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8/7/2019 Aviva UK: Investor Update, June 2010
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Investor PresentationJune 2010
8/7/2019 Aviva UK: Investor Update, June 2010
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DisclaimerCautionary statements:
This should be read in conjunction with the documents filed by Aviva plc (the “Company” or “Aviva”) with the United States
Securities and Exchange Commission (“SEC”). This announcement contains, and we may make verbal statements containing,“forward-looking statements” with respect to certain of Aviva‟s plans and current goals and expectations relating to future
financial condition, performance, results, strategic initiatives and objectives. Statements containing the words“believes”,“intends”, “expects”, “plans”, “will,” “seeks”, “aims”, “may”, “could”, “outlook”, “estimates” and “anticipates”, and wordsof similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly,there are or will be important factors that could cause actual results to differ materially from those indicated in these statements.Aviva believes factors that could cause actual results to differ materially from those indicated in forward-looking statements inthe presentation include, but are not limited to: the impact of diff icult conditions in the global capital markets and the economygenerally; the impact of new government initiatives related to the financial crisis; defaults and impairments in our bond,mortgage and structured credit portfolios; changes in general economic conditions, including foreign currency exchange rates,interest rates and other factors that could affect our profitability; the impact of volatility in the equity, capital and credit markets onour profitability and ability to access capital and credit; risks associated with arrangements with third parties, including jointventures; inability of reinsurers to meet obligations or unavailability of reinsurance coverage; a decline in our ratings withStandard & Poor‟s, Moody‟s, Fitch and A.M. Best; increased competition in the U.K. and in other countries where we have
significant operations; changes to our brands and reputation; changes in assumptions in pricing and reserving for insurancebusiness (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity andendowments; a cyclical downturn of the insurance industry; changes in local political, regulatory and economic conditions,business risks and challenges which may impact demand for our products, our investment portfolio and credit quality ofcounterparties; the impact of actual experience differing from estimates on amortisation of deferred acquisition costs and
acquired value of in-force business; the impact of recognising an impairment of our goodwill or intangibles with indefinite lives;changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect ofvarious legal proceedings and regulatory investigations; the impact of operational risks; the loss of key personnel; the impact ofcatastrophic events on our results; changes in government regulations or tax laws in jurisdictions where we conduct business;funding risks associated with our pension schemes; the effect of undisclosed liabilities, integration issues and other risksassociated with our acquisitions; and the timing impact and other uncertainties relating to acquisitions and disposals and relatingto other future acquisitions, combinations or disposals within relevant industries. For a more detailed description of these risks,uncertainties and other factors, please see Item 3, “Risk Factors”, and Item 5, “Operating and Financial Review and Prospects”
in Aviva‟s Annual Report Form 20-F as filed with the SEC on 30 March 2010. Aviva undertakes no obligation to update theforward looking statements in this announcement or any other forward-looking statements we may make. Forward-looking
statements in this presentation are current only as of the date on which such statements are made.
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Overview
General Insurance
Long Term savings
Composite
• Strong profits in a tough economic environment
• Encouraging sales outlook supported by our unique and growing
bancassurance franchise
• Structural changes and cost savings now delivering benefits forshareholders
Long-term savings sales (present value of new business premiums and investment sales), GI and health sales (net written premiums) and MCEV operating profit(regional split shown before group debt and interest costs)
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£36bn
Long-term savings sales
£9bn
GI and Health sales
£3.5bn
MCEV Operating profit
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Strong today, with a clear vision for the future
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Strong today Well positioned for growth
8.1
1.7
Europe(inc UK)
1.6
1.5
Asia ex Japan
2009 Assets
2009–14 ExpectedIncrease in Assets
European L&Passets expectedto grow by$1.7 trillion overthe next 5 years
($ trillion) Source: Oliver Wyman
3.9
1.3
North America
A single global brand• 53 million customers
• A unique bancassurancefranchise
• Top 4 in Europe and amarket leader in the UK
A 16% return on equity• Delivering 13% minimum Life
IRR in Europe and the UK
• Writing General Insurancebusiness at an ROE of 12%
at a low point in the cycle
Generating £1.9 billionof capital from theglobal in-force book
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Aviva Europe – Making a Quantum Leap22 October 2009
800m+population and
growing
$62tr personalfinancial assets, togrow by $12tr by2014
13% of wealthinvested in L&P
Source: UN (2009), CEA (2009), Aviva PFA Model (2008)
A huge market with significant growth potential
40% of theworld‟s personal
wealth
Life & pensions
Life & pensions
Composite
Composite
Large mature markets Emerging markets with
significant potential
Aviva’s
presence
„Baby boomers‟
approachingretirement
Page 5Source: Oliver Wyman
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Transformed cost base demonstrates strategic change
Analysis of Operational Cost Base (by Region) Movement in Headcount (by Region)
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15% reduction in 2009(19% since 2007)
13% reduction in 2009
£500m cost reduction target exceeded one year ahead of schedule
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• Looking to generate 30% improvement in
operating capital in 2010
• £300 million more than 2009
• Proposal to close the final salary pension scheme
• Continuing positive Solvency II developments
• Progress in UK
• UK Life Money Marketing company of the year
• UKGI turning the corner into growth
• Progress in Europe
• Establishing Dublin Head Office, European
bancassurance platform, shared product suite
Continuing return to growth, further actions to drive value
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Positive dividend growth outlook
Continuing return to growth Actions to drive value
• 15% quarterly improvement in
L&P sales
• Margins in line with 2009
• 44% quarterly improvement in
bancassurance sales
• 16% quarterly improvementin GI and health sales
• Continued current year
improvement offset by poor
weather
• IFRS NAV at £3.95, MCEV NAV at
£5.05
• Solvency surplus of £4.4 billion,
• UK life provisions of £1.1 billion
remain in place
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15% increase in sales Q4 2009 – Q1 2010
39% increase Q3 2009 – Q1 2010
Evidence of continuing recovery in customer appetite to save
Life & Pensions PVNBP
6,587
7,943
9,131
£m
• Growth of 13-14% in coremarkets of UK and Europe
• Margins in line with 2009
• Bancassurance sales up 44%
Asia Pacific
North America
Europe
UK Life
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16% increase in GI & Health sales
Q4 2009 – Q1 2010
GI & Health (NWP)
2,120 2,126
2,465
£m
Remaining focussed on meeting or beating 98% COR in 2010
• Positive impacts frommarketing campaign “get the
Aviva deal”
• Success with the RAC panel
• Continued improvementin underlying currentyear performance
Asia Pacific
North America
Europe
UK Life
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0.0
0.5
1.0
1.5
2.0
2.5
Operational capital
generated
Investment in new
business
2009 Underlying
capital generated
Expected capital
improvement
2010 expected
underlying capital
generation
Aiming to generate £300 million (30%) growth in underlying
capital in 2010
Key drivers for capital growth
• Higher in-force profits
• Increased non-life capital
generation
• Lower new business strain
• Disciplined cost management
£bn
Capital generation underpins dividend
2.5bn 1.5bn
1.0bn
1.3bn
Capital Generation
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Specific plans to drive value, earnings& dividend growth – Plans for 2010
Europe
► Increase penetration of bancassurance protection business
► Targeting a further shift towards higher margin unit linked products
► Centralise asset & liability management and reinsurance in Dublin
► Further GI market penetration and lower claims ratio
UK
► Grow RAC panel proposition and direct business
►Expand risk appetite to build mid-size Corporate GI
► Build Wraps and SIPP market share
► Grow the protection business
► Proposed closure of final salary pension scheme
North America
► Drive further increase in profits and improve IRRs
► Maintain GI market position whilst increasing earnings
Asia Pacific ► Expand market share in chosen markets and re-enter GI in selected countries
Aviva Investors ► Significantly increase third party mandates and investment outperformance
Value &earnings
IFRS EPS growth eg: Quantum Leap at least 13p; eliminate restructuring costs 10p
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Marketing leading positions across the regions
Life & pensions GI
UK UK Top 3 #1
Europe Ireland Top 3 #1
Poland #2
Spain Top 5
Turkey Top 5
France Top 10
Italy Top 10
Russia Top 10
Hungary Top 10
Romania Top 10
Delta Netherlands Top 5 Top 5
Lloyd Belgium Top 10
NorthAmerica
US / Canada #1/#2* #2
Asia Pacific China #4**
India #11***
Malaysia Top 10
Singapore Top 5
Largest insurance services providerin the UK
One of the leading providers of lifeand pension products in Europe
* Fixed indexed life/fixed indexed annuities** Among foreign insurers as at end 2009
*** Among private players as at end 2009Page 13
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Simplified structure under singleholding company
Shared systems and processes
One Pan European Business
One Head Office
Pan European distributionorganisation
Work underway to create one head office in Ireland
150 products removed which no longer met customers‟ needs
Pan-European Product Centres created in Poland and Ireland
Shared Services Bancassurance Platform established in SpainPan-European claims programme already delivering benefits
... all contributing to a 12% reduction in costs
Business managed by channel and function with clear
accountability alongside local market knowledge
Single holding company established in Ireland
Customer centre product catalogueand shorter time to market
Progress on Quantum Leap
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Q&A
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Appendix
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Non-GAAP financial measures
Financial measures
In this presentation, management has included and discussed certain “non-GAAP financial measures”, as such
term is defined in Regulation G, pertaining to the Company‟s results. These measures are ““PVNBP” (PresentValue of New Business Premiums), “Sales” and “MCEV earnings.” Management believes that these non-GAAPmeasures, which may be defined differently by other companies, explain the Company‟s results of operations in a
manner that allows for a more complete understanding of the underlying trends in the Company‟s business.
However, these measures differ from the most directly comparable measures determined in accordance withInternational Financial Reporting Standards (“IFRS”), which are “net written premiums” in the case of PVNBP, “net
written premiums” in the case of Sales and “profit/(loss) before tax” in the case of MCEV earnings. A discussion of
the differences between these non-GAAP financial measures and their respective most directly comparable IFRSfinancial measures is included in the following tables and the following note included in the Company‟s preliminary
announcement of results for the 12 months ended 31 December 2009 released on 4 March 2010 available onwww.aviva.com/investor-relations: “pro forma reconciliation of group operating profit to profit after tax – IFRSbasis”.
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All gross of tax and minority interestsPlease see 2009 preliminary results announcement for pro-forma reconciliation of IFRS operating profit to IFRS profit after tax.1 IFRS operating profit is termed “adjusted operating profit” within Aviva‟s 20-F.2 including operating experience variances and assumption changes
£ million 2009 2008
IFRS operating profit1
2,022 2,297New business impact 962 1,175
Existing business earnings2 671 (72)
Expected return on shareholders' net worth/funds (27) 186
Other items in operating profit (104) (173)
Fund management and other operations and regional costs (41) (46)
MCEV operating profit 3,483 3,367
£ million 2009 2008
Long-term insurance and savings new business sales 35,875 40,240
Less: Effect of capitalisation factor on regular premium long-term business (8,612) (9,893)
Share of long-term new business sales from JV‟s and associates (1,277) (1,062)
Annualisation impact of regular premium long-term business (446) (731)
Deposits taken on non-participating investment contracts (4,181) (7,523)
Retail sales of mutual fund type products (investment sales) (3,872) (3,995)
Add: IFRS gross written premiums from existing long-term business 7,164 7,236
Less: long-term insurance and savings business premiums ceded to reinsurers (1,730) (1,044)
Long-term insurance and savings net written premiums 22,921 23,228
Reconciliation of IFRS operating profit to MCEV operating profit
Reconciliation of sales to net written premiums under IFRS
Reconciliations of non-GAAP financial measures
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