8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
1/36
Delivering value in the newbusiness environment
2 November 2010
1
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
2/36
Disclaimer
Cautionary 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 Avivas plans and current goals and expectations relating to future financial condition, performance, results, strategic i nitiatives and objectives.
Statements containing the words believes,intends, expects, plans, will, seeks, aims, may, could, outlook, estimates and anticipates, and
words of 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 in the presentation include, but are not limited to: the impact of difficult
conditions in the global capital markets and the economy generally; 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 on our profitability andability to access capital and credit; risks associated with arrangements with third parties, including joint ventures; inability of reinsurers to meet obligations
or unavailability of reinsurance coverage; a decline in our ratings with Standard & Poors, Moodys, Fitch and A.M. Best; inc reased 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
insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; 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 of counterparties; 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 of various
legal proceedings and regulatory investigations; the impact of operational risks; the loss of key personnel; the impact of catastrophic 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 risks associated with our acquisitions; and the timing impact and other uncertainties
relating to acquisitions and disposals and relating to 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 Fi nancial Review and Prospects
in Avivas Annual Report Form 20-F as filed with the SEC on 30 March 2010. Aviva undertakes no obligation to update the forward 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.
2
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
3/36
Agenda
3
9.30 Q3 & Strategic update Andrew Moss
Q&A
10.45 Coffee
11.15 Winning in the UK Mark Hodges
Q&A
12.30 Lunch
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
4/36
Q3 update
4
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
5/36
Continuing strong results in Q3 2010
Capital generation on target
GI & Health NWP GI COR
Expected FY10
1.0bn
1.5bn
FY09
7.1bn
7.3bn
3Q103Q09
50%
4%
12%
10%
Long term savings sales
27.1bn
28.6bn
New business IRR
3Q103Q09 3Q10FY09
6%
2%points
3Q09 3Q10
97%
98%
5
HY IFRSoperating profit*
HY10HY09
1,270m
1,049m 21%
* Includes 80m UK special distribution receivable in 1H only
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
6/36
6
Life sales YTD IRR YTD
3Q09m
3Q10m
Growth%
FY09%
3Q10%
UK 6,664 7,631 15 14 15
Europe 9,770 10,640 9 13 12
North America 3,742 3,668 (2) 7 14
Asia Pacific 788 1,153 46 6 10
Delta Lloyd 2,835 2,462 (13) 6 6
Australia 261 - n/a 11 -
Life & pensions 24,060 25,554 6 10 12
Investment sales 3,042 3,039 -
Long termbusiness sales
27,102 28,593 6
Growing Life sales and profitability
Long Term Savings
Continued focus on profitable new business
UK sales up 15% at strong IRR of 15%,
sales growth across the product range
continued move in mix away frombonds
Europe sales up 9%
rebalanced sales mix
focus on capital efficient products
North America sales on track, IRRimproved to 14%
change in mix of sales towards morecapital efficient life products
significant improvement in IRR
Asia Pacific sales up 46% with improvingIRR
Delta Lloyd sales down 13%, largely due toclosure of loss-making German operation tonew business
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
7/367
GI returning to growth: 97% COR (96% in the UK)
General insurance
GI businesses returning to growth and CORimproved to 97% (3Q09: 98%)
4% underlying current year CORimprovement
UK sales up 3%
third consecutive quarter of growth
building momentum following exit fromunprofitable business in 2008/9
marketing campaigns proving effective
RAC panel showing strong growth
Europe sales up 2%
growth in Italy, Poland and Turkeyoffset by France and Ireland
COR reflects adverse weather in1H10
North America sales up 10%
reflects action taken in 2009 to exitpoorly performing business
Benefitting from higher averagepremiums
Delta Lloyd sales steady with COR of 97%
General Insurance net writtenpremiums YTD
3Q09m
3Q10m
Growth%
COR%
UK 3,319 3,412 3 96
Europe 1,435 1,468 2 103
North America 1,351 1,480 10 98
Delta Lloyd & Other962 976 1 97
Total 7,067 7,336 4 97
8,900
9,000
9,100
9,200
9,300
9,400
9,500
9,600
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Rolling 12 month net written premiums
m
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
8/368
Q3 2010: improving NAV
HY10 Proforma3Q10
424p
394p
IFRS NAV
NAV
Increase principally due to earningsin Q3
Proforma Q3 includes 10p additionalbenefit from agreed closure of pensionscheme
HY10
497p
461p
MCEV NAV
Proforma3Q10
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
9/36
Aviva today
9
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
10/36
Significant transformation under One Avivatwice the value
10
Structural & portfolio changes
Reallocation of capital
450 million raised from sale of
Australia, with annual profits ofc. 40 million
470 million allocated to thereattribution with annual profitsof 120 million
1 billion raised from Delta Lloyd IPO
500 million cost saves target achieved ayear early
c. 275 million to NAV and at least50 million cost savings pa from theclosure of the UK final salary pensionschemes
Proactive management of the balance
sheet through the financial crisis
Operational transformation
UK Life transformation
UK GI book cleansed
Europe Quantum Leap wellunder way
North America profitability
turnaround
Asia Pacific value accelerating
Global integration and growthof Aviva Investors
Uniting the Group under one brand
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
11/36
Significant ongoing cost savings
5,750
5,144
267121 387
133209
119
388
4,000
4,500
5,000
5,500
6,000
FY08
FX,M&A
+
ExceptionalsFY08
In
flation
UK
Europe
exDL
Delta
Lloyd
Other(inc.G
roup)
ExceptionalsFY09
FY09
13% reduction in costs in 2009
500 million cost savings achieved and more to come
11
m
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
12/36
800
850
900
4,000
4,500
5,000
5,500
HY09 HY10
General Insurance
NWP EXPENSES
flowing through to results in 2010
0
500
1,000
1,500
2,000
2,500
3,000
HY09 HY10
Life
INCOME EXPENSES
Notes: Life income includes underwriting margins, investment return and new business margin GI net written premiums includes both GI and health
Expenses: Life expenses include acquisition and administration expenses. GI expenses include commission andother operating expenses 12
mNWPm Expensesm
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
13/36
Strategy in a changing world
13
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
14/36
Strategy in a changing world
14
Uncertainty and lower disposable income drives
increasing preference for security
Capital more scarce leading to more local,focused ambitions
Solvency II and greater regulatory scrutiny
Looking forward
A more fragmented world withdivergent economies, low interest rates for longer
Higher customer risk appetite
Capital rich companies with global ambitions
Solvency I and light touch regulation
Pre crisis
Decade of strong growth
GI cycle peaked GI past low point and into slow upturn
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
15/36
15
Objective: driving profits and dividend growth
Strategy in a changing world
Where should we operate?
Should we be a composite?
What do we need to be better at?
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
16/36
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
17/36
Countries in which Aviva operates
17
Aviva is currently in 30 countries
BelgiumCzech RepublicFrance
GermanyHungaryIrelandItalyLithuaniaNetherlands
PolandRomaniaRussia
SlovakiaSpainTurkeyUAEUKLuxembourg*
Europe and Middle East
* Aviva Investors only
CanadaUSA
North America
ChinaHong KongIndiaIndonesiaMalaysia
SingaporeSouth KoreaSri LankaTaiwanAustralia*
Asia Pacific
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
18/36
Geographic focus in UK & Europe
18
Italy
France
Spain
Ireland
UK
Poland
Mkt share Population
Conditions met
Today Future
No 1 61m Top 10 Life 62m
Top 3 4m
Top 10 Life 59m No 1 Pension
No 2 Life38m
Top 5 Life 45m Top 5 Life 139m
No 1 PensionNo 4 Life
77m TurkeyRussia
Countries must provideeither:
$100 millioncontribution to IFRS
profits and 12%ROCE
or
$1 billion of franchisevalue
Invest and deepen our presence in these chosen markets
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
19/36
19
2009 Assets
200914 Expected Increase in Assets
European L&P assets expected to grow by$1.7 trillion between 2009-2014
Source: Oliver Wyman
Europe has highest potential growth in L&P assets inthe near term...
8.1
1.7
Europe(inc UK)
1.6
1.5
Asia(ex Japan)
($ trillion)
3.9
1.3
NorthAmerica
19
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
20/36
2070
90100
170
240
380
400
930 2,400
0
1,000
2,000
3,000
Ireland Poland Turkey Italy Spain France UK Russia Other EUcountries
Total
20
In Europe, people retiring in the next 40 years need to save anadditional 2.4 trillion each year to fill the pensions gap
bn
Source: Mind the gap quantifying Europes pensions gap,Aviva & Deloitte, September 2010
...and there is a large additional savings need
20
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
21/36
We have significant competitive strengths in the UKand Europe
21
Benefits of scale
Broad product range
Wide customer base
Multi-channel delivery
Diversity of risk and earnings
Single brand
UK
Competitive scale advantage
Risk/GI52%
Savings48%
Savings71%
Risk/GI29%
Market leading bancassurance franchise
Well established positions in chosen markets
Pan-European approach under Quantum leap
Competitive distribution advantage
Europe(inc DL)
Sales
Update
plannedfor 2011
UKupdatetoday
Aviva has 5.5% of Life and 2.5% of GI market share in our European markets
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
22/36
We have significant competitive strengths in the UKand Europe
22
Benefits of scale
Broad product range
Wide customer base
Multi-channel delivery
Diversity of risk and earnings
Single brand
UK
Competitive scale advantage
Risk/GI77%
Savings23%
Savings28%
Risk/GI72%
Market leading bancassurance franchise
Well established positions in chosen markets
Pan-European approach under Quantum leap
Competitive distribution advantage
Europe(inc DL)
Profit
Update
plannedfor 2011
UKupdatetoday
Aviva has 5.5% of Life and 2.5% of GI market share in our European markets
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
23/36
Maximising the value of Delta Lloyd
23
Delta Lloyd must provide either:
$100 million contribution to IFRSprofits and 12% ROCE
or
$1 billion of franchise value Profit growth
Net capital contributor
Hold for value
Delta Lloyd
Today Future
Profit ROCE Franchise n/a n/a
Partial IPO raised1 billion and reduced Avivas
shareholding to 58%
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
24/36
Managing for profit in North America
24
Countries must provide either:
$100 million contribution to IFRS
profits and 12% ROCE
or
$1 billion of franchise value
Canada
No 2 in the EIA market
Net capital contributor
Organic growth withemphasis on life
No acquisitions, no plans toenter variable annuity market
USA
Today Future
Profit ROCE Franchise n/a n/a
Today Future
Profit ROCE Franchise n/a n/a
No 2 in the GeneralInsurance market
Profit growth by capitalisingon scale
Consistent capital contributor
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
25/36
Growing value in Asia Pacific
25
China
Continued franchise growth
Long term increased focuson key markets
Exit Taiwan
India
Franchise valuemaximised through apan-Asian business
Asian countries
Today FutureProfit ?ROCE ?Franchise
Today Future
Profit ?ROCE ?Franchise
Countries must provide either:
$100 million contribution to IFRS
profits and 12% ROCE
or
$1 billion of franchise value
Value estimate of 3 x the 700 million invested to date?
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
26/36
Growing the franchise of Aviva Investors
26
Aviva Investors must provide
either: $100 million contribution to IFRS
profits and 12% ROCE
or
$1 billion of franchise value
Continued growth in thirdparty assets to drivefranchise value
Aviva Investors
Today Future
Profit ROCE Franchise
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
27/36
Increasing focus and depth
27
Italy
France
Spain
Ireland
UK
Poland
Turkey
Russia
Canada
US
China
India
80% of our Life & GI profit already comes from these 12 countries
Europe North America / Asia
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
28/36
28
Compositeinsurer
Should we be a composite?
Excel in GI
Drive outadditionalcomposite
value
Excel in Life
Insurer
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
29/36
0
100
200
300
400
500
600
Underwritingmargin
Unitlinkedmargin
Participatingbusiness
Spreadmargin
Expectedreturn
Resilient and balanced earnings
Newbusinessincome
HY m
29
Generalinsurance
Asset & liabilityduration matchingprovides a predictablenet income stream
Investment yieldsabove guaranteelevels with hedges inplace where required
Strong cost control tomaintain profits in lowinterest environment
Over 75% of income derived from risk earnings
Savings
Risk
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
30/36
Capital
Cash
Cost &
efficiency
Customer, brand& distribution
Structuraladvantage
Differentiation
Scale &efficiency
Diversification brings wide-ranging benefits
30 40% less capital required to write GI newbusiness
Solvency II will bring more clarity to this benefit
Complementary cash flow characteristics
Half of cash flow generated from GI businesses
Cost & operational efficiencies
Sharing of key skills and capabilities
53 million customers and growing
Integrated brand advantages
Global leadership in bancassurance
30
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
31/36
What do we need to be better at?
31
Technical
excellence
Pricing and product development
Underwriting
Claims management
Marketing anddistributionexpertise
Multi channel access to customers Bancassurance leadership
Brand strength
Operationaleffectiveness
Customer value management :retention, cross selling
Straight through processing to drivequality and efficiency
Financialdiscipline
Clear framework for capitalallocation
Managing investment risk & gearing
Selective portfolio changes / M&A
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
32/36
What do we need to be better at?
32
Technical
excellence
Operationaleffectiveness
Marketing anddistributionexpertise
Financialdiscipline
Pricing and product development
Underwriting
Claims management
Multi channel access to customers Bancassurance leadership
Brand strength
Customer value management :retention, cross selling
Straight through processing to drivequality and efficiency
Clear framework for capitalallocation
Managing investment risk & gearing
Selective portfolio changes / M&A
Pan European distribution model UK Bancassurance gains
Material increase in brand awareness
Pricing sophistication e.g. daily pricingof UK annuities
Bancassurance pricing action in Italy Early identification & action on BI claims
Company of the year & improvingcustomer net promoter scores
Improving retention levels
Track record of significant cost savings
20 January analyst event to focus onthe balance sheet
Clear capital allocation framework
Short term financial deliverables
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
33/36
Short term financial deliverables
33
Deliver at least 1.5 billion operational capital in 2011
2011 general insurance COR to be 97% or better
Deliver a Life IRR of at least 12% with payback of 10 years or less
Additional cost savings of 200 million and a further
200 million efficiency gains by end 2012
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
34/36
Summary
34
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
35/36
Driving profit and dividend growth
35
Excelling in both
Life & General Insurance
Increasing focus and depth in 12 countries
Building on our core capabilities
Driving out composite value from the
businesses
Demonstrating financial discipline through a range of short term targets
8/7/2019 Aviva UK Analyst Day: Delivering Value In The New Business Environment November 2010
36/36
Delivering value in the newbusiness environment
Q&A
36
Top Related