Aviva PLC — Annual Report 2013

Mar 6, 2014

National Storage Mechanism | Additional information You don't have Javascript enabled. For full functionality this page requires javascript to be enabled. RNS Number : 6413B Aviva PLC 06 March 2014  Part 4 of 5 Page 93 Capital & assets In this section Page Capital and liquidity C1 Capital performance 94 C2 Regulatory capital 97 C3 IFRS sensitivity analysis 99 Page 94 C1 - Capital performance (a) Capital generation and utilisation 2013 £m Restated 2012 £m Group operating capital generated after investment in new business 1,967 1,982 Interest, corporate and other costs (621) (677) External dividends and appropriations, net of shares issued in lieu of dividends (537) (723) Net operating capital generation after financing 809 582 (b) Capital required to write life new business, internal rate of return and payback period The Group generates a significant amount of capital each year which supports both shareholder distribution and reinvestment in new business. The new business written requires up front capital investment, due to set-up costs and capital requirements. The internal rate of return (IRR) is a measure of the shareholder return expected on this capital investment. It is equivalent to the discount rate at which the present value of the post-tax cash flows expected to be earned over the life time of the business written, including allowance for the time value of options and guarantees, is equal to the total invested capital to support the writing of the business. The capital included in the calculation of the IRR is the initial capital required to pay acquisition costs and set up statutory reserves in excess of premiums received ('initial capital'), plus required capital at the same level as for the calculation of the value of new business. The payback period shows how quickly shareholders can expect the total capital to be repaid. The payback period has been calculated based on undiscounted cash flows and allows for the initial and required capital. The projected investment returns in both the IRR and payback period calculations assume that equities, properties and bonds earn a return in excess of risk-free, consistent with the long-term rate of return assumed in operating earnings. The internal rates of return on new business written during the period are set out below: 2013 2012 Internal rate of return1 % New business impact on free surplus2 £m Payback period years3 Internal rate of return % New business impact on free surplus £m Payback period years United Kingdom 21% (47) 6 18% 6 6 Ireland 5% 30 13 2% 31 25 United Kingdom & Ireland 18% (17) 7 16% 37 8 France 11% 148 9 11% 125 8 Poland 22% 25 4 20% 25 4 Italy 14% 46 6 12% 41 6 Spain 17% 33 4 21% 35 4 Other Europe 32% 20 3 22% 42 3 Europe 15% 272 7 15% 268 6 Asia 16% 66 10 11% 84 11 Total - excluding United States 15.9% 321 7 14.9% 389 8 Total - United States - - - 17% 319 4 Total 15.9% 321 7 15.5% 708 7 1 Gross of non-controlling interests 2 Net of non-controlling interests 3 Gross of non-controlling interests Page 96 C1 - Capital performance continued (c) Analysis of return of equity - IFRS basis Operating return1 2013 Before tax £m After tax £m Opening shareholders' funds including non-controlling interests £m Return on equity % United Kingdom & Ireland life 952 904 5,646 16.0% United Kingdom & Ireland general insurance and health2 410 319 4,008 8.0% Europe 963 636 5,860 10.9% Canada 246 180 1,039 17.4% Asia 97 84 825 10.1% Fund management 93 72 225 32.1% Corporate and Other Business3 (384) (428) (1,471) n/a Return on total capital employed (excluding United States) 2,377 1,767 16,132 11.0% United States 290 207 367 56.5% Return on total capital employed (including United States) 2,667 1,974 16,499 12.0% Subordinated debt (305) (234) (4,337) 5.4% External debt (23) (18) (802) 2.2% Return on total equity 2,339 1,722 11,360 15.2% Less: Non-controlling interests (174) (1,574) 11.1% Direct capital instruments and fixed rate tier 1 notes (70) (1,382) 5.1% Preference capital (17) (200) 8.5% Return on equity shareholders' funds 1,461 8,204 17.8% 1 The operating return is based upon Group adjusted operating profit, which is stated before integration and restructuring costs, impairment of goodwill, amortisation of intangibles, exceptional items and investment variances. 2 The operating return for United Kingdom & Ireland general insurance and health is presented net of £79 million of investment return, which is allocated to Corporate and Other Business. The £79 million represents the return on capital supporting Pillar II ICA risks deemed not to be supporting the ongoing general insurance operation. 3 The 'Corporate and Other Business' loss before tax of £384 million comprises corporate costs of £150 million, interest on internal lending arrangements of £231 million, other business operating loss (net of investment return) of £60 million, partly offset by finance income on the main UK pension scheme of £57 million. Operating return1 2012 Restated before tax £m Restated after tax £m Opening shareholders' funds including non-controlling interests £m Restated return on equity % United Kingdom & Ireland life 892 869 5,478 15.9% United Kingdom & Ireland general insurance and health 490 370 3,903 9.5% Europe 967 671 5,420 12.4% Canada 277 205 1,034 19.8% Asia 64 56 916 6.1% Fund management 51 36 185 19.5% Corporate and Other Business2 (498) (541) (234) n/a Return on total capital employed (excluding Delta Lloyd and United States) 2,243 1,666 16,702 10.0% Delta Lloyd 112 84 776 10.8% United States 239 161 3,140 5.1% Return on total capital employed (including Delta Lloyd and United States) 2,594 1,911 20,618 9.3% Subordinated debt (294) (222) (4,550) 4.9% External debt (23) (17) (705) 2.4% Return on total equity 2,277 1,672 15,363 10.9% Less: Non-controlling interest (184) (1,530) 12.0% Direct capital instruments and fixed rate tier 1 notes (55) (990) 5.6% Preference capital (17) (200) 8.5% Return on equity shareholders' funds 1,416 12,643 11.2% 1 The operating return is based upon Group adjusted operating profit, which is stated before integration and restructuring costs, impairment of goodwill, amortisation of intangibles, exceptional items and investment variances. 2 The 'Corporate and Other Business' loss before tax of £498 million comprises corporate costs of £136 million, interest on internal lending arrangements of £307 million, other business operating loss (net of investment return) of £142 million offset by finance income on the main UK pension scheme of £87 million. Page 96 C1 - Capital performance continued (d) Group capital structure The table below shows how our capital, on both an IFRS and MCEV basis, is deployed by market and how that capital is funded. 2013 Capital employed 2012 Capital employed IFRS basis £m Internally generated AVIF £m MCEV6 basis £m IFRS basis £m Internally generated AVIF £m MCEV4 basis £m Life business United Kingdom 5,237 2,140 7,377 4,911 1,595 6,506 Ireland 595 71 666 735 361 1,096 United Kingdom & Ireland 5,832 2,211 8,043 5,646 1,956 7,602 France 2,366 1,587 3,953 2,119 1,329 3,448 Poland 380 1,075 1,455 336 1,442 1,778 Italy 1,108 428 1,536 1,276 (317) 959 Spain 769 218 987 1,113 340 1,453 Other Europe 93 84 177 155 79 234 Europe 4,716 3,392 8,108 4,999 2,873 7,872 Asia 676 226 902 784 28 812 11,224 5,829 17,053 11,429 4,857 16,286 General insurance & health United Kingdom 3,725 - 3,725 3,653 - 3,653 Ireland 421 - 421 355 - 355 United Kingdom & Ireland 4,146 - 4,146 4,008 - 4,008 France 570 - 570 562 - 562 Italy 269 - 269 242 - 242 Other Europe 43 - 43 57 - 57 Europe 882 - 882 861 - 861 Canada 925 - 925 1,039 - 1,039 Asia 33 - 33 41 - 41 5,986 - 5,986 5,949 - 5,949 Fund Management 237 - 237 225 - 225 Corporate & Other Business1 (1,305) 11 (1,294) (1,471) 13 (1,458) Total capital employed (excluding United States) 16,142 5,840 21,982 16,132 4,870 21,002 United States - - - 367 - 367 Total capital employed (including United States) 16,142 5,840 21,982 16,499 4,870 21,369 Financed by Equity shareholders' funds 7,964 5,145 13,109 8,204 4,230 12,434 Non-controlling interests 1,471 695 2,166 1,574 640 2,214 Direct capital instruments & fixed rate tier 1 notes 1,382 - 1,382 1,382 - 1,382 Preference shares 200 - 200 200 - 200 Subordinated debt 4,370 - 4,370 4,337 - 4,337 External debt 755 - 755 802 - 802 Total capital employed 16,142 5,840 21,982 16,499 4,870 21,369 Less: Goodwill & other intangibles (net of tax & non-controlling interests)2 (2,204) (2,088) (2,523) (2,429) Total tangible capital employed 13,938 19,894 13,976 18,940 Total debt3 6,957 6,957 6,971 6,971 Tangible debt leverage 50% 35% 50% 37% 1. Corporate and other business includes centrally held tangible net assets, the main UK staff pension scheme surplus and also reflects internal lending arrangements. These internal lending arrangements, which net out on consolidation include the formal loan arrangement between Aviva Group Holdings Limited and Aviva Insurance Limited (AIL). Internal capital management mechanisms in place allocated a majority of the total capital of AIL to the UK general insurance operations with the remaining capital deemed to be supporting residual (non-operational) Pillar II ICA risks. -.Certain subsidiaries, subject to satisfying standalone capital and liquidity requirements, loan funds to corporate and holding entities. These loans satisfy arm's-length criteria and all interest payments are made when due. 2. Goodwill and intangibles comprise £1,480 million (FY12: £1,703 million) of goodwill in subsidiaries, £1,068 million (FY12: £1,090 million) of intangibles in subsidiaries and £60 million (FY12: £132 million) of goodwill and intangibles in joint ventures, net of deferred tax liabilities of £(189) million (FY12: £(188) million) and the non-controlling interest share of intangibles of £(215) million (FY12: £(214) million). Under MCEV goodwill and intangibles have been further impaired by £116 million (FY12: £94 million) which has been reflected in the additional value of in-force long-term business in the MCEV balance sheet. 3. Total debt comprises direct capital instruments and fixed rate tier 1 notes, Aviva Plc preference share capital and core structural borrowings. In addition GA plc preference share capital £250 million within non-controlling interests has been included. 4. In preparing the MCEV information, the directors have done so in accordance with the European Insurance CFO Forum MCEV Principles with the exception of stating held for sale operation at their expected fair value, as represented by expected sale proceeds, less cost to sell. Total capital employed is financed by a combination of equity shareholders' funds, preference capital, subordinated debt and borrowings. At FY13 we had £16.1 billion (FY12: £16.5 billion) of total capital employed in our trading operations measured on an IFRS basis and £22 billion (FY12: £21.4 billion) of total capital employed on an MCEV basis. In July 2013 we issued €650 million of Lower Tier 2 subordinated debt callable in 2023. This was used to repay a €650 million Lower Tier 2 subordinated debt instrument at its first call date, in October 2013. On a net basis, these transactions did not impact on Group IGD solvency and Economic Capital measures. Financial leverage, the ratio of external senior and subordinated debt to tangible capital employed, is 50% (FY12: 50%), and financial leverage under MCEV is 35% (FY12: 37%). At FY13 the market value of our external debt, subordinated debt, preference shares (including both Aviva plc preference shares of £200 million and General Accident plc preference shares, within non-controlling interest, of £250 million), and direct capital instruments and fixed rate tier 1 notes was £7,573 million (FY12: £7,260 million), with a weighted average cost, post tax, of 3.8% (FY12: 4.4%). The Group Weighted Average Cost of Capital (WACC) is 6.6% (FY12: 6.3%) and has been calculated by reference to the cost of equity and the cost of debt at the relevant date. The cost of equity at FY13 was 8.3% (FY12: 7.5%) based on a risk free rate of 3% (FY12: 1.9%), an equity risk premium of 4.0% (FY12: 4.0%) and a market beta of 1.3 (FY12: 1.4). Page 97 C1 - Capital performance continued (e) Equity sensitivity analysis The sensitivity of the group's total equity, for continuing operations, on an IFRS basis and MCEV basis at 31 December 2013 to a 10% fall in global equity markets, a rise of 1% in global interest rates or a 0.5% increase in credit spreads is as follows: 31 December 2012 £bn IFRS basis 31 December 2013 £bn Equities down 10% £bn Interest rates up 1% £bn 0.5% increased credit spread £bn 11.5 Long-term savings 11.2 (0.1) (0.4) (0.2) 4.6 General insurance and other 4.9 (0.1) (0.4) 0.5 (5.1) Borrowings (5.1) - - - 11.0 Total equity 11.0 (0.2) (0.8) 0.3 Equities down 10% 31 December 2012 £bn MCEV basis 31 December 2013 £bn Direct £bn Indirect £bn Interest rates up 1% £bn 0.5% increased credit spread £bn 16.3 Long-term savings 17.1 (0.1) (0.4) (0.4) (0.9) 4.6 General insurance and other 4.9 (0.1) - (0.4) 0.5 (5.1) Borrowings (5.1) - - - - 15.8 Total equity 16.9 (0.2) (0.4) (0.8) (0.4) These sensitivities assume a full tax charge/credit on market value assumptions. The interest rate sensitivity also assumes an equivalent movement in both inflation and discount rate (i.e. no change to real interest rates) and therefore incorporates the offsetting effects of these items on the pension scheme liabilities. A 1% increase in the real interest rate has the effect of reducing the pension scheme liability in the main UK pension scheme by £1.6 billion (before any associated tax impact). The 0.5% increased credit spread sensitivities for IFRS and MCEV do not make an allowance for any adjustment to risk-free interest rates. MCEV sensitivities assume that the credit spread movement relates to credit risk and not liquidity risk; in practice, credit spread movements may be partially offset due to changes in liquidity risk. Life IFRS sensitivities provide for any impact of credit spread movements on liability valuations. The IFRS and MCEV sensitivities also include the allocation of staff pension scheme sensitivities, which assume inflation rates and government bond yields remain constant. In practice, the sensitivity of the business to changes in credit spreads is subject to a number of complex interactions. The impact of the credit spread movements will be related to individual portfolio composition and may be driven by changes in credit or liquidity risk; hence, the actual impact may differ substantially from applying spread movements implied by various published credit spread indices to these sensitivities. C2 - Regulatory capital Individual regulated subsidiaries measure and report solvency based on applicable local regulations, including in the UK the regulations established by the Prudential Regulatory Authority (PRA). These measures are also consolidated under the European Insurance Groups Directive (IGD) to calculate regulatory capital adequacy at an aggregate Group level, where Aviva has a regulatory obligation to have a positive position at all times. This measure represents the excess of the aggregate value of regulatory capital employed in our business over the aggregate minimum solvency requirements imposed by local regulators, excluding the surplus held in the UK and Ireland with-profit life funds. The minimum solvency requirement for our European businesses is based on the Solvency 1 Directive. In broad terms, for EU operations, this is set at 4% and 1% of non-linked and unit-linked life reserves respectively and for our general insurance portfolio of business is the higher of 18% of gross premiums or 26% of gross claims, in both cases adjusted to reflect the level of reinsurance recoveries. For our businesses in Canada a risk charge on assets and liabilities approach is used. Based on individual guidance from the PRA we recognise surpluses of the non-profit funds of our UK Life and pensions businesses which are available for transfer to shareholders. These have decreased to £0.1 billion as at 31 December 2013 (FY12: £0.4 billion) due to the transfer of surpluses to the shareholder fund at the beginning of the year. Page 98 C2 - Regulatory capital continued (a) Regulatory capital - Group: European Insurance Groups Directive (IGD) UK life funds £bn Other business £bn 31 December 2013 £bn 31 December 2012 £bn Insurance Groups Directive (IGD) capital resources 5.8 8.6 14.4 14.4 Less: capital resources requirement (5.8) (5.0) (10.8) (10.6) Insurance Group Directive (IGD) excess solvency - 3.6 3.6 3.8 Cover over EU minimum (calculated excluding UK life funds) 1.7 times 1.7 times The EU Insurance Groups Directive (IGD) regulatory capital solvency surplus has decreased by £0.2 billion since FY12 to £3.6 billion. The key movements over the period are set out in the following table: £bn IGD solvency surplus at 31 December 2012 3.8 Operating profits net of other income and expenses 1.2 Dividends and appropriations (0.5) Market movements including foreign exchange1 (0.4) Pension scheme funding (0.1) Disposals 0.2 Poland pension legislative changes (0.3) Increase in capital resources requirement (0.1) Other regulatory adjustments (0.2) Estimated IGD solvency surplus at 31 December 2013 3.6 1 Market movements include the impact of equity, credit spread, interest rate and foreign exchange movements net of the effect of hedging instruments. (b) Reconciliation of Group IGD capital resources to IFRS capital The reconciliation below provides analysis of differences between our capital resources and the amounts included in the capital statement made in accordance with FRS 27 and disclosed within our consolidated accounts. The Group Capital Adequacy report is prepared in accordance with the PRA valuation rules and brings in capital in respect of the UK Life valued in accordance with PRA regulatory rules excluding surpluses in with-profit funds. The FRS 27 disclosure brings in the realistic value of UK Life capital resources. As the two bases differ greatly, the reconciliation below is presented by removing the restricted regulatory assets and then replacing them with the unrestricted realistic assets. 2013 £bn Total capital and reserves (IFRS basis) 11.0 Plus: Other qualifying capital 4.4 Plus: UK unallocated divisible surplus 1.7 Less: Goodwill, acquired AVIF and intangible assets1 (2.6) Less: Adjustments onto a regulatory basis (0.1) Group Capital Resources on regulatory basis 14.4 The Group Capital Resources can be analysed as follows: Core Tier 1 Capital 9.9 Innovative Tier 1 Capital 1.4 Total Tier 1 Capital 11.3 Upper Tier 2 Capital 1.7 Lower Tier 2 Capital 3.2 Group Capital Resources Deductions (1.8) Group Capital Resources on regulatory basis (Tier 1 & Tier 2 Capital) 14.4 Less: UK life restricted regulatory assets (6.8) Add: UK life unrestricted realistic assets 6.0 Add: Overseas UDS2 and Shareholders' share of accrued bonus 5.0 Total FRS 27 capital 18.6 1 Goodwill and other intangibles includes goodwill of £60million in joint ventures and associates and amounts classified as held for sale. 2 Unallocated divisible surplus for overseas life operations is included gross of minority interest and amounts disclosed include balances classified as held for sale. Page 99 C2 - Regulatory capital continued (c) Regulatory capital - UK Life with-profits funds The available capital of the with-profit funds is represented by the realistic inherited estate. The estate represents the assets of the long-term with-profit funds less the realistic liabilities for non-profit policies within the funds, less asset shares aggregated across the with-profit policies and any additional amounts expected at the valuation date to be paid to in-force policyholders in the future in respect of smoothing costs, guarantees and promises. Realistic balance sheet information is shown below for the three main UK with-profit funds: New With-Profit Sub Fund (NWPSF), Old With-Profit Sub Fund (OWPSF) and With-Profit Sub-Fund (WPSF). These realistic liabilities have been included within the long-term business provision and the liability for insurance and investment contracts on the Group's IFRS balance sheet at 31 December 2013 and 31 December 2012. 31 December 2013 31 December 2012 Estimated realistic assets £bn Estimated realistic liabilities1 £bn Estimated realistic inherited estate2 £bn Capital support arrangement3 £bn Estimated risk capital margin £bn Estimated excess available capital £bn Estimated excess available capital £bn NWPSF 15.6 (15.6) - 1.1 (0.2) 0.9 0.3 OWPSF 2.8 (2.4) 0.4 - (0.1) 0.3 0.2 WPSF4 16.9 (15.4) 1.5 - (0.3) 1.2 1.3 Aggregate 35.3 (33.4) 1.9 1.1 (0.6) 2.4 1.8 1 These realistic liabilities include the shareholders' share of accrued bonuses of £0.1 billion (FY12: £0.3 billion). Realistic liabilities adjusted to eliminate the shareholders' share of accrued bonuses are £33.4 billion (FY12: £36.0 billion). These realistic liabilities make provision for guarantees, options and promises on a market consistent stochastic basis. The value of the provision included within realistic liabilities is £1.4 billion, £0.2 billion and £2.5 billion for NWPSF, OWPSF and WPSF respectively (FY12: £1.8 billion, £0.3 billion and £3.5 billion for NWPSF, OWPSF and WPSF respectively). 2 Estimated realistic inherited estate at FY12 was £nil, £0.3 billion and £1.8 billion for NWPSF, OWPSF and WPSF respectively. 3 The support arrangement represents the reattributed estate (RIEESA) of £1.1 billion at 31 December 2013 (FY12: £0.7 billion). 4 The WPSF fund includes the Provident Mutual (PM) fund which has realistic assets and realistic liabilities of £1.5 billion and therefore does not contribute to the realistic inherited estate. (d) Investment mix The aggregate investment mix of the assets in the three main with-profit funds was: 31 December 2013 % 31 December 2012 % Equity 29% 23% Property 12% 16% Fixed interest 49% 51% Other 10% 10% The equity backing ratios, including property, supporting with-profit asset shares are 70% in NWPSF and OWPSF, and 73% in WPSF. C3 - IFRS Sensitivity analysis The Group uses a number of sensitivity test-based risk management tools to understand the volatility of earnings, the volatility of its capital requirements, and to manage its capital more efficiently. Primarily, MCEV, ICA, and scenario analysis are used. Sensitivities to economic and operating experience are regularly produced on all of the Group's financial performance measurements to inform the Group's decision making and planning processes, and as part of the framework for identifying and quantifying the risks that each of its business units, and the Group as a whole are exposed to. For long-term business in particular, sensitivities of MCEV performance indicators to changes in both economic and non-economic experience are continually used to manage the business and to inform the decision making process. More information on MCEV sensitivities can be found in the presentation of results on an MCEV basis in section F (note F18) of this report. (a) 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 for both IFRS reporting and reporting under the MCEV methodology. (b) 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. Page 100 C3 - IFRS Sensitivity analysis continued (c) Sensitivity test results Illustrative results of sensitivity testing for long-term business, general insurance and health and fund management business and other operations 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. Sensitivity factor Description of sensitivity factor applied Interest rate and investment return 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. Credit Spreads 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 (life insurance only) The impact of a reduction in mortality rates for annuity contracts by 5%. Gross loss ratios (non-life insurance only) The impact of an increase in gross loss ratios for general insurance and health business by 5%. (d) Long-term businesses 31 December 2013 Impact on profit before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Assurance mortality +5% Annuitant mortality -5% Insurance participating (45) - (60) (10) (20) (30) (5) (40) Insurance non-participating (145) 140 (415) (5) 10 (80) (60) (450) Investment participating (10) 5 (5) 5 (5) (10) - - Investment non-participating (20) 20 (5) 5 (5) (15) - - Assets backing life shareholders' funds (35) 55 (25) 40 (45) - - - Total (255) 220 (510) 35 (65) (135) (65) (490) 31 December 2013 Impact on shareholders' equity before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Assurance mortality +5% Annuitant mortality -5% Insurance participating (45) - (60) (10) (20) (30) (5) (40) Insurance non-participating (145) 140 (415) (5) 10 (80) (60) (450) Investment participating (10) 5 (5) 5 (5) (10) - - Investment non-participating (20) 20 (5) 5 (5) (15) - - Assets backing life shareholders' funds (75) 100 (35) 45 (45) - - - Total (295) 265 (520) 40 (65) (135) (65) (490) 31 December 2012 Impact on profit before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Assurance mortality +5% Annuitant mortality -5% Insurance participating (45) (15) (110) 60 (95) (25) (5) (50) Insurance non-participating (160) 130 (430) - - (75) (45) (470) Investment participating (55) 45 - 5 (10) (10) - - Investment non-participating (40) 35 (5) 10 (15) (20) - - Assets backing life shareholders' funds 10 (15) (40) 45 (45) - - - Total excluding Delta Lloyd and United States (290) 180 (585) 120 (165) (130) (50) (520) United States 880 (640) 495 - - - - - Total excluding Delta Lloyd 590 (460) (90) 120 (165) (130) (50) (520) 31 December 2012 Impact on shareholders' equity before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Assurance mortality +5% Annuitant mortality -5% Insurance participating (45) (15) (110) 60 (95) (25) (5) (50) Insurance non-participating (165) 125 (430) - - (75) (45) (470) Investment participating (55) 45 - 5 (10) (10) - - Investment non-participating (45) 40 - 10 (15) (20) - - Assets backing life shareholders' funds (5) - (45) 50 (50) - - - Total excluding Delta Lloyd and United States (315) 195 (585) 125 (170) (130) (50) (520) United States - - - - - - - - Total excluding Delta Lloyd (315) 195 (585) 125 (170) (130) (50) (520) Changes in sensitivities between 2013 and 2012 reflect movements in market interest rates, portfolio growth, changes to asset mix and the relative durations of assets and liabilities and asset liability management actions. The sensitivities to economic movements relate mainly to business in the UK. In general, a fall in market interest rates has a beneficial impact on non-participating business, due to the increase in market value of fixed interest securities and the relative durations of assets and liabilities; similarly a rise in interest rates has a negative impact. The mortality sensitivities also relate primarily to the UK. Page 101 C3 - IFRS Sensitivity analysis continued (e) General insurance and health businesses 31 December 2013 Impact on profit before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Gross loss ratios +5% Gross of reinsurance (245) 235 (125) 50 (50) (110) (300) Net of reinsurance (295) 295 (125) 50 (50) (110) (285) 31 December 2013 Impact on shareholders' equity before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Gross loss ratios +5% Gross of reinsurance (245) 235 (125) 50 (50) (25) (300) Net of reinsurance (295) 295 (125) 50 (50) (25) (285) 31 December 2012 Impact on profit before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Gross loss ratios +5% Gross of reinsurance excluding Delta Lloyd (260) 235 (125) 45 (50) (120) (300) Net of reinsurance excluding Delta Lloyd (300) 285 (125) 45 (50) (120) (285) 31 December 2012 Impact on shareholders' equity before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Expenses +10% Gross loss ratios +5% Gross of reinsurance excluding Delta Lloyd (260) 235 (125) 50 (50) (25) (300) Net of reinsurance excluding Delta Lloyd (300) 285 (125) 50 (50) (25) (285) For general insurance, the impact of the expense sensitivity on profit also includes the increase in ongoing administration expenses, in addition to the increase in the claims handling expense provision. (f) Fund management and other operations businesses1 31 December 2013 Impact on profit before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Total - - 20 (5) 15 31 December 2013 Impact on shareholders' equity before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Total - - 20 (5) 15 31 December 2012 Impact on profit before tax £m Interest rates +1% Interest rates --1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Total excluding Delta Lloyd (5) - 30 (90) 10 31 December 2012 Impact on shareholders' equity before tax £m Interest rates +1% Interest rates -1% Credit spreads +0.5% Equity/ property +10% Equity/ property -10% Total excluding Delta Lloyd (5) - 30 (90) 10 1 For 2012, the fund management and other operations are not shown excluding the United States as their sensitivities are immaterial to the group. (g) Delta Lloyd The 2012 sensitivities contained in the above tables exclude any contribution from Delta Lloyd following deconsolidation of this business. Page 102 C3 - IFRS Sensitivity analysis continued (h) Limitations of sensitivity analysis The previous tables demonstrate the effect of a change in a key assumption while other assumptions remain unchanged. In reality, 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 analyses do 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 allocation, adjusting bonuses credited to policyholders, and taking other protective action. A number of the business units use passive assumptions to calculate their long-term business liabilities. Consequently, a change in the underlying assumptions may not have any impact on the liabilities, whereas assets held at market value in the statement of financial position will be affected. In these circumstances, the different measurement bases for liabilities and assets may lead to volatility in shareholders' equity. Similarly, for general insurance liabilities, the interest rate sensitivities only affect profit and equity where explicit assumptions are made regarding interest (discount) rates or future inflation. Other limitations in the above sensitivity analyses include the use of hypothetical market movements to demonstrate potential risk 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 interest rates move in an identical fashion. Page 103 Analysis of assets Page Analysis of assets D1 Total assets 104 D2 Total assets - Valuation bases/fair value hierarchy 104 D3 Analysis of asset quality 107 D4 Pension fund assets 125 D5 Available funds 126 D6 Guarantees 126 Page 104 D1 - Total assets As an insurance business, Aviva Group holds a variety of assets to match the characteristics and duration of its insurance liabilities. Appropriate and effective asset liability matching (on an economic basis) is the principal way in which Aviva manages its investments. In addition, to support this, Aviva also uses a variety of hedging and other risk management strategies to diversify away any residual mis-match risk that is outside of the Group's risk appetite. 2013 Policyholder assets £m Participating fund assets £m Shareholder assets £m Total assets analysed £m Less assets of operations classified as held for sale £m Balance sheet total £m Goodwill and acquired value of in-force business and intangible assets - - 2,548 2,548 (4) 2,544 Interests in joint ventures and associates 219 900 377 1,496 (29) 1,467 Property and equipment - 143 170 313 - 313 Investment property 3,564 5,648 239 9,451 - 9,451 Loans 471 5,535 17,873 23,879 - 23,879 Financial investments Debt securities 12,835 80,610 33,360 126,805 (2,420) 124,385 Equity securities 25,836 10,544 1,000 37,380 (54) 37,326 Other investments 26,563 3,880 1,008 31,451 (201) 31,250 Reinsurance assets 2,043 628 4,586 7,257 (37) 7,220 Deferred tax assets - - 252 252 (8) 244 Current tax assets - - 86 86 (10) 76 Receivables & other financial assets 258 2,033 4,846 7,137 (77) 7,060 Deferred acquisition costs and other assets - 500 2,558 3,058 (7) 3,051 Prepayments and accrued income 99 1,197 1,302 2,598 (100) 2,498 Cash and cash equivalents 4,725 12,321 8,304 25,350 (351) 24,999 Additional impairment to write down the disposal group to fair value less costs to sell - - (185) (185) 185 - Assets of operations classified as held for sale - - - - 3,113 3,113 Total 76,613 123,939 78,324 278,876 - 278,876 Total % 27.5% 44.4% 28.1% 100.0% - 100.0% FY12 Restated 73,730 125,328 115,409 314,467 - 314,467 FY12 Total % Restated 23.4% 39.9% 36.7% 100.0% - 100.0% As at 31 December 2013, 28.1% of Aviva's total asset base was shareholder assets, 44.4% participating assets where Aviva shareholders have partial exposure, and 27.5% policyholder assets where Aviva shareholders have no exposure. Of the total assets (excluding assets held for sale), investment property, loans and financial investments comprise £226.3 billion, compared to £223.2 billion at 31 December 2012. D2 - Total assets - Valuation bases/fair value hierarchy Total assets - 2013 Fair value £m Amortised cost £m Equity accounted/ tax assets1 £m Total £m Goodwill and acquired value of in-force business and intangible assets - 2,548 - 2,548 Interests in joint ventures and associates - - 1,496 1,496 Property and equipment 257 56 - 313 Investment property 9,451 - - 9,451 Loans 18,477 5,402 - 23,879 Financial investments Debt securities 126,805 - - 126,805 Equity securities 37,380 - - 37,380 Other investments 31,451 - - 31,451 Reinsurance assets - 7,257 - 7,257 Deferred tax assets - - 252 252 Current tax assets - - 86 86 Receivables and other financial assets - 7,137 - 7,137 Deferred acquisition costs and other assets - 3,058 - 3,058 Prepayments and accrued income - 2,598 - 2,598 Additional impairment to write down the disposal group to fair value less costs to sell - (185) - (185) Cash and cash equivalents 25,350 - - 25,350 Total 249,171 27,871 1,834 278,876 Total % 89.3% 10.0% 0.7% 100.0% Assets of operations classified as held for sale 3,026 40 47 3,113 Total (excluding assets held for sale) 246,145 27,831 1,787 275,763 Total % (excluding assets held for sale) 89.3% 10.1% 0.6% 100.0% FY12 Total Restated 278,188 34,210 2,069 314,467 FY12 Total % Restated 88.4% 10.9% 0.7% 100.0% 1 Within the Group's statement of financial position, assets are recognised for deferred tax and current tax. The valuation basis of these assets does not directly fall within any of the categories outlined above. As such, these assets have been reported together with equity accounted items within the analysis of the Group's assets. Page 105 D2 - Total assets - Valuation bases/fair value hierarchy continued Total assets - Policyholder assets 2013 Fair value £m Amortised cost £m Equity accounted/ tax assets1 £m Total £m Goodwill and acquired value of in-force business and intangible assets - - - - Interests in joint ventures and associates - - 219 219 Property and equipment - - - - Investment property 3,564 - - 3,564 Loans - 471 - 471 Financial investments Debt securities 12,835 - - 12,835 Equity securities 25,836 - - 25,836 Other investments 26,563 - - 26,563 Reinsurance assets - 2,043 - 2,043 Deferred tax assets - - - - Current tax assets - - - - Receivables and other financial assets - 258 - 258 Deferred acquisition costs and other assets - - - - Prepayments and accrued income - 99 - 99 Additional impairment to write down the disposal group to fair value less costs to sell - - - - Cash and cash equivalents 4,725 - - 4,725 Total 73,523 2,871 219 76,613 Total % 96.0% 3.7% 0.3% 100.0% Assets of operations classified as held for sale 44 - - 44 Total (excluding assets held for sale) 73,479 2,871 219 76,569 Total % (excluding assets held for sale) 96.0% 3.7% 0.3% 100.0% FY12 Total Restated 70,958 2,701 71 73,730 FY12 Total % Restated 96.2% 3.7% 0.1% 100.0% 1 Within the Group's statement of financial position, assets are recognised for deferred tax and current tax. The valuation basis of these assets does not directly fall within any of the categories outlined above. As such, these assets have been reported together with equity accounted items within the analysis of the Group's assets. Total assets - Participating fund assets 2013 Fair value £m Amortised cost £m Equity accounted/ tax assets1 £m Total £m Goodwill and acquired value of in-force business and intangible assets - - - - Interests in joint ventures and associates - - 900 900 Property and equipment 133 10 - 143 Investment property 5,648 - - 5,648 Loans 989 4,546 - 5,535 Financial investments Debt securities 80,610 - - 80,610 Equity securities 10,544 - - 10,544 Other investments 3,880 - - 3,880 Reinsurance assets - 628 - 628 Deferred tax assets - - - - Current tax assets - - - - Receivables and other financial assets - 2,033 - 2,033 Deferred acquisition costs and other assets - 500 - 500 Prepayments and accrued income - 1,197 - 1,197 Additional impairment to write down the disposal group to fair value less costs to sell - - - - Cash and cash equivalents 12,321 - - 12,321 Total 114,125 8,914 900 123,939 Total % 92.1% 7.2% 0.7% 100.0% Assets of operations classified as held for sale 2,585 134 - 2,719 Total (excluding assets held for sale) 111,540 8,780 900 121,220 Total % (excluding assets held for sale) 92.0% 7.3% 0.7% 100.0% FY12 Total Restated 114,494 9,603 1,231 125,328 FY12 Total % Restated 91.3% 7.7% 1.0% 100.0% 1 Within the Group's statement of financial position, assets are recognised for deferred tax and current tax. The valuation basis of these assets does not directly fall within any of the categories outlined above. As such, these assets have been reported together with equity accounted items within the analysis of the Group's assets. Page 106 D2 - Total assets - Valuation bases/fair value hierarchy continued Total assets - Shareholders assets 2013 Fair value £m Amortised cost £m Equity accounted/ tax assets1 £m Total £m Goodwill and acquired value of in-force business and intangible assets - 2,548 - 2,548 Interests in joint ventures and associates - - 377 377 Property and equipment 124 46 - 170 Investment property 239 - - 239 Loans 17,488 385 - 17,873 Financial investments Debt securities 33,360 - - 33,360 Equity securities 1,000 - - 1,000 Other investments 1,008 - - 1,008 Reinsurance assets - 4,586 - 4,586 Deferred tax assets - - 252 252 Current tax assets - - 86 86 Receivables and other financial assets - 4,846 - 4,846 Deferred acquisition costs and other assets - 2,558 - 2,558 Prepayments and accrued income - 1,302 - 1,302 Additional impairment to write down the disposal group to fair value less costs to sell - (185) - (185) Cash and cash equivalents 8,304 - - 8,304 Total 61,523 16,086 715 78,324 Total % 78.6% 20.5% 0.9% 100.0% Assets of operations classified as held for sale2 397 (94) 47 350 Total (excluding assets held for sale) 61,126 16,180 668 77,974 Total % (excluding assets held for sale) 78.4% 20.7% 0.9% 100.0% FY12 Total Restated 92,736 21,906 767 115,409 FY12 Total % Restated 80.4% 19.0% 0.6% 100.0% 1 Within the Group's statement of financial position, assets are recognised for deferred tax and current tax. The valuation basis of these assets does not directly fall within any of the categories outlined above. As such, these assets have been reported together with equity accounted items within the analysis of the Group's assets. 2 The remeasurement loss upon the classification of assets as held for sale included an additional impairment to write down the disposal group to fair value less costs to sell. IFRS does not allow this to be taken against assets at fair value, therefore for the purpose of this disclosure the impairment has been allocated to the amortised cost assets, resulting in a negative asset value. Fair value hierarchy To provide further information on the valuation techniques we use to measure assets carried at fair value, we have categorised the measurement basis for assets carried at fair value into a 'fair value hierarchy' described as follows, based on the lowest level input that is significant to the valuation as a whole: n Inputs to Level 1 fair values are quoted prices (unadjusted) in active markets for identical assets. n Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. If the asset has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset. n Inputs to level 3 values are unobservable inputs for the asset. 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 at the measurement date (or market information for the inputs to any valuation models). As such unobservable inputs reflect the assumptions the business unit considers that market participants would use in pricing the asset. Examples are certain private equity investments and private placements. Page 107 D2 - Total assets - Valuation bases/fair value hierarchy continued Financial assets of operations classified as held for sale have been analysed by underlying financial assets in the following tables. Fair value hierarchy Investment property and financial assets - total 2013 Level 1 £m Level 2 £m Level 3 £m Sub-total fair value £m Amortised cost £m Less: Assets of operations classified as held for sale £m Balance sheet total £m Investment property - - 9,451 9,451 - - 9,451 Loans - 3,115 15,362 18,477 5,402 - 23,879 Debt securities 77,042 40,884 8,879 126,805 - (2,420) 124,385 Equity securities 36,835 102 443 37,380 - (54) 37,326 Other investments (including derivatives) 24,132 4,283 3,036 31,451 - (201) 31,250 Assets of operations classified as held for sale - - - - - 2,675 2,675 Total 138,009 48,384 37,171 223,564 5,402 - 228,966 Total % 60.3% 21.1% 16.2% 97.6% 2.4% 100.0% Assets of operations classified as held for sale 2,245 282 148 2,675 - - 2,675 Total (excluding assets held for sale) 135,764 48,102 37,023 220,889 5,402 - 226,291 Total % (excluding assets held for sale) 60.0% 21.2% 16.4% 97.6% 2.4% 100.0% FY12 Total Restated 162,250 78,396 13,439 254,085 8,961 - 263,046 FY12 Total % Restated 61.7% 29.8% 5.1% 96.6% 3.4% 100.0% At 31 December 2013, the proportion of total financial assets and investment property classified as Level 1 in the fair value hierarchy was 60.3% (FY12: 61.7%). The proportion of Level 2 financial investments, loans and investment properties reduced to 21.1% (FY12: 29.8%) while those classified as Level 3 increased to 16.2% (FY12: 5.1%). Movements in the proportion of assets held in each fair value hierarchy level have been driven by the following factors: n The sale of the Group's US business in October 2013 where the majority of our Level 2 financial investments were previously held. n The reclassification of £29.4 billion of mainly debt securities from Level 1 to Level 2, as a result of the enhanced understanding of pricing vendor methodologies for the fair value classification of certain debt securities. n The reclassification of £14.6 billion of mortgage assets in the UK business held within Level 2 loans to Level 3 as a result of the reassessment of significant inputs used in the valuation, together with revisions to some of the models used. n Investment property of £9.5 billion has been reclassified from Level 2 to Level 3, reflecting a reassessment of observable inputs and related market activity. Excluding assets classified as held for sale, the proportion of Level 1 assets at 31 December 2013 is 60.0% with Level 2 assets at 21.2%. D3 - Analysis of asset quality The analysis of assets that follows provides information about the assets held by the Group. The amounts in individual line items below may differ from those presented in the IFRS section of this document, as the numbers below includes assets which are held for sale. D3.1 - Investment property 2013 Restated 1 2012 Fair value hierarchy Fair value hierarchy Investment property - Total Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Lease to third parties under operating leases - - 9,447 9,447 - 9,946 - 9,946 Vacant investment property/held for capital appreciation - - 4 4 - 11 - 11 Total - - 9,451 9,451 - 9,957 - 9,957 Total % - - 100.0% 100.0% - 100.0% - 100.0% Assets of operations classified as held for sale - - - - - 18 - 18 Total (excluding assets held for sale) - - 9,451 9,451 - 9,939 - 9,939 Total % (excluding assets held for sale) - - 100.0% 100.0% - 100.0% - 100.0% 2013 Restated1 2012 Fair value hierarchy Fair value hierarchy Investment property - Policyholder assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Lease to third parties under operating leases - - 3,562 3,562 - 4,173 - 4,173 Vacant investment property/held for capital appreciation - - 2 2 - - - - Total - - 3,564 3,564 - 4,173 - 4,173 Total % - - 100.0% 100.0% - 100.0% - 100.0% Assets of operations classified as held for sale - - - - - 12 - 12 Total (excluding assets held for sale) - - 3,564 3,564 - 4,161 - 4,161 Total % (excluding assets held for sale) - - 100.0% 100.0% - 100.0% - 100.0% 1 The statement of financial position hs been restated following the adoption of IFRS 10 'Consolidated Financials Statements' - see note B2 for details. There is no impact on the result for any year presented as a result of this restatement. Page 108 D3 - Analysis of asset quality continued 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Investment property - Participating fund assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Lease to third parties under operating leases - - 5,646 5,646 - 5,530 - 5,530 Vacant investment property/held for capital appreciation - - 2 2 - 1 - 1 Total - - 5,648 5,648 - 5,531 - 5,531 Total % - - 100.0% 100.0% - 100.0% - 100.0% Assets of operations classified as held for sale - - - - - - - - Total (excluding assets held for sale) - - 5,648 5,648 - 5,531 - 5,531 Total % (excluding assets held for sale) - - 100.0% 100.0% - 100.0% - 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Investment property - Shareholder assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Lease to third parties under operating leases - - 239 239 - 243 - 243 Vacant investment property/held for capital appreciation - - - - - 10 - 10 Total - - 239 239 - 253 - 253 Total % - - 100.0% 100.0% - 100.0% - 100.0% Assets of operations classified as held for sale - - - - - 6 - 6 Total (excluding assets held for sale) - - 239 239 - 247 - 247 Total % (excluding assets held for sale) - - 100.0% 100.0% - 100.0% - 100.0% 97.5% (FY12: 97.5%) of total investment properties by value are held in unit-linked or participating funds. Shareholder exposure to investment properties is principally through investments in French commercial property. Investment properties are stated at their market values as assessed by qualified external independent valuers or by local qualified staff of the Group, all with recent relevant experience. Values are calculated using a discounted cash flow approach and are based on current rental income plus anticipated uplifts at the next rent review, lease expiry or break option taking into consideration lease incentives, assuming no further growth in the estimated rental value of the property. This uplift and the discount rate are derived from rates implied by recent market transactions on similar properties where available. Upon reassessment of these inputs and related market activity, it was concluded that the significant inputs are non-market observable and these assets have been reclassified from Level 2 to Level 3 in 2013. 99.9% (FY12: 99.9%) of total investment properties by value are leased to third parties under operating leases, with the remainder either being vacant or held for capital appreciation. Page 109 D3 - Analysis of asset quality continued D3.2 - Loans The Group loan portfolio is principally made up of: n Policy loans which are generally collateralised by a lien or charge over the underlying policy; n 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; n Mortgage loans collateralised by property assets; and n Other loans, which include loans to brokers and intermediaries. Loans with fixed maturities, including policy loans, mortgage loans (at amortised cost) and loans and advances to banks, are recognised when cash is advanced to borrowers. These 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. For certain mortgage loans, the Group has taken advantage of the fair value option under IAS 39 to present the mortgages, associated borrowings, other liabilities and derivative financial instruments at fair value, since they are managed together on a fair value basis. The mortgage loans are not traded in active markets. These investments are valued using internal models with inputs such as current property values and credit assumptions. Upon reassessment of these inputs and related market activity these assets have been reclassified from Level 2 to Level 3. Loans - Total 2013 United Kingdom & Ireland £m Europe £m Canada £m Asia £m United States £m Total £m Policy loans 24 836 - 29 - 889 Loans and advances to banks 4,844 - - - - 4,844 Mortgage loans 17,910 1 - - - 17,911 Other loans 121 38 76 - - 235 Total 22,899 875 76 29 - 23,879 Total % 95.9% 3.7% 0.3% 0.1% 0.0% 100.0% Assets of operations classified as held for sale - - - - - - Total (excluding assets held for sale) 22,899 875 76 29 - 23,879 Total % (excluding assets held for sale) 95.9% 3.7% 0.3% 0.1% 0.0% 100.0% FY12 Total 23,562 862 83 30 3,397 27,934 FY12 Total % 84.3% 3.1% 0.3% 0.1% 12.2% 100.0% Loans - Policyholders assets 2013 United Kingdom & Ireland £m Europe £m Canada £m Asia £m United States £m Total £m Policy loans - - - 7 - 7 Loans and advances to banks 464 - - - - 464 Mortgage loans - - - - - - Other loans - - - - - - Total 464 - - 7 - 471 Total % 98.5% 0.0% 0.0% 1.5% 0.0% 100.0% Assets of operations classified as held for sale - - - - - - Total (excluding assets held for sale) 464 - - 7 - 471 Total % (excluding assets held for sale) 98.5% 0.0% 0.0% 1.5% 0.0% 100.0% FY12 Total 604 - - 1 - 605 FY12 Total % 99.8% 0.0% 0.0% 0.2% 0.0% 100.0% Loans - Participating fund assets 2013 United Kingdom & Ireland £m Europe £m Canada £m Asia £m United States £m Total £m Policy loans 18 825 - 19 - 862 Loans and advances to banks 3,827 - - - - 3,827 Mortgage loans 785 1 - - - 786 Other loans 42 18 - - - 60 Total 4,672 844 - 19 - 5,535 Total % 84.5% 15.2% 0.0% 0.3% 0.0% 100.0% Assets of operations classified as held for sale - - - - - - Total (excluding assets held for sale) 4,672 844 - 19 - 5,535 Total % (excluding assets held for sale) 84.5% 15.2% 0.0% 0.3% 0.0% 100.0% FY12 Total 4,398 848 - - 316 5,562 FY12 Total % 79.1% 15.2% 0.0% 0.0% 5.7% 100.0% Page 110 D3 - Analysis of asset quality continued D3.2 - Loans continued Loans - Shareholder assets 2013 United Kingdom & Ireland £m Europe £m Canada £m Asia £m United States £m Total £m Policy loans 6 11 - 3 - 20 Loans and advances to banks 553 - - - - 553 Mortgage loans 17,125 - - - - 17,125 Other loans 79 20 76 - - 175 Total 17,763 31 76 3 - 17,873 Total % 99.4% 0.2% 0.4% 0.0% 0.0% 100.0% Assets of operations classified as held for sale - - - - - - Total (excluding assets held for sale) 17,763 31 76 3 - 17,873 Total % (excluding assets held for sale) 99.4% 0.2% 0.4% 0.0% 0.0% 100.0% FY12 Total 18,558 14 83 31 3,081 21,767 FY12 Total % 85.2% 0.1% 0.4% 0.1% 14.2% 100.0% The value of the Group's loan portfolio (including Policyholder, Participating Fund and Shareholder assets), at 31 December 2013 stood at £23.9 billion (FY12: £27.9 billion), a decrease of £4.0 billion, with £3.4 billion of this reduction driven by the disposal of our US business in 2013. The total shareholder exposure to loans decreased to £17.9 billion (FY12: £21.8 billion), principally as a result of our US business disposal in 2013 and represented 75% of the total loan portfolio, with the remaining 25% split between participating funds (£5.5 billion) and policyholder assets (£0.5 billion). Of the Group's total loan portfolio (including Policyholder, Participating Fund and Shareholder assets), 75% (FY12: 79%) is invested in mortgage loans. Mortgage loans - Shareholder assets 2013 United Kingdom & Ireland £m United States £m Total £m Non-securitised mortgage loans - Residential (Equity release) 3,106 - 3,106 - Commercial 7,748 - 7,748 - Healthcare 4,102 - 4,102 14,956 - 14,956 Securitised mortgage loans 2,169 - 2,169 Total 17,125 - 17,125 Assets of operations classified as held for sale - - - Total (excluding assets held for sale) 17,125 - 17,125 FY12 Total 18,211 2,859 21,070 The Group's mortgage loan portfolio is mainly focused in the UK, across various sectors, including residential loans, commercial loans and government supported healthcare loans. Aviva's shareholder exposure to mortgage loans accounts for 96% of total shareholder asset loans. This section focuses on explaining the shareholder risk within these exposures. United Kingdom & Ireland (Non-securitised mortgage loans) Residential The UK non-securitised residential mortgage portfolio has a total current value of £3.1billion (FY12: £3.2 billion). The movement from the prior year is due to £0.5 billion of new loans and accrued interest, £0.5 billion of fair value losses and £0.1 billion of redemptions. These mortgages are all in the form of equity release, whereby homeowners mortgage their property to release cash equity. Due to the low relative levels of equity released in each property, they predominantly have a Loan to Value ("LTV") of below 70%, and the average LTV across the portfolio is approximately 29.3% (FY12: 29.6%). Healthcare Primary Healthcare & PFI businesses loans included within shareholder assets are £4.1billion (FY12: £4.1 billion) and 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. On a market value basis, we estimate the average LTV of these mortgages to be 89%, although as explained above, we do not consider this to be a key risk indicator. Income support from the Government bodies and the social need for these premises provide sustained income stability. Aviva therefore considers these loans to be lower risk. Page 111 D3 - Analysis of asset quality continued D3.2 - Loans continued Commercial Gross exposure by loan to value and arrears is shown in the table below. Shareholder assets 2013 >120% £m 115-120% £m 110-115% £m 105-110% £m 100-105% £m 95-100% £m 90-95% £m 80-90% £m 70-80% £m <70% £m Total £m Not in arrears 19 57 65 154 142 887 871 1,342 1,224 1,404 6,165 0 - 3 months - - - - 510 122 - - - - 632 3 - 6 months - - - - - 96 625 - - - 721 6 - 12 months - - - - - 68 - - - - 68 > 12 months - - - - - 162 - - - - 162 Total 19 57 65 154 652 1,335 1,496 1,342 1,224 1,404 7,748 Of the total £7.7 billion of UK non-securitised commercial mortgage loan in the shareholder fund, £7.5 billion are held by our UK Life business, of which £7.2 billion back annuity liabilities, and are stated on a fair value basis. The loan exposures for our UK Life business are calculated on a discounted cash flow basis, and include a risk adjustment through the use of Credit Risk Adjusted Value ("CRAV") methods. Aviva UK General Insurance hold the remaining £0.2 billion of loans which are stated on an amortised cost basis and are subject to impairment review, using a fair value methodology calibrated to the UK Life approach, adjusted for specific portfolio characteristics. For the commercial mortgages held by the UK Life and UK General Insurance business, loan service collection ratios, a key indicator of mortgage portfolio performance, improved slightly to 1.20x (FY12: 1.18x). Loan Interest Cover ("LIC"), which is defined as the annual net rental income (including rental deposits and less ground rent) divided by the annual loan interest service, was flat at 1.40x (FY12: 1.40x). Mortgage LTVs decreased during the year from 95% to 83% (CRAV basis) largely due to an increase in gilt spot rates (on average 74bps) causing the value of the mortgage assets to decrease, combined with a slight increase in property values c1.5% during the year. All loans in arrears have been assessed for impairment. Of the £1,583 million (FY12: £446 million) value of loans in arrears included within our shareholder assets, the interest and capital amount in arrears is only £15.7 million. During 2013 there has been a rise in the impairments, restructuring of loans and requests for forbearance. These relate to loans made prior to the current financial downturn, with particular exposure to the retail sector in the north England. As a result, at HY13 we increased allowances on commercial mortgages (including Healthcare and PFI mortgages) by £0.5 billion. This included a net increase of £0.3 billion and explicit recognition of the £0.2 billion margin previously held implicitly within the reinvestment margins. In the second half of 2013, commercial mortgages have performed in line with expectations, with the impact of the defaults offset by the release of the default allowances. At FY13 the total allowances for commercial mortgage defaults was £1.3 billion (FY12: £1.2 billion including an implicit reinvestment margin of £0.2 billion) against the risk of default on our riskier mortgages. For the UKL (CPF and Healthcare) mortgages with an LTV of greater 100% there was negative equity at FY13 of £0.9 billion compared with the value of the underlying properties. The provision of £1.3 billion therefore would be available to contribute to this amount. The valuation allowance (including supplementary allowances) of £1.3 billion made in the UK Life business for commercial mortgages, including Healthcare and PFI mortgages, held by Aviva Annuity UK Limited and carried at fair value equates to 124bps at 31 December 2013 (FY12: 89bps). The total valuation allowance held by Aviva Annuity UK Limited in respect of corporate bonds and mortgages, including Healthcare and PFI mortgages is £2.0 billion (FY12: £2.0 billion - including the implicit margin of £0.2 billion) over the remaining term of the UK Life corporate bond and mortgage portfolio. In addition, we hold £148 million (FY12: £118 million) of impairment provisions in our UK General Insurance mortgage portfolio, which is carried at amortised cost. The UK portfolio remains well diversified in terms of property type, location and tenants as well as the spread of loans written over time. The risks in commercial mortgages are addressed through several layers of protection with the mortgage risk profile being primarily driven by the ability of the underlying tenant rental income to cover loan interest and amortisation. Should any single tenant default on their rental payment, rental from other tenants backing the same loan often ensures the loan interest cover does not fall below 1.0x. Where there are multiple loans to a single borrower further protection may be achieved through cross-charging (or pooling) such that any single loan is also supported by rents received within other pool loans. Additionally, there may be support provided by the borrower of the loan itself and further loss mitigation from any general floating charge held over assets within the borrower companies. If the LIC cover falls below 1.0x and the borrower defaults then Aviva still retains the option of selling the security or restructuring the loans and benefiting from the protection of the collateral. A combination of these benefits and the high recovery levels afforded by property collateral (compared to corporate debt or other uncollateralised credit exposures) results in the economic exposure being significantly lower than the gross exposure reported above. Securitised mortgage loans Funding for the securitised residential mortgage assets (£2.2 billion) was obtained by issuing loan note securities. Of these loan notes approximately £180 million are held by group companies. The remainder is held by third parties external to Aviva. As any cash shortfall arising once all mortgages have redeemed is borne by the loan note holders, the majority of the credit risk of these mortgages is borne by third parties. Securitised residential mortgages held are predominantly issued through vehicles in the UK. Page 112 D3 - Analysis of asset quality continued D3.3 - Financial investments 2013 Restated 2012 Financial Investments - Total Cost/ amortised cost £m Unrealised gains £m Impairment and unrealised losses £m Fair value £m Cost/ amortised cost £m Unrealised gains £m Impairment and unrealised losses £m Fair value £m Debt securities 120,316 8,164 (1,675) 126,805 148,540 15,316 (2,079) 161,777 Equity securities 31,164 7,775 (1,559) 37,380 31,833 4,753 (2,273) 34,313 Other investments 29,454 2,706 (709) 31,451 27,417 1,976 (325) 29,068 Total 180,934 18,645 (3,943) 195,636 207,790 22,045 (4,677) 225,158 Assets of operations classified as held for sale 2,705 92 (122) 2,675 32,834 3,762 (181) 36,415 Total (excluding assets held for sale) 178,229 18,553 (3,821) 192,961 174,956 18,283 (4,496) 188,743 Aviva holds large quantities of high quality bonds, primarily to match our liability to make guaranteed payments to policyholders. Some credit risk is taken, partly to increase returns to policyholders and partly to optimise the risk/return profile for shareholders. The risks are consistent with the products we offer and the related investment mandates, and are in line with our risk appetite. The Group also holds equities, the majority of which are held in participating funds and policyholder funds, where they form an integral part of the investment expectations of policyholders and follow well-defined investment mandates. Some equities are also held in shareholder funds. The vast majority of equity investments are valued at quoted market prices. D3.3.1 - Debt securities Fair value hierarchy Debt securities - Total 2013 Level 1 £m Level 2 £m Level 3 £m Total £m UK Government 15,710 1,710 10 17,430 Non-UK Government 32,002 10,358 1,534 43,894 Europe 30,149 6,652 1,534 38,335 North America 230 2,570 - 2,800 Asia Pacific & Other 1,623 1,136 - 2,759 Corporate bonds - Public utilities 4,186 3,752 75 8,013 Corporate convertible bonds 179 1 209 389 Other corporate bonds 22,506 20,209 6,360 49,075 Other 2,459 4,854 691 8,004 Total 77,042 40,884 8,879 126,805 Total % 60.8% 32.2% 7.0% 100.0% Assets of operations classified as held for sale 2,138 282 - 2,420 Total (excluding assets held for sale) 74,904 40,602 8,879 124,385 Total % (excluding assets held for sale) 60.2% 32.7% 7.1% 100.0% FY12 Restated 108,107 43,588 10,082 161,777 FY12 % Restated 66.9% 26.9% 6.2% 100.0% Fair value hierarchy Debt securities - Policyholders assets 2013 Level 1 £m Level 2 £m Level 3 £m Total £m UK Government 3,272 19 - 3,291 Non-UK Government 1,215 783 - 1,998 Europe 1,046 495 - 1,541 North America 8 111 - 119 Asia Pacific & Other 161 177 - 338 Corporate bonds - Public utilities 69 173 3 245 Corporate convertible bonds - 1 - 1 Other corporate bonds 1,182 3,959 342 5,483 Other 904 907 6 1,817 Total 6,642 5,842 351 12,835 Total % 51.8% 45.5% 2.7% 100.0% Assets of operations classified as held for sale 13 3 - 16 Total (excluding assets held for sale) 6,629 5,839 351 12,819 Total % (excluding assets held for sale) 51.7% 45.6% 2.7% 100.0% FY12 Restated 14,062 2,267 165 16,494 FY12 % Restated 85.3% 13.7% 1.0% 100.0% Page 113 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.1 - Debt securities continued Fair value hierarchy Debt securities - Participating fund assets 2013 Level 1 £m Level 2 £m Level 3 £m Total £m UK Government 8,470 1,062 - 9,532 Non-UK Government 26,255 4,072 1,367 31,694 Europe 24,613 3,438 1,367 29,418 North America 192 11 - 203 Asia Pacific & Other 1,450 623 - 2,073 Corporate bonds - Public utilities 3,534 637 54 4,225 Corporate convertible bonds 179 - 129 308 Other corporate bonds 17,865 6,682 5,741 30,288 Other 1,344 2,593 626 4,563 Total 57,647 15,046 7,917 80,610 Total % 71.5% 18.7% 9.8% 100.0% Assets of operations classified as held for sale 1,890 253 - 2,143 Total (excluding assets held for sale) 55,757 14,793 7,917 78,467 Total % (excluding assets held for sale) 71.0% 18.9% 10.1% 100.0% FY12 Restated 68,999 5,087 9,490 83,576 FY12 % Restated 82.5% 6.1% 11.4% 100.0% Fair value hierarchy Debt securities - Shareholder assets 2013 Level 1 £m Level 2 £m Level 3 £m Total £m UK Government 3,968 629 10 4,607 Non-UK Government 4,532 5,503 167 10,202 Europe 4,490 2,719 167 7,376 North America 30 2,448 - 2,478 Asia Pacific & Other 12 336 - 348 Corporate bonds - Public utilities 583 2,942 18 3,543 Corporate convertible bonds - - 80 80 Other corporate bonds 3,459 9,568 277 13,304 Other 211 1,354 59 1,624 Total 12,753 19,996 611 33,360 Total % 38.2% 59.9% 1.9% 100.0% Assets of operations classified as held for sale 235 26 - 261 Total (excluding assets held for sale) 12,518 19,970 611 33,099 Total % (excluding assets held for sale) 37.8% 60.3% 1.9% 100.0% FY12 Restated 25,046 36,234 427 61,707 FY12 % Restated 40.6% 58.7% 0.7% 100.0% 1.9% (FY12: 0.7%) of shareholder exposure to debt securities is fair valued using models with significant unobservable market parameters (classified as Fair Value 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. 38.2% (FY12: 40.6%) of shareholder exposure to debt securities is based on quoted prices in an active market and are therefore classified as Fair Value Level 1. This has decreased due to the reclassification of certain debt securities to Level 2 as a result of the enhanced understanding of pricing vendor methodologies for the fair value classification, partially offset by the sale of our US business where the majority of our Level 2 investments were held. Excluding assets held for sale, 37.8% of shareholder debt securities are classified as Level 1. Page 114 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.1 - Debt securities continued External ratings Debt securities - Total 2013 AAA £m AA £m A £m BBB £m Less than BBB £m Non-rated £m Total £m Government UK Government - 17,175 46 - - 76 17,297 UK local authorities - - - - - 133 133 Non-UK Government 10,968 16,083 3,173 13,104 399 167 43,894 10,968 33,258 3,219 13,104 399 376 61,324 Corporate Public utilities 6 108 4,001 3,381 83 434 8,013 Convertibles and bonds with warrants - - - 303 - 86 389 Other corporate bonds 4,037 7,225 16,784 13,353 1,834 5,842 49,075 4,043 7,333 20,785 17,037 1,917 6,362 57,477 Certificates of deposits 3 511 412 6 - 2 934 Structured RMBS1 non-agency ALT A - - - - - - - RMBS1 non-agency prime 111 22 - 9 - 10 152 RMBS1 agency - - - - - - - 111 22 - 9 - 10 152 CMBS2 186 86 15 48 - 1 336 ABS3 50 329 172 32 89 10 682 CDO (including CLO)4 444 - - - - - 444 ABCP5 29 - - - - 5 34 709 415 187 80 89 16 1,496 Wrapped credit - 18 293 83 34 46 474 Other 598 371 1,481 1,276 1,169 53 4,948 Total 16,432 41,928 26,377 31,595 3,608 6,865 126,805 Total % 13.0% 33.1% 20.8% 24.9% 2.8% 5.4% 100.0% Assets of operations classified as held for sale 7 10 140 2,212 35 16 2,420 Total (excluding assets held for sale) 16,425 41,918 26,237 29,383 3,573 6,849 124,385 Total % (excluding assets held for sale) 13.2% 33.7% 21.1% 23.6% 2.9% 5.5% 100.0% FY12 Restated 39,467 27,401 38,594 41,147 6,745 8,423 161,777 FY12 % Restated 24.4% 16.9% 23.9% 25.4% 4.2% 5.2% 100.0% 1 RMBS - Residential Mortgage Backed Security. 2 CMBS - Commercial Mortgage Backed Security. 3 ABS - Asset Backed Security. 4 CDO - Collateralised Debt Obligation, CLO - Collateralised Loan Obligation. 5 ABCP - Asset Backed Commercial Paper. Page 115 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.1 - Debt securities continued External ratings Debt securities - Policyholders assets 2013 AAA £m AA £m A £m BBB £m Less than BBB £m Non-rated £m Total £m Government UK Government - 3,290 1 - - - 3,291 UK local authorities - - - - - - - Non-UK Government 426 183 797 528 30 34 1,998 426 3,473 798 528 30 34 5,289 Corporate Public utilities - 13 124 85 4 19 245 Convertibles and bonds with warrants - - - - - 1 1 Other corporate bonds 83 516 2,256 1,329 424 875 5,483 83 529 2,380 1,414 428 895 5,729 Certificates of deposits - 409 281 4 - 2 696 Structured RMBS1 non-agency ALT A - - - - - - - RMBS1 non-agency prime - - - - - - - RMBS1 agency - - - - - - - - - - - - - - CMBS2 3 - - 2 - - 5 ABS3 - 6 9 - - - 15 CDO (including CLO)4 - - - - - - - ABCP5 - - - - - - - 3 6 9 2 - - 20 Wrapped credit - - 8 3 - - 11 Other 133 82 326 281 257 11 1,090 Total 645 4,499 3,802 2,232 715 942 12,835 Total % 5.0% 35.0% 29.6% 17.4% 5.6% 7.4% 100.0% Assets of operations classified as held for sale 6 - 3 7 - - 16 Total (excluding assets held for sale) 639 4,499 3,799 2,225 715 942 12,819 Total % (excluding assets held for sale) 5.0% 35.1% 29.6% 17.4% 5.6% 7.3% 100.0% FY12 Restated 5,205 1,389 4,710 3,704 999 487 16,494 FY12 % Restated 31.5% 8.4% 28.6% 22.4% 6.1% 3.0% 100.0% Page 116 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.1 - Debt securities continued External ratings Debt securities - Participating fund assets 2013 AAA £m AA £m A £m BBB £m Less than BBB £m Non-rated £m Total £m Government UK Government - 9,523 - - - 9 9,532 UK local authorities - - - - - - - Non-UK Government 6,255 12,459 1,505 10,993 351 131 31,694 6,255 21,982 1,505 10,993 351 140 41,226 Corporate Public utilities - 59 1,567 2,320 79 200 4,225 Convertibles and bonds with warrants - - - 300 - 8 308 Other corporate bonds 2,972 5,374 9,399 8,676 1,119 2,748 30,288 2,972 5,433 10,966 11,296 1,198 2,956 34,821 Certificates of deposits - 37 75 2 - - 114 Structured RMBS1 non-agency ALT A - - - - - - - RMBS1 non-agency prime 39 - - 9 - - 48 RMBS1 agency - - - - - - - 39 - - 9 - - 48 CMBS2 70 35 9 31 - 1 146 ABS3 18 29 66 17 28 - 158 CDO (including CLO)4 444 - - - - - 444 ABCP5 7 - - - - - 7 539 64 75 48 28 1 755 Wrapped credit - 13 42 20 - - 75 Other 431 267 1,070 921 844 38 3,571 Total 10,236 27,796 13,733 23,289 2,421 3,135 80,610 Total % 12.7% 34.5% 17.0% 28.9% 3.0% 3.9% 100.0% Assets of operations classified as held for sale - 10 131 1,958 30 14 2,143 Total (excluding assets held for sale) 10,236 27,786 13,602 21,331 2,391 3,121 78,467 Total % (excluding assets held for sale) 13.1% 35.4% 17.3% 27.2% 3.0% 4.0% 100.0% FY12 Restated 21,974 17,135 16,104 22,019 3,822 2,522 83,576 FY12 % Restated 26.3% 20.5% 19.3% 26.3% 4.6% 3.0% 100.0% Page 117 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.1 - Debt securities continued External ratings Debt securities - Shareholder assets 2013 AAA £m AA £m A £m BBB £m Less than BBB £m Non-rated £m Total £m Government UK Government - 4,362 45 - - 67 4,474 UK local authorities - - - - - 133 133 Non-UK Government 4,287 3,441 871 1,583 18 2 10,202 4,287 7,803 916 1,583 18 202 14,809 Corporate Public utilities 6 36 2,310 976 - 215 3,543 Convertibles and bonds with warrants - - - 3 - 77 80 Other corporate bonds 982 1,335 5,129 3,348 291 2,219 13,304 988 1,371 7,439 4,327 291 2,511 16,927 Certificates of deposits 3 65 56 - - - 124 Structured RMBS1 non-agency ALT A - - - - - - - RMBS1 non-agency prime 72 22 - - - 10 104 RMBS1 agency - - - - - - - 72 22 - - - 10 104 CMBS2 113 51 6 15 - - 185 ABS3 32 294 97 15 61 10 509 CDO (including CLO)4 - - - - - - - ABCP5 22 - - - - 5 27 167 345 103 30 61 15 721 Wrapped credit - 5 243 60 34 46 388 Other 34 22 85 74 68 4 287 Total 5,551 9,633 8,842 6,074 472 2,788 33,360 Total % 16.6% 28.9% 26.5% 18.2% 1.4% 8.4% 100.0% Assets of operations classified as held for sale 1 - 6 247 5 2 261 Total (excluding assets held for sale) 5,550 9,633 8,836 5,827 467 2,786 33,099 Total % (excluding assets held for sale) 16.8% 29.1% 26.7% 17.6% 1.4% 8.4% 100.0% FY12 Restated 12,288 8,877 17,780 15,424 1,924 5,414 61,707 FY12 % Restated 19.9% 14.4% 28.8% 25.0% 3.1% 8.8% 100.0% The overall quality of the book remains strong, despite the continuing downgrade activity by the major rating agencies during the period. 44% of shareholder exposure to debt securities is in government holdings (FY12: 25%). Our corporate debt securities portfolio represents 51% (FY12: 66%) of total shareholder debt securities. The majority of non-rated corporate bonds are held by our businesses in the UK. At 31 December 2013, the proportion of our shareholder debt securities that are investment grade remained stable at 90.2% (FY12: 88.1%). The remaining 9.8% of shareholder debt securities that do not have an external rating of BBB or higher can be split as follows: n 1.4% are debt securities that are rated as below investment grade; n 8.4% are not rated by the major rating agencies. Of the securities not rated by an external agency 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 £2.4 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 Group has extremely limited exposure to CDOs, CLOs and 'Sub-prime' debt securities. Asset backed securities (ABS) are held primarily by our UK Life business (£496 million). 86.1% of the Group's shareholder holdings in ABS are investment grade. ABS that either have a rating below BBB or are not rated represent approximately 0.2% of shareholder exposure to debt securities. Page 118 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.2 - Equity securities 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Equity securities - Total assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Public utilities 3,716 - - 3,716 3,696 - - 3,696 Banks, trusts and insurance companies 7,536 88 383 8,007 7,150 72 415 7,637 Industrial miscellaneous and all other 25,186 14 60 25,260 22,327 158 58 22,543 Non-redeemable preferred shares 397 - - 397 437 - - 437 Total 36,835 102 443 37,380 33,610 230 473 34,313 Total % 98.5% 0.3% 1.2% 100.0% 98.0% 0.7% 1.3% 100.0% Assets of operations classified as held for sale 52 - 2 54 1,068 180 - 1,248 Total (excluding assets held for sale) 36,783 102 441 37,326 32,542 50 473 33,065 Total % (excluding assets held for sale) 98.5% 0.3% 1.2% 100.0% 98.4% 0.2% 1.4% 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Equity securities - Policyholder assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Public utilities 2,727 - - 2,727 2,575 - - 2,575 Banks, trusts and insurance companies 4,982 57 1 5,040 3,991 - 2 3,993 Industrial miscellaneous and all other 17,967 - 2 17,969 15,852 137 1 15,990 Non-redeemable preferred shares 100 - - 100 90 - - 90 Total 25,776 57 3 25,836 22,508 137 3 22,648 Total % 99.8% 0.2% 0.0% 100.0% 99.4% 0.6% 0.0% 100.0% Assets of operations classified as held for sale 2 - - 2 1,057 119 - 1,176 Total (excluding assets held for sale) 25,774 57 3 25,834 21,451 18 3 21,472 Total % (excluding assets held for sale) 99.8% 0.2% 0.0% 100.0% 99.9% 0.1% 0.0% 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Equity securities - Participating fund assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Public utilities 985 - - 985 1,103 - - 1,103 Banks, trusts and insurance companies 2,392 30 88 2,510 2,515 - 86 2,601 Industrial miscellaneous and all other 6,977 14 44 7,035 6,363 21 45 6,429 Non-redeemable preferred shares 14 - - 14 24 - - 24 Total 10,368 44 132 10,544 10,005 21 131 10,157 Total % 98.3% 0.4% 1.3% 100.0% 98.5% 0.2% 1.3% 100.0% Assets of operations classified as held for sale 49 - - 49 - - - - Total (excluding assets held for sale) 10,319 44 132 10,495 10,005 21 131 10,157 Total % (excluding assets held for sale) 98.3% 0.4% 1.3% 100.0% 98.5% 0.2% 1.3% 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Equity securities - Shareholder assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Public utilities 4 - - 4 18 - - 18 Banks, trusts and insurance companies 162 1 294 457 644 72 327 1,043 Industrial miscellaneous and all other 242 - 14 256 112 - 12 124 Non-redeemable preferred shares 283 - - 283 323 - - 323 Total 691 1 308 1,000 1,097 72 339 1,508 Total % 69.1% 0.1% 30.8% 100.0% 72.7% 4.8% 22.5% 100.0% Assets of operations classified as held for sale 1 - 2 3 11 61 - 72 Total (excluding assets held for sale) 690 1 306 997 1,086 11 339 1,436 Total % (excluding assets held for sale) 69.2% 0.1% 30.7% 100.0% 75.6% 0.8% 23.6% 100.0% 69.1% of our shareholder exposure to equity securities is based on quoted prices in an active market and as such is classified as Level 1 (FY12: 72.7%). The decrease in Level 1 shareholder equity securities reflects the sale of our holding in Delta Lloyd during the year. Excluding assets of operations classified as held for sale, 69.2% of shareholder exposure is to equities that are Level 1 (FY12: 75.6%). Shareholder investments include a strategic holding in Italian banks of £258 million (£132 million, net of any non-controlling interest share in the Group companies that own the investments). Page 119 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.3 - Other investments 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Other investments - Total Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Unit trusts and other investment vehicles 22,939 3,288 2,379 28,606 19,170 3,709 2,703 25,582 Derivative financial instruments 222 729 107 1,058 340 1,203 47 1,590 Deposits with credit institutions 590 11 - 601 702 11 26 739 Minority holdings in property management undertakings - 255 541 796 - 727 - 727 Other 381 - 9 390 321 - 109 430 Total 24,132 4,283 3,036 31,451 20,533 5,650 2,885 29,068 Total % 76.7% 13.6% 9.7% 100.0% 70.6% 19.4% 10.0% 100.0% Assets of operations classified as held for sale 55 - 146 201 445 709 396 1,550 Total (excluding assets held for sale) 24,077 4,283 2,890 31,250 20,088 4,941 2,489 27,518 Total % (excluding assets held for sale) 77.0% 13.7% 9.3% 100.0% 73.0% 18.0% 9.0% 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Other investments - Policyholder assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Unit trusts and other investment vehicles 22,713 3,108 3 25,824 18,909 3,423 56 22,388 Derivative financial instruments 20 5 - 25 34 7 - 41 Deposits with credit institutions 401 - - 401 515 - - 515 Minority holdings in property management undertakings - - - - - 6 - 6 Other 313 - - 313 311 - - 311 Total 23,447 3,113 3 26,563 19,769 3,436 56 23,261 Total % 88.3% 11.7% 0.0% 100.0% 85.0% 14.8% 0.2% 100.0% Assets of operations classified as held for sale 12 - - 12 206 51 - 257 Total (excluding assets held for sale) 23,435 3,113 3 26,551 19,563 3,385 56 23,004 Total % (excluding assets held for sale) 88.3% 11.7% 0.0% 100.0% 85.0% 14.8% 0.2% 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Other investments - Participating fund assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Unit trusts and other investment vehicles 1 167 2,243 2,411 - 264 2,231 2,495 Derivative financial instruments 182 407 97 686 132 300 - 432 Deposits with credit institutions 40 - - 40 44 - - 44 Minority holdings in property management undertakings - 241 438 679 - 605 - 605 Other 58 - 6 64 - - 62 62 Total 281 815 2,784 3,880 176 1,169 2,293 3,638 Total % 7.2% 21.0% 71.8% 100.0% 4.9% 32.1% 63.0% 100.0% Assets of operations classified as held for sale 6 - 124 130 70 - - 70 Total (excluding assets held for sale) 275 815 2,660 3,750 106 1,169 2,293 3,568 Total % (excluding assets held for sale) 7.3% 21.7% 71.0% 100.0% 3.0% 32.8% 64.2% 100.0% 2013 Restated 2012 Fair value hierarchy Fair value hierarchy Other investments - Shareholders assets Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Unit trusts and other investment vehicles 225 13 133 371 261 22 416 699 Derivative financial instruments 20 317 10 347 174 896 47 1,117 Deposits with credit institutions 149 11 - 160 143 11 26 180 Minority holdings in property management undertakings - 14 103 117 - 116 - 116 Other 10 - 3 13 10 - 47 57 Total 404 355 249 1,008 588 1,045 536 2,169 Total % 40.1% 35.2% 24.7% 100.0% 27.1% 48.2% 24.7% 100.0% Assets of operations classified as held for sale 37 - 22 59 169 658 396 1,223 Total (excluding assets held for sale) 367 355 227 949 419 387 140 946 Total % (excluding assets held for sale) 38.7% 37.4% 23.9% 100.0% 44.3% 40.9% 14.8% 100.0% In total 75.3% (FY12: 75.3%) of shareholder other investments are classified as Level 1 or 2 in the fair value hierarchy. The unit trusts and other investment vehicles invest in a variety of assets, which can include cash equivalents, debt, equity and property securities. Page 120 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.4 - Available for sale investments - Impairments and duration and amount of unrealised losses The total impairment expense for 2013 for AFS debt securities was £12 million (FY12: £12 million). The total AFS impairment expense relates to corporate bonds that are not yet in default but showed continued deterioration in market value from the previous impairment value. Total unrealised losses on AFS debt securities, equity securities and other investments at 31 December 2013 were £8 million (FY12: £74 million), £nil (FY12: £nil) and £nil (FY12: £5 million) respectively We have not recognised an impairment charge in respect of these unrealised losses as we believe the decline in fair value of these securities, relative to their amortised cost, to be temporary. 0 - 6 months 7 - 12 months more than 12 months Total 2013 Fair value1 £m Gross unrealised £m Fair value1 £m Gross unrealised £m Fair value1 £m Gross unrealised £m Fair value1 £m Gross unrealised £m Less than 20% loss position: Debt securities 25 - 9 - 279 (6) 313 (6) Equity securities - - - - - - - - Other investments - - - - 3 - 3 - 25 - 9 - 282 (6) 316 (6) 20%-50% loss position: Debt securities - - - - 3 (2) 3 (2) Equity securities - - - - - - - - Other investments - - - - - - - - - - - - 3 (2) 3 (2) Greater than 50% loss position: Debt securities - - - - - - - - Equity securities - - - - - - - - Other investments - - - - - - - - - - - - - - - - Total Debt securities 25 - 9 - 282 (8) 316 (8) Equity securities - - - - - - - - Other investments - - - - 3 - 3 - 25 - 9 - 285 (8) 319 (8) Assets of operations classified as held for sale - - - - - - - - Total (excluding assets held for sale) 25 - 9 - 285 (8) 319 (8) 1 Only includes AFS securities that are in unrealised loss positions. 0 - 6 months 7 - 12 months more than 12 months Total 2012 Fair value1 £m Gross unrealised £m Fair value1 £m Gross unrealised £m Fair value1 £m Gross unrealised £m Fair value1 £m Gross unrealised £m Less than 20% loss position: Debt securities 2,006 (14) 53 (3) 534 (11) 2,593 (28) Equity securities - - - - 2 - 2 - Other investments 8 - 8 - 20 (3) 36 (3) 2,014 (14) 61 (3) 556 (14) 2,631 (31) 20%-50% loss position: Debt securities - - - - 70 (34) 70 (34) Equity securities - - - - - - - - Other investments - - 2 (1) 2 (1) 4 (2) - - 2 (1) 72 (35) 74 (36) Greater than 50% loss position: Debt securities - - - - 7 (12) 7 (12) Equity securities - - - - - - - - Other investments - - - - - - - - - - - - 7 (12) 7 (12) Total Debt securities 2,006 (14) 53 (3) 611 (57) 2,670 (74) Equity securities - - - - 2 - 2 - Other investments 8 - 10 (1) 22 (4) 40 (5) 2,014 (14) 63 (4) 635 (61) 2,712 (79) Assets of operations classified as held for sale 2,014 (14) 63 (4) 231 (58) 2,308 (76) Total (excluding assets held for sale) - - - - 404 (3) 404 (3) 1 Only includes AFS securities that are in unrealised loss positions. Page 121 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.5 - Exposures to peripheral European countries Included in our debt securities and other financial assets are exposures to peripheral European countries. All of these assets are valued on a mark to market basis under IAS 39, and therefore our statement of financial position and income statement already reflect any reduction in value between the date of purchase and the balance sheet date. The significant majority of these holdings are within our participating funds where the risk to our shareholders is governed by the nature and extent of our participation within those funds. Net of non-controlling interests, our direct shareholder and participating fund asset exposure to the government (and local authorities and agencies) of Italy is £4.9 billion (FY12: £4.9 billion). Gross of non-controlling interests, 96% of our shareholder asset exposure to Italy arises from the investment exposure of our Italian business. Direct sovereign exposures to Greece, Ireland, Portugal, Italy and Spain (net of non-controlling interests, excluding policyholder assets) Participating Shareholder Total 2013 £bn 2012 £bn 2013 £bn 2012 £bn 2013 £bn 2012 £bn Greece - - - - - - Ireland 0.4 0.4 - - 0.4 0.4 Portugal 0.2 0.3 - - 0.2 0.3 Italy 4.5 4.5 0.4 0.4 4.9 4.9 Spain 0.9 0.9 0.5 0.5 1.4 1.4 Total Greece, Ireland, Portugal, Italy and Spain 6.0 6.1 0.9 0.9 6.9 7.0 Direct sovereign exposures to Greece, Ireland, Portugal, Italy and Spain (gross of non-controlling interests, excluding policyholder assets) Participating Shareholder Total 2013 £bn 2012 £bn 2013 £bn 2012 £bn 2013 £bn 2012 £bn Greece - - - - - - Ireland 0.4 0.4 - - 0.4 0.4 Portugal 0.2 0.3 - - 0.2 0.3 Italy 8.5 8.5 0.6 0.6 9.1 9.1 Spain 1.4 1.3 0.9 0.9 2.3 2.2 Total Greece, Ireland, Portugal, Italy and Spain 10.5 10.5 1.5 1.5 12.0 12.0 Page 122 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.6 - Non UK Government debt securities (gross of non-controlling interests) Policyholder Participating Shareholder Total Non UK Government Debt Securities 2013 £m Restated 2012 £m 2013 £m Restated 2012 £m 2013 £m 2012 £m 2013 £m Restated 2012 £m Austria 9 14 636 634 133 123 778 771 Belgium 29 45 1,475 1,342 154 172 1,658 1,559 France 108 189 9,714 9,073 1,909 1,944 11,731 11,206 Germany 146 217 1,922 2,390 763 957 2,831 3,564 Greece - - 1 - - - 1 - Ireland 21 35 364 363 28 26 413 424 Italy 255 263 8,458 8,518 628 617 9,341 9,398 Netherlands 43 65 1,222 1,194 399 228 1,664 1,487 Poland 649 673 885 1,015 490 445 2,024 2,133 Portugal - - 187 257 - - 187 257 Spain 101 36 1,355 1,317 930 854 2,386 2,207 European Supranational debt 89 136 2,612 2,928 1,583 1,470 4,284 4,534 Other European countries 91 238 587 646 359 421 1,037 1,305 Europe 1,541 1,911 29,418 29,677 7,376 7,257 38,335 38,845 Canada 7 18 171 195 2,198 2,517 2,376 2,730 United States 112 131 32 40 280 1,665 424 1,836 North America 119 149 203 235 2,478 4,182 2,800 4,566 Singapore 8 7 450 453 288 276 746 736 Sri Lanka 1 1 7 3 - - 8 4 Other 329 625 1,616 1,291 60 393 2,005 2,309 Asia Pacific and other 338 633 2,073 1,747 348 669 2,759 3,049 Total 1,998 2,693 31,694 31,659 10,202 12,108 43,894 46,460 Less: assets of operations classified as held for sale 13 197 1,649 556 201 2,274 1,863 3,027 Total (excluding assets held for sale) 1,985 2,496 30,045 31,103 10,001 9,834 42,031 43,433 At 31 December 2013, the Group's total non-UK government debt securities stood at £43.9 billion (FY12: £46.5 billion), a decrease of £2.6 billion. The significant majority of these holdings are within our participating funds where the risk to our shareholders is governed by the nature and extent of our participation within those funds. Our direct shareholder asset exposure to non-UK government debt securities amounts to £10.2 billion (FY12: £12.1 billion). The primary exposures, relative to total shareholder non-UK government debt exposure, are to Canadian (22%), French (19%), Spanish (9%), German (7%) and Italian (6%) government debt securities. The participating funds exposure to non-UK government debt amounts to £31.7 billion (FY12: £31.7 billion). The primary exposures, relative to total non-UK government debt exposures included within our participating funds, are to the government debt securities of France (31%), Italy (27%), Germany (6%), Belgium (5%), Spain (4%) and Netherlands (4%). Page 123 D3 - Analysis of asset quality continued D3.3 - Financial investments continued D3.3.7 - Exposure to worldwide bank debt securities Direct shareholder and participating fund assets exposures to worldwide bank debt securities (net of non-controlling interests, excluding policyholder assets) Shareholder assets Participating fund assets 2013 Total senior debt £bn Total subordinated debt £bn Total debt £bn Total senior debt £bn Total subordinated debt £bn Total debt £bn Austria - - - 0.2 - 0.2 France 0.2 - 0.2 3.4 0.9 4.3 Germany - - - 0.5 0.5 1.0 Italy 0.1 0.1 0.2 0.3 0.1 0.4 Netherlands 0.2 0.2 0.4 1.8 0.1 1.9 Spain 0.8 0.1 0.9 0.9 0.1 1.0 United Kingdom 0.6 0.3 0.9 0.7 0.9 1.6 United States 0.5 0.1 0.6 1.0 0.1 1.1 Other 0.4 0.3 0.7 1.7 0.5 2.2 Total 2.8 1.1 3.9 10.5 3.2 13.7 Less: assets of operations classified as held for sale - - - - - - Total (excluding assets held for sale) 2.8 1.1 3.9 10.5 3.2 13.7 FY12 Total 4.2 2.3 6.5 11.7 3.9 15.6 Net of non-controlling interests, our direct shareholder assets exposure to worldwide bank debt securities is £3.9 billion. The reduction from 2012 is principally driven by the disposal of our US business during 2013. The majority of our holding (72%) is in senior debt. The primary exposures are to Spanish (23%), UK (23%) and US (15%) banks. Net of non-controlling interests, the participating fund exposures to worldwide bank debt securities, where the risk to our shareholders is governed by the nature and extent of our participation within those funds, is £13.7 billion. The majority of the exposure (77%) is in senior debt. Participating funds are the most exposed to French (31%), Dutch (14%) and UK (12%) banks. Direct shareholder and participating fund assets exposures to worldwide bank debt securities (gross of non-controlling interests, excluding policyholder assets) Shareholder assets Participating fund assets 2013 Total senior debt £bn Total subordinated debt £bn Total debt £bn Total senior debt £bn Total subordinated debt £bn Total debt £bn Austria - - - 0.2 - 0.2 France 0.2 - 0.2 3.8 0.9 4.7 Germany 0.1 - 0.1 0.6 0.5 1.1 Italy 0.1 0.1 0.2 0.7 0.1 0.8 Netherlands 0.2 0.2 0.4 1.8 0.2 2.0 Spain 1.1 0.1 1.2 1.2 0.1 1.3 United Kingdom 0.6 0.3 0.9 0.8 1.0 1.8 United States 0.5 0.2 0.7 1.0 0.1 1.1 Other 0.5 0.3 0.8 2.0 0.6 2.6 Total 3.3 1.2 4.5 12.1 3.5 15.6 Less: assets of operations classified as held for sale - - - - - - Total (excluding assets held for sale) 3.3 1.2 4.5 12.1 3.5 15.6 FY12 Total 4.9 2.4 7.3 13.3 4.4 17.7 Gross of non-controlling interests, our direct shareholder assets exposure to worldwide bank debt securities is £4.5 billion. The majority of our holding (73%) is in senior debt. The primary exposures are to Spanish (27%), UK (20%) and US (16%) banks. Gross of non-controlling interests, the participating fund exposures to worldwide bank debt securities, where the risk to our shareholders is governed by the nature and extent of our participation within those funds, is £15.6 billion. The majority of the exposure (78%) is in senior debt. Participating funds are the most exposed to French (30%), Dutch (13%) and UK (12%) banks. Page 124 D3 - Analysis of asset quality continued D3.4 - Reinsurance assets The Group assumes and cedes reinsurance in the normal course of business, with retention limits varying by line of business. Reinsurance assets primarily include balances due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provisions or settled claims associated with the reinsured policies and in accordance with the relevant reinsurance contract. 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. For the table below, reinsurance asset credit ratings are stated in accordance with information from leading rating agencies. Financial assets that are past due but not impaired Arrears 2013 Neither past due nor impaired £m 0-3 months £m 3-6 months £m 6 months - 1 year £m Greater than 1 year £m Financial assets that have been impaired £m Total £m Policyholders assets 2,043 - - - - - 2,043 Participating fund assets 628 - - - - - 628 Shareholder assets 4,586 - - - - - 4,586 Total 7,257 - - - - - 7,257 Total % 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% Assets of operations classified as held for sale 37 - - - - - 37 Total (excluding assets held for sale) 7,220 - - - - - 7,220 Total % (excluding assets held for sale) 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% FY 2012 7,567 - - - - - 7,567 FY 2012 % 100.0% - - - - - 100.0% Ratings Ratings 2013 AAA £m AA £m A £m BBB £m Less than BBB £m Non-rated £m Total £m Policyholders assets - 10 1,608 43 - 382 2,043 Participating fund assets - 194 433 - - 1 628 Shareholder assets 25 3,684 650 35 6 186 4,586 Total 25 3,888 2,691 78 6 569 7,257 Total % 0.3% 53.6% 37.1% 1.1% 0.1% 7.8% 100.0% Assets of operations classified as held for sale - 17 - 9 - 11 37 Total (excluding assets held for sale) 25 3,871 2,691 69 6 558 7,220 Total % (excluding assets held for sale) 0.3% 53.6% 37.3% 1.0% 0.1% 7.7% 100.0% FY 2012 28 4,795 2,281 56 5 402 7,567 FY 2012 % 0.4% 63.4% 30.1% 0.7% 0.1% 5.3% 100.0% Page 125 D3 - Analysis of asset quality continued D3.5 - Receivables and other financial assets Financial assets that are past due but not impaired Arrears 2013 Neither past due nor impaired £m 0-3 months £m 3-6 months £m 6 months - 1 year £m Greater than 1 year £m Financial assets that have been impaired £m Total £m Policyholders assets 227 29 - 1 1 - 258 Participating fund assets 2,031 1 - 1 - - 2,033 Shareholder assets 4,753 26 26 16 21 4 4,846 Total 7,011 56 26 18 22 4 7,137 Total % 98.2% 0.8% 0.4% 0.2% 0.3% 0.1% 100.0% Assets of operations classified as held for sale 77 - - - - - 77 Total (excluding assets held for sale) 6,934 56 26 18 22 4 7,060 Total % (excluding held for sale) 98.2% 0.8% 0.4% 0.2% 0.3% 0.1% 100.0% FY 2012 Restated 7,790 46 13 14 26 - 7,889 FY 2012 % Restated 98.7% 0.6% 0.2% 0.2% 0.3% 0.0% 100.0% Credit terms vary from subsidiary to subsidiary, and from country to country, and are set locally within overall credit limits prescribed by the Group credit limit framework, and in line with the Group Credit Policy. The credit quality of receivables and other financial assets is managed at the local business unit level. Where assets classed as 'past due and impaired' exceed local credit limits, and are also deemed at sufficiently high risk of default, an analysis of the asset is performed and a decision is made whether to seek sufficient collateral from the counterparty or to write down the value of the asset as impaired. The Group reviews the carrying value of its receivables at each reporting period. If the carrying value of a receivable or other financial asset is greater than the recoverable amount, the carrying value is reduced through a charge to the income statement in the period of impairment. D3.6 - Cash and cash equivalents Cash and cash equivalents consist of cash at banks 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 normally those with less than three months maturity from the date of acquisition, and include certificates of deposit with maturities of less than three months at date of issue. D4 - Pension fund assets In addition to the assets recognised directly on the Group's statement of financial position outlined in the disclosures above, the Group is also exposed to the "Scheme assets" that are shown net of the present value of scheme liabilities within the IAS 19 net pension surplus. Pension surpluses are included within other assets and pension deficits are recognised within provisions in the Group's consolidated statement of financial position. Total scheme assets are comprised in the UK, Ireland and Canada as follows: 2013 2012 UK £m Ireland £m Canada £m Total £m UK £m Ireland £m Canada £m Total £m Bonds1 Fixed interest government 1,500 139 69 1,708 1,601 130 76 1,807 Fixed interest corporate 2,776 10 60 2,846 2,595 14 45 2,654 Index-linked 4,502 112 - 4,614 4,492 116 - 4,608 Equities 900 99 81 1,080 909 87 92 1,088 Property 1,074 13 - 1,087 914 12 - 926 Cash 518 1 21 540 514 44 13 571 Derivatives 225 55 - 280 386 1 - 387 Other1 239 2 2 243 236 2 2 240 Total fair value of assets 11,734 431 233 12,398 11,647 406 228 12,281 1 £179 million of transferrable insurance policies with other Group companies in the UK, previously disclosed within bonds, has been to reclassified to other assets for 2012. Page 126 D4 - Pension fund assets continued Total scheme assets are analysed by those that have a quoted price in an active market and those that do not as follows: 2013 2012 Total Quoted £m Total Unquoted £m Total £m Total Quoted £m Total Unquoted £m Total £m Bonds1 Fixed interest government 808 900 1,708 1,566 241 1,807 Fixed interest corporate 10 2,836 2,846 7 2,647 2,654 Index-linked 3,864 750 4,614 2,698 1,910 4,608 Equities 409 671 1,080 484 604 1,088 Property - 1,087 1,087 - 926 926 Cash 540 - 540 571 - 571 Derivatives 88 192 280 15 372 387 Other 1 - 243 243 - 240 240 Total fair value of assets 5,719 6,679 12,398 5,341 6,940 12,281 1 £179 million of transferrable insurance policies with other Group companies in the UK, previously disclosed within bonds, has been reclassified to other assets for 2012. Risk management and asset allocation strategy 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. To meet these objectives, each scheme's assets are invested in a portfolio, consisting primarily (nearly 75%) of debt securities. The investment strategy will continue to evolve over time and is expected to match to the liability profile increasingly closely. Main UK Scheme The Company works closely with the trustee, who is required to consult it on the investment strategy. Interest rate and inflation risks are managed using a combination of liability-matching assets and swaps. Exposure to equity risk has 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. On 5 March 2014, ASPS entered into a longevity swap covering approximately £5 billion of pensioner in payment scheme liabilities. The swap transfers longevity risk to three external reinsurers. 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. Refer to Note B16 for details on the movements in the main schemes' surpluses and deficits. D5 - Available funds To ensure access to liquidity as and when needed, the Group maintains £1.5 billion of undrawn committed central borrowing facilities with various highly rated banks, £0.75 billion of which is allocated to support the credit ratings of Aviva plc's commercial paper programmes. The expiry profile of the undrawn committed central borrowing facilities is as follows: 2013 2013 £m 2012 £m Expiring within one year 400 420 Expiring beyond one year 1,100 1,725 Total 1,500 2,145 D6 - Guarantees As a normal part of their operating activities, various Group companies have given guarantees and options, including investment return guarantees, in respect of certain long-term insurance and fund management products. For the UK Life with-profit business, provisions in respect of these guarantees and options are calculated on a market consistent basis, in which stochastic models are used to evaluate the level of risk (and additional cost) under a number of economic scenarios, which allow for the impact of volatility in both interest rates and equity prices. For UK Life non-profit business, provisions do not materially differ from those determined on a market consistent basis. In all other businesses, provisions for guarantees and options are calculated on a local basis with sensitivity analysis undertaken where appropriate to assess the impact on provisioning levels of a movement in interest rates and equity levels (typically a 1% decrease in interest rates and 10% decline in equity markets). Page 127 VNB & Sales analysis In this section Page E1 Trend analysis of VNB (continuing operations) - cumulative 128 E2 Trend analysis of VNB (continuing operations) - discrete 128 E3 Trend analysis of PVNBP (continuing operations) - cumulative 129 E4 Trend analysis of PVNBP (continuing operations) - discrete 129 E5 Trend analysis of PVNBP by product (continuing operations) - cumulative 130 E6 Trend analysis of PVNBP by product (continuing operations) - discrete 130 E7 Trend analysis of investment sales (continuing operations) - cumulative 131 E8 Trend analysis of investment sales (continuing operations) - discrete 131 E9 Geographical analysis of regular and single premiums - life and pension sales 131 E10 Geographical analysis of regular and single premiums - investment sales 131 E11 Trend analysis of general insurance and health net written premiums - cumulative 132 E12 Trend analysis of general insurance and health net written premiums - discrete 132 Page 128 E1 - Trend analysis of VNB (continuing operations1) - cumulative Growth on 4Q12 YTD Gross of tax and non-controlling interests 1Q12 YTD £m 2Q12 YTD £m 3Q12 YTD £m 4Q12 YTD £m 1Q13 YTD £m 2Q13 YTD £m 3Q13 YTD £m 4Q13 YTD £m Sterling % Local currency % United Kingdom 81 182 288 420 108 211 302 435 4% 4% Ireland (2) (6) (11) (8) (1) 1 2 6 175% 167% United Kingdom & Ireland 79 176 277 412 107 212 304 441 7% 7% France 35 62 84 119 39 86 112 166 39% 34% Poland 10 18 23 35 10 21 34 51 46% 42% Italy 9 14 19 29 4 6 7 15 (48)% (50)% Spain 14 21 32 56 5 13 19 33 (41)% (43)% Turkey 6 13 20 30 10 20 28 37 23% 28% Other Europe - 2 2 2 1 1 1 1 (50)% (50)% Europe 74 130 180 271 69 147 201 303 12% 9% Asia - excluding Malaysia & Sri Lanka 14 29 46 55 19 41 66 91 65% 65% Value of new business - excluding Malaysia & Sri Lanka 167 335 503 738 195 400 571 835 13% 12% Malaysia & Sri Lanka 2 8 8 8 1 1 1 1 (88)% (89)% Total value of new business 169 343 511 746 196 401 572 836 12% 11% 1 Following the announced disposal of US Life in Q4 2012, it was no longer managed on a MCEV basis and it was no longer included in covered business. The sale of US Life was completed on 2 October 2013. E2 - Trend analysis of VNB (continuing operations1) - discrete Growth on 4Q12 Gross of tax and non-controlling interests 1Q12 Discrete £m 2Q12 Discrete £m 3Q12 Discrete £m 4Q12 Discrete £m 1Q13 Discrete £m 2Q13 Discrete £m 3Q13 Discrete £m 4Q13 Discrete £m Sterling % Local currency % United Kingdom 81 101 106 132 108 103 91 133 1% 1% Ireland (2) (4) (5) 3 (1) 2 1 4 33% 29% United Kingdom & Ireland 79 97 101 135 107 105 92 137 1% 1% France 35 27 22 35 39 47 26 54 54% 48% Poland 10 8 5 12 10 11 13 17 42% 36% Italy 9 5 5 10 4 2 1 8 (20)% (23)% Spain 14 7 11 24 5 8 6 14 (42)% (44)% Turkey 6 7 7 10 10 10 8 9 (10)% (6)% Other Europe - 2 - - 1 - - - - - Europe 74 56 50 91 69 78 54 102 12% 9% Asia - excluding Malaysia & Sri Lanka 14 15 17 9 19 22 25 25 178% 172% Value of new business - excluding Malaysia & Sri Lanka 167 168 168 235 195 205 171 264 12% 11% Malaysia & Sri Lanka 2 6 - - 1 - - - - - Total value of new business 169 174 168 235 196 205 171 264 12% 11% 1 Following the announced disposal of US Life in Q4 2012, it was no longer managed on a MCEV basis and it was no longer included in covered business. The sale of US Life was completed on 2 October 2013. Page 129 E3 - Trend analysis of PVNBP (continuing operations1) - cumulative Growth on 4Q12 YTD Present value of new business premiums2 1Q12 YTD £m 2Q12 YTD £m 3Q12 YTD £m 4Q12 YTD £m 1Q13 YTD £m 2Q13 YTD £m 3Q13 YTD £m 4Q13 YTD £m Sterling % Local currency % Life and pensions business United Kingdom 2,430 5,387 8,002 10,410 2,336 4,441 6,657 9,379 (10)% (10)% Ireland 199 342 469 632 117 225 338 469 (26)% (29)% United Kingdom & Ireland 2,629 5,729 8,471 11,042 2,453 4,666 6,995 9,848 (11)% (11)% France 1,092 1,944 2,671 3,638 1,245 2,373 3,382 4,509 24% 19% Poland 107 201 274 373 123 227 358 486 30% 25% Italy 673 1,259 1,603 1,971 614 1,305 1,751 2,235 13% 9% Spain 402 705 934 1,295 375 641 813 1,224 (5)% (9)% Turkey 68 141 212 312 135 253 341 524 68% 76% Other Europe 56 108 132 158 20 20 20 20 (87)% (87)% Europe 2,398 4,358 5,826 7,747 2,512 4,819 6,665 8,998 16% 12% Asia - excluding Malaysia & Sri Lanka 418 854 1,287 1,673 472 845 1,243 1,628 (3)% (4)% Other business3 13 30 79 92 4 7 28 58 (37)% (37)% Total life and pensions sales - excluding Malaysia & Sri Lanka 5,458 10,971 15,663 20,554 5,441 10,337 14,931 20,532 - (2)% Malaysia & Sri Lanka 24 59 80 92 16 16 16 16 (83)% (82)% Total life and pensions sales 5,482 11,030 15,743 20,646 5,457 10,353 14,947 20,548 - (2)% Investment sales4 949 1,934 3,400 4,586 1,134 2,498 3,718 4,875 6% 4% Total long-term savings sales 6,431 12,964 19,143 25,232 6,591 12,851 18,665 25,423 1% (1)% 1 Following the announced disposal of US Life in Q4 2012, it was no longer managed on a MCEV basis and it was no longer included in covered business. The sale of US Life was completed on 2 October 2013. 2 Present value of new business premiums (PVNBP) is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine the value of new business. 3 Other business represents the results of Aviva Investors Pooled Pensions. 4 Investment sales are calculated as new single premiums plus the annualised value of new regular premiums. E4 - Trend analysis of PVNBP (continuing operations1) - discrete Growth on 4Q12 Present value of new business premiums2 1Q12 Discrete £m 2Q12 Discrete £m 3Q12 Discrete £m 4Q12 Discrete £m 1Q13 Discrete £m 2Q13 Discrete £m 3Q13 Discrete £m 4Q13 Discrete £m Sterling % Local currency % Life and pensions business United Kingdom 2,430 2,957 2,615 2,408 2,336 2,105 2,216 2,722 13% 13% Ireland 199 143 127 163 117 108 113 131 (20)% (23)% United Kingdom & Ireland 2,629 3,100 2,742 2,571 2,453 2,213 2,329 2,853 11% 11% France 1,092 852 727 967 1,245 1,128 1,009 1,127 17% 12% Poland 107 94 73 99 123 104 131 128 29% 24% Italy 673 586 344 368 614 691 446 484 32% 26% Spain 402 303 229 361 375 266 172 411 14% 9% Turkey 68 73 71 100 135 118 88 183 83% 91% Other Europe 56 52 24 26 20 - - - (100)% (100)% Europe 2,398 1,960 1,468 1,921 2,512 2,307 1,846 2,333 21% 17% Asia - excluding Malaysia & Sri Lanka 418 436 433 386 472 373 398 385 - (2)% Other business3 13 17 49 13 4 3 21 30 131% 131% Total life and pensions sales - excluding Malaysia & Sri Lanka 5,458 5,513 4,692 4,891 5,441 4,896 4,594 5,601 15% 13% Malaysia & Sri Lanka 24 35 21 12 16 - - - (100)% (100)% Total life and pensions sales 5,482 5,548 4,713 4,903 5,457 4,896 4,594 5,601 14% 12% Investment sales4 949 985 1,466 1,186 1,134 1,364 1,220 1,157 (2)% (4)% Total long-term savings sales 6,431 6,533 6,179 6,089 6,591 6,260 5,814 6,758 11% 9% 1 Following the announced disposal of US Life in Q4 2012, it was no longer managed on a MCEV basis and it was no longer included in covered business. The sale of US Life was completed on 2 October 2013. 2 Present value of new business premiums (PVNBP) is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine the value of new business. 3 Other business represents the results of Aviva Investors Pooled Pensions. 4 Investment sales are calculated as new single premium plus the annualised value of new regular premiums. Page 130 E5 - Trend analysis of PVNBP by product (continuing operations1) - cumulative Growth on 4Q12 YTD Present value of new business premiums2 1Q12 YTD £m 2Q12 YTD £m 3Q12 YTD £m 4Q12 YTD £m 1Q13 YTD £m 2Q13 YTD £m 3Q13 YTD £m 4Q13 YTD £m Sterling % Local currency % Life and pensions business Pensions 1,251 2,762 3,963 5,158 1,322 2,479 3,818 5,476 6% 6% Annuities 662 1,555 2,459 3,211 630 1,217 1,664 2,327 (28)% (28)% Bonds 128 253 322 379 33 59 97 183 (52)% (52)% Protection 300 608 920 1,228 253 504 781 992 (19)% (19)% Equity release 89 209 338 434 98 182 297 401 (8)% (8)% United Kingdom 2,430 5,387 8,002 10,410 2,336 4,441 6,657 9,379 (10)% (10)% Ireland 199 342 469 632 117 225 338 469 (26)% (29)% United Kingdom & Ireland 2,629 5,729 8,471 11,042 2,453 4,666 6,995 9,848 (11)% (11)% Savings 1,038 1,842 2,541 3,462 1,169 2,235 3,206 4,284 24% 19% Protection 54 102 130 176 76 138 176 225 28% 23% France 1,092 1,944 2,671 3,638 1,245 2,373 3,382 4,509 24% 19% Pensions 180 311 430 672 246 409 577 907 35% 34% Savings 994 1,836 2,337 2,888 882 1,770 2,353 3,124 8% 4% Annuities 11 18 25 39 11 17 20 29 (26)% (29)% Protection 121 249 363 510 128 250 333 429 (16)% (18)% Poland, Italy, Spain and Other 1,306 2,414 3,155 4,109 1,267 2,446 3,283 4,489 9% 6% Europe 2,398 4,358 5,826 7,747 2,512 4,819 6,665 8,998 16% 12% Asia - excluding Malaysia & Sri Lanka 418 854 1,287 1,673 472 845 1,243 1,628 (3)% (4)% Other business3 13 30 79 92 4 7 28 58 (37)% (37)% Total life and pensions sales - excluding Malaysia & Sri Lanka 5,458 10,971 15,663 20,554 5,441 10,337 14,931 20,532 - (2)% Malaysia & Sri Lanka 24 59 80 92 16 16 16 16 (83)% (82)% Total life and pensions sales 5,482 11,030 15,743 20,646 5,457 10,353 14,947 20,548 - (2)% 1 Following the announced disposal of US Life in Q4 2012, it was no longer managed on a MCEV basis and it was no longer included in covered business. The sale of US Life was completed on 2 October 2013. 2 Present value of new business premiums (PVNBP) is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine the value of new business. 3 Other business represents the results of Aviva Investors Pooled Pensions. E6 - Trend analysis of PVNBP by product (continuing operations1) - discrete Growth on 4Q12 Present value of new business premiums2 1Q12 Discrete £m 2Q12 Discrete £m 3Q12 Discrete £m 4Q12 Discrete £m 1Q13 Discrete £m 2Q13 Discrete £m 3Q13 Discrete £m 4Q13 Discrete £m Sterling % Local currency % Life and pensions business Pensions 1,251 1,511 1,201 1,195 1,322 1,157 1,339 1,658 39% 39% Annuities 662 893 904 752 630 587 447 663 (12)% (12)% Bonds 128 125 69 57 33 26 38 86 51% 51% Protection 300 308 312 308 253 251 277 211 (31)% (31)% Equity release 89 120 129 96 98 84 115 104 8% 8% United Kingdom 2,430 2,957 2,615 2,408 2,336 2,105 2,216 2,722 13% 13% Ireland 199 143 127 163 117 108 113 131 (20)% (23)% United Kingdom & Ireland 2,629 3,100 2,742 2,571 2,453 2,213 2,329 2,853 11% 11% Savings 1,038 804 699 921 1,169 1,066 971 1,078 17% 12% Protection 54 48 28 46 76 62 38 49 7% 2% France 1,092 852 727 967 1,245 1,128 1,009 1,127 17% 12% Pensions 180 131 119 242 246 163 168 330 36% 35% Savings 994 842 501 551 882 888 583 771 40% 34% Annuities 11 7 7 14 11 6 3 9 (36)% (38)% Protection 121 128 114 147 128 122 83 96 (35)% (36)% Poland, Italy, Spain and Other 1,306 1,108 741 954 1,267 1,179 837 1,206 26% 23% Europe 2,398 1,960 1,468 1,921 2,512 2,307 1,846 2,333 21% 17% Asia - excluding Malaysia & Sri Lanka 418 436 433 386 472 373 398 385 - (2)% Other business3 13 17 49 13 4 3 21 30 131% 131% Total life and pensions sales - excluding Malaysia & Sri Lanka 5,458 5,513 4,692 4,891 5,441 4,896 4,594 5,601 15% 13% Malaysia & Sri Lanka 24 35 21 12 16 - - - (100)% (100)% Total life and pensions sales 5,482 5,548 4,713 4,903 5,457 4,896 4,594 5,601 14% 12% 1 Following the announced disposal of US Life in Q4 2012, it was no longer managed on a MCEV basis and it was no longer included in covered business. The sale of US Life was completed on 2 October 2013. 2 Present value of new business premiums (PVNBP) is the present value of new regular premiums plus 100% of single premiums, calculated using assumptions consistent with those used to determine the value of new business. 3 Other business represents the results of Aviva Investors Pooled Pensions. Page 131 E7 - Trend analysis of investment sales - cumulative Growth on 4Q12 YTD Investment sales1 1Q12 YTD £m 2Q12 YTD £m 3Q12 YTD £m 4Q12 YTD £m 1Q13 YTD £m 2Q13 YTD £m 3Q13 YTD £m 4Q13 YTD £m Sterling % Local currency % United Kingdom & Ireland 432 823 1,269 1,730 305 841 1,494 2,040 18% 18% Aviva Investors 479 1,043 2,038 2,727 787 1,563 2,100 2,683 (2)% (5)% Asia 38 68 93 129 42 94 124 152 18% 17% Total investment sales 949 1,934 3,400 4,586 1,134 2,498 3,718 4,875 6% 4% 1 Investment sales are calculated as new single premiums plus the annualised value of new regular premiums. E8 - Trend analysis of investment sales - discrete Growth on 4Q12 Investment sales1 1Q12 Discrete £m 2Q12 Discrete £m 3Q12 Discrete £m 4Q12 Discrete £m 1Q13 Discrete £m 2Q13 Discrete £m 3Q13 Discrete £m 4Q13 Discrete £m Sterling % Local currency % United Kingdom & Ireland 432 391 446 461 305 536 653 546 18% 18% Aviva Investors 479 564 995 689 787 776 537 583 (15)% (18)% Asia 38 30 25 36 42 52 30 28 (22)% (23)% Total investment sales 949 985 1,466 1,186 1,134 1,364 1,220 1,157 (2)% (4)% 1 Investment sales are calculated as new single premiums plus the annualised value of new regular premiums. E9 - Geographical analysis of regular and single premiums - life and pensions sales Regular premiums Single premiums 2013 £m Local currency growth WACF Present value £m 2012 £m WACF Present value £m 2013 £m 2012 £m Local currency growth United Kingdom 783 2% 5.0 3,921 771 4.9 3,793 5,458 6,617 (18)% Ireland 26 (24)% 4.4 114 33 3.8 127 355 505 (33)% United Kingdom & Ireland 809 - 5.0 4,035 804 4.9 3,920 5,813 7,122 (19)% France 89 16% 8.1 723 74 7.9 584 3,786 3,054 19% Poland 38 3% 9.0 341 36 7.3 261 145 112 25% Italy 51 (9)% 5.5 280 54 5.9 317 1,955 1,654 13% Spain 52 (26)% 5.6 290 67 5.6 375 934 920 (3)% Turkey 99 68% 4.7 467 62 3.9 242 57 70 (15)% Other Europe 4 (83)% 1.5 6 24 4.6 110 14 48 (70)% Europe 333 3% 6.3 2,107 317 6.0 1,889 6,891 5,858 13% Asia - excluding Malaysia & Sri Lanka 284 6% 5.4 1,528 262 5.4 1,415 100 258 (62)% Other - - - - - - - 58 92 (37)% Total life and pensions sales - excluding Malaysia & Sri Lanka 1,426 2% 5.4 7,670 1,383 5.2 7,224 12,862 13,330 (5)% Malaysia & Sri Lanka 2 (90)% 4.0 8 20 3.4 67 8 25 (68)% Total life and pensions sales 1,428 1% 5.4 7,678 1,403 5.2 7,291 12,870 13,355 (6)% E10 - Geographical analysis of regular and single premiums - investment sales Regular Single PVNBP Investment sales1 2013 £m 2012 £m Local currency growth 2013 £m 2012 £m Local currency growth Local currency growth United Kingdom & Ireland 18 9 100% 2,022 1,721 17% 18% Aviva Investors 5 5 - 2,678 2,722 (5)% (5)% Asia - - - 152 129 17% 17% Total investment sales 23 14 64% 4,852 4,572 4% 4% 1 Investment sales are calculated as new single premiums plus the annualised value of new regular premiums. Page 132 E11 - Trend analysis of general insurance and health net written premiums - cumulative Growth on 4Q12 YTD 1Q12 YTD £m 2Q12 YTD £m 3Q12 YTD £m 4Q12 YTD £m 1Q13 YTD £m 2Q13 YTD £m 3Q13 YTD £m 4Q13 YTD £m Sterling % Local currency % General insurance United Kingdom 974 2,087 3,091 4,062 923 1,963 2,904 3,823 (6)% (6)% Ireland 82 174 252 326 71 146 215 278 (15)% (18)% United Kingdom & Ireland 1,056 2,261 3,343 4,388 994 2,109 3,119 4,101 (7)% (7)% Europe 410 726 982 1,295 435 764 1,033 1,360 5% 1% Canada 454 1,081 1,635 2,176 470 1,126 1,718 2,250 3% 5% Asia 6 11 17 22 3 7 11 14 (36)% (37)% Other 40 51 53 67 20 20 21 33 (51)% (51)% 1,966 4,130 6,030 7,948 1,922 4,026 5,902 7,758 (2)% (3)% Health insurance United Kingdom 120 255 389 528 138 289 383 536 2% 2% Ireland 40 57 76 102 36 52 71 99 (3)% (7)% United Kingdom & Ireland 160 312 465 630 174 341 454 635 1% - Europe 83 123 161 218 89 135 179 241 11% 6% Asia 27 50 79 98 35 47 69 86 (12)% (11)% 270 485 705 946 298 523 702 962 2% - Total 2,236 4,615 6,735 8,894 2,220 4,549 6,604 8,720 (2)% (2)% E12 - Trend analysis of general insurance and health net written premiums - discrete Growth on 4Q12 1Q12 Discrete £m 2Q12 Discrete £m 3Q12 Discrete £m 4Q12 Discrete £m 1Q13 Discrete £m 2Q13 Discrete £m 3Q13 Discrete £m 4Q13 Discrete £m Sterling % Local currency % General insurance United Kingdom 974 1,113 1,004 971 923 1,040 941 919 (5)% (5)% Ireland 82 92 78 74 71 75 69 63 (15)% (18)% United Kingdom & Ireland 1,056 1,205 1,082 1,045 994 1,115 1,010 982 (6)% (6)% Europe 410 316 256 313 435 329 269 327 4% 1% Canada 454 627 554 541 470 656 592 532 (2)% - Asia 6 5 6 5 3 4 4 3 (40)% (40)% Other 40 11 2 14 20 - 1 12 (14)% (14)% 1,966 2,164 1,900 1,918 1,922 2,104 1,876 1,856 (3)% (3)% Health insurance United Kingdom 120 135 134 139 138 151 94 153 10% 10% Ireland 40 17 19 26 36 16 19 28 8% 3% United Kingdom & Ireland 160 152 153 165 174 167 113 181 10% 9% Europe 83 40 38 57 89 46 44 62 9% 4% Asia 27 23 29 19 35 12 22 17 (11)% (10)% 270 215 220 241 298 225 179 260 8% 6% Total 2,236 2,379 2,120 2,159 2,220 2,329 2,055 2,116 (2)% (2)% End of Part 4 of 5 This information is provided by RNS The company news service from the London Stock Exchange END FR XELLBZXFXBBD