Half-year Report Part 4 of 4

RNS Number : 9581M

Aviva PLC

03 August 2017

Part 4 of 4

Page 87

Capital & liquidity

In this section	Page
Capital & liquidity
C1 Analysis of return on equity	88
C2 Group capital structure - IFRS basis	90
C3 Equity sensitivity analysis - IFRS basis	91

Page 88

C1 - Analysis of return on equity

	Operating return¹
6 months 2017	Before tax £m	After tax £m	Weighted average shareholders' funds including non-controlling interests² £m	Return on equity² %
United Kingdom & Ireland Life	756	606	11,323	10.7%
United Kingdom & Ireland General Insurance and Health	259	211	1,817	23.2%
Canada	71	52	1,468	7.1%
Europe	518	367	5,574	13.2%
Asia	115	107	1,661	12.9%
Fund management	69	55	481	22.9%
Corporate and Other Business³	(130)	(88)	5,725	n/a
Return on total capital employed	1,658	1,310	28,049	9.3%
Subordinated debt	(191)	(154)	(7,223)	4.3%
Senior debt	(2)	(2)	(1,384)	0.3%
Return on total equity	1,465	1,154	19,442	11.9%
Less: Non-controlling interests		(73)	(1,372)	10.6%
Direct capital instrument and tier 1 notes⁴		(23)	(1,123)	6.1%
Preference capital		(9)	(200)	8.5%
Return on equity shareholders' funds		1,049	16,747	12.4%

1 The operating return is based upon Group operating profit. Refer to note B1.

2 Return on equity is based on an annualised operating return after tax attributable to ordinary shareholders expressed as a percentage of weighted average ordinary shareholders' equity.

3 The 'Corporate' and 'Other Business' loss before tax of £130 million comprises corporate costs of £83 million, interest on internal lending arrangements of £3 million, other business operating loss (net of investment return) of £81 million, partly offset by finance income on the main UK pension scheme of £37 million.

4 The return on equity is based on an annualised operating return after tax reflecting the expected direct capital instrument interest in the second half of the year.

	Operating return¹
6 months 2016	Before tax £m	After tax £m	Weighted average shareholders' funds including non-controlling interests² £m	Return on equity² %
United Kingdom & Ireland Life	711	547	11,057	9.9%
United Kingdom & Ireland General Insurance and Health	231	187	3,008	12.4%
Canada	88	65	1,059	12.3%
Europe	430	296	4,960	11.9%
Asia	112	106	1,478	14.3%
Fund management	49	39	414	18.8%
Corporate and Other Business³	(112)	(91)	4,176	n/a
Return on total capital employed	1,509	1,149	26,152	8.8%
Subordinated debt	(184)	(147)	(6,711)	4.4%
Senior debt	-	-	(650)	-
Return on total equity	1,325	1,002	18,791	10.7%
Less: Non-controlling interests		(67)	(1,210)	11.1%
Direct capital instrument and tier 1 notes⁴		(21)	(1,123)	5.6%
Preference capital		(9)	(200)	9.0%
Return on equity shareholders' funds		905	16,258	11.0%

1 The operating return is based upon Group operating profit. Refer to note B1.

2 Return on equity is based on an annualised operating return after tax attributable to ordinary shareholders expressed as a percentage of weighted average ordinary shareholders' equity.

3 The 'Corporate' and 'Other Business' loss before tax of £112 million comprises corporate costs of £80 million, interest on internal lending arrangements of £15 million, other business operating loss (net of investment return) of £61 million, partly offset by finance income on the main UK pension scheme of £44 million.

4 The return on equity is based on an annualised operating return after tax reflecting the expected direct capital instrument interest in the second half of the year.

Page 89

C1 - Analysis of return on equity continued

	Operating return¹
Full Year 2016	Before tax £m	After tax £m	Weighted average shareholders' funds including non-controlling interests² £m	Return on equity² %
United Kingdom & Ireland Life	1,555	1,262	11,218	11.2%
United Kingdom & Ireland General Insurance and Health	471	380	2,431	15.6%
Canada	269	197	1,256	15.7%
Europe	964	674	5,160	13.1%
Asia	228	216	1,548	14.0%
Fund management	138	104	426	24.4%
Corporate and Other Business³	(227)	(219)	4,850	n/a
Return on total capital employed	3,398	2,614	26,889	9.7%
Subordinated debt	(387)	(309)	(6,907)	4.5%
Senior debt	(1)	(1)	(869)	0.1%
Return on total equity	3,010	2,304	19,113	12.1%
Less: Non-controlling interests		(147)	(1,279)	11.5%
Direct capital instrument and tier 1 notes		(68)	(1,123)	6.1%
Preference capital		(17)	(200)	8.5%
Return on equity shareholders' funds		2,072	16,511	12.5%

1 The operating return is based upon Group operating profit. Refer to note B1.

2 Return on equity is based on an annualised operating return after tax attributable to ordinary shareholders expressed as a percentage of weighted average ordinary shareholders' equity.

3 The 'Corporate' and 'Other Business' loss before tax of £227 million comprises corporate costs of £184 million, interest on internal lending arrangements of £23 million, other business operating loss (net of investment return) of £106 million, partly offset by finance income on the main UK pension scheme of £86 million.

Page 90

C2 - Group capital structure - IFRS basis

The table below shows how our capital is deployed by product and service segments and how that capital is funded.

	30 June 2017 Capital employed £m	31 December 2016 Capital employed £m
Life business
United Kingdom & Ireland	10,882	11,764
France	2,769	2,756
Poland	283	296
Italy	967	947
Spain	653	594
Other Europe	70	71
Europe	4,742	4,664
Asia	1,650	1,643
	17,274	18,071
General insurance & health
United Kingdom & Ireland¹	1,872	1,761
Canada	1,466	1,471
France	504	462
Italy	304	282
Other Europe	119	70
Europe	927	814
Asia	12	16
	4,277	4,062
Fund Management	501	462
Corporate & Other Business^1,2	5,917	5,533
Total capital employed	27,969	28,128
Financed by
Equity shareholders' funds	16,691	16,803
Non-controlling interests	1,319	1,425
Direct capital instrument & tier 1 notes	1,123	1,123
Preference shares	200	200
Subordinated debt³	7,233	7,213
Senior debt	1,403	1,364
Total capital employed⁴	27,969	28,128

1 Capital employed for United Kingdom & Ireland general insurance and health excludes c.£0.9 billion of goodwill which does not support the general insurance and health business for capital purposes and is included in 'Corporate & Other Business'.

2 'Corporate & 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.

3 Subordinated debt excludes amounts held by Group companies of £9 million (FY16: £9 million).

4 Goodwill, AVIF and other intangibles are maintained within the capital base. Goodwill includes goodwill in subsidiaries of £1,911 million (FY16: £2,045 million), goodwill in joint ventures of £19 million (FY16: £20 million) and goodwill in associates of £28 million (FY16: £47 million). AVIF and other intangibles comprise £4,841 million (FY16: £5,468 million) of intangibles in subsidiaries, £46 million (FY16: £72 million) of intangibles in joint ventures and £17 million (FY16: £18 million) of intangibles in associates, net of deferred tax liabilities of £(625) million (FY16: £(783) million) and the non-controlling interest share of intangibles of £(73) million (FY16: £(226) million).

Total capital employed is financed by a combination of equity shareholders' funds, preference capital, subordinated debt and borrowings. Total capital employed at HY17 amounted to £28.0 billion (FY16: £28.1 billion).

At HY17 the market value of external debt, subordinated debt, preference shares (including both Aviva plc preference shares of £200 million and General Accident plc preference shares, within non-controlling interests, of £250 million), direct capital instrument and tier 1 notes is £11,579 million (FY16: £11,006 million).

Page 91

C3 - Equity sensitivity analysis - IFRS basis

The sensitivity of the Group's total equity on an IFRS basis at 30 June 2017 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 2016 £bn	IFRS basis	30 June 2017 £bn	Equities down 10% £bn	Interest rates up 1% £bn	0.5% increased credit spread £bn
18.1	Long-term savings	17.3	-	(0.3)	(0.2)
10.1	General insurance and other	10.6	(0.1)	(0.4)	0.6
(8.6)	Borrowings	(8.6)	-	-	-
19.6	Total equity	19.3	(0.1)	(0.7)	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 £2.3 billion (before any associated tax impact).

The 0.5% increased credit spread sensitivity does not make an allowance for any adjustment to risk-free interest rates. The long-term business sensitivities provide for any impact of credit spread movements on liability valuations. The 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.

Page 92

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Page 93

Analysis of assets

In this section	Page
Analysis of assets
D1 Total assets	94
D2 Total assets - Valuation bases/fair value hierarchy	95
D3 Analysis of asset quality	98
D4 Pension fund assets	107
D5 Available funds	108
D6 Guarantees	108

Page 94

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 Group's risk appetite.

30 June 2017	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	-	-	7,350	7,350	(598)	6,752
Interests in joint ventures and associates	-	1,132	554	1,686	-	1,686
Property and equipment	-	189	322	511	(1)	510
Investment property	6,595	3,599	526	10,720	(1)	10,719
Loans	8	3,202	22,309	25,519	(67)	25,452
Financial investments
Debt securities	26,899	95,495	52,718	175,112	(4,042)	171,070
Equity securities	57,623	15,700	868	74,191	(616)	73,575
Other investments	51,368	8,991	4,337	64,696	(119)	64,577
Reinsurance assets	10,244	175	8,194	18,613	(101)	18,512
Deferred tax assets	-	-	186	186	-	186
Current tax assets	-	-	88	88	(8)	80
Receivables and other financial assets	208	2,179	6,699	9,086	(26)	9,060
Deferred acquisition costs and other assets	10	813	5,601	6,424	(17)	6,407
Prepayments and accrued income	325	1,264	1,380	2,969	(40)	2,929
Cash and cash equivalents	11,034	19,341	12,487	42,862	(406)	42,456
Assets of operations classified as held for sale	-	-	-	-	6,042	6,042
Total	164,314	152,080	123,619	440,013	-	440,013
Total %	37.3%	34.6%	28.1%	100.0%	-	100.0%
FY16 Total	161,128	157,775	121,516	440,419	-	440,419
FY16 Total %	36.6%	35.8%	27.6%	100.0%	-	100.0%

As at 30 June 2017, 28.1% of Aviva's total asset base was shareholder assets, 34.6% participating assets where Aviva shareholders have partial exposure, and 37.3% policyholder assets where Aviva shareholders have no exposure. Of the total assets (excluding assets held for sale), investment property, loans and financial investments comprise £345.4 billion (FY16: £335.4 billion).

Page 95

D2 - Total assets - Valuation bases/fair value hierarchy

Total assets - 30 June 2017	Fair value £m	Amortised cost £m	Equity accounted/ tax assets¹ £m	Total £m
Goodwill and acquired value of in-force business and intangible assets	-	7,350	-	7,350
Interests in joint ventures and associates	-	-	1,686	1,686
Property and equipment	395	116	-	511
Investment property	10,720	-	-	10,720
Loans	22,295	3,224	-	25,519
Financial Investments
Debt securities	175,112	-	-	175,112
Equity securities	74,191	-	-	74,191
Other investments	64,696	-	-	64,696
Reinsurance assets	10,170	8,443	-	18,613
Deferred tax assets	-	-	186	186
Current tax assets	-	-	88	88
Receivables and other financial assets	-	9,086	-	9,086
Deferred acquisition costs and other assets	-	6,424	-	6,424
Prepayments and accrued income	-	2,969	-	2,969
Cash and cash equivalents	42,862	-	-	42,862
Total	400,441	37,612	1,960	440,013
Total %	91.0%	8.6%	0.4%	100.0%
Assets of operations classified as held for sale	5,253	782	7	6,042
Total (excluding assets held for sale)	395,188	36,830	1,953	433,971
Total % (excluding assets held for sale)	91.1%	8.5%	0.4%	100.0%
FY16 Total	400,358	37,674	2,387	440,419
FY16 Total %	90.9%	8.6%	0.5%	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 - Policyholder assets 30 June 2017	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	-	-	-	-
Property and equipment	-	-	-	-
Investment property	6,595	-	-	6,595
Loans	-	8	-	8
Financial Investments
Debt securities	26,899	-	-	26,899
Equity securities	57,623	-	-	57,623
Other investments	51,368	-	-	51,368
Reinsurance assets	10,040	204	-	10,244
Deferred tax assets	-	-	-	-
Current tax assets	-	-	-	-
Receivables and other financial assets	-	208	-	208
Deferred acquisition costs and other assets	-	10	-	10
Prepayments and accrued income	-	325	-	325
Cash and cash equivalents	11,034	-	-	11,034
Total	163,559	755	-	164,314
Total %	99.5%	0.5%	-	100.0%
Assets of operations classified as held for sale	723	-	-	723
Total (excluding assets held for sale)	162,836	755	-	163,591
Total % (excluding assets held for sale)	99.5%	0.5%	-	100.0%
FY16 Total	159,107	1,932	89	161,128
FY16 Total %	98.7%	1.2%	0.1%	100.0%

Page 96

D2 - Total assets - Valuation bases/fair value hierarchy continued

Total assets - Participating fund assets 30 June 2017	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	-	-	1,132	1,132
Property and equipment	182	7	-	189
Investment property	3,599	-	-	3,599
Loans	168	3,034	-	3,202
Financial Investments
Debt securities	95,495	-	-	95,495
Equity securities	15,700	-	-	15,700
Other investments	8,991	-	-	8,991
Reinsurance assets	-	175	-	175
Deferred tax assets	-	-	-	-
Current tax assets	-	-	-	-
Receivables and other financial assets	-	2,179	-	2,179
Deferred acquisition costs and other assets	-	813	-	813
Prepayments and accrued income	-	1,264	-	1,264
Cash and cash equivalents	19,341	-	-	19,341
Total	143,476	7,472	1,132	152,080
Total %	94.3%	5.0%	0.7%	100.0%
Assets of operations classified as held for sale	2,476	-	-	2,476
Total (excluding assets held for sale)	141,000	7,472	1,132	149,604
Total % (excluding assets held for sale)	94.2%	5.0%	0.8%	100.0%
FY16 Total	149,146	7,273	1,356	157,775
FY16 Total %	94.5%	4.6%	0.9%	100.0%

Total assets - Shareholders assets 30 June 2017	Fair value £m	Amortised cost £m	Equity accounted/ tax assets¹ £m	Total £m
Goodwill and acquired value of in-force business and intangible assets	-	7,350	-	7,350
Interests in joint ventures and associates	-	-	554	554
Property and equipment	213	109	-	322
Investment property	526	-	-	526
Loans	22,127	182	-	22,309
Financial Investments
Debt securities	52,718	-	-	52,718
Equity securities	868	-	-	868
Other investments	4,337	-	-	4,337
Reinsurance assets	130	8,064	-	8,194
Deferred tax assets	-	-	186	186
Current tax assets	-	-	88	88
Receivables and other financial assets	-	6,699	-	6,699
Deferred acquisition costs and other assets	-	5,601	-	5,601
Prepayments and accrued income	-	1,380	-	1,380
Cash and cash equivalents	12,487	-	-	12,487
Total	93,406	29,385	828	123,619
Total %	75.5%	23.8%	0.7%	100.0%
Assets of operations classified as held for sale	2,054	782	7	2,843
Total (excluding assets held for sale)	91,352	28,603	821	120,776
Total % (excluding assets held for sale)	75.6%	23.7%	0.7%	100.0%
FY16 Total	92,105	28,469	942	121,516
FY16 Total %	75.8%	23.4%	0.8%	100.0%

Page 97

D2 - Total assets - Valuation bases/fair value hierarchy continued

Financial instruments (including investment property, derivatives and loans) - fair value hierarchy

The table below categorises the measurement basis for assets carried at fair value into a 'fair value hierarchy' in accordance with fair value methodology disclosed in note B17 in the condensed consolidated financial statements (IFRS section).

	Fair value hierarchy
Investment property and financial assets - Total 30 June 2017	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	-	-	10,720	10,720	-	(1)	10,719
Loans	-	70	22,225	22,295	3,224	(67)	25,452
Debt securities	101,475	57,041	16,596	175,112	-	(4,042)	171,070
Equity securities	73,291	-	900	74,191	-	(616)	73,575
Other investments (including derivatives)	55,160	5,191	4,345	64,696	-	(119)	64,577
Assets of operations classified as held for sale	-	-	-	-	-	4,845	4,845
Total	229,926	62,302	54,786	347,014	3,224	-	350,238
Total %	65.7%	17.8%	15.6%	99.1%	0.9%	-	100.0%
Assets of operations classified as held for sale	4,135	705	5	4,845	-	-	4,845
Total (excluding assets held for sale)	225,791	61,597	54,781	342,169	3,224	-	345,393
Total % (excluding assets held for sale)	65.4%	17.8%	15.9%	99.1%	0.9%	-	100.0%
FY16 Total	218,655	69,953	54,032	342,640	3,576	-	346,216
FY16 Total %	63.2%	20.2%	15.6%	99.0%	1.0%	-	100.0%

At 30 June 2017, the proportion of total investment property, financial investments and loans classified as Level 1 in the fair value hierarchy increased to 65.7% (FY16: 63.2%). The proportion of Level 2 financial investments was 17.8% (FY16: 20.2%), while those classified as Level 3 represented 15.6% (FY16: 15.6%).

Page 98

D3 - Analysis of asset quality

The analysis of assets that follows provides information about the assets held by the Group.

D3.1 - Investment property

				30 June 2017	31 December 2016
	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	-	-	526	526	-	-	526	526
Vacant investment property/held for capital appreciation	-	-	-	-	-	-	1	1
Total	-	-	526	526	-	-	527	527
Total %	-	-	100.0%	100.0%	-	-	100.0%	100.0%

95.1% (FY16: 95.1%) of total investment property by value is held in unit-linked or participating funds. Shareholder exposure to investment properties is principally through investments in UK and French 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. The investment properties are valued on an income basis that is based on current rental income plus anticipated uplifts at the next rent review, lease expiry, or break option taking into consideration lease incentives and assuming no further growth in the estimated value of the property. This uplift and the discount rate are derived from rates implied by recent market transactions on similar property. These inputs are deemed unobservable.

Page 99

D3 - Analysis of asset quality continued

D3.2 - Loans

The Group loan portfolio is principally made up of:

· Policy loans which are generally collateralised by a lien or charge over the underlying policy;

· Loans and advances to banks, which primarily relate to loans of cash collateral received in stock lending transactions. These loans are fully collateralised by other securities;

· Mortgage loans collateralised by property assets;

· Healthcare, Infrastructure & Private Finance Initiative ('PFI') other loans; and

· 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 classified as level 3 as the assumptions used to derive the credit risk, liquidity premium and property risk are not deemed to be market observable.

Loans - Total 30 June 2017	United Kingdom & Ireland £m	Canada £m	Europe £m	Asia £m	Total £m
Policy loans	24	-	740	36	800
Loans and advances to banks	2,319	-	15	-	2,334
Healthcare, Infrastructure & PFI other loans	2,586	-	55	-	2,641
Mortgage loans	19,084	-	-	-	19,084
Other loans	494	157	9	-	660
Total	24,507	157	819	36	25,519
Total %	96.1%	0.6%	3.2%	0.1%	100.0%
Assets of operations classified as held for sale	-	-	67	-	67
Total (excluding assets held for sale)	24,507	157	752	36	25,452
Total % (excluding assets held for sale)	96.3%	0.6%	3.0%	0.1%	100.0%
FY16 Total	23,798	170	854	37	24,859
FY16 Total %	95.8%	0.7%	3.4%	0.1%	100.0%

Loans - Shareholder assets 30 June 2017	United Kingdom & Ireland £m	Canada £m	Europe £m	Asia £m	Total £m
Policy loans	4	-	6	2	12
Loans and advances to banks	553	-	13	-	566
Healthcare, Infrastructure & PFI other loans	2,586	-	-	-	2,586
Mortgage loans	18,975	-	-	-	18,975
Other loans	4	157	9	-	170
Total	22,122	157	28	2	22,309
Total %	99.2%	0.7%	0.1%	0.0%	100.0%
Assets of operations classified as held for sale	-	-	18	-	18
Total (excluding assets held for sale)	22,122	157	10	2	22,291
Total % (excluding assets held for sale)	99.3%	0.7%	0.0%	0.0%	100.0%
FY16 Total	21,164	170	26	2	21,362
FY16 Total %	99.1%	0.8%	0.1%	0.0%	100.0%

The value of the Group's loan portfolio (including Policyholder, Participating Fund and Shareholder assets), at 30 June 2017 stood at £25.5 billion (FY16: £24.9 billion), an increase of £0.6 billion.

The total shareholder exposure to loans was £22.3 billion (FY16: £21.4 billion), and represented 87% of the total loan portfolio, with the remaining 13% mainly held in participating funds (£3.2 billion (FY16: £2.4 billion)) with £nil (FY16: £1.0 billion) in policyholder assets.

Of the Group's total loan portfolio excluding assets held for sale (including Policyholder, Participating Fund and Shareholder assets), 75% (FY16: 74%) is invested in mortgage loans.

Primary Healthcare, Infrastructure and PFI other loans included within shareholder assets are £2.6 billion (FY16: £2.5 billion) and are secured against the income from healthcare and educational premises.

Page 100

D3 - Analysis of asset quality continued

D3.2 - Loans continued

Mortgage loans - Shareholder assets

30 June 2017	Total £m
Non-securitised mortgage loans
- Residential (Equity release)	890
- Commercial	6,923
- Healthcare, Infrastructure & PFI mortgage loans	3,472
	11,285
Securitised mortgage loans	7,690
Total	18,975
Assets of operations classified as held for sale	-
Total (excluding assets held for sale)	18,975
FY16 Total	18,133

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 85% 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 current value of £0.9 billion (FY16: £0.7 billion). The movement is due to £0.2 billion of net new loans and accrued interest (net of redemptions). Fair value movements were less than £0.1 billion.

These mortgages are all in the form of equity release, whereby homeowners mortgage their property to release cash equity. Due to the structure of equity release mortgages, whereby interest amounts due are not paid in cash but instead rolled into the amount outstanding, they predominantly have a current Loan to Value ('LTV') of below 70%. The average LTV across the portfolio is 30.7% (FY16: 35.2%).

Commercial

Gross exposure by loan to value and arrears is shown in the table below.

Shareholder assets

30 June 2017	>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	-	-	-	-	-	302	47	228	1,121	5,225	6,923
0 - 3 months	-	-	-	-	-	-	-	-	-	-	-
3 - 6 months	-	-	-	-	-	-	-	-	-	-	-
6 - 12 months	-	-	-	-	-	-	-	-	-	-	-
> 12 months	-	-	-	-	-	-	-	-	-	-	-
Total	-	-	-	-	-	302	47	228	1,121	5,225	6,923

Of the £6.9 billion (FY16: £6.7 billion) of UK non-securitised commercial mortgage loans in the shareholder fund held by our UK Life business, £6.9 billion are used to 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.

For commercial mortgages loan service collection ratios, a key indicator of mortgage portfolio performance, improved to 2.09x (FY16: 1.89x). 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, also improved to 2.36x (FY16: 2.18x). Average mortgage LTV remained stable compared to FY16 at 58% (CRAV). The value of loans in arrears included within our shareholder assets is £nil (FY16: £0.1 million).

Commercial mortgages and Healthcare, Infrastructure & PFI loans are held at fair value on the asset side of the statement of financial position. Insurance liabilities are valued using a discount rate derived from gross yield on assets, with adjustments to allow for risk. £11.7 billion of shareholder loan assets are backing annuity liabilities and comprise of commercial mortgage loans (£6.9 billion), Healthcare, Infrastructure and PFI mortgage loans (£3.5 billion) and Primary Healthcare, Infrastructure and PFI other loans (£1.3 billion). The Group carries a valuation allowance within the liabilities against the risk of default of commercial mortgages, including Healthcare and PFI mortgages, of £0.4 billion (FY16: £0.5 billion) which equates to 39bps at 30 June 2017 (FY16: 50bps). The total valuation allowance held by Aviva Annuity UK Limited in respect of corporate bonds and mortgages, including Healthcare and PFI mortgages is £1.3 billion (FY16: £1.3 billion) over the remaining term of the UK Life corporate bond and mortgage portfolio. The valuation allowance for Friends Life Limited in respect of corporate bonds was £0.6 billion (FY16: £0.5 billion).

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 benefitting 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. We will continue to actively manage this position.

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D3.2 - Loans continued

Healthcare

Primary Healthcare, Infrastructure and PFI mortgage loans included within shareholder assets of £3.5 billion (FY16: £3.3 billion) are secured against primary health care premises (including General Practitioner surgeries), education, social housing and 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 78% (FY16: 74%), 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 relative to other mortgage loans.

Securitised mortgage loans

Securitised residential mortgages held are predominantly issued through vehicles in the UK. As at 30 June 2017, the Group has £7.7 billion (FY16: £7.4 billion) securitised mortgage loans of which £2.5 billion (FY16: £2.4 billion) are externally securitised and the remainder are internally securitised. Funding for the externally securitised residential mortgage assets of £2.5 billion (FY16: £2.4 billion) was obtained by issuing loan note securities. Of these loan notes approximately £183 million (FY16: £217 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.

£5.2 billion (FY16: £5.0 billion) of non-securitised residential loans are securitised internally through the issuance of loan notes. These mortgages are all in the form of equity release, whereby homeowners mortgage their property to release cash equity. Due to the structure of equity release mortgages, whereby interest amounts due are not paid in cash but instead rolled into the amount outstanding, they predominantly have a current Loan to Value ('LTV') of below 70%. The average LTV across the internally securitised mortgage loans is 23.4% (FY16: 23.4%).

3.3 - Financial investments

	30 June 2017				31 December 2016
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	160,635	15,542	(1,065)	175,112	168,075	16,408	(1,209)	183,274
Equity securities	60,645	15,133	(1,587)	74,191	57,268	13,214	(1,470)	69,012
Other investments	53,603	11,568	(475)	64,696	49,199	9,035	21	58,255
Total	274,883	42,243	(3,127)	313,999	274,542	38,657	(2,658)	310,541
Assets of operations classified as held for sale	4,647	130	-	4,777	9,872	865	(31)	10,706
Total (excluding assets held for sale)	270,236	42,113	(3,127)	309,222	264,670	37,792	(2,627)	299,835

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.

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D3.3 - Financial investments continued

D3.3.1 - Debt securities

	Fair value hierarchy
Debt securities - Shareholder assets 30 June 2017	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
UK Government	10,209	1,257	137	11,603
Non-UK Government	3,366	7,525	567	11,458
Europe	3,245	4,026	285	7,556
North America	32	3,148	282	3,462
Asia Pacific & Other	89	351	-	440
Corporate bonds - Public utilities	171	4,642	591	5,404
Corporate convertible bonds	-	-	-	-
Other Corporate bonds	1,317	15,929	4,415	21,661
Other	171	1,897	524	2,592
Total	15,234	31,250	6,234	52,718
Total %	28.9%	59.3%	11.8%	100.0%
Assets of operations classified as held for sale	1,233	208	-	1,441
Total (excluding assets held for sale)	14,001	31,042	6,234	51,277
Total % (excluding assets held for sale)	27.3%	60.5%	12.2%	100.0%
FY16 Total	15,042	32,440	6,233	53,715
FY16 Total %	28.0%	60.4%	11.6%	100.0%

11.8% (FY16: 11.6%) 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.

28.9% (FY16: 28.0%) of shareholder exposure to debt securities is based on quoted prices in an active market and are therefore classified as fair value Level 1.

	External ratings
Debt securities - Shareholder assets 30 June 2017	AAA £m	AA £m	A £m	BBB £m	Less than BBB £m	Non-rated £m	Total £m
Government
UK Government	-	11,444	71	-	-	71	11,586
UK local authorities	-	-	-	-	-	17	17
Non-UK Government	4,565	4,122	1,316	1,435	7	13	11,458
	4,565	15,566	1,387	1,435	7	101	23,061
Corporate
Public utilities	-	119	2,875	2,094	31	285	5,404
Convertibles and bonds with warrants	-	-	-	-	-	-	-
Other corporate bonds	1,988	3,021	8,206	5,639	267	2,540	21,661
	1,988	3,140	11,081	7,733	298	2,825	27,065
Certificates of deposits	-	-	-	2	9	-	11
Structured
RMBS¹ non-agency ALT A	-	-	-	-	-	-	-
RMBS¹ non-agency prime	1	33	22	3	44	-	103
RMBS¹ agency	59	-	-	-	-	-	59
	60	33	22	3	44	-	162
CMBS²	245	88	85	-	6	1	425
ABS³	41	474	388	49	39	9	1,000
CDO (including CLO)⁴	2	-	-	-	-	-	2
ABCP⁵	-	-	-	-	-	-	-
	288	562	473	49	45	10	1,427
Wrapped credit	-	13	413	53	58	46	583
Other	2	5	86	118	139	59	409
Total	6,903	19,319	13,462	9,393	600	3,041	52,718
Total %	13.2%	36.6%	25.5%	17.8%	1.1%	5.8%	100.0%
Assets of operations classified as held for sale	65	55	205	1,085	31	-	1,441
Total (excluding assets held for sale)	6,838	19,264	13,257	8,308	569	3,041	51,277
Total % (excluding assets held for sale)	13.3%	37.6%	25.9%	16.2%	1.1%	5.9%	100.0%
FY16 Total	7,307	19,796	13,988	9,165	580	2,879	53,715
FY16 Total %	13.6%	36.8%	26.0%	17.1%	1.1%	5.4%	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.

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D3.3 - Financial investments continued

D3.3.1 - Debt securities continued

During the period, shareholder exposure to debt securities decreased by £1.0 billion to £52.7 billion (FY16: £53.7 billion). The overall quality of the book remains strong. 44% of shareholder exposure to debt securities is in government holdings (FY16: 43%). Our corporate debt securities portfolio represents 51% (FY16: 52%) of total shareholder debt securities.

The majority of non-rated corporate bonds are held by our businesses in the UK.

At 30 June 2017, the proportion of our shareholder debt securities that are investment grade decreased to 93.1% (FY16: 93.5%). The remaining 6.9% of shareholder debt securities that do not have an external rating of BBB or higher can be split as follows:

· 1.1% are debt securities that are rated as below investment grade;

· 5.8% 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 £2.2 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 (FY16: £2.3 billion).

The Group has limited shareholder exposure to CDOs, CLOs and 'sub-prime' debt securities.

Out of the total shareholder asset backed securities (ABS), £938 million (FY16: £948 million) are held by the UK Life business. 95.2% of the Group's shareholder holdings in ABS are investment grade (FY16: 95.7%). ABS which either have a rating below BBB or are not rated represent approximately 0.1% of shareholder exposure to debt securities (FY16: 0.1%).

D3.3.2 - Equity securities

	30 June 2017				31 December 2016
	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	7	-	-	7	6	-	-	6
Banks, trusts and insurance companies	121	-	94	215	125	-	81	206
Industrial miscellaneous and all other	414	-	11	425	237	-	15	252
Non-redeemable preferred shares	221	-	-	221	206	-	-	206
Total	763	-	105	868	574	-	96	670
Total %	87.9%	-	12.1%	100.0%	85.7%	-	14.3%	100.0%
Assets of operations classified as held for sale	54	-	-	54	-	-	-	-
Total (excluding assets held for sale)	709	-	105	814	574	-	96	670
Total % (excluding assets held for sale)	87.1%	-	12.9%	100.0%	85.7%	-	14.3%	100.0%

Within our total shareholder exposure to equity securities, 87.9% is based on quoted prices in an active market and as such is classified as Level 1 (FY16: 85.7%).

D3.3.3 - Other investments

	30 June 2017				31 December 2016
	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	2,233	10	29	2,272	1,341	9	34	1,384
Derivative financial instruments	25	1,490	354	1,869	41	1,836	45	1,922
Deposits with credit institutions	9	-	-	9	3	-	-	3
Minority holdings in property management undertakings	-	28	157	185	-	27	162	189
Other	2	-	-	2	8	-	-	8
Total	2,269	1,528	540	4,337	1,393	1,872	241	3,506
Total %	52.3%	35.2%	12.5%	100.0%	39.7%	53.4%	6.9%	100.0%
Assets of operations classified as held for sale	106	24	4	134	-	-	-	-
Total (excluding assets held for sale)	2,163	1,504	536	4,203	1,393	1,872	241	3,506
Total % (excluding assets held for sale)	51.4%	35.8%	12.8%	100.0%	39.7%	53.4%	6.9%	100.0%

In total 87.5% (FY16: 93.1%) of total shareholder other investments are classified as Level 1 or 2 in the fair value hierarchy. Unit trusts and other investment vehicles invest in a variety of assets, which can include cash equivalents, debt, equity and property securities.

D3.3.4 - Available for sale investments - Impairments and duration and amount of unrealised losses

There was no impairment expense for the six months to 30 June 2017 for AFS securities (HY16: £nil).

Total unrealised losses on AFS debt securities, equity securities and other investments at 30 June 2017 were £nil (HY16: £nil), £nil (HY16: £nil) and £nil (HY16: £nil) respectively.

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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 £6.3 billion (FY16: £5.8 billion).

Direct sovereign exposures to Greece, Ireland, Portugal, Italy and Spain (net of non-controlling interests, excluding policyholder assets)

		Participating		Shareholder		Total
	30 June 2017 £bn	31 December 2016 £bn	30 June 2017 £bn	31 December 2016 £bn	30 June 2017 £bn	31 December 2016 £bn
Greece	-	-	-	-	-	-
Ireland	0.7	0.7	0.1	0.1	0.8	0.8
Portugal	0.1	0.1	-	-	0.1	0.1
Italy	5.7	5.4	0.6	0.4	6.3	5.8
Spain	1.0	1.0	0.4	0.4	1.4	1.4
Total Greece, Ireland, Portugal, Italy and Spain	7.5	7.2	1.1	0.9	8.6	8.1

Direct sovereign exposures to Greece, Ireland, Portugal, Italy and Spain (gross of non-controlling interests, excluding policyholder assets)

		Participating		Shareholder		Total
	30 June 2017 £bn	31 December 2016 £bn	30 June 2017 £bn	31 December 2016 £bn	30 June 2017 £bn	31 December 2016 £bn
Greece	-	-	-	-	-	-
Ireland	0.7	0.7	0.1	0.1	0.8	0.8
Portugal	0.1	0.1	-	-	0.1	0.1
Italy	7.8	7.5	0.7	0.5	8.5	8.0
Spain	1.4	1.4	0.7	0.7	2.1	2.1
Total Greece, Ireland, Portugal, Italy and Spain	10.0	9.7	1.5	1.3	11.5	11.0

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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	30 June 2017 £m	31 December 2016 £m	30 June 2017 £m	31 December 2016 £m	30 June 2017 £m	31 December 2016 £m	30 June 2017 £m	31 December 2016 £m
Austria	4	11	632	715	124	138	760	864
Belgium	17	21	1,042	1,273	271	357	1,330	1,651
France	119	115	12,604	13,285	1,768	1,859	14,491	15,259
Germany	109	142	1,416	1,629	677	606	2,202	2,377
Greece	-	-	-	-	-	-	-	-
Ireland	2	3	672	662	114	130	788	795
Italy	217	223	7,790	7,500	736	556	8,743	8,279
Netherlands	49	47	883	976	302	329	1,234	1,352
Poland	852	807	777	769	494	384	2,123	1,960
Portugal	1	2	129	118	-	-	130	120
Spain	91	88	1,373	1,386	668	659	2,132	2,133
European Supranational debt	135	174	1,827	2,404	1,820	1,821	3,782	4,399
Other European countries	298	272	1,312	1,029	582	642	2,192	1,943
Europe	1,894	1,905	30,457	31,746	7,556	7,481	39,907	41,132
Canada	20	16	53	174	2,452	2,397	2,525	2,587
United States	871	948	446	392	1,010	1,022	2,327	2,362
North America	891	964	499	566	3,462	3,419	4,852	4,949
Singapore	7	2	682	904	282	330	971	1,236
Other	2,190	2,295	2,695	2,650	158	143	5,043	5,088
Asia Pacific and other	2,197	2,297	3,377	3,554	440	473	6,014	6,324
Total	4,982	5,166	34,333	35,866	11,458	11,373	50,773	52,405
Assets of operations classified as held for sale	18	-	915	2,325	878	-	1,811	2,325
Total (excluding assets held for sale)	4,964	5,166	33,418	33,541	10,580	11,373	48,962	50,080

At 30 June 2017, the Group's total non-UK Government debt securities stood at £50.8 billion (FY16: £52.4 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.

Gross of non-controlling interests, our direct shareholder asset exposure to non-UK Government debt securities amounts to £11.5 billion (FY16: £11.4 billion). The primary exposures, relative to total shareholder non-UK Government debt exposure, are to Canadian (21%), French (15%), US (9%), Italian (6%), German (6%), and Spanish (6%) Government debt securities.

The participating funds exposure to non-UK Government debt amounts to £34.3 billion (FY16: £35.9 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 (37%), Italy (23%), Germany (4%), Spain (4%), Belgium (3%), and Netherlands (3%).

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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
30 June 2017	Total senior debt £bn	Total subordinated debt £bn	Total debt £bn	Total senior debt £bn	Total subordinated debt £bn	Total debt £bn
Australia	0.3	-	0.3	0.2	-	0.2
Denmark	-	-	-	0.9	-	0.9
France	0.5	0.1	0.6	2.7	0.6	3.3
Germany	-	-	-	0.5	0.3	0.8
Ireland	-	-	-	-	-	-
Italy	0.1	-	0.1	0.1	-	0.1
Netherlands	0.3	0.2	0.5	1.3	0.2	1.5
Spain	0.6	-	0.6	0.5	0.1	0.6
Sweden	0.2	-	0.2	0.2	-	0.2
Switzerland	-	-	-	1.1	-	1.1
United Kingdom	1.3	0.4	1.7	1.4	0.9	2.3
United States	1.0	0.2	1.2	1.7	0.1	1.8
Other	0.7	0.2	0.9	2.3	0.5	2.8
Total	5.0	1.1	6.1	12.9	2.7	15.6
Assets of operations classified as held for sale	0.2	-	0.2	0.3	-	0.3
Total (excluding assets held for sale)	4.8	1.1	5.9	12.6	2.7	15.3
FY16 Total	5.4	1.2	6.6	14.8	3.1	17.9

Net of non-controlling interests, our direct shareholder exposure to worldwide debt bank securities is £6.1 billion (FY16: £6.6 billion). The majority of our holding (82%) is in senior debt. The primary exposures are to UK (28%), US (20%), and Spanish (10%) 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 £15.6 billion (FY16: £17.9 billion). The majority of the exposure (83%) is in senior debt. Participating funds are the most exposed to French (21%), UK (15%), and US (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
30 June 2017	Total senior debt £bn	Total subordinated debt £bn	Total debt £bn	Total senior debt £bn	Total subordinated debt £bn	Total debt £bn
Australia	0.3	-	0.3	0.2	-	0.2
Denmark	-	-	-	0.9	-	0.9
France	0.5	0.1	0.6	2.8	0.6	3.4
Germany	-	-	-	0.6	0.3	0.9
Ireland	-	-	-	-	-	-
Italy	0.1	-	0.1	0.2	-	0.2
Netherlands	0.3	0.2	0.5	1.3	0.2	1.5
Spain	0.8	-	0.8	0.6	0.1	0.7
Sweden	0.2	-	0.2	0.2	-	0.2
Switzerland	-	-	-	1.1	-	1.1
United Kingdom	1.3	0.4	1.7	1.5	0.9	2.4
United States	1.0	0.2	1.2	1.8	0.1	1.9
Other	0.7	0.2	0.9	2.4	0.5	2.9
Total	5.2	1.1	6.3	13.6	2.7	16.3
Assets of operations classified as held for sale	0.4	-	0.4	0.4	-	0.4
Total (excluding assets held for sale)	4.8	1.1	5.9	13.2	2.7	15.9
FY16 Total	5.5	1.2	6.7	16.2	3.3	19.5

Gross of non-controlling interests, our direct shareholder exposure to worldwide bank debt securities is £6.3 billion (FY16: £6.7 billion). The majority of our holding (83%) is in senior debt. The primary exposures are to UK (27%), US (19%), and Spanish (13%) 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 £16.3 billion (FY16: £19.5 billion). The majority of the exposure (83%) is in senior debt. Participating funds are the most exposed to French (21%), UK (15%), and US (12%) banks.

Page 107

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. Refer to note B15 for details on the schemes' surpluses and deficits.

Scheme assets are stated at their fair values. Total scheme assets in the UK, Ireland and Canada are comprised as follows:

	30 June 2017				31 December 2016
	UK £m	Ireland £m	Canada £m	Total £m	UK £m	Ireland £m	Canada £m	Total £m
Bonds
Fixed interest	6,148	465	173	6,786	7,085	249	151	7,485
Index-linked	11,312	284	-	11,596	11,469	157	-	11,626
Equities	1	-	-	1	71	-	-	71
Property	329	-	-	329	338	-	-	338
Pooled investment vehicles	4,296	179	103	4,578	3,433	200	96	3,729
Derivatives	53	2	-	55	86	1	-	87
Cash and other¹	(3,813)	(313)	6	(4,120)	(3,046)	3	34	(3,009)
Total fair value of scheme assets	18,326	617	282	19,225	19,436	610	281	20,327
Less: consolidation elimination for non-transferable Group insurance policy²	(628)	-	-	(628)	(633)	-	-	(633)
Total IAS 19 fair value of scheme assets	17,698	617	282	18,597	18,803	610	281	19,694

1 Cash and other assets comprise cash at bank, insurance policies, receivables, payables and repos. At 30 June 2017, repos of £5,813 million (FY16: £4,666 million) are included within cash and other assets for the UK and Ireland pension schemes.

2 Friends Provident Pension Scheme assets are included in the UK balances. As at 30 June 2017, the Friends Provident Pension Scheme's cash and other balance includes an insurance policy of £628 million (FY16: £633 million) issued by a Group company that is not transferable under IAS 19 and is consequently eliminated from the Group's IAS 19 scheme assets.

Total scheme assets are analysed by those that have a quoted market price in an active market and those that do not as follows:

	30 June 2017			31 December 2016
	Total Quoted £m	Total Unquoted £m	Total £m	Total Quoted £m	Total Unquoted £m	Total £m
Bonds
Fixed interest	2,908	3,878	6,786	3,697	3,788	7,485
Index-linked	11,195	401	11,596	11,141	485	11,626
Equities	1	-	1	71	-	71
Property	-	329	329	-	338	338
Pooled investment vehicles	396	4,182	4,578	189	3,540	3,729
Derivatives	4	51	55	70	17	87
Cash and other¹	165	(4,285)	(4,120)	714	(3,723)	(3,009)
Total fair value of scheme assets	14,669	4,556	19,225	15,882	4,445	20,327
Less: consolidation elimination for non-transferable Group insurance policy²	-	(628)	(628)	-	(633)	(633)
Total IAS 19 fair value of scheme assets	14,669	3,928	18,597	15,882	3,812	19,694

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, the schemes' assets are invested in a portfolio consisting primarily (approximately 65%³) of debt securities. The investment strategy will continue to evolve over time and is expected to match the liability profile increasingly closely with swap overlays to improve interest rate and inflation matching. The schemes are generally matched to interest rate risk relative to the funding basis.

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. In 2014, the Aviva Staff Pension Scheme entered into a longevity swap covering approximately £5 billion of pensioner in payment scheme liabilities.

Other schemes

The other schemes are considerably less material but their risks are managed in a similar way to those in the main UK scheme. In 2015, the RAC pension scheme entered into a longevity swap covering approximately £600 million of pensioner in payment scheme liabilities.

3 Excluding repos of £5,813 million

Page 108

D5 - Available funds

To ensure access to liquidity as and when needed, the Group maintains £1.7 billion of undrawn committed central borrowing facilities with various highly rated banks. These facilities are used to support Aviva plc's commercial paper programmes. The expiry profile of the undrawn committed central borrowing facilities is as follows:

	30 June 2017 £m	31 December 2016 £m
Expiring within one year	-	-
Expiring beyond one year	1,650	1,650
Total	1,650	1,650

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-profits 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 109

VNB & sales analysis

In this section	Page
VNB & sales analysis
E1 Sales, VNB and new business margin analysis by market (adjusted Solvency II basis)	110
E2 Trend analysis of adjusted Solvency II VNB - cumulative	110
E3 Trend analysis of adjusted Solvency II VNB - discrete	111
E4 Trend analysis of PVNBP - cumulative	111
E5 Trend analysis of PVNBP - discrete	111
E6 Trend analysis of PVNBP by product - cumulative	112
E7 Trend analysis of PVNBP by product - discrete	112
E8 Geographical analysis of regular and single premiums	113
E9 Trend analysis of investment sales - cumulative	113
E10 Trend analysis of investment sales - discrete	113
E11 Trend analysis of general insurance and health net written premiums - cumulative	114
E12 Trend analysis of general insurance and health net written premiums - discrete	114
E13 Reconciliation of sales to net written premiums in IFRS	115
E14 Principal assumptions underlying the calculation of VNB (on an adjusted Solvency II basis)	116

Page 110

E1 - Sales, VNB and new business margin analysis by market (adjusted Solvency II basis)

The table below sets out the present value of new business premiums (PVNBP) written by the life and related businesses, value generated by new business written during the period (VNB) and the resulting margin, gross of tax and non-controlling interests, on an adjusted Solvency II basis. Following the introduction of the Solvency II regime on 1 January 2016, MCEV (which was calculated on the expired Solvency I basis) is no longer used as an indicator of the drivers of financial performance of the Group's in-force Life and related businesses. The MCEV VNB and MCEV PVNBP were disclosed for the last time at 31 December 2016.

The VNB shown below is the present value of the projected stream of pre-tax distributable profit generated by the new business written during the period, including expected profit between point of sale and the valuation date on an adjusted Solvency II basis. It reflects the additional value to shareholders created through the activity of writing new business including the impacts of interactions between in-force and new business. The VNB and PVNBP for 2016 include £(12) million and £257 million respectively relating to the internal transfer of annuities from a with-profits fund to a non profit fund during the second half of 2016 in the UK. The methodology underlying the calculation of adjusted Solvency II VNB remains unchanged from the prior year as set out in note 4. The demographic assumptions used are materially the same as that used at 31 December 2016 as set out in D.2.2 of the Aviva 2016 Solvency and Financial Condition Report (SFCR). The economic assumptions have been updated to be those relevant at the point of sale which has been implemented with the assumptions being taken as those appropriate to the start of each quarter. For contracts that are re-priced more frequently, weekly or monthly economic assumptions have been used. The principal economic assumptions are set out in E14. Adjusted Solvency II PVNBP is calculated using assumptions consistent with those used to determine the adjusted Solvency II VNB.

	Present value of new business premiums¹			Value of new business			New business margin
Gross of tax and non-controlling interests	6 months 2017 £m	6 months 2016 £m	Full year 2016 £m	6 months 2017 £m	6 months 2016 £m	Full year 2016 £m	6 months 2017 %	6 months 2016 %	Full year 2016 %
United Kingdom	11,191	8,232	18,142	267	200	429	2.4%	2.4%	2.4%
Ireland	495	339	710	3	5	12	0.6%	1.5%	1.7%
United Kingdom & Ireland	11,686	8,571	18,852	270	205	441	2.3%	2.4%	2.3%
France	2,405	2,898	5,523	120	101	225	5.0%	3.5%	4.1%
Poland	202	190	421	28	22	54	13.9%	11.6%	12.8%
Italy	2,191	2,024	3,634	60	42	83	2.7%	2.1%	2.3%
Spain	677	299	935	25	12	34	3.7%	4.0%	3.6%
Turkey	274	216	455	10	11	21	3.6%	5.1%	4.6%
Europe	5,749	5,627	10,968	243	188	417	4.2%	3.3%	3.8%
Asia	1,328	982	2,372	71	43	106	5.3%	4.4%	4.5%
Aviva Investors	1,262	1,388	2,845	12	12	28	1.0%	0.9%	1.0%
Total	20,025	16,568	35,037	596	448	992	3.0%	2.7%	2.8%

1 A reconciliation to IFRS net written premiums can be found in note E13.

E2 - Trend analysis of adjusted Solvency II VNB - cumulative

				Growth¹ on 1H16
Gross of tax and non-controlling interests	1H16 YTD £m	2H16 YTD £m	1H17 YTD £m	Sterling %	Constant currency %
United Kingdom²	200	429	267	34%	34%
Ireland	5	12	3	(42)%	(47)%
United Kingdom & Ireland	205	441	270	32%	32%
France	101	225	120	19%	8%
Poland³	22	54	28	24%	10%
Italy	42	83	60	43%	29%
Spain	12	34	25	107%	87%
Turkey	11	21	10	(1)%	8%
Europe	188	417	243	29%	18%
Asia	43	106	71	63%	49%
Aviva Investors	12	28	12	-	-
Total	448	992	596	33%	27%

1 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

2 Includes £(12) million relating to the internal transfer of annuities from a with-profits fund to a non profit fund in 2H16.

3 Poland includes Lithuania.

Page 111

E3 - Trend analysis of adjusted Solvency II VNB - discrete

				Growth¹ on 1H16
Gross of tax and non-controlling interests	1H16 Discrete £m	2H16 Discrete £m	1H17 Discrete £m	Sterling %	Constant currency %
United Kingdom²	200	229	267	34%	34%
Ireland	5	7	3	(42)%	(47)%
United Kingdom & Ireland	205	236	270	32%	32%
France	101	124	120	19%	8%
Poland³	22	32	28	24%	10%
Italy	42	41	60	43%	29%
Spain	12	22	25	107%	87%
Turkey	11	10	10	(1)%	8%
Europe	188	229	243	29%	18%
Asia	43	63	71	63%	49%
Aviva Investors	12	16	12	-	-
Total	448	544	596	33%	27%

1 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

2 Includes £(12) million relating to the internal transfer of annuities from a with-profits fund to a non profit fund in 2H16.

3 Poland includes Lithuania.

E4 - Trend analysis of PVNBP - cumulative

				Growth² on 1H16
Present value of new business premiums¹	1H16 YTD £m	2H16 YTD £m	1H17 YTD £m	Sterling %	Constant currency %
United Kingdom³	8,232	18,142	11,191	36%	36%
Ireland	339	710	495	46%	32%
United Kingdom & Ireland	8,571	18,852	11,686	36%	36%
France	2,898	5,523	2,405	(17)%	(25)%
Poland⁴	190	421	202	6%	(6)%
Italy	2,024	3,634	2,191	8%	(2)%
Spain	299	935	677	126%	105%
Turkey	216	455	274	26%	39%
Europe	5,627	10,968	5,749	2%	(7)%
Asia	982	2,372	1,328	35%	27%
Aviva Investors	1,388	2,845	1,262	(9)%	(9)%
Total	16,568	35,037	20,025	21%	16%

1 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.

2 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

3 Includes £257 million relating to the internal transfer of annuities from a with-profits fund to a non profit fund in 2H16.

4 Poland includes Lithuania.

E5 - Trend analysis of PVNBP - discrete

				Growth² on 1H16
Present value of new business premiums¹	1H16 Discrete £m	2H16 Discrete £m	1H17 Discrete £m	Sterling %	Constant currency %
United Kingdom³	8,232	9,910	11,191	36%	36%
Ireland	339	371	495	46%	32%
United Kingdom & Ireland	8,571	10,281	11,686	36%	36%
France	2,898	2,625	2,405	(17)%	(25)%
Poland⁴	190	231	202	6%	(6)%
Italy	2,024	1,610	2,191	8%	(2)%
Spain	299	636	677	126%	105%
Turkey	216	239	274	26%	39%
Europe	5,627	5,341	5,749	2%	(7)%
Asia	982	1,390	1,328	35%	27%
Aviva Investors	1,388	1,457	1,262	(9)%	(9)%
Total	16,568	18,469	20,025	21%	16%

2 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

3 Includes £257 million relating to the internal transfer of annuities from a with-profits fund to a non profit fund in 2H16.

4 Poland includes Lithuania.

Page 112

E6 - Trend analysis of PVNBP by product - cumulative

				Growth² on 1H16
Present value of new business premiums¹	1H16 YTD £m	2H16 YTD £m	1H17 YTD £m	Sterling %	Constant currency %
Pensions	5,578	11,615	7,169	29%	29%
Annuities³	571	2,074	1,075	89%	89%
Bonds	62	141	70	12%	12%
Protection	887	1,770	1,006	13%	13%
Equity release	247	637	360	46%	46%
Other	887	1,905	1,511	70%	70%
United Kingdom	8,232	18,142	11,191	36%	36%
Ireland	339	710	495	46%	32%
United Kingdom & Ireland	8,571	18,852	11,686	36%	36%
Savings	2,704	5,114	2,151	(20)%	(28)%
Protection	194	409	254	31%	19%
France	2,898	5,523	2,405	(17)%	(25)%
Pensions	322	757	429	33%	35%
Savings	2,137	4,082	2,562	20%	9%
Annuities	-	1	-	-	-
Protection	270	605	353	30%	19%
Poland⁴, Italy, Spain and Turkey	2,729	5,445	3,344	23%	12%
Europe	5,627	10,968	5,749	2%	(7)%
Asia	982	2,372	1,328	35%	27%
Aviva Investors	1,388	2,845	1,262	(9)%	(9)%
Total	16,568	35,037	20,025	21%	16%

2 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

3 Includes £257 million relating to the internal transfer of annuities from a with-profits fund to a non profit fund in 2H16.

4 Poland includes Lithuania.

E7 - Trend analysis of PVNBP by product - discrete

				Growth² on 1H16
Present value of new business premiums¹	1H16 Discrete £m	2H16 Discrete £m	1H17 Discrete £m	Sterling %	Constant currency %
Pensions	5,578	6,037	7,169	29%	29%
Annuities³	571	1,503	1,075	89%	89%
Bonds	62	79	70	12%	12%
Protection	887	883	1,006	13%	13%
Equity release	247	390	360	46%	46%
Other	887	1,018	1,511	70%	70%
United Kingdom	8,232	9,910	11,191	36%	36%
Ireland	339	371	495	46%	32%
United Kingdom & Ireland	8,571	10,281	11,686	36%	36%
Savings	2,704	2,410	2,151	(20)%	(28)%
Protection	194	215	254	31%	19%
France	2,898	2,625	2,405	(17)%	(25)%
Pensions	322	435	429	33%	35%
Savings	2,137	1,945	2,562	20%	9%
Annuities	-	1	-	-	-
Protection	270	335	353	30%	19%
Poland⁴, Italy, Spain and Turkey	2,729	2,716	3,344	23%	12%
Europe	5,627	5,341	5,749	2%	(7)%
Asia	982	1,390	1,328	35%	27%
Aviva Investors	1,388	1,457	1,262	(9)%	(9)%
Total	16,568	18,469	20,025	21%	16%

2 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

3 Includes £257 million relating to the internal transfer of annuities from a with-profits fund to a non profit fund in 2H16.

4 Poland includes Lithuania.

Page 113

E8 - Geographical analysis of regular and single premiums

					Regular premiums			Single premiums
	6 months 2017 £m	Constant currency growth¹	WACF	Present value £m	6 months 2016 £m	WACF	Present value £m	6 months 2017 £m	6 months 2016 £m	Constant currency growth¹
United Kingdom	929	7%	5.5	5,066	869	5.0	4,331	6,125	3,901	57%
Ireland	19	17%	6.3	119	15	6.5	97	376	242	41%
United Kingdom & Ireland	948	7%	5.5	5,185	884	5.0	4,428	6,501	4,143	56%
France	50	(15)%	9.8	491	53	8.9	474	1,914	2,424	(28)%
Poland²	25	17%	6.4	159	19	7.7	146	43	44	(13)%
Italy	18	(33)%	6.5	117	24	2.9	69	2,074	1,955	(4)%
Spain	22	33%	6.2	136	15	5.9	88	541	211	132%
Turkey	54	53%	4.1	224	39	4.8	188	50	28	102%
Europe	169	6%	6.7	1,127	150	6.4	965	4,622	4,662	(10)%
Asia	151	40%	6.7	1,011	100	6.8	682	317	300	(1)%
Aviva Investors	-	-	-	-	-	-	-	1,262	1,388	(9)%
Total	1,268	10%	5.8	7,323	1,134	5.4	6,075	12,702	10,493	15%

1 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

2 Poland includes Lithuania.

E9 - Trend analysis of investment sales - cumulative

				Growth² on 1H16
Investment sales¹	1H16 YTD £m	2H16 YTD £m	1H17 YTD £m	Sterling %	Constant currency %
United Kingdom & Ireland³	575	1,390	1,143	99%	99%
Aviva Investors⁴	3,587	5,765	2,949	(18)%	(23)%
Asia⁵	58	137	116	98%	78%
Total investment sales	4,220	7,292	4,208	-	(6)%

1 Investment sales are calculated as new single premiums plus the annualised value of new regular premiums.

2 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

3 UK & Ireland investment sales are also reported in UK Life PVNBP. YTD investment sales of £575 million for 1H16, £1,390 million for 2H16 and £1,143 million for 1H17 are equivalent to £636 million, £1,484 million, and £1,202 million respectively on a PVNBP basis.

4 YTD investment sales of £1,381 million for 1H16, £2,834 million for 2H16 and £1,259 million for 1H17 are also included in Aviva Investors' PVNBP.

5 Asia investment sales are also reported in Asia PVNBP.

E10 - Trend analysis of investment sales - discrete

					Growth² on 1H16
Investment sales¹	1H16 Discrete £m	2H16 Discrete £m	1H17 Discrete £m	Sterling %	Constant currency %
United Kingdom & Ireland³	575	815	1,143	99%	99%
Aviva Investors⁴	3,587	2,178	2,949	(18)%	(23)%
Asia⁵	58	79	116	98%	78%
Total investment sales	4,220	3,072	4,208	-	(6)%

1 Investment sales are calculated as new single premiums plus the annualised value of new regular premiums.

2 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

3 UK & Ireland investment sales are also reported in UK Life PVNBP. Discrete investment sales of £575 million for 1H16, £815 million for 2H16, and £1,143 million for 1H17, are equivalent to £636 million, £847 million, and £1,202 million respectively on a PVNBP basis.

4 Discrete investment sales of £1,381 million for 1H16, £1,453 million for 2H16, and £1,259 million for 1H17 are also included in Aviva Investors' PVNBP.

5 Asia investment sales are also reported in Asia PVNBP.

Page 114

E11 - Trend analysis of general insurance and health net written premiums - cumulative

				Growth¹ on 1H16
	1H16 YTD £m	2H16 YTD £m	1H17 YTD £m	Sterling %	Constant currency %
General insurance
United Kingdom²	2,001	3,930	2,105	5%	5%
Ireland	179	378	221	23%	12%
United Kingdom & Ireland	2,180	4,308	2,326	7%	6%
Canada	1,049	2,453	1,477	41%	25%
Europe	757	1,438	879	16%	5%
Asia & Other	5	12	6	11%	1%
	3,991	8,211	4,688	17%	11%
Health insurance
United Kingdom³	292	514	293	-	-
Ireland⁴	43	49	-	(100)%	(100)%
United Kingdom & Ireland	335	563	293	(13)%	(14)%
Europe	155	235	165	7%	(3)%
Asia⁵	64	125	78	22%	10%
	554	923	536	(3)%	(8)%
Total	4,545	9,134	5,224	15%	9%

1 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

2 FY16 excludes the impact from an outward quota share reinsurance agreement written in 2015 and completed in 2016 in Aviva Insurance Limited (AIL).

3 These premiums are also reported in UK Life PVNBP. 1H16 YTD NWP of £292 million, 2H16 YTD NWP of £514 million, and 1H17 YTD NWP of £293 million are equivalent to £255 million, £424 million and £308 million on a PVNBP basis respectively.

4 The sale of the Ireland Health business was completed in FY16

5 Singapore long-term health business is also reported in Asia PVNBP. For Singapore long term health business, 1H16 YTD NWP of £30 million, 2H16 YTD NWP £67 million and 1H17 YTD £38 million are equivalent to £97 million, £209 million and £69 million on a PVNBP basis respectively.

E12 - Trend analysis of general insurance and health net written premiums - discrete

				Growth¹ on 1H16
	1H16 Discrete £m	2H16 Discrete £m	1H17 Discrete £m	Sterling %	Constant currency %
General insurance
United Kingdom²	2,001	1,929	2,105	5%	5%
Ireland	179	199	221	23%	12%
United Kingdom & Ireland	2,180	2,128	2,326	7%	6%
Canada	1,049	1,404	1,477	41%	25%
Europe	757	681	879	16%	5%
Asia & Other	5	7	6	11%	1%
	3,991	4,220	4,688	17%	11%
Health insurance
United Kingdom³	292	222	293	-	-
Ireland⁴	43	6	-	(100)%	(100)%
United Kingdom & Ireland	335	228	293	(13)%	(14)%
Europe	155	80	165	7%	(3)%
Asia⁵	64	61	78	22%	10%
	554	369	536	(3)%	(8)%
Total	4,545	4,589	5,224	15%	9%

1 Currency movements are calculated using unrounded numbers so minor rounding differences may exist.

2 FY16 excludes the impact from an outward quota share reinsurance agreement written in 2015 and completed in 2016 in Aviva Insurance Limited (AIL).

3 These premiums are also reported in UK Life PVNBP, 1H16 NWP of £292 million, 2H16 of £222 million and 1H17 of £293 million are equivalent to £255 million, £255 million and £308 million on a PVNBP basis respectively.

4 The sale of the Ireland Health business was completed in FY16

5 Singapore long-term health business is also reported in Asia PVNBP. For Singapore long term health business, 1H16 NWP of £30 million, 2H16 £37 million and 1H17 NWP of £38 million are equivalent to £97 million, £112 million, and £69 million on a PVNBP basis respectively.

Page 115

E13 - Reconciliation of sales to net written premiums in IFRS

The table below presents our consolidated sales for the periods ended 30 June 2017, 30 June 2016 and the year ended 31 December 2016 as well as the reconciliation of sales to net written premiums in IFRS.

	6 months 2017 £m	6 months 2016 £m	Full Year 2016 £m
Present value of new business premiums	20,025	16,568	35,037
Investment sales	4,208	4,220	7,292
General insurance and health net written premiums	5,224	4,545	9,134
Less: long-term health and collectives business¹	(2,851)	(2,337)	(4,944)
Total sales	26,606	22,996	46,519
Less: Effect of capitalisation factor on regular premium long-term business	(5,938)	(4,941)	(10,563)
Share of long-term new business sales from JVs and associates	(354)	(238)	(552)
Annualisation impact of regular premium long-term business	(152)	(142)	(264)
Deposits taken on non-participating investment contracts and equity release contracts	(5,132)	(3,781)	(7,834)
Retail sales of mutual fund type products (investment sales)	(4,208)	(4,220)	(7,292)
Add: IFRS gross written premiums from existing long-term business	2,516	2,604	4,867
Less: Long-term insurance and savings business premiums ceded to reinsurers	(838)	(845)	(1,696)
Less: Outward reinsurance premium relating to general insurance business	-	-	(107)
Total IFRS net written premiums	12,500	11,433	23,078
Analysed as:
Long-term insurance and savings net written premiums	7,276	6,888	14,051
General insurance and health net written premiums	5,224	4,545	9,027
	12,500	11,433	23,078

1 Long-term health and collectives business are included as part of PVNBP.

Effect of capitalisation factor on regular premium long-term business

PVNBP is derived from the single and regular premiums of the products sold during the financial period and is expressed at the point of sale. The PVNBP calculation is equal to total single premium sales received in the year plus the discounted value of regular premiums expected to be received over the term of the new contracts. The discounted value of regular premiums is calculated using the same methodology as for VNB (on an adjusted Solvency II basis).

The discounted value reflects the expected income streams over the life of the contract, adjusted for expected levels of persistency, discounted back to present value. The discounted value can also be expressed as annualised regular premiums multiplied by a weighted average capitalisation factor (WACF). The WACF varies over time depending on the mix of new products sold, the average outstanding term of the new contracts and the projection assumptions.

Share of long-term new business sales from joint ventures and associates

Total long-term new business sales include our share of sales from joint ventures and associates. Under IFRS reporting, premiums from these sales are excluded from our consolidated accounts, with only our share of profits or losses from such businesses being brought into the income statement separately.

Annualisation impact of regular premium long-term business

As noted above, the calculation of PVNBP includes annualised regular premiums. The impact of this annualisation is removed in order to reconcile the non-GAAP new business sales to IFRS premiums and will vary depending on the volume of regular premium sales during the year.

Deposits taken on non-participating investment contracts and equity release contracts

Under IFRS, non-participating investment contracts are recognised in the Statement of Financial Position by recording the cash received as a deposit and an associated liability and are not recorded as premiums received in the IFRS income statement. Only the margin earned is recognised in the IFRS income statement.

Retail sales of mutual fund type products (investment sales)

Investment sales included in the total sales number represent the cash inflows received from customers to invest in mutual fund type products such as unit trusts and OEICs. We earn fees on the investment and management of these funds which are recorded separately in the IFRS income statement as 'fees and commissions received' and are not included in statutory premiums.

IFRS gross written premiums from existing long-term business

The non-GAAP measure of long-term and savings sales focuses on new business written in the year under review whilst the IFRS income statement includes premiums received from all business, both new and existing.

Page 116

E14 - Principal Assumptions underlying the calculation of VNB (on an adjusted SII basis)

Economic assumptions are derived actively, based on market yields on risk-free fixed interest assets at the end of each reporting period.

The risk-free interest rate curves used to calculate VNB reflect the basic risk-free interest rate curves (including the credit risk adjustment), volatility adjustment and fundamental spread for the matching adjustment published by EIOPA on their website. The details on methodology are set out in D.2.2.3 of the Aviva 2016 Solvency and Financial Condition Report (SFCR).

(a) Basic risk-free interest rates

The basic risk-free rate curves are stated in the table below, including a credit risk adjustment.

United Kingdom	2Q 2017 %	1Q 2017 %	4Q 2016 %	3Q 2016 %	2Q 2016 %	1Q 2016 %
Reference rate
1 year	0.4%	0.4%	0.4%	0.3%	0.4%	0.6%
5 years	0.8%	0.7%	0.7%	0.4%	0.5%	0.9%
10 years	1.2%	1.0%	1.1%	0.6%	0.9%	1.3%
15 years	1.4%	1.2%	1.3%	0.8%	1.1%	1.5%
20 years	1.5%	1.3%	1.3%	0.9%	1.1%	1.6%

Eurozone	2Q 2017 %	1Q 2017 %	4Q 2016 %	3Q 2016 %	2Q 2016 %	1Q 2016 %
Reference rate
1 year	(0.3)%	(0.3)%	(0.3)%	(0.3)%	(0.3)%	(0.2)%
5 years	0.2%	0.1%	0.0%	(0.2)%	(0.2)%	(0.1)%
10 years	0.8%	0.7%	0.6%	0.2%	0.3%	0.5%
15 years	1.2%	1.1%	1.0%	0.5%	0.7%	0.8%
20 years	1.4%	1.3%	1.1%	0.7%	0.8%	0.9%

(b) Matching adjustment

The matching adjustment (MA) is an increase applied to the risk-free rate used to value insurance liabilities where the cash flows are relatively fixed (e.g. no future premiums or surrender risk) and are well matched by assets that are intended to be held to maturity and have cash flows that are also relatively fixed. The intention is that, if held to maturity, the business can earn the additional yield on these assets that relate to illiquidity risk.

Aviva applies a matching adjustment to certain obligations in UK Life and Spain Life, using methodology which is set out in the SFCR Report. The matching adjustments used to value new business will reflect the characteristics of the assets allocated to back the new business. The allocation of assets to new business anticipates the expected assets chosen to back new business at the end of year closing balance sheet. These may be different to the matching adjustments applied at the portfolio level.

The matching adjustments used for new business are shown in the table below:

Matching Adjustment Portfolio (bps)	1H 2017	2H 2016	1H 2016
UK Life	123	171	152
Spain Life	19	24	30

At HY17, a combined MA of 123 bps was calculated for new business within the Friends UK and the Aviva UK annuity portfolios. Prior to HY17 separate MAs were calculated for these portfolios and the assumptions shown in the table above for the comparative periods relate to the Aviva UK annuity portfolio. For Friends UK, the MAs were 106 bps and 123 bps at 2H2016 and 1H2016 respectively. In the comparative periods, the higher MA for Aviva UK new business partly reflects the allocation to Aviva UK of a higher proportion of illiquid assets.

The volatility adjustment (VA) is intended to reflect temporary distortions in spreads caused by illiquidity in the market or extreme widening of credit spreads, in particular in relation to government bonds. VAs are prescribed by EIOPA and published along with the basic risk-free interest rate curves on their website. Where applicable the VA is applied to all those liabilities where a MA is not applied, with the exception of unit-linked business in UK Life where, in line with the approved applications, no allowance for the VA is made.

The volatility adjustments used are shown in the table below:

Volatility Adjustment (bps)	1H 2017	2H 2016	1H 2016
United Kingdom	21	30	38
Eurozone	9	13	16

Page 117

Other information

In this section	Page
Other information
Glossary	118
Shareholder services	122

Page 118

Product definitions

Annuity

A type of policy that pays out regular amounts, either immediately and for the remainder of a person's lifetime, or deferred to commence from a future date. Immediate annuities may be purchased for an individual and his or her dependants or on a bulk purchase basis for groups of people. Deferred annuities are accumulation contracts, which may be used to provide benefits in retirement and may be funded by a policyholder by payment of a series of contributions or by a capital sum. Annuities may be guaranteed, unit-linked or index-linked.

Bonds and savings

These are accumulation products with single or regular premiums and unit-linked or guaranteed investment returns.

Critical illness cover

Pays out a lump sum if the insured person is diagnosed with a serious illness that is specified within the insurance policy.

Equity release

Equity release mortgages allow a homeowner to receive a lump sum in return for a mortgage secured on their house. No interest is payable on the loan; instead, interest is rolled-up on the loan and the loan and accrued interest are repayable at redemption (upon death or moving into long-term care).

General insurance

Also known as non-life or property and casualty insurance. Property insurance covers loss or damage through fire, theft, flood, storms and other specified risks. Casualty insurance primarily covers losses arising from accidents that cause injury to other people or damage to the property of others.

Group pension

A pension plan that covers a group of people, which is typically purchased by a company and offered to their employees.

Health insurance

Provides cover against loss from illness or bodily injury. It can pay for medicine, visits to the doctor, hospital stays, other medical expenses and loss of earnings, depending on the conditions covered and the benefits and choices of treatment available on the policy.

Individual savings account (ISAs)

Tax-efficient plans within the UK for investing in stocks and shares, cash deposits or life insurance investment funds, subject to certain limits.

Investment sales

Comprise retail sales of mutual fund-type products such as unit trusts, individual savings accounts (ISAs) and open-ended investment companies (OEICs).

Mortgage endowment

An insurance contract combining savings and protection elements which is designed to repay the principal of a loan or mortgage.

Mortgage life insurance

A protection contract designed to pay off the outstanding amount of a mortgage or loan in the event of the death of the insured.

Open-ended investment company (OEIC)

A collective investment fund structured as a limited company in which investors can buy and sell shares.

Pension

A means of providing income in retirement for an individual and possibly his/her dependants. Individual pensions are pension plans that are arranged by the policyholder whereas workplace pensions are plans that are arranged by an individual's employer.

Protection

An insurance contract that protects the policyholder or his/her dependants against financial loss on death or ill-health.

Regular premium

A series of payments made by the policyholder, typically monthly or annually, for part of or all of the duration of the contract.

Single premium

A single lump sum paid by the policyholder at the start of the contract.

Unit-linked

Unit-linked business relates to collective investment savings products where premiums are invested on policyholders' behalf in individual units within an investment fund. The financial risk on these contracts is borne by the policyholders.

Unit trusts

A form of open-ended collective investment that is set up under a trust deed, in which investors can buy and sell units.

With-profits/Participating business

With-profits business relates to insurance contracts where premiums are invested in investment funds and policyholders have a contractual right to receive additional benefits based on factors such as the performance of the assets held within the fund, in addition to any guaranteed benefits. The insurer may have discretion as to the timing or amount of additional benefits allocated to policyholders.

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General terms

Alternative performance measures

Alternative performance measures ('APMs') are non-GAAP measures used by the Aviva Group within its financial publications to supplement disclosures prepared in accordance with other regulations such as International Financial Reporting Standards (IFRS) and Solvency II. We believe that these measures provide useful information to enhance the understanding of financial performance. The APMs should be viewed as complementary to, rather than a substitute for, the figures determined according to other regulatory measures.

The Group's APMs are highlighted below using the following symbol '‡'.

Acquired value of in force (AVIF)

The present value of future profits on a portfolio of long-term insurance and investment contracts, acquired either directly or through the purchase of, or investment in, a business.

Adjusted Solvency II Present value of new business premiums (PVNBP) ‡

Present value of new regular premiums plus 100% of single premiums from new business written at the point of sale and any changes to existing contracts, which were not anticipated at the outset of the contract that generates additional shareholder risk and associated premium income of the nature of a new policy. An example of a change to existing contracts that is considered to be generating PVNBP is an internal transfer of annuities from with-profits funds to a non-profit fund. PVNBP is calculated using assumptions consistent with those used to determine the adjusted Solvency II value of new business.

Adjusted Solvency II value of new business ‡

Adjusted Solvency II VNB is the increase in Solvency II Own Funds resulting from business written in the period, adjusted to remove the impact of contract boundaries, to include look through profits in service companies (where not included in Solvency II) and to include business which is not included in the Solvency II valuation. There is no explicit adjustment to include the cost associated with holding the Solvency II capital requirement as the Solvency II risk margin is viewed to be sufficient.

The methodology underlying the calculation of adjusted Solvency II VNB uses Solvency II rules with adjustments to reflect a more realistic basis than the prudential Solvency II basis.

Adjusted Solvency II VNB can be reconciled to the Solvency II Own Funds impact of new business; however there is no equivalent IFRS metric.

Annual premium equivalent (APE)

Used as a measure of life sales. It is calculated as the sum of new regular premiums plus 10% of new single premiums written in the period.

Assets under management‡

Assets under management represents all assets managed or administered by or on behalf of the Group, including those assets managed by third parties. Assets under management include managed assets that are included within the Group's statement of financial position and those assets belonging to external clients outside the Aviva Group which are therefore not included in the Group's statement of financial position.

Available for sale (AFS)

Securities that have been acquired neither for short-term sale nor to be held to maturity and are not classified as other than trading. These are shown at fair value on the statement of financial position and changes in value are taken straight to equity instead of the income statement.

Bancassurance/Affinity

An arrangement whereby banks and building societies sell insurance and investment products to their customers on behalf of other financial providers.

Best Estimate Liabilities (BEL)

The expected present value of future cash flows for a company's current insurance obligations, calculated using best estimate assumptions, projected over the contract's run-off period, taking into account all up-to-date financial market and actuarial information.

Cash remittances ‡

Amounts paid by our operating businesses to the Group, comprising dividends and interest on internal loans. These amounts eliminate on consolidation and hence are not directly reconcilable to the Group's IFRS consolidated statement of cash flows.

Combined operating ratio (COR) ‡

A financial measurement of general insurance underwriting profitability calculated as the sum of claims incurred, earned commission and earned expenses expressed as a percentage of net earned premiums. A COR below 100% indicates profitable underwriting.

The components used to calculate COR for the Group are detailed in note 7.ii - General insurance and health.

Contract boundaries

A contract boundary is the first point in time in the lifetime of an insurance policy at which the insurer has the ability to review the premiums charged at the individual policy level, without any contractual constraints. For policies in which such a point does not exist, the contract boundary is the same as the full term of the contract. Under Solvency II, if a contract boundary on an insurance contract is less than the full term of the contract the expected future premiums and obligations that relate to cover which may be provided after that date are not recognised in the measurement of the insurance liabilities.

Deferred acquisition costs (DAC)

The costs directly attributable to the acquisition of new business for insurance and investment contracts may be deferred to the extent that they are expected to be recoverable out of future margins in revenue on these contracts.

EIOPA

The European Insurance and Occupational Pensions Authority (EIOPA) was established as a consequence of the reforms to the structure of supervision of the financial sector in the European Union. The reform was initiated by the European Commission.

EIOPA's core responsibilities are to support the stability of the financial system, transparency of markets and financial products as well as the protection of policyholders, pension scheme members and beneficiaries. EIOPA is commissioned to monitor and identify trends, potential risks and vulnerabilities stemming from the micro-prudential level, across borders and across sectors.

The implementation of the Solvency II directive aims to address these goals.

Page 120

Fair value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price).

Financial Conduct Authority (FCA)

The FCA is an independent public body and is independent of the Bank of England. It is responsible for the conduct business regulation of financial services firms (including those firms subject to prudential regulation by the PRA) and the prudential regulation of firms not regulated by the PRA. The FCA has three statutory objectives: securing an appropriate degree of protection for consumers; protecting and enhancing the integrity of the UK financial system; and promoting effective competition in the interests of consumers.

Gross written premiums

The total earnings or revenue generated by sales of insurance products, before any reinsurance is taken into account. Not all premiums written will necessarily be treated as income in the current financial year, because some of them could relate to insurance cover for a subsequent period.

Independent Financial Advisers (IFAs)

A person or organisation authorised to give independent advice on financial matters. IFAs are authorised by the FCA in the UK.

Inherited estate

In the UK, the assets of the long-term with-profits funds less the realistic reserves for non-profit policies written within the with-profits funds, less asset shares aggregated across the with-profits 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 and guarantees.

International Financial Reporting Standards (IFRS)

These are international accounting regulations that all publicly listed companies in the European Union are required to use.

Latent claims

General insurance claims that are often not made until many years after the period of cover provided, due to the impact of perils or causes not becoming evident for a number of years. Sources of latent claims include asbestos-related diseases, environmental pollution and industrial deafness.

Life business

Subsidiaries selling life and pensions contracts.

Longevity risk

Risk associated with increasing life expectancy trends among policyholders and pensioners.

Long-term and savings business

Collective term for life insurance, pensions, savings, investments and related business.

Matching adjustment

An increase applied to the risk-free interest rate used to value insurance liabilities under Solvency II where the cash flows are relatively fixed (e.g. no future premiums or surrender risk) and are well matched to assets that are intended to be held to maturity and have cash flows that are also relatively fixed.

Minimum capital requirement (MCR)

The Minimum Capital Requirement is the minimum amount of capital that an insurer needs to hold to cover its risks under the Solvency II regulatory framework. If an insurer's capital falls below the MCR then authorisation will be withdrawn by the regulator unless a firm is able to meet the MCR within a short period of time.

Morbidity

Rate of disease or how likely someone will fall ill, varying by such parameters as age, gender and health, used in pricing and calculating liabilities for policyholders of life and annuity products, which contain morbidity risks.

Mortality

Rate of death, varying by such parameters as age, gender and health, used in pricing and calculating liabilities for policyholders of life and annuity products, which contain mortality risks.

Net asset value (NAV) per share‡

Net asset value (NAV) per share is calculated as the equity attributable to shareholders of Aviva plc, less preference share capital (both within the Consolidated statement of financial position), divided by the actual number of shares in issue as at the balance sheet date.

Net written premiums

Total gross written premiums for the given period, minus premiums paid over or 'ceded' to reinsurers.

New business margin

New business margins are calculated as the adjusted Solvency II value of new business divided by the adjusted Solvency II present value of new business premiums (PVNBP), and expressed as a percentage.

Operating Capital Generation (OCG)‡

OCG is the Solvency II surplus movement in the period due to operating items including the impact of new business, expected investment returns on existing business, operating variances, operating assumption changes and management actions. It excludes economic variances, economic assumption changes and integration and restructuring costs.

Operating earnings per share (EPS)‡

Operating EPS is calculated based on the operating profit attributable to ordinary shareholders net of tax, non-controlling interests, preference dividends, the direct capital instrument (DCI) and tier one notes divided by the weighted average number of ordinary shares in issue, after deducting treasury shares.

The components used to calculate the operating EPS are detailed in note B7 - Earnings per share.

Operating expense ratio ‡

The Group operating expense ratio expresses operating expenses as a percentage of operating income. Operating income is calculated as operating profit before Group debt costs and operating expenses.

The components used to calculate the operating expense ratio are detailed in note 1 - Operating profit, note 3 - Expenses and note A3 - Group debt costs and other interest.

Operating expenses ‡

The day-to-day expenses involved in running the business including staff costs. For the avoidance of doubt, operating expenses excludes commission, non-operating integration and restructuring costs, and amortisation and impairment of AVIF and intangible assets. The components of operating expenses are detailed in note 3 - Expenses.

Page 121

Operating profit ‡

This is a non-GAAP financial performance measure. It is based on expected investment returns and stated before tax and before non-operating items including impairment of goodwill and amortisation and impairment of acquired value of in-force business, the profit or loss on disposal and remeasurement of subsidiaries, joint ventures and associates, integration and restructuring costs and other items. Other items are those items that, in the Directors' view, are required to be separately disclosed by virtue of their nature or incidence to enable a full understanding of the Group's financial performance.

The components of operating profit are detailed in note A - Reconciliation of group operating profit to profit after tax.

Own Funds

Under Solvency II, capital available to cover the SCR and MCR is referred to as own funds. This includes the excess of assets over liabilities in the Solvency II balance sheet (calculated on best estimate, market consistent assumptions and net of transitional measures on technical provisions), subordinated liabilities that qualify as capital under Solvency II, and off-balance sheet own funds approved by the regulator. Own funds eligible to cover the SCR and MCR also reflect any tiering restrictions.

Persistency

The rate at which policies are retained over time and therefore continue to contribute premium income and assets under management.

Prudential Regulatory Authority (PRA)

The PRA is a part of the Bank of England and is responsible for the prudential regulation of deposit taking institutions, insurers and major investment firms. The PRA's objectives are: to promote the safety and soundness of the firms it regulates; specifically for insurers, to contribute to the securing of an appropriate degree of protection for policyholders; and a secondary objective to facilitate effective competition.

Return on equity ‡

The return on equity calculation is based on operating return after tax attributable to ordinary shareholders expressed as a percentage of weighted average ordinary shareholders' equity.

The components of the calculation are detailed in note C1 - Analysis of return on equity.

Risk-adjusted returns

Adjusting profits earned and investment returns by how much risk is involved in producing that return or profit.

Risk Margin

The amount an insurance company would require, in excess of best estimate liabilities, in order to take over and meet the whole portfolio of insurance and reinsurance obligations. It reflects the cost of providing capital equal to the Solvency II capital requirement for non-hedgeable risks necessary to support the insurance obligations over their lifetime. Risk Margin represents the value of deviation risk of the actual outcome compared with the best estimate, expressed in terms of a defined risk measure.

Solvency II

These are insurance regulations designed to harmonise EU insurance regulation. Primarily this concerns the amount of capital that European insurance companies must hold under a measure of capital and risk. Solvency II became effective from 1 January 2016.

Solvency II cover ratio ‡

Own funds divided by the Solvency Capital Requirement (SCR), as calculated on a shareholder view. The shareholder view excludes the contribution to Group SCR and Group own funds of fully ring fenced with-profits funds and staff pension schemes in surplus - these exclusions have no impact on Solvency II surplus.

Solvency II cover ratio is detailed in note 8.iv - Solvency II.

Solvency II own funds impact of new business

The change in own funds resulting from new business written in the period.

Solvency II surplus

Own funds less the SCR. Holding capital in excess of the SCR demonstrates an insurer has adequate financial resources in place to meet all its liabilities as and when they fall due and that there is sufficient capital to absorb significant losses.

Solvency II surplus impact of new business

The change in Solvency II surplus resulting from new business written in the period.

Solvency Capital Requirement (SCR)

The SCR is the amount of capital the regulator requires an insurer to hold to meet the requirements under the Solvency II regulatory framework. Firms may use their own internal model, the European Insurance and Occupational Pensions Authority (EIOPA) prescribed standard formula or a partial internal model to determine SCR.

Transitional Measures on Technical Provisions (TMTP)

TMTP is an adjustment to Solvency II technical provisions to bring them into line with the pre-Solvency II equivalent as at 1 January 2016 when the regulatory basis changed, to smooth the introduction of the new regime. This will decrease linearly over the 16 years following Solvency II implementation but may be recalculated to allow for material changes to the risk profile of the relevant business, subject to agreement with the regulator. TMTP may also be recalculated every 24 months if considered appropriate by the firm or at the request of the regulator.

Underwriting result

The profit or loss from general insurance and health activities, excluding investment performance. It is calculated as net earned premiums less net insurance claims, commission and expenses. The underwriting result is calculated in note 7ii - General insurance and health.

Volatility adjustment

A reduction to Solvency II technical provisions to reflect temporary distortions in spreads caused by illiquidity in the market or extreme widening of credit spreads. The volatility adjustment reduces technical provisions by increasing the discount rate used to calculate the best estimate liability. Volatility adjustments are prescribed by EIOPA on a currency and country basis.

Page 122

Annual General Meeting (AGM)

The voting results for the 2017 AGM, including proxy votes and votes withheld, can be viewed on our website at www.aviva.com/agm. There, you will also find a webcast of the formal business of the meeting and information relating to past general meetings.

2017 financial year calendar

2017 interim dividend ex-dividend	5 October 2017
2017 interim record date	6 October 2017
Last day for Dividend Reinvestment Plan and currency election for 2017 interim dividend	27 October 2017
Payment date¹	17 November 2017
Full year results announcement²	8 March 2018

1 Please note that the ADR dividend payment date will be 23 November 2017.

2 This date is provisional and subject to change

Don't miss out on your dividends!

From November 2017, we are simplifying the way we pay dividends to shareholders by only paying cash dividends directly into a nominated bank account. This provides shareholders with the following benefits:

· Make dividend payments to shareholders faster and more secure, minimising the risk of loss or fraud

· Reduce costs and our impact on the environment - we use six metric tons of paper for printing cheques each dividend payment

· Remove administration fees currently payable by shareholders for replacement dividend cheques

If you are currently receiving your dividend by cheque, take action now and choose from the dividend payment options detailed below. There is also a dividend changes timeline to the right showing the key dates of our change to payment of dividends. If you already receive your dividend directly to your bank account, your current payment instruction will apply.

Dividend payment options

Shareholders are able to receive their dividends in the following ways:

· Directly into your nominated UK bank account

· Directly into your nominated Eurozone bank account

· The Global Payment Service provided by our Registrar, Computershare Investor Services PLC (Computershare). This enables shareholders living outside of the Single Euro Payments Area (SEPA) to elect to receive their dividends or interest payments in a choice of over 60 international currencies

· The Dividend Reinvestment Plan enables eligible shareholders to reinvest their dividends in additional Aviva ordinary shares

You can find further details regarding these payment options at www.aviva.com/dividends and register your choice by contacting Computershare using the contact details on the next page, online at www.aviva.com/online or by returning a dividend mandate form. You must register for one of these payment options to receive dividend payments.

Manage your shareholding online

www.aviva.com/online:

You can access Computershare online services directly using the above address where you can log in using your Computershare details to:

· Change your address

· Change your payment options

· Switch to electronic communications

· View your shareholding

· View any outstanding payments

· Access useful information and view your Aviva policies

www.aviva.co.uk/myaviva:

If you've already registered for MyAviva you'll be able to view useful shareholder information. You can also check the details of Aviva policies you may have. Our online portal brings all this information together into one safe and secure place at a time that suits you. Just log in as normal using your email address via www.aviva.co.uk/myaviva.

MyAviva also includes a link to the Investor Centre, where you can log in and manage your shareholding as outlined above.

www.aviva.com/shareholders:

For access to our shareholder services centre.

www.aviva.com/dividends:

To find the latest information on Aviva dividends.

www.aviva.com/agm:

To find the latest information on our Annual General Meeting.

www.aviva.com/reports:

To access our latest reports.

www.aviva.com/shareprice:

To find out the latest Aviva plc Ordinary share price.

www.londonstockexchange.com:

To find out the latest Aviva plc Preference share price.

Dividend changes timeline

27 October 2017	Last date to complete a mandate instruction to receive the dividend payable in November 2017
17 November 2017	First dividend where direct credit is the only method of payment for cash dividends - a reminder will be sent to shareholders who have not received their dividend
Spring 2019	An annual dividend confirmation will be sent to shareholders who have had dividends withheld during the previous year

Page 123

Contact details

Ordinary and preference shares - Computershare Investor
Services Plc

For any queries regarding your shareholding, or to advise of changes to your personal details, please contact Computershare:

By telephone: 0371 495 0105

Lines are open from 8.30am to 5.30pm (UK time),
Monday to Friday (excluding public holidays).

Please call +44 117 378 8361 if calling from outside the UK.

By email: AvivaSHARES@computershare.co.uk

In writing: Computershare Investor Services PLC,

The Pavilions, Bridgwater Road, Bristol BS99 6ZZ

American Depositary Receipts (ADRs) - Citibank

For any queries regarding Aviva ADRs, please contact Citibank Shareholder Services (Citibank):

By telephone: 1 877 248 4237 (1 877-CITI-ADR), or +1 781 575 4555 if you are calling from outside the US. (Lines are open from 8.30am to 6pm, Monday to Friday US Eastern Standard Time).

By email: citibank@shareholders-online.com

In writing: Citibank Shareholder Services,

PO Box 43077, Providence, Rhode Island 02940-3077 USA

Please visit www.citi.com/dr for further information about Aviva's ADR programme.

Group company secretary

Shareholders may contact the group company secretary as follows:

By email: aviva.shareholders@aviva.com

In writing: Kirstine Cooper, Group Company Secretary,
St Helen's, 1 Undershaft, London EC3P 3DQ

By telephone: +44 (0)20 7283 2000

Shareholder updates

We provide quarterly online updates to shareholders to keep them informed on how Aviva is doing as well as useful information for shareholders. Sign up for email communications at www.aviva.com/online to receive a notification when the latest update is available.

Be a ScamSmart investor

www.fca.org.uk/scamsmart

As a shareholder, you may receive a call from someone offering to buy your shares at a higher price than their market value. This might sound like a great deal, but will likely come with a request for money upfront as a bond or other form of security. This is probably a scam where you pay money upfront but never hear from them again.

If you're cold-called regarding your shares or other investment opportunity, chances are it's very risk or a scam.

The safest thing to do is hang up.

Do you receive duplicate documents?

A number of shareholders still receive duplicate documentation and split dividend payments as a result of having more than one account on the Aviva Register of Members. If you think you fall into this group and would like to combine your accounts, please contact Computershare.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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