Area Life International Assurance DAC Report of the Independent Actuary on the proposed Scheme to transfer the business of Area Life International Assurance DAC to Aviva Life and Pensions Ireland DAC Prepared by: Gordon Wood Date: November 2019 Aviva: Confidential Executive summary Contents…………………………………………….…………….……… ...................................... 1 1. Executive summary .......................................................................................................... 2 1.1 Overview................................................................................................................................................ 2 1.2 Basis for opinion .................................................................................................................................... 2 1.3 Conclusions ........................................................................................................................................... 2 1.4 Supplementary Letter ........................................................................................................................... 3 2. Introduction ...................................................................................................................... 4 2.1 Independent Actuary ............................................................................................................................. 4 2.2 Purpose of this Report ........................................................................................................................... 4 2.3 Scope of this Report .............................................................................................................................. 4 2.4 Independence ........................................................................................................................................ 5 2.5 Terms of reference ................................................................................................................................ 5 2.6 Statements of reliance and limitations .................................................................................................. 7 2.7 Legal jurisdiction ................................................................................................................................... 7 2.8 Duty to the Court ................................................................................................................................... 7 2.9 Statement of truth ................................................................................................................................. 7 3. General considerations .................................................................................................... 8 3.1 Approach to review the level of security of policyholders’ benefits ...................................................... 8 3.2 Approach to review the rights and expectations of policyholders ......................................................... 8 3.3 Capital policy ......................................................................................................................................... 8 3.4 Policyholder Communication ................................................................................................................. 9 4. Outline of proposal .........................................................................................................10 4.1 Background to the proposal .................................................................................................................10 4.2 Details of the proposal ..........................................................................................................................10 4.3 With-profits business ............................................................................................................................10 5. Area Life International Assurance DAC (“ALI”) ...........................................................13 5.1 Background ..........................................................................................................................................13 5.2 Recent history and future development ...............................................................................................13 5.3 Nature of business written ...................................................................................................................14 5.4 Risk profile of Area Life’s business .......................................................................................................15 5.5 Solvency position..................................................................................................................................16 5.6 Own Risk Solvency Assessment (“ORSA”) ............................................................................................17 6. Aviva Life and Pensions Ireland (“ALPI”) .....................................................................19 6.1 Background ..........................................................................................................................................19 6.2 Recent history and future development ...............................................................................................20 6.3 Nature of business written ...................................................................................................................21 6.4 Risk profile of ALPI’s business ..............................................................................................................22 6.5 Solvency position..................................................................................................................................23 6.6 Own Risk Solvency Assessment (“ORSA”) ............................................................................................23 7. Effect of the Scheme on policyholders .........................................................................24 7.1 Introduction ..........................................................................................................................................24 7.2 Security of policyholder benefits ..........................................................................................................24 7.3 Rights and expectations of policyholders .............................................................................................26 7.4 Other considerations ............................................................................................................................27 8. Conclusions .....................................................................................................................29 Appendix A: Documents reviewed ....................................................................................30 EY 1 Aviva: Confidential Executive summary 1. Executive summary 1.1 Overview I have been appointed as the Independent Actuary required to report to the High Court of Ireland (“the Court”) on the terms of the proposed scheme of transfer of the life assurance business of Area Life International Assurance DAC (“ALI”) to Aviva Life and Pensions Ireland DAC (“ALPI”), pursuant to an insurance business scheme of transfer under Section 13 of the Assurance Companies Act 1909 (“the 1909 Act”) This report sets out my findings and conclusions from my review of the proposed scheme of transfer and, in particular, considers the impact of the proposed transfer on the security of the benefits and the benefit expectations of the existing long-term insurance policyholders of ALI and ALPI. This report has been prepared under the terms of the guidance set out in Actuarial Standard of Practice (“ASP”) LA-6 issued by the Society of Actuaries in Ireland. The contents of this Report have been peer reviewed to check quality and completeness, by James Maher. James is a partner at EY, a Fellow of the Society of Actuaries in Ireland and of the Institute and Faculty of Actuaries and has over 20 years’ experience of actuarial work in the life insurance industry. 1.2 Basis for opinion To reach my conclusions, I have sought to: ► Exercise my judgement in a reasoned and justifiable manner; ► Describe the impact on all classes of beneficiaries; ► Indicate how the Scheme might lead to any changes in the material risks to the benefits of different classes of beneficiaries; ► Indicate (in broad terms) the impact on the actuarial information of adopting alternative plausible assumptions; ► Assess the impact of all classes of beneficiaries; ► Indicate the rationale for the proposal for the Scheme to proceed; ► Include (in summary) the most material information on which my opinion is based; ► Describe the rationale for my opinion. My opinions are based on my review of the documents set out to me by ALI and ALPI during the review process. The documents reviewed are set out in Appendix A. Any issues arising from my review of these documents have been noted by exception in the main body of this report. 1.3 Conclusions I have reviewed documents provided by ALI and ALPI, and also held discussions with key members of each entity to understand the implications of the proposed transfer and the impact of this on policyholders, Having considered the impact of the Scheme on the policyholders (existing and transferring) of ALI and ALPI, it is my opinion that the Scheme: EY 2 Aviva: Confidential Executive summary ► will not have a material adverse impact on the security of ALI’s policyholders; ► will not have a material adverse impact