Aviva Plc · LSE:AV.
Aviva — FY2015 Earnings Presentation
37 slides from Aviva's earnings presentation, March 2016
Slide 1: 2015 Results
AVIVA 2015 Results
Slide 2: Disclaimer
Disclaimer Cautionary statements: This should be read in conjunction with the documents filed by Aviva plc (the “Company” or “Aviva”) with the United States Securities and Exchange Commission (“SEC”). This presentation contains, and we may make other verbal or written “forward-looking statements” wi
Slide 3: 2015 results – key milestones
2015 results – key milestones Capital management Friends Life integration Results Well ahead of schedule, with Operating profit up 20%, Solvency II ratio 180%¹ £168m of run-rate savings to £2,665m Surplus £9.7bn secured Operating EPS up 2% to 49.2p Resilient to a wide range of £225m synergy target m
Slide 4: 180% Solvency II coverage ratio – top of working range
180% Solvency II coverage ratio¹ – top of working range Group SII ratio Strength and resilience FY15: 180% • FY 2015 Solvency II cover ratio 180% of SCR Capital redeployment coverage ratio • Limited sensitivity to market movements Working range • February low point down 6pp • SCR represents key stre
Slide 5: Friends Life integration – 1 year ahead of schedule
Friends Life integration – 1 year ahead of schedule Progress towards £225m synergy target 2015 benefits included in the P&L £16m £26m £3m £29m £168m £92m £113m £73m UK Life Asset Plc/ Run-rate UK Life Asset Plc/ Realised Management Other Management Other Key integration deliverables Integration upda
Slide 6: Growth
Growth Life: Value of new business GI: Underwriting profit Aviva Investors £1,192m £352m AIMS TR 5.6% £1,005m 24%1 £321m Competitor A 2.6% 10% Competitor B 4.5% Global equities -1.3% UK Equities -3.0% FY14² FY15 FY14 FY15 • Group VNB up 24%¹ • Underwriting profit up 10% • Operating profit up 33%: £1
Slide 7: Continuing a track record of delivery
Continuing a track record of delivery VNB¹ Combined operating ratio £m 1300 98% 97.3% 1,192 97.0% 97% 1100 1,009 904 96% 95.7% 900 £1.5bn 94.6% 746 95% £566m 700 94% 500 93% FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15 Solvency surplus Inter-company loan £bn 180% £bn 7.0 11 9.7 8.3 5.8 8.0 6.0 9 SII² 5.0
Slide 8: 2015 Results – Tom Stoddard, Chief Financial Officer
2015 Results Tom Stoddard Chief Financial Officer 8
Slide 9: Key achievements in 2015
Key achievements in 2015 Solid execution Balance sheet secured • Operating profit up 20% to £2,665m, operating EPS up • Solvency II 180% of SCR² 2% to 49.2p • Low sensitivity to economic risks • VNB up 24%¹, COR improved by 1.1pp to 94.6% • Disposed non core commercial mortgages and latent • £225m F
Slide 10: Operating profit
Operating profit Operating profit (£m) FY14¹ FY15 Change Integration & restructuring FY14 FY15 Life 2,019 2,419 20% costs (£m) General Insurance 808 765 (5)% Friends Life: – integration n/a 143 Fund Management 86 106 23% – acquisition 11 30 Other operations (105) (84) 20% Solvency II 94 82 Life, GI,
Slide 11: Operating profit progression
Operating profit progression £m Total Friends Life impact: £554m 45 151 358 (30) (117) 103 2665 2,665 (58) 103 2469 2,213 2,008 FY14¹ Disposals FX Reduction in Operating Friends UK Life FPIL Friends other² FY15 life one-offs profit increase 1 Operating profit has been restated to exclude amortisatio
Slide 12: Operating expenses – discipline in all business units
Operating expenses – discipline in all business units GBP £m Segmental efficiency ratios Group ratio FY14 FY15 51.1%¹ Aviva UK Life 529 5% 2 502 50.0% 29.7%¹ 32.2% Friends UK - n/a 286 15.7% 14.8% 13.9% 12bps 13bps 14.5% Ireland Life 36 25% 27 UK & Ireland Life 565 44% 19% 815 Life GI FM Health FY14
Slide 13: UK Life – larger and stronger business
UK Life – larger and stronger business IFRS operating profit Value of new business £m FY14 FY15 %∆ +37% £1,408m Friends UK Protection 95 156 64% £1,025m £358m Annuities 233 298 28% Pensions & platforms 69 97 41% £1,050m Equity release & other2 76 58 (24)% FY14 FY15 Total 473 609 29% Cash remittance1
Slide 14: Aviva Investors – AIMS building momentum
Aviva Investors – AIMS building momentum AIMS outperforming peers IFRS operating profit +33% £105m 111 £79m 108 105 102 99 FY14 FY15 96 93 90 • Profit improvement driven by growth in asset base and higher AIMS Target Return GBP 87 Competitor A external performance fees 84 Competitor B • £45bn AUM tr
Slide 15: UK GI – resilient result despite UK floods
UK GI – resilient result despite UK floods IFRS operating profit Combined operating ratio £455m LTIR FY14 FY15¹ £41m Underwriting £368m Personal Motor 97.4% 97.8% Loan movement £215m Home 93.1% 90.6% £214m Commercial Motor 99.3% 99.4% £199m £154m Commercial Property & Liability 89.9% 93.9% FY14 FY15
Slide 16: Canada – strong results in a core market
Canada – strong results in a core market IFRS operating profit Combined operating 1 ratio LTIR FY14 FY15 +13% £214m £189m Underwriting Personal Motor 92.9% 94.9% £94m Home 103.2% 93.9% £106m Commercial Motor 98.0% 95.2% £120m £83m Commercial Property & Liability 94.3% 91.4% FY14 FY15 Total 96.1% 93.
Slide 17: Europe – solid performance despite headwinds
Europe – solid performance despite headwinds IFRS operating profit Value of new1 business £944m²,³ £m FY14 FY15 %∆ % ∆ cc1 +1%¹ £858m France 205 198 (4)% 7% Poland 64 65 2% 13% Italy² 63 79 26% 40% £847m¹,²,³ Spain² 30 31 5% 17% Turkey 30 27 (10)% 4% FY14 FY15 Total² 392 400 2% 14% Cash remittance •
Slide 18: Asia – moving forward
Asia – moving forward IFRS operating profit Value of new1 business £ million FY14² FY15 %∆ cc1 +186% £223m FPI Protection 84 109 27% Unit Linked 0 8 n/a £151m Health 23 24 2% £78m Participating 8 14 71% £72m Other 7 (4) (157)% FY14 FY14 FY15 FY15 Total 122 151 22% VNB +22%¹ £151m • 22%¹,² growth in
Slide 19: Net asset value
Net asset value Net asset value per share IFRS MCEV Opening NAV per share at 31 December 2014 340p 527p Operating profit¹ 48p 43p Friends Life acquisition 55p 5p Dividends (16)p (16)p Investment variances & AFS equity movements (4)p (19)p Pension fund (4)p (4)p Foreign exchange (8)p (11)p Integratio
Slide 20: Inter-company Loan – plan complete
Inter-company Loan – plan complete £5.8bn £(0.9)bn £(0.8)bn £(1.6)bn £(1.0)bn £1.5bn Opening Pension Scheme Current Loan Cash Other Actions Reinsurance balance Actions Value Internal loan value reduced by over £4bn Actions taken • Plan initiated in 2013 to reduce internal loan value from • Cash paym
Slide 21: Smooth transition from economic capital
Smooth transition from economic capital Consistent ratios FY15: £bn Coverage 180% ratio 200% 9.7 182% Surplus 172% 178% 181% 180% Own funds 21.8 150% 12.1 SCR 130% 100% FY11 FY12³ FY13 FY14 FY15 FY15 EC¹ SII² • No dramatic change in old or new coverage ratio • No reliance on equivalence or UFR • Cap
Slide 22: Capital resilient to stresses
Capital resilient to stresses Group SII ratio Corporate Equities movement Interest bond 2011 2008 FY15: 180% (decrease) rates¹ spreads GI Longevity financial financial Capital redeployment shock² shock3 crisis4 crisis4 coverage ratio -10% -25% -25bps +100bps 180% 177% 176% 177% 178% Working range 17
Slide 23: Capital Roadmap – capital & cash benefits of FL acquisition
Capital Roadmap – capital & cash benefits of FL acquisition Cost reduction £0.2bn • Maintenance expense reduction expected Capital optimisation £0.4bn • Optimisation of Friends Life annuities & hedging £0.5bn • £0.4bn of group diversification recognised in FY15 SII ratio £0.4bn £0.6bn • Diversificat
Slide 24: Cash and capital generation
Cash and capital generation Investment variances Organic growth What happened in 2015? funding • Estimated SII capital generation of £2.7bn primarily Remittances Debt from management actions and operating activities Organic partly offset by investment variances capital generation • £2.7bn is before
Slide 25: Continued development of excess centre cash
Continued development of excess centre cash £bn 2 1.8 £1.8bn £(0.3)bn 1.6 100% £1.4bn 1.4 £1.3bn £150m dividend 1.2 paid by Friends £(0.6)bn prior to 1 £0.9bn acquisition £1.5bn 1.5 0.8 1.4 CAD $230m 0.6 retained in Canada £1.0bn 0.4 0.2 0 2012 2013 2014 2015 Central costs Debt & other Pro-forma exc
Slide 26: 2015 Results – Mark Wilson, Group Chief Executive Officer
2015 Results Mark Wilson Group Chief Executive Officer 26
Slide 27: Investment Thesis – “Cash flow plus growth”
Investment Thesis – “Cash flow plus growth” Our strategic anchor True Customer Composite Digital First Not Everywhere Serving all customer needs across Life, GI, Customer experience driven by digital Only in markets where we can win Health and Asset Management @ Sustainable and progressive cash flow
Slide 28: Capital Allocation remains a competitive sport
Capital Allocation remains a competitive sport Withdrawal Investment Friends Life Exclusive Acquisition of acquisition partnership with RBC General announced HomeServe Insurance Exclusive GI Final dividend Indonesia JV providers for up 30% launched TSB Digital garage launched – Singapore Digital gar
Slide 29: Why Composite counts for Aviva and the customer
Why Composite counts for Aviva and the customer 31% of people prefer their products with one provider, 47% when given a reason to consolidate Economics of composite Composite delivery model Impact on net margin (% premium)* Better retention Improved Customer data customer Composite brand & analytics
Slide 30: Investment Thesis – so what’s next?
Investment Thesis – so what’s next? Cash flow Growth • Capital prioritised to markets with superior • Additional £1bn of remittances from UK Life return and growth • Refine geographic footprint • Further expense efficiencies • Rebalance earnings to Asset Management, GI • True Customer Composite and
Slide 31: Q&A
AVIVA 2015 Results Q&A
Slide 32: Appendix
AVIVA 2015 Results Appendix
Slide 33: Limited interest rate sensitivity
Limited interest rate sensitivity¹ Group SII ratio 183% 185% FY15: 180% Capital redeployment + 25bps coverage ratio - 25bps +100bps 176% Working range • Low appetite for interest rate risk reflected in product design and in- Risk reduction force product mix 100% Solvency Capital Requirement • Life b
Slide 34: Limited spread sensitivity
Limited spread sensitivity Group SII ratio Corporate bond spreads Sovereign bond spreads FY15: 180% Capital redeployment 183% coverage ratio 181% + 50bps +100bps -50bps +50bps - 50bps 179% 177% 177% Working range Shareholder Debt • Less than 2% of assets securities total shareholder debt relates to
Slide 35: Limited equity sensitivity
Limited equity sensitivity Group SII ratio • Limited equity exposure in the shareholder backed funds FY15: 180% Capital redeployment 181% coverage ratio - 10% - 25% • Participating products in France and Italy + 10% 180% have low equity backing ratios, leading to 177% Working range modest sensitivit
Slide 36: Earnings per share
Earnings per share FY14¹ FY15 Group operating profit 2,213 2,665 Less operating tax (563) (598) Minority Interest (143) (152) DCI and fixed rate tier 1 notes (69) (57) Preference shares (17) (17) Total operating earnings after tax, MI & DCI and preference shares 1,421 1,841 Weighted average number o
Slide 37: 2015 Results
AVIVA 2015 Results