption changes and other non-recurring items
2022
£m
457
475
589
597
(281)
(214)
1,623
(189)
1,434
2021
£m
513
694
737
296
(340)
(255)
1,645
(84)
1,561
Solvency II OCG is a key component of the movement in Solvency II shareholder surplus. The tables below provide an analysis of the change
in Solvency II shareholder surplus.
Shareholder view movement
Group Solvency II shareholder surplus at 1 January
Operating capital generation
Non-operating capital generation
Dividends1
(Repayment)/issue of debt
Capital return/share buyback
Acquisitions/Disposals
Estimated Solvency II shareholder surplus at 31 December
Own funds
£m
SCR
£m
22,150
1,623
(1,827)
(866)
(502)
(3,750)
(360)
16,468
(9,076)
(189)
1,502
—
—
—
(11)
(7,774)
2022
Surplus
£m
13,074
1,434
(325)
(866)
(502)
(3,750)
(371)
8,694
Own funds
£m
SCR
£m
25,770
1,645
(1,310)
(874)
(1,506)
(1,000)
(575)
22,150
(12,770)
(84)
1,156
—
—
—
2,622
(9,076)
2021
Surplus
£m
13,000
1,561
(154)
(874)
(1,506)
(1,000)
2,047
13,074
1. Dividends includes £17 million (2021: £17 million) of Aviva plc preference dividends and £21 million (2021: £21 million) of General Accident plc preference dividends
Solvency II future surplus emergence
Solvency II future surplus emergence is a projection of the capital generation from existing long-term in-force life business and provides an
indication of our expected Solvency II OCG from this business in future periods.
The projection is a static analysis as at a point in time and hence it does not include the potential impact of future new business or the
potential impact of active management of the business (for example, active management of market, demographic and expense risk through
investment, hedging, risk transfer, operational risk and expense management). It is also based on a linear run-off of the TMTP. These items
may affect the actual amount of Solvency II OCG earned from existing business in future periods.
For business subject to short contract boundaries under Solvency II, allowance has been made for the impact of renewal premiums as and
when they are expected to occur.
The projected surplus, which is primarily expected to arise from the release of risk margin (including transitional measures) and solvency
capital requirement as the business runs off over time, is expected to emerge through Solvency II OCG in future years.
The cash flows are real-world cash flows, i.e. they are based on best estimate non-economic assumptions used in the Solvency II valuation
and real-world investment returns rather than risk-free. The expected investment returns are consistent with the methodology used in the
Group adjusted operating profit.
Solvency II return on equity (Solvency II RoE)
Solvency II RoE is used as an economic value measure by the Group to assess growth and performance.
Solvency II RoE is calculated as:
• Operating own funds generation less preference dividends, equity RT1 notes coupons and excluding the return on excess capital above
target capital, adjusted to replace the run-off of TMTP with the economic cost of holding TMTP (calculated as Group Weighted Average
Cost of Capital plus 1-yr swap rate, multiplied by the opening TMTP on a shareholder basis), divided by:
• Opening Unrestricted tier 1 shareholder Solvency II own funds adjusted to exclude excess capital. Excess capital is derived as Solvency II
shareholder own funds in excess of those needed to meet our target shareholder cover ratio (currently 180%).
The denominator better reflects the long-term target Solvency II shareholder cover ratio which removes distortions in the evaluation of
growth and performance that would otherwise arise where the Group is temporarily holding excess capital.
Solvency II RoE is calculated on an annualised basis.
Aviva plc
4.12
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
The Solvency II return on equity is shown below:
Solvency II operating own funds generation
Adjustment to replace TMTP run-off with economic cost of TMTP
Adjustment to remove return on excess capital
Adjusted Solvency II operating own funds generation
Less preference share dividends
Less RT1 notes coupons
Opening Unrestricted tier 1 shareholder Solvency II own funds
Adjustment to remove excess capital above target Solvency II shareholder cover ratio1
Adjusted opening unrestricted tier 1 shareholder Solvency II own funds
Solvency II return on equity
2022
£m
1,623
64
(11)
1,676
(38)
(17)
1,621
2021
£m
1,645
43
(2)
1,686
(38)
—
1,648
15,697
(5,813)
9,884
16.4%
17,358
(2,784)
14,574
11.3%
1. Our excess capital as at 1 January 2022 was £5,813 million and this included capital set aside for the £3.75 billion capital return, £1 billion further debt reduction over time, pension scheme payment, Succession Wealth
acquisition and final 2021 dividend. The excess capital at 31 December 2022 is estimated at £2,474 million and this includes capital set aside for further debt reduction, pension scheme payment, final 2022 dividend and
share buyback.
Group Solvency II RoE on a continuing basis was disclosed as at 31 December 2021 to provide a comparative on an equivalent basis
following disposals in 2021.
Group Solvency II RoE on a continuing basis excludes the contribution from our discontinued operations and is therefore more
representative of the Group’s performance going forward. It has been calculated on a consistent basis to Group Solvency II RoE except
that an adjustment is made to remove the contribution of discontinued operations from the numerator and the denominator.
The table below provides a reconciliation between Group Solvency II RoE and Group Solvency II RoE on a continuing basis:
Group Solvency II return on equity at 31 December
Adjustment to remove impacts of discontinued operations1
Group Solvency II return on equity on a continuing basis
Solvency II
OFG (post
TMTP
adjustment)
£m
Opening own
funds
£m
1,648
(433)
1,215
14,574
(3,254)
11,320
2021
Solvency II
return on
equity
%
11.3%
N/A
10.7%
1. When calculating opening unrestricted tier 1 shareholder Solvency II own funds attributable to discontinued operations, adjusted to exclude excess capital, restricted tier 1, tier 2 and tier 3 capital repaid during 2021 is
assumed to be attributable to discontinued operations
Aviva plc
4.13
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
Solvency II return on capital (Solvency II RoC)
Solvency II return on capital is an unlevered economic value measure as it is used to assess growth and performance in our businesses
before taking debt into account. It is calculated on an annualised basis.
Solvency II RoC is calculated as:
• Operating own funds generation adjusted to replace the run-off of TMTP with the economic cost of holding TMTP (calculated as Group
Weighted Average Cost of Capital plus 1-yr swap rate) multiplied by the opening TMTP on a shareholder basis), divided by:
• Opening shareholder Solvency II own funds.
For UK general insurance only, capital held for internal risk appetite purposes is used instead of opening shareholder Solvency II own funds.
This removes any distortions arising from our general insurance legal entity structure and therefore ensures consistency in measuring
performance across markets. This is only applicable to UK general insurance Solvency II return on capital and not to the aggregated Group
Solvency II return on equity measure.
A reconciliation of Solvency II return on capital by market to Group return on equity is provided below.
2022
Business Solvency II return on capital
UK & Ireland Life
UK & Ireland General Insurance1
Canada
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Discontinued operations
Reconciliation to Group Solvency II return on equity
Corporate centre costs and Other1
Less: Senior and subordinated debt
Less: Adjustment to remove excess capital above target Solvency II shareholder cover ratio
Less: RT1 coupon and Preference shares2
Less: Net deferred tax assets
Solvency II return on equity at 31 December
Solvency II
OFG (post
TMTP
adjustment)
£m
Opening
shareholder
own funds
£m
Solvency II
return on
capital/equity
%
1,432
293
325
24
2,074
106
—
13,830
2,339
1,746
400
18,315
982
—
(279)
(214)
(11)
(55)
—
1,621
2,853
(5,880)
(5,813)
(450)
(123)
9,884
10.4%
12.5%
18.6%
6.0%
11.3%
10.8%
— %
N/A
— %
— %
— %
— %
16.4%
1. For UK general insurance only, capital held for internal risk appetite purposes is used instead of opening shareholder Solvency II own funds to ensure consistency in measuring performance across businesses. This is
only applicable to UK general insurance Solvency II return on capital and not to the aggregated Group Solvency II return on equity measure, with the reversal of the impact included in Corporate centre costs and Other
opening own funds.
2. Preference shares includes £21 million of dividends and £250 million of capital in respect of General Accident plc
2021
Business Solvency II return on capital
UK & Ireland Life
UK & Ireland General Insurance1
Canada
Aviva Investors
UK, Ireland, Canada and Aviva Investors
International investments
Discontinued operations
Reconciliation to Group Solvency II return on equity
Corporate centre costs and Other1
Less: Senior and subordinated debt
Less: Adjustment to remove excess capital above target Solvency II shareholder cover ratio
Less: Direct capital instrument and Preference shares2
Net deferred tax assets
Solvency II return on equity at 31 December
Solvency II
operating own
funds
generation
£m
Opening
shareholder
own funds
£m
Solvency II
return on
capital/equity
%
996
339
332
36
1,703
124
458
15,073
2,401
1,534
385
19,393
909
6,362
(342)
(255)
(2)
(38)
—
1,648
(894)
(7,866)
(2,784)
(450)
(96)
14,574
6.6%
14.1%
21.6%
9.3%
8.8%
13.6%
7.2%
N/A
— %
— %
— %
— %
11.3%
1. For UK general insurance only, capital held for internal risk appetite purposes is used instead of opening shareholder Solvency II own funds to ensure consistency in measuring performance across businesses. This is
only applicable to UK general insurance Solvency II return on capital and not to the aggregated Group Solvency II return on equity measure, with the reversal of the impact included in Corporate centre costs and Other
opening own funds.
2. Preference shares includes £21 million of dividends and £250 million of capital in respect of General Accident plc
Aviva plc
4.14
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Alternative performance measures continued
Solvency II net asset value per share (Solvency II NAV per share)
Solvency II NAV per share is used to monitor the value generated by the Group in terms of the equity shareholders’ face value per share
investment. This is calculated as the closing unrestricted tier 1 Solvency II shareholder own funds, divided by the actual number of shares in
issue as at the balance sheet date. Consistent with Solvency II RoE, it is an economic value measure used by the Group to assess growth.
The Solvency II NAV per share is shown below:
Unrestricted tier 1 shareholder Solvency II own funds (£m)
Number of shares in issue (in millions)
Solvency II NAV per share
2022
10,962
2,808
390p
2021
15,697
3,766
417p
Solvency II debt leverage ratio
Solvency II debt leverage ratio is calculated as total debt expressed as a percentage of Solvency II regulatory own funds plus senior debt and
commercial paper. Solvency II regulatory debt includes subordinated debt and preference share capital. The Solvency II debt leverage ratio
provides a measure of the Group’s financial strength.
Solvency II regulatory debt
Senior notes
Commercial paper
Total debt
Estimated Solvency II regulatory own funds, senior debt and commercial paper
Solvency II debt leverage ratio
A reconciliation from IFRS subordinated debt to Solvency II regulatory debt is provided below:
IFRS borrowings
Less: Borrowings not classified as Solvency II regulatory debt
Senior notes
Commercial paper
Operational borrowings
IFRS subordinated debt
Revaluation of subordinated liabilities
Other movements
Solvency II subordinated debt
Preference share capital and tier 1 notes
Solvency II regulatory debt
2022
£m
5,210
687
252
6,149
19,607
31%
2022
£m
6,755
(687)
(252)
(1,286)
4,530
(265)
(1)
4,264
946
5,210
2021
£m
6,330
651
50
7,031
26,274
27%
2021
£m
7,344
(651)
(50)
(1,211)
5,432
449
(1)
5,880
450
6,330
Other APMs
Cash remittances
Cash paid by our operating businesses to the Group, for the period between March 2022 and the end of the month preceding the results
announcement comprised of dividends and interest on internal loans. Dividend payments by operating businesses may be subject to
insurance regulations that restrict the amount that can be paid. The business monitors total cash remittances at a Group level and in each
of its businesses. Cash remittances are considered a useful measure as they support the payments of external dividends. Cash remittances
eliminate on consolidation and hence are not directly reconcilable to the Group’s IFRS consolidated statement of cash flows.
In 2022 a review was undertaken of the basis of allocation of remittances from Aviva's internal reinsurance vehicle. From April 2022,
remittances are allocated to business units using an aggregate capital basis, previously remittances were allocated on a first in, first out
basis.
Excess centre cash flow
This represents the cash remitted by business units to the Group centre less central operating expenses and debt financing costs. Excess
centre cash flow is a measure of the cash available to pay dividends, reduce debt or invest back into our business. Excess centre cash flow
does not include cash movements such as disposal proceeds or capital injections. Excess centre cash flow when positive in the period can
be referred to as excess centre cash inflows and when negative as excess centre cash outflows.
Centre liquidity
Centre liquidity comprises cash and liquid assets and represents amounts as at the end of the month preceding results announcements. It
provides meaningful information because it shows the liquidity at the Group centre available to meet debt interest and central costs and to
pay dividends to shareholders.
Aviva plc
4.15
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Shareholder services
2023 Financial Calendar
Ordinary dividend timetable:
Final
Interim**
Ordinary ex-dividend date
30 March 2023
24 August 2023
Dividend record date
31 March 2023
25 August 2023
Last day for Dividend
Reinvestment Plan and
currency election
25 April 2023 14 September 2023
Dividend payment date*
18 May 2023
5 October 2023
Other key dates:
Annual General Meeting
Quarter one market update**
2023 interim results
announcement**
10.30am on 4 May 2023
24 May 2023
16 August 2023
Quarter three market update**
15 November 2023
* Please note that the ADR local payment date will be approximately four business days after the
proposed dividend date for ordinary shares
** These dates are provisional and subject to change
Dividend payment options
Shareholders can receive their dividends in the following ways:
• Directly into a nominated UK bank account
• Directly into a nominated Eurozone bank account
• Shareholders living outside of the UK and the Single Euro
Payments Area can elect to receive their dividends or interest
payments in a choice of over 125 international currencies via our
Registrar, Computershare; or
• The Dividend Reinvestment Plan enables eligible shareholders to
reinvest their cash dividend in additional Aviva ordinary shares
You can find further details regarding these payment options at
www.aviva.com/dividends and register your choice by contacting
Computershare using the contact details opposite, online at
www.computershare.com/AvivaInvestorCentre or by returning a
dividend mandate form. You must register for one of these payment
options to receive any dividend payments from Aviva.
Manage your shareholding online
www.aviva.com/shareholders:
General information for shareholders.
www.computershare.com/AvivaInvestorCentre:
• Change your address
• Change payment options
• Switch to electronic communications
• View your shareholding
• View any outstanding payments
Annual General Meeting (AGM)
The 2023 AGM will be held at Norwich City Football Club, Carrow
Road, Norwich, NR1 1JE, on Thursday, 4 May 2023, at 10.30am with
facilities to attend electronically.
Details of each resolution to be considered at the meeting and
voting instructions are provided in the Notice of AGM, which will be
made available on the Company’s website at www.aviva.com/agm
in March 2023.
The voting results of the 2023 AGM will be accessible on
the Company’s website at www.aviva.com/agm shortly after
the meeting.
Shareholder contacts:
Ordinary and preference shares:
For any queries regarding your shareholding, please contact
Computershare:
• By telephone: 0371 495 0105
We’re open Monday to Friday, 8.30am to 5.30pm UK time,
excluding public holidays. Please call +44 117 378 8361 if calling
from outside of the UK
• By email: AvivaSHARES@computershare.co.uk
• In writing: Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol, BS99 6ZZ
American Depositary Receipts (ADRs):
For any queries regarding Aviva ADRs, please contact Citibank
Shareholder Services (Citibank):
• By telephone: 1 877 248 4237 (1 877-CITI-ADR)
We are open Monday to Friday, 8.30am to 6pm US Eastern
Standard Time, excluding public holidays. Please call
+1 781 575 4555 if calling from outside of the US
• By email: Citibank@shareholders-online.com
• In writing: Citibank Shareholder Services, PO Box 43077,
Providence, Rhode Island, 02940-3077 USA
Group Company Secretary
Shareholders may contact the Group Company Secretary:
• By email: Aviva.shareholders@aviva.com
• In writing: Kirstine Cooper, Group Company Secretary, St Helen’s,
1 Undershaft, London, EC3P 3DQ
• By telephone: +44 (0)20 7283 2000
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Aviva plc
4.16
Annual Report and Accounts 2022
1. Strategic Report
2. Governance
3. IFRS Financial Statements
4. Other Information
Cautionary Statement
This document should be read in conjunction with the documents
distributed by Aviva plc (the ‘Company’ or ‘Aviva’) through The
Regulatory News Service (RNS). This announcement contains, and
we may make other verbal or written ‘forward-looking statements’
with respect to certain of Aviva’s plans and current goals and
expectations relating to future financial condition, performance,
results, strategic initiatives and objectives (including, without
limitation, climate-related plans and goals). Statements containing
the words ‘believes’, ‘intends’, ‘expects’, ‘projects’, ‘plans’, ‘will’,
‘seeks’, ‘aims’, ‘may’, ‘could’, ‘outlook’, ‘likely’, ‘target’, ‘goal’,
‘guidance’, ‘trends’, ‘future’, ‘estimates’, ‘potential’, ‘objective’,
‘predicts’, ‘ambition’ and ‘anticipates’, and words of similar
meaning, are forward-looking. By their nature, all forward-looking
statements involve risk and uncertainty. Accordingly, there are or
will be important factors that could cause actual results to differ
materially from those indicated in these statements. Aviva believes
factors that could cause actual results to differ materially from those
indicated in forward-looking statements in the announcement
include, but are not limited to: the impact of ongoing uncertain
conditions in the global financial markets and the national and
international political and economic situation generally (including
those arising from the Russia-Ukraine conflict); market
developments and government actions (including those arising
from the evolving relationship between the UK and the EU); the
effect of credit spread volatility on the net unrealised value of the
investment portfolio; the effect of losses due to defaults by
counterparties, including potential sovereign debt defaults or
restructurings, on the value of our investments; reduce the value or
yield of our investment portfolio and impact our asset and liability
matching; the impact of changes in short or long-term inflation; the
impact of changes in equity or property prices on our investment
portfolio; fluctuations in currency exchange rates; the effect of
market fluctuations on the value of options and guarantees
embedded in some of our life insurance products and the value of
the assets backing their reserves; the amount of allowances and
impairments taken on our investments; the effect of adverse capital
and credit market conditions on our ability to meet liquidity needs
and our access to capital; changes in, or restrictions on, our ability
to initiate capital management initiatives; changes in or inaccuracy
of assumptions in pricing and reserving for insurance business
(particularly with regard to mortality and morbidity trends, lapse
rates and policy renewal rates), longevity and endowments; a
cyclical downturn of the insurance industry; the impact of natural
and man-made catastrophic events (including the longer-term
impact of COVID-19) on our business activities and results of
operations; the transitional, litigation and physical risks associated
with climate change; failure to understand and respond effectively
to the risks associated with environmental, social or governance
(‘ESG’) factors; our reliance on information and technology and
third-party service providers for our operations and systems; the
impact of the Group’s risk mitigation strategies proving less effective
than anticipated, including the inability of reinsurers to meet
obligations or unavailability of reinsurance coverage; poor
investment performance of the Group’s asset management
business; the withdrawal by customers at short notice of assets
under the Group’s management; failure to manage risks in
operating securities lending of Group and third-party client assets;
increased competition in the UK and in other countries where we
have significant operations; regulatory approval of changes to the
Group’s internal model for calculation of regulatory capital under
the UK’s version of Solvency II rules; the impact of actual experience
differing from estimates used in valuing and amortising deferred
acquisition costs (DAC) and acquired value of in-force business
(AVIF); the impact of recognising an impairment of our goodwill or
intangibles with indefinite lives; changes in valuation
methodologies, estimates and assumptions used in the valuation of
investment securities; the effect of legal proceedings and regulatory
investigations; the impact of operational risks, including inadequate
or failed internal and external processes, systems and human error
or from external events and malicious acts (including cyber attack
and theft, loss or misuse of customer data); risks associated with
arrangements with third parties, including joint ventures; our
reliance on third-party distribution channels to deliver our products;
funding risks associated with our participation in defined benefit
staff pension schemes; the failure to attract or retain the necessary
key personnel; the effect of systems errors or regulatory changes on
the calculation of unit prices or deduction of charges for our unit-
linked products that may require retrospective compensation to our
customers; the effect of simplifying our operating structure and
activities; the effect of a decline in any of our ratings by rating
agencies on our standing among customers, broker-dealers, agents,
wholesalers and other distributors of our products and services;
changes to our brand and reputation; changes in tax laws and
interpretation of existing tax laws in jurisdictions where we conduct
business; changes to International Financial Reporting Standards
relevant to insurance companies and their interpretation (for
example, IFRS 17); the inability to protect our intellectual property;
the effect of undisclosed liabilities, separation issues and other risks
associated with our business disposals; and other uncertainties,
such as diversion of management attention and other resources,
relating to future acquisitions, combinations or disposals within
relevant industries; the policies, decisions and actions of
government or regulatory authorities in the UK, the EU, the US,
Canada or elsewhere, including changes to and the implementation
of key legislation and regulation (for example, FCA Consumer Duty
and Solvency II). Please see Aviva's most recent Annual Report and
Accounts for further details of risks, uncertainties and other factors
relevant to the business and its securities.
Aviva undertakes no obligation to update the forward looking
statements in this announcement or any other forward-looking
statements we may make. Forward-looking statements in this report
are current only as of the date on which such statements are made.
The climate metrics used in this document should be treated with
special caution, as they are more uncertain than, for example,
historical financial information and given the wider uncertainty
around the evolution and impact of climate change. Climate metrics
include estimates of historical emissions and historical climate
change and forward-looking climate metrics (such as ambitions,
targets, climate scenarios and climate projections and forecasts).
Our understanding of climate change and its impact continue to
evolve. Accordingly, both historical and forward-looking climate
metrics are inherently uncertain and, therefore, less decision-useful
than metrics based on historical financial statements.
This report has been prepared for, and only for, the members of the
Company, as a body, and no other persons. The Company, its
directors, employees, agents or advisers do not accept or assume
responsibility to any other person to who this document is shown or
into whose hands it may come, and any such responsibility or
liability is expressly disclaimed
Aviva plc is a company registered in England No. 2468686.
Registered office
St Helen's
1 Undershaft
London
EC3P 3DQ
Aviva plc
4.17
Annual Report and Accounts 2022
Aviva plc
St Helen’s, 1 Undershaft
London EC3P 3DQ
+44 (0)20 7283 2000
www.aviva.com
Registered in England
Number 2468686
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