Aviva Plc · LSE:AV.
Aviva — H1 2017 Earnings Presentation
64 slides from Aviva's earnings presentation, 2017
Slide 1: Interim Results 2017
Interim Results 2017 Bi AVIVA
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: Mark Wilson, Group Chief Executive
Mark Wilson Group Chief Executive
Slide 4: Performance highlights
Performance highlights Operating profit Capital Cash Interim dividend £1,465m Solvency II ratio 193%1 £1,170m cash +11% 8.40p per share remittances Operating EPS +13% Capital Generation +56% 25.8p, +15% £1.1bn 4 All footnotes on page 27
Slide 5: Operating profit
Operating profit Operating profit: +11% Growth drivers: HY17 45% £1,465m £1,325m 20% 3% £1,170m 8% (19)% £1,008m £1,071m HY13 HY142 HY15 HY16 HY17 Aviva Europe UK & Asia Canada Investors Ireland 5 All footnotes on page 27
Slide 6: Capital & cash
Capital & cash Solvency II cover ratio 1 SII Capital Generation £1.1bn 180% 189% 193% 150% 180% 174% Cash remittances FY15 HY16 FY16 HY17 £1,170m 6 All footnotes on page 27
Slide 7: Interim dividend
Interim dividend Interim dividend up 13% Interim dividend 8.40p 8.40p 7.42p 6.75p 5.60p 5.85p 2017 share buyback HY13 HY14 HY15 HY16 HY17 £300m 7 All footnotes on page 27
Slide 8: Growth
Growth Life insurance General insurance New business volumes3 Net written premiums 75% 25% 29% 27% 20% 13% 11% 7% 6% 5% (28)% (4)% UK UK pension Asia4 Europe UK Europe France Canada4 UK personal UK Europe4 UK annuities & Protection4 protection savings savings4 lines commercial commercial equity & pe
Slide 9: Aviva Investors
Aviva Investors Growing Winning mandates Diversifying products Operating profit £71m (+45%) External appeal Progress on Operating margin 26% (+6pp) increasing multiple fronts Assets under management External AUM £345bn £351bn £290bn £72bn £246bn £57bn £45bn £44bn FY14 FY15 FY16 HY17 FY14 FY15 FY16 H
Slide 10: Digital
Digital Trading Strategic Disruption • 6m registrations5 (+28%) • Leading IP • Foundations in place • GI premiums £525m6 (+13%), • Using robotics and AI c25% of total UKGI sales • Unlocking back-books • Data & risk analytics • MyAviva: higher propensity • Strategic partnerships to buy 2nd product •
Slide 11: Strategic progress
Strategic progress Oaks Acorns Apple trees • HSBC partnership • Vietnam: 100% owned • Spain: capital withdrawn • UK insurance: single operating model • Aviva Investors: AIMS at • FPI: sale announced £12bn AUM • RBC integrated in Canada • India: re-evaluating options • HK Tencent JV: awaiting • Franc
Slide 12: Capital management
Capital management Underlying inflows Additional inflows • Capital generation • Special remittances • Remittances • Disposals Cash and Core usage capital Discretionary deployment • Bolt-on M&A • Dividend • Debt repayment • Organic growth • Share buyback 12
Slide 13: Checklist
Checklist Grow operating profit 11% growth Strong capital 193%1, £300m buyback in 2017 Grow dividend 13% growth, on track for 50% pay-out ratio Reallocate capital Announced disposals, improved focus Digital Further progress, focused on leading IP 13 All footnotes on page 27
Slide 14: Tom Stoddard, Chief Financial Officer
Tom Stoddard Chief Financial Officer
Slide 15: Operating profit
Operating profit Operating profit (£m) HY16 HY17 Change UK & Ireland life 711 756 6% Operating profit UK & Ireland general insurance & health7 222 259 17% £1,465m Aviva Investors 49 71 45% Up 11% Canada 88 71 (19)% Europe 430 518 20% Asia 112 115 3% Operating EPS Corporate costs, non insurance & oth
Slide 16: Net asset value
Net asset value Opening NAV per share 414p at 1 January 20178 Operating profit 26p Integration & restructuring costs Dividends (16)p Investment variances & short-term fluctuations Pension movement (8)p 0p Down 50% AVIF amortisation (5)p Integration (1)p & restructuring Disposals 5p Basic EPS Share b
Slide 17: UK Life – consistent growth
UK Life – consistent growth Life operating profit Operating expenses £750m £418m £699m £412m HY16 HY17 HY16 HY17 Value of new business 3 Highlights £267m Long term £200m £82m savings • Double digit growth in three core product lines £37m Annuities & £77m equity release £71m • 36% growth in new busin
Slide 18: UK Life – double-digit growth across all core segments
UK Life – double-digit growth across all core segments Operating profit Margin Driver HY16 HY17 HY16 HY17 ∆ Target range HY16 HY17 £m £m % bps % bps New (45) (40) 11% n/a n/a (45)-(50) Long Term 88bn 105bn Existing 109 129 18% 25bps 25bps 25-30bps Savings (Opening assets) (Opening assets) Total 64 8
Slide 19: Aviva Investors – maintaining growth momentum
Aviva Investors – maintaining growth momentum Operating profit AIMS: £12bn AUM £12.0bn £9.0bn AIMS target income AIMS target return £71m £49m £3.0bn HY16 HY17 FY15 FY16 HY17 Positive cost-income jaws AUM up to £351bn 300 £1.7bn £(2.4)bn £1.2bn £6.3bn 250 Operating income Operating expenses £351bn £3
Slide 20: UK & Ireland GI – organic growth, improved margins
UK & Ireland GI – organic growth, improved margins Operating profit Combined operating ratio9 £251m HY16 HY17 7 £210m £85m Reported earned COR 93.8% 92.5% £83m LTIR & other Of which prior year development +1.5% +0.9% Underwriting £166m £127m Weather +2.4% +2.9% HY16 HY17 Normalised AY COR 97.7% 96.3
Slide 21: Canada – underlying improvement overshadowed by PYD
Canada – underlying improvement overshadowed by PYD Operating profit Combined operating ratio9 HY16 HY17 £88m Reported earned COR 95.9% 98.9% £71m LTIR & other £46m Underwriting Of which prior year development +3.8% (1.6)% £55m £42m Weather (0.9)% (0.4)% £16m Normalised AY COR 98.8% 96.9% HY16 HY17
Slide 22: Europe – improved growth
Europe – improved growth Operating profit Combined operating ratio9 & growth £518m HY16 HY17 £430m 5 51 2 88 Turkey Net written premiums £757m £879m 47 63 Spain 103 Reported COR 98.9% 92.7% 90 Poland Italy Of which prior year development +0.7% +2.7% 228 271 France Weather (2.7)% (2.1)% HY16 HY17 Nor
Slide 23: Asia – operational progress, portfolio repositioned
Asia – operational progress, portfolio repositioned Operating profit Operating expenses £112m £115m £70m £70m FPI £101m £88m £42m £45m HY16 HY17 HY16 HY17 Value of new business13 Highlights • China: VNB more than doubled £71m • Vietnam: acquired 100% ownership, aligned £43m incentives • FPIL: sale a
Slide 24: Capital generation
Capital generation Operating capital Underlying generation capital £1.1bn generation £0.9bn £(0.2)bn £(0.3)bn £0.2bn 193% 189% £1.1bn £(0.2)bn £0.2bn £(0.7)bn £11.3bn £11.4bn 1 31-Dec-161 BU underlying Debt & Other capital Market, FX Share Disposals Dividend 30-Jun-17 generation centre costs actions
Slide 25: Reiterating financial targets
Reiterating financial targets Operating EPS Cash Dividend Mid-single digit growth £7bn cash remittances 50% pay-out in medium term 2016 - 2018 ratio 2017 25
Slide 26: Performance and delivery
Performance and delivery Operating profit Capital Cash Interim dividend £1,465m Solvency II ratio 193%1 £1,170m cash +11% 8.40p per share remittances +13% Operating EPS Capital Generation +56% +15% £1.1bn 26 All footnotes on page 27
Slide 27: Footnotes
Footnotes 1. Represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion). Includes an e
Slide 28: Appendix
Appendix
Slide 29: Life
Life
Slide 30: Operating profit snapshot (Global Life)
Operating profit snapshot (Global Life) % Change NB Income 600 15% Underwriting margin 324 5% Life operating profit Investment Return 1,366 6% 1,319 1,226 Total income 2,290 8% 9732 1,021 Acquisition expenses (439) (4)% Admin expenses (678) (6)% HY14 HY15 HY16 HY17 DAC, AVIF & Other 146 (15)% OPBT 1
Slide 31: Profit drivers (Global life)
Profit drivers (Global life) Underwriting margin New business (PVNBP10) 3.8% £310m £324m 3.5% 2.7% NB margin 3.0% £247m 2.7% 2.6% Acq. Margin £218m 2.5% 2.2% £20,025m £14,052m £16,568m £12,630m HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 Investment return (AUM / margin) Admin expenses & unit cost 84bps
Slide 32: Investment margin (Global life)
Investment margin (Global life) Investment mix Unit linked (reserves/AMC) 1,366 1,284 104bps 105bps 1,072 89 139 76 971 146 97bps 95bps 80 359 118 115 332 Expected return 104 273 Spread 165.9bn 298 147.8bn Participating 114.8bn 717 792 87.1bn 604 Unit linked 451 HY142 HY15 HY16 HY17 HY14 HY15 HY16 H
Slide 33: Life operating profit snapshot (UK & Ireland)
Life operating profit snapshot (UK & Ireland) % Change NB Income 370 17% Underwriting margin 164 4% Life operating profit Investment Return 676 - 756 711 569 Total income 1,210 5% 483 Acquisition expenses (213) (1)% Admin expenses (325) 2% HY142 HY15 HY16 HY17 DAC, AVIF & Other 84 (18)% OPBT 756 6%
Slide 34: Life profit drivers (UK & Ireland)
Life profit drivers (UK & Ireland ) Underwriting margin New business (PVNBP10) £164m 3.5% NB margin £158m 2.9% Acq. Margin 2.6% 2.5% 2.3% £103m 2.4% 2.4% £62m 1.8% £11,686m £7,341m £8,571m £6,248m HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 Investment return (AUM / margin) Admin expenses & unit cost 63b
Slide 35: Life investment margin (UK & Ireland)
Life investment margin (UK & Ireland) Investment mix Unit linked (reserves/AMC) 677 676 91bps 90bps 34 19 80bps 547 135 129 31 74bps 391 105 79 89 Expected return 45 58 Spread 71 107.2bn 118.4bn Participating 50 429 439 78.7bn 353 Unit linked 225 49.2bn HY142 HY15 HY16 HY17 HY14 HY15 HY16 HY17 Parti
Slide 36: Life operating profit snapshot (Europe)
Life operating profit snapshot (Europe) % Change NB income 129 (1)% Underwriting margin 124 8% Operating profit Investment Return 605 11% 455 433 372 395 Total income 858 9% Acquisition expenses (135) 6% Admin expenses (300) (16)% HY142 HY15 HY16 HY17 DAC, AVIF & Other 10 43% OPBT 433 10% 36 All foo
Slide 37: Life profit drivers (Europe)
Life profit drivers (Europe) Underwriting margin New business (PVNBP ) 10 £130m £124m 4.3% £115m 4.0% 4.2% £109m NB margin 3.3% 2.9% Acq. Margin 2.6% 2.3% 2.6% £4,966m £5,627m £5,749m £4,501m HY14 HY15 HY16 HY17 HY1411 HY15 HY16 HY17 Investment return (AUM / margin) Admin expenses & unit cost 109bps
Slide 38: Life investment margin (Europe)
Life investment margin (Europe) Investment mix Unit linked (reserves/AMC) 150bps 144bps 146bps 605 551 545 494 3 48 13 67 3 48 Expected return 119bps 4 43 269 Spread 252 222 258 Participating 36.7bn 38.1bn Unit linked 31.2bn 32.4bn 225 236 285 219 HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 Participatin
Slide 39: Operating profit snapshot (Asia life)
Operating profit snapshot (Asia life) % Change NB income 101 36% Underwriting margin 36 (3)% Investment Return 85 37% Operating profit 118 120 Total income 222 28% 79 Acquisition expenses (91) (34)% 34 Admin expenses (53) (13)% HY14 HY15 HY16 HY17 DAC, AVIF & Other 42 (30)% OPBT 120 2% 39
Slide 40: General insurance & health
General insurance & health
Slide 41: General insurance and health (Group)
General insurance and health (Group) Operating profit Net written premium 403 422 417 5,224 334 4,545 4,289 4,218 HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 GI Combined operating ratio 9 Investments Average assets LTIR % 95.8% 93.7% 95.7% 94.5% 2.9% 2.6% 2.4% 2.3% 31.3% 30.9% 32.2% 31.3% C&E ratio Loss
Slide 42: General insurance and health (UK & Ireland)
General insurance and health (UK & Ireland) Operating profit Net written premium 263 259 239 231 2,619 2,515 2,321 2,342 HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 GI Combined operating ratio 9 Investments Average assets LTIR % 94.3% 93.8% 93.8% 92.5% 2.8% 32.8% 31.6% 33.2% 2.6% 2.6% 2.6% 33.2% C&E rat
Slide 43: General insurance and health (Canada)
General insurance and health (Canada) Operating profit Net written premium 131 1,477 83 88 71 1,026 1,013 1,049 HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 GI Combined operating ratio 9 Investments LTIR % 97.0% 95.9% 98.9% 3.1% Average assets 91.9% 2.8% 30.6% 31.3% 29.4% 31.0% 2.3% C&E ratio 2.4% Loss r
Slide 44: General insurance and health (Europe)
General insurance and health (Europe) Operating profit Net written premium 1,044 85 885 912 802 57 59 35 HY14 HY15 HY16 HY17 HY14 HY15 HY16 HY17 GI Combined operating ratio 9 Investments Average assets LTIR % 97.9% 95.8% 98.9% 2.8% 92.7% 2.4% 28.3% 28.4% 30.4% 2.1% 29.3% 1.9% C&E ratio Loss ratio 69
Slide 45: Earnings per share
Earnings per share
Slide 46: Operating earnings per share
Operating earnings per share HY16 HY17 Group operating profit 1,325 1,465 Less operating tax (323) (311) Minority Interest (67) (73) DCI and fixed rate tier 1 notes (21) (23) Preference shares (9) (9) Total operating earnings after tax, MI & DCI and preference shares 905 1,049 Weighted average numbe
Slide 47: Basic earnings per share
Basic earnings per share HY16 HY17 Operating profit attributable to shareholders 905 1,049 Investment return variances and economic assumption changes on long-term business (2) (129) Short-term fluctuation in return on investments backing non long-term business (267) (166) Economic assumption change
Slide 48: Returns
Returns
Slide 49: Operating return on total capital employed
Operating return on total capital employed 23.2% 22.9% 21.2% 19.7% 18.8% 17.4% 14.6% 14.3% 13.2% 12.9% 12.4% 12.3% 12.1% 11.9% 10.7% 9.9% 8.7% 7.1% UK & I Life UK & I GI Canada Europe Asia FM HY15 HY16 HY17 49 1. Following a correction to accounting and modelling for annual management charge rebates
Slide 50: 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 11.6% 15.5% 9.3% 12.4% 8.8% 11.0% HY15 HY16 HY17 HY15 HY16 HY17 50
Slide 51: Analysis of operating return on equity
Analysis of operating return on equity Operating return Weighted average £m Before tax After tax shareholders’ funds including Return on Equity % non-controling interests UK & Ireland Life 756 606 11,323 10.7% UK & Ireland GI and Health 259 211 1,817 23.2% Canada 71 52 1,468 7.1% Europe 518 367 5,57
Slide 52: Capital & cash flows
Capital & cash flows
Slide 53: Solvency II own funds by tier
Solvency II own funds by tier Regulatory view* Shareholder view HY17 £bn % of SCR % of own funds • Regulatory view of own funds Tier 1 22.2 131% 77% adjusted by £5.2bn due to T1 unrestricted 19.2 113% 66% with-profits funds, pension T1 restricted 3.0 18% schemes and other pro-forma 10% adjustments T
Slide 54: Solvency II – sensitivities
Solvency II – sensitivities Impact on Solvency cover ratio (SCR) 30/06/2017 SCR : 193%1 25bps increase in interest rate 4% 100bps increase in interest rate 16% 25bps decrease in interest rate (6)% 50bps decrease in interest rate (12)% 10% increase in market value of equity 2% 10% decrease in market
Slide 55: External debt – a balanced maturity profile
Subordinated External debtdebt – aprofile balanced maturity profile £1,300m Restricted Tier 1 Tier 2 Tier 3 £882m £879m £800m 12.000% £790m £700m £443m 7.875% £450m £615m 6.125% £600m £571m £500m £500m £400m £400m 7.875% £162m 8.25% £210m £500m 6.625% £439m 6.875% 6.875% 5.9021% £267m 8.250% 6.875%
Slide 56: Balance sheet
Balance sheet
Slide 57: Total managed assets
Total managed assets Assets by liabilities covered Participating assets by type £m 134,578 126,987 350,238 334,694 73,641 70,207 Euro-style 126,987 UK With-profits 134,578 60,937 56,780 style Participating funds HY16 HY17 Policyholder funds Shareholder funds Shareholder assets by type 142,493 77,794
Slide 58: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m Total: £27,065m 80,758 77,794 10% 7% 12% 41% 29% 1% 20,963 23,061 Government debt AAA A Less than BBB Corporate bonds AA BBB Non-rated 28,149 27,065 Other debt Mortgage loans Government debt by rating 2,934 2,592 Other Total:
Slide 59: Shareholder assets
Shareholder assets Corporate bonds by industry Loans by type Total: £25,519m 6% 6% 9% 7% 2% 19% 10% 7% 8% 13% 19% 19% 75% Financials - Banks Communications Loans & advances to banks Financials - Insurance & other Real estate Healthcare, Infrastructure & PFI other loans Utilities Oil & gas Mortgage l
Slide 60: Shareholder assets – Mortgage loans
Shareholder assets – Mortgage loans Mortgage loans Commercial real estate portfolio Total: £18,975m Commercial: £6,923m 18% LTV 95% 83% 85% 61% 58% 58% 37% Loans in arrears 1,583 1,492 45% 446 9 Loan 2.4x interest 1.4x 1.4x 1.5x 2.1x 2.2x Healthcare, infrastructure & PFI cover Commercial FY12 FY13 F
Slide 61: Other
Other
Slide 62: Disposals – pro-forma
Disposals – pro-forma Antarius Spain (part) FPIL Completed 1Q17 Expected completion 2H17 Expected completion 2018 £m FY16 HY17 FY16 HY17 FY16 HY17 Operating profit (before tax & MI) 78 21 82 39 140 70 Operating EPS* 0.6p 0.2p 0.8p 0.3p 3.5p 1.7p Proceeds €500m €475m £340m IFRS NAV impact (net of pro
Slide 63: Estimated amortisation of acquired value of in-force
Estimated amortisation of acquired value of in-force £600m £500m FPI FL UK Other Aviva businesses £400m £300m £200m £100m £0m 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 This is our latest estimated projection as provided at FY16 and is subject to a variety of factors including the e
Slide 64: Footnotes
Footnotes 1. Represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds £3.2 billion (FY16: £2.9 billion) and staff pension schemes in surplus £1.2 billion (FY16: £1.1 billion). Includes an e