Aviva Plc · LSE:AV.
Aviva — Investor Day (October 2005)
48 slides from Aviva's investor day presentation, Oct 18, 2005
Slide 1: Investor & Analyst Seminar Aviva General Insurance
Investor & Analyst Seminar Aviva General Insurance 18 October 2005
Slide 2: Please switch mobiles and Blackberrys off
Please switch mobiles and Blackberrys off
Slide 3: 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 uncertaint
Slide 4: Welcome
Welcome Patrick Snowball Group Executive Director Aviva General Insurance
Slide 5: Today's Agenda
Today’s Agenda Patrick Snowball - Welcome Andrew Moss - Aviva Patrick Snowball - Aviva General Insurance Mark Hodges - Continuing to Deliver Simon Machell - Substantial Value Creation Q&A Patrick Snowball - Closing Session Insight Sessions Lunch
Slide 6: Our Structure
Our Structure Aviva General Insurance Patrick Snowball Group Executive Director - Aviva General insurance Chief Executive - Norwich Union Insurance Ireland UK Canada NUI Functions shared by RAC & NUGI | Finance HRT Solutions MD RAG MD NUGI ‘Simon Machel Mark Hodges * Rescue * Consumer * RAC Semvices
Slide 7: Aviva
Aviva Andrew Moss Group Finance Director Aviva
Slide 8: The Aviva Proposition
The Aviva Proposition • A balanced portfolio of businesses providing flexibility, strength and diversity - Growing sustainable profits from General Insurance - The growth story of International Life - Competitive advantage in UK Life • Generating £752m capital in H1 2005 to fund dividends and growth
Slide 9: The Foundations for Sustainable Growth
The Foundations for Sustainable Growth 2000-2003 2004-2005 2006 > Surviving Positioning Delivering growth the storm for growth and value • Cost reduction • Capital structure • Winning composite business • Operational • RAC acquisition model excellence • China / India • Benefits of scale • Major disp
Slide 10: The International Growth Story
The International Growth Story The European portfolio New Business Contribution (£m)* 500 400 401 300 359 359 401 23% Full year total 200 249 249 Half year total 100 195 240 113 159 240 0 2002 2003 2004 HY 2005 An increasing presence in Asia • China - 9 cities • Russia - Representative office • Indi
Slide 11: The UK Life Opportunity
The UK Life Opportunity • Current growth approximately 5% before bulk transfers • Gradual return to savings expected to accelerate in 2006 Poised to benefit and grow when demand returns Distributor Panel Members 4 others 5 others 5 others Key Protection Only Relationships Key Single Tie Relationship
Slide 12: A Balanced Portfolio
A Balanced Portfolio H1 2005 World-wide business mix (£17bn) UK Cont. Europe Intl. Life 4%* General 9% General 17% Intl. General 4% Cont. Europe UK Life 27%** Life 39% * Net written premiums from continuing operations. ** Based on PVNBP for life and pensions business plus investment sales The Benefi
Slide 13: Capital Efficiency – Diversification Benefits
Capital Efficiency – Diversification Benefits Group diversification and general insurance vs life investment % Group diversification 35 30 Aviva 25 20% 40% 60% 80% 20 G.I. business / total group economic capital Source: Aviva analysis Room for Further General Insurance Growth
Slide 14: Growing Profits from General Insurance
Growing Profits from General Insurance 2001 2002 2003 2004* 2005* (HY) Net Written Premiums £7,850m £7,805m £8,524m £8,864m £4,599m Combined Operating Ratio 102% 102% 100% 97% 95% Operating Profit1 £769m £752m £830m £1,070m £607m ROCE** 12.0% 12.5% 16.4% 17.1% 18.7% All figures from continuing opera
Slide 15: Powerful Engine for Profitable Growth
Powerful Engine for Profitable Growth Patrick Snowball Group Executive Director Aviva General Insurance
Slide 16: Focus for Today's Session
Focus for Today’s Session • COR Target 98% or below • Positive Global Market Environment • Improving Rates in UK • NUI’s Sustainable Competitive Advantage • RAC: £250m p.a. by 2008* • Cost Savings : - Confirm £100 million profit impact in 2006 - Run rate £130 million p.a. • 1.4 million Additional RA
Slide 17: £5bn Profit Since 2000 Underpins the Aviva Result
£5bn Profit Since 2000 - Underpins the Aviva Result 1400 110 20 18 1200 16 105 Operating Profit (£m) 1000 14 12 ROCE % COR % 800 100 10 600 8 400 6 95 4 200 2 0 90 0 HY HY 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 COR Operating Profit ROCE Represents Worldwide General Insurance inc
Slide 18: Worldwide 98% COR Target
Worldwide 98% COR Target Target < 100% COR to 2006 102% 102% 102% 100% Target < 98% COR 98% 97% 95% 94% 2001 2002 2003 2004 HY 2005 Confidence in Our Ability to Deliver
Slide 19: Hurricane Katrina
Hurricane Katrina • Katrina modelled loss estimates $40 bn-$60bn - Largest in US history - No Aviva exposure in US* - Effects across other markets *Travel and PA claims are less than £1m Benefiting from US Exit in 2000
Slide 20: A Market Perspective
A Market Perspective Top 5 & Top 10 Market Shares 90% by Press Release Class 2004 • UK Market Conditions 80% 70% - Market discipline 60% - Competitive but 50% 40% improving market 30% 20% - NUI portfolio allows 10% us to deliver 0% Personal Personal Commercial Commercial Commercial consistent profit
Slide 21: NUI's Business is Uniquely Balanced
NUI’s Business is Uniquely Balanced 100% 11% 90% 34% 8% Commercial: Broker 80% Commercial: Non-Broker 70% 1% 27% 70% Personal: Broker 60% 14% Personal: Partnerships 50% Personal: Direct 40% 25% 2% RAC income stream 30% 54% 20% 15% 16% 10% 4% 10% 9% 0% NUI 2005 HY RBSI 2004 (e) Zurich 2004 (e) Source
Slide 22: Continuing to Deliver
Continuing to Deliver Mark Hodges Managing Director Norwich Union General Insurance
Slide 23: Delivering Our COR Commitment
Delivering Our COR Commitment Closer to Customers Service provider with Insurance at the Core Cost Customer Strong and Care at the heart effective Acquisition and Retention Claims Focus and Financial Efficiency & U/W handling control Multi product/ multi Multi channel Financial Low Cost and Focus on
Slide 24: Multi Channel = Growth
Multi Channel = Growth Direct NWP Growth (£m's) 1000 • Substantial direct growth 22% 750 £ 20% • 22% in 2004 9% • 22% in half year 2005 500 250 • Between 2002 and 2004 NUD 2001 2002 2003 2004 grew by £300m NWP Partnership NWP Growth (£m's) 1750 1700 • Significant partnership growth 1650 £ 1600 1550
Slide 25: Multi Channel / Multi Product Advantage
Multi Channel / Multi Product Advantage COR Expenses + Commission 100% 100% 80% 60% 80% 40% 20% 60% 0% Broker CP Motor & Commercial Household Personal Broker CP Creditor Direct Based on 2004 NUI performance Product and Channel Multi Channel Approach Delivers Profitability
Slide 26: Scale
Scale • Source - Multi Product / Multi Channel • Applications - Supply Chain - Data - Expense Efficiency Scale Drives Performance and Ability to Invest
Slide 27: Market Leading Rating & Innovation
Market Leading Rating & Innovation 2004 vs 2003 Cost NUI NUI COR Market Rating Competitive Inflation Rating Change 2003 2004 Change Benefit Change Personal Motor 6% 2% 102% 102% - 4% (2%) Homeowner 6% 5% 99% 97% 2% 3% 4% Comm Motor 6% - 97% 97% - 6% (1%) Comm Property 4% 4% 91% 88% 3% 3% 1% Scale Cr
Slide 28: Scale
Scale • Source - Multi Product / Multi Channel • Applications - Supply Chain - Data - Expense Efficiency • Outcome - Competitive benefit drives COR stability - Investment in future - 100,000 PAYD devices by end 2006 Scale Drives Performance and Ability to Invest Price Sensitive – Not for further dis
Slide 29: Financial and Underwriting Discipline
Financial and Underwriting Discipline Large Claim Analysis (>£1m) • Continued focus on £160m 900 personal lines and SMEs Commercial Property NEP (£m) £140m 800 Sum of Large Claim Cost 700 • 1,500 accredited £120m commercial underwriters £100m 600 targeted on future profit 500 £80m 400 • Significant
Slide 30: Customer Service and Retention
Customer Service and Retention Leadership and Morale High Morale Annualised Resignation Aggregate Leadership Rate % Scores % 18 90 Sales & Reduced 16 Retention Attrition 14 12 10 80 8 6 Customer Increased 4 Satisfaction Experience 2 0 70 2003 2004 2005 Service and Morale are Critical to Financial Pe
Slide 31: Leading Online Insurer
Leading Online Insurer New Sales 2005 2004 • Leading online insurer 2003 car home 2002 travel • Expect 500k sales online 2001 in 2005 2000 0 100,000 200,000 300,000 400,000 500,000 600,000 • 14% share of online Channel Mix - Motor insurance market 100% 90% 80% 70% • Continued development of 60% 50%
Slide 32: RAC Direct Insurance Growth Plans
RAC Acquisition • RAC Direct Insurance Brand Consideration Who would you consider using first for motor insurance? - Significant growth 25% Unprompted potential Prompted 20% - Additional 600k+ 15% customers by 2008 10% - Conversion rate on AXA 5% Direct book up 15% 0% NU AA AXA RAC Direct Line Churc
Slide 33: RAC Integration: Cost Synergies
RAC Integration: Cost Synergies £37m £36m NUGI Cost Cost Synergies Synergies • Leveraging Commercial Relationships • Contact Centre Optimisation • Process Improvement • Transformation of Distribution RAC • First Notification of Loss (Club Line) • Marketing Supply Chain and Procurement • RAC Insuranc
Slide 34: Substantial Value Creation
Substantial Value Creation Simon Machell Managing Director RAC
Slide 35: RAC: A Transformational Deal for NUI
RAC: A Transformational Deal for NUI Home Insurance Travel Insurance Motor Insurance Telematics NUI Vehicle History Checking Huge growth Car Sales potential RAC Direct Insurance RAC Vehicle Inspection RAC Financial Services RAC RAC Auto Windscreens RAC Driver Training Rescue A Portfolio of Market Le
Slide 36: RAC Accelerates NUI Strategy
RAC Accelerates NUI Strategy • Focus and efficiency Closer to Customers • Financial discipline - Cost savings Strong Cost Customer effective Acquisition Focus and Financial and Retention Claims Efficiency & U/W • Integration benefits handling Multi control product/ - Revenue synergies multi Multi ch
Slide 37: RAC: 6 Months on a Simple Business Model
RAC: 6 Months on a Simple Business Model Roadside BSM Auto Windscreens Legal Services RAC Claims Management Parts RAC Insurance Rescue Loans MSS RAC India LVL NUI Hyundai Supply Transfleet RAC Chain RAC MOD Auto Services Lex Commercials Windscreens Airside Software Solutions LVL Lex Auto Logistics H
Slide 38: RAC Integration: Cost Synergies
RAC Integration: Cost Synergies £37m £36m Cost Cost Synergies RAC Synergies • Rescue and Services divisions created • Corporate office closed • Rationalisation of call centres NUGI • Back office off-shoring Supply Chain and Procurement £45m Cost Synergies £12m Cost Synergies Centralising Support Fun
Slide 39: RAC: Developing the Business - RAC Rescue
RAC: Developing the Business RAC Rescue • No1 for Customer Innovation and for Customer Service • Grow individual membership by 800k by 2008 - 400k in Ireland via Hibernian • Corporate partner deals in association with NUGI • The RAC and NU Rescue brands cover the market An Excellent Base for Sustain
Slide 40: RAC: Developing the Business - RAC Services
RAC: Developing the Business RAC Services • Deliver Operating Profit Growth of around £30m by 2008 - Transform BSM - Leverage RAC brand to grow HPI - Growth of loans business RAC Auto Windscreens • Deliver Operating Profit Growth of around £10 m by 2008 Doubling RAC Profits by 2008
Slide 41: Summary - Accelerating the NUI Strategy
Summary - Accelerating the NUI Strategy • RAC Integration Ahead of Plan • Simplified Business Model • On track to Deliver Cost Savings • Exciting Opportunities for Revenue Growth • Great People Delivering Excellent Service *Profit stream associated with RAC acquisition on a like for like basis Earni
Slide 42: Summary
Summary Patrick Snowball Group Executive Director Aviva General Insurance
Slide 43: Q&A
Slide 44: A Powerful Engine for Profitable Growth
A Powerful Engine for Profitable Growth • RAC integration ahead of plan • Cost saving: - Confirm £100m profit impact in 2006 - Run rate £130 million p.a. • Highly focused on core strategic benefits • Increasingly positive on further benefits - Over 1.4m additional RAC customers by 2008 - £250m p.a.
Slide 45: Insight Sessions
Insight Sessions Group indicated by the logo on your name badge • Aviva group please stay here for the insight session on the Web • Norwich Union group please make your way into the body shop on my left, for the session on PAYD • RAC group, please make your way into the body shop for the RAC Rescue
Slide 46: Appendix
Appendix
Slide 47: £250m pre-tax profit by 2008
£250m pre - tax profit by 2008 Like for like basis Benefiting Insurance result in 2006* £m approx £m approx RAC 2004 profit excluding Leyland discontinued business 80 40 2006 cost saves 100 60 In 2006 180 100 Building to in 2008: Cost saves to ultimate run rate 30 Revenue synergies and business grow
Slide 48: Norwich Union, an Aviva company
NORWICH UNION an AVIVA company