Aviva Plc · LSE:AV.
Aviva — FY2018 Earnings Presentation
48 slides from Aviva's earnings presentation, 2019
Slide 1: Aviva plc Results 2018
Aviva plc Results 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: 2018 review & outlook
2018 review & outlook Tom Stoddard Aviva plc Chief Financial Officer
Slide 4: 2018 key financial metrics
2018 key financial metrics EPS Capital Cash Dividend Operating EPS Solvency II ratio 2 Cash remittances 30.0p per share 58.4p, +7% 204% £3.1bn, +31% +9% Operating profit 1 Capital generation Centre liquidity 3 51.4% pay-out ratio £3,116m, +2% £3.2bn £1.6bn +1.4pp 4 All footnotes on page 48
Slide 5: Extending our EPS and DPS growth track record
Extending our EPS and DPS growth track record Dividend per share: +9% Operating EPS: +7% Moving to a progressive dividend policy +9% +7% +18% +7% +12% +15% +3% +1% 30.0p 58.4p 27.4p 54.8p 23.3p 51.1p 20.8p 49.0p 49.7p 18.1p 4 4 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 5 All footnotes on pag
Slide 6: 6 out of 8 major markets delivered strong operating profit growth
6 out of 8 major markets delivered strong operating profit growth 1 UK 5 France Poland Canada £2,324m +7% £546m +8% £190m +7% £46m +0% Aviva Investors Ireland Singapore Italy £150m (10)% £100m +16% £125m +14% £188m +16% 6 All footnotes on page 48
Slide 7: Operating profit
Operating profit 1 £m FY17 FY18 Change Major markets UK Insurance5 2,164 2,324 7% Operating EPS Aviva Investors 168 150 (10)% Canada 46 46 - 58.4p France (excl. Antarius) 507 546 8% Poland Italy (excl. Avipop) 177 162 190 188 7% 16% +7% Ireland (incl. Friends First) 86 100 16% Singapore 110 125 14%
Slide 8: UK Insurance
UK Insurance Life core segments General Insurance +7% Annuities & Equity Release: Net written premiums (£m) 779 • £4.8bn PVNBP (+12%) from strong BPA trading (+27%) • Growth in our preferred channels and products 725 • Our largest ever BPA win (M&S: £0.9bn) 4,193 despite a softer motor market 4,078
Slide 9: Aviva Investors
Aviva Investors Operating profit 1 Performance £m • Revenue increased by 4% to £597m (FY17: £577m) 21% (10)% FM • Operating profit margin of 25% (FY17: 29%) due to investment in expanding our Equity, Real Assets & distribution capabilities, and +32% the absorption of MiFID II costs • External client
Slide 10: Canada
Canada Operating profit 1 Performance £m • Continued progress from recovery plan: operating profit stable at £46m despite a £13m loss in the first half, challenging market conditions and absorption of RBC GI integration costs within 2018 operating expenses 26% (83)% • COR 102.4% (FY17: 102.2%) with
Slide 11: France
France Operating profit 1* Performance* £m 8% • Strong distribution footprint, with increased brand recognition 20% providing an opportunity to expand our presence with customers 546 507 GI & Health • Life operating profit +7% (excl. FX) despite market volatility and 6% increased competition in Prot
Slide 12: Poland
Poland Operating profit 1 Performance £m 7% • High ROCE multi-line franchise with multi-channel distribution 26% 190 GI 177 Life 20 • Life operating profit +8% (excl. FX) mainly from higher opening 1% 21 assets under management driving increased fee income 139 140 10 8 • VNB stable at £58m (FY17: £5
Slide 13: Italy
Italy Operating profit 1* Performance* £m 16% • Multi-line business with major bancassurance partnerships and 18% (12)% GI growth through FA channel 184 188 Life • Net inflows up 57% to £3.6bn (FY17: 2.3bn) from continued (excl. Avipop) 31 162 32 success of capital-light ‘hybrid’ products which cont
Slide 14: Ireland
Ireland Operating profit 1* Performance* £m 16% • Largest multi-line insurer with a leading brand and 15% market GI share in both Life and GI 18% 100 Life 40% 86 • Friends First acquisition completed in June & already accretive to operating profit; integration progressing at pace, on track to 73 del
Slide 15: Singapore
Singapore Operating profit 1 Performance £m • Leading life & health franchise and market leaders in FA space 14% Life 10% 125 GI & Health • Distribution in financial advisory subsidiaries continues to grow 14% 110 with 1,540 advisors (FY17: 1,266) including Aviva Financial 100 Advisors, which is now
Slide 16: Operating profit
Operating profit 1 £m FY17 FY18 Change Major markets UK Insurance5 2,164 2,324 7% Operating EPS Aviva Investors 168 150 (10)% Canada 46 46 - 58.4p France (excl. Antarius) 507 546 8% Poland Italy (excl. Avipop) 177 162 190 188 7% 16% +7% Ireland (incl. Friends First) 86 100 16% Singapore 110 125 14%
Slide 17: Operating EPS progression
Operating EPS progression 2018 operating EPS growth 58.4p c(2)% <0.5% c12% c(10.5)% c3% - c4.5% 54.8p FY17 Disposals FX Assumption Weather, Underlying Operating 2017-18 FY18 operating EPS changes & prior change spend growth tax capital returns operating EPS year development & other 17 All footnotes
Slide 18: Net asset value
Net asset value 7 Basic EPS Opening NAV per share 423p at 1 January 2018 Ogden Operating profit 60p Dividends (29)p Ogden 38.2p 35.0p Share buyback (15)p 23.1p 15.3p Lower share count 12p FY15 FY16 FY17 FY18 Market movements (15)p Pension movement (6)p Integration & restructuring costs Ogden8 4p AVI
Slide 19: Capital
Capital SII cover ratio 2 SII working range: 160-180% Shareholder basis Revised from previous 150-180% range set early 2016 204% Reflects stable risk appetite on stronger capital position 198% Consistent with AA credit rating 189% 180% 180% 160% £0.6bn £0.9bn Cumulative 2017-18 2018 share buy-back s
Slide 20: Capital resilient to stress
Capital resilient to stress 2 FY18 SII cover ratio 204% Interest rates +25bps 207% • Above top end of 160-180% revised working range Interest rates -25bps 200% across all sensitivities Interest rates -50bps 194% Corporate spreads -50bps 206% • Extensive planning and scenario testing for Brexit; rema
Slide 21: Investment portfolio quality
Investment portfolio quality AAA AA A BBB <BBB NR IFRS shareholder assets Corporate debt FY18 9% 11% 36% 30% 13% £24bn 56% rated ≥ A £84bn FY11* 3% 12% 39% 29% 4% 13% £39bn £80bn 86% ≥ BBB 16% Government debt Corporate bonds 28% & other debt Loans - mortgages AAA AA A Loans - other Other investments
Slide 22: Capital generation
Capital generation • £2.7bn spent on dividend payment, share buyback and debt repayments in 2018 • Underlying OCG – lower mainly reflecting: ‐ c£0.1bn higher digital & investment spend as we continue to manage costs in line Operating capital with temporarily higher longevity benefits included in ‘Ot
Slide 23: Cash
Cash £3.1bn cash remitted in 2018, +31% £7.9bn FY16-18 cash remitted to Centre vs. £8bn target £m FY16 FY17 FY18 FY16-18 cumulative cash remittances, 9 £7.3bn of which £2.0bn of UKI special UKI 1,187 1,800 2,549 UKI underlying 937 1,300 1,299 Friends Life special 250 500 500 + Other special 750 Euro
Slide 24: Financial leverage
Financial leverage SII debt leverage* • Plan to repay without refinancing at least £1.5bn of debt by 2021-22, primarily from special dividends from subsidiaries ‐ Target pro forma c20% reduction in total debt as at YE18 >£1.5bn debt reduction ‐ Improves debt to capital ratio by c4pp on a SII basis p
Slide 25: Current outlook for 2019
Current outlook for 2019 • Rate of growth in 2019 likely to be tempered by external uncertainty: cautious outlook given macro trends and weak investment markets coming into 2019 • Potential headwinds for operating EPS include: ‐ Higher operating tax rate due to changes in business mix of operating p
Slide 26: 2018 key financial metrics
2018 key financial metrics EPS Capital Cash Dividend Operating EPS Solvency II ratio 2 Cash remittances 30.0p per share 58.4p, +7% 204% £3.1bn, +31% +9% Operating profit 1 Capital generation Centre liquidity 3 51.4% pay-out ratio £3,116m, +2% £3.2bn £1.6bn +1.4pp 26 All footnotes on page 48
Slide 27: Appendix
Appendix
Slide 28: UK profit overview
UK profit overview
Slide 29: UKI profit overview
UKI profit overview £m Operating profit1 Margin Driver 2017 2018 ∆ 2017 2018 Target range 2017 2018 £m £m % bps % bps New (74) (96) (30)% n/a n/a (90)-(100) Long Term 105bn 118bn Existing 259 294 14% 25bps 25bps 25-30bps Savings (Opening assets) (Opening assets) Total 185 198 7% New 335 363 8% 8% 8%
Slide 30: Earnings per share & net income
Earnings per share & net income
Slide 31: Operating earnings per share
Operating earnings per share FY17 FY18 Group operating profit1 3,068 3,116 Less operating tax (639) (647) Minority Interest (134) (100) DCI and fixed rate tier 1 notes (65) (36) Preference shares (17) (17) Total operating earnings after tax, MI & DCI and preference shares 2,213 2,316 Weighted averag
Slide 32: Basic earnings per share
Basic earnings per share FY17 FY18 Operating profit attributable to shareholders 2,213 2,316 Investment return variances and economic assumption changes on long-term business 86 (198) Short-term fluctuation in return on investments backing non long-term business (250) (378) Economic assumption chang
Slide 33: Estimated amortisation of acquired value of in-force
Estimated amortisation of acquired value of in-force £500m FPI £400m FL UK Other Aviva businesses £300m £200m £100m £0m 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 This is our latest estimated projection and is subject to a number of factors including the effects of markets. We annou
Slide 34: Disposals
Disposals Consideration Period Completion Operating Operating Operating EPS (p) profit (before profit (after tax & MI) tax & MI) (£m) FY17 22 6 0.2 Antarius €500m 1Q17 FY18 - - - FY17 Sept ‘17 76 30 0.6 Spain* €688m FY18 Jul ‘18 9 3 0.1 FY17 51 18 0.4 Avipop €265m March ’18 FY18 8 3 0.1 FY17 119 122
Slide 35: Returns
Returns
Slide 36: Operating return on total capital employed
Operating return on total capital employed 25.7% 24.4% 22.5% 20.0% 18.8% 15.7% 15.7% 16.2% 14.5% 13.4% 13.5% 13.9% 14.0% 12.6% 12.9% 11.1% 2.4% 2.6% UK Life UK General Canada Europe Asia Fund management Insurance & Health FY16 FY17 FY18 36 1. Following a correction to accounting and modelling for an
Slide 37: Operating return on total capital employed & return on equity
Operating return on total capital employed & return on equity Group return on capital employed Group return on equity 10.3% 14.0% 9.7% 9.8% 13.2% 12.5% FY16 FY17 FY18 FY16 FY17 FY18 37 All footnotes on page 48
Slide 38: Analysis of operating return on equity
Analysis of operating return on equity ` Weighted average £m Before tax After tax shareholders’ funds including Return on Equity % non-controlling interests United Kingdom Life10 1,871 1,532 10,576 14.5% 10 United Kingdom General Insurance 453 367 1,633 22.5% United Kingdom 2,324 1,899 12,209 15.6%
Slide 39: Cash, capital & debt
Cash, capital & debt
Slide 40: Excess centre cash
Excess centre cash 61.5p 41.0p 30.0p 27.4p 23.5p 22.9p 23.3p 20.8p 18.1p 18.6p 2014 2015 2016 2017 2018 Excess centre cash per share Dividend per share Excess centre cash represents cash remitted by business units to the group centre less central operating expenses and debt financing costs. See note
Slide 41: Solvency II own funds by tier
Solvency II own funds by tier Regulatory view* Shareholder view FY18 £bn % of SCR % of own funds • Regulatory view of own funds Tier 1 21.4 140% 78% adjusted by £4.0bn due to with-profits T1 unrestricted 19.3 126% 70% funds, pension schemes, notional reset of transitionals and other pro- T1 restrict
Slide 42: Subordinated debt maturity profile
Subordinated External debt – aprofile debt balanced maturity profile £1,300m Restricted Tier 1 Tier 2 Tier 3 £871m £800m 12.000% £808m £700m 7.875% £628m 6.125% £450m £600m £583m £500m £400m £400m 7.875% 8.25% £162m £210m £500m 6.625% 6.875% 6.875% 5.9021% £259m 8.250% 6.875% 6.875% 5.902% 8.250% 20
Slide 43: Balance sheet
Balance sheet
Slide 44: Total managed assets
Total managed assets Assets by liabilities covered Participating assets by type £m £m 125,162 119,823 358,048 345,103 70,349 73,418 Euro-style 125,162 UK with-profits 119,823 54,813 46,405 style Participating funds FY17 FY18 Policyholder funds Shareholder funds Shareholder assets by type 153,729 145
Slide 45: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m Total: £24,188m 79,157 79,825 Government debt 9% 11% 36% 30% 1% 13% 22,271 Corporate bonds 22,418 Other debt Mortgage loans AAA A Less than BBB Other AA BBB Non-rated 24,433 24,188 Government debt by rating 2,335 2,286 Total:
Slide 46: Shareholder assets
Shareholder assets Corporate bonds by industry Loans by type Total: £25,648bn 2% 4% 8% 17% 21% 7% 1% 1% 7% 16% 18% 77% 21% Financials - Banks Communications Loans & advances to banks Financials - Insurance & other Real estate Healthcare, Infrastructure & PFI other loans Utilities Oil & gas Mortgage
Slide 47: Shareholder assets – Mortgage loans
Shareholder assets – Mortgage loans Mortgage loans Commercial real estate portfolio Total: £19,813m Commercial: £7,232m 14% LTV 83% 85% 61% 58% 56% 55% 37% Loans in arrears 1,583 1,492 49% 9 Loan 2.5x 2.8x interest 1.4x 1.5x 2.1x 2.2x Healthcare, infrastructure & PFI Commercial cover FY13 FY14 FY15
Slide 48: Footnotes
Footnotes 1. Group adjusted operating profit is an Alternative Performance Measure (APM) which is used by the Group to supplement the required disclosures under IFRS. See the Financial Supplement section of the Analyst Pack for more details. 2. The estimated Solvency II shareholder cover ratio repre