Aviva UK: Sanford C. Bernstein Strategic Decisions Conference, 2008

8/7/2019 Aviva UK: Sanford C. Bernstein Strategic Decisions Conference, 2008

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One Aviva, twice the value

Value andGrowth

Andrew Moss

Group Chief Executive

Accelerating

transformational change

to deliver a unified and

more profitable company

Sanford C. Bernstein Strategic Decisions Conference 2008


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Disclaimer

This presentation may include oral and written forward-looking statements with respect to certain of

Avivas plans and its current goals and expectations relating to its future financial condition, performance

and results. These forward-looking statements sometimes use words such as anticipate, target, expect,

estimate, intend, plan, goal, believe or other words of similar meaning. By their nature, all forward-

looking statements involve risk and uncertainty because they relate to future events and circumstanceswhich may be beyond Avivas control, including, among other things, UK domestic and global economic

and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the

policies and actions of regulatory authorities, the impact of competition, the possible effects of inflation or

deflation, the timing impact and other uncertainties relating to acquisitions by the Aviva Group and relating

to other future acquisitions or combinations within relevant industries, the impact of tax and other

legislation and regulations in the jurisdictions in which Aviva and its affiliates operate, as well as the otherrisks and uncertainties set forth in our 2007 Annual Report to Shareholders. As a result, Avivas actual

future financial condition, performance and results may differ materially from the plans, goals and

expectations set forth in Avivas forward-looking statements, and persons receiving this presentation

should not place undue reliance on forward-looking statements.

Aviva undertakes no obligation to update the forward-looking statements made in this presentation or any

other forward-looking statements we may make. Forward-looking statements made in this presentation are

current only as of the date on which such statements are made.


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Aviva is a strong company with great potential

Aviva remains focussed on achieving its targets and plans

The hygiene factors

Aviva has a diversified and strong asset base

Confident position with regard to capital and cash flow Exposure to Lehmans, AIG, other higher risk companies is well within our risk

appetite

UK and Europe now in recession, but

Majority of our profits and capital is derived from our in force book and GI earnings

A significant part of Avivas portfolio has strong growth characteristics

The current environment might offer up opportunities

Organic growth opportunities where other companies are in turmoil

Selective opportunities where assets are valued at distressed prices


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Aviva is undergoing transformational change

One Aviva, twice the value an agenda for change

Range of senior management appointments

Uniting under one brand

Dealing with underperformance

Growing operating profits and a sound capital position EEV operating profit up 12% to 1,719m

IFRS operating profit up 7% to 1,233m

Interim dividend up 10% to 13.09p

2008 HY IGD surplus of 1.8bn with increased downside protection

Achieving a balance between value and growth

Capitalising on our market leading positions

Investing in growth markets


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Sound capital position - IGD Solvency surplus

H108 IGD surplus of 1.8 billion

Downside protection further increased

(1.3)

(1.0)

(0.7)

(0.4)

30 June 2008

bn

5 Sept 2008

bn

Equity

movement

(0.9)-40%

(0.7)-30%

(0.6)-20%

(0.4)-10%

Additional 200m hybrid raised in August

115m due from WNS for sale of Avivas Indian offshoring operation

Income expected from sale of the ABN Amro bancassurance JV


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Avivas balance sheet is strong and of a high quality

Equities are principally held to back policyholder liabilities

The largest single asset class is Debt Securities, of which 94% are investment

grade (with 1% below investment grade, and 5% not rated).

The Group continues to have very limited exposure to Subprime MBS/ABS, Alt-A,

Wrapped Credit, CDOs and CLOs

1,509

669

525

189

126

Total

170

141

11

4

14

Participating

Fund Assets

117

36

48

0

33

Policyholder

Assets

0.46%1,222Total

0.20%492Wrapped Credit

0.16%466CDO/CLOs

0.06%185Alt-A

0.04%79Sub-prime

% of Asset

Base

Shareholder

Assetsm

Fair Values at 30 June 08


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A strong asset base with a diversified portfolio

Aviva has a diversified and strong asset base

HY08 IFRS net assets of 15.4 billion

Lehman Brothers debt face value of 270m, exposure estimated at less

than 1% of HY IFRS net assets

No loss anticipated on Dawnay Day

642m loans across 210 properties with 350 tenants, average LTV of c91%

Income more than covers interest rate costs

No loss anticipated on AIG


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A transformational agenda

Purpose

Regional / BU strategies

Vision

Group strategy and targets

Purpose

Prosperity &peace of mind

Strategicpriorities

Manage composite

portfolio

Build global Asset

Management

Allocate capital

rigorously

Increase customerreach

Boost productivity

Targets

Vision

One Aviva,twice the value

98% meet or beat COR

Long Term Savings

growth targets

500m cost savings by

2010

Double IFRS EPS by

2012 at the latest 1.5 2 x dividend cover

12.5% ROCE

UK

Market leadership

Address legacyTransform business

model

Exploit UK synergies

Generate capital

N. America

Double scale

Focus: top 5 inchosen segments

Expand products,

distribution 08+

Europe

Scale, growth, capital

Seize unique growthopportunities

Leverage scale

Generate capital

Asia Pacific

Scale, growth

Prioritised portfolio Regional operating

model

Investment required

Asset ManagementAsset ManagementAviva Investors

Globally integrated business Transform the investment model Increase third party business


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Allocate capital rigorously to drive growth

EuropeUK N.America AsiaPacific

Net capital generation

Capital utilisation for dividends and profitable growth

Dividends

AvivaInvestors

More mature Aviva markets are UK, Holland, France and Ireland

The other 23 countries, and Aviva Investors have a strong growth profile

Growth countries account for 39% of life & pension sales (2006: 27%)


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The growth opportunity



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The growth portfolio - Europe

HY 2007HY 2008Life

14

269

83

21

123

739

1,275

1,259

PVNBP m

1013thCzech Republic

95thRomania

713rdHungary

320thRussia

823rd (Life), 1st (Pen)Turkey

3792nd (Life), 1st (Pen)Poland

1,8186thItaly

1,1143rdSpain

Rank


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The growth portfolio USA, Asia & Aviva Investors

Aviva Investors - 316bn AUM across 15 countries, very limited external FUM

HY 2007HY 2008Life

7

38

26

138

149

95

126

2,205

PVNBP m

93rdSri Lanka

-Commenced Jan 08Taiwan

-Entered market Jul 07Malaysia

16216thHong Kong

1384thSingapore

5710thIndia

482nd (foreign insurer)China

1,7161stUSA

Rank

USA: In sales of indexed life and indexed annuities

China: In terms of total premium income

India: Among private providers

Singapore: Includes wrap platform sales


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Europe a market leading position

HY 2008 update

Maintaining momentum in a tough economic environment

Diversified distribution reduces dependence on one channel

New deals position the region for further growth

Scope for transformational operational change

Outlook: challenging economic conditions will continue to havean impact in the short term

HY1 CAGR 13%

NBC growth post cost of capital

Scale, growth,capital

Seize uniquegrowth

opportunities

Leverage scale

Generate

capital

2006 2007 20082005

million

0

100

200

300

400

500

EEV operating profit growth

0

250

500

750

1000

1250

1500

million

HY1 CAGR 19%

2006 2007 20082005


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Double scale

Focus: top 5 in

chosensegments

Expand

products,

distribution08+

North America - USA on track to double scale

HY 2008 update

95% pro forma life sales growth over the past two years

We are now the market leader in Indexed Annuities

And are developing plans to increase the product range

Plans in place for SEC registration of Indexed Annuities

Outlook: continuing growth, careful watch on credit exposure

Pro-Forma PVNBP growth EEV operating profit growth

0

250

500

750

1000HY1 CAGR 52%

2006 2007 2008

0

2000

4000

6000

HY1 CAGR 28%8000

US$million

US$million

2006 2007 H1 082005


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HY1 CAGR 14%

Asia Pacific a growing presence

HY 2008 update Proactive response to the Sichuan province earthquake

India & China: 97% CAGR over 3 years

Launch of bancassurance in Malaysia, Taiwan and South Korea

On track with regional sales volume growth targets

Scale, growth

Prioritised

portfolio

Regional

operating model

Investmentrequired

HY1 CAGR 33%

Growth in Asia Pacific PVNBP

0

500

1000

1500

2006 2007 20082005

million


0

25

50

75

100

2005 2006 2007 2008

million


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Aviva Investors

Globally

integratedbusiness

Transform the

investment

model

Increase third

party business

Aviva Investors executing the strategy

HY 2008 progress

UK investment portfolios restructured

Launched new funds on SICAV platform with more planned

Brand launch in September

Initiative under way to share investment expertise globally

Outlook: challenging economic conditions will continue to have animpact in the short term

IFRS operating profit

0

25

50

75

100

125

2005 2006 2007 2008

million


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The value opportunity



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0

250

500

750

1000

2005 2006 2007 2008

MarketLeadership

Address legacy

Transform

business

model

Exploit UKsynergies

Generate capital

UK Life continuing operational improvement

HY 2008 update

Will remain a leading player Growth in market share, profits and capital generated

2/3 of EEV profits generated from in-force book up 17% in H1 08

On track to achieve zero cost overrun in 2009

Inherited estate reattribution announced Sales outlook: 0 5% decline in the market in 2008

HY1 CAGR 13 %


million

IFRS operating profit growth

HY1 CAGR 39 %

million

0

250

500

750

1000

2005 2006 2007 2008


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0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

PVNBPm

UK Life new business profitability

Internal Rate of Return

Bubble size indicates amount of new business contribution before the cost of capital

7% WACC

2007 results:

Composite IRR of 13%(unleveraged)

Equity shareholders IRRof 15% (leveraged)

Bonds &

Savings

Annuities

Protection

CorporatePensions

IndividualPensions

GroupPersonalPensions


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MarketLeadership

Address legacy

Transform

business

model

Exploit UKsynergies

Generate capital

UK General Insurance - expense management

Delivering results

Increasing cost savings target to 350m by 2010

Reduced senior management team by over 25%

Marketing campaigns consolidated, IT projects rationalised Reducing the number of customer operations sites from 26 to 9

Reducing the product set from over 70 to under 20

3Starting RAC 2006 C&E Prog. 1 2008

point integration2

savings

1

Inflation andone-offCosts 1

(38)

(125+)

(200)

Expenseratio

13.9%

Expenseratio

12.4%

Aiming for anexpense ratio ofless than 11%


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Outlook in the current economic environment

Maintaining our focus to deliver Avivas objectives and targets

Continuing to invest in order to achieve the benefits of One Aviva, twice the value Keeping a clear focus on delivering against the plans

Responding to the current economic environment

Actively managing investments

Maintaining a strong capital position

Carefully assessing investment opportunities


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Andrew Moss, Group Chief Executive

Questions and Answers


Aviva UK: Sanford C. Bernstein Strategic Decisions Conference, 2008

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Transcript of Aviva UK: Sanford C. Bernstein Strategic Decisions Conference, 2008