Aviva Plc · LSE:AV.
Aviva — FY2009 Earnings Presentation
40 slides from Aviva's earnings presentation, 2010
Slide 1: Aviva plc Preliminary Results 2009
Aviva plc Preliminary Results 2009
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. Business review Andrew Moss 2. Financial Results Patrick Regan 3. 2010 and beyond Andrew Moss 4. Q & A Page 3
Slide 4: Business Review
Andrew Moss AVIVA Business Review
Slide 5: A significant rebound in total profits
A significant rebound in total profits Rebound in profits in a tough economic environment • IFRS total profit after tax of £1.3 billion • MCEV total profit after tax of £2.9 billion Operating profits reflect disciplined and prudent management • IFRS operating profit down 12% at £2.0 billion • MCEV o
Slide 6: Tackling the crisis
Tackling the crisis Decisive further action to manage impact of the crisis • IGD surplus raised from £2 billion to £4.5 billion Entered the crisis risk aware • £1.1 billion mortgage and debt • Shareholder equity exposure provisions established – still unused reduced by £3.4 billion in 2007 • Sales o
Slide 7: Tackling the crisis
Tackling the crisis Decisive further action to manage impact of the crisis • IGD surplus raised from £2 billion to £4.5 billion Entered the crisis risk aware • £1.1 billion mortgage and debt • Shareholder equity exposure provisions established – still unused reduced by £3.4 billion in 2007 • Sales o
Slide 8: Tackling the crisis, delivering the strategy
Tackling the crisis, delivering the strategy Significant measurable strategic delivery Decisive further action to manage Manage composite portfolio impact of the crisis • Transformational deal with Delta Lloyd • Sold sub scale Australian business • IGD surplus raised from £2 billion Allocate capital
Slide 9: Significant & measurable strategic delivery
Significant & measurable strategic delivery Manage composite portfolio • Transformational deal → £1 billion cash raised; IGD up £0.5 billion, new governance driving with Delta Lloyd better performance • Sold sub scale Australian business → 16 x IFRS profits realised; IGD up £0.5 billion Allocate cap
Slide 10: Transformed cost base demonstrates strategic change
Transformed cost base demonstrates strategic change Analysis of Operational Cost Base (by Region) Movement in Headcount (by Region) 6,000 13% reduction in 2009 15% reduction in 2009 267 57,000 5,750 54,800 3,200 (19% since 2007) 121 387 5,500 4,400 133 388 5,144 52,000 209 5,000 119 90 380 380 46,30
Slide 11: An experienced executive team fully committed to delivery
An experienced executive team fully committed to delivery Andrew Moss Chief Executive Mark Hodges Patrick Regan Andrea Moneta UK Chief Financial Officer Europe Amanda Mackenzie Simon Machell Marketing & Comms Asia Pacific Igal Mayer John Ainley North America Alain Dromer Robin Spencer Human Resource
Slide 12: The Financial Results
Patrick Regan The Financial Results
Slide 13: Key performance metrics
Key performance metrics 1. Life MCEV operating profits 2. IFRS operating profits 3. Total profits 4. Capital generation and utilisation 5. Return on equity and net asset value 6. Solvency and balance sheet quality Page 13 MCEV IFRS Total Capital RoE Solvency
Slide 14: Strong 2009 financial results
Strong 2009 financial results 1. MCEV operating profit • MCEV operating profit of £3,483 million, up 3% • Long term savings margin up 10bps at 2.2%, IRR in UK and Europe (ex DL) of 13-14% 2. IFRS operating profit • IFRS operating profit of £2,022 million, down 12% – Long term savings operating profi
Slide 15: Significant growth in Life MCEV operating profit
Significant growth in Life MCEV operating profit £m 4,000 £ million 2009 2008 3,500 198 3,389 125 New business profits 710 772 318 3,000 Profit from existing business 2,810 (90) 90 (62) In-force return 2,440 2,122 2,500 Experience variance (99) (224) 2,000 Assumption changes 44 (165) 1,500 Other ope
Slide 16: Increase in Life new business margins
Increase in Life new business margins £m Sales (PVNBP) 40,000 35,000 NBV Margin Margin IRR 2009 2009 2008 2009 Region £m % % % 30,000 25,000 UK 247 2.8% 1.7% 14% 20,000 Europe ex 521 3.9% 4.0% 13% 15,000 DL Europe - DL (103) (2.8)% (1.1)% 6% 10,000 North 5,000 16 0.4% 1.0% 7%* America - Asia Pacific
Slide 17: Minimal net experience variances & assumption changes
Minimal net experience variances & assumption changes £ million 2009 2008 £ million Total New business profits 710 772 Lapses (140) Mortality 76 Profit from existing business Other (35) Expected return 2,440 2,122 Total experience (99) variances Experience variance (99) (224) Lapses (262) Assumption
Slide 18: In-force profits - significant growth over five years
In-force profits - significant growth over five years 3,000 2009 2008 In-force profit - £m Region £m £m 2,500 UK 540 679 2,000 Europe ex DL 1,183 934 1,500 Europe - DL 634 243 North America 250 146 1,000 Asia Pacific 72 36 500 Total 2,679 2,038 0 2005 EEV 2006 EEV 2007 MCEV 2008 MCEV 2009 MCEV Page
Slide 19: IFRS operating profits
IFRS operating profits £m 2,600 2009 2008 192 (77) Life GI Life GI (161) UK 672 535 751 656 2,400 2,297 Europe ex DL 761 132 685 220 (16) 33 (79) 10 Europe - DL 277 143 196 177 (178) 2,200 North America 85 144 16 145 2,022 Asia Pacific 92 6 46 - 2,000 Total Life / GI 1,887 960 1,694 1,198 Fund Manag
Slide 20: Life IFRS operating profit drivers
Life IFRS operating profit drivers £m 500 300 100 -100 -300 -500 New business Technical margin UL Investment Participating Spread business Other Expected return margin business margin 2008 2009 • Well balanced profile of profit drivers – technical, investment, participating & spread margins • New bu
Slide 21: General Insurance operating profit by region
General Insurance operating profit by region Net written GI & health GI only COR Actions taken in 2009 premiums operating profits to improve COR Region 2009 2008 2009 2008 2009 2008 • Restructuring book away from £m £m £m £m % % lower margin business UK 4,298 5,413 535 656 99% 99% • Returning to gro
Slide 22: Improved underlying General Insurance combined operating ratio
Improved underlying General Insurance combined operating ratio Group COR 3.2% 99.1% 98.1% (3.9%) Expense ratio 98% • UK: Cost savings target of £350 million achieved • 27 operational sites reduced to 9 0.4% 96% • Europe: Further cost savings to come through 1.3% Quantum Leap 94% Claims ratio 92% • R
Slide 23: Rebound in IFRS profit after tax
Rebound in IFRS profit after tax 2009 2008 2009 £m £m EPS* Operating profit 2,022 2,297 45.1 p Investment variances & assumption 77 (2,544) changes Restructuring & integration costs (286) (326) Profit on disposals 153 7 Exceptional items 45 (551) Goodwill and intangibles amortisation (206) (183) Pro
Slide 24: £1 billion underlying capital generated with plans for further improvement
£1 billion underlying capital generated with plans for further improvement £bn 3.0 Capital generation 2.5 (1.5) 2.5 Other capital generated £bn 2.0 • Interest and Dividends (1.1) 0.7 1.7 • Disposals, DL IPO and 1.5 estate reattribution payment 0.5 • Investment variances and 1.0 economic assumption 1
Slide 25: Materially improved £2.2 billion central liquidity
Materially improved £2.2 billion central liquidity £bn Central liquidity 4.0 1.5 (0.5) 3.5 0.2 (0.6) 3.0 (0.5) 2.5 2.2 0.7 2.0 1.5 1.4 1.0 0.5 0.0 Opening centre Dividend from DL IPO and Inherited estate Debt raised Interest and Dividends net of Closing centre liquidity regions disposals payment cen
Slide 26: High quality asset portfolio
High quality asset portfolio 31 Dec 31 Dec Equities Balance sheet assets 2009 2008 £m £m • Limited equity backing the GI book • Exposure principally in Delta Lloyd & Italy Equity securities 5,027 5,754 • Equity hedges remain in place Mortgages 28,204 27,046 Mortgages Debt securities 56,450 51,437 •
Slide 27: Debt securities - a high quality, diverse portfolio
Debt securities - a high quality, diverse portfolio Shareholder debt securities £56.4bn Direct shareholder exposure to debt securities of £56.4bn AAA/ Insurance Less £m BBB Unrated Total AA / A rated than BBB Corporate debt Corporate securities 18,023 1,612 9,164 1,297 138 30,234 debt £30.2bn Other
Slide 28: Second half increase in MCEV net asset value
Second half increase in MCEV net asset value Movement in Pence per share HY 2009 FY 2009 2H09 Opening NAV excluding pension deficit as at 518p 518p 31 December 2008 Retained profit after tax 40p 67p 107p FX (52)p 24p (28)p Dividend net of scrip (13)p (6)p (19)p Delta Lloyd IPO - (20)p (20)p New shar
Slide 29: Significantly improved return on equity
Significantly improved return on equity 18% Return on equity - % 16% 14% • Return on equity of 16.2% (2008: 11.0%) 12% • Higher operating profit and lower effective tax rate drives top line 10% • Group opening capital £7 billion lower 8% at £13.2 billion 6% • Group return on equity benefits from low
Slide 30: Solvency I - IGD surplus significantly strengthened
Solvency I - IGD surplus significantly strengthened £bn 6.0 5.0 1.0 (0.5) 0.5 4.5 0.4 (0.5) (0.3) 4.0 1.9 3.0 2.0 2.0 1.0 0.0 IGD surplus Capital Issue of hybrid Dividends Disposals Inherited estate Increase in Other IGD surplus December 2008 generation debt (net of scrip) reattribution CRR December
Slide 31: 2010 and beyond
Andrew Moss AMINA 2010 and beyond
Slide 32: Strong today, with a clear vision for the future
Strong today, with a clear vision for the future Strong today A single global brand • 53 million customers • A unique bancassurance franchise • Top 4 in Europe and a market leader in the UK A 16% return on equity • Delivering 13% minimum Life IRR in Europe and the UK • Writing General Insurance busi
Slide 33: Strong today, with a clear vision for the future
Strong today, with a clear vision for the future Strong today Well positioned for growth European L&P A single global brand assets expected 1.7 to grow by • 53 million customers $1.7 trillion over • A unique bancassurance the next 5 years franchise • Top 4 in Europe and a market leader in the UK 200
Slide 34: Strong today, with a clear vision for the future
Strong today, with a clear vision for the future Strong today A clear vision for the future A single global brand • 53 million customers Purpose Prosperity & • A unique bancassurance peace of mind franchise Vision • Top 4 in Europe and a One Aviva, twice the value market leader in the UK Strategic T
Slide 35: Specific plans to drive value, earnings & dividend growth – Plans for 2010
Specific plans to drive value, earnings & dividend growth – Plans for 2010 ► Increase penetration of bancassurance protection business ► Targeting a further shift towards higher margin unit linked products Europe ► Centralise asset & liability management and reinsurance in Dublin ► Further GI market
Slide 36: Conclusion
Conclusion ► Significant turnaround in profits ► Strong capital position Strong set of financial results ► Delivering value from our in-force book ► Group ROE 16.2% and IRR of at least 13% in our main markets ► Reshaping of the business Significant strategic ► Cost base transformed progress ► Succes
Slide 37: Aviva
AVIVA
Slide 38: Appendix
AVIVA Appendix
Slide 39: Non-GAAP financial measures
Non-GAAP financial measures Financial measures In this presentation, management has included and discussed certain “non-GAAP financial measures”, as such term is defined in Regulation G, pertaining to the Company‟s results. These measures are ““PVNBP” (Present Value of New Business Premiums), “Sales
Slide 40: Reconciliations of non-GAAP financial measures
Reconciliations of non-GAAP financial measures Reconciliation of IFRS operating profit to MCEV operating profit £ million 2009 2008 IFRS operating profit1 2,022 2,297 New business impact 962 1,175 Existing business earnings2 671 (72) Expected return on shareholders' net worth/funds (27) 186 Other it