Aviva Plc · LSE:AV.
Aviva — Investor Day (2019)
111 slides from Aviva's investor day presentation, Dec 10, 2019
Slide 1: A stronger, simpler, better Aviva
A stronger, simpler, better Aviva
Slide 2: Disclaimer
Disclaimer Cautionary statements: This should be read in conjunction with the documents distributed by Aviva plc (the “Company” or “Aviva”) through The Regulatory News Service (RNS). This presentation contains, and we may make other verbal or written “forward-looking statements” with respect to cert
Slide 3: Today's agenda
Today’s agenda Strategy update Financial update Maurice Tulloch Jason Windsor Lunch Investments, Savings & Retirement UK Life General Insurance Europe Singapore Euan Munro Angela Darlington Colm Holmes Patrick Dixneuf Nishit Majmudar
Slide 4: Strategy update
Strategy update Maurice Tulloch Aviva plc Capital Markets Day 2019
Slide 5: Today's key messages
Today’s key messages Excel at the Group strategy refined with clear purpose and priorities fundamentals Simplified focus Commercial rigour
Slide 6: Delivering on commitments
Delivering on commitments Strategy Organisational design Digital Leadership changes Costs Full review of group and business unit strategy Separate management structure for UK Life & GI Align with trading business Build an experienced Aviva Leadership Team £300m cost saving by 2022 net of inflation &
Slide 7: Further progress on cost reduction plans
Further progress on cost reduction plans £m Cost reduction target by 2022 2019 2020 On track + In-year saving of £60m achieved for 2019 + Initiatives in place currently deliver £150m of cumulative in-year savings in 2020, with work ongoing to deliver more + Implementation costs expected to be c£40m
Slide 8: Group strategy refined with clear purpose and priorities
Group strategy refined with clear purpose and priorities
Slide 9: Our purpose, vision and strategic priorities
Our purpose, vision and strategic priorities Our Purpose With you today, for a better tomorrow Our Vision To earn customers’ trust as the best place to save for the future, navigate retirement and insure what matters most Our Group Strategy Simplify Aviva into a leading international Savings, Retire
Slide 10: Pioneer in sustainable finance
Pioneer in sustainable finance Leader for over 40 years Investing sustainably Accelerating our effort: * Founded or co-created market-leading * Integration of ESG considerations across aon 1. Carbon neutral since 2006 organisations all asset classes * Work with its, lat id . i i . - . fork with gove
Slide 11: Three strategic priorities to Run Aviva Better
Three strategic priorities to Run Aviva Better 90 aah cal Deliver great Excel at the Invest in customer outcomes fundamentals sustainable growth Vv * Grow customer numbers + Improve retention & TNPS scores + Improve brand awareness ll Top quartile underwriting, indemnity management, investment perfo
Slide 12: When we get these priorities right, we succeed
2 When we get these priorities right, we succeed Quotemehappy * Lean operations - low expense ratio * Digital only, low cost IT - 1.4m customers, retention in line with direct * Leading claims capability - reduction in average injury settlement Strong track-record of growth across OL a 28 advisor an
Slide 13: Sustainable returns from five business divisions
Sustainable returns from five business divisions
Slide 14: Financial targets aligned to economic value and sustainable dividend
gets aligned to economic value and sustainable dividend Sll return on equity Cash inflows to Centre Operating capital generation 12% (2022) £8.5-9.0bn (2019-22) c£7.5bn (2019-22) retefinterestandCentecests Cost reduction Debt leverage £300m net savings (2022) £1.5bn debt reduction (2019-22) Progress
Slide 15: Equity story built on five focused business divisions
Equity story built on five focused business divisions UK Life: dependable long term cash flow Annuities & Equity release, Protection and Health, Heritage retirement and insurance business delivering for Aviva is a leading international savings, our customers, shareholders and communities General Ins
Slide 16: Combining cash generators and growth engines
Combining cash generators and growth engines Investments, Asia Life Savings & Leverage strong . partnerships and Retirement unique distribution to grow long-term value Accelerated growth through end-to-end savings and retirement solutions UK Life Positive longterm es replacement cash- flows through
Slide 17: Investments, Savings & Retirement: future growth engine
Investments, Savings & Retirement: future growth engine 1. Use Aviva’s brand and product suite to develop Investment breadth & track record Sainepenelaitemaniseluitens In Workplace Pensions by AuA AuA&AUM scale 2. Leverage investment in capability to accelerate . growth in institutional asset manage
Slide 18: UK Life: dependable long-term cash-flow
UK Life: dependable long-term cash-flow Core capabilities Key priorities Data analytics and underwriting 1. Expand annuity appetite with capital efficient growth in BPA to increase long-term cash-flow Annuity and equity release assets (Fv18) Asset-liability management 2. Capitalise on data analytics
Slide 19: General Insurance: strong growth and improved profitability
General Insurance: strong growth and improved profitability Core capabilities Key priorities Brand 1. Simplicity, speed and efficiency to reinvigorate growth and profitability in personal lines Global net written premiums (rvs) Digital & automation 2. Expand commercial lines by extending strong SME
Slide 20: Europe Life: focused franchise with diverse distribution
Europe Life: focused franchise with diverse distribution Core capabilities Key priorities 1. Further develop multi-channel distribution capability and strengthen brand awareness Policyholder reserves (average, FY18) Owned and aligned distribution 2. Continue to evolve savings mix towards capital Pro
Slide 21: Asia Life: structural long term growth
Asia Life: structural long term growth 1. Increase penetration of FA channel in Singapore while maintaining leadership position Singapore APE 2016-18 CAGR Distribution 2. Work with JV partner in China to further expand Product & innovation distribution scale and productivity > China APE 2016-18 CAGR
Slide 22: Progressive dividend through running Aviva better
Progressive dividend through running Aviva better
Slide 23: Providing a sustainable, progressive dividend
Providing a sustainable, progressive dividend RoE target of 12% is sufficient to fund a progressive dividend and compounding growth in book value 12% 8% FY18 FY22e Dividendas ROE target % of SII equity 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Cash available for dividend and debt reduction over 2019-22 while ma
Slide 24: A simpler, stronger, better Aviva
24 Asimpler, st Priorities Leadership nger, better Aviva Simplified model with 5 focused divisions supported by a lean group centre Strong cash flow generation, including significant investment in the business Maintain capital strength and resilience, while further reducing debt leverage Broad-based
Slide 25: Jason Windsor
Jason Windsor Chief Financial Officer
Slide 26: Today's key messages
Today’s key messages Robust financial targets focused on economic value Growing value safely Strong financial position and prudent risk management 26
Slide 27: Robust financial targets focused on economic value
Robust financial targets focused on economic value
Slide 28: Robust targets reflect economic value focus
Robust targets reflect economic value focus SII Return on equity Cash inflows to Centre Operating Capital Generation 12% (2022) £8.5-9.0bn (2019-22) c£7.5bn (2019-22) retefinterestandCentecests Cost reduction Debt leverage £300m net savings (2022) £1.5bn debt reduction (2019-22) Progressive dividend
Slide 29: How do we think about value?
How do we think about value? Focused on increasing Return on Equity, controlling volatility and delivering Va lu e consistent franchise growth +170p (+52%) 90p FY16 FY17 FY18 3q19 Providing shareholders with sustainable income and growing NAV per share FY15 HB NAV per share (SII shareholder view) Cu
Slide 30: Measuring progress through SII return on equity
Measuring progress through SII return on equity 12.5% 12.0% mn tact > 11.0% Own Funds generated lanagement actions ia eo SITROE = ~ (%) Own Funds SIIROE excl. management actions 9% awh * Shareholder view FY18 Hy19° // 2022 Target * Own Funds generated is on an operating basis and deducts interest SI
Slide 31: Links to business performance drivers
Which links to business performance drive UK Life and IS&R General Insurance Europe Life Asia Life Unlevered ROC 14% 15% 1% 9.5% 10% 9.5% 10% a 1% Enhancing returns ii FY18 FY22e FY18 FY22e FY18 FY22e FY18 FY22e longer racoses + UKL: enhance NB payback & * Target 2022 COR95% * Shift mix towards * Lo
Slide 32: Targeting £300m net expense savings by 2022
Targeting £300m net expense savings by 2022 * Making good progress on cost reduction target with in-year saving of c£60m achieved for 2019 mainly from lower functional & head office overheads and lower investment spend * Two presentation changes: - Amortisation and impairment of internally generated
Slide 33: Higher quality IFRS earnings
3 Higher quality IFRS earnings Improving quality of IFRS earnings Adjusted for divestments * £168m contribution to FY18 operating profit, mainly from FPIL * Little contribution to OCG or Cash Looking ahead Presentation change + Amortisation and impairment of internally generated intangibles now pres
Slide 34: Strong cash and capital to fund a progressive dividend
Strong cash and capital to fund a progressive dividend
Slide 35: Sources of cash
Sources of cash 2019-22e: £8.5-9bn planned cash inflows to Centre * Underlyingcash expected from: Capitalefficient BU growth c£0.5bn £8.5-9.0bn - Optimised fundamentals - margin benefits c£0.5bn £0.75-1.25bn £7.5-8.0bn - Lower costs £2.0-2.5bn Partly offset by: Lower expected remittances from France
Slide 36: Strong underlying cash and capital generation
Strong underlying cash and capital generation 2019-22: Group 2019-22: business divisions * Targeting cumulative group OCG of c£7.5bn net of interest and Centre costs Conservative level of management actions assumed: UK Life +IS&R c£0.5bn benefit expected in 2019 mainly from longevity releases; longe
Slide 37: Allocating capital to grow, and enhance returns
Allocating capital to grow, and enhance returns
Slide 38: Capital allocation at Aviva
38 Capital allocation at Aviva Strategic priorities Deliver great customer outcomes Financial framework ROE / EVA Change spend 4 —_ Total shareholder return occ New business strain Ability to execute
Slide 39: Capital allocation: driving returns from new business
39 Capital allocation: driving returns from new business Economic Value Add (‘EVA’) framework in action Shorter. payback Improve Grow or Stop EVAIRR: > Stop |. Selective | Life new business £0.2bn new business OCG strain at FY18: UK Life * Mainly optimising annuities to grow value (incl. IS&R) £121m
Slide 40: Capital allocation: investing for the future
Capital allocation: investing for the future Group targets are net of significant investment in the business Estimated change spend (cash basis, fbn) FY19e 0.6 Embedded within our financial ambitions is an expectation of c£1.3bn of investment over 2020-22 (while also investing c£300m to achieve £300
Slide 41: Strong financial position and prudent risk management
Strong financial position and prudent risk management
Slide 42: Very strong 3Q19 capital position
42 Very strong 3Q19 capital position 3Q19 Group SII cover ratio * Remains abovetop end of working range at 3Q19 * All BU solo entities above respective risk appetites Shareholder basis" 204% 9 198% 1949 195% 189% 180% 160% FY16 FY17 FY18 HY19 3Q19 Solvency resilience before recovery actions Stress s
Slide 43: Confirming our leverage commitment
43 Confirming our leverage commitment Managing leverage Reducing debt Debt profile Maintain flexibility in SII regulatory capital with headroom across alltiers Consistent with AA metrics Preferred level: <30% over the medium term £1.5bn debt reduction planned over 2019-22 - Expected run rateinterest
Slide 44: Managing low interest rates
Managing low interest rates Exposure Sensitivity to low interest rates mainly arises from our European with-profits funds in France . and Italy Sensit ity to 25bps decrease in interest rates Product management Group SII ratio via, shareholder) Europe * Active management of guarantees: asset yields >
Slide 45: External reinsurance: managing capital and volatility
External reinsurance: managing capital and volatility Life examples + UKlongevity risk: - 2019 new business: up to 100% reinsured for BPAs; 30% on average for Individual Annuities - Existing business: c15% reinsured on average + UKProtection: - Individual: c80% reinsured on average (reducing) - Grou
Slide 46: Today's key messages
Today’s key messages Robust financial targets focused on economic value Growing value safely Strong financial position and prudent risk management 46
Slide 47: Investments, Savings & Retirement
Investments, Savings & Retirement Euan Munro Aviva plc Capital Markets Day 2019 4
Slide 48: Today's key messages
48 Today’s key messages Investments, Savings & Retirement Financial ambitions Introducing Investments, Savings and Retirement A significant local and global opportunity Combining our capabilities to accelerate growth Net fund flows: £10bn3“%party & (Aviva investors, 2022) £10bn savings (UK Savings &
Slide 49: Introducing Investments, Savings & Retirement
Introducing Investments, Savings & Retirement Scale savings business with Powerful investment Compelling customer leading customer and & capability across & outcome focused savings distributor experience multiple asset classes and investment solutions Asignificant global outcome oriented asset manag
Slide 50: We are building towards a combined business
We are building towards a combined business Historic Set up Today Our future Aviva Oy) Investors Significant opportunity * Leverage Aviva brand to support investment message * Confident in our own solutions + UK leader in assisting the mass market with their savings and retirement journey * Easy to
Slide 51: Uniquely positioned to help customers on their savings journey
Aviva is uniquely positioned to help customers on their lifetime savings and retirement journey Consolidate Take tax Wealth pensions. free cash Change job, several Consider intergenerational transfers / long term care / inheritance Save into / Auto-enrolled into SA7US + Pay rises apployer pension Ac
Slide 52: Three routes to capture the IS&R growth opportunity
Three routes to capture the IS&R growth opportunity Growing Savings Growing Aviva Investors Growing together as Aviva : C) Sustain leadership in workplace Continue 3° party expansion Active investment solutions for the 99% Maintain strong net flows momentum with Leverage ESG leadership Capitalise on
Slide 53: Growing in workplace and savings
Growing in workplace and savings UK Savings assets under administration Capitalising on our strength and momentum £bn 103 Number Lin the workplace’ 91 91 * 26,000 schemes and 3.5 million customers 26 80 20 oa * Differentiated proposition, providing health, wellness and employee benefits in conjuncti
Slide 54: Growing in Aviva Investors
Growing in Aviva Investors Aviva Investors assets under management £bn 351 345 331 346 290 ST n ui 65 246 ae 45 288 246 279 asi 2014 2015 2016 2017 2018 HY 2019 ExternalAuM [jj Internal AuM Harvesting the benefits of investment in capability Leadership in ESG * Strong heritage as responsible investo
Slide 55: Growing together as Aviva
Growing together as Aviva Growing together Our immediate focus * Connecting solutions with the savings administration Corporate relationships businesses High quality affordable active solutions for the 99% * Continued close interaction with corporate sales teams and relationship managers across the
Slide 56: How will we be measured?
How will we be measured? Aviva Investors (external net fund flows) £2.9bn £1.2bn -£0.1bn 2016 2017 2018 UK Savings & Retirement (net fund flows) £7.1bn £6.8bn £5.1bn 2016 2017 2018 2019 outl > 34 party annual net fund flow by 2022 & Savings & Retirement annual net fund flow by 2022 Aviva Investors 2
Slide 57: Investments, Savings & Retirement ambition
Investments, Savings & Retirement ambition Scale savings & Powerful investment & Compelling outcome business capability focused solutions Asignificant global outcome oriented asset manager and the UK’s leading savings & retirement solutions provider to our customers Net fund flows: £10bn3%party & £1
Slide 58: UK Life
UK Life Angela Darlington Aviva plc Capital Markets Day 2019
Slide 59: Award-winning insurance company
59 Award-winning insurance company ~ COVER : 2019 Cover Excellence Awards 2019 * Best Group Critical Illness . + Best Individual Critical Illness . > , a ‘moRTaace \) ‘AWARDS 2019 PENSIONS4ge WARDS WINNER What Mortgage Awards 2019 * Best Equity Release Lender . Best Equity Release Lender Customer Se
Slide 60: Today's key messages
Today’s key messages Leading scale and skill across all UK life products . Annuities and equity release are primary growth engines UK Life Delivering dependable growth in long-term cash flow Maximise value and minimise complexity in Heritage Financial ROC 9.5% Cash remittances ambitions Combined UK
Slide 61: Slide 61
Slide 62: A strong and balanced foundation for the group
A strong and balanced foundation for the group UK Life is a significant source of capital and cash flow Operating capital generation Cash remittances FY18 combined UKL + UK Savings & Retirement FY18 combined UKL + UK Savings & Retirement @& Underlying Underlying HM Management actions & other Il Spec
Slide 63: New business volumes assumed consistent with 2019
• New business volumes assumed to be consistent with 2019 for the next 10 years • • • • • •
Slide 64: Strong focus on cost efficiency
Strong focus on cost efficiency Improving unit cost’ While continuing to invest to support our business 43bps Creating simplified journeys for both our customers 40bps and advisors through digitisation and automation ae Product and proposition development to support our > AA areas of future focus an
Slide 65: Well matched annuity cash flows
Well matched annuity cash flows Interest rate risk management £m 4,050 * Highly predictable liability are illiquid and 3,600 cash-flows are highly predictable 3,150 2,700 * High quality long duration assets tightly ® 3080 matched to liability cashflows . 1,800 a oo 1,350 * Limited economic risk of c
Slide 66: Strong balance sheet, low risk asset portfolio
Strong balance sheet, low risk asset portfolio Well diversified portfolio (shareholder assets) * £61bn investment portfolio at HY19 19% 14% 14% 12% 11% PFI& non PFI * £18bn (30%) corporate bonds 21% 19% 10% ee Ei Banks &financials | Consumer industrial Mi Energy I Utilities HM Realestate [lll Commun
Slide 67: Longevity trends
Longevity trends Significant reserve releases in recent years Mortality improvement trends fbn Life expectancy (years) England & Wales* 21 20 19 07 0.7 18 17 16 0.3 0.3 15 SANRTYSERSSHNMAT HEROS 0.0 SSssssssssesesseegagge RARRRARARARARRARARARARE FY14 FY15 FY16 FY17 FY18 z ——MalesAge65 = — — - Males
Slide 68: Maximise growth opportunities
Maximise growth opportunities
Slide 69: Well positioned in Annuities & Equity Release
Well positioned in Annuities & Equity Release A leading provider with full suite of capabilities and scope to grow Individual annuities Market position qst Market share 29% Customer numbers clm TNPS 54 2 ABI, HI 2019 2 Equity release council 69 Bulk purchase annuities Equity release’ Market position
Slide 70: PVNBP growth in annuities and equity release
• • • • • • • • • • *PVNBP is presented on an adjusted Solvency II basis. Further information is given in the Other Information section of the HY19 analyst pack
Slide 71: Strong Protection & Health businesses
Strong Protection & Health businesses Individual protection Health’ Group protection’ Market position gnd Market position Ba Market position am Market share c16% Market share 13% Market share 20% Customer numbers 4.6m Lives covered 0.9m Lives covered c2.7m TNPS 53 TNPS 45 TNPS n/a ‘ABI, H1 2019 2 La
Slide 72: Strong Individual Protection franchise with leading capabilities
Strong Individual Protection franchise with leading capabilities Our franchise #2 16% c4.6m Market position Market share Customers Our strengths Our future focus * Track record of innovation in Individual Protection + Develop next generation of propositions to make it easy for IFAs to do business wi
Slide 73: Supporting corporates across Protection & Health
Supporting corporates across Protection & Health Wellbeing - reimagining our relationships with corporates, employees & consumers Building a suite of services, Focused on driving ...and sustainable and : focused initially on Corporates performance benefits for defendable benefits to Addressing the h
Slide 74: Significant value in Heritage business
Significant value in Heritage business Our franchise Our strengths Our future focus * Large back book with c2.1m customers * Provides capital and cash generation * Retention: underpin * Targeted approach: c300k customers engaged through direct response campaigns AUM (£bn) * c2.1m customers: retentio
Slide 75: Financial ambition
Financial ambition
Slide 76: UK Life ambition
UK Life ambition Delivering dependable growth in long-term cash flow a a OD ~~ oo 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 HB °re-2019 existing business New business strain 2019 onwards existing business [__] Management actions & other Financial ROC 9.5% Cash remittances ambitions Combined
Slide 77: General Insurance
General Insurance Colm Holmes Aviva plc Capital Markets Day 2019
Slide 78: Today's key messages
Today’s key messages y Strong franchises, delivering attractive results and low volatility Sustainable profitable growth at a reduced expense ratio delivering attractive returns on capital NWP Cash remittances GI COR ROC +20% £2.0-2.5bn 95% 14% (2022) (cumulative 2019-22) (2022) (2022)
Slide 79: Aviva GI operates at scale in UK & Canadian markets
Aviva GI operates at scale in the UK & Canadian markets, with an attractive European business that brings diversity & balance owe Position Market ae average Business split by net written premium < = 42 #1 11% 95.7% (+) 2.9 #2 10% 99.8% ( p ll #12 2% 95.3% ( ) 0.4 #2 15% 91.7% ( ) 03 #18 1% 96.1% wow
Slide 80: Unrivalled Strengths
Unrivalled Strengths o @®@ @ Pricing & Indemnity Reinsurance Distribution Brand data analytics management * Ask it never * Total Loss tool * Low net lines * Regional networks * TNPS * Non-linear pricing model * Claims digitisation * Low volatility * Strategic Partnerships * Broker Trust * Underwriti
Slide 81: Trusted brand for customers and brokers
Trusted brand for customers and brokers Case Study: UK Customers Partners Employees 67 65 78 56 n 15 Broker Commercial Trust: Personal 2016 2017 2018 2016 2017 2018 TNPS Scores* Engagement SURANG, “ y datalQ’ Ay Es is GOLD AWARD C 2019 rene SEER al * . . Personal lines, home claims
Slide 82: GI loss ratio; Market large losses
GI loss ratio Market large losses (USD bn) *
Slide 83: Our strategic priorities will form the basis of future growth
Our strategic priorities will form the basis of future growth Leading fundamentals Simplicity & speed I Gi & Data & analytics Fast customer journeys Pricing & underwriting Self-serve capability Talent & capability Clear accountability Focused execution ©) Targeted customer acquisition Closing gaps w
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Slide 89: General Insurance ambition
Slide 90: Europe
Slide 91: Today's key messages
Slide 92: Track record of growth
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Slide 102: Europe ambition
Slide 103: Singapore
Slide 104: Today's key messages
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Slide 106: Differentiated strategy with a focus on profitability
Slide 107: Av iva: Secret
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Slide 108: Aviva: Secret
Aviva: Secret
Slide 109: Well positioned to deliver sustainable growth and net cash generation
Slide 110: Appendix
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