Aviva Plc · LSE:AV.
Aviva — H1 2007 Earnings Presentation
51 slides from Aviva's earnings presentation, Aug 9, 2007
Slide 1: One Aviva
One Aviva 9 August 2007 “Our priority is to realise the full potential of Aviva’s existing businesses” Andrew Moss Group Chief Executive
Slide 2: 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 3: Agenda
Agenda Introduction Andrew Moss Group Chief Executive Financial review Philip Scott Group Finance Director CEO perspective Andrew Moss Group Chief Executive Q&A
Slide 4: Aviva plc 2007 half year results
Aviva plc 2007 half year results Philip Scott, Group Finance Director
Slide 5: H1 2007 key highlights
H1 2007 key highlights • Long term new business sales up 25% to £19.3bn • Life new business contribution up 21% to £550m at stable margin • GI COR 97% • EEV operating profit down 8% to £1,541m • IFRS operating profit up 1% to £1,375m • Net asset value per share up 8% to 737p • Interim dividend per s
Slide 6: Regional performance
Regional performance North Asia UK Europe America Pacific Other (2) Group £m £m £m £m £m £m Total sales 10,365 10,000 2,381 2,046 - 24,792 Long term savings new business 7,415 8,131 1,716 2,032 - 19,294 New business contribution 178 283 57 32 - 550 New business margin (gross) 3.1% 3.8% 3.3% 4.9% - 3
Slide 7: Regional analysis
Regional analysis Total Sales EEVOR Asia Asia North Pacific Pacific America 3% North 8% 10% America UK 10% UK 38% 42% Europe Europe 40% 49%
Slide 8: UK Life
UK Life HY07 HY06 • Record half year sales: £m £m – Total sales, including investments, up 7% New business – On top of 35% growth in HY06 Life and pensions 5,820 5,816 • Life EEV operating profit up 18% – New business contribution increased due Investment sales 1,595 1,083 to higher margin of 3.1% (
Slide 9: UK General Insurance
UK General Insurance HY07 HY06 • Adverse weather impact of £235m (HY06: £m £m £125m benefit) Operating profit (1) • Profit of £245m on prior year claims (HY06: £140m). Underwriting result (46) 222 • Net written premiums reflect management LTIR 330 344 action • Combined operating ratio of 102% Non-in
Slide 10: Europe
Europe HY07 HY06 • Strong and profitable sales growth in £m £m Europe – total sales up 14% New business • Excellent performance in Southern Europe, Life and pensions 7,353 6,645 Ireland, CEE and Russia • France and the Netherlands generating Investment sales 778 582 strong profits and capital New bu
Slide 11: Europe – Life performance
Europe – Life performance Life and New business • France – stable margin in a market pensions Contribution Margin which has contracted this year HY07 HY06 HY07 HY06 HY07 • Ireland – sales up 62% from growth in both bank and broker channels £m £m £m £m % • Italy – now the 2nd largest business in Fran
Slide 12: North America
North America HY07 HY06* £m £m United States • Excellent sales growth of 51% (proforma) Life and pensions 1,716 289 • New business contribution up 60% New business contribution 57 5 (proforma) Life EEV operating profit 112 16 • Integration programme 80% complete at mid year Life IFRS operating profi
Slide 13: Asia Pacific
Asia Pacific HY07 HY06 £m £m New business • Excellent growth with total sales up 72% Life and pensions 654 397 – Life and pensions sales strong in China, Investment sales 1,378 819 Hong Kong and Singapore New business contribution 32 19 – Investment sales up 71% • Entries announced into new markets
Slide 14: Asset management
Asset management HY07 HY06 £m £m • UK profits up 42% - mainly Morley IFRS operating profit – Additional performance fees UK 37 26 – UK funds under management up Europe 29 30 by £13bn North America 1 1 – Strong market growth Asia Pacific 9 4 – New third party mandates • Asia Pacific profits doubled 7
Slide 15: Value creation
Value creation • NAV per share up 8% to 737p (31 Dec 2006: 683p) • Interim dividend per share up 10% • RoCE of 11.6% (Life 9.1%; GI 14.1%) • IGD solvency increased to £4.0bn, cover of 1.8 times
Slide 16: My agenda
My agenda Earnings • IFRS operating profit definition review in Q4 • MCEV – expect end 2008 implementation Capital • Economic capital - is the measure • Securitisation – a growing market • Solvency II – an opportunity to come Disclosure • Transparency and simplicity • Insights on capital generation
Slide 17: Outlook
Outlook • Continued strong growth of life sales • Life margins stable subject to product mix changes • Worldwide COR – committed to meet or beat 98% target but degree of uncertainty for 2007 due to floods • Rises in household and commercial rates coming through
Slide 18: One Aviva
One Aviva 9 August 2007 “Our priority is to realise the full potential of Aviva’s existing businesses” Andrew Moss Group Chief Executive
Slide 19: An increasingly global company
An increasingly global company £30 billion 8% Asia Pacific Sales 10% North America £15 40% Europe billion 9% 33% 42% UK 58% HY 2000 HY 2007
Slide 20: One Aviva
One Aviva Purpose Purpose Vision Vision Strategic Group strategy and targets Targets priorities UK Europe N.America Asia Regional / BU strategies Pacific
Slide 21: One Aviva – Purpose
One Aviva Purpose Purpose Vision Vision Purpose Prosperity & peace of mind Strategic Group strategy and targets Targets priorities UK Europe N.America Asia Regional / BU strategies Pacific
Slide 22: One Aviva – Vision
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision Vision One AvivaTargets Strategic Group strategy and targets priorities UK Europe N.America Asia Regional / BU strategies Pacific
Slide 23: A highly capable and experienced executive team appointed
A highly capable and experienced executive team appointed Andrew Moss Chief Executive Philip Scott Tidjane Thiam Finance Europe Mark Hodges Director Tom Godlasky UK Life North America Igal Mayer UK GI Simon Machell Asia Pacific Alain Dromer John Ainley Aviva Global Human Anupam Sahay Resources Inves
Slide 24: Regional structure
Regional structure UK Europe N. America Asia Pacific
Slide 25: One Aviva – Strategic priorities
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic priorities ● Manage composite portfolio ● BuildStrategic global Asset Management Group strategy and targets Targets ● Allocate capital priorities rigorously ● Increase customer reach ● Boost productivity UK Europe
Slide 26: One Aviva – Strategic priorities
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic priorities ● Manage composite portfolio ● BuildStrategic global Asset Group strategy and targets Management Targets priorities ● Allocate capital rigorously ● Increase customer reach ● Boost productivity UK Europe
Slide 27: Manage the composite portfolio
Manage the composite portfolio Long Term savings General Insurance Composite
Slide 28: One Aviva – Strategic priorities
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic priorities ● Manage composite portfolio ● Build global Asset Strategic Group strategy and targets Management Targets priorities ● Allocate capital rigorously ● Increase customer reach ● Boost productivity UK Europ
Slide 29: Build Aviva global asset management
Build Aviva global asset management Morley Delta Lloyd Fund Management Investment Mgt Morley Hibernian Investment Managers CUIM Polska Aviva Capital Mgt Morley Morley AFS – Luxembourg Aviva Gestion d’Actif Portfolio Partners Benefits Morley • Manufacturing Aviva Gestion Spain • Distribution Aviva In
Slide 30: One Aviva – Strategic priorities
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic priorities ● Manage composite portfolio ● BuildStrategic global Asset Management Group strategy and targets Targets ● Allocate priorities capital rigorously ● Increase customer reach ● Boost productivity UK Europe
Slide 31: Allocate capital rigorously
Allocate capital rigorously Using capital to maximise value for shareholders Inorganic Organic Russia History of disciplined use of equity to fund acquisitions
Slide 32: Allocate capital rigorously
Allocate capital rigorously • Risk appetite Using capital to maximise value for shareholders • Realising Inorganic more capital from existing businesses Organic – New focus on securitisation – Inherited estate reattribution – Maximising diversification benefits in the Solvency II world Russia • Prog
Slide 33: One Aviva – Strategic priorities
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic priorities ● Manage composite portfolio ● BuildStrategic global Asset Management Group strategy and targets Targets ● Allocate capital priorities rigorously ● Increase customer reach ● Boost productivity UK Europe
Slide 34: Access to customers
Access to customers Multi-distribution Direct Sales Bancassurance Independent Agents
Slide 35: The strategic advantage of bancassurance
The strategic advantage of bancassurance • Six new bancassurance JV’s in H1 2007 • Giving access to over 30m potential customers – Confirming we are partner of choice – Demonstrating further European growth opportunities – Increasing the geographical footprint in Asia Pacific
Slide 36: The strategic advantage of bancassurance
The strategic advantage of bancassurance
Slide 37: The strategic advantage of bancassurance
The strategic advantage of bancassurance Bancassurance sales CAGR of 20%* Margin of 4.5% compared to 3.5% for the group* Access to c.200 million potential customers across c.48,000 branches * From principal bancassurance deals
Slide 38: Customers – unlocking the potential
Customers – unlocking the potential • Products - continued development and simplification – Sharing ideas – e.g. Australian wrap platform used in Singapore – Rapid development – e.g. Polish on-line GI – Innovation – e.g. digital flood mapping • Service - vital to continue improving standards – World
Slide 39: One Aviva – Strategic priorities
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic priorities ● Manage composite portfolio ● BuildStrategic global Asset Management Group strategy and targets Targets ● Allocate capital priorities rigorously ● Increase customer reach ● Boost productivity UK Europe
Slide 40: Costs savings – making it happen
Costs savings – making it happen Cost Initiatives Underway £m 500 The “One Aviva” approach 23 403 • Working across borders 400 130 and boundaries (shared 300 services, IT) 250 • Simplify (Swiss Re 200 agreement, removing 220 IT systems) 100 • More cost savings to come 0 UK Cost & RAC US Total Effici
Slide 41: One Aviva – Strategic targets
One Aviva Purpose Purpose Prosperity & peace of mind Vision Vision One Aviva Strategic Targets priorities ● Manage composite ● 98% meet or beat COR portfolio ● 5 year 10% international Group strategy and targets ● Build global Asset Targets life growth Management ● Allocate capital ● 1.5 – 2 x divid
Slide 42: One Aviva – UK
One Aviva • Competitive advantage with brand, breadth of distribution UK Purpose and product range Prosperity & Purpose • On track to achieve £250m cost peace saving target of mind Market leadership • UK Life Vision Vision One Aviva – Untapped savings and protection gap ● Address legacy – Broadening
Slide 43: One Aviva – Europe
One Aviva • Demographics provide strong driver for growth Europe Purpose • H1 2007 growth Prosperity & Purpose peace of mind – Southern European sales up 19% Scale, growth, capital – CEE sales up 44% Vision Vision One Aviva ● Seize unique growth – Ireland sales up 62% opportunities • Access to enorm
Slide 44: One Aviva – North America
One Aviva • Large demographic opportunity with the “baby N. America Purpose boomers” Purpose Prosperity & peace of mind • Competitive advantage in Vision product innovation Double scale Vision One Aviva ● Focus : top 5 in chosen • Re-rating will allow access to further distribution segments Strategi
Slide 45: One Aviva – Asia Pacific
One Aviva • Huge and well understood demographic Asia Pacific Purpose opportunities Purpose Prosperity & peace of mind • Now operating in eight territories Scale, growth Vision Vision One Aviva – Using the bancassurance model to drive growth ● Prioritised portfolio Strategic – Sharing product expert
Slide 46: One Aviva – Group and regional strategies
One Aviva Purpose Prosperity & Purpose peace of mind Vision Vision One Aviva Strategic Targets priorities ● Manage composite ● 98% meet or beat COR portfolio ● 5 year 10% international life Group strategy and targets ● Build global Asset growth Management ● 1.5 – 2 x dividend cover ● Allocate capita
Slide 47: Q&A
Q&A “Our priority is to realise the full potential of Aviva’s existing businesses” Andrew Moss Group Chief Executive
Slide 48: Appendix
Appendix
Slide 49: Solvency cover on EU groups directive basis
Solvency cover on EU groups directive basis FY Actual IGD Solvency £3.5bn 2006 Capital generation in the period net of RMM increase £0.7bn External dividend £(0.5)bn Other capital generation HY £0.3bn Actual IGD Solvency £4.0bn 2007 1 2 3 4 5 £bn 1.8 times cover at 30 June 2007
Slide 50: Movement in net asset value per share
Movement in net asset value per share Reported Pence As at 31 December 2006 683 Deduct 2006 final dividend (less scrip) (14) 669 Operating profit for the period 39 Investment variances 18 Pension deficit 20 Other (9) As at 30 June 2007 737
Slide 51: One Aviva
One Aviva 9 August 2007 “Our priority is to realise the full potential of Aviva’s existing businesses” Andrew Moss Group Chief Executive