Aviva Plc · LSE:AV.
Aviva — HSBC UK Life Seminar 2003
20 slides from Aviva's conference presentation, Apr 29, 2003
Slide 1: Aviva plc, HSBC UK Life Seminar
Aviva plc Philip Scott, Executive Director HSBC UK Life Seminar 29 April 2003
Slide 2: FTSE all share since 1973
2 FTSE all share since 1973 3500 2000 Tech bubble bursts 3000 2500 2000 October 1987 - Mar ket crash Shar es fell 36% in 5 weeks 1500 1990s "Irrational exuber anc e" and tech bubble fuels s trong mar ket 1000 gains 1973/4 Bear mar kets in UK Equities fell 71% in real terms 500 0 Jan-77 Jan-78 Jan-79
Slide 3: UK Life in an Aviva context
3 UK Life in an Aviva context 12 months 2002 Group premiums / sales* £28bn 72% Cont. Life* Europe Intl. Life 5% Life 32% UK 28% General 17% G.I. Cont Europe General 6% UK Life Intl. General 5% 35% * Continuing operations. Life includes retail inv sales and health
Slide 4: Growth of UK Life & Pensions market
4 Growth of UK Life & Pensions market New Business (£bn)) Premium (£bn 7000 60 50 6000 40 FTSE 100 5000 30 20 4000 10 0 3000 1998 1999 2000 2001 2002 Source: ABI
Slide 5: Concentration in the Life & Pensions Market
5 Concentration in the Life & Pensions Market Top 5 providers 6-10 Rest of market 12 10 28% 28% 37% 32% 8 APE £bn 26% 24% 6 22% 27% 4 2 41% 41% 46% 48% 0 1999 2000 2001 2002
Slide 6: Drivers for demand
6 Drivers for demand Wealth is still £27bn savings being created gap Customers need to invest Ageing population Further incentives to save required
Slide 7: Offering customers choice through a broad product range
7 Offering customers choice through a broad product range NU Life Sales 2002 APE Equity Release Other 3% Annuities Term & Protection 8% 4% 9% Mortgage Bonds & Savings 5% 21% Investment Funds 3% Group Pensions 10% Indiv. Pensions 37%
Slide 8: Fund choice
Fund choice Very Low Risk/Return Medium Risk/Return Property Balanced Managed Sustainable Future Managed
Slide 9: With-Profits is a re-balanced fund
9 With-Profits is a re-balanced fund Asset mix of Norwich Union With Profits Fund As at 31 December 2002 Other Property (2001:1% ) 4% 17% Fixed (2001:14% ) Interest 44% (2001:31% ) Equity 35% (2001:54% ) An investment choice for consumers
Slide 10: With-Profits - the future
10 With-Profits - the future Continue to be an investment option The market leaders are already changing – Better policy holder communication – Transparency around charges – Clarity around bonus rates Capital strength a differentiator Reattribution?
Slide 11: Regulatory activity
11 Regulatory activity
Slide 12: Sandler - does the cap fit?
12 Sandler - does the cap fit? Economic Reality Possible Solution? 1% creates exclusion Breakeven Case Size (£APE)* The ‘wholesale price’ 900 1% RIY is capped at 1% 800 1.5% RIY 700 Distributors (Saver 600 Agents) may charge 500 up to an additional, 400 say, ½% to make ‘retail price’ of 1½% 300 200
Slide 13: Emergence of multi-tie distribution
13 Emergence of multi-tie distribution IFA Sector will be determined by firms whose marketing proposition is predicated on independence IFA Tied 20% Multi--tied & Distributor Multi 30% Likely to include current network members, smaller “non specialist” IFA’s and increased proportion of bank
Slide 14: The consolidation/aggregation opportunities
14 The consolidation/aggregation opportunities Distributors Providers/Funds Portal or Linked extranet To Capture Efficiency Gains - all Players in the Chain Need to be Linked
Slide 15: UK Life - capital strength
15 UK Life - capital strength Current industry pressures Implications Falling equity markets have adversely impacted capital strength z Equity investment restructured Current Regulatory solvency rules in sharp focus z Ability to write New Business Effect of modern product design on capital pay
Slide 16: Capital management
16 Capital management Customer Manage bonus payouts to policyholders Promote capital efficient products 1% world Management Changed dividend Regulator Shareholder Realistic solvency Actions policy Raise internal capital hurdle rates Capital management disciplines Internal
Slide 17: Future capital direction
17 Future capital direction The cost and complexity of capital regulation is set to increase Prudential Source Book Realistic solvency - ensure smooth transition to multi-dimensional reporting Risk based capital - build capability to manage and report Solvency waivers - secure investment fle
Slide 18: New Business continues to add value
18 New Business continues to add value Aviva - UK Life New Business Contribution 350 30% 300 25% 250 20% 200 £m 15% Margin 150 10% 100 50 5% 0 0% 2000 2001 2002 Responses Pricing for profit not volume Simpler product design New channel development Scalable operating platform Focus on value
Slide 19: Summary
19 Summary Difficult market conditions 2002/3 Consumers need to save and protect Distribution will consolidate Effective change management delivery Broad product range and investment choice in place Flight to quality will continue
Slide 20: HSBC UK Life Seminar Philip Scott
HSBC UK Life Seminar Philip Scott 29 April 2003