Aviva Plc · LSE:AV.
Aviva — FY2006 Earnings Presentation
33 slides from Aviva's earnings presentation, Mar 1, 2007
Slide 1: 2006 Preliminary Results
2006 Preliminary Results 1 March 2007 Attracting, and retaining Using brands to widen talented people leadership positions Building profitable Growing organically and market-leading positions through carefully selected acquisitions Delivering effective distribution channels Understanding & meeting t
Slide 2: Agenda
Agenda • Introduction Richard Harvey Group Chief Executive • Financial review Andrew Moss Group Finance Director • Review of the business Richard Harvey • Questions & Answers 2 © Aviva plc
Slide 3: Disclaimer
Disclaimer This presentation may contain “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 uncertainty beca
Slide 4: Aviva plc: 2006 highlights
Aviva plc: 2006 highlights • Record long-term savings sales up 21%, maintaining focus on value • Operating profit up 12% on an EEV basis and 46% on an IFRS basis • General insurance COR of 94%, ahead of 98% meet or beat target • Return on equity shareholders’ funds of 13.1% • Dividend per share up 1
Slide 5: Financial review: 2006 Operational performance
Andrew Moss Group Finance Director Financial review 2006 Operational performance 5 © Aviva plc
Slide 6: 2006 performance
2006 performance 2006 2005 Growth † £m £m % Life EEV operating return 2,033 1,814 12% Fund management 96 83 17% General insurance and health 1,680 1,551 8% Non-insurance operations (23) 28 Corporate costs (160) (136) Unallocated interest (381) (436) Operating profit: EEV basis (1) 3,245 2,904 12% Op
Slide 7: Long-term savings: 21% growth
Long-term savings: 21% growth 2006 UK: Sales (1) Growth (2) • Strongest UK performance to Aviva UK £m % date Life and pensions 11,146 21% • Individual pension sales up 42% Investments 2,455 112% • Bond sales up 37% • RBSG sales up 58% 13,601 31% Aviva International International: Life and pensions 1
Slide 8: Life: new business contribution up 12%
Life: new business contribution up 12% Contribution (1) Margin (1) 2006 2005 2006 2005 £m £m % % France 110 91 3.1 2.6 Ireland 9 13 0.7 2.0 Italy 50 36 1.8 1.6 Netherlands 25 58 1.1 2.1 Spain 168 155 8.2 7.7 Other countries 58 42 2.1 2.3 Aviva International 420 395 2.9 3.0 Aviva UK 263 217 2.4 2.4 T
Slide 9: Life EEV operating return up 12%
Life EEV operating return up 12% 2006 2005 • Benefits of well diversified portfolio £m £m • Ireland – Ark Life offset by adverse Aviva International expenses and lapses France 402 321 • France, Italy and Poland– new business Ireland (40) 20 growth and benefit of favourable Italy 110 96 experience Ne
Slide 10: Life: Aviva UK EEV operating return
Life: Aviva UK EEV operating return 2006 2005 £m £m New business contribution post cost of capital 263 217 Expected returns 561 523 Experience variances (140) (95) Operating assumption changes 60 (56) TOTAL 744 589 Includes: Includes: • Exceptional expenses of £(149)m • Benefit of with-profit contri
Slide 11: Life: Ireland EEV operating return
Life: Ireland EEV operating return 2006 2005 £m £m New business contribution post cost of capital 9 13 Expected returns 56 39 Experience variances (20) (21) Operating assumption changes (85) (11) TOTAL (40) 20 Operating assumptions: • Adverse expense assumption change £(25)m • Adverse mortality assu
Slide 12: Key drivers of movement in life IFRS profits
Key drivers of movement in life IFRS profits £m 2005 IFRS life operating profit 1,065 PS06/14 reserving benefit 149 With-profit contribution to pension funding 140 Acquisitions (AmerUs £84m, Ark £45m) 129 Interest rate guarantee releases in the Netherlands 150 Higher bonuses in UK with profit funds
Slide 13: General insurance and health results
General insurance and health results UK: 2006 2005 • GI operating profits up 10% £m £m to £1,075m Underwriting result 607 505 LTIR 1,073 1,046 • Weather benefit £75m Operating profit 1,680 1,551 • RAC contribution £115m • Exceptional prior year reserve releases GI only COR: International: UK 95% 96%
Slide 14: Fund management benefiting from increased sales and higher funds
Fund management benefiting from increased sales and higher funds 2006 2005 • Morley: Positive market £m £m movements and performance fees. Morley (UK and international) 76 49 Improved cost/income ratio 72% Other UK (6) 8 • France: Higher funds France 33 26 under management Netherlands 37 32 • Nether
Slide 15: Other operations and corporate costs
Other operations and corporate costs 2006 2005 Other operations £m £m RAC 45 30 Lifetime and SIPP (29) (14) Other UK 5 7 Other (44) 5 Total EEV basis result (23) 28 Corporate costs (160) (136) 15 © Aviva plc
Slide 16: AmerUs: A strong start
AmerUs: A strong start • Sales of £324m (6 weeks); £2,261m (proforma full year) • Contribution to life operating profit since acquisition: – £22m EEV; £84m IFRS • Proforma operating profit* for full year 2006: – £176m EEV; £330m IFRS • Integration impact: – Cost £27m ($50m), benefits of £24m ($45m)
Slide 17: Operational update
Operational update • UK Cost and efficiency update – On target for £250m cost savings from 2008 at cost of £250m – Costs reported to date £205m • RAC update – Integration complete – Cost savings of £100m achieved – £160m contribution to operating profit 17 © Aviva plc
Slide 18: Value creation
Value creation • Equity shareholders funds up 18% • NAV per share 683p (31 Dec 2005: 622p) • Dividend growth 10% to 30p per share • £1.25bn of capital generated post dividend • IGD solvency steady at £3.6bn, cover of 1.8 times 18 © Aviva plc
Slide 19: Summary and Outlook
Summary and Outlook 2006 • Operating profit up 12% (EEV); up 46% (IFRS) • Long term savings new business sales up 21% • Equity shareholders’ funds up 18% 2007 • UK life growth at least in line with market (5-10%) • Strong growth in Europe and International life • Commitment to meet or beat 98% COR 1
Slide 20: Review of the business
Richard Harvey Group Chief Executive Review of the business 20 © Aviva plc
Slide 21: Aviva
Aviva 2006 proforma sales £43.4bn(1) 7% USA Life An international company… • European portfolio growing ahead of the market 37% International • 91% growth in the Asian portfolio Life (Ex USA) • AmerUs provides the platform for growth in America 11% International GI 14% UK GI …with leading positions
Slide 22: UK Life: achievements in 2006
UK Life: achievements in 2006 New management team with a track record for operational excellence Implementing a clear strategy, balancing sales growth and maximising value of the in-force book Increasing market share in a growing market Net winners from A-Day 31% Improving service standards and redu
Slide 23: UK GI: achievements in 2006
UK GI: achievements in 2006 Taking the lead in tackling the insurance cycle Delivering on RAC profitability targets On track to deliver cost savings initiatives Successful launch of PAYD 14% Strengthening the balanced distribution portfolio 23 © Aviva plc
Slide 24: European & Asia-Pacific growth
European & Asia-Pacific growth £m Europe - Sales Growth 14000 % G R 10.8 12000 CA 20 countries 10000 Nearly 20m customers 8000 £158bn funds under management 6000 Over 22,500 employees 4000 Demonstrating portfolio benefits 2000 2002 2003 2004 2005 2006 Multi-distribution Multi-product Multi-national
Slide 25: Aviva USA
Aviva USA AmerUs & Aviva USA pro-forma quarterly sales growth 900 800 700 600 £m 500 400 300 200 Q1'06 Q2'06 Q3'06 Q4'06 AmerUs life and annuity sales Aviva USA • 21% growth in AmerUs sales 7% • In 2006 signed distribution agreements with Annexus and 2 other IMO’s • Positive outlook for 2007 • Integ
Slide 26: The Aviva World – right markets, right time
The Aviva World – right markets, right time North America Europe Asia Pacific • 30% of world-wide • Mature, growing markets in • High growth markets savings western Europe • Accelerating growth in India • Demographics provide • Strong growth prospects in and China huge growth potential southern Euro
Slide 27: Growth & momentum
Growth & momentum Group Operating Profit* (EEV) Group Operating Profit** (IFRS) 3,500 3,500 % 3,000 R 17.2 3,000 % C AG 6.4 R2 2,500 2,500 CAG £m £m 2,000 2,000 1,500 1,500 1,000 1,000 500 500 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Long term savings sales Net Asset Value* (inc. goodwill)
Slide 28: Questions & Answers
Richard Harvey Group Chief Executive Questions & Answers 28 © Aviva plc
Slide 29: Appendix
Appendix 29 © Aviva plc
Slide 30: Capital generation: consistently strong operational capital generation
Capital generation: consistently strong operational capital generation 2006 2005 £m £m New business strain (602) (536) Life inforce profits 1,662 1,250 Non life profits after interest costs 814 729 Normalised operating profits after tax 1,874 1,443 Dividend including preference shares and DCI (821)
Slide 31: Capital strength: solvency cover on EU groups directive basis
Capital strength: solvency cover on EU groups directive basis FY Actual IGD Solvency £3.6bn 2005 Capital generation in the year, net of RMM increase £1.5bn External dividend: £(0.8)bn AmerUs solvency impact £(0.7)bn Impact of pension scheme funding £(0.4)bn Other capital generation from corporate ac
Slide 32: Movement in net asset value per share
Movement in net asset value per share Reported pence As at 31 December 2005 622 Deduct: 2005 final and 2006 interim dividend* (23) 599 Operating profit for the period 84 Investment variances 37 Foreign exchange (17) Pension deficit and other (12) Effect of issuing equity share capital (8) As at 31 D
Slide 33: © Aviva plc
33 © Aviva plc