Aviva Plc · LSE:AV.
Aviva — H1 2018 Earnings Presentation
48 slides from Aviva's earnings presentation, Oct 19, 2018
Slide 1: Aviva plc Interim Results 2018
Aviva plc Interim 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: Mark Wilson, Group Chief Executive Officer
Mark Wilson Aviva plc Group Chief Executive Officer
Slide 4: HY 2018 key financial metrics
HY 2018 key financial metrics EPS Capital Cash Dividend 1 2 Operating EPS Solvency II ratio Cash remittances 9.25p per share 26.8p, +4% 187%, -11pp £1.49bn, +28% +10% 4 All footnotes on page 48
Slide 5: 7 out of 8 major markets delivered strong growth
7 out of 8 major markets delivered strong growth UK 3,4,5 France6 Poland Canada £1,040m +10% £279m +12% £95m +8% £(13)m £(84)m Aviva Investors Ireland Singapore Italy 7 £76m +7% £50m +14% £46m +10% £82m +9% 5 All footnotes on page 48
Slide 6: Major markets performance highlights
Major markets performance highlights UK France Poland Canada LT Savings net inflows £2.5bn Mix shift to U/L & protection Maintained high quality mix GI COR8 104.6% Annuity sales +83% Operating expenses -2% U/L & protection c85% of sales Weather 2.2ppts above LTA GI COR8 94.3% GI COR8 95.5% GI COR8 8
Slide 7: Confidence in achieving >5% FY growth ambition
Confidence in achieving >5% FY growth ambition 2018 FY * H1 Headwinds FY Outlook Ambition - Canada -£84m + Organic growth - UK Weather -£60m + Canada stabilisation - Disposals -£83m + 2017/18 Capital returns EPS growth >5% *HY18 on HY17 7
Slide 8: Double-digit dividend growth underpins FY confidence
Double-digit dividend growth underpins FY confidence Interim dividend up 10% Interim dividend +13% 10% 9.25p +10% +15% 9.25p 8.40p 2018 share buyback 7.42p 5.85p 6.75p £600m HY14 HY15 HY16 HY17 HY18 8 All footnotes on page 48
Slide 9: Disciplined deployment of surplus capital
Disciplined deployment of surplus capital 2018 capital deployment: YTD progress H2 outlook Organic Invest to grow – internally funded Invest to grow growth GCS, AFA, Aviva Investors, BPA, LT savings Business as usual Bolt-on c.£500m target c.£400m M&A €146m: completed acquisition of Friends First in
Slide 10: HY 2018 key messages
HY 2018 key messages Operating EPS SII Capital 1 Cash Interim remittances 2 dividend +4% 187% +28% +10% On track for >5% Strong and resilient Surplus deployed to Confidence reflected operating EPS target capital position de-lever and provide in continued growth in in FY18 maintained additional retur
Slide 11: Tom Stoddard, Chief Financial Officer
Tom Stoddard Chief Financial Officer
Slide 12: Operating profit
Operating profit £m HY17 HY18 Change Major markets UK Insurance4,5 942 1,040 10% Operating EPS Aviva Investors 71 76 7% Canada 71 (13) n/a 26.8p France (excl. Antarius) 250 279 12% Poland Italy (excl. Avipop) 88 75 95 82 8% 9% +4% Ireland 44 50 14% Singapore 42 46 10% Total major markets 1,583 1,655
Slide 13: Net asset value
Net asset value 10 Basic EPS Opening NAV per share 423p at 1 January 2018 Operating profit 27p Dividends (19)p 14.9p Share buyback (5)p 7.9p 2.5p Investment variances (14)p HY16 HY17 HY18 & short-term fluctuations FX (2)p Integration & restructuring costs Pension movement 3p AVIF amortisation (4)p D
Slide 14: UK Insurance
UK Insurance 3 5 Operating profit Performance £m 10% • Unique, large scale multi-line insurer with unparalleled brand & distribution and a top 3 rank across multiple 1,040 product lines 7% Health 942 GI • Long term savings net flows up 17% to £2.5bn (HY17: 195 Life 9 £2.1bn), BPA volumes x5 to £1.5b
Slide 15: UK Insurance profit drivers
UK Insurance profit drivers Life General Insurance Annuities & Equity Release Net written premiums (£m) 9 • £2.6bn PVNBP (+83%) • Maintained disciplined growth in our • Our largest ever BPA win (£0.9bn) 2,105 2,110 preferred channels in a soft market 309 322 • Temporarily reduced NB margin • +5% Com
Slide 16: Canada
Canada Operating profit Performance • Small improvement on 2H17 loss despite materially elevated Target COR 94-96% weather losses and challenging conditions in motor market by 2020 £88m £71m • 8 COR 104.6% (HY17: 98.9%; 2H17: 105.3%) with c2pp higher weather costs following significant wind & ice st
Slide 17: Aviva Investors
Aviva Investors Operating profit Performance £m 7% • Stable average AUM in difficult market environment while we 45% continue to invest to expand capabilities FM • Investment to build equities team and broaden distribution coverage in the US & Europe • Revenue growth exceeded expense growth with ope
Slide 18: France
France* Operating profit Performance £m 12% • Strong distribution footprint, with increased brand 32% recognition providing an opportunity to expand our 279 presence with customers GI & Health 250 50 Life • 9 (excl. Antarius) VNB up 10% to £123m (HY17: £111m) driven by higher 54 volumes and improved
Slide 19: Poland
Poland Operating profit Performance £m 8% • High ROCE multi-line franchise with 15% share of profit 40% GI pool 95 Life 88 9 • Life operating profit +8% (excl. FX) with higher assets under 11 management driving increased fee income 63 • 9 3 VNB £25m (HY17: £28m); Maintained high quality mix with pro
Slide 20: Italy
Italy* Operating profit Performance £m 9% • Multi-line business with major bancassurance partnerships GI and a growing IFA franchise (3)% 82 Life 77 75 14 (excl. Avipop) • £2.3bn net inflows (HY17: £0.9bn; FY17: £2.3bn) from 10 8 continued success of capital-light ‘hybrid’ and WP products • 9 VNB ne
Slide 21: Ireland
Ireland Operating profit Performance £m 14% • Largest multi-line insurer with strong brand and 15% GI market share in both Life and GI 38% 50 Life 44 • 8 COR 87.1% (HY17: 84.7%) with lower PY releases and less benign weather partly offset by improved underlying performance 32 37 • NWP stable at £223
Slide 22: Singapore
Singapore Operating profit Performance £m 10% • Top 6 in Life & Health segment with opportunity to take Life additional share through disruptive distribution strategy (5)% 46 GI & Health 44 42 • Life operating profit up 22% (excl. FX) to £57m from strong growth in FA channel partly offset by investm
Slide 23: Capital generation
Capital generation • £1.8bn impact from dividend payment, £600m share buyback and €500m debt repayment Underlying • OCG: £0.2bn lower reflecting reduced profitability in Canada, timing Operating capital capital generation differences due to BPA asset origination and impacts from disposals generation
Slide 24: Sources of EPS growth
Sources of EPS growth 2018 outlook HY18 operating EPS Targeting operating EPS growth >5% Underlying growth: c5% + Organic growth in major markets: >5% Canada: about flat because of weather + Capital returns offset adverse impact from disposals + Capital returns: c4-5% + Small positive impact from FX
Slide 25: HY 2018 key messages
HY 2018 key messages Operating EPS SII Capital 1 Cash Interim 2 remittances dividend +4% 187% +28% +10% On track for >5% Strong and resilient Surplus deployed to Confidence reflected operating EPS target capital position de-lever and provide in continued growth in in FY18 maintained additional retur
Slide 26: Appendix
Appendix
Slide 27: UK profit overview
UK profit overview
Slide 28: UK profit overview
UK profit overview £m Operating profit Margin Driver HY17 HY18 ∆ HY17 HY18 FY17 Target range HY17 HY18 £m £m % bps % bps % bps New (40) (41) (2)% n/a n/a n/a FY (90)-(100) Long Term 105bn 118bn Existing 129 147 14% 25bps 25bps 25bps 25-30bps Savings (Opening assets) (Opening assets) Total 89 106 19%
Slide 29: Earnings per share
Earnings per share
Slide 30: Operating earnings per share
Operating earnings per share HY17 HY18 Group operating profit 1,465 1,438 Less operating tax (311) (303) Minority Interest (73) (46) DCI and fixed rate tier 1 notes (23) (6) Preference shares (9) (9) Total operating earnings after tax, MI & DCI and preference shares 1,049 1,074 Weighted average numb
Slide 31: Basic earnings per share
Basic earnings per share HY17 HY18 Operating profit attributable to shareholders 1,049 1,074 Investment return variances and economic assumption changes on long-term business (129) (419) Short-term fluctuation in return on investments backing non long-term business (166) (160) Economic assumption ch
Slide 32: Returns
Returns
Slide 33: Operating return on total capital employed
Operating return on total capital employed 22.9% 20.1% 18.8% 16.0% 14.3% 13.1% 13.6% 13.6% 12.3% 12.9% 11.8% 12.2% 10.1% 7.1% -1.5% UK3 Canada Europe 3 Asia FM HY16 HY17 HY18 33 1. Following a correction to accounting and modelling for annual management charge rebates in UK Life, prior year comparat
Slide 34: 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 9.3% 9.5% 12.4% 12.7% 8.8% 11.0% HY16 HY17 HY18 HY16 HY17 HY18 34 All footnotes on page 48
Slide 35: 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 Life3,5 831 659 10,883 12.1% 3,5 United Kingdom General Insurance 209 169 1,720 19.7% United Kingdom 1,040 828 12,603 13.1% Cana
Slide 36: Capital & debt
Capital & debt
Slide 37: Solvency II – sensitivities
Solvency II – sensitivities Impact on solvency cover ratio 1 30/06/2018 solvency cover ratio: 187% 25bps increase in interest rate 4% 100bps increase in interest rate 12% 25bps decrease in interest rate (6)% 50bps decrease in interest rate (12)% 50bps increase Corporate Bond spread13 (4)% 100bps inc
Slide 38: Solvency II own funds by tier
Solvency II own funds by tier Regulatory view* Shareholder view HY18 £bn % of SCR % of own funds • Regulatory view of own funds Tier 1 22.1 128% 78% adjusted by £4.7bn due to with-profits T1 unrestricted 19.6 113% 69% funds, pension schemes, notional reset of transitionals and other pro- T1 restrict
Slide 39: External debt – a balanced maturity profile
Subordinated External debt – aprofile debt balanced maturity profile £1,300m Restricted Tier 1 Tier 2 Tier 3 £871m £800m 12.000% £796m £700m 7.875% 6.125% £450m £619m £600m £575m £500m £436m £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% 8.2
Slide 40: Balance sheet
Balance sheet
Slide 41: Total managed assets
Total managed assets Assets by liabilities covered Participating assets by type 126,987 124,512 £m 350,238 356,018 70,207 71,672 Euro-style 126,987 124,512 UK With-profits 56,780 52,840 style Participating funds HY17 HY18 Policyholder funds Shareholder funds Shareholder assets by type 142,493 153,37
Slide 42: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m Total: £23,323m 80,758 78,135 9% Government debt 9% 10% 41% 29% Corporate bonds 1% 23,061 23,080 Other debt Mortgage loans AAA A Less than BBB Other AA BBB Non-rated 27,065 23,323 Government debt by rating 2,592 2,126 Total: £
Slide 43: Shareholder assets
Shareholder assets Corporate bonds by industry Loans by type Total: £27,717m 6% 2% 16% 15% 9% 7% 9% 14% 5% 9% 71% 17% 20% Financials - Banks Communications Loans & advances to banks Financials - Insurance & other Real estate Healthcare, Infrastructure & PFI other loans Utilities Oil & gas Mortgage l
Slide 44: Shareholder assets – Mortgage loans
Shareholder assets – Mortgage loans Mortgage loans Commercial real estate portfolio Total: £19,636m Commercial: £7,271m 15% LTV 83% 85% 61% 58% 56% 55% 37% Loans in arrears 1,583 1,492 48% 9 Loan 2.1x 2.2x 2.5x 2.6x interest 1.4x 1.5x Healthcare, infrastructure & PFI Commercial cover FY13 FY14 FY15
Slide 45: Other
Other
Slide 46: Disposals
Disposals Consideration Period Completion Operating Operating Operating EPS (p) profit (before profit (after tax & MI) tax & MI) (£m) Antarius €500m FY17 1Q17 22 6 0.2 FY17 Sept ’17 (Part I) 76 30 0.6 Spain €677m HY18 Jul ’18 (Part II) 9 3 0.1 FY17 51 18 0.4 Avipop €265m March ‘18 HY18 8 3 0.1 FY17
Slide 47: 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 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 This is our latest estimated projection as provided at FY17 and is subject to a number of factors including the effects
Slide 48: Footnotes
Footnotes 1. The estimated Solvency II position represents the shareholder view only. See Section 8i of the Analyst Pack for more details. 2. Cash remitted to Group and Solvency II operating capital generation are managed at legal entity level. As Ireland constitutes a branch of the United Kingdom b