Aviva Plc · LSE:AV.
Aviva — Investor Day (2017)
40 slides from Aviva's investor day presentation, 2017
Slide 1: Cash flow plus growth…Upgraded: Capital Markets Day 2017
Aviva plc Cash flow plus growth…Upgraded Capital Markets Day 2017
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 3
Slide 4: Cash flow plus growth…Upgraded
Cash flow plus growth…Upgraded Leading Growth Digital Capital franchises Disposals complete Growing share Leading IP De-leveraging Quality and focus Composite delivering Partner of choice Bolt-on M&A Deploy surplus, Underlying growth Better earnings quality Enhanced efficiency Capitaldividends incre
Slide 5: Composites win in a digital world
Composites win in a digital world More capital Deeper More data Lower cost efficient relationships Superior insight Scale Diversification benefit Capturing value chain Cross-underwriting Customer acquisition Lower volatility Multi-product Deploy surplus, Positive risk selection Administration Higher
Slide 6: Quality oaks
Quality oaks “We are focused on 8 attractive, growing UK markets where we are, or have the #1 composite providing a core potential to be best in class. It is these growth engine and high levels of sustainable cash flow businesses that will underpin cash flow plus growth” France Canada Poland Cash ge
Slide 7: High potential acorns
High potential acorns “We have made a number of strategic bets Digital that will accelerate growth and provide Leading IP being rolled out across increased value over the long term” our markets, with scope for further commercialisation China Hong Kong Turkey Delivering strong growth in sales and Joi
Slide 8: Building track record of outperformance in the UK
Building track record of outperformance in the UK Performance* Track record Growth drivers • Auto-enrolment FY15 102 HY16 64 • 39% year on year growth*: workplace Long-term pensions leader • DB to DC savings • Advisor platform: 10% share of net • Grow platform share FY16 142 HY17 89 flows • Savings
Slide 9: Consistently delivering growth outside the UK
Consistently delivering growth outside the UK Performance* Track record Growth drivers VNB • France: 47% UL & Protection • Diverse distribution FY15 416 HY16 193 • Poland: #2 with attractive returns International • Product development (e.g. hybrids) • Italy: €2bn+ net inflows p.a. • Pensions reforms
Slide 10: Leading IP and enhanced efficiency
Leading IP and enhanced efficiency Effortless Deeper World-class Strategic Low-cost experience relationships partnerships investments MyAviva Back-end digitisation Tencent Ask It Never Wealthify MyContact Automation HSBC Digital Wallet Aviva Ventures Aviva Plus Artificial intelligence RBC How to mea
Slide 11: Excess capital, excess cash
Excess capital, excess cash * Solvency surplus increased, calibrations strengthened Remittances (2016-18) £bn 11.3 11.4 £8bn 9.7 8.3 8.0 7.1 Cash to deploy 3.6 £3bn £2bn (2018e) FY11 FY12 FY13 FY14 FY15 FY16* HY17* £1bn (2019e) 11 * FY11-FY15 on economic capital basis. FY16-FY17 on Solvency II basis
Slide 12: Excess cash deployment fuels additional growth
Excess cash deployment fuels additional growth 2018e – £2bn £900m debt reduction Interest cost savings >£100m pa 3-4% de-leveraging £1.1bn £900m other debt deployment reduction £1.1bn other deployment Bolt-on M&A Capital returns 12
Slide 13: Improved cash pay-out potential underpins higher sustainable dividend
Improved cash pay-out potential underpins higher sustainable dividend Improved earnings/cash conversion 2017: 50% 3-5% target pay-out ratio c7% 15-20% 5-8% 2020: 55-60% Lower integration & restructuring FPI disposal Debt repayment Cash pay-out potential target pay-out ratio 13
Slide 14: Aiming higher £8bn
Cash flow plus growth…Upgraded Operating EPS Cash Dividend Mid-single digit growth £7bn cash remittances pay-out ratio target in the medium term 2016-18 inclusive 50% (2017) Aiming higher £8bn 55-60% (2020) 14
Slide 15: Tom Stoddard, Chief Financial Officer
Tom Stoddard Aviva plc Chief Financial Officer 15
Slide 16: Our financial priorities
Our financial priorities Earnings Capital & Liquidity Dividend Improving quality Maintain strength Sustainable Increased ambition Accretive deployment Consistent growth 16
Slide 17: Diversified portfolio
Cash flow plus growth…Upgraded Diversified portfolio %FY16 market operating profit (adjusted for disposals*) UK France Digital China Canada Poland Hong Kong Turkey FM 5% Italy Ireland Indonesia India GI 25% Non UK 42% Vietnam Corporate & Specialty Singapore Aviva Investors Winning positions Disrupti
Slide 18: Cash flow plus growth: UK Insurance
Cash flow plus growth: UK Insurance #1 Composite* Leveraging growing UK pension pools #1 ind. Annuities #1 workplace #1 GI • BPA opportunities from DB de-risking #2 equity release #4 platform (net flows) #2 protection - Market leader on small BPA deals (<£300m) - Superior skill set to be major playe
Slide 19: Cash flow plus growth: France
Cash flow plus growth: France #2 contributor to Group* Transformed strategy • Leadership in 5 distribution channels • Single brand; 4 customer propositions • Composite: Life, GI & Aviva Investors • Maintain focus on risk products • New management making impact • Offer attractive & alternative saving
Slide 20: Growth ambition >5% p.a. 2019 onward
Growth ambition >5% p.a. 2019 onward Operating EPS Headwinds - Perimeter changes: FPI, Spain, Antarius 2013-16 CAGR & Banco BPM +5% - Canada in 2017 - Change spend (IFRS17, IT etc.) Tailwinds 49.0p 49.7p 51.1p 44.2p + Organic growth in major markets 25.8p + Investment optimisation & backbook actions
Slide 21: Profit growth converting to strong capital & cash generation
Profit growth converting to strong capital & cash generation High conversion ratios support dividend growth • c80% of BU operating profit after tax & MI c80% converts to capital surplus (OCG) c90% • c90%+ of BU OCG converts to cash remittances Medium-term pay- out ratio target: • SII life new busine
Slide 22: Why increase pay-out ratio target?
Why increase pay-out ratio target? Pay-out ratio: 55-60% 2020 1. Enhanced capital generation & cash flow as business units optimise for Sll 58% 56% 54% 46% 2. Improved quality of earnings • Eliminating cash drain of below-the-line 55-60% integration & restructuring costs 50% 42% 46% • Divesting cash
Slide 23: Strengthened capital position and upgraded ratings
Strengthened capital position and upgraded ratings SII cover ratio Moody’s Aa3 Stable Fitch AA- Stable Shareholder basis S&P A+ Stable 193% AM Best A Stable 189% 180% 180% 150% £300m 2017 share buy- back complete FY15 FY16 HY17 $650m 8.25% RT1 notes redeemed 23
Slide 24: Capital resilient to stress
Capital resilient to stress HY17 SII cover ratio 193% Interest rates -50bps 181% • Well capitalised Corporate spreads +100bps 192% • Tightly matched Equities -25% 190% • High quality investment portfolio Longevity shock: 5% fall in mortality rates (annuities) 181% • Well positioned to respond to mar
Slide 25: Industry-leading financial risk management
Industry-leading financial risk management Capital surplus High quality investment portfolio (shareholder assets) Debt securities Commercial mortgages 193% 36% AA & above LTV 50% A 31% BBB 102% 26% <BBB 58% 21% 18% Non rated FY11 HY17 FY11 HY17 £11.4bn Hedging Reinsurance 130% • Strategic hedges pro
Slide 26: Building cash capacity for redeployment
Building cash capacity for redeployment Liquidity before capital redeployment 2017 2018e Not to scale £0.8bn £2.0bn redeployed available for redeployment £1.8bn £1.3bn Liquidity management £1.1bn £1.0bn Maintain both: • Centre assets within £1.0-1.5bn range FY14 FY15 FY16 FY17e FY18e FY19e FY20e • L
Slide 27: Expect to redeploy £2bn excess cash in 2018
Expect to redeploy £2bn excess cash in 2018 2017 2018e Strong operating generation supporting dividend & organic growth £0.9bn Disciplined >£0.5bn 1. Deleveraging 2. Bolt on M&A 3. Capital returns £0.8bn returned to debt investors & shareholders in 2017 Hybrid debt repayment • Focus on major markets
Slide 28: And another £1bn in 2019
And another £1bn in 2019 2019e Beyond £1bn for discretionary deployment Sll ratio trending above working range Capital returns Bolt on M&A • Dividend remains paramount • Focus on major markets • Returns to shareholders • Reinforce our winning positions • Continued focus on optimising cost of debt •
Slide 29: Aiming higher £8bn
Cash flow plus growth…Upgraded Operating EPS Cash Dividend Mid-single digit growth £7bn cash remittances pay-out ratio target in the medium term 2016-18 inclusive 50% (2017) Aiming higher £8bn 55-60% (2020) 29
Slide 30: Maurice Tulloch, CEO International
Maurice Tulloch Chief Executive Officer International
Slide 31: Growth ambition in International
Growth ambition in International Focused footprint Partnerships Growth Significant positions in some of the world’s Strong and diversified Building a largest insurance distribution track record markets 31
Slide 32: Aviva International's business
Aviva International’s business Operating Capital Operating profit* VNB* and NWP* Cash* Generation* VNB - £0.5bn £1.3bn 37% of group £1.3bn £0.6bn 36% of group NWP** - £4.3bn 38% of group 35% of group 52% of group 32 *Includes France, Italy, Poland, Ireland, Turkey & Canada and based on FY16 numbers
Slide 33: The International markets
The International markets Italy France Canada Poland Turkey Turkey Ireland • World’s 5th • World’s 8th • #2 in Life • World’s 7th • Operating profit • #1 in GI, #4 in largest largest largest more than Life insurance insurance • Great ROE insurance doubled (HY17) • Highest GDP market market market •
Slide 34: Accelerating our ambition in Ireland
Accelerating our ambition in Ireland Market leading composite insurer #4 Life insurer #1 GI insurer 1.1m customers • Superior brand • €130m consideration Scale benefits • 800k customers • 250k customers • Proven growth and • Market leader Group Attractive composite product offerings underw
Slide 35: Strong diversified distribution and partnerships
Strong diversified distribution and partnerships Owned channels Key partners #2 Direct GI France #2 FA network Agents Small Direct GI Canada Select owned brokers Brokers Direct #1 Life Direct Sales Force Poland #2 FA network Direct IFA Italy Developing strategy Network Ireland Direct
Slide 36: Consistent delivery in International
Consistent delivery in International Net written premium and COR** * Value of new business* £m £m +11% +10% +4% 4,269 +17% 504 3,652 3,474 +16% 401 416 +16% 2,577 1,985 246 193 FY14 FY15 FY16 HY16 HY17 FY14 FY15 FY16 HY16 HY17 96.2% 94.7% 93.9% 96.6% 95.7% France Italy Turkey Canada Italy Poland Pol
Slide 37: France: Rebalancing to capital-lite
Rebalancing to capital-lite Efficient new business mix Low guarantees 3.9% 53% 3.0% 62% France 38% 47% 0.2% 0.2% FY14 HY17* FY20e FY14 HY17 FY20e With-profits Unit-linked and Protection Ave. Guarantee Ave. Yield 3.7% 3.6% 67% 66% HYBRID 1.8% Italy HYBRID 0.8% 33% 34% FY14 HY17 FY20e FY14 HY17 FY20e
Slide 38: Growth ambition in International
Growth ambition in International Focused footprint Partnerships Growth Significant positions in some of the world’s Strong and diversified Higher than mid single- largest insurance distribution digit growth markets 38
Slide 39: Appendix
Appendix
Slide 40: Potential benefits from paying back expensive debt
Potential benefits from paying back expensive debt Subordinated debt profile c£3m c£60m c£105m c£105m c£105m c£105m c£105m c£105m c£105m c£105m c£105m c£105m c£105m c£105m 33% 32% 30% 29% Implied cash savings (illustrative only)* £1,300m Implied SII gearing ratio (illustrative only)* Restricted Tier