Aviva Plc · LSE:AV.
Aviva — FY2021 Earnings Presentation
66 slides from Aviva's earnings presentation, Mar 2, 2022
Slide 1: Aviva plc 2021 results
Aviva plc 2021 results 2 March 2022 1 Aviva: Internal
Slide 2: Disclaimer & important information
Disclaimer & important information Cautionary statements This document should be read in conjunction with the documents distributed by Aviva plc (the ‘Company’ or ‘Aviva’) through The Regulatory News Service (RNS). This announcement contains, and we may make other verbal or written ‘forward-looking
Slide 3: Agenda
Agenda Strategic update Amanda Blanc, Group CEO 2021 results and financial review Jason Windsor, Group CFO Delivering Aviva’s Promise Amanda Blanc, Group CEO Q&A Aviva: Internal 3
Slide 4: Strategic update
Strategic update Amanda Blanc 4 Aviva: Internal
Slide 5: Foundations in place for next phase of strategy
Foundations in place for next phase of strategy 1 Focus the portfolio Completed New phase: Delivering 2 Rebuild financial strength Completed Aviva’s Promise 3 Transform performance Accelerating Today’s Capital Dividend Investment in Upgraded updates: return guidance the business targets Aviva: Inter
Slide 6: Focus the portfolio
Focus the portfolio What have we achieved? Where does that leave us today? Decisive plan to refocus Aviva 3 attractive core markets with leading positions Unique position of strength, serving all customer needs Swift execution Growth opportunities in all our markets 8 disposals completed Highly syne
Slide 7: Rebuild financial strength
Rebuild financial strength What have we achieved? Where does that leave us today? £1.9bn external debt reduction Return £4.75bn2 capital to shareholders Plans to de-lever by a further £1bn over time £0.7bn internal loan reduction Capacity to reinvest for growth SII debt leverage ratio <30% Efficient
Slide 8: Significant performance momentum into 2022
Significant performance momentum into 2022 2021 financial progress1 Excellent performance across key markets +23% Life sales £6.2bn BPA premiums – highest level on record Aviva is growing… +6% GI premiums 2 +17% S&R net flows 4pp GI COR improvement £244m Net cost reduction 2018-213 £10bn S&R net flo
Slide 9: Substantial capital return
Substantial capital return1 Total capital return Capital return details Total capital return of £4.75bn B Share Scheme of £3.75bn1 announced today £4.75bn Adds to existing Buyback programme of £1.0bn Targeting B Share Scheme completion in May 20222 Share consolidation at illustrative ratio¹ of 75 fo
Slide 10: Clear dividend guidance
Clear dividend guidance Cash DPS cost DPS growth 2021 ~£830m 22.05p +5% • Clear dividend guidance for 2022 & 2023 • Reflects significant strategic progress and our ~£870m confidence in outlook 20221 ~31.5p ~40% • Attractive payout level with longer-term sustainability 20231 ~£915m ~33p ~5% • Surplus
Slide 11: Confidence to invest for the future
Confidence to invest for the future On top of £4.75bn1 shareholder return we have the capacity and confidence to invest for the future £200m Investing over 2022-23 to drive the next phase of cost reduction and reach our target of £750m reduction gross of inflation by 2024 for efficiency £300m Invest
Slide 12: Delivering Aviva's Promise: upgraded Group targets
Delivering Aviva’s Promise The leading UK provider and go-to customer brand Upgraded Group targets1 for all insurance, wealth and retirement solutions, with strong franchises in Canada and Ireland 1. Cash remittances >£5.4bn Increased from >£5bn 2022-2024 2021-2023 Building on a unique position of m
Slide 13: 2021 results and financial review
2021 results and financial review Jason Windsor 13 Aviva: Internal
Slide 14: Financial highlights
Financial highlights Solvency II Operating own Cash remittances1 Life sales1,2 Funds Generation (SII OFG)1 £1.66bn £1.2bn £36.7bn +22% flat +23% Solvency II cover ratio3 Costs1,4 GWP1 244% £2.86bn £8.8bn +42pp -8% vs 2018 +6% All footnotes on pages 64-66 Aviva: Internal 14
Slide 15: Strong growth in cash generation
Strong growth in cash generation Cash remittances from continuing operations New 2022-24 target >£5.4bn • On track to meet existing target of +22% >£5bn (2021-23), growing toward £1.8bn £1.66bn £1.8bn in 2023 (£1.3bn net of centre costs1 and debt costs) £1.37bn • Updating cash target to >£5.4bn cumu
Slide 16: Strategic flexibility from strong capital position
Strategic flexibility from strong capital position SII cover ratio1 Capital framework Total: £4.75bn capital return Capital c.180% Existing £1bn (11)% share buyback Centre c.£1.5bn (41)% liquidity 202% (11)% 191% 186% Leverage <30% (1)% (5)% 244% Maintain AA credit rating metrics Pro forma estimated
Slide 17: Dividend well covered, with growing SII OFG and cash
Dividend well covered, with growing SII OFG and cash 2022 2023 Potential for New dividend 2021 total c.40% DPS illustrative illustrative dividend further returns to policy1 growth c.£870m/c.31.5p1 c.£915m/c.33p1 Shareholders c.£830m/22.05p over time Growing DPS at low-to-mid single digits thereafter
Slide 18: B Share Scheme and share consolidation
B Share Scheme and share consolidation 1 Expected timeline Key points 2 March Today’s Announcement £3.75bn of capital to be returned via B Share Scheme in May 20221,2. Delivering on promise to return >£4bn capital by June 2022 On or around 4 April Shareholder circular Shareholders will receive: publ
Slide 19: Upgrading cost savings ambition
Upgrading cost savings ambition Significant cost savings achieved to date1 £244m cost reduction, Upgrading cost target to £750m1 net of inflation £750m cost reduction 2018-24 gross of inflation3 3,098 130 (374) Equates to £400m net savings vs 2018 baseline 2,8542 Cost to achieve of c.£200m recognise
Slide 20: UK & Ireland Life
UK & Ireland Life Savings & Retirement Cash remittances net flows Solvency II OFG £1.2bn £10bn £953m +21% +17% -10% -7% ex. management actions & other VNB Costs1 Operating profit £668m £1.1bn £1.4bn -1% -3% -25% -6% ex. management actions & other Ambition VNB: 5-7% growth per annum All footnotes Avi
Slide 21: Excellent Savings & Retirement growth
Excellent Savings & Retirement growth AUM and flows Operating profit & SII OFG £14bn £152bn £147m £10bn £119m £128bn Operating profit FY20 Net flows Market FY21 FY20 FY21 movements and other • Operating profit up 24% reflecting growing asset base and • Record net flows reaching £10bn for the first t
Slide 22: Strong profitability in Protection & Health
Strong profitability in Protection & Health VNB and new business margin Operating profit & SII OFG 6.8% 7.9% £229m £188m £167m £189m New business margin Operating VNB profit FY20 FY21 FY20 FY21 • Sales1 marginally lower in 2021 reflecting large Group • Profit up 21% despite lower volumes driven by s
Slide 23: Annuities and equity release sales growth and profitability
Annuities and equity release sales growth and profitability Annuity and equity release sales1 VNB, SII OFG & operating profit £7.9bn 4.7% 3.6% New business margin £7.5bn £356m £6.0bn £6.2bn BPA £280m IA & ER VNB £1.6bn £1.7bn FY20 FY21 FY20 FY21 • Strong performance in H2 of £5.4bn and FY21 BPA sale
Slide 24: General insurance – UK, Ireland and Canada
General insurance – UK, Ireland and Canada Cash remittances GWP Solvency II OFG £417m £8.8bn £671m +38% +6% +9% COR Costs1 Operating profit 92.9% £1.1bn £762m -3.9pp -5% +52% Ambition Combined operating ratio: <94% All footnotes Aviva: on pages 64-66 Internal 24
Slide 25: UK general insurance
UK general insurance Commercial lines Personal lines FY21 FY20 Change FY21 FY20 Change GWP (£m) 2,609 2,262 15% GWP (£m) 2,334 2,377 (2)% Underwriting (£m) 109 (117) - Underwriting (£m) 121 180 (33)% COR 94.6% 106.4% (11.8)pp COR 94.6% 92.3% 2.3pp PYD and weather* 3.6% 2.0% PYD and weather* (0.4)% (
Slide 26: Canada general insurance
Canada general insurance Commercial lines Personal lines FY21 FY20 Change FY21 FY20 Change GWP (£m) 1,268 1,153 10% GWP (£m) 2,187 2,118 3% Underwriting (£m) 140 (100) - Underwriting (£m) 153 262 (42)% COR 86.8% 110.2% (23.4)pp COR 92.6% 87.2% 5.4pp PYD and weather* (1.5)% 3.7% PYD and weather* (0.4
Slide 27: Aviva Investors
Aviva Investors FY21 FY20 Change £m £m % Operating profit 41 25 64% • Operating profit growth up 64% driven by 6% increase Revenue1 403 381 6% in revenue reflecting higher average AUM and asset Controllable costs excl. implementation costs (345) (356) (3)% origination fees and reduction in cost base
Slide 28: Summary messages
Summary messages Completed our disposal programme – 8 businesses sold for £7.5bn Delivered on our promise to shareholders – £4.75bn capital return1 Financial performance is encouraging – momentum as we move into 2022 We are in a strong and confident position – clear guidance on dividend outlook2 All
Slide 29: Delivering Aviva's Promise
Delivering Aviva’s Promise Amanda Blanc 29 Aviva: Internal
Slide 30: Clear strategy and plans to deliver Aviva's promise
Clear strategy and plans to deliver Aviva’s promise The leading UK provider and go-to customer brand for all insurance, wealth and retirement solutions, with strong franchises in Canada and Ireland Growth Customer Efficiency Sustainability Targeted growth Powering up the Aviva Simplifying and Delive
Slide 31: Building on a unique position of market strength
Building on a unique position of market strength Growth Market-leading positions in all core segments Unique advantage of highly synergistic model # market position1 Wealth Workplace #1 A leading customer platform Individual Wealth #4 18.5m Customers, #1 trusted brand, distribution strength, custome
Slide 32: Attractive growth opportunities in all key markets
Attractive growth opportunities in all key markets 1 Growth £1.6tn+ wealth assets in 2020 growing to £2.1tn in 2024 Wealth £37tn+ estimated global ESG assets by 2025 £44bn UKGI market growing at 2% Insurance £40bn Canada market growing at 5% £14bn UK Protection & Health market growing at 3-4% £2tn s
Slide 33: Driving targeted profitable growth
Driving targeted profitable growth Growth Focus areas Growth priorities Momentum Ambition 2021 Launch full range of advice models to capture assets at retirement Wealth Proposition enhancements to develop market leading Master Trust offering £10bn net flows Formerly Savings & Retirement Execute new
Slide 34: Building an integrated proposition for Wealth
Building an integrated proposition for Wealth Growth Start investing Grow personal wealth Transition to retirement In retirement Workplace Primary customer Pensions & Adviser acquisition engine platform Introduction to investing Retirement Early Solutions Savings Retain and attract new Accompany Dir
Slide 35: Succession Wealth – accelerating our strategy
Succession Wealth – accelerating our strategy Growth Adds advice to our UK Wealth capabilities • Significantly enhances our position in the fast growing Wealth market • Accelerates our ability to offer high-quality advice to our customers • Helps retain more of the c.£6bn p.a. of assets moving to ou
Slide 36: Customers at the heart of what we do
Customers at the heart of what we do Customer Leading customer franchises Customers at the heart of our strategy 60% 58% Trusted brand Consideration Trust (+16pp vs. nearest (+6pp vs. nearest competitor) competitor) Transparent products Best Protection Commercial Lines Provider Insurer of the Year 2
Slide 37: Building an engaging digital customer experience
Building an engaging digital customer experience Customer Bringing One Aviva to our customers Driving customer satisfaction and product holdings Fixing and enhancing digital customer journeys to improve connected customer experience through MyAviva 2021 2024 ambition Registered customers 5.7m >8m Sa
Slide 38: Leading with customer-centric innovation
Leading with customer-centric innovation Customer New approach to innovation Aviva Zero: disruptive green proposition Designing, testing and learning of new customer propositions at pace MyFuture Commercial Planner Property Telematics Financial coaching for Partnering with Partnering with the under
Slide 39: Simplifying and transforming our cost base
Simplifying and transforming our cost base Efficiency Making good progress on key levers1 We are moving headquarters Momentum Ambition St Helen’s EightyFen 2021 IT simplification -11% -25% IT applications Product -30% -65% simplification UKGI PL products Digitisation & 52% >75% automation UK custome
Slide 40: Working towards top quartile efficiency
Working towards top quartile efficiency Efficiency Ambition Basis 2020 2021 Key levers 20245 Operating model efficiency, Retirement Solutions UK&I Life Costs1/AUM2 38bps 35bps 30bps system, cost reduction and simplification in Heritage Fund and fee simplification, improved operational Costs1/ AI Avi
Slide 41: Leading UK Financial Services on sustainability
Leading UK Financial Services on sustainability Sustainability Progress so far Ambition UK infrastructure & Pre-tax profits invested • >13% UK population saving and retiring with Aviva real estate investment in communities £4.3bn 2% • ESG choices for customers 2021 2021 • £10bn UK infrastructure & r
Slide 42: Delivering Aviva's Promise
Delivering Aviva’s Promise Substantial progress Disposals complete; financially stronger; performance improving Significant operating momentum Conviction that we have the right strategy 4 important updates today Capital return, dividend, business investment, targets Clear and deliverable plan For gr
Slide 43: Q&A
Q&A Amanda Blanc Group CEO Jason Windsor Group CFO Aviva: Internal 43
Slide 44: Appendices
Appendices 44 Aviva: Internal
Slide 45: Solvency II
Solvency II Aviva: Internal 45
Slide 46: Solvency II position
Solvency II position Cover ratio 1 202% +11pp +10pp (7)pp (13)pp (9)pp +50pp 244% OCG £1,561m (521) 317 (154) 1,765 (874) Surplus 1 13,000 13,074 (1,506) £m 2,047 (1,000) 31 December Debt & Non-operating Dividends3 Debt issuance / 31 December £m BU generation Other 2 (ordinary + Share buyback Dispos
Slide 47: Pro forma centre liquidity and SII debt leverage
Pro forma centre liquidity and SII debt leverage Centre liquidity SII debt leverage £6.6bn 31% £(0.1)bn (3)% 4% 28% £4.1bn 27% £(3.75)bn £1.7bn £(1.0)bn £(0.1)bn Feb-21 Feb-22 Remaining B Share Further One-off Pro forma FY20 FY21 B Share Further Pro forma buyback Scheme1 £1bn debt pension estimated
Slide 48: Solvency II RoE – revised methodology
Solvency II RoE – revised methodology At 31 December 2021, Solvency II RoE and Solvency II RoC measures have been amended following a review of the basis of preparation The change in approach is more relevant as it: The denominator has been adjusted to exclude • Improves comparability of Solvency II
Slide 49: Solvency II return on capital/equity
Solvency II return on capital/equity SII RoE 2021 2020 Change £m £m % 12.3% Life new business 513 698 (27) % Existing business 740 772 (4) % (0.9)% Non-life capital generation 737 824 (11) % Debt & centre costs (incl. pref/DCI costs) (638) (637) -% (0.1)% 11.3% Management actions & other1 296 6 - Op
Slide 50: Solvency II return on capital/equity (FY21)
Solvency II return on capital/equity (FY21) Solvency II operating own funds generation Solvency II Impact of Earnings Non-life Management OFG (post Solvency II new from existing capital actions & TMTP Opening Return on business (life) business (life) generation other1 Total adjustment) own funds cap
Slide 51: Solvency II return on capital/equity (FY20)
Solvency II return on capital/equity (FY20) Solvency II operating own funds generation Solvency II Impact of Earnings Non-life Management OFG (post Solvency II new from existing capital actions & TMTP Opening Return on business (life) business (life) generation other1 Total adjustment) own funds cap
Slide 52: Solvency II own funds
Solvency II own funds Opening own funds Closing own funds 1 January 2021 31 December 2021 £m £m UK & Ireland Life 15,073 13,831 UK & Ireland General Insurance 2,401 2,338 Canada 1,534 1,746 Aviva Investors 385 400 UK, Ireland, Canada and Aviva Investors 19,393 18,314 International investments 909 98
Slide 53: Solvency II sensitivities (Group shareholder view)
Solvency II sensitivities (Group shareholder view) FY21 post capital deployment FY20 Sensitivity Impact on surplus Impact on cover ratio Impact on surplus Impact on cover ratio £bn pp £bn pp Changes in economic assumptions 25 bps increase in interest rate 0.2 5 pp 0.3 5 pp 50 bps increase in interes
Slide 54: Solvency II regulatory own funds tiering and debt leverage
Solvency II regulatory own funds tiering and debt leverage £m £m % of own % of own % of SCR % of SCR £m £m Regulatory view 2021 2020 funds funds 2021 2020 Regulatory view 2021 2020 2021 2020 Unrestricted Tier 1 19,120 20,850 75% 71% 153% 127% Solvency II regulatory debt2 6,330 8,316 Senior notes 651
Slide 55: Subordinated and senior debt profile
Subordinated and senior debt profile Restricted Tier 1 £1,002m Tier 2 Senior £756m £502m £700m £663m 6.125% £588m £600m £517m £500m £400m £390m £400m £253m 3.375% 6.125% 5.125% 6.125% 3.875% 6.875% £500m 4.0% 1.875% 4.375% 8.25% £264m £263m 0.625% 4.0% 2022 2023 2024 2025 2026 2027 2029 2030 2035 20
Slide 56: Assets
Assets Aviva: Internal 56
Slide 57: Total managed assets
Total managed assets Assets by type of liabilities covered Shareholder assets by type £m £m 310,588 99,751 101,867 296,068 46,180 50,270 Annuity & Participating funds non-profit Policyholder funds GI, Health 78,075 162,541 Shareholder funds 82,142 & other 146,047 99,751 101,867 23,792 17,609 FY20 FY
Slide 58: Shareholder assets
Shareholder assets Shareholder assets by type Corporate debt by rating £m 97,203 94,474 9% 15% 36% 25% 15% 25,368 29,437 AAA A Less than BBB Government debt AA BBB Non-rated 25,057 24,134 Corporate bonds Other debt 9,127 10,168 Mortgage loans Government debt by rating Other 22,034 21,663 21% 70% 5%
Slide 59: Shareholder assets – corporate bonds and loans
Shareholder assets – corporate bonds and loans Corporate bonds by industry Loans by type Total: £33,464m 5% 1% 2% 11% 5% 18% 6% 8% 23% 22% 10% 65% 24% Financials - banks Industrial Loans & advances to banks Utilities Finacials - insurance & other Healthcare, Infrastructure & PFI other loans Consumer
Slide 60: Shareholder assets – mortgage loans
Shareholder assets – mortgage loans Mortgage loans Commercial real estate portfolio Total: £21,663m FY21 commercial total: £7,225m 12% LTV 58% 56% 55% 56% 61% 56% FY16 FY17 FY18 FY19 FY20 FY21 33% 55% Balance 1 in arrears (£m) FY16 FY17 FY18 FY19 FY20 FY21 Loan 2.8x 2.9x 2.7x 2.7x Healthcare, infras
Slide 61: Additional information
Additional information Aviva: Internal 61
Slide 62: IFRS 17 – preparation is well advanced
IFRS 17 – preparation is well advanced Background Aviva is well prepared for implementation of IFRS 17 • IFRS 17 is a comprehensive new accounting standard, effective from 1 • Aviva has been preparing for the implementation of IFRS 17 since 2018 January 2023 (subject to UK Endorsement) which predomi
Slide 63: Footnotes
Footnotes Aviva: Internal 63
Slide 64: Footnotes (1)
Footnotes (1) Slide Reference Footnote 1. The estimated Solvency II position represents the shareholder view only 7 2. £3.75bn B Share Scheme (subject to shareholder approval and other customary conditions, including no material deterioration in market conditions or the Company’s financial position)
Slide 65: Footnotes (2)
Footnotes (2) Slide Reference Footnote There are important notices relating the B Share Scheme and illustrative share consolidation ratio and illustrative future dividend per share on page 2 of this presentation. Please read these notices in full in order to obtain a comprehensive understanding of 1
Slide 66: Footnotes (3)
Footnotes (3) Slide Reference Footnote 1. Momentum and ambitions against 2020 baseline, unless otherwise stated 39 2. Based on occupied floor space as at 31 Dec 2021 3. Gross of inflation 1. Controllable costs excluding IFRS 17 and implementation costs and planned investment in growth 2. Average AUM