Aviva Plc · LSE:AV.
Aviva — FY2004 Earnings Presentation
27 slides from Aviva's earnings presentation, Mar 9, 2005
Slide 1: AVIVA plc 2004 results
AVIVA plc 2004 results Strength Performance 1 Growth 9 March 2005 © Avi va plc
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: Disclaimer continued
Disclaimer continued This document should be read in conjunction with, and is qualified in its entirety by reference to, the full terms of the announcement by Aviva dated 9 March 2005 relating to the recommended offer for RAC (the “Offer”). This document does not constitute an offer to sell or invit
Slide 4: Agenda
Agenda • Overview Richard Harvey, Group Chief Executive • Financial review Andrew Moss, Group Finance Director • RAC acquisition Patrick Snowball, Group Executive Director • Questions 4 © Avi va plc
Slide 5: A strong set of results
A strong set of results Operating profit (EEV basis) £2,344m +25% Operating profit (MSSB) £1,861m +27% Life and pensions sales (PVNBP) £20.7 bn +12% New business contribution £706 m +11% General insurance COR 96.7% (2003 100%) Full year dividend 25.36p +5% Strongly covered ROCE 14.4% (FY 2003 13.1%)
Slide 6: Strong growth in life new business sales
Strong growth in life new business sales (including investment sales) Growth 12% UK Continental Growth 23% Europe Growth 13% International 0 1 2 3 4 5 6 7 8 9 £’000 million Total new business sales 2003 2004 6 © Avi va plc
Slide 7: Priorities in life markets
Priorities in life markets • UK – target 15% IRR • launch of fully charged pensions • ongoing cost management • further actions on commissions • management of overall business mix – multi-tie partnerships • Continental Europe – deliver bancassurance growth – unit-linked • Asia – build on foundations
Slide 8: Excellent General Insurance results: ahead of target
Excellent General Insurance results: ahead of target % of total GI Combined operating ratios premiums 2004 2003 62 UK 97% 99% 6 France 101% 102% 6 Ireland 87% 97% 8 Netherlands 95% 101% 14 Canada 97% 108% * Group 97% 100% ** ( Pilot added *7% & **1%) Confident of meeting COR target of 100% in 2005 a
Slide 9: Financial review
Financial review Andrew Moss Group Finance Director
Slide 10: Strong results from a position of capital strength
Strong results from a position of capital strength • Full year operating profit of £2,344 million on EEV basis (2003: £1,906 million) • Equivalent to ROCE of 14.4% (2003: 13.1%) • New business contribution up 11% to £706 million • New business margins on PVNBP basis 3.4 % (2003: 3.4%) • Operating pr
Slide 11: Strong results across all major businesses
Strong results across all major businesses 2004 2003 Growth † £m £m % Life EEV operating profit 1,611 1,496 9% Health 58 61 (3%) Fund management 23 (4) - General insurance 1,326 911 47% Non-insurance operations (31) 8 - Corporate costs (178) (160) 11% Unallocated interest (465) (406) 15% Operating p
Slide 12: Growth across our life businesses with further to come in 05
Growth across our life businesses with further to come in 2005 FY 2004 • UK: improvement in unit- linked sales and annuities Sales Growth (2) PVNBP (1) % • France: strong growth in £m AFER and unit-linked sales; good start to Crédit UK 9,172 8% du Nord partnership France 2,782 28% Ireland 561 8% • N
Slide 13: Continued improvement in new business contribution
Continued improvement in new business contribution £m % 250 NBC APE basis margins* PVNBP basis margins** 35 30 200 25 150 20 15 100 10 50 5 0 0 Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404 *Margins calculated as NBC on EEV basis over APE 13 **Margins calculated as NBC over PVNBP © Avi va plc
Slide 14: New business contribution up 11% whilst maintaining a focus on value
New business contribution up 11% whilst maintaining a focus on value New business New business New business contribution (1) margin margin Restated * (using PVNBP) (using APE) 2004 2003 2004 2003 2004 2003 £m £m % % % % UK 269 250 2.9% 2.9% 23.1% 22.4% France 95 72 3.4% 3.2% 30.9% 29.9% Ireland 19 2
Slide 15: Life EEV operating profits up 9%
Life EEV operating profits up 9% EEV operating 2003 return: £1,496 million Higher new business contribution: £42 million Higher expected returns: £83 million Increased negative experience from in force book: £10 million EEV operating return: 2004 £1,611 million 0 500 1,000 1,500 2,000 £m Over 60% of
Slide 16: Strong results from Continental Europe
Strong results from Continental Europe 2004 2003 • UK: impact of operating £m £m assumption changes and experience variances UK 551 597 • France: strong growth in AFER France 286 228 and unit-linked sales; good start to Crédit du Nord partnership Ireland 40 57 • Ireland: impact of lapse Italy 79 70
Slide 17: UK life operating profit
UK life operating profit £m New business contribution post cost of capital 215 Expected returns 475 Experience variances (81) Operating assumption changes (58) 551 Includes: Includes: • Exceptional expenses of £153m • Adverse lapse assumption • Adverse lapse experience of £50m change of £110m • Posi
Slide 18: Strong results from Continental Europe
Strong results from Continental Europe 2004 2003 • UK: impact of operating £m £m assumption changes and experience variances UK 551 597 • France: strong growth in AFER France 286 228 and unit-linked sales; good start Ireland 40 57 to Crédit du Nord partnership Italy 79 70 • Ireland: impact of lapse
Slide 19: Life MSSB profits – businesses generating capital and cash
Life MSSB profits – businesses generating capital and cash 2004 2003 • UK: £m £m – With profit: driven by UK With profit 107 145 reducing terminal Non profit 478 433 bonuses – Non profit: higher France 182 179 Ireland 35 41 surplus on existing Italy 43 30 business Netherlands 166 107 Poland 84 103 •
Slide 20: Excellent general insurance results
Excellent general insurance results General insurance results up 47% Operating profit: 2003 £911 million Underlying improvement in underwriting result : £285 million Non recurrence of reserve strengthening in Canada: £70 million Higher LTIR from strong cash flows: £60 million Operating profit: 2004
Slide 21: General insurance business delivering in an increasingly competitive environment
General insurance business delivering in an increasingly competitive environment 2004 2003 • UK: £m £m – Personal lines increase of up to 2% – SME and commercial lines increase on average between 4% UK 832 676 and 7% – Expense ratio of 10.0% France 32 35 • Ireland: Increasing capacity and Ireland 15
Slide 22: Strong results across all major businesses
Strong results across all major businesses 2004 2003 Includes provision £m £m for vacant owner Life EEV operating profit 1,611 1,496 occupied Health 58 61 properties of £40 Fund management 23 (4) million General insurance 1,326 911 Non-insurance operations (31) 8 Includes GFTP Corporate costs (178)
Slide 23: Working from a position of capital strength
Working from a position of capital strength Estimated 31 December 31 December 2004 2003 Total capital employed £19.3bn £17.8bn in business operations Shareholders’ funds on £14.1bn £11.7bn an EEV basis EU Directive Group £3.6bn excess £2.4bn excess solvency* * Excludes strength of UK and Irish life
Slide 24: A business model that is self-financing
A business model that is self-financing 2004 2003 £m £m New business strain (520) (581) Life inforce profits 848 1,111 Non life profits after interest costs 572 305 Normalised operating profits after tax 900 835 Dividend including preference shares and DCI appropriation (598) (562) Benefit from scri
Slide 25: Change in internal debt
Change in internal debt £m Internal debt as previously reported – 31 December 2003 3,083 Reclassification for net tangible assets (1,470) Net internal debt - 31 December 2003 1,613 Net internal debt - 31 December 2004 987 25 © Avi va plc
Slide 26: Aviva: a thriving business
Aviva: a thriving business • Strong growth in profits – New business contribution +11% – COR improved to 96.7% – Operating efficiency • Brighter outlook for long-term savings • Strong and sustainable outlook for general insurance • Healthy dividend growth and cover Aviva is financially fit and stron
Slide 27: Questions and answers
31 December 2004 results Questions and answers