Aviva Plc · LSE:AV.
Aviva — Investor Presentation (October 2004)
12 slides from Aviva's investor presentation, Oct 8, 2004
Slide 1: Jim Newman, Finance Director: Driving for Value
Jim Newman Finance Director Driving for Value
Slide 2: The UK market is undergoing change
The UK market is undergoing change •With Profit business represented 46% of total Life and Pensions YTD NBM progression New Business Contribution (19% 1H04) 26.0% 26.0% 24.0% 24.0% 22.0% 22.0% •We have replaced this by strong actions to 20.0% 20.0% improve non profit: non profit margin 18.0% 18.0% i
Slide 3: Achieved substantial savings: more to come
Achieved substantial savings: more to come 2003 2004 2005 2006 2007 Acquisition cost ratio/ APE 31.0% 27.5% 26.5% 24.5% 22.0% Maintenance cost per policy 47.4 43.4 43.1 42.4 41.7 • Improving cost ratios reflect cost reduction actions which are further supported by future growth • Off-shoring, out-so
Slide 4: Expected benefits from initiatives
Expected benefits from initiatives Expected Benefits 2004 2005 2006 2007 Cumulative Benefits 32 76 108 130 • Benefits are expected to be realised through: • Business Services outsourcing • Operations offshoring • process excellence initiatives • realignment and cost reduction of the distribution mod
Slide 5: One off costs expected in 2004-2007
One off costs expected in 2004-2007 Costs of initiatives 2004 2005 2006 2007 One off Cost (64) (49) (28) (11) • One off costs incurred in 2004 are principally made up of: • severance payments • property vacation • retraining • change management • Costs will directly impact our NULS result
Slide 6: We are in a strong position
We are in a strong position Total Cost Ratio (includes commission)(FUM %) 1.80% 1.70% •Costs in line with our competitors. 1.60% 1.50% •NUL progress reflects the work already done on 1.40% the expense base. Norwich Union 1.30% Average Top 10 1.20% •Picture can be distorted by fluctuations in new 1.1
Slide 7: Range of returns on current Products
Range of returns on current Products IRR WP Annuity UL Bond Protection Pensions relative sales of NUL product Margin
Slide 8: Growing IRR embedded as key management target
Growing IRR embedded as key management target IRR Indicative Return from New Business 1% annual growth: 15% 15% target by 2007 Capital management Product mix Tools Product design 10% Commission Cost reduction 2004 2005 2006 2007
Slide 9: Management Actions on New Business
Management Actions on New Business • Enhanced capability for protection, supported by reduced commission on business not submitted electronically (Oct 2004) • Reduced commission on main Individual Pensions classes from 04/10/04 • Withdrew Group Your Pension and Group Your Pension Select in Q2 2003 •
Slide 10: Management actions on Existing Book
Management actions on Existing Book • We have potential value in our existing book (£3.7bn) • Focus on - persistency management - cost reduction - claims control - investment performance
Slide 11: Equity Release provides further value to the business
Equity Release provides further value to the business • We are market leaders - 40% market share • £1.8bn loan book, 96,000 customers • Embedded Value 30/6/04 £133m, LAOP £21m • Increased visibility in NU results under European Embedded Value
Slide 12: Summary: In a strong position to manage capital and deliver value
Summary: In a strong position to manage capital and deliver value • Market leading capital management capability and management of risk • Focused on deployment of capital to create value (IRR) • Successfully maintained new business profitability despite reduction in with-profits business • Huge pote