Aviva Plc · LSE:AV.
Aviva — FY2013 Earnings Presentation
33 slides from Aviva's earnings presentation, Mar 18, 2014
Slide 1: 2013 Results
AVIVA 2013 Results
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 other verbal or written “forward-looking statements” wi
Slide 3: 2013 Results - Mark Wilson, Group CEO
2013 Results Mark Wilson Group Chief Executive Officer 3
Slide 4: 2013 Results summary
2013 Results summary Cash remittances to Group up 40% at £1,269m (FY12: £904 million) Operating capital generation (“OCG”) £1,772 million (FY12: £1,859 million) Cash flow Remittance ratio 72% (FY12: 49%) Final dividend per share 9.4p (FY12: 9p) Operating profit 6% higher at £2,049 million
Slide 5: Key metrics
5 key metrics Cash flow Operating profit Operating expenses £1,269m £2,049m £3,234m 7% £3,006m 40% £1,926m 6% £904m 2012 2013 2012 2013 2012 2013 Value of new business Combined operating ratio Final dividend £835m 9.4p 97.0% 0.3 97.3% 9.0p 4% ppt £738m 13% 2012 2013 2012 2013 2012 2013 5
Slide 6: 2013 Recap
2013 Recap Focus Areas Progress Improve cash remittances Cash remittances up 40% to £1,269m Turnaround Italy, Spain, Ireland Structural progress made, new management appointed & Aviva Investors Dividend payments resumed from Italy & Ireland Complete the disposal of US business Completed – proceeds h
Slide 7: Investment Thesis – Cash flow plus growth
Investment Thesis – “Cash flow plus growth” Cash IFRS Op Cash flow Cash remitted to Group from Business units flow Profit Expenses VNB COR Group z z z z z UK Life z z z z - 1. Life Value of new business “VNB” UK General Insurance z z z - z France z z z z z Growth 2. GI Underwriting result Canada z z
Slide 8: Progress on cash flow
Progress on cash flow 2011 2012 2013 45% 49% 72% £1,859m £1,772m £1,596m £127m £1,269m £904m £724m Operating Capital Generation (1) Remittance (1) Focus areas • Move the remittance to greater than 80% • Continue structural simplification • Operating expense reduction to flow through to bottom line •
Slide 9: Progress on intercompany loan
Progress on intercompany loan At £2.2bn AIL would not rely on this asset in a 1:200 stress event Actions taken to date Actions to be taken 2014-15 £0.45bn £1.25bn £0.45bn £5.8bn £4.1bn £1.45bn £5.1bn £2.2bn £5.8bn Opening Direct Other Current Direct Other FY 15 balance Cash actions balance Cash acti
Slide 10: Progress on expenses - reduction target on track
Progress on expenses - reduction target on track Material progress made on 2014 target Operating Expense Ratio £3,366m £3,234m £400m £3,006m Target -3ppt 57% 54% Baseline 2011 2012 2013 2012 2013 Actions taken in 2013 Expense ratio: Operating expenses Operating income • Delayering and efficiency sav
Slide 11: Growth is the second part of our investment thesis
Growth is the second part of our investment thesis Cash Generators Growth Markets VNB VNB • Move to Digital • Economic growth • Predictive analytics • Favourable demographics £601m • Ageing population £179m £539m £120m • Strategic partners • Cost income ratio • Distribution agreements • Back book ma
Slide 12: Return on Capital
Discipline in allocation of capital 3 filters (strategic, execution, and financial) enable us to identify priorities A. Strategic filters Reinvestment plan - Illustrative, for NB and for Strategic Spend - Focus and prioritise investment to align Cut - off point Return on Capital with Group strategy
Slide 13: Our purpose and accompanying value set
Our purpose and accompanying value set 13
Slide 14: 2013 Results - Patrick Regan, CFO
2013 Results Patrick Regan Chief Financial Officer 14
Slide 15: Operating profit improvement
Operating profit improvement Operating profit £ million FY12 FY13 Change Life 1,831 1,901 4% IFRS Operating profit reconciliation General Insurance & Health 894 797 (11)% Operating profit FY12 1,926 Fund Management 51 93 82% Operating expense savings 228 Other operations (177) (90) 49% Weather year
Slide 16: UK Life
UK Life Value of new business Operating profit Operating expenses £ million FY12 FY13 £887m £930m £675m Pensions 71 78 10% £569m Protection 66 75 14% Annuities 259 279 8% Other 24 3 (88)% Total 420 435 4% FY12 FY13 FY12 FY13 Remittances to group • Improved performance in all key metrics £300m • Perf
Slide 17: UK GI
UK GI Operating profit Operating profit Operating expenses* £m FY12 FY13 £459m Underwriting result 48 117 Internal £431m £710m £704m loan £78m Inv Income internal loan 299 221 Change Other Inv Income 112 93 Total 459 431 £381m Combined operating ratio FY12 FY13 Personal Motor 97% 96% FY12 FY13 FY12
Slide 18: France
France Value of new business Operating profit Operating expenses £m FY12 FY13 £448m £425m £422m £411m Protection 32 43 35% Unit linked savings 32 74 130% Other savings 55 49 (13)% Total 119 166 39% FY12 FY13 FY12 FY13 Remittances to group VNB • Expense reduction on local currency basis £235m £166m •
Slide 19: Canada
Canada Combined operating ratio Operating profit Operating expenses FY12 FY13 £277m £401m £378m £246m Personal Motor 90% 90% Home 92% 100% Commercial 98% 97% Total 93% 95% FY12 FY13 FY12 FY13 Remittances to group Net written premium £136m £130m • Expenses lower, premiums higher £2.2bn £2.3bn • Remit
Slide 20: Combined Operating Ratio
Combined Operating Ratio Current year Prior year Combined underlying Weather reserve Expense ratio operating ratio loss ratio releases1 32.8% 32.8% 97.0% 97.3% 21.9%2 22.1%2 (0.9)% (0.9)% 61.6% 61.1% 10.9%3 10.7%3 3.5% 4.3% FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY13 1GI Only 2Commission ratio
Slide 21: Value of new business
Value of new business FY12 FY13 VNB/Capital Strain improved by 112ppt since 2010 UK & Ireland 412 7% 441 France 119 39% 166 185% Poland 35 46% 51 130% Turkey 30 23% 37 93% 73% Asia* 55 65% 91 Italy 29 48% 15 2010 2011 2012 2013 VNB and Strain net of taxation and minority interests Spain1 58 41% 34 M
Slide 22: Cash remittances
Cash remittances Total by country* Received in 2012 Received in 2013 Operational Operational % remitted to % remitted £ million capital Remittance capital Remittance Group to Group generation generation UK Life & Health 662 150 23% 570 300 53% UK GI 341 150 44% 340 347 102% France 330 202 61% 294 23
Slide 23: Expense reduction on track
Expense reduction on track £360 million cost savings achieved 132 £3,366m 33 11% 106 reduction 6 £3,234m 52 4 41 6 18 18 10 £3,006m Baseline FY12 Forex UK Life UKGI Ireland France Rest of Asia Canada Aviva Other FY13 FY11 Movement Europe Investors Group Market numbers displayed on a constant currenc
Slide 24: Economic capital surplus
Economic capital surplus Economic capital surplus* £7.1bn1 Key economic capital* movements in 2013 £8.3bn Economic Capital* Market Pro forma £7.1bn movements Dividend FY13 £bn 2012 and other £5.3bn Available capital 17.0 1.9 (0.5) 18.4 182% Required capital (9.9) (0.2) - (10.1) 172% 147% Total 7.1 1
Slide 25: Net asset value
Net asset value Net asset value per share IFRS MCEV Opening NAV per share at 31 December 2012 278p 422p Operating profit 53p 55p Effect of US Disposal 6p 6p Dividends and appropriations (18)p (18)p Investment variances & AFS equity movements (14)p 18p Pension fund (19)p (19)p Integration and restruc
Slide 26: Intercompany loan
Intercompany loan Significant progress made in 2013 and plans in place to reduce intercompany balance to £2.2bn by 2015 £5.8bn £(0.45)bn £(1.25)bn £4.1bn £(0.45)bn £(0.4)bn £(0.6)bn £(0.4)bn £(0.05)bn £2.2bn Opening Cash Other Actions Current Balance Future Cash Pension Pension Internal Other Target
Slide 27: 2013 Results - Mark Wilson, Group CEO
2013 Results Mark Wilson Group Chief Executive Officer 27
Slide 28: 2014 – Looking ahead
2014 – Looking ahead Focus areas • Continue to improve cash remittances • Ensure benefit of £400m expense savings flow through to P&L in 2014 Cash flow • Improve cost income ratio • Continue to improve our turnaround businesses • Reduce integration and restructuring costs in 2014 • Increase VNB in o
Slide 29: 2013 Results Q&A
AVIVA 2013 Results Q&A
Slide 30: 2013 Results Appendices
AVIVA 2013 Results Appendices
Slide 31: Group Life profit driver analysis
Group Life profit driver analysis Key: IFRS Profit Driver Pre-tax FY12 FY13 Variance operating profit 1,831 1,901 4% Income DAC/AVIF Expenses and commissions amortisation and other 3,609 3,352 (7)% 9 131 1356% (1,787) (1,582) 11% Acquisition expenses Admin expenses and renewal New business income In
Slide 32: Group Life profit driver analysis
Group Life profit driver analysis Key: IFRS Profit Driver Investment return FY12 FY13 Variance 1,964 1,944 (1)% Expected return on Unit linked margin Participating business Spread margin shareholder assets 882 885 0.3% 547 590 8% 197 205 4% 338 264 (22)% Bonus Spread AMC (bps) 107 102 (5) 54 59 5 43
Slide 33: Operating Expense Ratio
Operating Expense Ratio Operating Expense Ratio -3pps 57% 54% 2012 2013 Components of Operating Expense Ratio £ million FY12 FY13 Regional Operating Profit 2,599 2,701 Less Corporate Centre (136) (150) Group Operating profit excluding Debt Costs and Pension income 2,463 2,551 Add operating expenses