aviva europe: analyst day part 2

8/7/2019 Aviva Europe: Analyst Day Part 2

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Aviva Europe Making a Quantum Leap


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Aviva Europe Making a Quantum Leap22 October 2009 Page 3

3

Andrea Moneta

Aviva Europe CEO


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Exploit LeadingBancassurance Position

Recap

Grasp Retail franchise

opportunity

Simplify & Innovate tointegrate Shared Services

Establish state of the artProducts and Governance

Grow at marginal cost, improve mix, increasepenetration by leveraging compelling businessmodel

Increase sales force profitability, improve mixthrough targeted sales campaigns, focus onretention and reduce network costs

Twelve head offices transformed to one,centralised procurement and changemanagement, claims cost management

Tax and capital efficient structure, pan Europeanrisk and capital management, centralised productdevelopment and customer centric catalogue

Our Quantum Leap is transforming our business by bold, clear and high value strategies

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe

Making moneyand creating

value


5/23


OurQuantum

Leap


value

Conclusionsand

Q & A

Focussessions

Our opportunityin Europe


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Making money and creating value

As per every business

Value comes from profit, growth andreturn on capital

Never forget the basics

- Balance sheet

- Cash flow

- P&L

Understand and pull the right value drivers

The insurance business is complicated .

VIF PVFP

CNHR

VNB

MCEV

TVOG

PVNBP

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

NO, it is not ! Though it can be explained better


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Value components: Life

EEV

Appraisalvalue

MCEV

Shareholdersfunds

NPV of inforcebusiness

NPV of newbusiness infuture years

NPV offuture

investmentspreads

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value


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The value of the Life in force business

m

Expected free surplus generation from life in-force book*

Generating cash on asustainable basis

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

* From business in-force at 1.1.08 at current exchange rates* Comprises expected interest on net worth, expected current year investment returns on PVIF, emergence of MCEV profits and release of required capital on in-force book

Over 40% of MCEV profit andrequired capital released to free

surplus in first 5 years

0

2 0 0

4 0 0

6 0 0

8 0 0

1 , 0 0 0

1 , 2 0 0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027+

Source: Aviva Life in force book run off profile


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1,162

252

229

1,075

112

979

522

-

500

1,000

1,500

2,000

2,500

Opening freesurplus

Expected freesurplus

generation

Operatingvariances

Economicmovements &

FX

Investment innew business

Net capitalreturns

Closing freesurplus


m

Self-funding newbusiness


OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

Free surplus generated by life in-force book, full year 2008


Opening freesurplus


generation

Operatingvariances

Economicmovements

& FX

Investmentin new

business

Net capitalreturns

Closing freesurplus


10/23


1,162

252

229

1,075

112

979

522

-

500

1,000

1,500

2,000

2,500

Opening freesurplus


generation

Operatingvariances

Economicmovements &

FX

Investment innew business

Net capitalreturns

Closing freesurplus


Self-funding newbusiness


Transferring significantvalue to shareholders

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value


Free surplus generated by life in-force book, full year 2008

m

Opening freesurplus


generation

Operatingvariances

Economicmovements

& FX

Investmentin new

business

Net capitalreturns

Closing freesurplus


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Profits from investments Investment margin

Making money in insurance

Profits from investments

Profits from taking risk

Investment to grow

Costs to run our business

Tax to Authorities, minorities

Investment margin

Underwriting margin

New business acquisition

Overheads

Taxation, minority interests

A straightforward P&L ... with clear profit sources

Profits from taking risk Underwriting margin

Costs to run our business Overheads

Investment to grow New business acquisition

Tax to authorities, minorities Taxation, minority interests

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value


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How we make money

For both life and general insurance

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

Investmentmargin

Underwritingmargin

(600)

(400)

(200)

0

200

400

600

800

1,000

Life GI Overheads

Taxation andminority interests

Other

Profit after tax andminorities

New businessacquisition

Life

GI

1H 09 m IFRS Profit


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Our Quantum Leap is all about value and money

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

Transforming the business

by executing strategies with high impact on all key value drivers


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Sustainable profit growth

Investmentmargin

Underwritingmargin

(600)

(400)

(200)

0

200

400

600

800

1,000

Life GI Overheads

Taxation

Minority interestsOther

Profit after taxand minorities


Key focus areas: Opening AUM Net sales Product mix Performance

Increase assets under management and profitability

Bancassurance sales at minimal marginal cost

Retail increase sales force productivity and retention portfolio rebalancing

Improve customer experience and retention

Capital efficient growth through new legal structure

Increase investment return

centralised investment management

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value


15/23


Investmentmargin

Underwritingmargin

(600)

(400)

(200)

0

200

400

600

800

1,000

Life GI Overheads

Taxation




Key focus areas: Earned premiums Claims and handling costs

Risk selection and pricing

Underwriting best practice

Customer segmentationHigher penetration of protection business

Effective claims management

Fraud reduction

Lower unit costs Supplier management Procurement

Cost effective claims handling

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value



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Investmentmargin

Underwritingmargin

(600)

(400)

(200)

0

200

400

600

800

1,000

Life GI Overheads

Taxation




Key focus areas: Acquisition costs Commissions

Reduce average acquisition costs

Grow Bancassurance at marginal cost

Improve Retail sales force productivityIncrease cross/up sell

Improve quality of leads

Customer centric and innovative product catalogue

Improve automation of sales processes

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value



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Investmentmargin

Underwritingmargin

(600)

(400)

(200)

0

200

400

600

800

1,000

Life GI Overheads

Taxation




Key focus areas: Front/back office ratio Spans of control

Expense ratios Property efficiency

OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value


Pan-European governance, operations & IT

Single head office and streamlined organisation

Efficient IT / shared servicesSingle product catalogue

Single change portfolio and centralised procurement


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Investmentmargin

Underwritingmargin

(600)

(400)

(200)

0

200

400

600

800

1,000

Life GI Overheads

Taxation




OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value


France34%

Spain30%

Poland19%

Italy

32% Ireland12.5%

CEE16-20%

Single holding company

EU carrier and branches

Central risk and investment managementProduct factories

Tax and capital efficiency

Profit before tax and headline tax rates


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OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

Life GI

(600)

(400)

(200)

0

200

400

600

800

1,000

Investmentmargin

Underwritingmargin

Overheads

Taxation



Investmentmargin

Underwritingmargin


Overheads

Taxation


Sustainableprofit growth

Life

GI


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OurQuantum

Leap

Focussessions

ConclusionsandQ&A

Ouropportunity in

Europe


value

Life GI

(600)

(400)

(200)

0

200

400

600

800

1,000

Investmentmargin

Underwritingmargin

Overheads

Taxation



Sustainable profitgrowth

Life

GI

Doubling2007 IFRSnet profit by

2012


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OurQuantum

Leap


value

Conclusionsand

Q & A

Focussessions

Our opportunityin Europe


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Questions & Answers


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Source: UN (2009), CEA (2009), Aviva PFA Model (2008)

To conclude

Quantum Leap tobecome theundisputed leader

One Aviva, twicethe value deliveredby 2012

Great franchise inthe worlds largestmarket

aviva europe: analyst day part 2

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