Aviva Plc · LSE:AV.
Aviva — Investor Presentation (October 2006)
46 slides from Aviva's investor presentation, Oct 26, 2006
Slide 1: Norwich Union Life – Realising the Potential
Norwich Union Life – Realising the Potential Investor and Analyst Presentation - Thursday 26th October 2006
Slide 2: Please switch off your BlackBerry and mobile phone
Please switch off your BlackBerry and mobile phone
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: Agenda
Agenda An Aviva perspective Andrew Moss, Group Finance Director Norwich Union: a compelling business model Patrick Snowball, Executive Chairman, Norwich Union Norwich Union Life: realising the potential Mark Hodges, Chief Executive, Norwich Union Life Conclusion Patrick Snowball Lunch
Slide 5: The Group Context
AVIVA The Group Context Andrew Moss, Group Finance Director
Slide 6: Aviva: The composite model
Aviva: The composite model HY 2006 HY 2006 EEV Operating Profits Sales £21.3bn (1) £1.9bn (2) • The largest insurance service International Aviva provider in the UK Life International 41% • A leading provider of general 52% insurance services in Canada, Ireland and the Netherlands. International GI
Slide 7: Aviva: Our strategy
Aviva: Our strategy Aviva’s business strategy is to be a clear leader in helping our customers grow their wealth and protect their assets and their health… Long term savings and fund General insurance and management related services …by offering a superior range of …by providing a broad range of lon
Slide 8: The Aviva world
The Aviva world North America Europe Asia Pacific • Largest market with largest • Mature, stable markets • High growth market projected growth • Access to distribution is key • Accelerate growth in India • Well established • Superior understanding of and China competition customer as differentiator
Slide 9: Aviva: Profitable growth and increasing dividends
Aviva: Profitable growth and increasing dividends Best ever results in H1 2006 £ billion 3.5 – Strong growth across UK 3 Group Operating Life, General Insurance Profit* 2.5 and International Life 2 businesses 1.5 – Return on equity of 14% 1 0.5 – 10% increase in dividend 0 2002 2003 2004 2005 2006 H
Slide 10: Aviva is building on its UK core
Aviva is building on its UK core 3.5 Group operating profit* 3 £ billion 2.5 Rest of group 2 UK GI 1.5 UK life 1 0.5 0 2002 2003 2004 2005 HY 2006 25 Group embedded value before central debt** £ billion 20 Non insurance 15 Aviva International UK GI 10 UK life 5 0 2002 2003 2004 2005 HY 2006 * 2002 a
Slide 11: Success in the UK
Success in the UK • Leading franchise in its home territory • An excellent reputation for value and service to customers and distributors • Profitable growth • New business IRR 4% ahead of WACC • Maximised value from the in force book • Efficiency gains from operational excellence • A flow of funds
Slide 12: Norwich Union: A compelling business model
Norwich Union A compelling business model Patrick Snowball Executive Chairman, Norwich Union
Slide 13: Scale and performance in the UK
Scale and performance in the UK • No. 1 in life and general insurance markets Norwich Union Operating Profit and ROCE 2.0 30% • 2005: £16.5bn sales, £1.6bn operating profit 2 1 25% • Over £125bn funds under management Operating Profit £bn 1.5 20% • Over 20m policies and 17 million customers ROCE1 1.
Slide 14: Norwich Union Structure
Norwich Union Structure Executive Chairman Norwich Union Patrick Snowball * Chief Executive, GI Risk & Chief Information Corporate Affairs Chief Executive, India Offshoring HR Director, Norwich Union Reinsurance Officer Director Norwich Union Life John Ainley * Norwich Union Insurance Philip Easter
Slide 15: The strategic opportunity
The strategic opportunity • Enhancing customer experience under our brand Customer • Leveraging resources and learning across the UK • Leveraging scale and Distribution Manufacturer reducing overlap Bringing NUL and NUI closer offers significant potential
Slide 16: Cost base reduction
Cost base reduction Other Property £40m • UK cost base to be reduced by 10% £10m - UK headcount of 36,000 reduced by 4,000 - Cost of £250m £135m Staff £65m • By end of 2006: Procurement - c.20% of annualised benefits achieved - around 1,000 employees under notice Cost Savings Split • Strong strategi
Slide 17: NU Insurance: sustaining performance
NU Insurance: sustaining performance 900 110 • Track record of performance 800 108 (92% COR – H1 2006) 700 106 Operating Profit £m 104 600 102 • RAC acquisition a success COR (%) 500 100 400 98 300 96 • PAYD launched 200 94 100 92 0 90 • NUI has the business model to 2001 2002 2003 2004 2005 2006 su
Slide 18: The UK Life industry
The UK Life industry £bn UK Savings and Savings Ratio • Growth market 60 13% 50 11% • Customer value and trust 40 – Retention 8% – Service 30 6% • Significant market challenges 20 10 3% – New sources of competition 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 – Changing distribution patter
Slide 19: NU Life: my view
NU Life: my view UK life total sales growth 3,750 • Steady performance 2000 to 2005 3,250 • Strong sales performance in 2006 2,750 2,250 • Clear direction and focus 1,750 Q105 Q205 Q305 Q405 Q106 Q206 Q306 • Well placed to succeed Life and Collective Pensions Investments Source: Quarterly PVNBP Inte
Slide 20: Norwich Union Life: Realising the potential
Norwich Union Life Realising the potential Mark Hodges Chief Executive, Norwich Union Life
Slide 21: Agenda
Agenda • UK market • Position of strength • Delivering strong financial results Q3 2006 • Driving forward with a clear strategy and plans • Well placed to succeed
Slide 22: Growth opportunities
Growth opportunities The under-provided The under-protected £27 billion annual savings gap £2.5 billion annual protection gap Savings & Protection Investment £0.8 billion £10.3 billion Current Norwich Union Life Market Corporate Income £4.4 billion £1.1 billion Corporate benefits £1 trillion pension
Slide 23: The market is growing
The market is growing Additional growth of up to 10% pa • Growing corporate market, including bulk purchase annuities p ga • Ageing population n c tio rot e • Unlocking the potential of the £27bn P s gap annual savings gap and the £2.5bn in g Sav protection gap ts N U L marke Today New Market growth
Slide 24: Agenda
Agenda • The UK market • Position of strength • Delivering strong financial results Q3 2006 • Driving forward with a clear strategy and plans • Well placed to succeed
Slide 25: We are in a position of strength
We are in a position of strength Brand = flexibility and scale Product range to deliver market leading performance and Distribution breadth shareholder value Financial strength Uniquely placed to lead and succeed
Slide 26: Brand
Brand Financial Services brand consideration and awareness Q1 2006 60 55 Brand Consideration (%) 50 45 40 35 30 75 80 85 90 95 100 Brand Awareness (%) • Growing brand awareness and consideration • Number 1 for awareness and consideration among traditional L&P providers • NU Life benefiting from GI b
Slide 27: A broad range of market leading products
A broad range of market leading products NUL Market Share H106 NUL Product Mix 2006 YTD 12.1% (H105: 10.6%) Individual Pensions 30.4% Group Pensions Protection 14.2% 14.9% 12.9% 13.1% 10.3% Annuities 9.5% 7.6% Bonds Collective Investments Individual Group Corp Protection Annuities Bonds Collective E
Slide 28: An unrivalled multi distribution platform
An unrivalled multi distribution platform • No.1 in the IFA market with 13.5% market share • Leading provider to banks, Corporate Bancassurance building societies and the top 4 24% 11% networks and service providers Direct 3% • On 22 of 28 multi-tie panels IFA (Networks & Service IFA (Nationals Prov
Slide 29: RBSG joint venture growing strongly
RBSG joint venture growing strongly • Share of YTD sales up 69% on 2005 at £879m Sales and Margin 800 5.0% • Share of new business 600 4.0% contribution up 140% on 2005 to £29m, a margin of 3.8% 3.0% £m 400 2.0% • Advisers up 21% over the last 200 1.0% 12 months to 700, targeting 850 by end-2007 0 0
Slide 30: Financial strength
Financial strength Operating movements to net worth in 2½ year period • Large in-force book annual profit provides funding for new business (2004 to mid-2006) and dividend to Group £m 1,500 (930) • Strong AA rated with-profit funds 1,330 • Appropriate regulatory capitalisation 1,000 of non-profit fu
Slide 31: Agenda
Agenda • The UK market • Position of strength • Delivering strong financial results Q3 2006 • Driving forward with a clear strategy and plans • Well placed to succeed
Slide 32: Progressive sales performance
Progressive sales performance £m Sales & Margin 3,750 3.5% 3,250 3.0% 2,750 2.5% 2,250 1,750 2.0% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Life & Pensions Investments Margin (Cumulative) • Excellent sales performance with PVNBP up 39% to £10,464 million • Market share at June 2006 of 12.1%, 1.5% higher th
Slide 33: Writing new business above the cost of capital
Writing new business above the cost of capital WACC 3,000 6.6% Bonds & savings 2,500 • IRR of 10.4% Individual Pensions (unleveraged) – in 2,000 excess of Group PVNBP £m WACC of 6.6% 1,500 Group Personal Annuity Pensions 1,000 Protection Corporate • Equity shareholders Pensions IRR of 12.5% 500 (lev
Slide 34: Agenda
Agenda • The UK market • Position of strength • Delivering strong financial results Q3 2006 • Driving forward with a clear strategy and plans • Well placed to succeed
Slide 35: Driving forward with strategic intents
Driving forward with strategic intents Broad product Balanced Low cost provider offering distribution Clear accountability Financial literacy and pride Guidance and Easy customer advice Self-service experience Clear business direction
Slide 36: Strategic intents with clear plans
Strategic intents with clear plans Broad product Balanced Low cost provider offering distribution Clear accountability Rationalise Financial literacy cost and pride Develop Simplify the the legacy business Manage Value out of retention service Guidance and Easy customer advice Self-service experienc
Slide 37: Rationalising the cost base
Rationalising the cost base Cost Savings Split • Simpler, faster and more customer GI Life Sales focused processes Sales & Operations & Operations • Strong supplier management £50m £57m • Sharing of support services across Support Functions the UK £143m • Robust prioritisation of change spend £125m
Slide 38: Simplifying the legacy
Simplifying the legacy Current products and systems Scale 60% Value Develop target systems and processes 80% value c900 products 8.5 million policies 550 systems Migration 40% Value Ring-fence and rationalise Heritage 20% value Decommission A pragmatic approach to become a scale, low cost operator
Slide 39: Creating value out of service
Creating value out of service Good service increases value Service Rating • Retention of existing customers • New business sales 60% NUL Objectives 40% • “One and done” • Easy to do business with 20% Already seeing results 0% • Record levels of distributor satisfaction Aug Oct Dec Feb March May July
Slide 40: Managing retention
Managing retention • Winning from A-day NUL Pension Cashflows 9 Months 2006 3,000 • Developing products 2,500 - Bond service promise 2,000 - Improving confidence in With Profits £m £3.0 bn £(2.8) bn 1,500 1,000 - Move customers to more modern 500 contracts 0 - Move customers to better products for P
Slide 41: Developing the business
Developing the business IFA fund centre Simplified life cover “Making sense of it” website Developing the business to exploit the market opportunities
Slide 42: Well placed to succeed
Well placed to succeed To be a winner in a growing market with: • Position of strength with track record of delivery • Clear plans to deliver strategy - Low cost and flexible operating model - Simplified legacy - Value out of service - Customer retention - Developing the business • Already made sign
Slide 43: Questions & Answers
Questions & Answers
Slide 44: Conclusion
Conclusion Patrick Snowball Executive Chairman, Norwich Union
Slide 45: A compelling business
A compelling business • Fantastic platform on which to build • Clear opportunities to extract more value • Growth returning to the market • Right people in place to deliver • Exciting future opportunities Fixing the business for today and tomorrow
Slide 46: Thank you & Lunch
Thank you & Lunch