Aviva Plc · LSE:AV.
Aviva — H1 2005 Earnings Presentation
31 slides from Aviva's earnings presentation, Aug 11, 2005
Slide 1: Aviva plc Interim results 2005
AVIVA plc Interim results 2005 11 August 2005
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 • Overview Richard Harvey Group Chief Executive • Financial review Andrew Moss Group Finance Director • Questions & Answers 3 © Aviva plc
Slide 4: Strong operations delivering good profits
Strong operations delivering good profits Operating profit (EEV basis) £1,318m +21% Operating profit (IFRS) £943m +19% Life and pensions sales (PVNBP) £11.0 bn +12% New business contribution £393m +15% General insurance COR 95% (FY 2004: 97%) Interim dividend 9.83p +5% ROCE 14.6% (FY 2004: 13.7%) 4
Slide 5: 2005 interim results: key themes
2005 interim results: key themes • Strong new business sales with increased value from our bancassurance network • Strong performance in mature markets, particularly France • Transforming our UK Life business to succeed in a competitive market • Prospects for our developing businesses • Excellent ge
Slide 6: Total sales
Strong growth in long-term savings new business £m 7,000 Growth 26% H1 2004 6,000 H1 2005 Growth flat 5,000 Total sales 4,000 3,000 2,000 Growth 35% 1,000 0 Continental UK International 6 Europe © Aviva plc
Slide 7: Increasing value from our bancassurance network
Increasing value from our bancassurance network New business contribution on net basis* • Bancassurance is an £m increasing proportion 80 of new business profits 70 now over quarter of business 60 50 H2 H2 • Businesses growing in Increase of 20% France, Italy and the 40 Netherlands 30 • Higher avera
Slide 8: France: benefiting from focus on unit linked sales
France: benefiting from focus on unit linked sales • Total sales up 36% (PVNBP) to £1.9 billion – Contribution up 52% (gross) to £202 million – Total proportion of unit-linked sales now 40% (FY 2004: 32%) – Net margin at 2.6% (FY 2004: 1.9%) • Benefit of Crédit du Nord (commenced October 2004) • Inc
Slide 9: UK Life: managing for value
UK Life: managing for value • Operating in competitive market where growth modest • Holding volume whilst increasing margin • Retaining a significant presence across the product portfolio • Achieving an IRR of 11.4% (H1 2004: 11.0%) – IRR improves to 13.6% taking into account debt/equity mix 9 © Avi
Slide 10: Strong UK market share consistently maintained in main product areas
Strong UK market share consistently maintained in main product areas... Total market share at 11.5% (Q1 2005) 15.8% 14.7% 13.9% 15% 12.9% 11.3% 9.5% 7.1% 15.8% 14.3% 14.8% 10.8% 8.6% 8.3% 6.4% 0% Annuities Bonds & Group Individual Corporate Investment Protection Savings Personal Pensions Pensions Fu
Slide 11: UK Life: transforming the business for the long-term
UK Life: transforming the business for the long-term • Expect to see a reduction in second half margins as product mix changes • Continue to improve underlying value drivers – Broad distribution base – Innovative capital management – Aggressive transformation of the business • Offshoring • Assisted
Slide 12: Developing our presence in other markets
Developing our presence in other markets • Rapid expansion in India and China: – Total sales from operations of £82 million (2004: £29 million) – India: working with 8 banks – China: presence in 6 cities • Broadening distribution and moving into new product markets in the US • Enter new markets sele
Slide 13: Excellent contribution from general insurance and health
Excellent contribution from general insurance and health Growing premium income ... ... whilst increasing ROCE £bn COR % ROCE % 10.0 110 20 9.8 18 9.6 16 105 9.4 14 9.2 12 9.0 100 10 8.8 8 8.6 6 95 8.4 4 8.2 2 8.0 90 0 2000 2001 2002 2003 2004 * H1 2000 2001 2002 2003 2004 H1 2005 2005 COR ROCE • GI
Slide 14: GI achievements in 2005
GI achievements in 2005 Flood mapping delivery June 04 September 04 • Corporate Partner deals December 04 March 05 – New Barclays contract In progress – Extended Asda deal to 2009 – Extending Canadian strategic alliance with Loblaws • Digital flood map • Telematics • Improving customer service – Dir
Slide 15: UK: sustained profits
UK: sustained profits GWP Growth in 2004 6% 4% 2% • Using our business model to win in a 0% -2% competitive market -4% -6% NUI Next 5 Market – 22% increase in Direct premiums Personal Lines – Cumulative – Rates increasing in personal lines 35% Rate Increases 30% 25% – 5% in personal motor and 6% 20%
Slide 16: RAC
RAC The RAC Opportunity • RAC accelerates NUI’s strategy, bringing us closer to our customers, and will Motor Insurance Home Insurance NUI Travel Insurance generate significant revenue and cost • No.1 UK general insurer • Proven scale advantages synergies • Vehicle History Checking • Track record of
Slide 17: Financial review
Financial review Andrew Moss Group Finance Director
Slide 18: Improved operational performance across all businesses
Improved operational performance across all businesses H1 2005 H1 2004 Growth † £m £m % Life EEV operating return 857 799 5 Fund management 18 10 80 General insurance and health 694 583 18 Non-insurance operations 45 (12) - Corporate costs (83) (99) 16 Unallocated interest (213) (205) (3) Operating
Slide 19: Growth from an international life portfolio
Growth from an international life portfolio H1 2005 • UK: Improvement in unit-linked Sales Growth (2) bond sales and annuities, offset PVNBP (1) % by lower pension and protection £m sales Life and pensions • France: Strong growth in unit- linked sales; strong start to UK 4,244 (1%) Crédit du Nord pa
Slide 20: Life businesses creating shareholder value
Life businesses creating shareholder value H1 2005 H1 2004 FY 2004 Contribution Margin Margin Margin £m Group Gross (1) 393 3.6% 3.5% 3.4% Gross, net of required capital 286 2.6% 2.6% 2.5% Net to shareholders (2) 158 1.7% 1.7% 1.6% Net to shareholders (2) UK 74 1.7% 1.7% 1.6% Continental Europe 76 1
Slide 21: New business profitability: focus on post required capital margins
New business profitability: focus on post required capital margins H1 2005 H1 2004 FY 2004 Contribution Margin (1) Margin (1) Margin (1) £m UK 105 2.5% 2.5% 2.3% France 48 2.6% 2.0% 1.9% Ireland 8 2.3% 4.1% 2.9% Italy 20 1.5% 1.7% 1.9% Netherlands 18 1.5% 2.5% 2.0% Spain 70 7.3% 4.9% 5.7% Other coun
Slide 22: Life EEV operating return
Life EEV operating return H1 2005 H1 2004 £m £m • Post required capital new business contribution up £35 million to £286 UK 327 345 million due to increased volume France 158 112 • Higher returns on opening embedded Ireland 22 16 value at start of 2005 up £27 million to Italy 47 36 £595 million (200
Slide 23: Life IFRS profits: businesses generating capital and cash
Life IFRS profits: businesses generating capital and cash H1 2005 H1 2004 £m £m • UK: Lower with-profit result due to bonus cut UK With profit 33 49 • France: Significant improvement due to Non profit 178 179 profitable business development and France 131 89 investment gains Ireland 14 14 • Netherla
Slide 24: Sustainability and resilience in excellent general insurance and health profits
Sustainability and resilience in excellent general insurance and health profits H1 2005 H1 2004 £m £m • GI COR of 95% (2004: 97%) • UK: Underwriting result 182 92 LTIR 512 491 • Personal motor rates up 5% and homeowners up 6% Operating profit 694 583 (including indexation) Analysed as: • Commercial
Slide 25: Asset management gathering momentum
Asset management gathering momentum • IFRS fund management operating profit up 94% to £33 million • Morley UK and overseas businesses significantly increased from £7 million to £18 million • Morley UK and overseas businesses: cost/income ratio 80% (2004: 89%) • Award winning performances in France •
Slide 26: RAC profits up 13%
RAC profits up 13% Post acquisition RAC trading amounts for the six months included in ended 30 June interim results 6 months 6 months 2 months 30 June 30 June 30 June 2005 2004 2005 £m £m £m Turnover Insurance 107 105 36 Non-insurance 510 502 162 617 607 198 Operating profit Insurance 19 19 6 Non-i
Slide 27: Strong operational cash generation, with benefits of innovative financing
Strong operational cash generation, with benefits of innovative financing H105 H104 £m £m New business strain (210) (280) Life inforce profits 646 493 Non life profits after interest costs 316 238 Normalised operating profits after tax 752 451 Interim dividend including preference shares and DCI (26
Slide 28: Movement in EU groups directive solvency
Movement in EU groups directive solvency IGD £ billion As reported at 31 December 2004 3.6 Less: previously signposted changes FSA valuation rules: market value of non-insurance (0.6) FSA valuation rules: pension deficit (0.4) Disposal of Asia 0.2 Acquisition of RAC (0.8) Sub-total (1.6) Capital gen
Slide 29: Movement in net asset value per share
Movement in net asset value per share Reported pence As at 31 December 2004 (restated for IFRS/EEV) 511 Deduct: 2004 final dividend (16) 495 Operating profit for the period 36 Investment variances 12 Foreign exchange and pension deficit (13) 35 Effect of issuing equity share capital 3 As at 30 June
Slide 30: Aviva: a thriving business
Aviva: a thriving business • Strong and steady growth in profits from businesses operating efficiently – New business contribution +15% – Excellent COR at 95% • Working to maximise our position in competitive long-term savings environment • Strong and sustainable outlook for general insurance • Stro
Slide 31: Questions and answers
30 June 2005 results Questions and answers