Aviva Plc · LSE:AV.
Aviva — FY2010 Earnings Presentation
45 slides from Aviva's earnings presentation, March 2011
Slide 1: Aviva plc Preliminary Results 2010
Aviva plc P li i Preliminary Results R lt 2010
Slide 2: Disclaimer
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 statemen
Slide 3: Agenda
Agenda 1. Review of the business Andrew Moss 2 Financial results 2. res lts Patrick Regan 3. Looking ahead Andrew Moss 4. Q&A 3
Slide 4: Significant growth in all key performance metrics
Significant growth in all key performance metrics IFRS Net operating IFRS Return on Equity operating profit capital generated £1.7bn 14.8% £2,550m , 10.9% 26% £2,022m 70% £1.0bn FY09 FY10 FY09 FY10 FY09 FY10 Funds under management Dividend NAV 621p £402bn 454p 25.5p £23bn £379bn 80p 24p 6% 374p EEV
Slide 5: Strong growth in Life & GI
Strong growth in Life & GI Life operating profit Life sales (PVNBP) Life IRR £2,318m £33.4bn 12.5% 2.5 4% 10.0% ppt 23% £32.0bn £1,887m FY09 FY10 FY09 FY10 FY09 FY10 GI & Health operating profit GI & Health sales (NWP) GI COR £1,050m £9.7bn 99% 9% £9.2bn 6% 97% £960m FY09 FY10 FY09 FY10 FY09 FY10 5
Slide 6: Growing income whilst controlling expenses
Growing income whilst controlling expenses £m 8,000 Income 7,000 6,000 5,000 Expenses 4,000 FY09 FY10 6
Slide 7: Growth in sales and profits in UK – Life
Growth in sales and profits in UK – Life L&P sales New business IRR £10.3bn 15% Increased sales, returns £8.9bn 16% and profits 14% Pensions, • Record and sustainable profits £5.7bn bonds of £850 million £5.8bn Improved 7 year Payback P b k payback • Substantive S b t ti and d permanentt 45% 8 years
Slide 8: Growth in sales and profits in UK – GI
Growth in sales and profits in UK – GI GI & health NWP GI COR* £4.5bn Improved sales, COR and profits 99% £4 3bn £4.3bn 6% Fourr consecutive Fo consec ti e q quarters arters of GI 96% sales growth • Strong retention levels • Growth in Direct and the RAC panel Significant improvement in current year
Slide 9: Resilience and profit growth in Europe – Life
Resilience and profit growth in Europe – Life L&P sales New business IRR £13.5bn £13.5bn Resilience and growth in profits Pensions, 13% 13% Resilient R ili t new b business i iin a period i d WP savings of continued economic volatility £10.1bn £10.9bn Second half sales lower due to: Payback Payback
Slide 10: Improved sales in Europe – GI but COR remains high
Improved sales in Europe – GI but COR remains high GI & health NWP GI COR Improved sales, £2.0bn COR remains high £1.9bn 103% 103% 4% • 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
Slide 11: Significant profit improvement in North America
Significant profit improvement in North America L&P sales New business IRR £4.7bn 14% Significant increase in £4.5bn 4% Life profits Profitable growth and capital Annuity £3.7bn self-sufficiency £3.6bn 7% Improved 4 year • Diversification of business mix payback with a focus f on life f sales 15% Pa
Slide 12: Value growth in Asia Pacific
Value growth in Asia Pacific L&P sales New business IRR Increased sales, returns £1.6bn 11% and profits 48% • Scale and mix drives a 6% 500 bps IRR improvement £1.1bn Improved • Bancassurance contributes 13 year payback 51% of sales sales, a 76% increase Payback 25 years from 2009 • Resilient and gr
Slide 13: Profit growth and further investment in fund management
Profit growth and further investment in fund management Operating profits Increase in profits £201m Growth in p profits driven by y Delta Lloyd emerging markets profits 51% Delta £133m Lloyd Continuing investment in Delta Lloyd Aviva Investors • Investment in capability and Aviva Aviva infrastructur
Slide 14: Delta Lloyd – strong profit growth
Delta Lloyd – strong profit growth Life PVNBP* GI&H NWP Strong operating performance £3.3bn £3 1bn £3.1bn £1 2bn £1.2bn £1 2bn £1.2bn • Life new business IRR -6% improvement due to mix and cost savings • Three-fold asset management IRR IRR IRR* COR COR profit growth to £103 million 6% 7% 97% 95% • C
Slide 15: Patrick Regan: Financial results
Patrick Regan Fi Financial i l results lt 15
Slide 16: Key performance metrics
Key performance metrics 1. Capital generation and efficiency 2. IFRS operating profits 3 T 3. Total t l profits fit 4 The balance sheet 4. 5. Return on equity, NAV and IGD 16
Slide 17: Capital generation and efficiency
Capital generation and efficiency 17
Slide 18: 70% increase in net capital generation provides strong dividend cover
70% increase in net capital generation provides strong dividend cover 2010 vs 2009 Operating capital 2010 £bn Generated g Usage Net £bn UK 0.9 0.1 1.0 FY10 £2.7bn Europe 0.8 (0.5) 0.3 FY10 £1.0bn North America 0.6 (0.3) 0.3 FY09 2.0 £2.5bn FY10 Asia Pacific - (0.1) (0.1) £1 7bn* £1.7bn Delta Lloyd*
Slide 19: Effective use of capital to grow shareholder value
Effective use of capital to grow shareholder value Improved life capital efficiency* Payback 2010 Capital IRR period 4.8% £bn Sales usage % years 3.8% UK Life 10.3 (0.1) 15 7 Europe Life 13 5 13.5 (0 5) (0.5) 13 7 North America 4.7 (0.4) 14 4 Life Asia Pacific Life 1.6 (0.1) 11 13 FY09 FY10 Delta Ll
Slide 20: IFRS operating profits
IFRS operating profits AVIVA
Slide 21: Improved performance flowing through to profit
Improved performance flowing through to profit IFRS operating profits FY09 FY10 Life GI Life GI £m UK 672 535 850 579 3,000 Aviva Europe 761 132 893 109 +23% +9% +51% Delta Lloyd 277 143 330 146 68 (61) North America 85 144 174 222 2,600 90 2,550 431 Asia Pacific 92 6 71 (6) Total Life / GI 1,887 96
Slide 22: Summary IFRS life profit drivers
Summary IFRS life profit drivers £m FY09 FY10 Key: UK 672 850 Driver A i E Aviva Europe 761 893 FY09 FY10 Variance Delta Lloyd 277 330 Pre-tax North America 85 174 operating profit Asia Pacific 92 71 Operating profit 1,887 2,318 1,887 2,318 23% Income DAC/AVIF Expenses and amortisation and other com
Slide 23: Life new business income
Life new business income Key: Driver Total New business income FY09 FY10 Variance 813 1,021 26% • Growth in annuities annuities, UK protection and group personal New business income APE 1,143 1,310 15% pension sales 402 499 24% Margin 35% 38% 3ppt • Benefit of business mix on margin Aviva Europe APE
Slide 24: IFRS life underwriting margin
IFRS life underwriting margin Key: Driver Total FY09 FY10 Variance Underwriting margin 783 881 13% Higher expense margins in Delta Lloyd and growth of the in-force book Expenses 356 438 23% Mortality & Lower profits in Europe and the US 377 353 (6)% offset by higher profits in UK longevity Persisten
Slide 25: Total IFRS life investment return
Total IFRS life investment return Key: Driver Investment return FY09 FY10 Variance 2,865 3,226 13% Unit linked margin Participating business Spread margin Expected return on shareholder assets 938 999 7% 660 682 3% 676 890 32% 591 655 11% AMC Bonus Spread (0.1) 111 108 (3) 59 60 1 94 114 20 Equity 7
Slide 26: Life expenses
Life expenses Key: Driver FY09 FY10 Variance Acquisition expenses Admin expenses and and commissions renewal commissions (945) (1,084) (15)% (1,408) (1,360) 3% Acquisition Existing expense expense 25% 27% (2)ppt 53 48 5 ratio (bps) ratio Average reserves APE (£m) 3,746 3,943 5% 267.7 284.6 6% (£bn)
Slide 27: GI & Health profit drivers
GI & Health profit drivers Key: Pre-tax operating profit Driver 960 1,050 9% FY09 FY10 Variance GI Underwriting result Health underwriting Expected investment result return 74 232 214% 30 31 3% 875 846 (3)% Net written 8,492 8,920 5% Average e age rate ate 4.6% 6% 4.6% 6% - premiums Claims Average 6
Slide 28: General Insurance performance
General Insurance performance Group COR 99.1% (3.3)% 1.3% 96.8% (0.3)% FY09 Underlying Weather Prior year FY10 current year reserves improvement 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
Slide 29: Fund management
Fund management Key: £m FY09 FY10 Driver Aviva Investors 115 97 FY09 FY10 Variance Delta Lloyd 28 103 Other (10) 1 Pre-tax operating profit Fund Management 133 201 133 201 51% Total income Operating expenses 731 803 10% (598) (602) (1)% Average fees 17.4 18.6 1.4 (bps) Average assets 289 315 9% £bn
Slide 30: MCEV performance
MCEV performance PVNBP New business margin £33.4bn £32.0bn 4% 2.4% 1.9% FY09 FY10 FY09 FY10 Total MCEV MCEV NAV operating profit 542p £3 760 £3,760m 473p 69p £3,592m 5% FY09 FY10 FY09 FY10 Capital Total Balance ROE & MCEV 30 efficiency profits sheet NAV
Slide 31: Total profits
Total profits AVIVA
Slide 32: IFRS profit after tax
IFRS profit after tax FY09 FY10 Integration and £m £m restructuringg costs Operating profit 2,022 2,550 • Regional restructuring and Integration & restructuring costs (286) (243) Solvency II Other exceptional p items 45 ((273)) P fit on disposals Profit di l Investment variances & assumption changes
Slide 33: IFRS profit after tax
IFRS profit after tax FY09 FY10 £m £m FY10 Aviva Other exceptional items Operating profit 2,022 2,550 £m share Integration & restructuring costs (286) (243) Net gain on UK pension 286 schemes closure Other exceptional p items 45 ((273)) Delta Lloyd Longevity reserve increase (483) Investment varianc
Slide 34: IFRS profit after tax
IFRS profit after tax FY09 FY10 £m £m Investment variances and FY10 Aviva Operating profit 2,022 2,550 assumption changes £m share Integration & restructuring costs (286) (243) Asset and liability 800 curve movements Other exceptional p items 45 ((273)) Other investment variances 210 Investment vari
Slide 35: The balance sheet
The balance sheet AVIVA
Slide 36: Balance sheet assets remain high quality
Balance sheet assets remain high quality FY09 FY10 Government Bonds £bn £bn • 96% investment grade Government bonds 17.0 19.1 • Limited exposure to higher risk sovereigns Corporate bonds 33.7 38.7 • Minimal losses Asset backed securities 83 8.3 68 6.8 Corporate Bonds Other 1.0 1.3 • 90% investment g
Slide 37: Continuing low levels of losses
Continuing low levels of losses UK Corporate bonds Aviva USA 116bps 60bps 40bps 31bps 10bps < 5bps 2008 2009 2010 2008 2009 2010 UK mortgage portfolio Delta Lloyd mortgage portfolio 38bps p 36bps* 36bps 1bp 1bp 1bp 2bps Nil 2008 2009 2010 2007 2008 2009 2010 * 36bps = £57 million loss Capital Total
Slide 38: Aviva's pension schemes
Aviva’s pension schemes Actions Result (£bn) nting basis defiicit (£bn) 2.5 • Aviva and RAC schemes closed reducing g liabilities 03 0.3 06 0.6 • Aviva scheme: 2 1.7 – Long-term funding agreement in place 1.5 0.3 – £378 million deficit funding gppayment y cheme accoun in 2010 0.4 • Updated mortality
Slide 39: IGD, ROE & NAV
IGD, ROE & NAV AVIVA
Slide 40: Significant improvement in NAV
Significant improvement in NAV 454p 80p 374p Pence per share IFRS MCEV IFRS NAV at year end 2009 374p 473p IFRS P fit and Profit d iinvestment t t variances i 68 68p 62 62p Dividends (net of scrip) and new (26)p (26)p FY09 FY10 621p shares issued Pension scheme revaluation 37p 37p Foreign exchange a
Slide 41: Growing return on equity
Growing return on equity 15.8% 16% 14.8% 12.0% 12% 10 9% 10.9% 10.2% 8.5% 8% 4% 0% Life GI Group FY09 FY10 Group IFRS return on equity stated after tax, minority interest, Capital Total Balance ROE & IFRS 41 preference dividend and DCI over opening shareholders’ funds efficiency profits sheet NAV
Slide 42: Andrew Moss: Looking ahead
Andrew Moss L ki ahead Looking h d 42
Slide 43: Looking ahead: a clear direction
Looking ahead: a clear direction Strategic Increasing focus portfolio p and depth in 12 • Progress g on portfolio changes g in 2011 changes countries • UK: Continued market leadership with profitable Excelling in Life, sales growth General Insurance & • Europe: Rigorous focus on delivery & execution
Slide 44: Strong results pave the way for further growth
Strong results pave the way for further growth Strong performance • IFRS operating profit up 26% to £2,550 million • Increased net operational capital generation by 70% to £1.7 billion • IFRS NAV per share up by 21% to 454p Profitable growth in both life and general insurance • 23% increase in life
Slide 45: Q&A
AVIVA Q&A iK9) +