Aviva Plc · LSE:AV.
Aviva — H1 2013 Earnings Presentation
35 slides from Aviva's earnings presentation, 2013
Slide 1: Interim Results 2013
AVIVA Interim Results 2013
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 announcement contains, and we may make other verbal or written “forward-looking statements” wi
Slide 3: Interim Results 2013 - Mark Wilson, Group CEO
Interim Results 2013 Mark Wilson Group Chief Executive Officer 3
Slide 4: 2013 Interim Results summary
2013 Interim Results summary £573 million remittances received from continuing operating entities (HY12: £441 million) Cash flow Operating capital generation (“OCG”) at £936 million (HY12: £906 million) Interim dividend per share 5.6p Operating profit at £1,008 million (HY12: £959 million) P
Slide 5: Key metrics
5 key metrics Cash flow Operating profit Operating capital generation Remittances to Group £1,008m £936m £906m £959m 5% 3% £573m 30% £441m HY12 HY13 HY12 HY13 HY12 HY13 Operating expenses Value of new business Combined operating ratio £1,675m 9% £1,528m £401m 96.2% £343m 95.5% 0.7 17% ppt HY12 HY13
Slide 6: Focus areas
Focus areas • Improve cash remittances • Turnaround the performance of Italy, Spain, Ireland and Aviva Investors • Complete the disposal of the US business • Reduce intercompany loan • Lower external leverage ratio • Ensure £400 million expense savings flow through to the P&L • Reduce restructuring
Slide 7: Expense reduction target on track
Expense reduction target on track Derivation of operating expense target • HY13 operating expenses 9% lower at £1,528m £m (HY12: £1,675m) Total 2011 operating cost base excluding • Impact of inflation to be absorbed 4,224 restructuring costs • £400m will go to the P&L in 2014 Delta Lloyd (362) • Fur
Slide 8: Recap: Investment Thesis – Cash flow plus growth
Recap: Investment Thesis – “Cash flow plus growth” IFRS 1. Three core business lines with scale – Life, General Cash Op Insurance and Aviva Investors flow Profit Expenses VNB COR 2. Progressive cash flow focus Group Cash flow UK&I Life - 3. Significant diversification benefits UK&I
Slide 9: Investment thesis – geography
Investment thesis – geography Cash generator Growth Turnaround Operating profit Value of new business HY13 HY13 15% 5% “Cash flow plus growth” 9% 21% • Diverse portfolio of cash generators, growth businesses and turnaround operations 76% 74% • Growth businesses currently contribute 21% of VNB 9
Slide 10: Cash generators: UK, Canada and France
Cash generators: UK, Canada and France UK • Market leader in the UK • Recognised brand, good customer service • Strength in annuities • Experts in risk • Improve remittances • Improve expense ratios • Better manage backbook • Invest in digital • Grow use of predictive analytics Canada • Number 2 in
Slide 11: Turnaround businesses: Italy, Spain, Ireland, Aviva Investors
Turnaround businesses: Italy, Spain, Ireland, Aviva Investors Italy • Credit exposure significantly reduced and capital position has strengthened • Shifting product mix away from guarantees • Exiting small Italian partnerships • Expense reductions Spain • Launched new unit-linked and protection prod
Slide 12: Growth markets – future cash generators
Growth markets – future cash generators: Poland, Turkey, SE Asia, China Poland • Strengthened management team • Top 3 insurer • Strengthened distribution and bancassurance network • Unhelpful potential pension reforms on closed book • Increased focus on protection and GI Turkey • Number 2 life & pen
Slide 13: Strategic framework
Strategic framework A consistent framework across the Group for all our stakeholders Customer thesis Strategic priorities • Predictive analytics Investment Thesis Distribution • Automated processes “Cash flow thesis plus growth” • Digital / Direct People thesis 13
Slide 14: Interim Results 2013 - Patrick Regan, CFO
Interim Results 2013 Patrick Regan Chief Financial Officer 14
Slide 15: Operating profit improvement
Operating profit improvement Operating profit IFRS Operating profit reconciliation £ million HY12 HY13 Change Life 897 910 1% Operating profit HY12 959 General Insurance & Health 462 428 (7)% Operating expense savings 147 Fund Management 18 42 133% 2012 UK Life non-recurring items (74) Other operati
Slide 16: UK Life
UK Life Value of new business Operating profit Operating expenses £ million HY12 HY13 £469m* £346m £438m £296m Pensions 37 30 (19)% Protection 36 36 - £395m* Annuities 98 138 41% Other 11 7 (36)% Total 182 211 16% HY12 HY13 HY12 HY13 • Underlying operating profit up due to a Remittances to group com
Slide 17: Commercial mortgages loan to value
Commercial mortgages Total UK Annuity portfolio Commercial mortgage segmentation 140% Higher risk £2.8bn Loan to value Total Medium Risk £1.3bn 110% annuity commercial mortgage Low Risk portfolio £4.0bn 80% Bubble size = size of portfolio £12.2bn NHS backed 50% healthcare & PFI £4.1bn 1.5x 150% 1.2x
Slide 18: UK GI
UK GI Operating profit £m HY12 HY13 Operating profit Operating expenses Underwriting result 19 76 £239m Investment income 208 163 £378m £227m £360m Total 227 239 Combined operating ratio HY12 HY13 Personal Motor 96% 96% Home 95% 90% HY12 HY13 HY12 HY13 Commercial Motor 101% 113% Commercial Property
Slide 19: France
France Value of new business Operating profit Operating expenses £m HY12 HY13 £222m £193m £213m £216m Protection 20 30 50% Unit linked savings 14 32 129% Other savings 28 24 (14)% Total 62 86 39% HY12 HY13 HY12 HY13 Remittances to group COR • Improved business mix with unit-linked sales up 99% and p
Slide 20: Canada
Canada Combined operating ratio Operating profit Operating expenses HY12 HY13 £174m Personal Motor 85% 87% £147m £199m £196m Home 93% 95% Commercial Motor 91% 95% Commercial Property 100% 111% Other commercial 92% 84% HY12 HY13 HY12 HY13 Total 90% 92% Remittances to group • Impact of floods in Alber
Slide 21: Combined Operating Ratio
Combined Operating Ratio Current year Prior year Expense Combined underlying Weather reserve ratio* operating ratio loss ratio releases 33.1% 95.5% 96.2% 32.3% (0.8)% (0.2)% 61.0% 59.8% 3.4% 3.1% HY12 HY13 HY12 HY13 HY12 HY13 HY12 HY13 HY12 HY13 * Commission and expense ratio 21
Slide 22: Value of new business
Value of new business HY12 HY13 HY12 VNB UK & Ireland 176 20% 212 Mix / pricing France 62 39% 86 Volume Poland 18 17% 21 Economic effect Turkey1 15 40% 21 Asia 29 41% 41 HY13 VNB Italy 14 57% 6 Mix and pricing Spain 21 38% 13 • Re-pricing annuity book in UK Life • Increased proportion of protection
Slide 23: Expense analysis
Expense analysis £147 million cost savings achieved 50 18 3 18 23 9 3 4 25 9% reduction £1,675m £1,528m HY12 UK Life UKGI Ireland France Rest of Asia Canada Aviva Other Group HY13 Europe Investors activities 23
Slide 24: Net asset value
Net asset value Net asset value per share IFRS MCEV Opening NAV per share at 31 December 2012 278p 422p Operating profit 26p 27p Dividends (9)p (9)p Investment variances 3p 9p Commercial mortgages (8)p (2)p Pension fund (8)p (8)p Integration and restructuring costs, goodwill impairment, (6)p (5)p ot
Slide 25: Intercompany loan
Intercompany loan Recap: origination of the loan Actions taken to reduce balance to £5.1bn Aviva Insurance Limited 0.3 Holding company UK GI 0.4 Investment in subsidiaries Receivable from Hold Co £5.8bn £5.1bn Aviva Group Aviva Insurance Holdings Limited Investment in Loan to Hold Co: subsidiaries £
Slide 26: Operating capital generation
Operating capital generation New Experience/ Operating HY13 Free surplus Remittances business management capital £ million emergence to date strain actions generated UK & Ireland Life 205 17 41 263 300 France1 176 (74) 57 159 103 Poland 75 (14) 1 62 83 Italy 57 (27) 15 45 - Spain 47 (19) - 28 17 Asi
Slide 27: Sustainable capital generation
Sustainable capital generation Example capital generation £bn Back book capital generation £bn Year 1 1.2 Back book capital generation 1.1 Year 2 1.1 Year 3 1.1 New business strain (0.3) Year 4 1.1 Year 5 1.1 Surplus generation from future new business 0.2 Year 6 1.1 Year 7 1.0 GI and fund managemen
Slide 28: Interim Results 2013 - Mark Wilson
Interim Results 2013 Mark Wilson 28
Slide 29: Q&A
AVIVA Interim Results 2013 Q&A 723)
Slide 30: Appendices
Interim Results 2013 Appendices 30
Slide 31: Half year 2013: KPIs
Half year 2013: KPIs HY12 HY13 Variance Cash flow (remittances to Group) £441m £573m 30% Operating capital generation £906m £936m 3% Operating expenses1 £1,675m £1,528m (9)% Value of new business £343m £401m 17% Combined operating ratio 95.5% 96.2% 0.7ppt Operating profit £959m £1,008m 5% Restructur
Slide 32: Economic capital surplus
Economic capital surplus Economic capital surplus* Key economic capital* movements in 2013 £7.6bn1 Economic Capital* Pro Market Pro £7.1bn1 forma movements forma £5.3bn £bn 2012 and other Dividend HY13¹ 175% 172% Available capital 17.0 1.1 (0.3) 17.8 Required capital (9.9) (0.3) - (10.2) 147% Total
Slide 33: Group Life profit driver analysis
Group Life profit driver analysis Key: IFRS Profit Driver Pre-tax HY12 HY13 Variance operating profit 897 910 1% Income DAC/AVIF Expenses and amortisation and other commissions 1,721 1,661 (3)% 81 56 (31)% (904) (808) (11)% Acquisition expenses Admin expenses and New business income Investment retur
Slide 34: Group Life profit driver analysis
Group Life profit driver analysis Key: IFRS Profit Driver Investment return HY12 HY13 Variance 960 981 2% Unit linked margin Participating business Spread margin Expected return on shareholder assets 443 447 1% 262 290 11% 102 100 (2)% 153 144 (6)% AMC Bonus Spread 110 104 (6) 51 58 7 46 43 (3) (bps
Slide 35: Impact of changes in accounting policies/standards on income statement
Impact of changes in accounting policies/standards on condensed consolidated income statement 6 months 2012 Full year 2012 Effect of Effect of As Effect of Effect of Less change in change in Restated reported change in change in Restated As discontinued policy policy continuing continuing policy pol