Aviva Plc · LSE:AV.
Aviva — HY2020 Earnings Presentation
46 slides from Aviva's earnings presentation, 2020
Slide 1: Aviva plc Interim results 2020
Aviva plc Interim results 2020
Slide 2: Disclaimer
2 Disclaimer Cautionary statements: This should be read in conjunction with the documents distributed by Aviva plc (the or through the Regulatory News Service (RNS). This announcement contains, and we may make other verbal or written -looking with respect to certain of plans and current goals and ex
Slide 3: Our priorities
Our priorities Focus the portfolio Transform performance Aviva will focus on the UK, Ireland and Canada where it has leading market Develop a tougher competitive edge to capitalise on our positions and significant potential strong customer and distributor franchises International businesses in Europ
Slide 4: Focus the portfolio
Focus the portfolio Life & Investments General Insurance International Invest for growth Manage for value • Focus on growing stock of cash-flows • Personal Lines performance step change • Withdraw capital where we cannot meet strategic objectives • S&R, Health and Protection growth • Capitalise on v
Slide 5: Transform performance
Transform performance Efficiency Customer experience • Performance management at the core of our approach, with efficiency • Our customer franchise is under-appreciated a key component • Digital is about better customer experience, not disruption • Better use of technology will drive simplification
Slide 6: Financial strength
Financial strength 1 Solvency II cover ratio Centre liquidity 198% 204% 206% £2.4bn £2.5bn 189% 194% £2.0bn £1.8bn £1.6bn FY16 FY17 FY18 FY19 HY20 Feb-17 Feb-18 Feb-19 Feb-20 Jul-20 • Track record of disciplined financial management • Conservative management of cash-flows and centre liquidity • Our
Slide 7: Dividends
Dividends FY19 results HY20 results Announced final Announced dividend of dividend of 21.4p 6p per share 8 April 2020 Q4 2020 Update on Covid-19 and Update on FY19 dividend withdrawal of FY19 final and future dividend policy • Second interim dividend of 6p per share. This strikes a balance between p
Slide 8: Impacts of COVID-19 have been challenging but we have responded well
Impacts of COVID-19 have been challenging but we have responded well both operationally and in terms of financial resilience With the change in leadership, there is a change in approach. Meaningful change is required to unlock value and we are taking decisive action our International businesses we w
Slide 9: Financials
Financials
Slide 10: HY20 snapshot
HY20 snapshot SII ROE -3.9pp 2 Total OCG +14% SII ratio 194% 1 11.0% £890m £780m Other3 101 3.9 7.1% 356 0.6 Other 206% 194% Underlying 679 7.1 6.5 Underlying 534 HY19* HY20 HY19 HY20 FY19 HY20 Operating profit -12% 4 Operating EPS -10% 6 Basic EPS -29% £1,386m £1,225m 26.1p 28.2p 23.4p 20.0p HY195
Slide 11: Underlying OCG and operating profit
Underlying OCG and operating profit Underlying OCG Operating profit 4 £m HY195 HY20 Change £792m UK Life and ISR 812 852 5% £679m General Insurance 332 167 (50)% (258) Europe Life 392 367 (7)% £534m Asia Life (excl. FPI/HfS) 68 67 (1)% Corporate & other (103) (99) 4% +17% Debt costs (199) (202) (2)%
Slide 12: Return on equity
Return on equity 11.0% (0.9)% Group (£m) HY19* HY20 Change (2.9)% Life new business 305 361 18% 7.1% Existing business 480 455 (5)% SII Group ROE 2 (1.8)% 1.7% Debt & centre costs (incl. pref/DCI costs) (243) (283) (16)% 9.3 3 Management actions & other 297 53 (82)% Own funds generated (UT1) 839 586
Slide 13: Solvency II position
Solvency II position 206% +9pp (21)pp - 194% OCG £890m Underlying OCG £534m 356 £m 12,638 771 (237) (1,557) 11,952 Surplus 1 (19) BU underlying Debt & Other capital Market, Dividends £m 31 Dec 2019 30 Jun 2020 generation Centre costs actions3 FX & other (ordinary + preference) Own funds 24,548 816 (
Slide 14: Balance sheet and Liquidity
Balance sheet and Liquidity SII NAV per share 1 SII debt leverage Significant reduction in market risk (4)pp (3)pp HY20 (5)pp (7)pp FY19 423p 372p 416p 31% 32% (11)pp (10)pp Interest rates -50bps Credit spreads +100bps Equities -25% SII ratio sensitivities FY19 1Q20 HY20 FY19 HY20 Pro forma for DCI
Slide 15: High quality investment portfolio
High quality investment portfolio Mortgage loans: low LTVs and strong LICs • £27.4bn shareholder portfolio continues to perform well (FY19: £25.7bn) • £7.6bn commercial mortgages (FY19: £7.6bn) LIC (x) LTV (%) 95% 83% 85% 2.9x £bn 2.5x 2.8x 2.8x 2.1x 2.2x 10.0 1.4x 1.4x 1.5x 7.8 3.3 0.3 3.6 61% 58%
Slide 16: Trading HY20 vs. HY19
Trading HY20 vs. HY19 Savings & Retirement UK Life (excl. S&R) Europe & Asia Life General Insurance and Aviva Investors 3.9% 5.0% NB margin 3.9% 4.2% NB margin 96.8% 99.8% Combined ratio 96.2% COR excl. COVID-19 claims* 5.2 PVNBP (£bn) 4.2 Net flows (£bn) 8.6 PVNBP (£bn) 4,725 4,749 NWP (£m) 0.4 3.2
Slide 17: Trading 2Q20 vs. 1Q20
Trading 2Q20 vs. 1Q20 Savings & Retirement UK Life (excl. S&R) Europe & Asia Life General Insurance and Aviva Investors (31)% PVNBP (£bn) (22)% Net flows (£bn) PVNBP (£bn) NWP (£m) +2% 3.7 3.9 2.9 2,353 2,396 0.2 0.7 1.5 2.3 0.5 2.3 1.9 1,005 0.2 0.7 2.7 994 1.2 0.4 0.7 0.4 0.5 2.2 0.3 1.1 1.2 1.3 0
Slide 18: Progress on costs
Progress on costs Controllable costs * • Controllable costs down £54m (3%) vs. HY19, reflecting: £m ‐ 3% reduction in global headcount and >50% reduction in number 1,966 2,056 1,912 of external contractors ‐ Rationalisation of property footprint ‐ Benefits of IT simplification and data centre migrat
Slide 19: Appendix
Appendix 19
Slide 20: Balance sheet
Balance sheet 20
Slide 21: Solvency II return on capital/equity (HY20)
Solvency II return on capital/equity (HY20) 2 Operating own funds generation Non-life New Existing capital Opening Return on business (life) business (life) generation Other Total own funds capital/equity 3 6 months 2020 £m £m £m £m £m £m % UK Life and Investments, Savings & Retirement 225 92 26 13
Slide 22: Solvency II return on capital/equity (HY19)
Solvency II return on capital/equity (HY19) 2 Operating own funds generation Non-life New Existing capital Opening Return on business (life) business (life) generation Other3 Total own funds capital/equity 6 months 2019 £m £m £m £m £m £m % UK Life and Investments, Savings & Retirement 130 76 49 194
Slide 23: Solvency II own funds
Solvency II own funds Estimated closing own Opening own funds funds 1 January 2020 30 June 2020 £m £m UK Life and Investments, Savings & Retirement 14,126 14,582 General Insurance 4,827 5,085 Europe Life 6,119 6,136 Asia Life 1,524 1,583 Other (2,048) (2,760) Estimated Solvency II shareholder own fu
Slide 24: Solvency II sensitivities (shareholder view)
Solvency II sensitivities (shareholder view) Sensitivity Impact on surplus, 30 June Impact on cover ratio 30 Impact on surplus 31 Dec Impact on cover ratio 31 2020 (£bn) June 2020 (%) 2019 (£bn) Dec 2019 % Changes in economic assumptions 25 bps increase in interest rate 0.1 2% 0.2 4% 50 bps increase
Slide 25: Solvency II regulatory own funds tiering & debt leverage
Solvency II regulatory own funds tiering & debt leverage % of own FY19 FY19 % of own % of SCR % of SCR HY20 Regulatory view HY20 funds £m £m fund FY19 FY19 HY20 HY20 Solvency II regulatory debt* 7,892 8,173 Unrestricted Tier 1 20,377 20,096 72% 71% 131% 125% Senior notes 1,052 1,129 Restricted Tier
Slide 26: Subordinated debt: maturity and first call date
Subordinated debt: maturity and first call date £1,300m Restricted Tier 1 Tier 2 Tier 3 £879m £800m £818m £700m £450m £636m £591m £600m £500m £400m £400m £162m £500m £267m 2021 2022 2023 2024 2025 2026 2029 2030 2035 2038 All debt instruments have been presented at optional first call dates at nomin
Slide 27: IFRS
IFRS 27
Slide 28: Operating earnings per share
Operating earnings per share 6 5 HY 2019 HY 2020 Group operating profit4 1,386 1,225 Less operating tax (306) (224) Minority Interest (47) (48) DCI and fixed rate tier 1 notes14 (6) (27) Preference shares (9) (9) Total operating earnings after tax, MI & DCI and preference shares 1,018 917 Weighted a
Slide 29: Basic earnings per share
Basic earnings per share 5 HY 2019 HY 2020 Operating profit attributable to shareholder 1,386 1,225 Investment return variances and economic changes on long-term business 372 305 Short-term fluctuations in in return on investments backing non-long-term business 145 (171) Economic assumption changes
Slide 30: Estimated amortisation of acquired value of in-force
Estimated amortisation of acquired value of in-force £300m Other Aviva businesses FL UK £200m £100m £0m 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 This is our latest estimated projection as provided at our full year 2019 results and remains subject to a number of factors including the ef
Slide 31: Market pages
Market pages 31
Slide 32: UK Life and Investments, Savings & Retirement
UK Life and Investments, Savings & Retirement OCG & ROC Operating profit UK Life incl. Savings & Retirement Aviva Investors Return on capital 6.5% 5.0% £m 581 £m 817 £m 522 752 69 60 64 Management actions 124 215 & other 35 748 688 Underlying 398 366 5,16 5,16 16 HY19 HY20 HY19 HY20 HY19 HY20 • Lowe
Slide 33: UK Life incl. Savings & Retirement
UK Life incl. Savings & Retirement 5,16 Operating profit (£m) Savings & • £4.2bn net inflows (+28%) driven by Workplace and Platform; £113bn closing AuA, of 4.2 Net flows Retirement 76 3.2 (£bn) which £30bn Platform 20 • Operating profit x3.8: higher asset base (opening AuA HY20: £113bn; HY19: £91bn
Slide 34: General Insurance
General Insurance OCG & ROC Operating profit Combined ratios & Sales 13.3% 8.0% HY19 HY20 Mvt £m 216 £m 332 Group COR (%) 96.8% 99.8% 3.0pp Europe 103 UKGI 97.2% 106.3% 9.1pp Return on capital 167 Canada 98.1% 95.5% (2.6)pp OCG - Underlying 163 315 Canada 89 104 Europe 92.9% 92.6% (0.3)p OCG - Manag
Slide 35: Europe Life
Europe Life OCG & ROC Operating profit Flows and Sales Return on capital 11.0% 7.1% Net flows PVNBP 464 £m 392 £m Ireland & Turkey 30 367 £bn 2.4 7.4 14 (53)% Other 0.3 Protection 9% Italy 82 100 22% 5.4 324 239 WP France 24% 10% Management Poland 85 Italy 1.6 0.8 actions & other 125 88 4% 0.1 WP It
Slide 36: Asia Life
Asia Life OCG & ROC Operating profit Focus on Singapore Return on capital 10.4% 12.7% £m 68 £m PVNBP VNB 67 43 China 25 724 71 72 £m 19 (24)% 693 18 Singapore 52 53 2% (5) 44% Other (9) 5,17 HY19 HY20 HY19 HY20 HY19 HY20 HY19 HY20 • Strong growth primarily driven by improved • Operating profit excl.
Slide 37: Life flows
Life flows 37
Slide 38: Life business fund flows
Life business fund flows Premiums and Claims and Effect of disposals, Managed assets deposits, redemptions, market and at 1 January net of net of other Managed assets at 2020 reinsurance reinsurance Net flows movements 30 June 2020 Life business UK non-profit: platform 29,085 2,932 (1,020) 1,912 (81
Slide 39: Assets
Assets 39
Slide 40: Total managed assets
Total managed assets Assets by liabilities covered Participating assets by type £m £m 134,952 141,355 412,633 Euro-style 401,025 81,829 87,220 UK With-profits style 141,355 53,123 54,135 134,952 Participating funds FY19 HY20 Policyholder funds Shareholder funds Shareholder assets by type 172,368 169
Slide 41: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m 101,678 Total: £27,387m 93,705 27,637 9% 12% 36% 29% 1% 13% 24,065 AAA A Less than BBB Government debt 27,387 AA BBB Non-rated 25,675 Corporate bonds Other debt Government debt by rating Mortgage loans 7,531 6,817 Other Total:
Slide 42: Shareholder assets corporate bonds & loans
Shareholder assets corporate bonds & loans Corporate bonds by industry Loans by type Total: £32,338m 0% 2% 5% 10% 6% 20% 9% 22% 8% 7% 68% 21% 22% IFRS credit default allowances FY19 HY20 UK, £bn Loans & advances to banks Financials - Banks Communications Corporate bonds 1.3 1.4 Financials - Insuranc
Slide 43: Shareholder assets Mortgage loans
Shareholder assets Mortgage loans Mortgage loans Commercial real estate portfolio Total: £21,977m Commercial total: £7,584m 13% LTV 83% 85% 61% 58% 56% 55% 56% 59% 35% Loans 1,583 1,492 52% in arrears (£m) 95 9 Loan 2.1x 2.2x 2.5x 2.8x 2.9x 2.8x interest cover 1.4x 1.5x Healthcare, infrastructure &
Slide 44: Disposals
Disposals 44
Slide 45: Disposals
Disposals Disposal Date of Consideration IFRS operating Operating EPS Controllable Cash (£m) OCG (£m) completion profit (£m) (p) costs (£m) HY20 74 1.9 17 - - £259m (o/w FPIL 15 July 2020 £50 deferred) FY19 128 3.3 42 - - 45
Slide 46: Footnotes
Footnotes 1. The estimated Solvency II position represents the shareholder view only. See section 3 of the Analyst Pack for more details. 2. Includes Group centre, debt costs and other items not allocated to the markets. 3. Other includes the impact of capital actions and non-economic assumption cha