Aviva Plc · LSE:AV.
Aviva — SG Conference: The Premium Review 2004
31 slides from Aviva's conference presentation, Dec 2, 2004
Slide 1: AVIVA plc – SG Conference, The Premium Review
AVIVA plc Richard Harvey Group Chief Executive SG Conference The Premium Review 2 December 2004
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: Agenda
Agenda • Life, pensions & savings remains a growth market • General insurance cycle and prospects • Summary and outlook 3 Aviva plc
Slide 4: Aviva overview
Aviva overview 2003 premiums / sales* (£30bn) • Leading pan-European life insurer • Short-tail general insurance business 71% 72% Life** 29% Life* G.I. • Strong market positions • Self-financing model Intl. Life 4%** Cont. Europe Life 34%** UK General 17% UK Life Cont 33%** Europe General 7% Intl. G
Slide 5: The savings market is huge…
The savings market is huge… Direct $90 tn Investments 15% Cash and Mutual Deposits Funds 7% 27% Life and Pensions 10% Occupational Pensions 12% Home Equity 29% $26 tn accessible by insurers, more than twice US GDP 5 Source: Aviva Savings Trends Project, Q4 2003 Aviva plc
Slide 6: Insurance assets weighted to European and US markets, but rapid growth prospects in Asia
Insurance assets weighted to European and US markets, but rapid growth prospects in Asia life Global distribution of life and general insurance premiums (2003) General insurance Life Americas Europe Asia Africa Oceania 6 Source: Swiss Re, Sigma, Morgan Stanley Research Aviva plc
Slide 7: “Ride the wave” as markets develop
“Ride the wave” as markets develop Split of personal financial assets by asset class 100% Home Equity Occupational Pensions 50% Life and Pensions Mutual Funds Direct Investments Cash and deposits 0% GDP per <$5,000 $5,000-$15,000 $15,000 - $30,000 capita Example Example Example China Poland Italy 7
Slide 8: Life remains a growth business
Life remains a growth business Ageing % of population aged over 60 India US 2000 UK 2050 France Germany China Italy 0 10 20 30 40 8 Source: UN Aviva plc
Slide 9: UK Life: savings ratio needs to double
UK Life: savings ratio needs to double UK household savings ratio* 16 • Bear market overhang • Property investment 14 • Regulatory uncertainties • Life industry responding 12 10 8 6 4 2 Q1 1980 Q1 1983 Q1 1986 Q1 1989 Q1 1992 Q1 1995 Q1 1998 Q1 2001 Q1 2004 -* Percentage of household disposable inco
Slide 10: Product strategy
Product strategy • Broad product strategy – enhances quality of growth – access to cycle trends 10 Aviva plc
Slide 11: Are people becoming more risk averse?
Are people becoming more risk averse? Are you more or less likely to take financial risks than you were 5 years ago? More likely to take financial risks Less likely to take financial risks 50 % 30 10 0 India Ireland US China Spain Poland Italy France UK Nether- Germany lands 11 Source: The Henley Ce
Slide 12: Aviva’s UK life business broad product strength
Aviva’s UK life business broad product strength 20% 40% 16.9% 15% 14.5% 14.6% 13.5% 10% 10.7% 10.2% 6.9% 5% 0% Annuities Bonds & Group Individual Corporate Investment Protection Equity Savings Personal Pensions Pensions Funds Release Pensions Source: ABI / MSE H1 2004 NU’s total market share H1 2004
Slide 13: UK Life: potential “Golden Scenario”
UK Life: potential “Golden Scenario” Value DIV E R IVE T H SURVIVE 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 Trusted brand Industry shakeout Financial stre
Slide 14: Distribution
Distribution • Multi-distribution – access growth via different channels – successful new market entry 14 Aviva plc
Slide 15: Distribution: Evolving across life markets
Distribution: Evolving across life markets Advice dominated UK Direct sales forces Netherlands Poland Turkey Lithuania Bancassurance Spain Italy France Portugal 15 Aviva plc
Slide 16: Aviva capturing bancassurance opportunity
Aviva capturing bancassurance opportunity (23%* of Aviva’s life & pension sales) 16 * APE FY 2003 Aviva plc
Slide 17: Distribution to evolve rapidly throughout Asia
Distribution to evolve rapidly throughout Asia • DSF initially in China • Importing western insurers’ distribution expertise • International bank networks being developed China Aviva strategic emphasis increasing in Start Date: Jan 2003 Asian long-term savings • Beijing • Chengdu India • Guangzhou S
Slide 18: China: positive life launch (10x10x10)
China: positive life launch (10x10x10) • Chengdu (from 9/04) – First foreign JV player – No. of life players: 6 locals only – Population 10.4 million; • Beijing (from 9/04) – No. of life players: 8 locals & 5 foreign branch/JVs – Population 14.6 million – Our China HQ • Guangzhou (from 1/03) – No. o
Slide 19: Depolarisation in UK life
Depolarisation in UK life • Aviva top choice for IFA life & pensions multi-ties - 65% of IFAs questioned would include Norwich Union in their top 4 multi-tie providers 70% 60% 50% 40% 30% 20% 10% 0% Norwich Standard Legal & Skandia Friends Clerical Axa Scottish Scottish Prudential Union Life General
Slide 20: Depolarisation expected to change distribution, not market size
Depolarisation expected to change distribution, not market size Market Distribution Mix Market Distribution Mix 2004 2007 Direct Direct DSF DSF IFA - 5% Whole of 9% Commission 14 Market & 5% Multi-tie % Distribution Banc- Groups 42 49 assurance % 24 Banc- % 16 assurance % % 16 % 20 % EBC / IFA EBC /
Slide 21: General insurance
General insurance • UK cycle looks and feels different 21 Aviva plc
Slide 22: Market dynamics in UK general insurance very different to 1990s
Market dynamics in UK general insurance very different to 1990s • Low inflation & interest rates • No bull equity market / capital scarcity • Stronger regulation (FSA / rating agencies) UK general insurance market concentrated (top 5 market share) 1992 2002 28.6% 28.6% 49.9% 49.9% 22 Source: CEA, Mo
Slide 23: Aviva UK general insurance: sustainable model
Aviva UK general insurance: sustainable model • Strong management team across period • Leveraged scale advantages (esp bulk purchase for claims: Supply chain savings over £200m (annualised) in 2004) • Creating new competitive advantages • COR target of 100% for 2004 - 2006 Norwich Union performance
Slide 24: UK general insurance: offshoring reduces costs
UK general insurance: offshoring reduces costs India • 40% reduction in claims handling cost • Service quality on par with UK Substantial level of UK claims handling capacity in India by end 2004 24 Aviva plc
Slide 25: Aviva summary
Aviva summary 25 Aviva plc
Slide 26: Cost competitiveness
Aviva making progress moving North-East… Cost/Service efficiency 2003 Cost/Service efficiency 2004 Higher Higher Cost competitiveness Lower Lower Lower Higher Lower Higher Service level Service level (relative to local market average) GI / Bubble size = 2003 NWP as forecast in 09/2003 GI / Bubble si
Slide 27: Pricing, cost savings and mix benefiting net shareholder life margins and ROCE
Pricing, cost savings and mix benefiting net shareholder life margins and ROCE Aviva new business net Aviva ROCE shareholder margins¹ (after tax, solvency & minorities) % 13.5 % 16 13.4%* 13 14 12.7% 12 12.5 10 9.7% 12 8 11.5 6 11 4 10.5 2 10 0 2002 6m 2003 2003 6m 2004 2002 2003 6m 2004 27 (1) Year
Slide 28: Aviva outlook
Aviva outlook • Long-term savings markets recovering • Aviva total new business sales +9% (APE) at 9m 2004 • Multi-product and distribution skills to capture growth • UK general insurance market more disciplined than previous cycles • Overall outlook = positive 28 Aviva plc
Slide 29: Appendix
Appendix 29 Aviva plc
Slide 30: Strategy
Strategy • Grow long-term savings aggressively and profitably • Build a world-class fund management business • Focused approach to general insurance business • Build top 5 positions in selected markets • Withdraw from lines of business or markets which do not offer the potential for market-leading p
Slide 31: Strong market positions
Strong market positions Rank Market share Rank Market share Life Life (est.) GI GI (est.) UK 1 12% 1 14% France 10 4% Top 15 2% Netherlands 4 11% 4 8% Spain 2 11% - - Italy 7 4% n/a <1% Ireland 3 11% 1 22% Canada - - 2 10% Poland 1 15% - - Singapore 5 9% - - Turkey 2 14% Top 15 2% Australia Top 10 4