Aviva Plc · LSE:AV.
Aviva — FY2016 Earnings Presentation
71 slides from Aviva's earnings presentation, 2017
Slide 1: 2016 Results
2016 Results BM 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 Officer
#AvivaResults MARK WILSON GROUP CHIEF EXECUTIVE OFFICER
Slide 4: Performance and delivery
Performance and delivery Operating profit Capital Cash Dividend £3,010m Solvency II ratio 23.3p per share 189%3,4 £1,805m cash +12% +12%1,2 remittances Operating EPS Capital Generation +20% 46% pay-out ratio +3%1,2 £3.5bn +4pp 4 All footnotes on page 33
Slide 5: Operating profit
Operating profit Operating profit: +12% Operating EPS: +3% £3,010m 51.1p £2,688m 49.0p 49.7p £2,097m £2,238m 44.2p 2013 20141 20151,2 20162 2013 20141 20151,2 20162 5 All footnotes on page 33
Slide 6: Operating profit – key drivers
Operating profit – key drivers Operating profit: +12% 1 • Growth consistent with strategy • Strong growth performance in AI, Canada and the UK 32% 26% 23% • Resilient performance in 10% 7% Europe (4)% Aviva Investors Canada UK & Ireland GI & Health2,5 Europe UK & Ireland Life1 Asia • Asia: disruptio
Slide 7: Life insurance – sustained growth
Life insurance – sustained growth Value of new business6 Operating profit £1,352m £2,642m £2,442m £1,192m £1,949m £2,044m £1,005m £899m 2013 2014 2015 2016 2013 20141 20151 2016 7 All footnotes on page 33
Slide 8: General insurance – returned to growth
General insurance – returned to growth Net written premiums Operating profit LTIR & other Underwriting result £806m £694m £691m £595m £8,211m £7,758m £7,372m £7,171m 2013 2014 20152 20162 20135 20145 20152,5 20162 8 All footnotes on page 33
Slide 9: Fund management – strong flows, higher margins
Fund management – strong flows, higher margins Growing AuM Positive net flows £bn £bn 56.6 2.9 43.7 48.1 45.5 (0.3) (1.3) (1.8) (1.9) 288.0 246.2 192.4 200.4 (4.8) (3.7) (3.2) 2013 2014 2015 2016 2013 2014 20157 20167 External Internal External Internal 9 All footnotes on page 33
Slide 10: UK Digital – an insurance disruptor
UK Digital – an insurance disruptor Infrastructure Users Sales Customer systems 75% MyAviva 47% new business sales connected satisfaction score8 to existing customers9 Single customer view Aviva registrations Direct policy sales 14.6m 5.0m 1,122k 1,022k 8.3m 8.6m 3.0m 931k 2.3m 4.5m 1.8m 2014 2015 H
Slide 11: Capital – above working range
Capital – above working range SII cover ratio3,4 SII capital generation 189% £3.5bn 180% 180% 174% 150% Planning additional capital returns during 2017 FY15 HY16 FY16 11 All footnotes on page 33
Slide 12: Oaks, acorns and apple trees
Oaks, acorns and apple trees Oaks Acorns Apple trees • UK: TCC organisation • Aviva Investors: AIMS AuM • Italy: strong results x3 to £9bn • France: Antarius sale for • Spain: examining capital €500m • UKD: registrations x2 to 5m withdrawal • Canada: RBCI acquisition, • Singapore: 450-strong FA • FP
Slide 13: Cash remittances
Cash remittances Cash remittances: +20% Friends Life integration additional dividend in 2016 £250m £1,805m £1,507m £1,269m £1,431m Target 2016-18 201310 2014 2015 2016 £7bn 13 All footnotes on page 33
Slide 14: Dividend – 46% pay-out ratio
Dividend – 46% pay-out ratio Total dividend Up 12% to 23.3p 23.3p 20.8p 18.1p 15.0p 2013 2014 2015 2016 50% pay-out ratio target 2017 14
Slide 15: Checklist
Checklist Grow operating profit 12% growth Strong capital 189%, planning capital returns for 2017 Grow dividend 12% growth, 46% pay-out ratio Friends Life Integration Integration complete, more cash and capital to come Digital Infrastructure built, user numbers growing 15
Slide 16: Tom Stoddard, Chief Financial Officer
#AvivaResults TOM STODDARD CHIEF FINANCIAL OFFICER
Slide 17: Growing operating profit
Growing operating profit Operating profit (£m) FY15 FY16 Change UK & Ireland life1 1,455 1,555 7% Operating profit £3,010m 1,2 UK & Ireland general insurance & health2,5 Up 12% 384 471 23% Aviva Investors 105 139 32% Canada 214 269 26% Europe 880 964 10% Asia 238 228 (4)% Operating EPS 51.1p 1,2 Cor
Slide 18: NAV – up 6% driven by operating profit & FX
NAV – up 6% driven by operating profit & FX Opening NAV per share 390p at 1 January 20161 51p Integration & restructuring Operating profit costs Ogden Down 44% (9)p Dividends (22)p Investment variances (8)p & economic assumptions Pension movement 6p Foreign exchange 23p AVIF amortisation (11)p Basic
Slide 19: UK Life – discipline and growth
UK Life – discipline and growth Life operating profit Operating expenses 11 FL 1Q15 £132m £1,431m £1,523m £788m £827m FY151 FY16 FY15 FY16 12 Value of new business6 Cash remittance £671m £1,096m £609m 138 Long term FL integration 97 £250m additional savings remittance Annuities & £667m 330 314 equit
Slide 20: UK Life profit drivers
UK Life profit drivers Operating profit FY151 FY16 FY16 Bps / Bps / Margin Target Range £m £m Margin basis Long Term Savings (79) (77) n/a New business strain (90)-(100) New Business Annuities & Equity Release 292 305 11% PVNBP 7.5-8.5% Protection 70 118 54% APE 40-50% Long Term Savings 181 219 25 b
Slide 21: Friends Life integration complete – more cash to come
Friends Life integration complete – more cash to come £270m run rate synergies delivered £223m P&L benefits £12m £21m £34m £14m £51m £83m £223m £270m £186m £92m FY15 UK Life Asset Mgt PLC / other FY16 UK Life Asset Mgt International PLC FY16 realised realised Capital benefits delivered Special remit
Slide 22: Aviva Investors – a breakout year
Aviva Investors – a breakout year Operating profit AIMS accelerating: £9.0bn AUM £9.0bn 10 Net flows target income 8 Net flows 6 target return £139m £3.0bn £105m 4 2 Closing AUM - £0.4bn total AIMS 0 FY15 FY16 FY14 FY15 FY16 Positive cost-income jaws AUM up 19% to £345bn 500 450 Operating income £14
Slide 23: UK & Ireland GI – returned to growth
UK & Ireland GI – returned to growth Operating profit Combined operating ratio £433m FY15 FY16 £352m Reported COR 95.0% 94.9% £174m Prior year development +2.4% +2.1% £189m LTIR & other 14 Underwriting Weather -0.2% +2.3% £259m £163m Normalised AY COR 97.2% 99.3% Normalised AY COR excl. Flood Re, HS
Slide 24: Canada – consistent strength
Canada – consistent strength Operating profit Combined operating ratio £269m FY15 FY16 £214m Reported COR 93.8% 94.6% £101m LTIR & other £94m Underwriting Prior year development +4.4% +5.4% £168m £120m Weather14 +0.7% -0.7% FY15 FY16 Normalised AY COR 98.9% 99.3% Net written premiums Cash remittance
Slide 25: Europe – resilient in a challenging environment
Europe – resilient in a challenging environment Operating profit Combined operating ratio & growth £964m £880m 6 FY15 FY16 11 107 92 140 Turkey Net written premiums £1,200m £1,438m 139 212 Spain 172 Reported COR 95.4% 95.8% Poland Italy Prior year development +2.7% +2.5% 466 499 France Weather14 +0.
Slide 26: Asia – investing in disruption
Asia – investing in disruption Operating profit Operating expenses £238m £228m £151m £140m FPI £177m £141m £87m £88m FY15 FY16 FY15 FY16 Value of new business16 Cash remittance £151m £148m £28m DBS £123m £21m FY15 FY16 FY15 FY16 26
Slide 27: Strong capital generation drives increased coverage ratio
Strong capital generation drives increased coverage ratio Actions include (£bn): Operating capital FL integration synergies 0.6 Underlying generation UKL assumption changes 0.2 capital £3.5bn France assumption changes 0.2 generation UKL and Spain model 0.4 £1.7bn Other actions 0.4 189% £1.8bn £(1.2)
Slide 28: Sensitivities remain resilient to stresses
Sensitivities remain resilient to stresses Group SII ratio Equities movement Interest Corporate bond GI Longevity FY16: 189% (decrease) rates spreads shock* shock** coverage ratio Capital redeployment -10% -25% -25bps +100bps 188% 185% 184% 188% 186% 178% Working range Excess capital provides flexib
Slide 29: Capital strength supportive of growth
Capital strength supportive of growth Extended pipeline of capital capacity Existing surplus Capital generation Optimisation Strategic choices • 189% S2 ratio • Organic generation • Business/product mix • Capital reallocation • £1.8bn centre cash • Capital actions • Model refinements • Simplify and
Slide 30: Performance and delivery
Performance and delivery Operating profit Capital Cash Dividend £3,010m Solvency II ratio 23.3p per share 189%3,4 £1,805m cash +12% +12%1,2 remittances Operating EPS Capital Generation +20% 46% pay-out ratio +3%1,2 £3.5bn +4pp 30 All footnotes on page 33
Slide 31: Mark Wilson, Group Chief Executive Officer
#AvivaResults MARK WILSON GROUP CHIEF EXECUTIVE OFFICER
Slide 32: Q&A
Q&A
Slide 33: Footnotes
Footnotes 1. Following a correction to accounting and modelling for annual management charge rebates in UK Life, prior year comparatives have been restated. This has led to an increase in operating profit and profit before tax of £23m for 2015 and an increase in opening retained earnings for 2015 of
Slide 34: Appendix
Appendix
Slide 35: Life
Life
Slide 36: Operating profit snapshot (Global Life)
Operating profit snapshot (Global Life) % Change NB Income 1,252 15% Underwriting margin 625 10% Life operating profit Investment Return 2,645 16% 2,642 2,442 Total income 4,522 15% 2,044 1,949 Acquisition expenses (828) 7% Admin expenses (1,268) 16% FY13 FY141 FY151 FY16 DAC, AVIF & Other 216 (40)%
Slide 37: Profit drivers (Global life)
Profit drivers (Global life) Underwriting margin New business (PVNBP) 4.1% 4.0% £625m 3.9% 3.9% £555m £569m NB margin £463m 2.9% Acq. Margin 2.6% 2.6% 2.4% £29,765m £34,967m £24,418m £24,407m FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 Investment return (AUM / margin) Admin expenses & unit cost 84bps 39
Slide 38: Investment margin (Global life)
Investment margin (Global life) Investment mix Unit linked (reserves/AMC) 2,645 2,287 166 103bps 185 289 102bps 1,967 1,901 215 264 204 734 Expected return 207 187 619 98bps 96bps Spread 611 624 152.0bn Participating 129.8bn 1,268 1,456 Unit linked 86.4bn 85.8bn 885 886 2013 2014 2015 2016 2013 2014
Slide 39: Life operating profit snapshot (UK & Ireland)
Life operating profit snapshot (UK & Ireland) % Change NB Income 801 13% Underwriting margin 326 17% Life operating profit Investment Return 1,352 12% 1,555 1,455 Total income 2,479 13% 1,074 967 Acquisition expenses (396) (3)% Admin expenses (652) 12% FY13 FY141 FY151 FY16 DAC, AVIF & Other 124 (50
Slide 40: Life profit drivers (UK & Ireland)
Life profit drivers (UK & Ireland ) Underwriting margin New business (PVNBP) 3.8% 3.9% £326m 3.7% 3.7% £279m NB margin £198m Acq. Margin £175m 2.4% 2.3% 2.2% 2.1% £16,797m £18,801m £12,393m £12,444m FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 Investment return (AUM / margin) Admin expenses & unit cost 6
Slide 41: Life investment margin (UK & Ireland)
Life investment margin (UK & Ireland) Investment mix Unit linked (reserves/AMC) 1,352 88bps 87bps 1,208 62 95 269 198 Expected return 782 195 738 152 143 74 Spread 83bps 142 136 Participating 110.1bn 86 94 826 763 Unit linked 434 46.9bn 49.8bn 92.2bn 75bps 411 2013 2014 2015 2016 2013 2014 20151 201
Slide 42: Life operating profit snapshot (Europe)
Life operating profit snapshot (Europe) % Change NB income 267 17% Underwriting margin 223 7% Operating profit Investment Return 1,134 15% 884 882 844 766 Total income 1,624 14% Acquisition expenses (274) 13% Admin expenses (520) 20% FY13 FY14 FY15 FY16 DAC, AVIF & Other 14 (22)% OPBT 844 10% 42
Slide 43: Life profit drivers (Europe)
Life profit drivers (Europe) Underwriting margin New business (PVNBP) 4.7% £305m 4.4% 4.2% £230m 3.8% NB margin £223m £208m Acq. Margin 2.9% 2.9% 3.5% 2.5% £9,228m £10,975m £8,558m £8,498m FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 Investment return (AUM / margin) Admin expenses & unit cost 113bps 107b
Slide 44: Life investment margin (Europe)
Life investment margin (Europe) Investment mix Unit linked (reserves/AMC) 155bps 1,122 1,113 1,134 140bps 109 118 989 11 81 28 25 126bps 7 77 Expected return 119bps 524 Spread 531 531 470 Participating 38.3bn 34.8bn 33.4bn Unit linked 31.0bn 454 439 435 518 2013 2014 2015 2016 2013 2014 2015 2016 Pa
Slide 45: Operating profit snapshot (Asia life)
Operating profit snapshot (Asia life) % Change NB income 184 21% Underwriting margin 76 (7)% Investment Return 159 77% Operating profit 244 241 Total income 419 29% Acquisition expenses (158) 24% 96 87 Admin expenses (96) 32% FY13 FY14 FY15 FY16 DAC, AVIF & Other 76 (63)% OPBT 241 (1)% 45
Slide 46: General insurance & health
General insurance & health
Slide 47: General insurance and health (Group)
General insurance and health (Group) Operating profit Net written premium 833 9,134 721 719 8,720 645 8,300 8,090 20135 20145 20152,5 20162 2013 2014 20152 20162 GI Combined operating ratio Investments Average assets LTIR % 97.3% 95.7% 94.6% 95.2% 3.0% 2.8% 32.8% 31.7% 30.1% 31.9% 2.6% C&E ratio Los
Slide 48: General insurance and health (UK & Ireland)
General insurance and health (UK & Ireland) Operating profit Net written premium 471 4,871 412 4,736 384 4,546 4,581 337 20135 20145 20152,5 20162 2013 2014 20152 20162 GI Combined operating ratio Investments Average assets LTIR % 97.2% 94.9% 95.0% 94.9% 3.0% 2.7% 2.7% 35.1% 33.5% 30.1% 33.3% 2.4% C
Slide 49: General insurance and health (Canada)
General insurance and health (Canada) Operating profit Net written premium 269 2,453 246 214 2,250 189 2,104 1,992 2013 2014 2015 2016 2013 2014 2015 2016 Combined operating ratio Investments LTIR % 94.6% 96.1% 93.8% 94.6% Average assets 3.5% 3.1% 31.4% 30.6% 30.5% 31.1% 2.7% 2.5% C&E ratio Loss rat
Slide 50: General insurance and health (Europe)
General insurance and health (Europe) Operating profit Net written premium 113 114 120 1,673 112 1,601 1,556 1,410 2013 2014 2015 2016 2013 2014 2015 2016 GI Combined operating ratio Investments LTIR % 98.1% 97.7% 95.4% 95.8% Average assets 28.5% 28.0% 2.7% 2.8% 29.2% 29.1% C&E ratio 2.1% 2.1% Loss
Slide 51: Earnings per share
Earnings per share
Slide 52: Operating earnings per share
Operating earnings per share FY15 FY16 Group operating profit 2,668 3,010 Less operating tax (603) (706) Minority Interest (152) (147) DCI and fixed rate tier 1 notes (57) (68) Preference shares (17) (17) Total operating earnings after tax, MI & DCI and preference shares 1,859 2,072 Weighted average
Slide 53: Basic earnings per share
Basic earnings per share FY15 FY16 Operating profit attributable to shareholders 1,859 2,072 Investment return variances and economic assumption changes on long-term business (37) 270 Short-term fluctuation in return on investments backing non long-term business (62) (398) Economic assumption change
Slide 54: Returns
Returns
Slide 55: Operating return on total capital employed
Operating return on total capital employed 30.1% 24.4% 23.2% 22.0% 16.1% 15.6% 16.2% 15.7% 14.4% 14.2% 14.0% 13.0% 12.7% 13.1% 11.2% 10.2% 9.0% 9.4% UK & I Life UK & I GI15 Europe Canada Asia FM FY14 FY15 FY16 2015 and 2016 reflect the adverse the impact from the higher weighted average shareholder
Slide 56: 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 11.4% 16.2% 10.8% 9.7% 14.1% 12.5% FY14 FY15 FY16 FY14 FY15 FY16 2015 and 2016 reflect the adverse the impact from the higher weighted average shareholder equity following the acquis
Slide 57: 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 1,555 1,262 11,218 11.2% UK & Ireland GI and Health 471 380 2,431 15.6% Europe 964 674 5,160 13.1% Canada 269 1
Slide 58: Capital & cash flows
Capital & cash flows
Slide 59: Solvency II own funds by tier
Solvency II own funds by tier Regulatory view* Shareholder view FY16 £bn % of SCR % of own funds Tier 1 21.8 132% 77% • Regulatory view adjusted by £4bn due to with-profits funds, T1 unrestricted 18.8 114% 66% pension scheme and other T1 restricted 3.0 18% 11% pro-forma adjustments Tier 2 6.3 38% 22
Slide 60: Solvency II – sensitivities
Solvency II – sensitivities Impact on Solvency cover ratio (SCR) 31/12/2016 SCR : 189% 25bps increase in interest rate 4% 100bps increase in interest rate 18% 25bps decrease in interest rate (5)% 50bps decrease in interest rate (11)% 10% increase in market value of equity 2% 10% decrease in market v
Slide 61: External debt – a balanced maturity profile
Subordinated External debtDebt – aProfile balanced maturity profile £1,300m Restricted Tier 1 Tier 2 Tier 3 £892m £884m £800m 12.000% £768m £700m £465m 7.875% £450m 6.125% £598m £600m £555m £526m £500m £400m £400m 7.875% £162m 8.25% £210m £500m 6.625% £427m 6.875% 6.875% 5.9021% £272m 8.250% 6.875%
Slide 62: 2016 excess centre cash flow
2016 excess centre cash flow £1,805m £(540)m £(85)m £(251)m £929m £871m Cash remitted External interest Internal interest Central spend & other FY16 Excess Dividend cost to Group centre cash flow (calendar year) 62
Slide 63: Balance sheet
Balance sheet
Slide 64: Total managed assets
Total managed assets Assets by liabilities covered Participating assets by type 133,535 £m 346,216 119,874 307,951 62,366 76,863 Euro-style 133,535 UK With-profits 57,508 56,672 style 119,874 Participating funds FY15 FY16 Policyholder funds Shareholder funds Shareholder assets by type 132,901 79,780
Slide 65: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m 79,780 Total: £28,133m 9% 70,136 8% 13% 42% 27% 22,883 1% 18,755 Government debt AAA A Less than BBB Corporate bonds AA BBB Non-rated 28,133 26,402 Other debt Mortgage loans Government debt by rating 2,699 Other Total: £22,883
Slide 66: Shareholder assets
Shareholder assets Corporate bonds by industry Loans by type Total: £21,362m 3% 7% 2% 20% 1% 12% 4% 7% 9% 12% 19% 20% 85% Financials - Banks Communications Loans & advances to banks Financials - Insurance & other Real estate Healthcare, Infrastructure & PFI other loans Utilities Oil & gas Mortgage l
Slide 67: Shareholder assets – Mortgage loans
Shareholder assets – Mortgage loans Mortgage loans Commercial real estate portfolio Total: £18,133m Commercial: £6,651m 102% 18% 95% 83% 85% 61% 58% LTV 1,583 37% £m 1,492 Loans in arrears 418 446 45% 9 0 2.05x 2.18x Loan 1.32x 1.4x 1.4x 1.47x interest Healthcare, infrastructure & PFI cover Commerci
Slide 68: Other
Other
Slide 69: France – Antarius pro-forma
France – Antarius pro-forma Key metrics – France adjusted for Antarius £m FY16 FY16 (excl. Antarius) Operating profit before tax (gross of tax & MI) 481 403 Net profit after tax (after tax & MI) 200 174 Value of new business (MCEV basis) 224 192 69
Slide 70: 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 current estimated projection and is subject to a variety of factors including the effects of markets.
Slide 71: Footnotes
Footnotes 1. Following a correction to accounting and modelling for annual management charge rebates in UK Life, prior year comparatives have been restated. This has led to an increase in operating profit and profit before tax of £23m for 2015 and an increase in opening retained earnings for 2015 of