Aviva Plc · LSE:AV.
Aviva — Debt Investor Presentation (November 2004)
34 slides from Aviva's debt investor presentation, November 2004
Slide 1: Presentation to Fixed Income Investors
Presentation to Fixed Income Investors November 2004
Slide 2: Disclaimer
Disclaimer This presentation is the property of Aviva plc. Aviva plc does not intend to register any portion of the offering of the notes in the United States or to conduct a public offering of the notes in the United States. By receiving this presentation, each investor (i) acknowledges that the of
Slide 3: Agenda
Agenda • Purpose of Presentation / Transaction Rationale • Aviva Overview • Financial Performance • Funding Policy & Terms of Offering • Questions and Answers 3 © Aviva plc
Slide 4: Purpose of presentation/ transaction rationale
Purpose of presentation/ transaction rationale • Publication of PS 04/ 16 and PS 04/20 clarifies basis for Innovative Tier 1 issuance • Aviva has a strong and resilient capital position – no requirement for additional capital to support planned growth: – £2.2bn (published) EU Groups Directive surplu
Slide 5: Aviva Overview
Aviva Overview • 5th largest insurer worldwide1 • FY2003 premiums / sales 2 of £29.8bn • No. 1 insurer in the UK1 • Predominantly Life (Life 72 % 3 ; GI 28% as at 30 June 2004) • Major asset manager – AUM: £242bn4 • Resilient capital position: Estimated EU Directive surplus of £2.2bn at 30 June 2004
Slide 6: Focused and Consistent Strategy
Focused and Consistent Strategy • Grow long-term savings business aggressively and profitably • Build a world-class fund management business • Take a focused approach to general insurance, with disciplined underwriting and efficient claims-handling • Build top-5 positions in key markets • Withdraw f
Slide 7: Valuable Business Franchises From Strong Market Positions
Valuable Business Franchises From Strong Market Positions Rank Market share Rank Market share Life Life (est.) GI GI (est.) UK 1 12 % 1 13.5 % France 10 4% 13 2.4 % Netherlands 4 9% 4 8% Spain 2 11 % - - Italy 7 4% - <1% Ireland 3 11 % 1 22 % Canada - - 2 10 % Poland 2 15 % - - Singapore 6 9% - - Tu
Slide 8: UK Life – Market Concentrating
UK Life – Market Concentrating • Continue to benefit from consolidation to strongest players • Well positioned to capitalise on market growth • Cost cutting actions continue to deliver benefits Market Share (%)1 14 CGU NU NU Post Merger 12 10 8 6 4 2 5.2% 0 1996 1997 1998 1999 2000 2001 2002 2003 1H
Slide 9: Investing In High Growth Opportunities
Investing In High Growth Opportunities Netherlands: UK: bancassurance bancassurance JV JV with RBSG with ABN Amro Entered France: Lithuania life bancassurance JV from Poland China: with Crédit du Nord JV life business Italy: created top 7 and two further Spain: created LTS business; licenses granted
Slide 10: Strong GI Outlook
Strong GI Outlook • Focus on personal & SME commercial • Strong and sustainable profit outlook underpinned by focused underwriting and efficient claims handling • Combined Operating Ratio (1) ahead of 100% target for 2004 – 2006 • Diversity and scale provide strong high quality earnings and cash • C
Slide 11: Managing Businesses In Low Interest Rate / Flat Equity Environment
Managing Businesses In Low Interest Rate / Flat Equity Environment • Sizing costs to revenues • Rigorous focus on capital management and returns • Price for returns not volumes • Cash generative general insurance model complements life businesses • General insurance COR target was 102% now 100% • Fo
Slide 12: Cost Saving Initiatives
Cost Saving Initiatives • Estimated net pre-tax P&L benefit of £30m in 1H 2004 (relative to 1H 2002) – after one-off costs of £75m • Full year 2004 estimated net pre-tax P&L benefit £85m – after one-off costs of £140m • On target to achieve estimated gross annualised savings of £250m 12 © Aviva plc
Slide 13: Aviva Outlook
Aviva Outlook • Gradual recovery in long-term savings growth • Margin before volume • Efficiency improvements remain a focus • Strong and sustainable outlook for general insurance earnings • Diversity and scale provide strong high quality earnings and cash 13 © Aviva plc
Slide 14: Interim Results 2004
Interim Results 2004 • Group operating profit1 £1,130m • MSSB operating profit2 £878m • Profit before tax £707m3 • ROCE 13.4% (HY 2003: 11.0%) • Life and pensions sales maintained at £1.2bn APE • Margins improved at 26.5% (HY 2003: 24.5%) • General insurance COR of 97% (HY 2003: 101%) (1) Including
Slide 15: Delivering Profitable New Life Business
Delivering Profitable New Life Business H1 2004 H1 2004 FY 2003 APE (3) Growth (2) Margin (1) £m UK 547 3% 23.0% 22.6% France 145 21% 30.3% 29.0% Ireland 44 13% 23.0% 28.5% Italy 89 (24%) 23.5% 23.2% Netherlands 119 17% 31.9% 27.7% Spain 130 (7%) 51.0% 54.4% Other countries 150 (2%) 12.7% 14.2% Grou
Slide 16: Strong LTS New Business Numbers for Nine Months to September 2004
Strong LTS New Business Numbers for Nine Months to 30 September 2004 • Long-term savings new business sales up 13 % to £11,961 million (11% growth in UK and 17 % growth in Continental Europe) • Life and pension sales on an APE basis up 7 % to £1,847 million • Total bancassurance sales up 11 % to £ 2
Slide 17: General Insurance: Ahead of Target
General Insurance: Ahead of Target • Target Group COR of 100% for 2004-6 • COR target consistent with ROCE focus % of total GI Combined operating ratios premiums 6 months 2004 2003 60 UK 98% 99% 7 France 100% 100% 7 Ireland 88% 97% 8 Netherlands 94% 98% 13 Canada 99% 115%* ( Pilot added *13% & **2%)
Slide 18: Summary Capital Position
Summary Capital Position • Equity shareholders’ funds at 30 June 2004 of £10.9bn • EU Directive Group surplus estimate of £2.2bn at 30 June 2004 – excludes the strength of the UK and Irish Life funds • Capital position of UK With-Profit Life funds at 30 June 2004 is strong – 14.3% statutory free ass
Slide 19: To Re-cap…
To Re-cap… 9 A leading competitive position 9 Strong growth in profits benefiting from operational efficiency 9 Strong and sustainable outlook for general insurance 9 Diversity and scale provide strong high quality earnings and cash 9 Efficiency remains a focus 9 Strong and resilient capital base 19
Slide 20: Funding Policy
Funding Policy External Debt summary: 30.06.2004 (£m) • Aviva plc acts as the principal financing Hybrid vehicle for the Group Preference Shares 450 Upper Tier II 1,244 • Policy requires compliance with S&P’s Lower Tier II 1,634 constraints (with the objective of 3,328 maintaining AA range Insurance
Slide 21: Transaction Summary
Transaction Summary • Target around £750 million equivalent • Benchmark size securities • Access £ and € institutional investors • Perpetual securities eligible for Innovative Tier 1 treatment by the FSA • Final step-up, size and mix to take account of investor demand 21 © Aviva plc
Slide 22: Summary Terms – € Direct Capital Instruments
Summary Terms – € Direct Capital Instruments • Issuer: Aviva plc. • Securities: € [•] [•] % Fixed/Floating Rate Direct Capital Instruments (the “DCI®”). • Expected Ratings: [A3] (Moody’s) / [A-] (S&P). • Coupon: The DCI will make annual payments at a fixed rate of [•]% up to the First Reset Date, fo
Slide 23: Summary Terms – £ Direct Capital Instruments
Summary Terms – £ Direct Capital Instruments • Issuer: Aviva plc. • Securities: £ [•] [•] % Fixed/Floating Rate Direct Capital Instruments (the “DCI®”). • Expected Ratings: [A3] (Moody’s) / [A-] (S&P). • Coupon: The DCI will make annual payments at a fixed rate of [•]% up to the First Reset Date, fo
Slide 24: Questions
Questions 24 © Aviva plc
Slide 25: Appendix
Appendix
Slide 26: Operational Capital – Summarised Group Structure
Operational Capital – Summarised Group Structure Aviva plc Holding company which has issued all the sub debt Australia The life business only CGUII plc NU Insurance UK Life Life General The old CGU general The NU general Includes all the life businesses of: insurance business which insurance busines
Slide 27: Regulatory Measure – Operational Capital Excess Solvency Over Required Minimum Margin
Regulatory Measure – Operational Capital Excess Solvency Over Required Minimum Margin CGUII plc NU Insurance Life General Major overseas subsidiaries CGUII 30 June 2004 CGUII plc group 30 June 2004 NU Insurance Available assets £3.9bn £6.4bn Available assets £1.0bn MCR/ RMM £0.6bn £3.1bn RMM £0.4bn
Slide 28: Realistic Measure – Operational Capital Risk Based Capital – Worldwide GI & Health
Realistic Measure – Operational Capital Risk Based Capital – Worldwide GI & Health Aviva plc CGUII plc NU Insurance Life General Major overseas subsidiaries 28 © Aviva plc
Slide 29: Risk Based Capital
Risk Based Capital Shareholders’ capital employed* - £4.6bn Risk based capital - £3.3bn NWP - 34% £9.8bn (annualised) • Current capital requirement 34% of net written premium from continuing operations • RBC stochastic model factors in market, credit, underwriting and reserve tail risk • 99% confide
Slide 30: Strength of Consolidated CGUII and NUI Groups – Risk Based Capital Basis
Strength of Consolidated CGUII and NUI Groups – Risk Based Capital Basis £bn Available assets* Available assets* - - £7.8bn 8 £7.6bn • Risk based capital requirement for 7 general insurance and health 6 £4.5bn £4.3bn business equivalent to 34% of NWP 5 4 • £4.5 billion of excess capital to 3 support
Slide 31: Operational Capital - UK Life Regulatory Structure
Operational Capital - UK Life Regulatory Structure UK Life CULAC Unit-linked CGNU life NU life & pensions 31 © Aviva plc
Slide 32: UK Life – Capital Strength of With Profit Funds
UK Life – Capital Strength of With Profit Funds Estimated 30 June 31 Dec 2004 2003 Statutory free asset ratio 14.3% 16.3% Realistic orphan estate £4.2bn £4.3bn Risk capital margin £1.8bn £1.6bn • Free asset ratio of NUL&P includes implicit items for non profit business only • Realistic orphan estate
Slide 33: Realistic Solvency by Fund
Realistic Solvency by Fund 30 June 2004 Statutory Basis Realistic Basis With Profits Free Free Assets Orphan (net of RMM) Estate RCM (2) Excess Cover Asset £bn £bn £bn £bn times Ratio CGNU Life 16.8% 1.0 1.4 0.4 1.0 3.8 CULAC 12.2% 1.1 1.5 0.4 1.1 3.5 NUL&P (1) 14.4% 1.5 1.3 1.0 0.3 1.2 Total 14.3%
Slide 34: With-Profit Asset Mix – 30 June 2004
With-Profit Asset Mix – 30 June 2004 Total fund size - £52bn Other: 3% (Dec 03: 4%) Equity: 39% Fixed income (Dec 03: 38%) securities: 41% (Dec 03: 42%) Property: 17% CGNU, CULAC, NUL&P consolidated (Dec 03: 16%) 34 © Aviva plc