Aviva Plc · LSE:AV.
Aviva — UBS Warburg Conference 2003
32 slides from Aviva's conference presentation, Apr 29, 2003
Slide 1: Capturing value in a challenging environment
Richard Harvey Group Chief Executive Aviva plc “Capturing value in a challenging environment” UBS Warburg Conference New York 29 April 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 P&C business 2002 premium sales* (£28bn) Intl. Life 5%** Cont. Europe Life 32%** UK 72% P&C Life* 17% 28% P&C UK Life Cont 35%** Europe P&C 6% Intl. P&C 5% * Net written premiums from continuing operations. ** Life includes retail in
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 P&C pricing ! Weak players ! Organic consolidation capitulating benefiting stronger companies ! Insurers re-capitalising
Slide 6: Aviva 2003 priorities
6 Aviva 2003 priorities ! Drive P&C earnings ! Size costs to revenues ! Raise hurdle rates and pricing ! Capital efficiency ! Deliver from recent bancassurance expansion
Slide 7: Best of (European) breed P&C results
7 Best of (European) breed P&C results Aviva Combined operating ratios % of total* P&C premiums 2002 2001 61 UK 101% 102% 6 France 102% 104% 5 Ireland 100% 101% 5 Neths 105% 104% 13 Canada 102% 107% Group* 102% 103% *Continuing operations
Slide 8: Aviva: Scale advantages in UK P&C
8 Aviva: Scale advantages in UK P&C UK P&C expense ratios % 25 Zurich 20 AXA Credit Suisse Allianz 15 RSA Norwich Union 10 1997 1998 1999 2000 2001 Source: FSA returns
Slide 9: Leveraging cost advantage out of Aviva's growing expertise in India
9 Leveraging cost advantage out of Aviva’s growing expertise in India ! Call centre / claims processes supports UK P&C capacity and efficiency ! Consider other applications Virtual call 1,000 centre/claims employees processes end 2003
Slide 10: Aviva cash generation in 2002
10 Aviva cash generation in 2002 ! Large in-force statutory life profits of £1.4 bn net ! Strong statutory P&C profits of £0.6 bn net ! Dividend cut saved £350m Operating statutory profit(1) 21% Cont Europe & Intl life 46% Worldwide P&C 33% UK life (1) Key business areas. Continuing operations in 20
Slide 11: Capital: resilient position
11 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 12: Aviva in strong operational shape to meet challenges of downturn
12 Aviva in strong operational shape to meet challenges of downturn ! Good cashflow from strong P&C earnings ! Dividend rebased (1.5x covered) ! Sizing costs to revenues ! Resilient capital position ! Diversified business and strong market positions
Slide 13: Longer-term
13 Longer-term
Slide 14: Longer-term savings growth prospects remain strong
14 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 15: UK Life market - Europe's largest
15 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 16: UK Life - market concentrating
16 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 17: UK Life market
17 UK Life market £m APE Product trends 6000 Pensions 5000 4000 3000 Investment bonds 2000 Protection 1000 Annuities/ income drawdown Endowments 0 1997 1998 1999 2000 2001 2002 Source: ABI
Slide 18: Investing into lower penetrated markets and structural bancassurance growth
18 Investing into lower penetrated markets and structural bancassurance growth UK: Netherlands: bancassurance JV bancassurance JV with RBSG with ABN Amro Entered France: Lithuania life bancassurance from Poland China: from 2004 JV life business Italy: created top from 2003 Spain: 6 LTS business crea
Slide 19: Attractive margins from bancassurance
19 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 20: Aviva Italy has a market leading cost base
20 Aviva Italy has a market leading cost base 2001 expense ratios Expenses as proportion of premium income 5% 4% 3% 2% 1% 0% Consolidated Aviva Other leading All top 15 life Leading non- life companies bancassurers companies bancassurers Source: ANIA
Slide 21: Aviva Spain – efficiency key to bancassurance margin
21 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 22: Aviva Spain: an under penetrated bank client base
22 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 23: Aviva bancassurance opportunity
23 Aviva bancassurance opportunity ! Banks have good or improving CRM ! Aviva access 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 24: Q1 2003 life sales
24 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 25: Winners from current insurance market shake-out
25 Winners from current insurance market shake-out ! Strong brand ! Distribution access to customers ! Low cost ! Organic consolidation ! Focussed and disciplined M&A approach
Slide 26: Aviva summary
26 Aviva summary ! Drive P&C earnings ! Sizing costs to revenues ! Harvest bancassurance opportunities ! Beneficiary of shake-out
Slide 27: Appendix
27 Appendix
Slide 28: Strong and valuable market positions
28 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 29: Aviva in Eastern Europe
29 Aviva in Eastern Europe EU accession brings economic benefits Poland Poland •• 1992 1992 £5m £5m greenfield greenfield investment investment •• In In 2002: 2002: •Noo 11 private •N private pensions pensions (29% (29%of of market) market) •18% of total life market •18% of total life market •40% •4
Slide 30: India & China new ventures
30 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 !
Slide 31: Equity content in shareholders' funds
31 Equity content in shareholders’ funds Lower equity content in shareholders’ funds at £3.1bn (2001: £4.9bn) £bn 2001 year end 4.9 Change in market values (1.4) Disposal of Australia/ New Zealand (0.2) Divestment of strategic stakes (0.6) Net reinvestment 0.2 Foreign exchange 0.2 2002 year end 3.1
Slide 32: Internal capital generation
32 Internal capital generation Post-tax statutory operating profits Post- 2001 2002 £bn Actual Pro forma Actual Profit from in- in-force 1.4 1.4 1.4 Cash strain from new non- non-profit business (0.6) (0.6) (0.7) Life statutory profits (after new business strain) 0.8 0.8 0.7 GI & health 0.6 0.6 0.6