Aviva Plc · LSE:AV.
Aviva — FY2019 Earnings Presentation
45 slides from Aviva's earnings presentation, March 2020
Slide 1: Aviva plc 2019 results
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 announcement contains, and we may make other verbal or written “forward-looking statements” with respect to cert
Slide 3: Maurice Tulloch, Chief Executive Officer
Slide 4: Results: solid progress
Results: solid progress 14.3% SII Return on Equity’ +1.8pp £3,184m Operating profit’ +6% Al £2,259m OCG (29)% 60.5p Operating EPS' +8% 206% Solvency cover ratio” +2pp 30.9p Dividend per share 3% Highlights Implemented important structural changes On track to deliver financial targets Improving organ
Slide 5: Building momentum towards 2022 targets
Building momentum towards 2022 targets SILROE OCG Cash in-flows Debt Expense savings Alootnetes onpege ss 12% (2022) c.£7.5bn (2019-22) £8.5-9.0bn (2019-22) £1.5bn reduction (2019-22) £300m net savings (2022) 14.3% in 2019. Focus on enhancing underlying returns £2.3bn in 2019. Achieved c.30% of cumu
Slide 6: Delivering profitable growth in Life & Savings
Delivering profitable growth in Life & Savings Global life net flows positive Diversified business mix Average reserves: £389bn, 1-Jan-19 UKL(ex WP& Europe Market, FX 31-Dec-19 European participating [J Unit-linked WP) other = & Asia. & other Hl UK participating HB Annuities Asia participating Focus
Slide 7: Strong flows in the UK and Aviva Investors
Strong flows in the UK and Aviva Investors UK annuities & equity release UK Long-term savings Net fund flows. £67bn £5.6bn £5.0bn £5.4bn ¢61bn £62bn £6.2bn £7.1bn <6.8bn Ske £4.8bn £4,3bn £(1.5)bn _ | | (1.5) £(1.8)bn £(2.1)bn FYIT FY18 FY19 FYIT FY18 FY19 PVNBP [i Assets Savings & Retirement [J Her
Slide 8: Growth & mix optimisation in Europe and Asia
Growth & mix optimisation in Europe and Asia Europe Life Singapore & China PVNBP®” PVNBP £13.8bn £2.3bn e12,1bn £12.6bn ae £2.0bn £1.9bn £1.9bn <0.7bn £0.7bn £5.3bn £6.5bn £0.7bn e13b £1.6bn £1.2bn dein £5.3b1 £3.9bn n aan FY17 FY18 FY19 FY17 FY18 FY19 Poland&otherEurope I France & Italy WP. China [
Slide 9: Delivering profitable growth in GI
Delivering profitable growth in GI Net written premiums’ Combined operating ratio’ £9.1bn £9.1bn £9.3bn 98.2% f H 97.5% 1.6% 7 35% 37% 39% J 1 18% COR performance strong on ; consistent basis Sy Average COR: 95.6% 96.6% 96.6% 95.7% 65% 3% o% GS GS Sy Standard deviation 0.8) FY17 FY18 Fy19 FY17 FY18
Slide 10: COR reduction remains primary focus
COR reduction remains primary focus Normalised accident year claims ratio’ 68.2% 67.1% 66.5% FY17 FY18 FY19 PYD (0.3)% (2.3)% (L.7)% Weather (0.9)% +0.1% (1.0)% 10 Commission & expense ratio’ 33.1% 31.3% 31.2% pea 21.3% 20.5% 20.8% FY1T FY18 FY19 Digital allocation Expense ratio Commission ratio Pre
Slide 11: Earning customers' trust is central to our vision
ll Earning customers’ trust is central to our vision There for our customers after recent UK storms Storms Ciara and Dennis resulted in double the normal level of calls and claims in days following the storms Teams working around-the-clock to support customers. Major incident plan invoked, deploying
Slide 12: Progress on costs, with continued investment
2 Progress on costs, with continued investment Expense savings £300m £150m £72m FY19 FY20e FY22e Alootnetes onpege ss Target of £300 million reduction in controllable costs will require gross savings of £500 million. + £72m% savings achieved in 2019. + Expectation of £150m P&L saving in 2020 (vs 201
Slide 13: Our priorities
Our priorities Customers * Focus on customer retention with continued investment in improving customer experience * Strong engagement with distributors Our 12% targets SII ROE 2022 £7.5bn Fundamentals Objective of £150 million in achieved savings in 2020, net of inflation Disciplined execution on ex
Slide 14: Jason Windsor, Chief Financial Officer
Slide 15: FY19 snapshot
FY19 snapshot SII ROE'+1.8pp Total OCG £2.3bn SII ratio’ 206% DPS +3% 14.3% £3,198m 12.5% Other 62 other £2,259m “ 206% Undertving aa Underlying 1,433 FY18 FY19 FY18 FY19 FY18 FY19 Operating profit’ +6% Operating EPS'+8% Basic EPS +67% £m noe FY19 Change UK Life and ISR’ 1,988 1,951 (2)% General Ins
Slide 16: Return on equity
Return on equity SII Group ROE BU unlevered ROCs 16 FY18 604 1,179 (550) 218 497 1,948 15,550 Europe Life 14.3% 12.5% Group (£m) Life new business 3.2% 6.2% Existing business (Life, Gi, Al & other) 14% Debt & centre costs (incl. pref DCI costs) Life temporary TMTP Management actions & other 7.9% 8.1
Slide 17: Solvency II position
Solvency II position —— (171) (1,222) 12.638 11,982 (432) — u - (210) Surplus * | [_ Own funds 23,551 1,745 (432) 944 172 (1,222) 24,548 NB 659 EB 1,086 SCR (11,569) 120 - (118) (343) - - (11,910) NB (900)
Slide 18: Cash
Cash £2.6bn cash inflows to Centre in FY19: c30% of FY19-22e target of £8.5-9.0bn delivered to date £m 672 1,250 500 1,887 42% ——> = 1,925 3,137 other Europe Life &Asia Life 536 @ 519 2,597 Ill General Insurance HM UK Life+ise 994 @ 973 FYI8 cash FY18 UKL FYI8 Fy19 UKL specials + FY19 cash remittanc
Slide 19: Balance sheet strength
Balance sheet strength Compounding value: 13% 2016-19 CAGR * Netasset value: - SIINAV per share 423p, +8% (YE18: 392p) - 9/ p T158p (¥45%) IFRS NAV per share 434p, +2% (YE18: 424p) oe * Slldebt leverage: down 2pp to 31% (FY18: 33%) - 6.875% £210m hybrid Tier 1 note paid back in 2019 392 387p B + Reg
Slide 20: UK Life and IS&R
UK Life and IS&R OCG & ROC Return on capital 11.1% 9.5% an 1,947 Managementactions 349 1,260 1 TMTP 401 oMManderlying) 218 Underlying exc temporary MTP | 889 859 FY18 FY19 nD proforma™ + Lower underlying OCG: expected loss of temporary NB transitional benefits and adverse experience in Protection *
Slide 21: UK Life incl. S&R
UK Life incl. S&R Operating profit (Em + £5.4bn net inflows (+7%): Long-term - UKS&R: £7.5bn inflows (+10%) from new wins & improved retention in workplace and savings 187 ail = vues £3.5bninflows in Platform (PY: £3.9bn) - Heritage Pensions: -£2.1bn outflows (-17%) * £138bn total AUA: £113bn UK S&R
Slide 22: General Insurance
General Insurance OCG & ROC 10.0% 14.0% 574 em 563 Retum on capital 0CG- Underlying OCG- Management eis actions & other 563 (41) FY18 FY19 eo proforma * Underlying OCG +9%, from improved profitability in Canada and favourable weather experience * 2019 management actions mainly relate to UKD one-off
Slide 23: Europe Life
23 Europe Life OCG & ROC =m 724 754 aamenemen agp ws Underlying | 377 oA FY18 Fy19 Underlying OCG -14% mainly from low interest rates increasing new business strain 2019 management actions driven by increased hedging in France while PY mainly related to FRPS Operating profit +2% tm 807 827 Ireland &
Slide 24: Asia Life
24 OCG & ROC Retumoncapital @G.790 12.7% 60 fm 55 FY18 Fy19 * Growth driven by higher returns in Singapore Operating profit +5% Em 263 276 (16)% FPI 151 wae ve) China Sem @ Other FY18 FY19 * Operating profit excl. held for sale businesses grew 33% to £157m (PY: £119m), driven by Singapore and China
Slide 25: Looking ahead
Looking ahead £3.2bn OCG FY18 FY19 Bl Underlying Temporary TMTP lj Management ‘excl. temporary TMTP actions & other £3.0bn £3.2bn iz Operating profit FY18 FY19 I Total excl. UKL Other’, Weather J UKL ’Other’ FPI weather above LTA&FPI above LTA Significant uncertainty around macro trends compounded b
Slide 26: Appendix
Appendix
Slide 27: Balance sheet
Balance sheet
Slide 28: Solvency II return on capital/equity: (FY18)
Solvency II return on capital/equity: (FY18) Operating own funds generation Non-life New Existing capital Opening Return on business (life) business (life) generation Other’ Total own funds capital/equity 2018 £m £m £m £m £m £m % UK Life and Investments, Savings & Retirement 347 472 lll 733 1,663 14
Slide 29: Solvency II return on capital/equity (FY19)
Solvency II return on capital/equity (FY19 Operating own funds generation Non-life New Existing capital Opening Return on business (life) business (life) generation Other? Total own funds capital/equity 2019 £m £m £m £m £m £m % UK Life and Investments, Savings & Retirement 381 194 70 669 1,314 13,83
Slide 30: Solvency II own funds
Solvency II own funds Opening own funds Closing own funds 1 January 2019 31 December 2019 £m £m UK Life and Investments, Savings & Retirement 13,835 14,126 General Insurance 4,498 4,817 Europe Life 5,548 6,134 Asia Life 1,470 1,584 Other (1,800) (2,113) Estimated Solvency II shareholder own funds 23
Slide 31: Solvency II sensitivities (shareholder view)
Solvency II sensitivities (shareholder view) Sensitivity | FY18 FY19 (Changes in economic assumptions 25 bps increase in interest rate 3% 4% 50 bps increase in interest rate 5% T% 100 bps increase in interest rate 8% 13% 25 bps decrease in interest rate (4%) (5%) 50 bps decrease in interest rate (10
Slide 32: Solvency II regulatory own funds tiering & debt leverage
Solvency II regulatory own funds tiering & debt leverage % of own « 2018 2019 % of own %ofSCR %ofSCR « 2018 2019 Regulatory view €m —m funds FY18 funds FY18 FY19 Regulatory view &m £m Unrestricted Tier1 19,312 20,377 += 70% ~=«72% «= «126% += 133% Solvency Il regulatory debt’ 8,160 7,892 Senior note
Slide 33: Subordinated debt profile
Subordinated debt profile £1,300m Restricted Tier 1 MM tier 2 Mi Tier 3 £874m £800m £763m £700m £593m £600m £551m £500m £400m £400m 2020 2021 2022 2023 2024 2025 2026 2029 2030 2038 Alldebt instruments have been presented at optional first call dates at nominal values converted to GBP using 31 Decem
Slide 34: IFRS
IFRS
Slide 35: Operating earnings per share
Operating earnings per share FY 2018 FY 2019 Group operating profit? 3,004 3,184 Less operating tax (625) (668) Minority Interest (100) (98) DCI and fixed rate tier 1 notes (36) (34) Preference shares (17) (17) Total operating earnings after tax, MI & DCI and preference shares 2,226 2,367 Weighted a
Slide 36: Basic earnings per share
Basic earnings per share FY 2018 FY 2019 Operating profit attributable to shareholder 2,226 2,367 Investment return variances and economic changes on long-term business (198) 535 Short-term fluctuations in in return on investments backing non-long-term business (378) 129 Economic assumption changes
Slide 37: Estimated amortisation of acquired value of in-force
Estimated amortisation of acquired value of in-force FPI £400m | HH Other Aviva businesses FLUK £300m 4 £200m 4 a = = = — — £100m 4 rf — £0m 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 This is our latest estimated projection and is subject to a number of factors including the effects
Slide 38: Life flows
Life flows
Slide 39: Life business fund flows
39 Life business fund flows Premiums and Claims and Effect of disposals, Managed assets deposits, redemptions, market and at 1 January net of net of other Managed assets at 2019 reinsurance reinsurance Net flows movements 31 December 2019 Life business UK- non-profit: -platform 22,643 5,662 (2,206)
Slide 40: Assets
Assets
Slide 41: Total managed assets
Total managed assets Assets by liabilities covered Participating assets by type £m £m 133,355 134,952 401,025 Hl Evro-style 374,742 UK With-profits style I Participating funds Policyholder funds Shareholder funds Shareholder assets by type 152,158 172,368 ” £m 89,229 93,705 Annuity & 72,556 76,893 n
Slide 42: Shareholder assets
Shareholder assets Shareholder assets by type ém 93,705 89,229 24,065 2,974 25,675 25,841 en 21,508 13,683 15,640 Fyig2 FY19 a2 ‘Alifootrotes onpage ss Government debt Hl corporate bonds Other debt HB Mortgage loans Other Corporate debt by rating Total: £25,675m 8% 12% 37% 13% AAA MA Hl Less than BB
Slide 43: Shareholder assets - corporate bonds & loans
Shareholder assets - corporate bonds & loans Corporate bonds by industry I Financials - Banks Communications Hl Financials - Insurance & other [lll Industrial Utilities HM oilegas HM consumer services Hl other Real estate 43 Loans by type Total: £31,238m 10% Loans & advances to banks Hl Healthcare,
Slide 44: Shareholder assets - Mortgage loans
Shareholder assets - Mo Mortgage loans Commercial real estate portfolio Total: £21,508m Commercial total: £7,640m 13% uv Loans 1,583 492| in arrears (£m) sae 49: Loan interest cover Healthcare, infrastructure & PFI Fyl3FY14. ss FYIS)«sFYI6.«SsFY17_—=«s#FY8~—sOFYI19 Hl commercial Securitised mortgage
Slide 45: Footnotes
gs en nn 11. 12. Footnotes Includes Group centre, debt costs and other items not allocated to the markets. The estimated Solvency II position represents the shareholder view. See section 3 of the Analyst Pack for more details. Group adjusted operating profit is a non-GAAP Alternative Performance Mea