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Investor presentation
June 2011
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 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 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
and ability 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 & 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 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 Financial Review
and Prospects” in Aviva’s Annual Report Form 20-F as filed with the SEC on 24 March 2011. 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
Overview
Delivering against the targets
• At least £1.5 billion operational capital in 2011
• Life IRR of at least 12% with payback of 10 years or less
• 2011 general insurance COR of 97% or better
• Additional cost savings of £200 million and £200 million efficiency gains by 2012
A clear strategy
• Increase focus and depth in 12 countries
• Excelling in Life & GI, driving out composite value
1. A strong customer base, with a growing franchise
2. Tight cost control
3. A strong balance sheet
Valuation upside*
• Dividend yield of over 5.5%
• Valued at only 8.5x IFRS earnings
• Trading on only 70% of EEV NAV
3
* All measures are based on share price of 435 pence
Dividend yield = total dividend for 2010 over share price
IFRS earnings = IFRS profit after tax, non-controlling interests, preference dividend and coupon payments on direct capital instrumentsOverview &
strategy
2.22.3
2.0
2.55
0
1
2
2007 2008 2009 2010
A diversified portfolio
4
£2.55bn
2010 IFRS operating profit
£bn
– with resilient profits
Sustainable
IFRS operating profit
0%
20%
40%
60%
80%
100%
by region by business
GI &
Non-life
Life
UK
Europe
N.Am
Asia Pac
Overview &
strategy
5
Significant growth in all key performance metrics
IFRS
operating profit
Net operating
capital generated
FY10
£1.0bn
£1.7bn
FY09FY10FY09
£2,550m
£2,022m
NAV
IFRS
EEV*374p
621p
FY10FY09
IFRS
454p
FY10
Dividend
25.5p
FY10FY09
6%24p
IFRS Return on Equity
FY10
10.9%
14.8%
FY09
26%70%
80p
Funds under management
£402bn
FY10FY09
£23bn£379bn
* EEV-equivalent embedded value basis
Overview &
strategy
6
Strong growth in Life & GI
Life IRR
10.0%
12.5%
2.5
ppt
FY10FY09
Life sales (PVNBP)
£33.4bn
£32.0bn4%
FY10FY09
Life operating profit
£1,887m
£2,318m
23%
FY10FY09
GI & Health sales (NWP)
£9.2bn
£9.7bn
GI COR
99%
97%6%
FY10FY09 FY10FY09
£960m
GI & Health operating profit
£1,050m
FY10FY09
9%
Overview &
strategy
Growing return on equity
7
8.5%
12.0%
10.9%10.2%
15.8%
14.8%
0%
4%
8%
12%
16%
Life GI Group
FY09 FY10
Group IFRS return on equity stated after tax, minority interest, preference dividend and DCI over opening shareholders’ fundsOverview &
strategy
Strong progress continues with a good start to 2011
8
General insurance:
• Strong premium growth and improved
profitability
• UK GI sales up for the 5th consecutive
quarter
• Brand strategy working: 580,000
additional motor customers since start of
2010
• Appointed preferred strategic partner to
HSBC across Europe
Life insurance:
• increasing returns from a change in
business mix
• Management actions to improve
profitability and capital efficiency drive
lower sales volumes in Italy and the US
Good strategic progress
• Continued focus on priority markets
where we have strength and scale
• Reduced shareholding in Delta Lloyd
from 58% to 43% generating proceeds of
£381 million
• On track to meet the Group’s near term
targets
Overview &
strategy
Life IRR 1Q11 1Q10
UK 16% 14%
Europe ex DL 13% 11%
North America 14% 13%
Asia Pacific 13% 12%
Total IRR excluding Delta Lloyd 13.7% 12.3%
Delta Lloyd 9% 5%
Total IRR 13.1% 11.3%
GI COR 1Q11 1Q10
Total GI COR of which: 97% 102%
UK 98% 104%
Europe ex DL 95% 111%
North America 98% 99%
Worldwide sales 1Q11 4Q10 1Q10
Change
on 4Q10
Change
on 1Q10
Long-term savings 8,764 8,767 10,174 - (14)%
GI & health NWP 2,690 2,363 2,465 14% 9 %
Worldwide sales 11,454 11,130 12,639 3% (9)%
Driving profit and dividend growth
9
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
Overview &
strategy
Countries in which Aviva operates
10
Aviva is currently in 30 countries…
Belgium
Czech Republic
France
Germany
Hungary
Ireland
Italy
Lithuania
Netherlands
Poland
Romania
Russia
Slovakia
Spain
Turkey
UAE
UK
Luxembourg*
Europe and Middle East
* Aviva Investors only
Canada
USA
North America
China
Hong Kong
India
Indonesia
Malaysia
Singapore
South Korea
Sri Lanka
Taiwan
Australia*
Asia Pacific
Overview &
strategy
…we will focus on 12
11
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
Countries must provide
either:
• $100 million contribution
to IFRS profits and 12%
ROCE
or
• $1 billion of franchise
value
Overview &
strategy
12
2009 Assets
2009–14 Expected Increase in Assets
European L&P assets expected to grow by
$1.7 trillion between 2009-2014
Source: Oliver Wyman
Europe has highest potential growth in L&P assets in
the near term
8.1
1.7
Europe
(inc UK)
1.6
1.5
Asia
(ex Japan)
($ trillion)
3.9
1.3
North
America
12Overview &
strategy
Continued growth in third party assets
Focus on growing franchise value
Focus on growing profits organically
Further 15% sold down leaving a
minority holding
Invest and deepen presence in
priority markets
Invest and deepen presence
Delta
Lloyd
North
America
Asia
Pacific
Aviva
Investors
Europe
UK
Gross capital
generationIFRS operating
profit contribution
0.91.4
0.80.9
0.4*0.5
0.60.4
--
-0.1
Strategic direction
13
FY 2010 (£bn)
Driving profit and dividend growth
* Excluding Delta Lloyd longevity reserving of £0.2 billion post tax & MI
Overview &
strategy
Capital
Cash
Cost &
efficiency
Customer, brand
& distribution
Structural
advantage
Differentiation
Scale &
efficiency
Diversification brings wide-ranging benefits
• 30 – 40% less capital required to write GI new
business
• 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
• Over 53 million customers and growing
• Integrated brand advantages
• Global leadership in bancassurance
14Overview &
strategy
70% increase in net capital generation provides strong dividend cover
15
£bn
2.0
1.0
FY10
£2.7bn
FY10
£1.0bn
FY10
£1.7bn*
Operating
capital generated
New
business
investment
Underlying
capital generated
2010 vs 2009
FY09
£1.0bn
FY09
£1.5bn
FY09
£2.5bn
70%
£0.7 billion uplift from 2009 driven by:
• £0.2 billion higher gross capital generated
• £0.2 billion lower US new business strain
• £0.2 billion lower GI capital requirements
• £0.1 billion benefit of UK inherited estate
2010
£bn
Operating capital
Generated Usage Net
UK 0.9 0.1 1.0
Europe 0.8 (0.5) 0.3
North America 0.6 (0.3) 0.3
Asia Pacific - (0.1) (0.1)
Delta Lloyd* 0.4 (0.2) 0.2
Total 2.7 (1.0) 1.7
* Excluding Delta Lloyd longevity reserving of £0.2 billion post tax & MICapital
generation
Effective use of capital to grow shareholder value
16
2010
£bn Sales
Capital
usage
IRR
%
Payback
period
years
UK Life 10.3 (0.1) 15 7
Europe Life 13.5 (0.5) 13 7
North America
Life4.7 (0.4) 14 4
Asia Pacific Life 1.6 (0.1) 11 13
Delta Lloyd Life 3.2 (0.1) 7* 16
Non-life** 13.7 0.2 n/a n/a
Total 47.1 (1.0) 12.5 8
* Life capital efficiency (life capital usage over life sales) excluding Delta Lloyd & Australia
Improved life capital efficiency*
4.8%
3.8%
FY10FY09
£33bn
£36bn
FY10FY09
Increased future cash flows
*Delta Lloyd IRR excludes German operations closed to new business
**Non-life sales include investment sales and GI & health net written premiums
Capital
generation
Balance sheet assets remain high quality
Government Bonds
• 96% investment grade
• Limited exposure to higher risk sovereigns
• Minimal losses
17
Corporate Bonds
• 90% investment grade or NAIC rated
• Minimal losses
• Limited exposure to financial institutions in higher risk countries
Mortgages and Loans – minimal losses
£13bn Healthcare and UK commercial property with
1.3x rental cover
£7bn Dutch residential mortgages with minimal losses
£8bn Securitised mortgages with minimal residual risk
£7bn Other loans with low LTVs and/or guarantees
Equities
• Significant hedging remains in place
• £4.2bn held by Delta Lloyd continues to outperform
FY09
£bn
FY10
£bn
Government bonds 17.0 19.1
Corporate bonds 33.7 38.7
Asset backed securities 8.3 6.8
Other 1.0 1.3
Debt securities 60.0 65.9
Mortgages and loans 32.6 34.7
Cash 6.6 8.5
Equities 5.1 5.3
Properties 2.2 2.0
Other investments 2.8 3.3
Total investments 109.3 119.7
Other assets 28.7 28.2
Total shareholder
assets138.0 147.9
Balance
sheet
A strong credit track record
18
A demonstrable track record of credit outperformance
across a range of funds
Exceptionally high quality mortgage portfolios
Reduced holding with significant downside protection
Debt securities,
mortgages, loans & cash
91% of shareholder
investments
Equities
4% of shareholder
investments
Minimal impairments over many years
£1.3 billion provisions in place
Balance
sheet
Continuing low levels of losses
19
UK Corporate bonds
2009 2010
10bps< 5bps
2008
60bps
Aviva USA
Delta Lloyd mortgage portfolioUK mortgage portfolio
1bp 1bp 1bp 2bps
2007 2008 2009 2010
2009 2010
40bps
2008
116bps
2009 2010
Nil
36bps*
2008
38bps
* 36bps = £57 million loss
31bps
Balance
sheet
The mortgage portfolio
Dec
2010
Dec
2009
Dec
2008
Annual interest income £623m £641m £643m
Annual rental income £828m £842m £853m
Rental/interest cover 1.3x 1.3x 1.3x
Long term fixed interest mortgage
portfolio
• c. 50% of the book is backed by
investment grade tenants including the
UK Government
• First charge over properties with their
tenants
• £0.7 billion provision remains in place
20
Very low losses£34.7bn
Other loans
£4.6bn
Securitised
mortgages
£8.3bn
Other non-
securitised
mortgages
£1.9bn
DL residential
£6.9bn
UK
Commercial
Property
£10.2bn
FY10 Mortgages & loans
UK Healthcare & PFI
£2.8bn
038bps
036bps
1995 - 2007 2008 2009 2010
Balance
sheet
* 36bps = £57 million loss
£4.2bn
Small direct shareholder equity exposure
2010
£3.4bn sold
in 2007
when FTSE
was at 6400
Equity holding
£3.4bn
£1.1bn
Delta Lloyd
holding
Aviva holding
£m IGD impact (net of tax and MI)
Hedged
Unhedged
Significant hedging remains in place
21
Delta Lloyd outperformed
benchmark by 6% in HY10
-1,500
-1,000
-500
0.0
500
1,000
40% 30% 20% 10% 0% 10% 20%
Balance
sheet
0
0.5
1
1.5
2
2.5
Aviva’s pension schemes
22
Actions Result (£bn)
1.7
Zero
Pe
nsio
n s
ch
em
e a
ccou
ntin
g b
asis
deficit (
£bn
)
0.3 0.6
0.3
0.4
0.2
0.5
• Aviva and RAC schemes closed reducing
liabilities
• Aviva scheme
– Long-term funding agreement in place
– £378 million deficit funding payment
in 2010
• Updated mortality assumptions favourable
in the UK with offset in DL
• Ongoing further ALM improvements and
volatility mitigation strategies underway-
covering longevity, equity, interest rate,
inflation and credit exposure
Balance
sheet
A conservative and disciplined approach to ALM
Clear benefits of asset and liability duration matching at point of sale
A highly
predictable
earnings
stream
Active portfolio management
• Ongoing hedging programme
• Liquidity ratios and lapse rates monitored and durations adjusted as required
• Effective governance allowing quick and efficient response to changes in market conditions
23
Limited impact
on in-force
book from
interest rate
movements
Limited
re-investment
risk
Limited
liquidity issues
Limited
requirement to
“force sell”
assets
ALM
0
2
4
6
8
10
12
UK Annuities UK Protection US Life & Annuity Europe
Assets Liabilities
£21.0bn
Asset and liability durations across the Group are well matched
Durations of assets and liability by region
Duration in years (HY 2010)
24
• Assets and liabilities are duration
matched at point of sale
• Regional in-force portfolios are
reviewed regularly to ensure
continued matching over time
• Benchmarking metrics
aligned to ALM and not to pure
out-performance
• Diversity across products and
regions helps to manage the
overall ALM risk profile
Shareholder
funds
Portfolio
value£31bn £15.8bn£0.8bn
ALM
Limited guarantee risk
US Savings business European Savings business*
Insurance liabilities by guarantee (FY09, $bn) Insurance liabilities by guarantee (FY09, €bn)
25
• Average guarantee rate on US savings
business is 1.8%
• Average portfolio yield of 6.1%
• Actions have been taken to manage
guarantee risk in the current low interest
rate environment
• Average guarantee rate on European
savings business is 1.5%
• Investment income provides a 2.1% buffer
above guaranteed rates (net of fees)
• In addition we hold dedicated reserves
equivalent to 1.4% of liabilities that
provides a further buffer
0
5
10
15
20
25
30
0% (0-1%) (1-2%) (2-3%) (3-4%) (4-5%) (>5%)
0
2
4
6
8
10
12
14
0% (0-1%) (1-2%) (2-3%) (3-4%) (4-5%) (>5%)
* European savings business covers 92% of European business (exc. Delta Lloyd). It includes AIME but excludes AFER ALM
Limited interest rate sensitivity
26
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Co. 1 Co. 2 Co. 3 Co. 4 Co. 5 Co. 6 Co. 7 Co. 8 Co. 9 Co. 10 Co. 11 Aviva Co. 12
MCEV sensitivity to 100bps change in reference rates
FY09
1% increase in reference rates
1% decrease in reference rates
ALM
£12.8bn
Aviva’s capital position
Aviva’s capital structure
Borrowing
IFRS equity
shareholders
funds
2010 £23.8bn
£4.6 billion tier 2 hybrid capital
Treated as equity for solvency and rating
purposes
£1 billion direct capital instrument
Transferable into Tier 1/2 or preference shares
£0.9 billion debenture loans
Senior debt
£0.6 billion commercial paper
Short term borrowing at low interest rates
£3.7bn
£6.1bn
£1.2bn
Capital
£17.7bn
Preference
shares & DCI
Minority
interests*
* includes £250m of general accident preference shares 27Capital
structure
Debt leverage in line with market median
External debt and preference shares / Tangible total capital
28
64%
39%
48%
37%35%
42%
37%35%
39% 39%
0%
10%
20%
30%
40%
50%
60%
70%
Europe 1 Europe 2 Europe 3 Europe 4 Europe 5 Aviva UK 1 UK 2 UK 3 UK 4
Median
39%
UK peer groupEuropean peer group
HY10
Capital
structure
Planning to renew 50% or less of the hybrid debt
that is called over the next 3 years, reducing
external debt by at least £700 million
1,400
1,800
2,200
2,600
3,000
FY09 Life GI Fund Mgt
Group & Other
FY10
Improved performance flowing through to profit
29
FY09 FY10
Life GI Life GI
UK 672 535 850 579
Aviva Europe 761 132 893 109
Delta Lloyd 277 143 330 146
North America 85 144 174 222
Asia Pacific 92 6 71 (6)
Total Life / GI 1,887 960 2,318 1,050
Fund Management 133 201
Other, non-insurance (214) (220)
Corporate costs (108) (143)
Group debt costs (562) (569)
Pension costs (74) (87)
Operating profit 2,022 2,550
IFRS operating profits
£m
2,550
+23% +9% +51%
2,022
431
9068 (61)
IFRS profit
drivers
Summary IFRS life profit drivers
New business income
813 1,021 26%
Underwriting margin
783 881 13%
Pre-tax operating profit
1,887 2,318 23%
Investment return
2,865 3,226 13%
Income
4,461 5,128 15%
Driver
FY09 FY10 Variance
Key:£m FY09 FY10
UK 672 850
Aviva Europe 761 893
Delta Lloyd 277 330
North America 85 174
Asia Pacific 92 71
Operating profit 1,887 2,318
DAC/AVIF amortisation and other
(221) (366) (66)%
Expenses and commissions
(2,353) (2,444) (4)%
Acquisition expenses and commissions
(945) (1,084) (15)%
Admin expenses and renewal commissions
(1,408) (1,360) 3%
30IFRS profit
drivers
Life new business income
UKNew business income
402 499 24%
APE 1,143 1,310 15%
Margin 35% 38% 3ppt
Aviva EuropeNew business income
310 382 23%
APE 1,554 1,544 (1)%
Margin 20% 25% 5ppt
ROW*New business income
101 140 39%
APE 1,049 1,089 4%
Margin 10% 13% 3ppt
TotalNew business income
813 1,021 26%
31
Key:
• Growth in annuities,
protection and group personal
pension sales
• Benefit of business mix
on margin
• Focus on profit over volume
reflected by increase in margin
• Asian growth offset by lower
sales in Delta Lloyd
• Margin reflects pricing action
in US and Asia
Driver
FY09 FY10 Variance
* 2009 excludes Australia which was sold in October 2009
IFRS profit
drivers
IFRS life underwriting margin
Expenses 356 438 23%
Mortality &
longevity377 353 (6)%
Persistency 50 90 80%
TotalUnderwriting margin
783 881 13%
32
Driver
FY09 FY10 Variance
Key:
Release of reattribution guarantees
and improved lapses in the rest of
the world
Higher expense margins in Delta Lloyd
and growth of the in-force book
Lower profits in Europe and the US
offset by higher profits in UK
IFRS profit
drivers
Total IFRS life investment return
Unit linked margin
938 999 7%
Participating business
660 682 3%
Spread margin
676 890 32%
Expected return on shareholder assets
591 655 11%
Investment return
2,865 3,226 13%
AMC
(bps)111 108 (3)
Average
reserves
(£bn)
84.5 92.7 10%
Bonus
(bps)59 60 1
Average
reserves
(£bn)
111.0 114.2 3%
Spread
(bps)94 114 20
Average
reserves
(£bn)
72.2 77.7 8%
Equity 7.3% 7.2%(0.1)
ppt
Property 5.8% 5.7%(0.1)
ppt
Bonds 4.9% 4.7%(0.2)
pptImproved market
conditions across all
businesses
Growth in French AFER
bonuses offset by lower
UK with profit bonuses
Pricing actions in the US
business
33
Driver
FY09 FY10 Variance
Key:
IFRS profit
drivers
Life expenses
Acquisition expenses and commissions
(945) (1,084) (15)%
Acquisition
expense
ratio
25% 27% (2)ppt
APE (£m) 3,746 3,943 5%
Admin expenses and renewal commissions
(1,408) (1,360) 3%
Existing expense
ratio (bps)53 48 5
Average reserves
(£bn)267.7 284.6 6%
Growth in sales and higher
initial commissions in Italy
Growing in-force book and cost
savings in UK and Delta Lloyd
34
Driver
FY09 FY10 Variance
Key:
IFRS profit
drivers
GI & Health profit drivers
GI Underwriting result
74 232 214%
Expected investment return
875 846 (3)%
Pre-tax operating profit
960 1,050 9%
Health underwriting result
30 31 3%
Average rate 4.6% 4.6% -
Average
assets £bn19.1 18.5 (3)%
Net written
premiums8,492 8,920 5%
Claims
ratio66.7% 64.5% 2.2ppt
Commission
ratio19.8% 19.9% (0.1)ppt
Expense ratio 12.6% 12.4% 0.2ppt
COR 99% 97% 2.3ppt
35
Driver
FY09 FY10 Variance
Key:
Note: Operating profit includes £(59)m resulting from unwind of discount and pension scheme finance costs (FY09: £(19)m) IFRS profit
drivers
General Insurance performance
36
Group COR
FY09 Underlying
current year
improvement
Prior year
reserves
FY10
99.1% (3.3)%
1.3% 96.8%
GI & Health NWP £m GI COR
FY09 FY10 FY09 FY10
UK 4.3 4.5 99% 96%
Aviva Europe 1.9 2.0 103% 103%
North America 1.8 2.0 100% 97%
Delta Lloyd & others 1.2 1.2 97% 95%
Total 9.2 9.7 99% 97%
Weather
(0.3)%
IFRS profit
drivers
Fund management
Pre-tax operating profit
133 201 51%
Total income
731 803 10%
Operating expenses
(598) (602) (1)%
£m FY09 FY10
Aviva Investors 115 97
Delta Lloyd 28 103
Other (10) 1
Fund Management 133 201
37
Driver
FY09 FY10 Variance
Key:
Average
fees
(bps)
17.4 18.6 1.4
Average
assets
£bn
289 315 9%
IFRS profit
drivers
Financial risk management at Aviva
Continual development and improvement of risk managementRisk
management
Efficient, underpinning returns to shareholdersBalance sheet
Measured risk with a track record of limited losses
Shareholder
assets &
liabilities
Low risk with limited interest rate and guarantee riskAsset/Liability
management
Calibrated to AA, benefiting from diversification
Economic
Capital
Management
38Economic
capital
Overview of economic capital (FY09)
£17.6bn
Available
Economic
Capital
Capital
Required*
Required
£12.8bn
Surplus
£4.8bn
Capital surplus within the range of a
AA calibrated risk appetite
Aviva’s risk profile
39
Other risks
Credit & Insurance related risks
Credit
25%
Interest
rate
10%
Life
15%
GI
18%
Equity
12%
Operational
12%
Other
market
8%
Aviva’s capital model
* Capital required is based on internal assessment and capital management policies. The term ‘required’ does not imply required by
regulators or other third parties
Economic
capital
Growth in sales and profits in UK – Life
L&P sales
£8.9bn
£10.3bn
£5.7bn
£4.6bn
£3.1bn
£5.8bn
Pensions,
bonds
Protection
& annuities
FY09 FY10
16%
40
45%
Payback
8 years
Improved
7 year
payback
14%
15%
New business IRR
FY09 FY10
IFRS operating profit
£672m
£850m
FY09 FY10
26%
Net operating
capital generated
£0.1bn
£0.4bn
FY09 FY10
Increased sales, returns
and profits
• Record and sustainable profits
of £850 million
• Substantive and permanent
operational change implemented
• Increased earnings from new
business and the in-force book
• Continued shift in mix towards
more profitable credit and
insurance related earnings
• New distribution agreements
with Santander and RBS
x4
Regional
results
FY09
Growth in sales and profits in UK – GI
Net written premiums
£4.5bn
FY10
£4.3bn
41
GI COR*
FY09 FY10
96%
99%
£535m
£579m
FY09 FY10
GI & health
operating profits
8%
6%
£0.6bn
£0.4bn
FY09 FY10
50%
Improved sales, COR and profits
Four consecutive quarters of GI
sales growth
• Strong retention levels
• Growth in Direct and the
RAC panel
Significant improvement in current
year COR due to:
• Strong underwriting
• Further cost savings
• Distribution management
Improvement in spite of £40 million
exceptional weather-related claims
* COR excludes Aviva Re and run-off business
Net operating
capital generated
Regional
results
Resilience and profit growth in Europe – Life
FY09 FY10
42
£761m
£893m
FY09 FY10
Payback
7 years
Payback
7 years
13% 13%
FY09 FY10
L&P sales
IFRS operating profits
New business IRR
£0.3bn £0.3bn
FY09 FY10
Net operating
capital generated*
Resilience and growth in profits
Resilient new business in a period
of continued economic volatility
Second half sales lower due to:
• Legislative changes and
economic pressures
• Actions taken to redesign
products and refocus sales
Resulting in improved second half
margin and increased capital
efficiency
Continued bancassurance
leadership
Higher returns from AUM growth in
France, Italy and Spain
Introduction of realistic term
assurance reserving in Ireland
Quantum Leap programme
continues to deliver
£3.5bn
£10.1bn£10.9bn
£2.6bnUnit linked,
Protection
Pensions,
WP savings
£13.5bn £13.5bn
17%
33%
* For both life and non-life business
Regional
results
FY09
Improved sales in Europe – GI
but COR remains high
£2.0bn
FY10
£1.9bn
43
FY09 FY10
103%103%
£132m
£109m
FY09 FY10
4%
GI & health
operating profits
-17%
Improved sales,
COR remains high
• GI sales growth across the
portfolio offset by a tougher
environment in Ireland
• Health franchise continues
to grow
• Profit reflects a fall in
investment returns
COR reflects:
• Second year of exceptional
weather related claims
• Lower reserve margin releases
• Offset by cost savings
Net written premiums GI COR
Regional
results
£85m
£174m
Significant profit improvement in North America
£4.5bn £4.7bn
£3.7bn
£1.0bn£0.9bn
£3.6bn
Annuity
Life
FY09 FY10
4%
44
£0.1bn
£0.3bn
FY09 FY10
15%
x3
Payback
14 years
Improved
4 year
payback
7%
14%
FY09 FY10
L&P sales
Net operating
capital generated
New business IRR
Significant increase in
Life profits
Profitable growth and capital
self-sufficiency
• Diversification of business mix
with a focus on life sales
• Strong improvement in IRR
reflects product, pricing &
capital actions
• Re-pricing of the in-force book
• Improved economic environment
Canadian COR of 97%
Record profits achieved in 2010
• Improved underwriting
• Pricing action across the book
• Favourable weather conditions
FY09 FY10
IFRS
operating profit
54%
£144m
£222m
Life
GI
x2
Regional
results
Value growth in Asia Pacific
£1.1bn
£1.6bn
FY09 FY10
48%
45
Payback
25 years
Improved
13 year
payback
6%
11%
FY09 FY10
Increased sales, returns
and profits
• Scale and mix drives a
500 bps IRR improvement
• Bancassurance contributes
51% of sales, a 76% increase
from 2009
• Resilient and growing in-force
book with a 66% increase in
IFRS in-force profits
Continuing progress
• Well positioned to benefit
from the region’s long-term
growth potential
• Pulling back from high capital
low return markets
• Sharpened focus on creating
franchise value through
organic growth
All FY09 figures exclude Australia, which was sold in 2009
* Underlying operating profit excludes Australia and Singapore reserve release in FY09; FY10 excludes China GAAP adjustment
£4m
£(31)m
FY09
FY10
Underlying total IFRS
operating profits*
48%
5%
ExpensesSales
Sales growth absorbs expenses
L&P sales New business IRR
Regional
results
Profit growth and further investment in
fund management
46
Operating profits
FY09 FY10
£201m
£133m
Aviva Investors
Delta Lloyd
Delta
Lloyd
Funds performing above
benchmark*Positive third party
net flows**
78%73%
FY09 FY10
£2.4bn
£(0.2)bn
FY09
FY10
51%
Aviva
Investors
Aviva
Investors
£(3)bn
FY08
* On an equally weighted 1 and 3 year basis where benchmarks exist ** excluding liquidity funds
Increase in profits
Growth in profits driven by Delta
Lloyd emerging markets profits
Continuing investment in
Aviva Investors
• Investment in capability and
infrastructure development
• Continuing high performance
against benchmarks
• Growing pipeline of
external mandates
• Increased focus on higher
margin assets
• Ongoing improvement in client
service standards
Regional
results
Delta Lloyd – strong profit growth
47
Total IFRS operating profit
Life PVNBP*
IRR
6%
IRR*
7%
£3.3bn£3.1bn
FY10FY09
FY10FY09
£536m
£399m
GI&H NWP
COR
97%
COR
95%
£1.2bn £1.2bn
FY10FY09
IFRS net assets**
IFRS
IFRS
£4.3bn
FY10FY09
£3.8bn
Continued structural
improvements
• German subsidiary closed to
new business
• Programme on track to deliver
cost savings by 2012
Strong operating performance
• Life new business IRR
improvement due to mix and
cost savings
• Three-fold asset management
profit growth to £103 million
• Continuing low investment
impairments
• Dividend increased to €1.0
(2009 €0.5) per share
Longevity reserving increase in line
with the Dutch Central Bureau of
Statistics findings
* Excluding German life operation, now closed to new business
** 100% of IFRS net assets
13%34%
-6%
Regional
results
Contacts
48
Aviva Investor Relationswww.aviva.com/investor-relations
Aviva Media Relationswww.aviva.com/media
Charles Barrows
Investor Relations [email protected]
Nigel Prideaux
Group Communications [email protected]
Jonathan Price
Head of Investor [email protected]
Sue Winston
Head of Media [email protected]
Jane Gillis
Head of Investor [email protected]
Andrew Reid
Head of Media [email protected]