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Final Results

Thu, 9th Mar 2017 10:00

RNS Number : 9613Y
Friends Life Holdings plc
09 March 2017

INFORMATION FOR FRIENDS LIFE HOLDINGS PLC

SUBORDINATED DEBT HOLDERS

FRIENDS LIFE HOLDINGS PLC

Audited results for the year ended 31 December 2016

These results are published for the benefit of the subordinated debt holders of Friends Life Holdings plc ("the Company") for the year ended 31 December 2016. The Company has three debt instruments, subordinated debt due in 2021 (LT2, £162 million principal), Subordinated debt due 2022 (LT2, £500 million principal) and reset perpetual subordinated debt (UT2, $575 million) listed on the London Stock Exchange.

On 19 January 2015, Friends Life Group Limited (FLGL), the ultimate parent company of the Company at that time, published details of the proposed acquisition by Aviva plc of the entire ordinary share capital of FLGL by way of a Scheme of Arrangement in accordance with Guernsey company law. Following approval by FLGL's shareholders, Aviva's shareholders and the Guernsey Court, the Scheme became effective on 10 April 2015 and at that point the Company became part of the Aviva Group. FLGL became a wholly-owned subsidiary of Aviva plc. This resulted in a restructuring of the former Friends Life Group companies within the Aviva group of companies, which involved the Company's interests in its principal subsidiaries being transferred to other Aviva Group companies. Details of the transactions were included in the Company's Financial Statements for the year ended 31 December 2015.

The principal risks and uncertainties facing the Company are (1) interest rate risk, as the net asset value of the Company's financial resources is exposed to potential fluctuations in interest rates; and (2) foreign exchange risk through the Company's issuance of US$575 million reset perpetual subordinated notes. Exposure to interest rate risk is managed through the monitoring of several risk measures. Exposure to foreign exchange risk in respect of the USD loan has been fully hedged.

Equity shareholders' funds of the Aviva Group, prepared using accounting policies under IFRS, increased during the period by £1,001 million from restated £16,002 million restated at 31 December 2015 to £17,003 million at 31 December 2016. Operating profit of the Aviva Group at £3,010 million was 12.0% higher than for the twelve months to 31 December 2015 (restated £2,688 million) and net operating cash inflow for the twelve months to 31 December 2016 was £4,747 million (2015: £4,755 million).

Consolidated Income Statement

2016

2015

£m

£m

Income

Net investment income

171

145

171

145

Expenses

Other expenses

(5)

(20)

Finance costs

(175)

(110)

(180)

(130)

(Loss)/profit for the year before tax from continuing operations

(9)

15

Tax charge from continuing operations

(3)

(1)

(Loss)/profit for the year after tax from continuing operations

(12)

14

Profit for the year after tax from discontinued operations

-

4

(Loss)/profit for the year

(12)

18

Attributable to:

Equity holders of Friends Life Holdings plc

- from continued operations

(12)

(6)

- from discontinued operations

-

4

Non controlling interests

-

20

(Loss)/profit for the year

(12)

18

Consolidated Statement of Comprehensive Income

2016

2015

£m

£m

(Loss)/profit for the year from continuing operations

(12)

14

Profit for the year from discontinued operations

-

4

Total (loss)/profit for the year

(12)

18

Items that may be reclassified subsequently to income statement

Investment classified as available for sale

Fair value gains/(losses)

3

(35)

Aggregate tax effect

(1)

6

Other comprehensive income/(loss), net of tax from continuing

operations

2

(29)

Other comprehensive loss, net of tax from discontinued operations

-

(17)

Total other comprehensive income/(loss) for the year

2

(46)

Total comprehensive loss, net of tax from continuing operations

(10)

(15)

Total comprehensive loss, net of tax from discontinued operations

-

(13)

Total comprehensive loss for the year

(10)

(28)

Attributable to:

Equity holders of Friends Life Holdings plc

- from continued operations

(10)

(35)

- from discontinued operations

-

(13)

Non controlling interests

-

20

Total comprehensive loss for the year

(10)

(28)

Consolidated Statement of Changes in Equity

Equity attributable to shareholders of Friends Life Holdings plc

Ordinary share capital

Other reserves

Retained earnings

Total

STICS

Non controlling interests

Total equity

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2016

515

(35)

81

561

-

-

561

Loss for the year

-

-

(12)

(12)

-

-

(12)

Other comprehensive income

-

3

(1)

2

-

-

2

Total comprehensive loss

-

3

(13)

(10)

-

-

(10)

Dividends and appropriations

-

-

(210)

(210)

-

-

(210)

Transfer between capital and reserves

(250)

-

250

-

-

-

-

Balance at 31 December 2016

265

(32)

108

341

-

-

341

Equity attributable to shareholders of Friends Life Holdings plc

Ordinary share capital

Other reserves

Retained earnings

Total

STICS

Non controlling interests

Total equity

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2015

515

414

3,446

4,375

318

1

4,694

(Loss)/profit for the year

-

-

(2)

(2)

20

-

18

Other comprehensive loss

-

(35)

(11)

(46)

-

-

(46)

Total comprehensive loss

-

(35)

(13)

(48)

20

-

(28)

Dividends and appropriations

-

(435)

(4,423)

(4,858)

(7)

-

(4,865)

Capital contribution

-

21

1,208

1,229

-

-

1,229

Reclassification of STICS as a financial liability

-

-

(93)

(93)

(192)

-

(285)

Transfer of 2003 STICS to Aviva plc

-

-

(85)

(85)

(139)

-

(224)

Share-based payments, net of settlements

-

-

(3)

(3)

-

-

(3)

Funding of Employee Benefit Trust

-

-

8

8

-

-

8

Aggregate tax effect - shareholder tax

-

-

36

36

-

-

36

Attributable to non- controlling interests

-

-

-

-

-

(1)

(1)

Balance at 31 December 2015

515

(35)

81

561

-

-

561

(i) The profit on disposal arising from the group reorganisation is recognised as a capital transaction.

(ii) Loss on reclassification of 2005 STICS as a financial liability, as a result of the Company giving notice to the STICS

holders on 29 May 2015 of intent to redeem on 1 July 2015.

(iii) The movement in other reserves for share-based payment schemes of £(3) million for the year represents an expense

of £1 million for all schemes that vested early on the acquisition of the Group by Aviva and £(4) million for the

reclassification of the FLG LTIP from an equity-settled scheme to a cash-settled scheme as rewards will now be paid

in cash.

(iv) In April 2015, the EBT repaid cash of £8 million to the Company.

Consolidated Statement of Financial Position

2016

2015

£m

£m

Assets

Non current assets

Financial investments

1,459

1,538

Tax assets

-

14

Deferred tax assets

8

9

Current assets

Financial investments

-

1

Receivables and other financial assets

44

65

Cash and cash equivalents

143

95

Total assets

1,654

1,722

Equity

Ordinary share capital

265

515

Other reserves

(32)

(35)

Retained earnings

108

81

Total equity

341

561

Liabilities

Non current liabilities

Borrowings

1,132

1,052

Tax liabilities

4

-

Current liabilities

Borrowings

2

2

Payables and other financial liabilities

129

62

Other liabilities

46

45

Total liabilities

1,313

1,161

Total equity and liabilities

1,654

1,722

Consolidated Statement of Cash Flows

2016

2015

£m

£m

Cash flows from investing activities

Interest received

89

77

Collateral received

86

34

Net disposal of financial investments

176

23

Disposal of held for sale assets, net of cash transferred

-

(6,954)

Net cash from/(used in) investing activities

351

(6,820)

Cash flows from financing activities

Repayment of loan to parent

-

145

Repayment of the 2005 STICS

-

(285)

Net funding of EBT

-

8

Finance costs

(95)

(88)

STICS interest

-

(7)

Net movement in other borrowings, net of expenses

-

(13)

Ordinary dividends paid

(210)

(376)

Amounts repaid to fellow Group companies

(18)

-

Amounts repaid from fellow Group companies

21

25

Net cash used in financing activities

(302)

(591)

Total net cash increase/(decrease) in cash and cash equivalents

49

(7,411)

Cash and cash equivalents at 1 January

95

7,503

Effect of exchange rate changes on cash and cash equivalents

(10)

3

Cash and cash equivalents at 31 December

134

95

(i) Cash and cash equivalents include bank overdraft which is disclosed as part of payables and other financial liabilities.

Notes

1. Business disposals

(a) Disposal of discontinued operations

On 13 April 2015 the former Friends Life Group companies were restructured within the Aviva group of companies. As part of this restructuring the Company disposed of its interests in FPG, FLI and FLFL. The Company's shareholdings in FLI and FLFL plus 68% of the Company's interest in FPG were transferred to the Company's parent undertaking, FLG Holdings Limited, by way of a dividend in specie of £3,297 million. The Company's remaining 32% shareholding in FPG was transferred to Aviva Group Holdings Limited ("AGH") in exchange for consideration of £1,544 million in the form of a loan payable by AGH. The loan was fully settled as at 31 December 2015.

The Company retained its interest in £500 million of STICS of Friends Life Limited ("FLL") ("internal STICS"), an insurance undertaking of the disposal Group.

(i) The profit on the restructure was recognised as a capital contribution:

13 April

2015

£m

Disposal group equity attributable to shareholders

(3,612)

Dividend in specie

3,297

Residual equity attributable to shareholders

(315)

Loan consideration

1,544

Capital contribution

1,229

The results of FPG, FLI and FLFL and their subsidiary undertakings were classified as results from discontinued operations in the Group's results for 2015.

(ii) Results of discontinued operations

2015 Period to 13 April

FPG,FLI

FLFL

£m

Revenue

Gross earned premiums

380

Premiums ceded to reinsurers

(170)

Net earned premiums

210

Fee and commission income and income from service

activities

164

Investment return

6,109

Total revenue

6,483

Claims, benefits and expenses

Gross claims and benefits paid

(998)

Amounts receivable from reinsurers

168

Net claims and benefits paid

(830)

Change in insurance contract liabilities

(352)

Change in investment contract liabilities

(4,526)

Movement in net asset value attributable to unit-holders

(36)

Movement in policyholder liabilities

(4,914)

Acquisition expenses

(129)

Administrative and other expenses

(299)

Finance costs

(15)

Total claims, benefits and expenses

(6,187)

Profit before tax from discontinued operations

296

Policyholder tax

(279)

Profit before shareholder tax from discontinued

operations

17

Shareholder tax

(13)

Profit after tax from discontinued operations

4

Other comprehensive loss, net of tax

(17)

Total comprehensive loss, net of tax

(13)

(iii) Major classes of assets and liabilities at disposal date (FPG, FLI and FLFL in aggregate)

13 April

2015

£m

Intangible assets

3,026

Property, plant and equipment

42

Investment properties

2,685

Investment in associates

4

Financial assets

97,359

Deferred acquisition costs

849

Reinsurance assets

1,269

Insurance and other receivables

1,653

Cash and cash equivalents

6,954

Assets

113,841

Insurance contracts

36,081

Unallocated surplus

693

Financial liabilities

- Investment contracts

68,789

- Loans and Borrowings

868

Net asset value attributable to unit-holders

212

Provisions

135

Pension deficits

26

Deferred tax liabilities

1,125

Current tax liabilities

51

Insurance payables, other payables and deferred income

1,724

Liabilities

109,704

Equity attributable to shareholders

3,612

Equity attributable to STICS holders

524

Total equity attributable to equity holders of the parent

4,136

Equity attributable to non-controlling interest

1

Total equity

4,137

Total equity and liabilities

113,841

Basis of preparation

The preliminary announcement for the year ended 31 December 2016 was approved by the Board of Directors on 8 March 2017. The preliminary announcement for the year ended 31 December 2016 is prepared on the basis of the accounting policies set out in the annual accounts. Audited statutory accounts, together with the auditor's report thereon, will be filed with the Registrar of Companies when approved and published.

The Company's Annual Report and Accounts for 2015 have been filed with the Registrar of Companies. The results for the year ended 31 December 2015 and 2016 were audited by PricewaterhouseCoopers LLP. The auditor's report was unqualified and did not contain a statement under section 498(2) or section 498(3) of the Companies Act 2006.

The audited annual reports and accounts of both the Company and of Aviva plc for the year ended 31 December 2016, once published, will be available on application to the Group General Counsel and Company Secretary, Aviva plc, St Helen's, 1 Undershaft, London, EC3P 3DQ. Copies will be made available on the Aviva plc website once published at http://www.aviva.com/investor-relations/reports/.

Enquiries: Chris Esson, Investor Relations Director, Aviva plc 020 7662 8115

This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JLMRTMBBMMPR
Date   Source Headline
4th Oct 201811:31 amRNSFriends Life Hlds - Intent to Redeem Subordinated Notes
9th Mar 201710:00 amRNSFinal Results
4th Aug 201610:11 amRNSHalf-year Report
10th Mar 201610:10 amRNSFinal Results

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