Aviva Plc · LSE:AV.
Aviva — Goldman Sachs Conference, Monte Carlo 2004
16 slides from Aviva's conference presentation, Jun 9, 2004
Slide 1: Managing life profitability in a volatile economic environment
Philip Scott Group Executive Director Aviva plc “Managing life profitability in a volatile economic environment” 9 June 2004 Monte Carlo Goldman Sachs Conference
Slide 2: 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 uncertai
Slide 3: Managing life profitability in a volatile economic environment
Managing life profitability in a volatile economic environment Lower unit-linked & Volatility conventional savings Higher solvency capital • Equity markets Spreads for bond backed policies • Interest rates Guarantee issues Uncertainty • Heavy regulation 3
Slide 4: Managing life profitability in volatile economic environment
Managing life profitability in volatile economic environment • Product mix and profitability in the UK • Product mix and profitability in France • Guarantees and asset liability management • Group-wide cost management and statutory profits 4
Slide 5: The benefits of product breadth for Aviva
Product mix and profitability in the UK The benefits of product breadth for Aviva • Tax incentivised savings Norwich Union Sales APE 600 500 • Reduced with-profits 400 • Reduced unit-linked £m 300 • Higher cost of capital 200 100 0 Pensions Annuities Bonds Protection Investment Equity products relea
Slide 6: Aviva offset c2% margin impact from lower sales in 2003
Product mix and profitability in the UK Aviva offset c2% margin impact from lower sales in 2003 Life & pensions sales Management actions in 2003 1400 23.5 Margin • £140m cost reduction 1200 23 (£33m to bottom line) 1000 22.5 • Improved pricing £m APE 800 22 % - annuities 600 21.5 - term assurance 40
Slide 7: UK Life: potential Golden Scenario
Product mix and profitability in the UK UK Life: potential “Golden Scenario” Value CO OW NTR GR AC T STABILISE Aviva : Better equity Markets Bear Market Aviva : Tough regulatory env Reducing costs Less regulation Margin & sales growth Price increases Confidence down Confidence returns Unit linked Tr
Slide 8: French consumer preference for Euro products
Product mix and profitability in France French consumer preference for Euro products Individual product sales 100% 80% Unit-linked 60% 40% Euro (bond based) 20% 0% 2000 2001 2002 2003 8 Source: Fédération Française des Sociétés d’Assurances
Slide 9: Unit-linked sales highly geared to market levels
Product mix and profitability in France Unit-linked sales highly geared to market levels Targeting unit-linked as equity market stabilised CAC 40 to improve net margins € bn 3.5 Unit-linked fund turnover CAC 40 3.0 7000 2.5 2.0 5000 1.5 1.0 3000 0.5 0.0 1000 1992 1993 1994 1995 1996 1997 1998 1999 2
Slide 10: Aviva France outperforming in unit-linked
Product mix and profitability in France Aviva France outperforming in unit-linked • Aviva 2003 unit-linked sales +1% (market 15%) • Aviva Q1 2004 unit-linked sales +32% • Unit-linked sales supported by: Product guarantees Sales force incentivisation Investment performance • Targeting flat costs desp
Slide 11: Guarantees more attractive in volatile conditions
Guarantees and asset liability management Guarantees more attractive in volatile conditions • An important differentiator for the industry • Highly valued by customers… • Must be properly priced, valued and managed • Increasingly sophisticated approaches applied to legacy books • New products subjec
Slide 12: Interest profits to shareholders on Dutch life contracts
Guarantees and asset liability management Interest profits to shareholders on Dutch life contracts 30% 25% Traditional SP 20% % of NPV (premium) 15% NPV (interest profit) Traditional RP 10% Unit-linked 5% 0% Total investment -5% return -10% Mitigated by -15% reserving, ALM & hedging -20% 3% 4% 5% 6%
Slide 13: Spain: Cashflow matching of annuities
Guarantees and asset liability management Spain: Cashflow matching of annuities Aseval Externalisation Business 35 Annual Income/outgo 30 25 20 €m 15 10 5 0 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 Asset Income Liability Outgo • Cashflow mat
Slide 14: Group-wide cost savings announced in 2003
Group-wide cost savings announced in 2003 • Builds on merger saves of £317m pa • Efficiency remains a focus in 2004 Cost saves: P&L benefit (from 2003 actions) £m 250 £250m Gross pa 200 run rate 150 100 50 0 2003 2004 2005 14
Slide 15: Strong statutory profit flows support financing in volatile conditions
Strong statutory profit flows support financing in volatile conditions Aviva 2003 statutory profits £1.5bn* Other 1% Europe & Int Life 26% General insurance 44% UK Life 29% * before tax amortisation of goodwill, amortisation of acquired additional value of in-force business and exceptional items. An
Slide 16: Aviva Responses
Managing life profitability in a volatile economic environment Aviva Responses Volatility • Built strong statutory profits • Equity markets • Reduce costs • Interest rates • Product innovation • Heavy regulation • Guarantees (well managed) • Expertise to shape regulation 16