Aviva Plc · LSE:AV.
Aviva — FY2005 Earnings Presentation
33 slides from Aviva's earnings presentation, Mar 2, 2006
Slide 1: Sustainable Growth: 2005 Preliminary Results
Sustainable Growth The Composite Model: • Flexibility • Strength • Resilience 2005 Preliminary Results1 • Balance 2 March 2006 © Aviva plc
Slide 2: Agenda
Agenda • Introduction Richard Harvey Group Chief Executive • Financial review Andrew Moss Group Finance Director • Review of the business Richard Harvey • Questions & Answers 2 © Aviva plc
Slide 3: 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 4: Significant growth across the portfolio
Significant growth across the portfolio Operating profit (EEV basis) £2,904m +29% Operating profit (IFRS) £2,128m +25% Long term savings sales (PVNBP) £24.6bn +10% New business contribution £808m +14% General insurance COR 95% (2004: 97%) Total dividend per share 27.27p +7.5% ROCE 15.0% (2004: 13.7%
Slide 5: Andrew Moss: Financial review
Andrew Moss Group Finance Director Financial review 2005 Operational performance Cash and capital generation
Slide 6: Strong operational performance across all businesses
Strong operational performance across all businesses 2005 2004 Growth † £m £m % Life EEV operating return 1,814 1,611 11 General insurance and health 1,551 1,259 22 Fund management 51 20 155 Non-insurance operations 60 (41) Corporate costs (136) (188) Unallocated interest (436) (437) Operating profi
Slide 7: Long term savings: excellent international growth and robust UK sales
Long term savings: excellent international growth and robust UK sales 2005 Sales (1) Growth (2) • International: £m % – 59% of total Group Life and pensions 13,193 14 sales; – Bancassurance Investments 1,239 56 channel sales of £5.5bn, up 23%, in Aviva International 14,432 16 France, Italy, Spain Li
Slide 8: Life: new business contribution up 18% with higher margins
Life: new business contribution up 18% with higher margins from key businesses New business New business contribution (1) margin (1) 2005 2004 2005 2004 £m £m % % Aviva UK 213 215 2.4 2.3 France 91 54 2.6 1.9 Ireland 13 16 2.0 2.9 Italy 36 34 1.6 1.9 Netherlands 57 43 2.4 2.0 Spain 155 121 7.7 5.7 O
Slide 9: Life: new business increasing shareholder returns
Life: new business increasing shareholder returns New business Margin contribution 2005 2004 2005 2004 £m £m % % Net to shareholders (1) 341 297 1.8 1.6 Analysed as: Aviva UK 149 150 1.6 1.6 Aviva International 192 147 1.9 1.6 Bancassurance 93 74 2.9 2.7 Non bancassurance 248 223 1.6 1.5 9 (1) Post
Slide 10: Life: EEV operating return boosted by high new business and in force profits
Life: EEV operating return boosted by high new business and in force profits 2005 2004 £m £m Aviva UK 585 551 • Post required capital new business contribution up France 321 286 £96m to £612m Ireland 20 40 Italy 96 79 • Higher returns on opening embedded value at start Netherlands 318 277 of 2005 up
Slide 11: Life: benefiting from a diversified portfolio
Life: benefiting from a diversified portfolio 2005 2005 2005 2004 £m £m £m £m UK International Total Total New business contribution post cost 213 399 612 516 of capital Expected returns 522 702 1,224 1,117 Experience variances (93) 54 (39) (15) Operating assumption changes (57) 74 17 (7) TOTAL 585
Slide 12: Life: IFRS profits - businesses generating capital and cash
Life: IFRS profits - businesses generating capital and cash 2005 2004 • UK: £m £m – With profit: bonus Aviva UK improvements With profit 99 97 – Non profit: strong Non profit 285 256 annuity and equity release profits France 258 213 Ireland 28 31 • France: Inclusion of Crédit du Nord joint venture I
Slide 13: General insurance and health: outstanding profits, up 22%
General insurance and health: outstanding profits, up 22% • UK: 2005 2004 – Operating profits improved by 22% to £974m; £m £m – Efficiency focus with expense ratio of 10.9% including RAC; Underwriting result 505 271 – Personal motor and homeowner rates up 4% and 6%, LTIR 1,046 988 respectively; Oper
Slide 14: General insurance: RAC delivered a good performance
General insurance: RAC delivered a good performance in the year Post acquisition RAC trading amounts for the year included in ended 31 December results 8 months 31 December 2005 2004 2005 £m £m £m Turnover Insurance 304 288 209 Non-insurance 838 908 523 1,142 1,196 732 Operating profit Insurance 42
Slide 15: Fund management: profit growth of 130%
Fund management: profit growth of 130% 2005 2004 £m £m Morley (UK and international) 49 18 • Morley: Achieving scale Other UK 8 (2) and managing costs France 26 15 • France: Strongly Other countries 9 9 performing equity markets and new business inflows Total IFRS profit 92 40 • Worldwide sales of £
Slide 16: Strong operational performance across all businesses
Strong operational performance across all businesses 2005 2004 Includes, RAC of £m £m £30m, improved Dutch banking Life EEV operating return 1,814 1,611 performance and General insurance and health 1,551 1,259 non recurrence of Fund management 51 20 £40m vacant Non-insurance operations 60 (41) prope
Slide 17: Capital generation: consistently strong operational capital generation
Capital generation: consistently strong operational capital generation, net of financing 2005 2004 £m £m New business strain (536) (520) Life inforce profits 1,250 848 Non life profits after interest costs(1) 729 486 Normalised operating profits after tax 1,443 814 Dividend including preference shar
Slide 18: Capital strength: strong solvency cover on EU groups directive basis
Capital strength: strong solvency cover on EU groups directive basis 2004 Estimated IGD Solvency £3.6bn Previously signposted changes: FSA valuation rules: market value of non Insurance: £(0.6)bn FSA valuation rules: pension deficit: £(0.4)bn Disposal of Asia General insurance: £0.2bn Acquisition of
Slide 19: Dividend: greater flexibility
Dividend: greater flexibility • Until now: – Grow the dividend by 5% per annum following the dividend cut in 2002 • Gave a high degree of certainty to our shareholders regarding future dividend growth • However, the Board now believes that the 5% growth target has become too rigid a constraint • Our
Slide 20: Group pension schemes: proposed funding
Group pension schemes: proposed funding • Gross of tax payments of £700m: – £500m into Aviva scheme; – £200m into RAC scheme (of which £160m was paid in 2005) • The remaining payment to be spread over the next two years • Funding to be made from own internal resources • The Group's financial flexibi
Slide 21: Richard Harvey: Review of the business
Richard Harvey Group Chief Executive Review of the business
Slide 22: Foundation for sustainable growth
Foundation for sustainable growth 2000-2003 2004-2005 2006 > Weathering Platform for Delivering growth the storm growth and value • Cost reduction • Capital structure • Continued international growth • Operational • Expansion of in mature and new markets excellence bancassurance model • Leverage ban
Slide 23: The Aviva portfolio
The Aviva portfolio Sales EEV Operating Profits £35bn(1) £3.5bn(2) 41% International Life Aviva International 54% International General 12% Insurance 18% UK General Insurance Aviva UK 46% 29% UK Life (1) 2005 total long-term savings new business sales and GI and health new business premiums 23 (2) E
Slide 24: International life: delivering growth
International life: delivering growth New Business Contribution (1) £m £543m 22% (2) 500 £437m £396m 250 H2 H1 2003 2004 2005 • Building strongly placed businesses using multiple distribution channels • Continuing bancassurance development in Europe & Asia • Emerging market growth: China, India, Rus
Slide 25: General insurance: sustainable results
General insurance: sustainable results Growing premium income ... ... whilst increasing profitability £ bn COR % Operating Profit £ bn 10.4 110 2.0 10.0 COR Operating Profit 9.6 105 1.5 9.2 100 1.0 8.8 95 0.5 8.4 8.0 90 0 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 • Increase e-busin
Slide 26: UK life: building momentum
UK life: building momentum UK Life and Pensions Total Sales £m 3,000 2,500 2,000 PVNBP 1,500 1,000 Q1'05 Q2'05 Q3'05 Q4'05 • Strong sales growth in the second half of the year • Strong product development programme • Continued improvements in service and efficiency • 39% growth in RBSG bancassurance
Slide 27: Effective Capital Management
Effective Capital Management • Self financing composite model • Effective Aviva debt structure – Use of hybrid debt • Capital efficiency in writing new business – Product development and pricing – Reinsurance – In force book • Investment in new business – Bancassurance – Emerging markets – Operating
Slide 28: Sustainable growth
Sustainable growth • Increasing profit • Increasing dividend • Growth opportunities both in the UK and Internationally 28 © Aviva plc
Slide 29: Questions and Discussion
Questions and Discussion The Composite Model: • Flexibility • Strength • Resilience 29 • Balance Sustainable Growth © Aviva plc
Slide 30: Appendix
Appendix
Slide 31: Movement in net asset value per share
Movement in net asset value per share Reported pence As at 31 December 2004 511 Deduct: 2004 final and 2005 interim dividends (27) 484 Operating profit for the year 75 Investment variances 70 Foreign exchange, pension deficit and other movements (11) 134 Effect of issuing equity share capital 4 As a
Slide 32: Life: Aviva UK EEV operating return
Life: Aviva UK EEV operating return 2005 2004 £m £m New business contribution post cost of capital 213 215 Expected returns 522 475 Experience variances (93) (81) Operating assumption changes (57) (58) TOTAL 585 551 Includes: Includes: • Exceptional expenses of £148m • Provision of £130m due to • Po
Slide 33: Group pension schemes
Group pension schemes • RAC Movements in the pension schemes deficits in 2005: – Deficit as at 4 May 2005, the date of UK International Group acquisition; – £160 million of the £m £m £m deficit funded during 1 January 2005 (742) (151) (893) 2005 • Employers’ contribution rate Employer contributions