31 dec 2019: pillar 3 disclosures - aviva

For today’s investor

Pillar 3 Disclosures December 2019

2 Aviva Investors

Contents

Section 1: Introduction 5 1.1 Overview 6

1.1.1 Purpose 6 1.1.2 Basis of disclosures 6 1.1.3 Frequency of disclosures 6 1.1.4 Verification,mediaandlocation 6 1.2 Scope 7 1.2.1 Basisofconsolidation 7 1.2.2 Transferofcapitalresources 7

Section 2: Governance structure and key responsibilities 9 2.1 Board and Committees 10 2.1.1 Aviva plc Board 10 2.1.2 AvivaInvestors 10 2.2 Three lines of defence 13 2.2.1 Firstlineofdefence 14 2.2.2 Second line of defence 14 2.2.3 Third line of defence 15 2.3 Culture and conduct 16 2.3.1 Culture 16 2.3.2 Conduct 16 2.3.3 GlobalEthicalConductCodeand

supportingpolicies 17 2.3.4 RecruitmentandReward 17 2.4 Risk, compliance and control environment 18 2.4.1 Frameworks 18 2.4.2 AvivaInvestorsRiskregister 18 2.4.3 Riskappetitestatement 18 2.4.4 Risktolerancesandaggregation 19 2.4.5 Approach 19

Pillar 3 Disclosures 2019 3

Section 3: Capital Resources and Adequacy 25 3.1 Capital Resources 26 3.2 Capital Resource Requirements – Pillar 1 27 3.3 Features, Terms and Conditions of

Capital Instruments 29 3.3.1 CET1Capital 29 3.3.2 Tier2Capital 29

3.4 Prudential Filters and Deductions 29 3.5 Capital Ratios 29 3.6 Analysis of Capital Requirements 30

3.7 Other Exposures 32 3.8 Capital Resource Requirements –

New prudential regime for investment firms 32

Section 4: Remuneration Code Disclosure 35 4.1 Decision-making process for remuneration policy 36 4.2 External consultants 36 4.3 Role of the relevant stakeholders 36 4.4 Code Staff criteria 37 4.5 The link between pay and performance for

Code Staff 38 4.6 Aggregate remuneration cost for Code Staff

by business area 38

Abbreviations and glossary of terms 40

5

Section 1Introduction

Section

1

6 Aviva Investors

Introduction

1.1 Overview

1.1.1 Purpose TheCapitalRequirementsDirectiveIV(“CRDIV”)istheframeworkforimplementinginternationalcapitaladequacystandardsintheEuropeanUnion("EU");andconsistsofthreepillars:

• Pillar1setstheminimumcapitalrequirementsthatregulatedentitiesarerequiredtomeetforcredit,marketandoperationalrisk,asdeterminedbythelocalregulator;

• Pillar2requiresregulatedentitiesandtheirsupervisorstoassesswhetheradditionalcapitalshouldbeheldagainstrisksnotcoveredinPillar1;and

• Pillar3seekstoimprovemarketdisciplinebyrequiringregulatedentitiestodisclosecertaininformationontheirrisks,riskmanagementandcapital.

AvivaInvestorsFCAconsolidationgroup (hereafterreferredtoas“UKRegulatoryGroup”)iscategorisedasasignificantPrudentialSourcebookforInvestmentFirms("IFPRU")Groupandissubjecttoprudentialoversightbytheregulators ofthecountriesinwhichitoperates.TheUnitedKingdom’sRegulator–theFinancialConductAuthority("FCA")–implementsthePillar3requirementsintheUKbywayofPartEightof theCapitalRequirementsRegulation(“CRR”).Insummary,theregulationsrequireAvivaInvestors toconsiderthefollowing:

• ThealignmentofAvivaInvestorsbusinessstrategy,plan,forecasts,RiskAppetiteStatement("RAS"),risksandmonitoringmeasurements.

• Theidentification,definition,exposureandmeasurementofitskeyrisksandcontrolstomitigatethoserisks.

• Thecapitaladequacyassessmentprocesstoassesseachmaterialriskanddeterminetheappropriatecapitalrequirements.

• TheintegrationoftheInternalCapitalAdequacyAssessmentProcess("ICAAP")intothe AvivaInvestorsRiskManagementFramework(“RMF”)processes.

• TheresilienceofthefinancialpositionbystressingthefinancialprojectionswithanumberofStressandScenarioTesting("SST)whichreflectthecurrentandfuturerisksof AvivaInvestors.

1.1.2 Basis of disclosures

ThesedisclosuresaremadeinaccordancewiththerequirementsofArticles431to455oftheCRR.Specifically,thesedisclosuresincludeAvivaInvestors'riskmanagementframeworkandpolicieswhichincludethestrategies,culture,processes,governancearrangements,toolsandreportingproceduresnecessarytomanageitscurrentandfutureriskprofiles.

1.1.3 Frequency of disclosuresThese disclosures are produced on an annual basis asaminimumandmorefrequently,ifappropriate.AvivaInvestorshasafinancialreportingdateof31Decemberandthesedisclosuresreflectthepositionat31December2019.

1.1.4 Verification, media and locationThesedisclosuresareproducedsolelyforthepurposesofsatisfyingthePillar3requirements, toexplainthebasisofpreparation,disclosure ofcertaincapitalrequirementsandtoprovideinformationaboutthemanagementofcertainrisks.Thedisclosuresarenotsubjecttoauditnordotheyconstituteanyformofauditedfinancialstatements.

AvivaInvestorsHoldingsLimited(“AIHL”)anditssubsidiariescollectivelyreferredtoasthe"AvivaInvestorsGroup",areresponsibleforthesystemofinternalcontrolandforreviewingitseffectiveness.Suchasystemcanprovidereasonablebutnotabsoluteassuranceagainstmaterialfinancialmisstatementorloss,conductandreputationalimpactsandisdesignedtomitigate,not eliminate,risk.

TheAvivaInvestorsPillar3disclosureshavebeenpreparedandreviewedinaccordancewiththeAvivaInvestorsPillar3disclosurepolicyapprovedbytheAIHLBoardon14 April 2020.ManagementconsiderthatdisclosuresassetoutinthisdocumentadequatelyconveytheriskprofileofAvivaInvestors.

Thesedisclosuresarepublishedonthe AvivaInvestorscorporatewebsite(www.avivainvestors.com).


1.2 Scope

1.2.1 Basis of consolidationInaccordancewiththeexemptionsavailableunderInternationalAccountingStandard(“IAS”)27ConsolidatedandSeparateFinancialStatementsandsection400oftheCompaniesAct2006,AvivaInvestorsHoldingsLimited("AIHL")doesnotpublishitsownconsolidatedaccountsastheAvivaInvestorsgroupisconsolidatedintotheaccountsofitsultimateparentcompany,Avivaplc,whicharepublishedontheAvivacorporatewebsite(www.aviva.com).InternalAvivaInvestorsgroupconsolidatedmanagementaccounts,preparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”),includeaconsolidationofitssubsidiaries,jointventuresandrelevantproportionsofundertakingsbyvirtueofaBankingConsolidationDirectiveArticle134relationship.AnArticle134relationshipisarelationshipwheresignificantinfluenceisexercisedoveranothercompany,butwithoutholdingaparticipationorothercapitaltiesinthecompanyandwithoutbeingaparentundertakingofthecompany.

Allundertakings-meetingtherequirementsofArticle134-thatformpartoftheAvivaInvestorsGroupconsolidatedaccountsareultimatelyheldbyAvivaplc.Forthepurposesofregulatoryreporting,andasrequiredbytheFCA,AvivaInvestorsFranceSA,AvivaInvestorsFranceRealEstateSAandAvivaInvestorsFranceRealEstateSGP,whichareincludedinconsolidatedinternalreportingunderanArticle134relationshipasdefinedbytheFCAareexcludedfromtheUKRegulatoryGroup.

WithintheUKRegulatoryGroup,thefollowingentitiesareregulatedbytheFCAandareconsolidatedforregulatoryreportingpurposesusingtheaggregationmethodundertheFCArulesforinvestmentfirms:

• AvivaInvestorsGlobalServicesLimited("AIGSL"), asignificantIFPRUfirm–LimitedLicence€125k;

• AvivaInvestorsUKFundServicesLimited("AIUKFSL"),anIPRU-INVcollectiveportfoliomanagementfirm;

Thefollowingoverseasentitiesareregulatedbylocalregulatoryauthoritiesintheirjurisdictionofincorporationandareconsolidatedusingtheaggregationmethod:

• AvivaInvestorsLuxembourgSA;

• AvivaInvestorsAsiaPteLtd;

• AvivaInvestorsPacificPtyLimited;

• AvivaInvestorsAmericasLLC;

• AvivaInvestorsJerseyUnitTrusts ManagementLimitedand

• AvivaInvestorsCanadaInc.

The following entities were liquidated in 2019:

• AvivaInvestorsUKFundsLimited("AIUKFL)anIFPRUfirm–LimitedLicence€125k(liquidated 18June2019);and

• FriendsLifeFundsLimited("FLFL")anIPRU-INVcollectiveportfoliomanagementfirm(liquidated13September2019).

TheUKRegulatoryGroupfullyconsolidatedthefollowingentitywithaminorityinterest:

• AvivaInvestorsPolandTFI(AvivaInvestorshas51%ownership).

Thefollowinginvestmentwasnotconsolidated:

• AvivaInvestorsPensionsLimited(“AIPL”);

AIPLisan“insuranceundertaking”andisthereforenotaninstitutionorafinancialinstitutionandfallsunderSolvencyIIregulatoryregime,asdefinedbyEuropeanInsuranceandOccupationalPensionsAuthority("EIOPA").Consequently,AIPLisexcludedfromtheconsolidation,butreflectedasaninvestmentinsubsidiary.

ThereareotherunregulatedanddormantentitiesintheAvivaInvestorsGroupwhicharenotincludedinthelistabovebutareconsolidatedforregulatoryreportingpurposes.AfulllistofAvivaInvestorsentitiesisincludedintheAvivaplcAnnualReport2019availableatwww.aviva.com

1.2.2 Transfer of capital resourcesThereisnocurrentorforeseenmaterial,practicalorlegalimpedimenttotheprompttransferofcapitalresourcesfromAIHL,theAvivaInvestorsgroupparentundertaking,toitssubsidiaryundertakings.

8 Aviva Investors8

Main header for Section to go along here


9

Section 2Governancestructureand keyresponsibilities

9

Section

2

10 Aviva Investors

Governance structure and key responsibilities

2.1 Boards and Committees

2.1.1 Aviva plc Board AvivaInvestorsformspartofthetheAvivaplcgroupofcompaniesasreportedintheAvivaplcAnnualReportandaccounts2019("AvivaGroup"),headedbyAvivaplc.TheAvivaplcBoardisresponsiblefordeterminingtheoverallGroupriskappetite,whichisanexpressionoftheriskthatAvivaGroupiswillingtotake.Riskappetiteissetrelativetocapital,liquidityandfranchisevalueatgroupandindividualentitylevel.TheGroup’spositionagainstriskappetiteismonitoredandreportedtotheAvivaplcBoardonaregularbasis.

Therespectiveknowledge,skillsandexperienceofthemembersoftheAvivaplcBoardareprovidedintheAvivaplcAnnualReportandAccounts.TheapproachtodiversitywithregardtotheselectionofmembersoftheAvivaplcBoard,itsobjectivesandtargets,andtheextenttowhichthesetargetshavebeenachieved,arealsoprovidedintheAvivaplcAnnualReportandAccounts,whichareavailableatwww.aviva.com.TheAvivaplcBoard’sDiversityandInclusionstatement,whichisinlinewiththeoverallAvivaGroupDiversityandInclusionstrategy,isavailableathttps://www.aviva.com/content/dam/aviva-corporate/documents/companysecretarial/pdfs/Aviva_Board_Diversity_Statement.pdf.

2.1.2 Aviva Investors AIHListheimmediateparentofAIGSL&AIUKFSLandheadsuptheregulatorygroupoftheseentities.Assuch,theAIHLBoardexercisesoversight(directlyorthroughitsRisk,Audit,RemunerationorNominationcommittees(the“BoardCommittees”))overtheoperationofthesesubsidiaries.ThisoversightincludesmonitoringtheAvivaInvestorsriskandcontrolenvironment.AIGSL&AIUKFSLarespecificallyincludedwithinthescopeoftheBoardCommittees.TheDirectorsofAIHL,AIGSLandAIUKFSLareallseniormanagersunderFCASeniorManger&CertificationRegime("SMCR")inrespectofeachentity.

AIHL Board

TheAIHLBoardofdirectors(“AIHLBoard”)isresponsiblefororganisinganddirectingtheaffairsofAvivaInvestorsinamannerthatismostlikelytopromotethesuccessofAvivaInvestorsforthebenefitofitsshareholderandinamannerthatisconsistentwithitsArticlesofAssociation,applicableregulatoryrequirementsandcurrentcorporategovernancepractice.TheAIHLBoardmembershipissubjecttotheapprovalofitsshareholderandtheUKregulator;andcomprisesexecutiveandnon-executivedirectors.

DirectorsandmanagementofAvivaInvestorsarecommittedtomaintainingastrongrisk,controlandcomplianceculturethroughouttheorganisation.

Thisisachievedthroughagovernancestructureconsistingofthreecoreelements:boards,boardcommitteesandpersonalcommittees;threelinesofdefence,policies,processesandcontrols;androlesandaccountabilities.BoardmembershavespecificresponsibilitytoreviewandmonitorthecurrentandfuturerisksofAvivaInvestors.

TheBoardisresponsibleforreviewingandsettingpoliciesandproceduresforthebusinesslineswithinAvivaInvestors.TheBoardcommitteesareestablishedtoassistandsupporttheBoardtomanagekeystrategicmatters;reviewbusinessactivityandrisks;andprovidesupportwhereneeded.

Board Committees

TheAIHLBoarddelegatescertainofitsdutiestotheboardcommitteesasdescribedbelow.TheAIHLBoard,togetherwiththesecommittees,providesoversightandchallengeofglobalstrategic,financial,reputational,conductandcontrolaspectsoftheAvivaInvestorsbusiness.MattersmayalsobeescalatedbythebusinesstothesecommitteesortheAIHLBoard.Allboardcommitteesarechairedbynon-executivedirectors.

• The Aviva Investors Audit Committee (‘AuditCommittee’)workscloselywiththeAvivaInvestorsRiskCommitteeandisresponsibleformonitoringtheintegrityoffinancialstatementsandtheeffectivenessofsystemsofinternalcontrol,andformonitoringtheeffectiveness,performance,independenceandobjectivityoftheinternalandtheexternalauditors.


• The Aviva Investors Risk Committee (‘RiskCommittee’)assiststheBoardintheoversightofrisk(includingconduct,regulatory,complianceandlegalrisk)byreviewingtheeffectivenessoftheriskmanagementframework,riskappetiteandprofile,methodologyandcalculationsusedindeterminingcapitalrequirementsandstressandscenariotestingresults,ensuringduediligenceappraisalsarecarriedoutonstrategicorsignificanttransactions;andmonitoringregulatoryrequirements.

• The Aviva Investors Nomination Committee (‘NominationCommittee’)monitorsthebalanceofskills,knowledge,experienceanddiversityonboardsofdirectorsandrecommendsappointmentstotheboardsofAIHL,AIGSL(forCRDIVpurposes)andtheothermainoperatingandregulatedentitiesthroughoutAvivaInvestors.

• The Aviva Investors Remuneration Committee (‘RemunerationCommittee’)supportsandadvisestheAIHLBoardontheoverallremunerationpolicyforAvivaInvestorsandtheemployment,remuneration,reward

andbenefitstermsforAvivaInvestors’seniormanagementandmaterialemployees,includingCodeStaffandidentifiedstaff;andreviewsandmakesrecommendationsonremunerationmatterstotheAvivaplcGroupRemunerationCommitteeandtheAIHLBoardfor approval.

Personal Committees

TheAIHLBoardhasdelegatedauthoritytotheAvivaInvestorsChiefExecutiveOfficer("CEO")fortheexecutivemanagementofthebusiness.TheCEOisprovidedwithsupportandadvicebyapersonalExecutiveCommitteecomprisingallthemembersoftheExecutiveteam.Sub-committees(referredtoaspersonalcommittees)areformedofExecutiveCommitteememberstodeliverfocusedgovernanceoutcomes,suchasinvestments,finance,people,risk,client,productandoperations.

Aviva Investors Executive Committee*

InterimPeople DirectorPETER REILLY

France–Chief ExecutiveOfficerINES DE DINECHIN

ChiefRisk OfficerSTEVE FARRALL

ChiefExecutive OfficerEUAN MUNRO

President&Chief OperatingOfficerSUSAN EBENSTON

General Counsel PHIL COFFER

Chief Financial OfficerDAVID CLAYTON

GlobalHeadof ClientSolutionsLOUISE KAY

ChiefInvestment Officer–Credit COLIN PURDIE

ChiefInvestment Officer–Multi Assets&MacroPETER FITZGERALD

ChiefInvestment Officer–EquitiesDAVID CUMMING

ChiefInvestment Officer–RealAssetsMARK VERSEY

ChiefInvestment Officer–Solutions AL DENHOLM

Business Management

Investments

*Asat31December2019

Section

2

12 Aviva Investors

Governance structure and key responsibilities Continued

InadditiontotheExecutiveCommittee,theotherpersonalcommitteesare:

• Risk Management Committee(chairedbytheChiefRiskOfficer("CRO"))considersthekeyconduct,credit,investment,operational,compliance,financialcrimeandemergingrisksofAvivaInvestors.

• Investment Committee (chairedbytheCEO)overseesinvestmentmanagementactivitiesandmaterialchangestotheinvestmentstrategiesorhouseview.

• Finance Committee(chairedbytheChiefFinancialOfficer("CFO"))overseesthefinancialperformanceandactionstodeliveragainststrategy.Performsaquarterlyreviewofbalancesheetandcapitalprovisionmanagement.

• Client and Product Committee(chairedbyGlobalHeadofGlobalClientSolutions("GCS"))reviewsclientretention,salespipelineandassociatedactions,aswellasproductmanagementactivities.

• Operations Oversight Committee(chairedbythePresidentandChiefOperatingOfficer("COO"))overseesoperationalvolumes,performanceandefficiency.MonitorsClientAssetsSourcebook("CASS"),pricingandvaluationconsistency.

• People Committee(chairedbyPeopleDirector)reviewspeopleagenda,drivecontinuouscultureimprovement,analyseandmonitorconductrulebreachesunderSMCR.

Governance Structure

Executive Committee

Aviva Investors Holdings LimitedBoard of Directors

Audit Committee

Risk Committee

Nomination Committee

Remuneration Committee

Risk Management

Committee

Investment Committee

Client and Product

Committee

Operations Oversight

Committee

PeopleCommittee

Personal Committees

Board Committees

Finance Committee

Note: TheCapitalCommitteereferencedinthisdocumentisasub-committeeoftheFinanceCommittee.


2.2 Three lines of defenceAvivaInvestorsmanagesitsrisksbasedonthe“threelinesofdefence”model:thefirstlineofdefencecomprisesbusinessmanagers,informationtechnology,legal,securityandcontinuityteamswhomanagebusinessrisksonadailybasis;thesecondlineofdefencecomprisestheriskandcomplianceteamsunderthedirectionoftheAvivaInvestorsCROwhoadviseandchallengethebusinessonthemanagementofitsrisks;andthethirdlineofdefencecomprisesofinternalauditwhoassessandreportontheeffectivenessofcontrols.

AllemployeesoftheorganisationareinvolvedinthemanagementandmitigationofriskatAvivaInvestors.

Asaresult,AvivaInvestorsRMFisembeddedintheday-to-daymanagementanddecision-makingprocesses.Thereisactiveanddemonstrablesponsorshipandsupportfromtheboardandexecutivemanagement.

Therolesofthethreelinesofdefenceoutlinedbeloweachcontributetoembeddedriskmanagement.Roleprofiles,agreedobjectivesanddelegatedauthorityletters- whereappropriate-areinplacedefiningeachrelevantemployee’sriskmanagementresponsibilities.TherequirementforadelegatedauthorityletterisdrivenbylocalregulatoryrequirementsandconsideredappropriateforthemostseniorroleswithinAvivaInvestorswhereauthorityisgiventobindthecompanyfinancially.

Day-to-day ownership and responsibility for identification and management of risks and controls in each respective business area.

Establish risk and compliance frameworks, monitor risk

and compliance, advise and challenge 1st line of defence.

1st Line of defenceBusiness management, legal,

people, IT, security, continuity

2nd Line of DefenceIndependent risk and compliance

management

3rd Line of DefenceInternal Audit

Executive Management

Board and Board

Committees

External audit

Regulators

Independent objective and critical assessment of 1st and

2nd lines of defence. Reports directly to the Audit Committee.

Governance and controls representativeOversight, challenge, monitoring, training and support to the business of the risk and control continuous assessment cycle.

First line risk and control specialist

Section

2

14 Aviva Investors


2.2.1 First line of defenceAvivaInvestorsrecognisestheimportanceofclearandappropriateapportionmentofsignificantresponsibilitiesamongdirectorsandseniormanagers.Thisisachievedbyhavingclearroleprofilesthatrecordallemployeeaccountabilitiesandareconsistentwithcommitteeanddelegatedauthoritystructures.

Thefirstlineofdefenceisresponsibleforfutureandcurrentriskidentification,measurement,management,monitoringandreporting("IMMR")throughtheimplementationandpracticeofriskmanagementtechniquesdescribedintheRMF.

Governance and control functionsAvivaInvestorsrecognisestheimportanceofoversight,monitoring,trainingandsupportingthebusinessinperformingitsriskandcontrolmanagementresponsibilities.ThisisachievedbyemployingappropriaterepresentativestosupporttheExecutiveCommitteemembersandtheirnomineesinthesuccessfulcommencementandcompletionoftheriskandcontrolassessmentcyclethroughouttheyear.

Thegovernanceandcontrolrepresentativesshouldremainoperationallyindependentfromrisk-takingactivitiesthatcouldcompromisetheirindependenceandabilitytochallenge.Ifamembercannotremainoperationallyindependent,appropriatemitigationsareundertakentoreducetheindependenceandself-reviewthreatstoareasonablelevel.

2.2.2 Second line of defenceThesecondlineofdefenceconsistsoftheRiskandComplianceFunctions.

TheRiskandComplianceFunctionsreportdirectlytotheAvivaInvestorsglobalCROandareoperationallyindependentfromrisk-takingactivitiesandanyotheractivitiesthatcouldcompromisetheirindependence.Asummaryofactivitiesisoutlinedbelow:

• Riskisresponsibleforthedesign,implementationandvalidationoftheriskandcontrolmanagementframeworks,systemsandeconomiccapitalmodelsrequiringregulatoryapproval. TheRiskfunctionreportstotheCRO,RiskManagementCommittee,RiskCommitteeandAIHLBoardontheoverallriskprofileof AvivaInvestors.

MaterialbusinessdecisionssuchasthedevelopmentofnewproductsorthepurchaseofnewbusinessesrequirethesupportoftheRiskfunctionbeforeproceedingwhichissummarisedintheCROopinion.

• Global Complianceisresponsibleforassessing,advising,monitoringandreportingonthefirm’sregulatoryriski.e.theriskthatthefirmfailstocomplywithitsobligationsundertheapplicablerequirementsandthestandardssetbytheFCAandotherrelevantregulatoryauthorities.


AvivaInvestorshasamatrixstructurewithregionalCROsreportingtotheAvivaInvestorsGlobalCRO;theregionalComplianceOfficersreporttotheChiefComplianceOfficer("CCO").

Regional Risk teamsareresponsibleforensuringthattheRMFisappliedconsistentlyacrossAvivaInvestors’businessglobally.Thelocalriskteamsreportto:

• TheCROEurope;

• TheCROAmericas;and

• TheCROAsiaPacific.

2.2.3 Third line of defenceAvivaInvestorsInternalAudit("IA")ispartoftheAvivaplcGroupAuditfunction.Ithasadedicatedauditteamwhoarespecialisedinfundmanagement,ledbyanAuditDirectorwhoreportstotheChiefAuditOfficerofAvivaplcandtheAvivaInvestors’AuditCommittee.InternalAudit’spurposeistohelptheBoardandexecutivemanagementtoprotecttheassets,reputationandsustainabilityofAvivaInvestorsbyprovidingindependentandobjectiveassurancedesignedtoaddvalueandimproveAvivaInvestors’operations.Theteamassiststhebusinessinachievingitsobjectivesbyexhibitingasystematic,disciplinedapproachtoevaluatetheeffectivenessofriskmanagement,controlandgovernanceprocesses.

InpursuitofthispurposeIAundertakes,objectivelyandindependentlyfrommanagement,toassesswhetherallsignificantrisksareidentifiedandappropriatelyreportedbymanagementandsecondlineofdefence(toAvivaGroupandAvivaInvestorsAuditandRiskcommitteesandexecutivemanagementasappropriate);assessingwhethertheyareadequatelymanaged;andbychallengingExecutiveManagementtoimprovetheeffectivenessofgovernance,riskmanagementandinternalcontrols.ThescopeofIAassuranceactivitiesincludesassessingandreportingontheeffectivenessofthedesignandoperationoftheframeworkofcontrolsandontheeffectivenessofmanagementactionstoaddressanydeficiencieswithintheframeworkofcontrolsandrisksthatareoutoftolerance.IAalsoinvestigatesandreportsoncasesofsuspectedorallegedinstancesofinternalandnon-customermalpracticeorfinancialcrime.

IAisresponsibleforperformingthesefunctionsefficientlyandeffectively,butitisnotresponsibleforsettingAvivaInvestors’riskappetiteorfortheeffectivenessoftheframeworkofcontrols.

Aviva Investors is one of Europe’s

largest managers

of real assets with £346 billion assets under management.

Section

2

16 Aviva Investors


2.3. Culture and Conduct

2.3.1 CultureTheBoardsandExecutivesofAvivaInvestorsseekstoembedaculturethatensuresallemployeesactinthebestinterestoftheclientsbyputtingclients’interestsaheadoftheirownandtreatingclientsfairly.

CultureandconductconsiderationsarekeytoAvivaInvestors’strategyandareembeddedinallbusinessprocesses.AvivaInvestorshasstrategicthemestosupportgrowth,whichareintegratedaroundtheclient.Thesearecalled“diversifiedexcellence”,“operationalsimplicity”and“growandprotect”.

Diversified Excellence Thecontinuedgrowthofoutcomeorientatedproductstoassistclientsseekingspecificinvestmentsolutionsacrossthealphaandrealassetofferings.

Operational Simplicity InitiativestoimproveoperationalsimplicitywithinAvivaInvestorswillbenefitclientsaswellasreducerisk.Significantandcontinuousprojectsareinprogressresultingindeliveringimprovedclientreportingandenhancedclientexperience.

Grow and Protect AvivaInvestors’presencecontinuestofocusonthedevelopment,promotionandsaleofproductswherethereareclientneeds.

2.3.2 ConductAvivaInvestorsexpectsallemployeestomaintainthehigheststandardsofpersonalandbusinessconduct,marketpractice,integrityandethics.ConfidenceintheintegrityofAvivaInvestorsanditsemployeesiskeytoestablishingtrustbetweenthefirmanditsstakeholders,suchasregulators,clientsandbusinesspartners.AvivaInvestorshasembeddedframeworksandpoliciesthatsupporttimelyidentification,measurement,mitigationandimprovementofconductrisk.

ConductriskisthecurrentorprospectiveriskthatAvivaInvestors(oranyofitsemployees)failstoconducttheassetmanagementbusinessinanappropriatemanner;thereby,compromisingorharmingstakeholders(e.g.clients,regulators,employees,parentcompany,market,etc.)andconsequentlynegativelyimpactingsustainabilityandmarketintegrity.

Managementinformationisdevelopedtorigorouslyandpervasivelymonitorconductriskacrosstheglobalbusiness.Boardsreceiveconductriskanalysisresultsfromallthreelinesofdefenceteamshighlightingissuesidentifiedforresolution.

Frameworks,processesandcontrolsarecontinuouslyreviewed,testedandimprovedtoobtainassurancethatAvivaInvestorsadherestotheconductstandardsexpectedofalargeparticipantintheassetmanagementindustry.

Individualresponsibilitiesforgoodconductarereinforcedinwrittenroleprofilesclearlyhighlighting

SolutionsLeader

Alpha Engine

Real AssetHouse

Client

Frameworks, processes and controls are continuously reviewed, tested and improvedto obtain assurance

that Aviva Investors adheres to the conduct standards expected of a large participant in the asset management industry.


conductresponsibilities(underpinnedbySMCRrequirements),recruitment,remunerationandrewardframeworks;aswellasannualconductattestationsandtrainingactivities.ThekeyframeworkrelatingtopersonalconductobligationistheGlobalEthicalConductCode.

2.3.3 Global Ethical Conduct Code and supporting policiesAvivaInvestors’GlobalEthicalConductCode(referredtoasthe“Code”)establishesthestandardsofethicalconductexpectedfromallemployeesincludingthehigheststandardsofhonestyandintegritytoavoideventheperceptionofimpropriety.

• TheCodeisunderpinnedbyprinciplessupportedbypoliciesdescribinghowemployeesarerequiredtoadheretothestandardsintheCode.

Theprimarypoliciesarenotedbelow:

• Globalmarketconduct;

• Personalaccountdealing;

• Financialcrime;

• Conflictsofinterest;

• Giftsandhospitality;and

• Whistleblowing.

2.3.4 Recruitment and RewardAvivaInvestorshaspoliciesandprocedurestohiretherightpeople.Thesepoliciesandproceduresrequireprospectiveemployeestobescreened,priortothecommencementofemploymentwithAvivaInvestors.Enhancedchecksareappliedtosenioremployees,certifiedstaff,includingotherroleswithadditionalregulatoryresponsibilitiesandcustomerfacingroles.

AvivaInvestors’remunerationpoliciesandpracticesareconsistentwithsoundriskmanagementandpromotionofethicalbehaviourandintegrity.Thepoliciesandpracticesdonotencourageexcessiverisktakingbyemployeesandaddressbehavioursthatamounttowrongdoing,malpractice,misconduct,corruptionormismanagementwithinAvivaInvestors.ThepoliciesandpracticespromotethealignmentoftheinterestofemployeeswiththoseofAvivaInvestors’stakeholders(e.g.clients,parentcompanyandregulators).

Section

2

18 Aviva Investors


2.4 Risk, Compliance and Control Environment AIHLseekstooptimiseitsassetmanagementbusiness’performancesubjecttoremainingwithinriskappetiteandmeetingtheexpectationsofstakeholders.Thisisachievedbyembeddingrigorousandconsistentrisk,complianceandcontrolmanagementacrosstheassetmanagementbusiness;andresponsiblyinvestingavailableresourcestooptimisethebalancebetweenrisksandreturns.

TheRiskManagementFrameworkisapprovedbytheAIHLBoardannuallyinthefourthquarterofthecalendaryearonaforward-lookingbasis.Themostrecentapprovaloccurredon5December2019.

2.4.1 Frameworks Therisk,compliance,financialcrimeandcontrolmanagementframeworksaredevelopedbysecondline.Theseincludeappropriateprinciples,strategies,policies,processes,governancearrangements,toolsandreportingproceduresusedbyallemployeestoIMMMRthecurrentandfuturerisk,compliance,financialcrimeandcontrolprofilesofthebusiness.

Allframeworksarealignedtoeachotherandaimtodriveconsistencyandcontrolacrossthebusiness.Secondlineprovideprocedures,training,adviceandguidanceto,andmonitors,allemployeesontheappropriateembeddingofsuchframeworksintheirday-to-daymanagementactivities.

AllframeworksincorporatetheAvivaGroupEnterpriseframeworkswhichareadaptedtotheneedsandrequirementsoftheassetmanagementbusiness.

2.4.2 Aviva Investors Risk Register ThepurposeoftheAvivaInvestorsRiskRegister("AIRR")istoprovideacommonbasistoIMMMRallrisksacrossthebusiness.TheAIRRdevelopedcontains3registers(cause,eventandeffectregistersthatarecomplementaryregisterstoeachother).

1. Causal register

Thecausalregisterprovidesacommonbasistoanalysetherootcause(s)ofweaknessesidentifiedacrossthebusiness.Thecausalregisterisdividedinto4level1categories,namely:people,process,internalsystemsandexternalfactorswhicharefurtherdividedintogranularcausalcategories(level2).

2. Event register

Theeventregisterprovidesacommonbasistoclassifyandgroupresidualriskexposuresandconsistsofthefollowing:

• IFPRU2.2.7regulatoryriskcategories(level1);

• Operationalrisk,whichisfurtherdividedintothe7BaselIIriskeventcategoriestogetherwiththeotherregulatoryriskcategoriesthathavebeendividedintoriskeventcategoriesinternallydevelopedbythebusiness(level2);

• Theriskeventcategoriesarefurtherdivided intogranularcategoriesalignedtotheindividualbusinessactivitiesacrossthebusiness(levels3 and4).

3. Effect register

Effecttyperegisterprovidesacommonbasistoassesstheeffectthateachevent–ifcrystallised–couldhaveonthebusiness(financial,misstatement,conductandreputationalimpacts).

TheAIRRisusedtoaggregatetheindividualriskexposuresofthebusinesswhichenablestheCROtoreporttheoverallriskprofiletotheAIHLBoardandAviva Group.

2.4.3 Risk appetite statementTheAIHLBoardownstheRASwhicharticulateshowallriskcategoriesaredefined,assessedandmonitoredinlinewiththebusinessstrategy,plan,forecastandAvivaInvestors’currentcapitalposition.TheRASformspartoftheriskmanagementprocess.ItspurposeistoarticulatetheriskappetiteoftheAIHLBoardinprovidingassetmanagementservicesandproductsbyoutlining:

• Thedefinitionofeachriskcategoryandhowthisisinterpretedasexposurefacingthebusiness.

• ReconciliationbetweentheriskcategoriesassessedintheRASandAIRR.

• Theappetiteforeachoftheserisksindeliveringthebusiness plan.

• Therationalesdevelopedtodeterminetheappropriateriskappetitesforeachriskcategory.

• Theapproachused(bothleading,lagging,quantitativeandqualitative)bythebusinesstoIMMMRtheactualriskexposurescomparedtoriskappetites.

• Theapproachtakenintheeventthatthemeasurementsindicateariskappetiteisabouttobebreachedaswellasactiontakentoaddressriskappetiteswhichhavebeenbreached.

• ThequalitativestatementsusedtodefinethecultureandbehaviourofAvivaInvestors.

TheRASexpressesAvivaInvestors’appetitefortherangeofrisksfacingthebusinessbothqualitativelyandquantitatively.Asthebusinessevolves,sotheriskappetitemaychange.Consequently,thestatementisreviewedatleastannuallybytheAIHLBoardofwhichiterationsrequireformalapproval.


Risk continuum

2.4.4 Risk tolerances and aggregationTheriskappetiteintheRASistranslatedintogranularrisktolerancesandmappedagainstthegranularriskexposuresmanagedinthebusiness.TherisktolerancesareapprovedatleastannuallyorwitheverysignificantbusinesschangebytheAIHLBoard.

Theapprovedrisktolerancesareprovidedtothebusinesstomeasuretheresidualriskexposuresofthebusinessagainst,inordertoidentifythoseriskexposuresexceedingtolerancewhichrequireremediation.

TheriskaggregationmethodimplementedbyAvivaInvestorsaggregatestheriskexposuresatitsmostgranularleveltoitshighestlevel(regulatoryriskcategories)whichallowstheAIHLBoardtoobtainaviewofitsoverallriskprofile.

2.4.5 ApproachAllrisks–suchas(butnotlimitedto)operational,compliance,conduct,financialcrime,legalandstrategic–areincludedintheseframeworksandgroupedintotwocategories:

• FuturerisksarethoseriskstowhichAvivaInvestorsmaybeexposedtosometimeinthefuture;and

• Currentrisksarethoseriskscurrentlyfacingthebusiness(bothresidualandinherent)whilstachievingitsstrategicobjectives.

Bothfutureandcurrentrisksareidentifiedandassessedbyseniormanagementtodeterminethetopdownconcernsofthebusiness.BelowisariskcontinuumdiagrampresentingthedifferentareasofriskmanagementincludedintheIMMMRprocessrangingfromgranularrisks(left-handsideofthediagram)toonce-in-a-lifetimerisks(right-handsideofthediagram).

Expected losses (RCSA cycle) Unexpected losses (ICAAP)

Bottom-up current risk profile Top-down current and future risk profiles

Risk Target. Management of the risk before it reaches risk capacity.

Risk exceeds appetite and capacity (reverse stress / wind down situation).

Risk within appetite and tolerance.

Risk within appetite and tolerance. Risk is nearing tolerance.

Risk within appetite. Risk exceeds tolerance.

Risk within appetite and exceeds tolerance. Risk is nearing appetite.

Risk exceeds appetite and tolerance. Risk is within risk capacity.

Monitoring measurements: key and non-key risk, control, strategic / lead and performance

indicators.

Risk appetite monitoring measurements.

Risk capacity monitoring measurements.

Proactive management of risk before it reaches appetite.

Low risk High risk

Complementary Relationship between Risk and Business Strategy

ComplementaryBusiness strategy

Objectives

Process 1 Process 2

Activity 1 Activity 2 Activity 3 Activity 4

Objectives

Control 1

Resource Requirements: People knowhow, liquidity, capital(includes systems, suppliers, external dependencies, etc.).

Control 2 Control 3 Control 4 Control 5 Control 6 Control 7 Control 8

Risk strategy

Riskexposure

Riskmitigation

Thebusinessmodelhasbeensplitintoprocesscategorieswhichincludesobjectives,activitiesandcontrolsunderpinnedbytheappropriateresources.Thecontrolactivitiesareusedtobothachievethe

businessstrategyandmitigateAvivaInvestors’currentandfutureriskstoanacceptablelevel. Thebelowdiagramillustratesthecomplementaryrelationshipbetweenthebusinessandriskstrategy.

Section

2

20 Aviva Investors

Process Categories*

Processcategoriesincorporatingthebusinessactivities,controlobjectivesandcontrolactivitiesareillustratedinthediagrambelowthatareincorporatedintoourriskmanagementsystemiCare.

Euan Munro (CEO – responsible for all processes)

Core Core Core Core Support Support Support Support Support

Global Client Solutions

Liquid markets Real assets Operations Finance Legal and Company Secretarial

People Risk and Compliance

Supplier, data, controls, IT and facilities

Louise Kay CIOs - Liquidmarkets

Mark Versey Susan Ebenston David Clayton Phil Coffer Peter Reilly Steve Farrall Susan Ebenston

SMF18 Other overall responsibility

SMF3 Director SMF24 Chief Operations Function

SMF2 Chief Finance Function

CF Significant management


SMF4 Chief Risk Function

SMF24 Chief Operations Function

1. P

rodu

ct li

fecy

cle

man

agem

ent

2. M

arke

ting

and

com

mun

icat

ions

3. S

ales

and

dis

trib

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n

4. C

lient

onb

oard

ing

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serv

icin

g

5. C

lient

onb

oard

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(seg

rega

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and

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repo

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6. O

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ons

7. In

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men

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ent –

liqu

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8. T

radi

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9. In

vest

men

t man

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real

ass

ets

10. M

anda

te m

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11. D

eriv

ativ

es a

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risk

12. I

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tmen

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illiq

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(inc

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Ope

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ata

Man

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13. I

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real

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14. F

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of f

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NAV

s) a

nd a

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/ val

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n

15. P

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16. C

ASS

and

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17. G

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18. T

rans

form

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19. F

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20. T

ax

21. L

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and

Com

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22. P

eopl

e

23. R

isk

24. C

ompl

ianc

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25. F

acili

ties m

anag

emen

t

26. C

ISO

/ IT

/ BP

27. S

uppl

ier g

over

nanc

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28. D

ata

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ce a

nd p

rote

ctio

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29. G

over

nanc

e an

d co

ntro

ls (i

ncl.

Cont

rols

As

sura

nce)

Process

Executive owner

SMCR

Note 1 Note 2 Note 3


Note 1 – CASS and Transaction reporting oversight. • SMF18–CASSoversight.• PR4–ResponsibilityforcompliancewithCASS.

Note 2 – Finance. • PR13–Managingthefirm’sinternalstresstestingandensuringtheaccuracyandtimelinessoftheinformationprovidedtotheFCA

forthepurposesofstresstesting.

Note 3 – Risk and Compliance. • SMF16–Complianceoversight.• SMF17–MoneyLaunderingReportingOfficer.• PR4–Responsibilityforfirm’spoliciesandproceduresforcounteringtheriskthatthefirmmightbeusedtofurtherfinancialcrime.


*Asat31December2019


Observations are linked to the risk categories. In this manner when

an observation is made it flows through this

process to the risk assessment.

Each risk category isassessed using this

method whenobservations are

made by the business affecting

the risks.

Monitor Identify and measure Manage

ObserverControl owner

(failure) or process owner(control gap)

Issue owner Risk owner Route to greenplan owner

Risk event, for example:A trade capture and

input risk event crystallised with a

financial impact of £20K.

Risk event, for example:A trade capture and

input risk event crystallised with

a financial impact of £350K.

Observation:The financial

impact of the risk events were: £370k.

The root causes of the risk eventswere: failure to follow process

(control failure) and data capture

error (control gap).

Control gap/failure:Has the

observationindicated a

control failure or gap in

the businessenvironment?

Raise an issue:Raise an issuedescribing theobservation

(impact and root cause) and

gap / failure (control

environment).Link the issue to the risk category.

Assess the risk:Trade capture

and input errors risk category is

assessed based on the information

contained in the issue.

Report

The relevant controlactivities in relationto the observationare assessed. If no

control activity exists to be assessed,

a gap assessment is performed.

Address the issue:If the risk is

assessed as out of tolerance based

on the issue develop a route

to green plan to address the issue.

Identify, Measure, Manage, Monitor and Report

TheIMMMRprocess–asillustratedbythediagrambelow–revolvesaroundthesetupofthebusinessmodel anditsrelationshipsbetweenprocesses,controlsandrisks.

Observer (monitor)

ObservationsaremethodsusedbyAvivaInvestors,auditors,advisors,employees,consultantsoranyrelevantpartytoobservethebusinessmodelandidentifyweaknessesexposingthefirmtoriskorfailureofachievingobjectives.AllobservationsidentifiedasissuesaremappedtotherelevantcurrentorfuturerisksfacingthebusinessandtotheobjectivesthatAvivaInvestorsendeavourstoachieve.

Observationsarecategorisedintofourgroups:

• Riskeventsandnearmisses;

• Internalandexternalreviews;

• Trackingmechanisms(e.g.indicators);and

• Assuranceandcontroltesting.

Control and process owner (monitor)

ControlandprocessownersrequireanintimateknowledgeofthecontrolenvironmentandmarketsinwhichAvivaInvestorsoperatesaswellastherelevantcontrolactivities’controlobjectivesandriskexposures.Thecontrol(ifacontrolfailure)andprocess(ifacontrolgap)ownersassesstheeffectivenessofthecontrolenvironmentonacontinuousbasisusingtheobservationsmadebytheobserver.

Issue owner (monitor)

Ifanobservationresultsinacontrolfailureorgap,theobserverandcontrolorprocessownercollaboratestoraiseanissueagainsttheparticulargaporfailure.An

appropriateissueownerisidentifiedwhoisresponsiblefor:

• Managingandmonitoringtheremediationoftheissue;

• Gatheringthenecessaryevidencetodemonstrateadequateandappropriateremediationhasbeencompleted;and

• Closingtheissueuponcompletionoftheremediation.

Risk owner (identify and measure)

Riskownersequippedwithanintimateknowledgeofthebusiness,themarketsinwhichAvivaInvestorsoperates,anditsstrategicandbusinessobjectivesareresponsibleforidentifyingandmeasuringrisksinresponsetotheissuesraisedacrossthebusiness.Riskidentificationandmeasurementisrefreshedwhenchangesintheenvironmentoccur.

Avarietyofriskmeasurementtoolsandprocesses areavailabletosupportriskidentificationandmeasurementdependingonwhetheritisacurrent orfutureriskbeingassessed.Currentrisksusealikelihoodandimpactscalewhereasfuturerisksconsideraproximity,impactandreadinessscale. Allriskassessmentsareperformedonaforward-lookingbasis.

Bothmeasurementscalesallowtheriskownertoidentifytheprimaryconcernsofthebusinesswhicharethenprioritisedforremediation.

Section

2

22 Aviva Investors


Route to Green Plans (manage)

Riskownersareresponsiblefordecidinghowriskexposuresneedtobemanagedwhichincludes:acceptance,avoidance,transferandremediation.Forrisksoutsideacceptablelevels,remediationisselectedinalmostallinstances.Insomerarecircumstances,riskacceptance,transferoravoidanceisselected.Allriskmanagementdecisionsaredocumented.

Remediationrequiredforissuesidentifiedtargetsrootcauses.Theissueownerreportsontheprogressoftheremediationbacktotheriskownersonacontinuousbasisinordertoearlyidentifyremediationwhichisnotontrack.

Risksoutsideacceptablelevelsrequiringanacceptance,avoidanceortransferoftheexposureundergoarobustgovernanceprocesswithsecondlineinordertoconsiderchangestotheacceptablerisklevels.

Risk reporting

Riskreportingencompassesthereportingofeachofthefourstepsofriskmanagement(identify,measure,manageandmonitor)andisprovidedtoseniormanagementbasedontheirriskprofileneeds,committeetermsofreference,escalationrequirementsanddecision-makingresponsibilities.

Riskreportingisdevelopedtobeclear,relevant,accurateandtimely,highlightingandprioritisingtheprimaryconcernsofthebusiness.Alldecisionsmadearedocumentedandmonitoredforexecutionacrossthebusiness.

Internal capital adequacy assessment process (ICAAP)

TheICAAPisaprocessusedtodeterminetheappropriateminimumcapitalrequirementstobeheldbyAvivaInvestorsforsevere,butplausibleevents.Thisprocess

consistsofseveralunderlyingactivitieswhichconsiderstheinformationoftheday-to-daycurrentandfutureriskprofiles(e.g.risks,controls,issues,etc.)toinformtheinternalcapitaladequacyassessmentprocess.

Insummary,theICAAPincludesthebelowthreeactivities:

• TheICAAPidentifiestheamountofcapitalthatneedstobeheldtoensurethatthebusinesscanwithstandtheimpactofasevere,yetplausible1-in-200-yearcombinationofitstop-downcurrentandfutureriskscrystallisingonaforward-lookingbasis.

• Operationalriskscenario,stresstestingandwinddownplanworkshopsareconductedbetweentheRiskFunction,relevantExecutivesandSubjectMatterExpert("SME")todeterminetheappropriatescenariostouseintheICAAPtoassessandstressthecapitalpositionofAvivaInvestors.Workshopparticipantsarebriefedusingdatafromthebusiness,suchasthecurrentandfutureriskprofiles,internal/externalevents,internalauditopenissues,monitoringmeasurementresultsandinternal/externalreviewsperformed.

• TheICAAPassessestheAvivaInvestors’capitalrequirements.ThescenariosandcalculationsgeneratedarediscussedindetailwiththerelevantExecutivesandupdatedforthefeedbackreceived.TheentireICAAPdocumentisreviewedandchallengedbytheExecutiveCommittee,CapitalCommittee,RiskManagementCommitteeandRiskCommittee;andapprovedbytheAIHLBoard.

Aviva Investors was awarded

Trailblazing Company of the year 2019 at the Financial Adviser's Diversity in Finance Awards.

25

25

Section 3CapitalResources and Adequacy

25

Section

3

26 Aviva Investors

3.1 Capital Resources AvivaInvestorshasasimplecapitalstructurecomprisingCommonEquityTier1(“CET1”)andTier2(“T2”)capital.CET1capitalisthehighest-rankingformofcapitalandcomprisesordinarysharecapital,sharepremium,retainedprofitsandotherreserves.TotalAvivaInvestorscapitalamountedto£452.6mat31December2019, withCET1capitalbeing£427.6mandT2capitalbeing£25.0m.T2capitalconsistedofsubordinatedloansreceivedfromAIHL’simmediateparent,AvivaGroupHoldingsLimited("AGHL").

At31December2019andthroughouttheyear,AvivaInvestorscompliedwiththecapitalrequirementsassetbytheFCA.

3.2 Capital Resource Requirements – Pillar 1FortheUKRegulatoryGroup(significantIFPRUGroup)andindividualLimitedLicenceIFPRUentitiesthecapitalresourcerequirementiscalculatedasthehigherof:

• Thebasecapitalresourcesrequirement;

• Thesumofitscreditriskandmarketriskcapitalrequirements;and

• FixedOverheadRequirement("FOR")

ForAIUKFSL(acollectiveportfoliomanagementfirm) thecapitalresourcerequirementiscalculatedasthehigherof:

• TheFundsUnderManagement(FUM")requirement(includingthebasecapitalresourcesrequirement);and

• TheFOR;

Pluseither:

• Theprofessionalnegligencecapitalrequirement;or• Theprofessionalindemnityinsurance(excess)capital

requirement.

Overseasregulatedentitiesarefollowinglocalcapitalrequirements.

Capital Resources and Adequacy

Total Aviva Investors capital amounted to

£452.6m at 31 December 2019, with CET1 capital being

£427.6m and T2 capital being

£25.0m

Pillar 3 Disclosures 2019 27Pillar 3 Disclosures 2019 27

The Pillar 1 capital surplus for the UK Regulatory Group at 31 December 2019 is represented below:

Bridge from Net Assets to CET1 Capital £’m

Permanentsharecapital 248.0

Sharepremiumaccount 41.6

Profitandlossandotherreserves 163.5

Balance Sheet Net Assets (excluding MI) 453.1

Deductions:

Intangibleassets1 (10.3)

UnauditedProfits2 (15.2)

CET1 Capital After Deductions [A] 427.6

T2 Capital

SubordinatedLoans 25.0

Total Capital Resources [B] 452.6

Capital Resource Requirement

Deductthehigherofthefollowing:

CreditandMarketriskrequirements3 (55.0)

Fixed Overhead Requirement [C] (81.7)

Pillar 1 Surplus 370.9

Required Actual

Capital Ratios % %

CET1 Capital Ratio A/(12.5%*C) 4.5% 41.9%

Total Capital Ratio B/(12.5%*C) 8.0% 44.3%

1.Deductionshavebeenmadeforcapitalisedprojectcosts.

2.2019unauditedprofitandthecapitalpositionalignstoQ42019COREPsubmissionandthereforemaynotaligntothefinalauditedUKRegulatoryGroupstatutory financialstatements.

3.TheUKRegulatoryGroupisalimitedlicenseIFPRUGroupandassuchoperationalriskisnotconsideredunderPillar1,however,thisisincludedinthePillar2internalcapitaladequacyassessment.

Section

3

28 Aviva Investors

Capital Resources and Adequacy Continued

IncludedintheconsolidatedAvivaInvestorsPillar1calculationsshownintheprecedingtableareAIGSL,aLimitedLicenceFirmandAIUKFSL,acollectiveportfoliomanagementfirm.Thestand-alonePillar1calculationsforthesetwoentitiesareshowninthebelowtableasfollows:

£’m AIGSL AIUKFSL

Bridge from Net Assets to CET1 Capital

PermanentShareCapital 207.1 21.5

Profitandlossandotherreserves 63.9 13.2

Balance Sheet Net Assets 271.0 34.7

Deductions:

IntangibleAssets (10.3) -

UnauditedProfits4 (27.9) (4.7)

CET1 Capital After Deductions [A] 232.8 30.0

T2 Capital

SubordinatedLoans 68.0 -

Total Capital Resources [B] 300.8 30.0

Capital Resource Requirements

Deduct the higher of the following:

CreditandMarketRisk (32.3) N/A

FixedOverheadRequirement (66.4) (4.7)

FUMRequirement - (8.5)

Plus:

PIIRequirement - (7.6)

Total Capital Resources Requirement [C] (66.4) (16.1)

Pillar 1 Surplus 234.4 13.9

Capital Ratios5 % %

CET1 Capital Ratio A/(12.5%*C) 28.0% N/A

Total Capital Ratio B/(12.5%*C) 36.2% N/A

4.2019unauditedprofitandthecapitalpositionalignstoQ42019COREPsubmissionandthereforemaynotaligntothefinalauditedAIGSLstatutoryfinancialstatements.

5.TheCET1andTotalCapitalRatiosonlyapplytoIFPRUfirms(UKRegulatoryGroupandAIGSL).


3.3 Features, Terms and Conditions of Capital Instruments

3.3.1 CET1 Capital

CET1CapitalcomprisesofPermanentShareCapital(OrdinaryShares).Allordinarysharesarefullypaidupandrankequallywithregardtovotingrightsanddividendentitlementsdeclared,madeorpaidbytheCompany.Allshareswillalsobeentitledtoaproportionalshareoftheresidualassetsofthe Companyuponwindingup.

SharePremiumrepresentstheexcessamountreceivedovertheparvalueofshares.

Profitandlossandotherreservesconsistprimarilyofretainedearnings.Otherreservesconsistofcurrencyretranslationreservesreflectingtheimpactofexchangeratemovementsandacapitalcontributionreserve.

3.3.2 Tier 2 Capital

Tier2CapitalcomprisesofSubordinatedLoansofwhichthekeyfeatures,termsandconditionsare:

• Eachloanisfullypaidup;

• Claimsontheprincipalamountofthesubordinatedloaniswhollysubordinatedtotheclaimsofallnon-subordinatedcreditors;

• Theloansareneithersecured,norsubjecttoaguaranteeoranyotherarrangementthatenhancestheseniorityoftheclaimbytheborrower,anydirectorindirectholdingcompanyoranyundertakingthathascloselinkswiththeborrower;

• Eachloanhasanoriginalmaturityofgreaterthanfiveyears;

• Provisionsoftheloansdonotincludeanyincentivefortheirprincipalamounttoberedeemedorrepaidpriortotheirmaturity;

• Anyearlyrepaymentoptionisexercisableatthesolediscretionoftheborrower;and

• Thelenderhasnorighttoacceleratethefuturescheduledpaymentofinterestorprincipal,otherthanintheinsolvencyorliquidationoftheborrower.

3.4 Prudential Filters and DeductionsNoprudentialfilters,includingthoseinrespectofunrealisedgainsorlossesonfairvalueassets,havebeenappliedtocapitalresourcesinarrivingatcommonreporting("COREP")OwnFunds.

Intangibleassetdeductionsassetoutinsection3.2relatetocapitalisedinternalprojectcosts.

AllappropriateitemshavebeendeductedinaccordancewithArticles36,47,48,66and79oftheCRR.

3.5 Capital RatiosSeethetablesin3.2fordetailsoftheCET1andTotalCapitalRatios,whichhavebeencalculatedforFullYear2019inaccordancewithamountsdisclosedfortheUKRegulatoryGroupandoneIFPRUfirm(AIGSL).Allratioswereabovetheminimumrequiredthresholdof4.5%(CET1Ratio)and8%(TotalCapitalRatio)assetoutinArticle92oftheCRR.

Section

3

30 Aviva Investors


3.6 Analysis of Capital Requirements

3.6.1 Standardised Credit Risk Capital RequirementsPillar1creditriskcapitalrequirementcalculationshavebeencarriedoutinlinewiththeCRR.AvivaInvestorsappliesthestandardisedapproachtocalculatingitscreditriskcapitalrequirementassetoutinPartThreeTitleIIoftheCRR.ThePillar1capitalrequirementis

calculatedbyapplyingariskweightingtothebalancesheetassetvalueandthenapplyinganOwnFundsRequirementpercentageof8%totheriskweightedasset.

Exposure class (£’m) 2019

Corporates 33.2

UnitsorsharesinCIUs 7.5

EquityExposures 2.4

Institutions 1.9

Retail 0.7

OtherItems 5.0

Default 0.0

Total 50.6

Asat31December2019,AvivaInvestorshadnotemployedanyofthecreditriskmitigationtechniquesoutlinedinPartThree,TitleII,Chapter4ofCRR.

3.6.2 Counterparty Credit RiskAvivaInvestorsdoesnothaveanyexposurestoover-the-counter(“OTC”)derivativesanddoesnothaveatradingbook,thereforefacesnocounterpartyriskexposuresoutlinedinArticle439oftheCRRatpresent.

3.6.3 Credit Risk AdjustmentsAvivaInvestorsdefinespastdueitemsforaccountingpurposesasanyitemsnotreceivedwithin90daysoftheinvoicedate.

Crystallisedandanticipatedlossesareprovidedforwithintheincomestatementassoonastheircrystallisationisconsideredprobableandthequantumcanbereliablyestimated.

Noaccountingoffsetsarepresentthatwouldresultinexposurevaluesdifferentfromthoseoutlinedin section3.6.1.

AtAvivaInvestorsleveltherehavebeennomaterialimpairmentstoassets.


Exposure class (£’m) UK UK Retail Europe Asia Pacific

North America Total

Corporates 343.4 44.7 13.9 2.9 3.1 408.1

UnitorsharesinCIUs 87.9 5.7 0.0 0.0 0.0 93.6

EquityExposures 29.4 0.0 0.1 0.7 0.0 30.2

Institutions 1.9 17.4 4.8 2.5 2.7 29.8

Retail 0.0 8.4 0.0 0.0 0.0 8.4

OtherItems 50.2 0.4 2.5 0.6 9.3 63.1

Default 0.0 0.0 0.0 0.0 0.0 0.0

Total 512.7 76.6 21.3 6.8 15.2 633.1

InrespectofArticle442(e)oftheCRRandtakingintoaccountbothproportionalityandthefactthatAvivaInvestorsisnotacreditinstitution,exposuresprimarilyrelatetoinvestmentsandtradereceivableswithhighlyratedcorporateinstitutions(includingotherAvivaGroupcompanies).

Allexposuresaredueandpayablewithin90daysofinvoicing.Therearenomaterialpastdueexposureswhichcauseconcernoverrecoverability.

3.6.5 Encumbered AssetsAvivaInvestorsdoesnotholdanyencumberedassets.

3.6.6 Use of External Credit Assessment Institutions AvivaInvestorscalculatesrisk-weightedexposureamountsinaccordancewithPartThree,TitleII,Chapter2oftheCRR.TheExternalCreditAssessmentInstitutions("ECAI")usedbyAvivaInvestorsareStandard&Poor’s,Moody’sandFitchacrossallexposureclasses.AspertheAvivaInvestorsGlobalCounterpartyCreditPolicy,wherecounterpartieshavesplitratings,themiddleratingisusedandifthecounterpartyhasonlytworatings,thelowerwillbeused.Thepolicysetstheminimumlong-termcreditratingasA-/A3whichisequivalenttoanECAIscoreof2.TheECAI’screditassessmentisusedtodeterminethecreditqualitystepofeachexposureusingthestandardisedmapping.

3.6.7 Market RiskAvivaInvestorsfollowsastandardisedapproachtocalculatingthePillar1marketriskcapitalrequirementandiscalculatedinlinewithArticle352ofCRR.Positionsineachcurrencyarenettedtoeitheranetlongornetshortposition(otherthanthereportingcurrency)andconvertedatspotratesintoGBP.Thehigherofeither;sumofalllongorsumofallshortpositionsistheoverallForeignExchange("FX")exposure.Thecapitalrequirementiscalculatedas8%oftheoverallnetFXexposure.Asat31December2019,AvivaInvestorshasamarketriskexposureamountof£54.75mandaPillar1marketriskcapitalrequirementof£4.34m.ThisrisksolelyrelatestoforeigncurrencytranslationriskonassetsandliabilitiesdenominatedincurrenciesotherthanGBP,asAvivaInvestorsdoesnotoperatea tradingbook.

Excessiveleverageriskisthe“currentorprospective riskresultingfromAvivaInvestors’vulnerabilitydue toleverageorcontingentleveragethatmayrequireunintendedcorrectivemeasurestoitsbusinessplan,includingdistressedsellingofassetswhichmight resultinlossesorinvaluationadjustmentstoitsremainingassets."

AvivaInvestorsdoesnotcurrentlyundertakeanybusinessactivitiesonitsownaccountthatuseleverageandtheleverageratioisthereforenotapplicable.

3.6.4 Geographical Analysis of Credit Risk ExposuresSeebelowforatableoutliningthegeographicdistributionofAvivaInvestorsriskweightedcreditriskexposuresat31December2019:

Section

3

32 Aviva Investors


3.7 Other Exposures

3.7.1 Exposure in equities not included in the trading book AIUKFSL,anIPRU-INVcollectiveportfoliomanagementfirm,hasOEICboxfloatunitswhichareclassifiedasequityexposures.

Theboxholdingsareinalargenumberoffundsacrossnumerousassettypes(property,equity,fixedincome,multi-asset).Differentassetclassesareexposedtodifferentrisks.ThishasbeenincludedinPillar1creditriskcalculationandtreatedaccordingtoCRDIV/CRRrulesandisnotconsideredmaterialfordisclosure.

3.7.2 Exposure to interest rate risk on positions not included in the trading bookAvivaInvestorshasnoPillar1capitalrequirement forinterestrateriskinthebankingbook("IRRBB") andisnotexposedtointerestrateriskonpositions notincludedinthetradingbookforregulatory capitalpurposes.

3.7.3 Exposure to securitisation risk Securitisationriskisthe"currentorprospectiverisk oflossarisingfromexposuretoinadequatecapitalresourcesheldbyAvivaInvestorsforassetswhicharesecuritisedhavingregardtotheeconomicsubstance ofthetransaction,includingthedegreeofrisk transferachieved."

AvivaInvestorsdoesnotparticipateinsecuritisationactivitiesonitsownaccountand,asaresult,itisnotnecessarytoholdcapitalagainstsecuritisationrisk.

3.8 Capital Resource Requirements – New prudential regime for investment firms TheEuropeanBankingAuthority("EBA")andnationalcompetentauthoritieshavebeenfinalisingthetextoftheInvestmentFirmRegulation(IFR)andDirective(IFD).TherequirementscontainedinthesetextsrepresentasignificantchangeintheprudentialregimethatInvestmentFirmsarerequiredtocomplywith.ThefinaltextsoftheIFRandIFDwerepublishedintheOfficialJournaloftheEuropeanUnionon5December2019.Thenewprudentialregimeaimstocreateaframeworkwithinwhichthecapital,liquidityandotherkeyprudentialrequirementsandcorrespondingsupervisoryarrangementsaresufficientlyrobust tocapturetherisksofinvestmentfirmsinaprudentiallysoundmanner.ThescopeofthenewproposalcoversallMiFIDlicensedinvestmentfirmsexcludingUCITSandAIFMs.WithintheAvivaInvestorsUKRegulatoryGroup,theonlyentityinscopewillbeAIGSL,whichisaMiFIDinvestmentfirm.Thenewruleswillcomeintoforceon26June2021.AIGSLmeetsthecriteriatobecategorisedasaClass2firm.AninitialassessmenthasbeenconductedtocalculatethepotentialimpactonAIGSL’sPillar1capitalrequirementandithasbeenestablishedthatthecapitalrequirementunderIFRwouldnotbemateriallydifferenttoAIGSL'sFOR.

Section

C

34 Aviva Investors34


Section 4RemunerationCodeDisclosure

3535

Section

CSection

4

36 Aviva Investors

Remuneration Code Disclosure

ThepurposeofthisDisclosureistoprovideinformationinrelationtotheremunerationpolicyandstructuresofAvivaInvestorsentities(beingsubsidiariesofAvivaInvestorsHoldingsLimited)forstaffwhoseprofessionalactivitieshaveamaterialimpactontheriskprofileofthoseentities(referredtobelowasCodeStaff6).RemunerationpolicyandstructuresaregovernedbyaRemunerationCode7 and are summarisedinaRemunerationPolicyStatementdocument.EachoftheAvivaInvestorsentitieshavebeenclassifiedasaproportionalityLevel3firm,whichimpactstheCode’sapplicationinrelationtothem.

4.1 Decision- making process for remuneration policyTheAvivaInvestorsRemunerationCommitteeiscomprisedoftheAvivaInvestorsIndependentNon-ExecutiveDirectors:

• JeffreyWeingarten,Chair

• MarkWhite

• AlexaCoates

AndoneNon-ExecutiveDirector:

• MikeCraston

ThisCommitteeconsidersissuesrelatingtotheremunerationpolicyandstructuresforAvivaInvestorsincludingthetermsofannualbonusandlong-termincentiveplansandindividualremunerationpackagesforallemployeestowhichtheRemunerationCodeapplies.Itisalsoresponsible forreviewingandmakingrecommendationsontheRewardPolicyStatementsforAvivaInvestorstotheAvivaGroupRemunerationCommittee.AvivaInvestorsoperatestheAvivaGroupMalusandClawbackPolicy.In2019,theAvivaInvestorsRemunerationCommitteemetonsixoccasions.

TheAvivaGroupRemunerationCommitteeapprovestheRemunerationPolicyStatementsforAvivaInvestors.TheIndependentNon-ExecutiveDirectorsoftheGroupRemunerationCommitteeare:

• PatriciaCross

• MichaelMire

• Claudia Arney

• GlynBarker

TheAvivaGroupRemunerationCommitteeconsidersalignmentbetweenGroupstrategyandtheremunerationofDirectors,CodeStaffandMaterialRiskTakers8withinAvivaInvestors.Theremunerationpolicyprovidesastructuretodelivermarketcompetitiveremunerationforallstaff,includingCodeStafftoachieveboththeannualbusinessplanandthelongertermstrategicobjectivesoftheGroup.Significantlevelsofdeferralaidretentionandaligntheinterestsofkeypersonnel.Aswellasrewardingtheachievementofobjectives,variableremunerationcanbezeroifperformancethresholdsarenotmet.In2019,theAvivaGroupRemunerationCommitteemetontenoccasions.

ThefullobjectivesoftheAvivaGroupRemunerationCommitteearedocumentedintheDirectors’remunerationreportintheAvivaAnnualReport whichisincludedontheInvestorRelationswebsite,foundhere:

(http://www.aviva.com/investor-relations/corporate-governance/board-of-directors/board-committees/remuneration-committee/)

4.2 External consultantsTheAvivaInvestorsRemunerationCommitteereceivedindependentadviceonexecutiveremunerationissuesfromDeloitteLLPwhichisamemberoftheRemunerationConsultantsGroup andadherestoitsCodeofConduct.Noindividual isinvolvedindecisionsrelatingtohisorher ownremuneration.

DuringtheyeartheAvivaGroupRemunerationCommitteealsoreceivedadviceonexecutiveremunerationmattersfromDeloitteLLP.

4.3 Role of the relevant stakeholdersTherelevantRemunerationCommitteestakefullaccountoftheCompany’sstrategicobjectivesinsettingremunerationpolicyandaremindfuloftheirdutiestoshareholdersandotherstakeholders.TheCommitteesseektopreserveshareholdervaluebyensuringthesuccessfulretention,recruitmentandmotivationofemployees.

6.SeeBIPRU11.5.187.SeeFCAHandbookSYSC19A8.SeeFCAhandbookSYSC27.8.14


4.4 Code Staff criteriaInadditiontoapplyingtheEBARegulatoryTechnicalstandards,AvivaInvestorsconsiderfurtherqualitativecriteriaforthepurposesofCodeStaffidentification,theseincludeindividualswhoseprofessionalactivities/who:

• CouldhaveamaterialimpacttothebalancesheetofAvivaInvestors;

• CouldhaveamaterialimpacttotherevenueornetprofitofAvivaInvestors;

• CouldhaveamaterialimpacttothereputationofAvivaInvestors;

• ManageAssetsUnderManagement("AUM")of£10bnormore(c3%oftotalfirmassets)whereinvestmentriskisnotratedaslow;

• Manageretailfundswith£5bnoroverwhereinvestmentriskisnotratedaslow;or

• Areheadsofaninvestmentdesk;

ThefollowinggroupsofemployeeshavebeenidentifiedasmeetingthecriteriaforCodeStaff:

• – LegalDirectorsofUKRegulatedEntities;

• –MembersofAIExecutiveCommittee;

• SignificantInfluenceFunctionsateachUKRegulatedEntityasoutlinedinthetablebelow;

CF 3 Chiefexecutivefunction

CF 4 Partnerfunction

CF 8 Apportionmentandoversightfunction

CF 10 Complianceoversightfunction

CF 10a CASSoperationaloversightfunction

CF 11 Moneylaunderingreportingfunction

CF 28 Systemsandcontrolsfunction

CF 29 Significantmanagementfunction

ChairsoftheAvivaInvestorsBoard,AvivaInvestorsRemunerationCommittee,AvivaInvestorsRiskCommitteeandAvivaInvestorsAuditCommittee;

• GeneralCounsel;

• ChiefRiskOfficer

• InternalAuditDirector;

• PeopleDirector;

• ChiefOperatingOfficer;

• DirectreportofChiefRiskOfficer,CF10,CF10a,CF11andInternalAuditDirectorwhowouldbeconsidereddeputy;

• Individualsidentifiedaspartofanadditionalqualitativeassessment;or

• Individualsidentifiedaspartofaquantitativeassessment.

TheCodeStaffpopulationisreviewedatleastannuallybytheRemunerationCommitteesandCodeStaffarenotifiedoftheirstatus.

Section

C

38 Aviva Investors

Section

4Remuneration Code Disclosure Continued

4.5 The link between pay and performance for Code StaffAvivaInvestors’remunerationframeworkisbasedonatotalrewardapproachandisdesignedtoreflectthesuccessorfailureagainstarangeofpersonalandcompanyperformanceobjectives.

Therearefourcomponentsofpay:

1. BasicSalary–setwithinanappropriatemarketrange,whichissufficienttoallowthepossibility,whereperformancesowarrants,thatanemployeemayreceive no variable pay.

2. Annualbonus–adiscretionaryshort-termincentiveplanwhereindividualsmayreceiveabonusbasedonbusinessandindividualperformanceagainsttargets.Wherebonusesareequaltoorgreaterthan£75,000, a3yeardeferralwithpro-ratavestinginAvivafundsand/orAvivaGroupplcsharesoccurs,following thisafurtherholdingperiodapplieswhere regulationrequires.

• Theextenttowhicheachaspectofperformanceaffectstheoverallpaymentleveldependsontheroleandresponsibilitiesoftheindividual.Performanceismeasuredagainstacombinationofindividual,businessunit,AvivaInvestorsandGroupperformanceoveranappropriateperiod.

• Aroundedassessmentoffinancialperformanceismadeaccountingforarangeoffinancialconsiderations,including,butnotlimitedtooperatingprofit,investmentperformanceandnetflows.TheassessmentofAvivaInvestors’financialperformanceisformedwithreferenceto:

• Actualresultsvs.priorperiodresults

• Actualresultsvs.agreedplans

• Actualresultsrelativetocompetitors

• Actualresultsvs.,andprogresstowards,ourlong-termtargetambition.

• TheremunerationofemployeesinControlFunctions(definedasRisk,ComplianceandAudit)isdeterminedindependentlyofthefinancialresultsofAvivaInvestorsinordertoreinforcetheindependenceofthesefunctions.

• Thenon-financialconsiderationsincludeconsiderationofrisk,conduct,culture,customerandemployeeengagementmetrics,withAvivavaluesclearlyunderpinningallourdecisions.Incertainroles,adherencetoResponsibleInvestmentandESGprincipleswillalsobeaconsideration.

• ThePerformanceassessmentdoesnotencouragerisktakingoutsidetheAvivaInvestorsstatedriskappetiteandincludesmechanismsbywhichperformanceagainstriskandconductrelatedmeasureshasasignificantimpactontheavailabilityandsizeofbusinessandindividualvariableawards.

3. LongTermIncentiveAwards(LTIA)–discretionarylong-termincentiveplantoalignrewardwithlong-terminvestmentperformance,AvivaGroupandshareholderinterests,andwiththeadditionalintentiontohelpretainkeytalent.AwardsforIdentifiedStaffwillbesubjecttoapre-vestingassessmentofindividualperformance,behavioursandalignmentwiththecompanyvaluesofAvivaInvestorsthroughoutthethree-yearperformanceperiod.

LTIAsincludethefollowingcomponentparts:

• AnawardinAvivaPLCRestrictedShareUnitswith3yearcliffvesting,creatingalignmentwiththeperformanceofAvivaPLCsharesovertheperformance period.

• AnAwardinAvivaInvestorsFundswitha3yearcliffvesting(5yearsforindividualsinAlternativeInvestments),creatingalignmentwiththeperformanceofAvivaInvestorsfundsovertheperformance period.

4. BenefitsinKind–standardbenefitsareprovidedthatareappropriatetothemarket.

AvivaInvestorsbelievesinrewardingstrongperformanceandachievementofourbusinessandindividualgoals;however,themannerinwhichthesegoalsareachievedisalsoimportant.WedonotconsideritappropriatetorewardpeoplewhohaveengagedininappropriatebehaviourorconductwhichisnotinlinewithAviva’svaluesandvariablepayawardsaresubjecttotheAvivaGroupMalusandClawbackPolicy.Assuch,AvivamaydecidethataDeferredAwardwhichhasnotvestedwilllapsewhollyorinpartiftheyconsiderthat:


• Theparticipantortheirteamhas,intheopinionoftheDirectors,engagedinmisconductwhichoughttoresultinthecompleteorpartialforfeitorrepaymentoftheiraward;

• Therehasbeen,intheopinionoftheDirectors,amaterialfailureofriskmanagementbyreferencetoGroupriskmanagementstandards,policiesandprocedures,takingintoaccounttheproximityoftheparticipanttothefailureofriskmanagementinquestionandtheleveloftheparticipant’sresponsibility;

• Thereis,intheopinionoftheDirectors,amateriallyadversemisstatementofAviva’sortheparticipant’srelevantbusinessunit’sfinancialstatementsforwhichtheparticipanthassomeresponsibility;

• Theparticipantparticipatedinorwasresponsibleforconductwhichresultedinsignificant,orpotentiallysignificant,loss(es)totheirrelevantbusinessunit,AvivaoranymemberoftheAvivaGroup;

• Theparticipantfailedtomeetappropriatestandardsoffitnessandpropriety;

• Thereisevidenceofmisconductormaterialerrorthatwouldjustify,orwouldhavejustified,hadtheparticipantstillbeenemployed,summaryterminationoftheircontractofemployment;or

• AnyothercircumstancesrequiredbylocalregulatoryobligationstowhichanymemberoftheGrouporbusinessunitissubject.

4.6 Aggregate remuneration cost for Code Staff by business areaFollowingareviewofthebusiness,ithasbeendeterminedthattheoperationsofAvivaInvestorsshouldbeconsideredasonematerialbusinessunit.Thetotalaggregateremunerationisasfollows:

Therewere65CodeStaffforallorpartofthe2019performanceyear.AggregateremunerationexpenditureinrespectofCodeStaffforthe2019performanceyearwas£41.1m.

Fixedremunerationrepresents29.6%ofthistotal,with6.7%beingpension/benefitsand63.7%variableremuneration.

Ofthetotalvariablepay(bonusandLTIA)madetoCodeStaff,64.2%wasdeferredandissubjecttomalusprovisionsasoutlinedaboveduringthisperiod.Theseawardsarealsosubjecttoclawbackprovisionsforafurther2yearsuponvesting.

TheremunerationsplitbetweenSeniorManagementandotherCodeStaffthatmakeupthe65CodeStaffisasfollows:

Senior Management Other Code Staff

Total Remuneration £17.9m £23.1m

Ofwhich,FixedRemuneration 20.2% 36.8%

VariableRemuneration Ofwhichdeferred

72.9%

74.1%

56.6% 54.4%

Pension/Benefits 6.9% 6.6%

NumberofCodeStaff 18 47

40 Aviva Investors

AGHL AvivaGroupHoldingsLimited

AIGSL AvivaInvestorsGlobal

ServicesLimited

AIHL AvivaInvestorsHoldingsLimited

AIPL AvivaInvestorsPensionsLimited

AIRR AvivaInvestorsRiskRegister

AIUKFL AvivaInvestorsUK

FundsLimited

AIUKFSL AvivaInvestorsUKFund

ServicesLimited

AUM AssetsUnderManagement

AvivaInvestors InaccordancewithArticle7and9of

theCRR,includesentitiesdetailed

onpage7ofthisreport

AvivaGroup TheAvivaplcgroupofcompaniesas

reportedinNote64–Organisational

structure,onpage246oftheAvivaplc

AnnualReportandaccounts2019,

availableatwww.aviva.com

Avivaplc TheholdingcompanyoftheAviva

GroupandAIHL’sultimateparent

company

Board BoardofDirectors

Business

Standards Asetofbusinessstandardswhichset

outtherequirementsforoperating

acrossAvivaGroup’smostimportant

business processes. The business

standardsareakeypartoftheAviva

Group’sriskmanagementframework.

CASS ClientAssetsSourcebook

CCO AvivaInvestorsChiefCompliance

Officer

CEO AvivaInvestorsChiefExecutiveOfficer

CET1 CommonEquityTier1capital

CFO AvivaInvestorsChiefFinancialOfficer

COO AvivaInvestorsChiefOperatingOfficer

COREP CommonReporting–Standardised

reportingframeworkissuedbythe

EuropeanBankingAuthorityfor

CRDIVreporting

CRDIV CapitalRequirementsDirectiveIV

CRO AvivaInvestorsChiefRiskOfficer

CRR CapitalRequirementsRegulation

EBA EuropeanBankingAuthority

ECAI ExternalCreditAssessment

Institutions

Abbreviations and glossary of terms


EIOPA European Insurance and

OccupationalPensionsAuthority

EU EuropeanUnion

FLFL FriendsLifeFundsLimited

FCA FinancialConductAuthority

FOR FixedOverheadRequirement

FUM FundsUnderManagement

GCS GlobalClientSolutions

IA AvivaInvestorsInternalAudit

IAS InternationalAccountingStandards

ICAAP InternalCapitalAdequacy

AssessmentProcess

iCARE IntegratedCommon

AssuranceReporting

IFPRU PrudentialSourcebookfor

InvestmentFirms

IFRS InternationalFinancialReporting

Standards

IMMMR Identification,measurement,

management,monitoringand

reporting

IPRU-INV InterimPrudentialsourcebookfor

InvestmentBusinesses

IRRBB InterestRateRiskintheBankingBook

LTIA LongTermIncentiveAward

KRI KeyRiskIndicator

OEIC Open-endedInvestmentCompany

OTC Over-the-counter

RAG Red-Amber-Green

RAS RiskAppetiteStatement

RCSA RiskandControlSelfAssessment

RED RiskEventDatabase

RST Reversestresstesting

RMF RiskManagementFramework

SMCR SeniorManager&CertificationRegime

SME SubjectMatterExpert

SREP SupervisoryReviewand

EvaluationProcess

SST Stressandscenariotesting

T2 Tier2capital

UCITS UndertakingsforCollective

InvestmentinTransferableSecurities

(RegulatoryStatus)

90428-03/2020

31 dec 2019: pillar 3 disclosures - aviva

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