TIDMGACA
RNS Number : 0249U
General Accident PLC
26 March 2019
26 March 2019
GENERAL ACCIDENT PLC
2018 ANNUAL REPORT AND FINANCIAL STATEMENTS
Following the release by General Accident plc (the "Company") on
7 March 2019 of the Company's 2018 Preliminary Results Announcement
for the year ended 31 December 2018, the Company announces that it
has today issued the 2018 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 http://www.morningstar.co.uk/uk/NSM
Printed copies of the 2018 annual report and financial
statements can be requested free of charge by shareholders from 26
March 2019 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 7 March 2019.
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 2018 Annual report and financial
statements. Page and note references in the text below refer to
page numbers and notes in the 2018 Annual report and financial
statements.
Statement of directors' responsibilities
The directors are responsible for preparing the strategic
report, directors' 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 ("EU"). 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 EU have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- 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
6 March 2019.
Principal risks and uncertainties
A description of the principal risks and uncertainties facing
the Company and the Company's risk management policies are set out
in note 1 to the financial statements.
Risk factors beyond the Company's control that could cause
actual results to differ materially from those estimated include,
but are not limited to:
- 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. The external
issuer credit rating (representing an issuer's ability to meet its
overall financial commitments as they fall due) is A-, and as such
the risk of counterparty default is considered remote.
In addition, the loan amounting to GBP9,770 million (2017:
GBP9,900 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 2018 or 31 December
2017.
- 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 GBP98 million (2017: increase / decrease of GBP99
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 a loan structure in place, which generates more than
adequate income, even at zero LIBOR rates, to cover the annual cost
of those dividends.
- Brexit: Although the directors do not believe that Brexit has
a significant operational impact on the business, the influence
that it will continue to have on the UK economy will require
careful monitoring. During the year the Group Board reviewed the
impact of potential exit scenarios and the operational response
plans.
Risk management
(a) Risk management framework
The Company operates a risk management framework that forms an
integral part of the management and Board processes and
decision-making framework, aligned to the Group's risk management
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
across all businesses, the Group has a set of risk policies and
business standards which set out the risk strategy, appetite,
framework and minimum requirements for the Group's worldwide
operations, including the Company.
For the purposes of risk identification and measurement, and
aligned to the Company's risk policies, risks are usually grouped
by risk type: credit, market, liquidity and operational risk. Risks
falling within these types may affect a number of metrics including
those relating to statement of financial position strength,
liquidity and profit.
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.
Further information on the types and management of specific risk
types is given in sections (b) to (g) below.
(b) Credit risk
Credit risk is the risk of financial loss as a result of the
default or failure of third parties to meet their payment
obligations to the Company, or variations in market values as a
result of changes in expectation related to these risks.
The credit quality of receivables and other financial assets is
monitored by the Company, and provisions are made for expected
credit losses. Expected credit losses on material receivables and
other assets are calculated with reference to the Company's
historical experience of losses, along with an analysis of payment
terms. Short term financial assets (where all amounts are
receivable within 12 months from the reporting date) do not
generally attract an expected credit loss charge, unless there is
objective evidence that losses are likely to arise.
The Company makes use of the simplified approach when
calculating expected credit losses on trade receivables which don't
include a significant financing component, and therefore calculates
expected credit losses over the lifetime of the instrument in
question. As at the reporting date, no lifetime expected credit
losses have been recognised in relation to receivables.
The Company has not purchased or originated any credit-impaired
financial assets as at the reporting date.
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. There are no material expected credit losses
recognised in relation to loans due from Aviva plc.
In addition, the loan amounting to GBP9,770 million (2017:
GBP9,900 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 2018
were GBPnil (2017: GBPnil).
(c) Market risk
Market risk is the risk of an adverse financial impact resulting
directly or indirectly from fluctuations in interest rates,
inflation, 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 GBP98 million (2017: increase /
decrease of GBP99 million). The fair value or net asset value of
the Company's financial resources is not materially affected by
fluctuations in interest rates.
(d) Liquidity risk
Liquidity risk is the risk of not being able to make payments as
they become due because there are insufficient assets in cash
form.
The 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.
(e) 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.
(f) Capital management
The Company's capital risk is determined with reference to the
requirements of the Company's stakeholders. In managing capital the
Company seeks 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 2018 the Company had GBP13,934 million (2017:
GBP13,941 million) of total capital employed.
(g) Brexit
Although the directors do not believe that Brexit has a
significant operational impact on the business, the influence that
it will continue to have on the UK economy will require careful
monitoring. During the year the Group Board reviewed the impact of
potential exit scenarios and the operational response plans.
Related party transactions
The Company had the following transactions with related parties,
which include parent companies, subsidiaries, and fellow Group
companies in the normal course of business.
(a) Loans due from parent company
On 14 December 2017, the Company provided a loan to Aviva plc,
its parent company, of GBP9,990 million with a maturity date of 31
December 2022. The loan accrued interest at 65 basis points above 3
month LIBOR (and in the event that the LIBOR rate is less than
zero, the rate shall be deemed to be zero) with settlement to be
paid at maturity. As at the statement of financial position date,
the loan balance outstanding was GBP9,770 million (2017: GBP9,900
million). This facility has been secured against the ordinary share
capital of Aviva Group Holdings Limited. The loan agreement also
includes a penalty interest charge of 1% above the interest rate if
any amounts payable under the loan agreement remain
outstanding.
The maturity analysis of the related party loan is as
follows:
2018 GBPm 2017 GBPm
1 - 5 years 9,770 9,900
---------- ----------
9,770 9,900
---------- ----------
Effective Interest
Rate 1.47% 1.38%
---------- ----------
The interest received on this loan shown in the income statement
is GBP146 million (2017: GBP138 million). Refer to note 1.
(b) Other transactions
(i) Services provided to related parties
2018 Receivable at 2017 Receivable at
year end GBPm year end GBPm
Immediate parent 4,164 4,073
------------------- -------------------
4,164 4,073
------------------- -------------------
The related parties' receivables are not secured, and no
guarantees were received in respect thereof. The receivables will
be settled in accordance with normal credit terms.
(ii) Services provided by related parties
2018 2017
Expenses incurred Payable at Expenses incurred Payable at
in the year year end GBPm in the year year end GBPm
GBP000 GBP000
------------------ --------------- ------------------ ---------------
Immediate
parent 35 - 10 -
------------------ --------------- ------------------ ---------------
Other Aviva
Group companies - - - 32
------------------ --------------- ------------------ ---------------
35 - 10 32
------------------ --------------- ------------------ ---------------
The related parties' payables are not secured and no guarantees
were given in respect thereof. The payables will be paid in
accordance with normal credit terms.
(iii) Audit fees
Expenses incurred in the year represents audit fees. There were
no non-audit fees paid to the Company's auditors during the year
(2017: GBPnil). Audit fees as described in note 4 are borne by the
Company's ultimate parent, Aviva plc.
(iv) Group relief
Transactions with Group companies for settlement of corporation
tax assets and liabilities by way of group relief are described in
note 12.
(v) Dividends paid
Dividends paid relate to an intercompany transaction of GBP130
million (2017: GBP90 million) with the Company's parent, Aviva plc.
Preference dividends of GBP21 million (2017: GBP21 million) were
paid on behalf of the Company by its parent, Aviva plc. Refer to
note 6.
(c) 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 to note 3 for details of directors'
remuneration.
(d) Ultimate parent entity
The immediate and ultimate parent entity and controlling party
is Aviva plc, a public limited company incorporated and domiciled
in the United Kingdom. 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACSSEWSUMFUSELD
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