Aviva Plc · LSE:AV.
Aviva — FY2020 Earnings Presentation
66 slides from Aviva's earnings presentation, March 2021
Slide 1: Aviva plc 2020 Results
Aviva pit 2020 Results
Slide 2: Cautionary statements
Cautionary statements, This document 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 ‘forwarc-looking statements’ with respect to certai
Slide 3: Strategic progress update
Strategic progress update Amanda Blanc Full year 2020 financial results Jason Windsor Accelerating UK growth - strategic update Amanda Blanc Q&A
Slide 4: Strategic progress update
Slide 5: Delivering at pace against our strategic priorities
Delivering at pace against our strategic priorities Focus the portfolio ve Completed disposals since 6th August 2020 of £1.7bn: Singapore, Indonesia and Hong Kong WU Announced disposals with expected completion in 2021 of £4.3bn: France, Italy, Vietnam and Turkey v Actively managing for value: Polan
Slide 6: Delivering robust financial and trading performance
Delivering robust financial and trading performance Resilient performance from Core markets in 2020 Growth highlights Cash remittances’ Cost Operating ¥ Commercial lines NWP of £3.2bn, up 8% YoY to the Group savings profit £1.4bn £180m £2.5bn aot Someaeet crcl centre-costs Y BPArecord new business s
Slide 7: Transforming performance and growing "New Aviva"
Transforming performance and growing “New Aviva” Strategic beliefs underpinning Building on strong positions in performance transformation our Core markets The only UK & Ireland insurer able to 16m serve all customer needs, with market- customers leading positions Customers at the heart of everythin
Slide 8: Reinvigorated leadership team and culture
Reinvigorated leadership team and culture New and experienced leadership team Stronger performance culture ely et Py 7 new appointees to the ExCo iy a ai Amanda Blanc Jason Windsor Nick Amin Group CEO Group CFO Group COO Clarity on expectations of our leaders i me . @. in ry } iki Qo Overhaul of ind
Slide 9: Increased ambition on sustainability
Increased ambition on sustainability Fighting climate change Net zero Net zero Reduction in carbon operations & company? intensity of assets! supply chain bo : with you WES 2040 25%by2025 2030 today, for A 5 a better P re orawige 60% by 2030 3 tomorrow é Building a stronger Britain UK population Inv
Slide 10: Creating value for our shareholders
Creating value for our shareholders New financial targets Cash remittances’ from Core Operating efficiency Debt leverage ratio*’ >£5bn £1.8bn £300m __—‘ Top quartile <30% cumulative 2023 net savings from efficiency across all 2021-23 Core by end of 2022 businesses’ Excess capital deployment Announci
Slide 11: Full year 2020 financial results
Slide 12: Delivering on our priorities
Delivering on our priorities oo. . Core cash remittances’ Centre liquidity* Delivering against our strategy * Decisive progress on focusing the portfolio men f4bn oye . eae UK Life * Strong Solvency II position and centre liquidity’ ial 13am * £1.7bn debt reduction to accelerate deleveraging * Clear
Slide 13: Sales of Aviva France and Italy - major progress in our strategic transformation
Sales of Aviva France and Italy - major progress in our strategic transformation Cover ratio’ QOD 13.0 » , E> <p Surplus’ A Post Estimated FY20 Less Less Ita ly Proceeds’ France Impact (£m) France (inc. Vita) and Italy Own funds’ 25.8 (3.6) (1.6) 3.9 24.5 (1.3) scRY (12.8) 16 0.8 - (10.4) 2.4 Surplu
Slide 14: Material reduction in leverage in H1 2021
Material reduction in leverage in H1 2021 as first step in executing against our capital framework Our capital framework Accelerating leverage reduction SII cover ratio** 160%-180% working range £1.7bn debt reduction Debt leverage ratio”* < 30% £800m £900m Tender offer H1 maturities/calls’ Invest fo
Slide 15: Debt actions utilising excess cash and capital
Debt actions utilising m excess cash and capital rity of current SII cover ratio” 206% 202% wise (12)% ° 190% ee 180% wa nn Sn nnn nn nnn nnn nnn nnn nnn nnn nnn 160% Fy19 HY20 FY20 Expected _ Illustrative debt post debt reduction reduction H12021 Centre liquidity’ £4.1bn £2.4bn £2.5bn 22.3bn Feb 20
Slide 16: Cash remittance target with strong growth in excess cash flow
Cash remittance target with strong growth in excess cash flow New 3-year remittance target Building excess cash flow to support business and dividend growth {cash remittances from Core EB centre cash outflows > Cash remittances’ from Core Target >£5bn >£5bn a 1 . I Cumulative target fl4bn i I Illust
Slide 17: £300m net cost target from Core markets on track
£300m net cost target from Core markets on track Delivered £180m of cost savings to date £300m target now to be delivered from Core markets only £3,165m £300m * 9.5% of FY18 controllable costs' from Core markets (previously c.7.5% of Group) plus absorbing 4 years of inflation Continued progress as w
Slide 18: 2020 financial results highlights
2020 financial results highlight Group Core markets FY20 FY19 Change UK, Canada, Ireland & Aviva Investors FY20 FY19 Change £m £m % £m £m % Operating profit’’ 3,161 3,184 = (1)% . : Operating profit 2,492 2,558 (3)% IFRS profit after tax 2,910 2,663 9% Cash remittances’ excl. specials 1,500 1,925 (2
Slide 19: UK & Ireland Life
UK & Ireland Life me me Change * Growth in Savings & Retirement and BPA, offset by m m . 7 woe ee . : hs = lower new business profits in individual protection and Operating profit'* 1,907 1,974 (3)% . ; . equity release - Savings & Retirement 119 88 35% - Annuities & Equity Release 815 866 (6)% * He
Slide 20: Strong growth in S&R and bulk purchase annuities
Strong growth in S&R and bulk purchase annuities Savings & Retirement Assets under management® Annuities & Equity Release Assets under management® crsbn | 2020 £128bn £119m £815m +11% £113bn *13% +35% e67bn ° -6% Operating profit’ Operating profit’ £62bn £91bn £8.5bn New business. +14% +25% +21% Net
Slide 21: Resilience in Protection & Health and management actions
Resilience in Protection & Health and continued benefit from management actions and assumption changes Protection & Health Management actions and other’ PVNBP* Operating profit* £2,212m £2,382m £469m ” £416m £189m £371m £123m +2% a 6% Operating profit’ Expenses release +38% £390m Group protection Lo
Slide 22: General Insurance - UK, Ireland and Canada
General Insurance - UK, Ireland and Canada Improvement in underlying operating performance Strong progress in COR’ FY20 FY19 Change £m £m % = NWP Operating profit’ 500 488 2% e1.6bn £7.7bn £7.7bn cor Underwriting result 244 183 33% _—_ LTIR and other 256 305 = (16)% 99.0%" NWP 7,726 7,699 COR’ (%) 9
Slide 23: UK GI - Double-digit growth in commercial lines
UK GI - Double-digit growth in commercial lines UK GI personal lines UK GI commercial lines FY20 FY19 Change RNPS+17pp FY20 FY19 Change 95% (+3%) NWP (£m) 2,232 2,399 ()% vs. competitor NWP (£m) 2,008 1,819 10% broker trust Underwriting (£m) 172 7 912% benchmark Underwriting (£m) (109) 69 (258)% sco
Slide 24: Canada GI - Strong improvement in underlying performance
Canada GI - Strong improvement in underlying performance Canada GI personal lines Canada GI commercial lines FY20 FY19 Change FY20 Fy19 = Change NWP (£m) 2,075 2,100 (1)% 2.4m NWP (£m) 1,021 961 6% 378k Underwriting (£m) 262 46 470% customers Underwriting (£m) (100) 19 (626)% policies cor’ 87.2% 97.
Slide 25: Aviva Investors - Improved net flows and positive outlook
Aviva Investors - Improved net flows and positive outlook FY20 FY19 Change £m £m Operating profit’' 85 96 (11)% Total net flows’ 8.5 (2.8) 11.3 Net flows’ excluding liquidity funds (£bn) 0.2 (4.1) 43 - Internal legacy (£bn) (6.6) (7.8) 12 - Internal core (£bn) 5.1 14 3.7 - External (£bn) 7 2.3 (0.6)
Slide 26: Manage-for-value: Continental Europe and Asia
Manage-fo Continental Europe and Asia £m £m % Operating profit' 1,311 1,150 14% * France profit stable with an improved mix of business offsetting -France 467 473 (1)% adverse protection claims experience - Italy 298 195 53% * OCG' reduced as a result of correction to a mis-applied rule in -Poland 1
Slide 27: Delivering on our priorities
Delivering on our priorities Focusing the portfolio * Sales of France and Italy - major progress in our strategic transformation * Builds on divestments in other markets including Singapore, Vietnam, Turkey Executing against our capital framework * Taking actions to reduce leverage’ <30% * Investing
Slide 28: Accelerating UK growth - strategic update
Accelerating _ UK growth- strategic update
Slide 29: Big vision and clear priorities for the UK
Big vision and clear priorities for the UK Our vision Four strategic priorities sec atecs To be the UK's leading insurer 1 < ) SIMPLIFY, DIGITISE AND AUTOMATE by establishing Aviva as the go-to customer brand... 2? & DRIVE TARGETED GROWTH ... for all insurance, protection, - savings and retirement n
Slide 30: Strategy centred on what our customers need
tegy centred on what our Our customers... @eé Individuals SMEs & Corporates Intermediaries What they want from their What they need... insurer... Saving for the future, for Simple and transparent products that themselves and employees meet their needs at a fair price Trusted brand they can rely on t
Slide 31: Delivering on our customers' expectations
Delivering on our customers’ expectations #1 brand 66% 55% 42% in our sector Connarentompettoy — ebenearencomsenton > onenennet competion Award winning Insurance WSB ege ‘THE BRITISH INSURANCE Propositions Fras Quuards Sim I 5 m Market leading +45 TNPS +36 TNPS +53 TNPS : customer services S&R UKGI
Slide 32: Strongest relationships with intermediaries
Strongest relationships with intermediaries Intermediaries are crucial in the UK... Share of market held by Intermediaries , Individual savings 70% ia Individual annuities 53% Pa Equity release 100% Individuals [DCG Wye cen 91% GI Personal 51% Workplace 88% an”) BPA 100% " Group protection 95% SMEs
Slide 33: Our leading UK market positions are a unique strength
Our leading UK market positions are a unique strength Retirement Protection & Insurance i200 #2 (15%) #3 (24% BPA |Group Protection| Protection #2 (18%) #1 (28%) “Individual Annuities. | Health | #3 (12%) #3 (15%) “Equity Release GI Commercial #1 (11%) By GI Personal #3 (10%) AVIVA Savi ngs Market P
Slide 34: Our UK model delivers tangible benefits and synergies
Our UK model delivers tangible benefits and synergies Capitalising on #1 position in workplace pension’ Bulk Personal Purchase General Annuities DB schemes Serving needs of Insurance RK de-risking Corporates Employees individuals Z| Health, Pe A | ; —-a Individual UK Protection & F oe 4] =) — Saving
Slide 35: Four priorities for the UK
Four priorities for the UK 1 < ) SIMPLIFY, DIGITISE AND AUTOMATE 2 & ) DRIVE TARGETED GROWTH 3 aM ) POWER UP THE AVIVA BRAND 4 BUILD ENGAGING, DIGITALLY LED CUSTOMER EXPERIENCE
Slide 36: Intensifying simplification, digitisation and automation
intensifying simplification, digitisation and automation Digitise & automate customer journeys 50% 2020, UK customer journeys digitised and automated! a >75% By end of 2023 Simplify our product portfolio 261 2020, UK GI PL products (30% reduction over past year) —S -65% By end of 2022 Simplify our t
Slide 37: Targeted growth supported by fundamental trends
Targeted growth supported by fundamental trends Fundamental trends @ &o 6 6 G&G Ageing population and income in retirement gap Individual responsibility for retirement and pension auto-enrolment Shift from DB to DC and Corporate de-risking Heightened focus on health & wellness and protection gap Eco
Slide 38: Powering up the Aviva brand
Powering up the Aviva brand Aviva is the No. 1 insurance brand in the UK The brand needs to provide clarity on the breadth of our offering Brand needs to highlight Aviva as the UK’s leading insurer Relaunching of the Aviva brand in April 2021 Build trust and improve awareness with customers, who wil
Slide 39: Building engaging, digitally led customer experience
Building engaging, digitally led customer experience Enhance mobile-led digital Connect rich customer data to Lead the UK market with platforms, giving customers offer customers the right customer-centric access to full Aviva offering and products and services at the innovative propositions useful t
Slide 40: Big vision and clear priorities for the UK
Big vision and clear priorities for the UK Our vision Four strategic priorities , oe To be the UK’s leading insurer 1 & SIMPLIFY, DIGITISE AND AUTOMATE by establishing Aviva as the go-to customer brand... 2? & DRIVE TARGETED GROWTH ... for all insurance, protection, - savings and retirement needs...
Slide 41: Q&A
Slide 42: How we will measure success
How we will measure success Profitable Meeting more G . Avi ti fi hi growth customers’ needs rowing Aviva customer tranchise Gl: NWP & COR’ % multiple product Life: PVNBP’& VNB’ holders’ S&R & Aviva Investors: NF‘ & CIR Customer Customer journeys 9-9 9 NPS digitised and automated Modernising operati
Slide 43: Key messages and take-aways
Key messages and take-aways * Clear vision and priorities for Aviva * Strong progress to date and delivering on our commitments * Reinvigorated leadership team in place * Leading UK financial services on fighting climate change and building a stronger Britain * Confident in our ability to grow the b
Slide 44: Q&A session
Q&A session Ls Amanda Blanc, Chief Executive Officer q Jason Windsor, Chief Financial Officer
Slide 45: Investor relations
Investor relation >>) Coming up... March 16 March 29/31 March 6 May 27 May 12 August Virtual roadshows Morgan Stanley conference HSBC West Coast Financials conference Annual General Meeting First quarter 2021 update Half year 2021 results QO Contact us Investor relations Jakub Rosochowski Tegan Gill
Slide 46: Appendix
Appendix
Slide 47: Balance sheet
Balance sheet ee 2
Slide 48: Solvency II position
Solvency II position (25)pp (pp a> &> Ee (1,828) 13,000 257 550 (649) =— ™ Bp apes repayment 25,770 Debt oe (557) Own funds 24,548 2,242 SCR (11,910) (1,165) - - 64 (12,770) All footnotes on pages 64-66 MAVIVA 48
Slide 49: Solvency II return on capital/equity
Solvency Il return on capital/equity: it SII Group ROE soe manana rva0FYi9._ Change Management actions & other’ £m £m % Life new business 698 659 6% 14.3% fet 7 a Existing business 1,549 1,125 38% - (1.1)% Debt & centre costs (incl. pref/DCI costs) (627) (543) (15)% 6.2% 9.8% Management actions & ot
Slide 50: Solvency II return on capital/equity (FY19)
Solvency II return on capital/equity' (FY19) Solvency I operating own funds generation’ Non-life Solvency II 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 & Ireland Life 373 171 - 703 1,247 13,733
Slide 51: Solvency II return on capital/equity (FY20)
Solvency II return on capital/equity' (FY20) Solvency I operating own funds generation’ Non-life Solvency Il New Existing capital Opening Return on business (life) business (life) generation Other’ Total own funds capital'/equity’ 2020 £m £m £m £m £m £m % UK & Ireland Life 449 273 = 335 1,057 14,241
Slide 52: Solvency II own funds
Solvency II own funds Opening own funds Closing own funds 1 January 2020 31 December 2020 £m £m UK & Ireland Life 14,241 15,148 UK & Ireland General Insurance 2,509 2,401 Canada 1,442 1,534 Aviva Investors 488 412 Core markets 18,680 19,555 Manage-for-value markets. 8,010 7,166 Group centre costs an
Slide 53: Solvency II sensitivities (shareholder view)
Solvency II sensitivities (shareholder view) Impact onsurplus ____Impacton cover ratio. Impacton surplus Impact on cover ratio Sensitivity ~FY20 ~FY20 -FY19 ~FY19 £bn pp £bn pp Genyeaczimuts 25 bps increase in interest rate 03 spp 02 4pp assumptions 50 bps increase in interest rate 06 9p 02 6p 100 b
Slide 54: Solvency II regulatory own funds tiering and debt leverage
Solvency II regulatory own funds tiering and debt leverage’ %ofown %ofown Regulatory view 2020 2019 funds funds WoFSCR % of SCR Regulatory view 2020 2019 £m £m FY20 FY19 FY20 Fy19 &m £m Unrestricted Tier 1 20,850 20,377 71% 72% 127% 131% Solvency II regulatory debt 8,316 7,892 Restricted Tier 1 1,31
Slide 55: Subordinated debt profile
Subordinated debt profile £1,300m Restricted Tier 1 Hitier2 Hitier3 £800m £870m ean £806m £700m 658m £627m £600m £582m £500m 3.375% £400m / 6.125% 12.009] 6.125961 3.875% 4.00% £258m 4.375% 2021 2022 2023 2024 2025 2026 2029 2030 2035 2038 All debt instruments have been presented at optional first c
Slide 56: Earnings per share
Earnings per share
Slide 57: Operating earnings per share
Operating earnings per share FY20 FY19 Continuing operations Adjusted operating profit before tax attributable to shareholders’ profits* 2,849 2,933 Less - Tax attributable to shareholders’ profit (596) (640) - Amount attributable to non-controlling interests (98) (98) - Coupon payments in respect o
Slide 58: Basic earnings per share
Basic earnings per share FY20 FY19 Continuing operations Adjusted operating profit attributable to ordinary shareholders? 2,111 2,144 Adjusting items - Life business: Investment variances and economic assumption changes 143 558 - Non-life business: Short-term fluctuation in return on investments (11
Slide 59: Assets
Assets
Slide 60: Total managed assets
Total managed assets Assets by type of liabilities covered Participating assets by type £m fm 134,952 140,810 423,333 - . 401,025 Hl Euro-style Hl Uk With-profits 140,810 style 134,952 I Participating funds I Policyholder funds Fy19 Fy20 I Shareholder funds 176,500 Shareholder assets by type £m 106,
Slide 61: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m 106,023 Total: £27,111m 93,705 28,353 24,065 AAA HA — Ei Less than BBB Government debt HAA $= W688 ( Non-rated I Corporate bonds Other debt Il Vortgage loans Government debt by rating I other Total: £28,353m 22% 15,640 Fy19 FY
Slide 62: Shareholder assets - corporate bonds and loans
Shareholder assets - corporate bonds and loans Corporate bonds by industry Loans by type Total: £34,924m I Financials - Banks I Communications [Bl Loans & advances to banks 1 Financials - Insurance & other [ill Industrial {0 Healthcare, Infrastructure & PFI other loans Wl Utilities HM oil & gas I Mo
Slide 63: Shareholder assets - Mortgage loans
Shareholder assets - Mortgage loans Mortgage loans Commercial real estate portfolio Total: £22,034 FY20 commercial total: £7,479m uv Loans in arrears (£m) 9 34 Loan interest cover Fyl3) FY14. sO FYIS) ss FY16.—SsFYI7-~—s*#FYI8~—FY19_—s FY20 1 Healthcare, infrastructure & PFI 1) commercial Il Securit
Slide 64: Footnotes (1)
Footnotes (1) + DenotesAlternative Performance Measures (APMs) and furtherinformation can be foundin the ‘Other Information’ section of the Analyst Pack. slide Reference Footnote 1 Extemal net flows excluding net lows into liquidity funds and cash . 2 References to sales represents present value of
Slide 65: Footnotes (2)
Footnotes (2) + DenotesAlternative Performance Measures (APMs) and furtherinformation can be foundin the ‘Other Information’ section of the Analyst Pack. slide Reference Footnote Following a review ofthe presentation of intercompany loan interest, to achieve consistency in our reporting, comparative
Slide 66: Footnotes (3)
Footnotes (3) + DenotesAlternative Performance Measures (APMs) and furtherinformation can be foundin the ‘Other Information’ section of the Analyst Pack. slide Reference Footnote 36 1 Aviva-owned UK customer journeys ie, excludes outsourced journeys 1 Includes multiple products on a single policy eg