aviva uk: sg premium review conference 2009

8/7/2019 Aviva UK: SG Premium Review Conference 2009

1/25

2009

SG Premium Review

Conference

Andrea MonetaChief Executive, Aviva Europe

& Aviva plc Board Member


2/25


3/25

Introduction

1) Group

Global company 2 years into our 5 year strategy

Focus on margins, profit and cost management

Strong balance sheet

3

2) Europe


4/25

10%

40%

15

30

H1 2000 H1 2009

An increasingly global company

(1) Total long-term savings new business sales and G.I. and health net written premiums. *Europe includes Aviva Europe and Delta Lloyd

34%

32%

24%

5%

47%

21%

9%

17%

6% 20%General

Insurance

80%Long

Term

Savings

H1 2009 sales

24.4bn (1)

Asia Pacific

North America

UK Life

Europe*

UK GI

billion

billion

5%

4


5/25

Purpose

Prosperity &

peace of mind

Strategic

priorities

Manage composite

portfolio

Build global Asset

Management

Allocate capital

rigorously

Multi-channel customer

reach

Boost productivity

Targets

VisionOne Aviva,

twice the value

98% meet or beat COR

500m cost savings by 2010

Double IFRS EPS by 2012 at

the latest

1.5 2 x dividend cover on

IFRS post tax operating

earnings

UK

Market leadership

Drive up profitability

Generate capital

Insurance excellence

Operational excellence

N. America

Profitable growth

Optimise business mix,

growth & margin

Diversify distribution and

products Generate net capital

returns

Europe

Scale, growth, capital

Seize unique growth

opportunities

One Europe operating

model Generate capital

Asia Pacific

Scale, growth

Prioritised portfolio

Regional operating

model

Investment required

Asset ManagementAsset ManagementAviva Investors

Globally integrated business Transform the investment model Increase third party business

2 years into our 5 year strategy

5


6/25

General insurance

COR2Life and Pensions Margins

2.1%

1.7%

2.8%

1.0%

2.1%

2.1%

2.6%

0.5%

UK

Europe*

North America

Group Total

2.5% 2.3%Asia Pacific

Focus on margins vs sales

Life and Pensions margins maintained

2.1% margin retained at Q309 19% local currency reduction in sales at Q309 due to a

combination of market conditions and management action

Pricing and commission action reduces impact of growing

customer demand for lower margin guaranteed products

18.2bn17.5bn

General

insurance

22%

26%

Europe

Life

UK Life

General

insurance

21%

36%

33%

HY1 2008 HY1 2009

UK

4.7bn

7.1bn

Europe*

NA/Asia

UK

6.0bn

7.0bn

Europe*

3.1bnNA/Asia

3.9bn

10 bn

15 bn

5 bn

DL 2.1bn

DL

1.8bn

Sales

6 months

2009 %12 months

2008 %

6* Europe includes Aviva Europe and Delta Lloyd


7/25

Focus on profitability vs premiums

General Insurance COR improved

98% COR achieved at Q309

Cost and commission action taken to build sustainableprofitability

Evidence of rating improvement in challenging markets

NWP5.1bn

4.9bn

General

insurance

22%

26%

Europe

Life

UK Life

General

insurance

21%

36%

33%

5 bn

3 bn

HY1 2008 HY1 2009

UK

1.1bn

Europe*

NA/Asia

UK

2.8bn

1.0bn

Europe*

0.8bnNA/Asia

0.9bn

2.3bn

DL 0.6bn

DL

0.5bn

General insurance

COR2General Insurance CORs

97%

97%

99%

98%

6 months

2009 %12 months

2008 %

99%

96%

97%

UK

Europe*

North America

Total General Insurance

99%

7* Europe includes Aviva Europe and Delta Lloyd


8/25

Focus on improving returns

Strong Cost Management

8

Ahead of run rate 500

million cost saving targets

Eliminating cost over runs

and reducing operational

complexity in UK Life

Closing 13 operational

centres and simplifyingproduct range in UK GI

Cost reduction exercises

across Europe

35% reduction in group

centre costs

Customer service

maintained

9.0% - 239m

Reduction inunderlying cost base

1,500m

1,700m

1,900m

2,100m

2,300m

2,500m

2,700m2,622m

72m(38m)

148m 2,493m

(80m)

(118m)

(75m)

(38m)

HY08Expense

Base

Forex+acq& disposal +Restructuring

HY08

Inflation Restructuring

HY09

HY09

ExpenseBase

UK Life UK GI Europe* Other (inc. Group)

* Europe includes Aviva Europe and Delta Lloyd


9/25

Strong balance sheet

Enhanced IGD solvency surplus of 3.7bn*

* Excludes 0.4bn uplift from sale of Australian business, additional 0.5bn from the Delta Lloyd IPO and deduction of 0.5bn for

policyholder incentive payments as part of the reattribution 9

1.1bn default provision against UK annuity book remains unutilised, with no

material default experience

Increased NAV per share IFRS 409p (H109: 349p); MCEV 520p (H109: 416p)

Net unrealised gain of 0.4bn on debt securities in US business following

improvement in US credit markets (31 Dec 2008: unrealised loss of 2.4bn)


10/25

Reallocating capital to generate increasing returns

Sale of Australian business completed

Realises value from a business where Aviva had limited organic growth opportunities

452 million selling price at 16 x IFRS earnings

10

Reattribution of the inherited estate

Over 800,000 customers will benefit from a 470 million payout

Provides approximately 650 million of new business capital in the first 5 years

Successful IPO of Delta Lloyd

Total gross cash proceeds of approximately 1 billion for a 41% stake

Significant strategic milestone

Enhances value and liquidity of retained stake in Delta Lloyd


11/25

Delivering against a consistent strategy

A strong balance sheet

Increasing profits through operational improvements

Reallocating capital to generate increasing returns

Improving net asset values

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12/25

1) Group

12

2) Europe

Significant part of the Group

Unique position with 15 markets

Quantum Leap already delivering results


13/25

Europe in context

General Insurance

Long Term savings

Composite

Significant part of the Aviva group

Strong historic foundations

Unique opportunity to establish a leadership position

Clear execution strategies are already beginning to make a difference

Poised to make a Quantum Leap

Long-term savingssales

GI and Health sales IFRS Operatingprofit

HY1 2009 for long-term savings sales (present value of new business premiums and investment sales), GI and health sales (net

written premiums) and IFRS operating profit (before group debt and interest costs)

DL

11%

DL

14%

DL

14%

UK

26%UK

47%

Europe Europe Europe50% 35% 44%

Other

regions

24%

Other

regions 18%

UK

44%

Other

regions 12%

13


14/25

Share of GDP L&P PVNBP GI NWP

H1 09 m H1 09 m

France 14.5% Top 10 2,733 631

Ireland 1.4% Top 5 478 Top 5 294

Italy 11.7% Top 10 2,461 190

Lithuania 0.2% Top 5 49 -

Poland 2.7% Top 5 572 20

Russia 8.5% Top 5 14 -

Spain 8.1% Top 5 1,394 -

Turkey 3.7% Top 5 134 53

Czech Rep 1.1% 17 -

Hungary 0.8% Top 10 26 -

Slovakia 0.5% 1 -

Romania 1.0% Top 5 41 -

Belgium 2.6% Top 10 465 -

Germany 18.6% 177 -

Netherlands 4.4% Top 5 1,351 Top 5 758

79.8% 9,913 1,946

Source: IMF

AvivaRegion

14

Aviva is uniquely positioned in Europe

Strengths in 15 markets

Covering 80% of GDP and premium


15/25

Developed markets

Source: AXCO

High potential

markets

0

2

4

6

8

10

- 10,000 20,000 30,000 40,000 50,000

GDP per Capita (PPP) ()

LifeInsu

rancePenetration(GWP/GDP)%

IrelandFrance

Italy

SpainPoland

Czech Rep

Hungary

Romania

Turke y Russia

Belgium

Netherlands

Germany

Lithuania

Slovakia

Market bubble sizeproportionate to premiums



In different stages of development


15


16/25

0%

10%

20%

30%

40%

50%

60%

70%

80%

0 5 10 15 20 25

Allianz

Generali

Zurich

AXA

AEGONING

Groupama

Credit

AgricoleCNP

Source: CEA,Aviva Analysis2009

In different stages of development



With an enviable competitivefootprint

Number of markets

Regionalisation*

* Regionalisation (Continental Europe) defined as premium generated outsidehome market and UK as a percentage of total premium generated in Europe

Bubble size proportionateto premiums


16


17/25

A clear strategy to exploit the European opportunity

Quantum Leap game changing for the industry

Aviva Europe

Delta Lloyd

IPO strategic management

Total gross cash proceeds c 1billion for a 41% stake

Significant strategic milestone

Enhances value and liquidity of retained stake in Delta Lloyd17


18/25

From To

Aviva Europes Quantum Leap

Multiple, complex products

Twelve federated businesses

Multiple systems

and processes

Complex legal entity structure

Sub optimal capital allocation

and risk management

Fungible capital, state of the art

capital and risk processes

Simplified structure under

single holding company

Shared systems

and processes

Customer centric product catalogue

and shorter time to market

One Pan European Business

One Head Office

Pan European distribution

organisation

18


19/25

Our journey has started

New management & accountability in place

Pan European capital allocation & risk management

PLC Board approve vision & strategy

Launch of Quantum Leap

30 Sep 08

01 Apr 09

01 Jan 09

21 Nov 08

and its already delivering

Centralised procurement 30 Apr 09

Pan European GI claims laboratory

Pan European retention initiative

Single change portfolio

Pan European holding company

1 May 09

12 May 09

5 Jul 09

12 Oct 09

19


20/25

Bancassurance: our leading position

46 agreements Over 20,000 branches

Access to over 30m bank

customers

Other insurersAviva

Source: TheBanker, 2008

0

5

10

15

20

25

30

35

40

45

50

N

o.ofpartners

Successfully executing our

strategy

Increasing number of high

quality partners


21/25

Undisputed leading

partner of choice

Significant mix & growth

opportunities

Leverage unique business model

Aviva in a box - scalable bancassurance

platform

Managed through multiple points of

contact

Focus on protection

GI growth opportunity

Leverage low cost per policy

Grow at marginal cost

Common channel

approach

Improve customer retention by

10%

Grow protection sales by 30%,

increasing margin

Triple current GI contribution

21

Bancassurance an exciting opportunity


22/25

0

2,000

4,000

6,000

8,000

10,000

12,000

2005 2006 2007 2008

9 million customers

Diverse distribution

- IFAs/Brokers (8,000)

- DSF (10,000)

- Phone/Web

Captive networks generate 75% of new

business

Large and profitable life back-book

Profitable GI business with growth

potential

Retail steady growth builds significant franchise

m

GI NWP

Life PVNBP (2008 & 2007 MCEV, 2006 & 2005 EEV)

Aviva Europe Retail sales

CAGR +6%

Retail a great and growing franchise

22


23/25

New tools

Single channel ownership

Performance benchmarking

De-couple distribution from production

Innovative front end

Product bundling and dynamic pricing

Remunerate for value

New governance

Improve performance2009-2012

Increase productivity by 30%

Increase customer retention by 10%

Lower network costs by 10%23

Retail an exciting opportunity


24/25

To conclude

Quantum Leap tobecome the

undisputed

leader

One Aviva, twicethe value

delivered by 2012

Great franchise inthe worlds

largest market

24


25/25

25

Questions

aviva uk: sg premium review conference 2009

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