Aviva Plc · LSE:AV.
Aviva — Investor Presentation (January 2018)
25 slides from Aviva's investor presentation, Jan 22, 2018
Slide 1: BPA and Private Debt Seminar
Aviva plc BPA and Private Debt Seminar January 22nd 2018
Slide 2: Disclaimer
Disclaimer Cautionary statements: This should be read in conjunction with the documents distributed by Aviva plc (the “Company” or “Aviva”) through The Regulatory News Service (RNS). This presentation contains, and we may make other verbal or written “forward-looking statements” with respect to cert
Slide 3: Today's speakers
Today’s speakers Jason is the CFO for UK Insurance having previously been Chief Capital and Jason Windsor Investment Officer, Strategy and M&A Director, and a member of the Aviva group CFO, UK Insurance executive Tom Ground Tom Ground joined Aviva in August 2017. Prior to joining Aviva, Tom headed u
Slide 4: Aviva Defined Benefit Solutions: Key messages
Aviva Defined Benefit Solutions Key messages Low risk Attractive Core strengths investment Growing appetite market strategy Total annuity book of c£15bn-£20bn pa1 c.£51bn2, of which c.£7bn is BPA Proprietary access to key Investment grade portfolio asset classes: Opportunity to grow market share BPA
Slide 5: Bulk purchase annuities: Context in Aviva Group Strategy
Bulk purchase annuities Context in Aviva Group Strategy 2016 Mid 2000s 2012 Writes £620m Aviva enters Withdraws from BPAs (41 deals) BPA market large BPAs 2017 2015 Aviva writes its 2011 Aviva acquire largest bulk Writes £1,075m Friends Life (c.£600m) BPA (49 deals) (£13bn annuities) 2014 2017 Pensi
Slide 6: Our Bulk Purchase Annuity History
Our Bulk Purchase Annuity History Historic focus on small to medium schemes Aviva bulk annuity schemes (#) Aviva bulk annuity premiums 60 60 £1,075m £984m 47 49 £826m £873m £873m 39 41 33 33 34 £620m £379m £320m £176m £187m 08 09 10 11 12 13 14 15 16 08 09 10 11 12 13 14 15 16 H1 17 H1 2017 annuity
Slide 7: Attractive financial returns
Attractive financial returns Operating profit Margin Driver HY16 HY17 HY16 HY17 Target ∆ HY16 HY17 £m £m % bps % bps range New 88 109 24% 11% 8% 7.5-8.5% 818m 1,435m (PVNBP3) (PVNBP3) Annuities & Existing 158 200 27% 60bps 70bps 55-70bps 53bn 57bn equity release (Opening assets) (Opening assets) Tot
Slide 8: Our Asset Strategy
Our Asset Strategy UK annuity asset mix (HY17) Aviva investment beliefs 2% • Long-term ALM approach: avoid short-term directional views 5% 3% 6% • All weather portfolio: focus on downgrade/default risk 9% • Responsible ESG investor 2% • Diversification: sector / geography / name 5% • Financial metri
Slide 9: Asset Portfolio Quality
Asset Portfolio Quality High quality shareholder bond portfolio underpins annuity book Breakdown by Sector (Nov 17) 1: Breakdown by Rating (HY17) : 4% 8% 5% 1% 6% 28% 8% 18% 43% 8% 13% 27% 30% Sovereigns Industrials Quasi-sovereigns AAA-AA BB or below Financials Consumer Telcos A Internally rated Ut
Slide 10: Asset Portfolio Quality: Commercial mortgage portfolio
Asset Portfolio Quality Commercial mortgage portfolio de-risked 2 years ago Sector Distribution HY17 Geographic Distribution Q4 2016 35% 9% 10% 36% 15% 8% 10% 8% 13% 6% 4% 5% 3% 3% 3% 2% Inner London Central London East Anglia North East North West Scotland Midlands Outer London South East South Wes
Slide 11: BPAs – growing appetite, winning capabilities
Aviva plc BPAs – growing appetite, winning capabilities Tom Ground
Slide 12: Bulk Annuity market is a significant growth opportunity for Aviva
Bulk Annuity market is a significant growth opportunity for Aviva £100bn of transactions since 2012 £60bn: buy-ins and buy-outs Continued growth expected… £40bn: annuity back-book / corporate transactions £30.0bn Less than 5% of £2.0trn private 20% CAGR sector liabilities insured £23.0bn £10bn1 £19.
Slide 13: 5 capabilities to winning BPA
5 capabilities to winning BPA…Aviva is well placed to win in all 5 Lower cost of Transaction Member Longevity risk Investment risk capital expertise recognition management management Corporate / trustee Only true Composite relationships Strongest brand Global Insurer in • 6.6m policies recognition S
Slide 14: Well placed to win
Well placed to win Transaction expertise Member recognition • Aviva now bidding on transactions of all sizes: 2018 pipeline of c£15bn • Strongest brand recognition of any player in market • Superior deal winning and origination skills • At scale 1.4m annuity customers: back-end digitisation (My Aviv
Slide 15: Excellence in Data & Analytics
Excellence in Data & Analytics Data analytics capability Longevity risk management • Next generation post-code model to evaluate longevity • Superior insight with Aviva Quantum: world class data - Multi-factorial predictive model of base and improver basis science capability (500+ strong team) - Pro
Slide 16: Investing to meet bulk purchase annuity liabilities
Aviva plc Investing to meet bulk purchase annuity liabilities Mark Versey, Aviva Investors
Slide 17: Aviva Investors – European Private Debt Expert
Aviva Investors – European Private Debt Expert Expertise Co-Investment Multi-asset Scalable model approach Unrivalled market Externalising business Broad asset coverage £22bn AUM access UK & Lux platforms Increased deal Relative Value Lending since 1984 flexibility Deploy surplus, In-house legal & F
Slide 18: AIS 2017 Origination: By Asset Class
AIS 2017 Origination: By Asset Class Infrastructure Debt Real Estate Finance Structured Finance - 500 1,000 1,500 Notional (£m) £2.4bn Private Debt with sizes ranging from £1m to £355m 18
Slide 19: AIS 2017 Origination: Rating Analysis
AIS 2017 Origination: Rating Analysis AAA AAA AA AA AA- AA- A A A- A- BBB+ BBB+ BBB BBB - 500 1,000 1,500 0.00% 1.00% 2.00% Notional (£m) Spread over gilts (%) Supply dominated by BBB issuance giving average spread c2%...all secured 19
Slide 20: AIS Origination: By Indexation Type
AIS Origination: By Indexation Type Fixed RPI CPI - 500 1,000 1,500 2,000 Notional (£m) Borrowing mainly Fixed Rate but increasing volumes of Inflation Linked 20
Slide 21: AIS Origination: Benefits of multi-asset approach
AIS Origination: Benefits of multi-asset approach 3.00% 2.50% Structured Finance Infra Debt 2.00% Real Estate Finance 1.50% 1.00% 0 10 20 30 40 50 Weighted Average Life (years) 21 33 deals across spread and duration with 13y WAL
Slide 22: Application: Bulk Annuity Investment Strategy
Application: Bulk Annuity Investment Strategy Illustrative example of a notional £1bn BPA deal Good cash flow matching to liabilities 22
Slide 23: Example – Real Estate Finance
Example – Real Estate Finance Regional REIT Investment Senior Secured Loan Portfolio of 70+ regional office and Assets| industrial assets Investment size c£75m Tenor 10 years Annualised all-in return ~215bps Illiquidity premium (over public credit) ~100bps Rating BBB Loan Terms 50% LTV Investment da
Slide 24: Example – Infrastructure Debt
Example – Infrastructure Debt Investment Senior Secured Loan South West Trains Assets Rolling Stock Investment size c£250m Tenor >25 years Spread 180-220 bps Illiquidity premium (over public ~120bps p.a. credit) Rating BBB Investment date 2017 For illustrative purposes only 24
Slide 25: 2018 – Challenges & Opportunities
2018 – Challenges & Opportunities Supply Demand Valuation Fiscal stimulus Low yields Political tension Bank demand Liability matching Credit spreads Real asset demand Increased external demand Interest rates / XCY birth rate in Europe* Pipeline of > £19bn 25