Aviva Plc · LSE:AV.
Aviva — Merrill Lynch conference (October 2004)
32 slides from Aviva's conference presentation, Oct 6, 2004
Slide 1: Managing complexity
AVIVA plc Richard Harvey Group Chief Executive Managing complexity 6 October 2004 Merrill Lynch conference
Slide 2: Disclaimer
Disclaimer This presentation may contain certain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertai
Slide 3: Managing complexity
Managing complexity • Enemy of success? EU insurance-related 38 initiatives since 1990 ! 32 28* 22 Regulatory environment Accounting changes 15 Evolving customer 8 8 9 Global business 3 4 4 4 2 3 2 Distribution 90 95 00 04 19 19 20 20 *As of 15 May 2004 Source: CEA 3 Avi va plc
Slide 4: Managing complexity: enemy of success or competitive advantage?
Managing complexity • Enemy of success? OR Potential competitive advantage? Leverage scale Regulatory environment advantages Accounting changes Re-use best ideas Evolving customer Resource and expertise Global business to manage change Distribution 4 Avi va plc
Slide 5: Managing complexity for advantage: distribution techniques
Managing complexity for advantage • Distribution techniques • Volume vs value • General insurance pricing / underwriting 5 Avi va plc
Slide 6: Distribution: reaching the customer
Distribution: reaching the customer Customer evolution: More women working Divorce Increased wealth Ageing populations Customer interaction evolves Contact via : Channels: Face to face + DSF Letter + Telephone Bancassurance + Internet Advice + Global networks 6 Avi va plc
Slide 7: Distribution models vary by markets
Distribution models vary by markets Life & pensions sales Poland UK France Italy Spain Bancassurance Direct Other IFA / Tied sales broker agents force 7 Source: Datamonitor / Aviva Avi va plc
Slide 8: Aviva distribution aligned to country models
Aviva distribution aligned to country models • Distribution key to capturing customer in Europe Multi- distribution Direct sales Bancassurance 8 Avi va plc
Slide 9: Leveraging bancassurance skills
Leveraging bancassurance skills (23%* of Aviva’s life & pension sales) 9 * APE FY 2003 Avi va plc
Slide 10: Transferring DSF & bancassurance skills into India & China savings markets
Transferring DSF & bancassurance skills into India & China savings markets China Start Date: Jan 2003 • Beijing • Chengdu • Guangzhou India Hong Kong Start Date: June 2002 Purchase Date: July 2002 Canara Bank Lakshmi Vilas Bank ABN AMRO American Express Punjab & Sind Bank Singapore Purchase Date: Ju
Slide 11: China: positive life launch (10x10x10)
China: positive life launch (10x10x10) • Chengdu (from 9/04) – First foreign JV player – No. of life players: 6 locals only – Population 10.4 million; • Beijing (from 9/04) – No. of life players: 8 locals & 5 foreign branch/JVs – Population 14.6 million – Our China HQ • Guangzhou (from 1/03) – No. o
Slide 12: Managing complexity for advantage: volume vs value
Managing complexity for advantage • Distribution techniques • Volume vs value • General insurance pricing / underwriting 12 Avi va plc
Slide 13: Volume vs value
Volume vs value Achieved profits Statutory profits Value creation methodology Supports financing and dividends Best assessment of Manage cashflows pricing / margin / IRR Payback periods / financing techniques Managing profitability and cashflows Profit recognition (Illustrative policies) 500 400 MSS
Slide 14: Pricing, cost savings and mix benefiting net shareholder life margins and ROCE
Pricing, cost savings and mix benefiting net shareholder life margins and ROCE Aviva new business net Aviva ROCE shareholder margins¹ (after tax, solvency & minorities) % 13.5 % 16 13.4%* 13 14 12.7% 12 12.5 9.7% 10 12 8 11.5 6 11 4 10.5 2 10 0 2002 6m 2003 2003 6m 2004 2002 2003 6m 2004 14 (1) Year
Slide 15: NU Life using leading position and cost levers to focus on margin
NU Life using leading position and cost levers to focus on margin • Tightening terms on pensions • Outsourced 950 jobs • 1,300 jobs offshored by end 2005 • H1 2004: Life & pensions sales (APE) +3% New business contribution +8% Norwich Union life margins % 24 23 22 21 20 2002 2003 H1 2004 15 * 2002 r
Slide 16: Managing complexity for advantage: general insurance pricing / underwriting
Managing complexity for advantage • Distribution techniques • Volume vs value • General insurance pricing / underwriting 16 Avi va plc
Slide 17: UK general insurance: sustainable model
UK general insurance: sustainable model • Strong management team across period • Leveraged scale advantages (esp bulk purchase for claims: Supply chain savings over £200m (annualised) in 2004) • Creating new competitive advantages • COR target of 100% for 2004 - 2006 Norwich Union performance Digita
Slide 18: Digital flood mapping
Digital flood mapping 28% of properties within this postcode area flood: SY3 7 Properties that don’t flood Properties that DO 18 flood Avi va plc
Slide 19: Use large scale and complex data for more accurate underwriting of household risks
Use large scale and complex data for more accurate underwriting of household risks Norwich Union UK household claims costs by peril 1995-2003 Theft Weather Escape of Water Fire Other Accidental Damage Subsidence 1995 1996 1997 1998 1999 2000 2001 2002 2003 19 Avi va plc
Slide 20: Telematics for motor insurance
Telematics for motor insurance Pilot study underway (5,000 installations) For PAYD insurance For new income • Ability to understand risk at • Convergence with policy different level initiatives for road charging and • Truly new product with market congestion change potential: • Development of extens
Slide 21: UK motor data
UK motor data Traffic Density Monday Tuesday Wednesday Thursday Friday Saturday Sunday 21 Avi va plc
Slide 22: UK motor data
UK motor data Traffic Density Collisions Monday Tuesday Wednesday Thursday Friday Saturday Sunday 22 Avi va plc
Slide 23: UK motor data
UK motor data Traffic Density Collisions Age 18-24 Road Deaths Monday Tuesday Wednesday Thursday Friday Saturday Sunday 23 Avi va plc
Slide 24: PAYD potential for young drivers
PAYD potential for young drivers Delivery: Customer benefit: Part of Telematics Pilot Affordability in return for safer PAYD insurance driving 18-23 year olds Control of cost Off-peak rate £X NUI cover and service Peak night rate multiple £X Longer life expectation Norwich Union benefit: Manages ris
Slide 25: Aviva's technology platform for UK offshoring
Aviva’s technology platform for UK offshoring Voice & data network sharing technology. IP Telephone Controlled & An integrated voice & data managed in UK network for UK, extended to offshore locations Existing Telephone Systems New IP Telephone System International Av iva’s private IP Av iva’s priva
Slide 26: UK general insurance: offshoring reduces costs
UK general insurance: offshoring reduces costs India • 40% reduction in claims handling cost • Service quality on par with UK Substantial level of UK claims handling capacity in India by end 2004 26 Avi va plc
Slide 27: Aviva managing complexity and scale to create competitive advantage
Aviva managing complexity and scale to create competitive advantage • Premier life and savings distribution model across Europe – Optimum position to capture upturn – Leveraging expertise into Asian savings markets • Building a higher return business – Improved net margins and ROCE – UK life opportu
Slide 28: Appendix
Appendix 28 Avi va plc
Slide 29: Aviva overview
Aviva overview 2003 premiums / sales* (£30bn) • Leading pan-European life insurer • Focused general insurance business 71% 72% Life** 29% Life* G.I. • Exited long-tail general insurance business in 2000 • Bancassurance expansion, but multi- channel Intl. Life 4%** Cont. Europe Life 34%** UK General
Slide 30: Strategy
Strategy • Grow long-term savings aggressively and profitably • Build a world-class fund management business • Focused approach to general insurance business • Build top 5 positions in selected markets • Withdraw from lines of business or markets which do not offer the potential for market-leading p
Slide 31: Strong market positions
Strong market positions Rank Market share Rank Market share Life Life (est.) GI GI (est.) UK 1 12% 1 14% France 10 4% Top 15 2% Netherlands 4 11% 4 8% Spain 2 11% - - Italy 7 4% n/a <1% Ireland 3 11% 1 22% Canada - - 2 10% Poland 1 15% - - Singapore 5 9% - - Turkey 2 14% Top 15 2% Australia Top 10 4
Slide 32: Results highlights for H1 2004
Results highlights for H1 2004 • Total sales incl inv products £7,889m +7% • Life and pensions sales (APE) £1,224m +2% • New business contribution £324m +10% • Life margins improved 26.5% (H1 2003 24.5%) • General insurance COR 97% (H1 2003 101%) • Interim dividend 9.36p +4% Strongly covered • ROCE