Aviva Plc · LSE:AV.
Aviva — FY2007 Earnings Presentation
41 slides from Aviva's earnings presentation, 2008
Slide 1: Aviva plc Preliminary results 2007
Aviva plc Preliminary results 2007
Slide 2: Disclaimer
Disclaimer This presentation may include oral and written “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. These forward-looking statements sometimes use words such as ‘an
Slide 3: Agenda
Agenda Introduction Andrew Moss Group Chief Executive Financial review of 2007 Philip Scott Group Finance Director Progress on Andrew Moss One Aviva, twice the value Questions & Answers 3
Slide 4: Highlights
Highlights • A robust set of results – Total long term savings new business sales up 25% – EEV operating profit up 1% to £3,286m – Net asset value per share up 13% to 772p – Final dividend per share up 10% to 33.00p • A strong balance sheet • A confident outlook – Strength and resilience of the comp
Slide 5: One Aviva, twice the value – confidence and progress
One Aviva, twice the value – confidence and progress • Review of Aviva’s 5 strategic priorities, with emphasis on: – The launch of Aviva Investors: a new global approach to asset management • Regional operational review and outlook • A new target to complement the existing set of operational and fin
Slide 6: Aviva plc 2007 full year results
Aviva plc 2007 full year results Philip Scott, Group Finance Director 6
Slide 7: Contents
Contents • Highlights • Regional performance • Life and general insurance experience • New disclosures • Analysis of assets • Capital management • Value creation 7
Slide 8: FY 2007 key highlights
FY 2007 key highlights • Long term new business sales up 25% to £38.6bn • Life new business contribution up 32% to £1,174m at increased margin • GI COR 100% (95% excluding UK adverse weather) • EEV operating profit up 1% to £3,286m • IFRS operating profit down 15% to £2,228m • IFRS earnings per shar
Slide 9: UK Life
UK Life FY07 FY06 £m £m New business Life and pensions 11,655 11,146 • Record full year sales: Investment sales 2,751 2,455 – Total sales, including investments, up 6% New business contribution 360 327 – Margin increased to 3.1% (FY06 2.9%) • Life EEV operating profit up 16% Operating profit Life EE
Slide 10: UK General Insurance
UK General Insurance FY07 FY06 • Adverse weather impact of £475m (FY06: £m £m £75m benefit) Operating profit (1) • Combined operating ratio of 106% – Personal motor profitability improved Underwriting result (214) 394 having achieved rating increases of 6% LTIR 647 724 – Household impacted by floods
Slide 11: Europe
Europe FY07 FY06 £m £m New business Life and pensions 14,914 12,840 • Strong and profitable sales growth in Europe – total sales up 19% Investment sales 1,572 891 New business contribution 598 502 • Margins up to 4.0% (FY 06: 3.9%) Operating profit • EEV life operating profit up 29%, Life EEV 1,543
Slide 12: North America
North America FY07 FY06* £m £m United States • Excellent sales growth of 39% (proforma) PVNBP 3,602 884 • New business contribution up 71% New business contribution 154 20 (proforma) Life EEV operating profit 255 32 • Integration programme completed - cost Life IFRS operating profit 103 13 savings a
Slide 13: Asia Pacific
Asia Pacific FY07 FY06 £m £m New business Life and pensions 1,429 982 • Excellent growth with total sales up 60% Investment sales 2,660 1,564 – Life and pensions sales strong in Australia, China, Hong Kong and India New business contribution 62 43 – Investment sales up 67% Operating profit Life EEV
Slide 14: Asset management
Asset management FY07 FY06 £m £m • UK profits up 10% - mainly Morley IFRS operating profit UK 77 70 – Additional performance fees Europe 60 73 – UK funds under management of £165bn North America 3 3 – Property market decline Asia Pacific 15 9 155 155 – New third party mandates • Europe profits reduc
Slide 15: Life experience
Life experience UK International Total £m £m £m Experience variances • Reduced UK expense variances due to cost reductions Expenses (80) (56) (136) • Adverse expenses in Netherlands and Mortality 14 55 69 US Persistency (5) 10 5 • Favourable mortality in France and Poland Other 26 20 46 • Persistenc
Slide 16: General Insurance – Loss development
General Insurance – Loss development 2007 Prior year releases include: £m • Overall recurring benefit of our conservative approach to setting loss reserves while maintaining a strong Prior year releases* balance sheet • UK – reduced bodily injury claims experience, benefit UK Non-recurring 215 of in
Slide 17: New disclosures made available
New disclosures made available Total expense base (analyst pack p.96) • Demonstrates impact of cost reductions programmes on bottom line • Like for like reduction in group-wide costs of 6.5% Costs savings (analyst pack p.97) • Clear, quantitative, tracking of our progress against cost reduction prom
Slide 18: Analysis of Assets - Headlines
Analysis of Assets - Headlines • AVIVA’s Balance Sheet is strong and high quality - as evidenced in a separate comprehensive disclosure. • The largest single asset class is Debt Securities, of which 95% are investment grade (with 1% below investment grade, and 4% not rated). • The Group has very lim
Slide 19: Capital management
Capital management • Equity de-risking of GI shareholder funds and pension scheme • Equities principally held to back policyholder liabilities • IGD solvency of £3.1bn, cover of 1.6 times - significantly reduced equity sensitivity of IGD capital • AXXX reserve securitisation lifting US IRR to 14% •
Slide 20: Value creation
Value creation 2007 2007 IFRS EEV ROCE pence per pence per share share Operating profit 53.2 76.5 Investment return variances and economic assumption 3.1 2.3 changes on long-term business Short-term fluctuation on return on investments backing (1.5) (1.5) general insurance and health business Integr
Slide 21: One Aviva, twice the value
One Aviva, twice the value Andrew Moss, Group Chief Executive 21
Slide 22: One Aviva, twice the value
One Aviva, twice the value “Our priority is to realise the full potential of our existing businesses” Purpose Prosperity & Purpose peace of mind Vision One Aviva, Vision twice the value Strategic Targets priorities • 1.5 – 2 x dividend cover ● Manage composite • 98% meet or beat COR portfolio • 10%
Slide 23: The strategic priorities – building a stronger, more unified group
The strategic priorities – building a stronger, more unified group 1. Manage the composite portfolio – Cash flow, resilient product range, breadth of portfolio 2. Allocate capital rigorously – Clear regional objectives, significantly more disclosure 3. Increase customer reach – Over 50 million more
Slide 24: Global asset management – the starting point
Global asset management – the starting point Aviva benefits from good existing core capabilities, with scale in several asset classes, geographies Asia-Pac ex Emerging Asset Class Global UK Europe N America Japan Japan Markets Fixed Income Equities Property Quant/Index Structured Protected TAA Alter
Slide 25: Introducing Aviva Investors
Introducing Aviva Investors A powerful new global asset management business • Globally integrated asset management business – The third pillar of our composite model, rebranded Aviva Investors – £316 billion funds, over 1,300 staff in 15 countries around the world • Accelerate the transformation of
Slide 26: Regional review and outlook
One Aviva, twice the value Regional review and outlook 26
Slide 27: UK Life – a year of very good progress
UK Life – a year of very good progress 2007 • Market leadership - a much stronger position • Higher sales & margins, costs reduced, improved service • Lapses in line with assumptions Market leadership • Legacy being actively addressed ● Address legacy • Swiss Re outsourcing agreement • Over 100 fewe
Slide 28: UK General Insurance – taking decisive action
UK General Insurance – taking decisive action 2007 • Market leadership • Rating action on all product lines • A strong balance sheet and conservative reserving Market leadership • Prior year releases an ongoing feature • Action on IT, marketing and project costs ● Address legacy 2008 outlook ● Trans
Slide 29: Europe – multi channel strategy is working well
Europe – multi channel strategy is working well 2007 – 19% growth • A great start to 10% average growth target • Northern Europe – sales and profit growth • Southern Europe growing ahead of their markets Scale, growth, • CEE growth rates akin to Asia capital • Seize unique growth opportunities • New
Slide 30: North America – on track to double scale
North America – on track to double scale 2007 • 39% pro forma life sales growth • Cost savings, brand change, AM Best ratings upgrade achieved in line or ahead of plan • 6 new IMO distribution agreements Double scale • New product launches – eg Wellness ● Focus : top 5 in • 98% COR from Canadian GI
Slide 31: Asia Pacific – a growing presence
Asia Pacific – a growing presence 2007 • 60% growth in sales • 11% of Aviva’s long term savings sales • Entry into Malaysia and Taiwan Scale, growth • Focus on expansion in China and India ● Prioritised portfolio 2008 outlook ● Regional operating • Continuing value creation model • Entry into Korea
Slide 32: The targets
One Aviva, twice the value The targets 32
Slide 33: A balanced set of targets
A balanced set of targets • A challenging set of operational targets – 98% meet or beat COR – Regional sales and EV new business contribution targets – Cost saving targets • Combined with disciplined financial targets – 12.5% ROCE (to be re-set as return on economic capital by end 2008) – Double IFR
Slide 34: Driving IFRS earnings
Driving IFRS earnings Capital utilisation for dividends and profitable growth Dividends Net capital generation Asia UK Europe N.America Pacific Operational Double Dividend ROCE targets IFRS EPS GI COR 98% meet or beat 9 9 9 Life growth targets 9 9 9 Cost savings 9 9 9 Aviva Investors 9 9 9 Capital e
Slide 35: One Aviva, twice the value
One Aviva, twice the value • A robust result in a challenging year • Growth targets reaffirmed • A clear agenda to realise the full potential of our existing businesses 35
Slide 36: Questions and answers
One Aviva, twice the value Questions and answers 36
Slide 37: Aviva plc Preliminary results 2007
Aviva plc Preliminary results 2007
Slide 38: Appendix
One Aviva, twice the value Appendix 38
Slide 39: Regional performance
Regional performance North UK Europe America Asia Pacific Other (2) Group £m £m £m £m £m £m Total sales 20,302 19,719 5,014 4,117 - 49,152 Long term savings new business 14,406 16,486 3,602 4,089 - 38,583 New business contribution 360 598 154 62 - 1,174 New business margin (gross) 3.1% 4.0% 4.3% 4.3
Slide 40: Aviva Capital Generation
Aviva Capital Generation Capital Generation 2007 Another year of positive capital generation from diversified business model 40
Slide 41: UK Life – new business profitability
UK Life – new business profitability 7% WACC Bonds & Savings • Composite IRR of 13% (unleveraged) • Equity shareholders IRR of 15% (leveraged) Annuities Individual Group Pensions Personal Pensions Corporate Pensions Protection Internal Rate of Return Bubble size indicates amount of new business cont