Aviva Plc · LSE:AV.
Aviva — BNP Paribas Conference 2003
33 slides from Aviva's conference presentation, Jun 3, 2003
Slide 1: Strategies for growth in a challenging environment
Mike Biggs Group Finance Director Aviva plc “Strategies for growth in a challenging environment” BNP Paribas Conference Paris 03 June 2003
Slide 2: Disclaimer
2 Disclaimer This presentation may contain certain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncert
Slide 3: Aviva overview
3 Aviva overview The leading pan-European life insurer Focused General Insurance business 2002 premium sales* (£28bn) Intl. Life 5%** Cont. Europe Life 32%** UK 72% GI Life** 17% 28% GI UK Life Cont 35%** Europe GI 6% Intl. GI 5% * Net written premiums from continuing operations. ** Life include
Slide 4: Agenda
4 Agenda Insurers re-structuring Short-term Cash, costs, capital Growth will return Longer-term Increased organic and inorganic opportunities
Slide 5: Short-term: Market forces re-structuring industry
5 Short-term: Market forces re-structuring industry Shake-out Opportunities Tough life sales Reduced capital environment sustaining GI pricing Weak players Organic consolidation capitulating benefiting stronger companies Insurers re-capitalising
Slide 6: Aviva 2003 priorities
6 Aviva 2003 priorities Deliver from recent bancassurance expansion Drive GI earnings Size costs to revenues Raise hurdle rates and pricing Capital efficiency
Slide 7: Q1 2003 life sales
7 Q1 2003 life sales Q1 2003 2002 APE Growth* Margin Margin £m % % UK 263 (22%) 22.0 23.6 France 61 (3%) 31.0 30.9 Ireland 21 (41%) 28.3 28.2 Italy 61 +97% 22.8 24.9 Netherlands 45 +18% 17.9 13.3 Spain 69 +94% 40.8 45.9 Other countries 81 +11% 11.2 13.9 Group 601 (2%) 23.6 24.4 *Local currency
Slide 8: Consistent profitability from personal and small commercial lines GI
8 Consistent profitability from personal and small commercial lines GI Combined Operating Ratio 2002 2001 Withdraw where Exited long-tail UK 101% 102% no scale business France 102% 104% – Spain – US P&C – Germany Ireland 100% 101% – Belgium – London Markets – French broker Netherlands 105% 104% – So
Slide 9: Aviva: Scale advantages in UK GI
9 Aviva: Scale advantages in UK GI UK GI expense ratios % 25 Zurich 20 AXA Credit Suisse Allianz 15 RSA Norwich Union 10 1997 1998 1999 2000 2001 Source: FSA returns
Slide 10: Leveraging cost advantage out of Aviva's growing expertise in India
10 Leveraging cost advantage out of Aviva’s growing expertise in India Call centre / claims processes supports UK GI capacity and efficiency Consider other applications Virtual call 1,000 centre/claims employees processes end 2003
Slide 11: Aviva cash generation in 2002
11 Aviva cash generation in 2002 Large in-force statutory life profits of £1.4 bn net Strong statutory GI profits of £0.6 bn net Dividend cut saved £350m Operating statutory profit(1) 21% Cont Europe & Intl life 46% Worldwide GI 33% UK life (1) Key business areas. Continuing operations in 2002
Slide 12: Capital: resilient position
12 Capital: resilient position Resilient CGUII structure (holds major overseas subs) can withstand significant equity market falls S&P AA- (stable outlook) Strong UK life with-profit “realistic” capital orphan estate £4.3bn (after >£4bn for guarantees, glidepath etc…) manage bonuses / MV
Slide 13: Aviva in strong operational shape to meet current market challenges
13 Aviva in strong operational shape to meet current market challenges Good cashflow from strong GI earnings Dividend rebased (1.5x covered) Sizing costs to revenues Resilient capital position Diversified business and strong market positions
Slide 14: Longer-term
14 Longer-term
Slide 15: Longer-term savings growth prospects remain strong
15 Longer-term savings growth prospects remain strong Demographics driving long-term savings 400 growth > GDP Global life premiums 350 300 250 Global GDP 200 150 100 50 0 1984 1986 1988 1990 1992 1994 1996 1998 Source: Swiss Re/HSBC 2000
Slide 16: UK Life market - Europe's largest
16 UK Life market - Europe’s largest Attractive demographics Government “withdrawing” from retirement provision Growth of UK life & pensions market £m APE 12000 10000 Banks / tied / 8000 direct 6000 4000 IFAs 2000 0 Source: ABI 1997 1998 1999 2000 2001 2002
Slide 17: UK Life - market concentrating
17 UK Life - market concentrating Norwich Union outperforming market Competitive advantage through capital strength, brand, market leading product range Market share % 12 NU NU Post Merger 10 CGU 11.4% 8 6 4 2 5.2% 0 1996 1997 1998 1999 2000 2001 2002
Slide 18: UK Life market
18 UK Life market £m APE Product trends 6000 Pensions 5000 4000 3000 Investment bonds 2000 Protection 1000 Annuities/ income drawdown 0 Endowments 1997 1998 1999 2000 2001 2002 Source: ABI
Slide 19: Investing into lower penetrated markets and structural bancassurance growth
19 Investing into lower penetrated markets and structural bancassurance growth Netherlands: UK: bancassurance JV bancassurance JV with ABN Amro with RBSG 2003 France: Entered bancassurance Lithuania life from 2004 from Poland China: JV life business Italy: created top 2003 Spain: 6 LTS business crea
Slide 20: Aviva bancassurance opportunity
20 Aviva bancassurance opportunity Banks have good or improving CRM Aviva has access to over 30m “warm” bank customers in Europe Low insurance penetration Resilient sales channel in current markets Opportunity to harvest deposits as equity markets recover
Slide 21: Attractive margins from bancassurance
21 Attractive margins from bancassurance Aviva 2002 bancassurance new business margins UK (RBSG) 21.5% Spain 51.3% Italy 24.9% Singapore 29.4% 35.1% Group total margin 24.4%
Slide 22: In Spain Aviva has established a major business with its partners
22 In Spain Aviva has established a major business with its partners Life insurance ranking 2002 Market growth (Premiums) € bn Market share % CAGR 30 La Caixa 12.3 21% 27.0 23.4 22.5 Mapfre 8.3 20 17.2 Aviva 7.1 11.8 12.5 10.0 10 8.7 8.3 SCH 6.6 4.9 5.3 BBVA 5.7 92 93 94 95 96 97 98 99 00 01 02 Sour
Slide 23: Aviva Spain: an under penetrated bank client base
23 Aviva Spain: an under penetrated bank client base Life insurance & pension reserves as % of total customer funds 2001 Customers La Caixa 15.3% Bancaja 14.3% 2.4m Banco Sabadell 12.3% Ibercaja 12.2% Caixa Catalunya 12.1% CAM 10.6% BBVA ex-America 8.9% Banco Popular 7.7% Caja Madrid 7.5% SCH ex-Ame
Slide 24: An example of expected returns in Spanish bancassurance deals
24 An example of expected returns in Spanish bancassurance deals Aviva IRR against 10 year business plan 17.5% Key features 15.0% I Incentivisation 12.5% − earn-outs I Protection 10.0% − 10-year business IRR 7.5% plan − capped future 5.0% payments 2.5% Minimum Earn-in Earn-out Maximum − earn-ins pri
Slide 25: Aviva Spain – efficiency key to bancassurance margin
25 Aviva Spain – efficiency key to bancassurance margin Acquisition and administration costs 5 (% of premium, H102) 4 (%) 3 2 1 0 Aseval Largest Spanish Total Spanish life (Aviva) bancassurers market Source: ICEA, data regarding H102
Slide 26: Aviva France
26 Aviva France Growth faster than the market Base 100 in 1998 160 140 +38% Aviva +31% Market 120 +22% Traditional Networks 100 1998 1999 2000 2001 2002 Source : Fédération Française des Sociétés d’Assurance
Slide 27: Aviva France
27 Aviva France Leading market positions Focus on profitable segments N°1 in savings association Unit-linked vs euros business with Afer Individual vs Group business N°1 in direct sales of individual protection Withdrawal from segments where critical mass cannot be reached Ranked 4th amongst traditi
Slide 28: Aviva well positioned for current tough trading conditions
28 Aviva well positioned for current tough trading conditions Strong brand Distribution access to customers Low cost Organic consolidation Focussed and disciplined M&A approach
Slide 29: In the longer-term Aviva will……
29 In the longer-term Aviva will…….. Benefit from the long-term savings opportunities in Europe harvest bancassurance opportunities continue to expand distribution EU accession Develop positions in selected markets outside Europe Drive GI earnings
Slide 30: Appendix
30 Appendix
Slide 31: Strong and valuable market positions
31 Strong and valuable market positions Rank Market share Rank Market share Life Life (est.) P&C P&C (est.) UK 2 11% 1 16% France 10 4% Top 15 2.5% Netherlands 4 10%* 4 9%* Spain 3 7% – – Italy 6 5% n/a <1% Ireland 4 11% 1 24% Canada – – 2 9% Poland 2 18% – – Singapore 3 11% 2 9% Turkey 3 13% – – Au
Slide 32: Aviva in Eastern Europe: EU accession brings economic benefits
32 Aviva in Eastern Europe EU accession brings economic benefits Poland •• 1992 1992 £5m £5m greenfield greenfield investment investment •• In In 2002: 2002: •N •Noo 11 private private pensions pensions (29% (29% of of market) market) •18% of total life market •18% of total life market •40% •40% of
Slide 33: India & China new ventures
33 India & China new ventures India JV partnership (26%) with Dabur Group in 2002 Distribution agreements with: –Canara Bank (ranked 2nd, 2,400 branches) –Lakshmi Vilas Bank (regional bank, 208 branches) –ABN Amro –American Express China Aviva-COFCO Life Insurance launched 1 Jan 2003 Ini