Last checked at 27 Mar 2018 11:00
27 March 2018
GENERAL ACCIDENT PLC
2017 ANNUAL REPORT AND FINANCIAL STATEMENTS
Following the release by General Accident plc (the "Company") on 8 March 2018 of the Company's 2017 Preliminary Results Announcement for the year ended 31 December 2017, the Company announces that it has today issued the 2017 annual report and financial statements.
The documents are available to view on the Company's website at www.aviva.com/reports and copies have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do
Printed copies of the 2017 annual report and financial statements can be requested free of charge by shareholders from 27 March 2018 by contacting the Company's Registrar, Computershare Investor Services PLC, on 0371 495 0105 or at AvivaSHARES@computershare.co.uk, or by writing to the Group Company Secretary, Aviva plc, St Helen's, 1 Undershaft, London EC3P 3DQ.
Enquiries:
Kirsty Cooper, Group General Counsel and Company Secretary
Telephone - 020 7662 6646
Roy Tooley, Head of Secretariat - Corporate
Telephone - 020 7662 6019
Information required under Disclosure & Transparency Rule 6.3
This announcement should be read in conjunction with the Company's preliminary results announcement issued on 8 March 2018. Together these constitute the material required by DTR 6.3 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the Company's 2017 Annual report and financial statements. Page and note references in the text below refer to page numbers and notes in the 2017 Annual report and financial statements.
Directors' responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and
- make judgements and accounting estimates that are reasonable and prudent: and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a company's performance, business model and strategy.
The directors are responsible for the maintenance and integrity of the ultimate parent company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board on
7 March 2018.
Principal risks and uncertainties
A description of the principal risks and uncertainties facing the Company and the Company's risk management policies to manage and mitigate these risks are set out in note 14 to the financial statements.
Risk factors beyond the Company's control that could cause actual results to differ materially from those estimated include credit and interest rate risk.
Credit risk
The net asset value of the Company's financial resources is exposed to the potential default on the loan and short term receivables due from its parent, Aviva plc which has an external issuer credit rating of A- (issuer credit ratings represent an issuer's ability to meet its overall financial commitments as they fall due), and as such the risk of counterparty default is considered remote. In addition, the loan amounting to £9,900 million (2016: £9,990 million) is secured by a legal charge against the ordinary share capital of Aviva Group Holdings Limited mitigating the risk of loss in the event of Aviva plc defaulting. Due to the nature of the loan, and the fact that it is intended to be held until settled by Aviva plc (on maturity or earlier if redeemed before maturity) and not traded, the Company is not exposed to the risk of changes to the market value caused by changing perceptions of the credit worthiness of Aviva plc. There were no financial assets that were past due or impaired at either 31 December 2017 or 31 December 2016.
Interest rate risk
The net asset value of the Company's financial resources is exposed to potential fluctuations in interest rates. The effect of a 100 basis point increase / decrease in interest rates would be an increase / decrease in net interest income of £99 million (2016: increase / decrease of £100 million). Interest rate risk is a risk the Company chooses to accept rather than reduce or mitigate, as although it may materially impact the results of the Company, it does not impact the Company as a going concern, as the Company has no operating expenses and, in respect of preference dividends, it has both discretion over payment and also a loan structure in place, which generates more than adequate income, even at zero LIBOR rates, to cover the annual cost of those dividends.
14 - Risk management
(a) The Company's approach to risk and capital management
Risk management framework
The Company's risk management framework is aligned with that of the Aviva plc Group and forms an integral part of the management and Board processes and decision-making framework.
The Company's risk management approach is aimed at actively identifying, measuring, managing, monitoring and reporting significant existing and emerging risks. Risks are measured considering the significance of the risk to the business and its internal and external stakeholders.
To promote a consistent and rigorous approach to risk management, the Aviva plc Group has set out formal risk management policies and business standards which set out the risk strategy, framework and minimum requirements for the Group's worldwide operations, including the Company.
The directors recognise the critical importance of having efficient and effective risk management systems in place and acknowledge that they are responsible for the Company's framework of internal control and of reviewing its effectiveness. The framework is designed to manage rather than eliminate the risk of failure to achieve the Company's objectives, and can only provide reasonable assurance against misstatement or loss. The directors of the Company are satisfied that their adherence to this Group framework provides an adequate means of managing risk in the Company. These are documented as follows:
(b) Management of financial and non-financial risks
(i) Market risk
Market risk is the risk of an adverse financial impact resulting from fluctuations in interest rates, foreign currency exchange rates, equity prices and property values. At the statement of financial position date, the Company did not have any material exposure to currency exchange rates, equity prices or property values.
Interest rate risk arises from the inter-company loans receivable (see note 8). The effect of a 100 basis point increase / decrease in interest rates would be an increase / decrease in interest income (before tax) of £99 million (2016: increase / decrease of £100 million). The fair value or net asset value of the Company's financial resources is not materially affected by fluctuations in interest rates.
14. Risk management continued
(b) Management of financial and non-financial risks continued
(ii) Credit risk
Credit risk is the risk of financial loss as a result of the default or failure of third parties to meet their payment obligations, or variations in market values as a result of changes in expectation related to these risks.
The Company's financial assets primarily comprise loans and receivables due from its parent, Aviva plc, which has an external issuer credit rating of A- (issuer credit ratings represent an issuer's ability to meet its overall financial commitments as they fall due), and as such the credit risk arising from the counterparty failing to meet all or part of their obligations is considered remote. In addition, the loan amounting to £9,900 million (2016: £9,990 million) is secured by a legal charge against the ordinary share capital of Aviva Group Holdings Limited. Due to the nature of the financial assets, and the fact that the loans are intended to be held until settled, by the issuer (on maturity or earlier if redeemed before maturity), and not traded, the Company is not exposed to the risk of changes to the market value caused by changing perceptions of the credit worthiness of Aviva plc. Financial assets that were past due or impaired at 31 December 2017 were £nil (2016: £nil).
(iii) Liquidity risk
Liquidity risk is the risk that the Company is not able to make payments as they become due because there are insufficient assets in cash form.
The Company does not hold any assets in cash form. Cash settlements of its dividend obligations to holders of preference shares, which are discretionary and subject to Director resolution, pass through an intercompany account. Group relief is also settled through an intercompany account.
(iv) Operational risk
Operational risk is the risk of a direct or indirect loss arising from inadequate or failed internal processes, people and systems, or external events, including changes in the regulatory environment.
Given its limited activities, the key operational risks to the Company are inadequate governance and lack of sufficiently robust financial controls. The risks are mitigated by the Company's implementation of the Group's risk management policies and framework and compliance with the Group's Financial Reporting Control Framework.
(c) Capital management
The Company's capital risk is determined with reference to the requirements of the Company's stakeholders. In managing capital we seek to maintain sufficient, but not excessive, financial strength to support the payment of preference dividends and the requirements of other stakeholders. The sources of capital used by the Company are equity shareholders' funds and preference shares. At 31 December 2017 the Company had £13,941 million (2016: £13,914 million) of total capital employed.
15 - Related party transactions
(a) The Company had the following related party transactions
The Company receives interest income from, and pays dividends to its parent company in the normal course of business. These activities are reflected in the tables below.
(i) Loans due from parent company
On 14 December 2017, the Company renewed a facility to Aviva plc, its parent company, of £9,990 million and the Board approved the extension of the maturity of the loan by five years from 31 December 2017 to 31 December 2022. The other terms of the loan will remain unchanged, including the rate of interest payable by Aviva plc to the Company (65 basis points above 3 months LIBOR and in the event that the LIBOR rate is less than zero, the rate shall be deemed to be zero). As at the Statement of Financial Position date, the loan balance outstanding was £9,900 million (2016: £9,990 million). This facility has been secured against the ordinary share capital of Aviva Group Holdings Limited.
(a) The Company had the following related party transactions continued
(i) Loans due from parent company continued
The maturity analysis of the related party loan is as follows:
2017 | 2016 | |
£m | £m | |
1-5 years | 9,900 | 9,900 |
9,900 | 9,900 | |
Effective interest rate | 1.38% | 1.59% |
The interest received on this loan shown in the Income Statement is £138 million (2016: £160 million) Refer to note 4.
(ii) Other transactions
Services provided to related parties
2017 | 2016 | |
Receivable at year end | Receivable at year end | |
£m | £m | |
Immediate Parent | 4,073 | 3,990 |
4,073 | 3,990 |
Services provided by related parties
2017 | 2016 | |||
Expenses paid in the year | Payable at year end | Expenses paid in the year | Payable at year end | |
£,000 | £m | £,000 | £m | |
Immediate Parent | 10 | - | 10 | - |
Other Aviva Group Compaies | - | 32 | - | 34 |
10 | 32 | 10 | 34 |
Expenses paid represents audit fees paid by Aviva plc. Refer note 3.
Preference dividends of £21 million (2016: £21 million) were paid on behalf of the Company by its parent, Aviva plc.
Group relief
The services provided by related parties related to liabilities for prior years' tax settled by group relief.
Dividends paid
Dividends paid relate to an intercompany transaction of £90 million (2016: £110 million) with the Company's parent, Aviva plc.
(b) Key management compensation
Key management, which comprises the directors of the Company, are not remunerated directly for their services as directors for the Company and the amount of time spent performing their duties is incidental to their role across the Aviva Group. The majority of such costs are borne by Aviva plc and are not recharged to the Company. Refer note 1 for details of directors' remuneration.
(c) Parent entity
The immediate and ultimate parent entity and controlling party is Aviva plc, a public limited company incorporated and domiciled in England and Wales. This is the parent undertaking of the smallest and largest Group to consolidate these financial statements. Copies of Aviva plc consolidated financial statements are available on application to the Group Company Secretary, Aviva plc, St Helen's, 1 Undershaft, London EC3P 3DQ, and on the Aviva plc website at www.aviva.com.