aviva uk: analyst day part 1

Aviva EuropeMaking a Quantum Leap

Aviva Europe – Making a Quantum Leap22 October 2009

2

This presentation is for information purposes only. It should be read in conjunction with the documents filed by Aviva plc (the “Company” or “Aviva”) with the United States Securities and Exchange Commission (“SEC”).

This presentation contains certain “forward-looking statements” with respect to certain of Aviva’s plans and current goals and expectations relating to future financial condition, performance, results, strategic initiatives and objectives. Statements containing the words “believes”, “intends”, “expects”, “plans”, “seeks”, “aims”, “may”, “could”, “outlook”, “estimates” and “anticipates”, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aviva believes these factors include, but are not limited to: the impact of difficult conditions in the global capital markets and the economy generally; the impact of new government initiatives related to the financial crisis; defaults in our bond, mortgage and structured credit portfolios; the impact of volatility in the equity, capital and credit markets on our profitability and ability to access capital and credit; changes in general economic conditions, including foreign currency exchange rates, interest rates and other factors that could affect our profitability; risks associated with arrangements with third parties, including joint ventures; inability of reinsurers to meet obligations or inavailability of reinsurance coverage; a decline in our ratings with Standard & Poor’s, Moody’s, Fitch and A.M. Best; increased competition in the U.K. and in other countries where we have significant operations; changes in assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; a cyclical downturn of the insurance industry; changes in local political, regulatory and economic conditions, business risks and challenges which may impact demand for our products, our investment portfolio and credit quality of counterparties; the impact of actual experience differing from estimates on amortisation of deferred acquisition costs and acquired value of in-force business; the impact of recognising an impairment of our goodwill or intangibles with indefinite lives; changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect of various legal proceedings and regulatory investigations; the impact of operational risks; the loss of key personnel; the impact of catastrophic events on our results; changes in government regulations or tax laws in jurisdictions where we conduct business; funding risks associated with our pension schemes; the effect of undisclosed liabilities, integration issues and other risks associated with our acquisitions; and the timing impact and other uncertainties relating to acquisitions and disposals and relating to other future acquisitions, combinations or disposals within relevant industries.

For a more detailed description of these risks, uncertainties and other factors, please see Item 3, “Risk Factors”, and Item 5, “Operating and Financial Review and Prospects” in Aviva’s registration statement on Form 20-F as filed with the SEC on 7 October 2009. Aviva undertakes no obligation to update the forward-looking statements in this presentation or any other forward-looking statements we may make. Forward-looking statements in this presentation are current only as of the date on which such statements are made.

Disclaimer


3

Andrew Moss

Aviva Group CEO


Purpose

Prosperity &peace of mind

Strategic priorities

• Manage composite portfolio

• Build global Asset Management

• Allocate capital rigorously

• Multi-channel customer reach

• Boost productivity

Targets

Vision

One Aviva,twice the value

• 98% meet or beat COR• £500m cost savings by 2010• Double IFRS EPS by 2012 at

the latest• 1.5 – 2 x dividend cover on

IFRS post tax operating earnings

UKMarket leadership● Drive up profitability● Generate capital● Insurance excellence● Operational excellence

N. AmericaProfitable growth● Optimise business mix,

growth & margin● Diversify distribution and

products● Generate net capital

returns

EuropeScale, growth, capital● Seize unique growth

opportunities● ‘One Europe’ operating

model ● Generate capital

Asia PacificScale, growth● Prioritised portfolio● Regional operating

model● Investment required

Asset ManagementAsset ManagementAviva Investors

• Globally integrated business • Transform the investment model • Increase third party business

Purpose

Prosperity &peace of mind

Strategic priorities

• Manage composite portfolio

• Build global Asset Management

• Allocate capital rigorously

• Multi-channel customer reach

• Boost productivity

Targets

Vision

One Aviva,twice the value

• 98% meet or beat COR• £500m cost savings by 2010• Double IFRS EPS by 2012 at

the latest• 1.5 – 2 x dividend cover on

IFRS post tax operating earnings

UKMarket leadership● Drive up profitability● Generate capital● Insurance excellence● Operational excellence

N. AmericaProfitable growth● Optimise business mix,

growth & margin● Diversify distribution and

products● Generate net capital

returns

EuropeScale, growth, capital● Seize unique growth

opportunities● ‘One Europe’ operating

model ● Generate capital

Asia PacificScale, growth● Prioritised portfolio● Regional operating

model● Investment required

Asset ManagementAsset ManagementAviva Investors

• Globally integrated business • Transform the investment model • Increase third party business

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

Aviva Europe Investor and Analyst Event

• Two years into the five year “One Aviva, twice the value” strategy

• We have communicated plans and progress in UK Life, UK GI, North

America and Aviva Investors

• Evidence of delivery with improving IRRs, cost savings and reallocation

of capital to improve returns

• Progress with the partial IPO of Delta Lloyd


Europe in context

General Insurance

Long Term savings

Composite

Significant part of the Aviva group

• Strong historic foundations

• Unique opportunity to establish a leadership position

• Clear execution strategies are already beginning to make a difference

• Poised to make a ‘Quantum Leap’

Long-term savings sales

GI and Health sales IFRS Operating profit

HY1 2009 for long-term savings sales (present value of new business premiums and investment sales), GI and health sales (net written premiums) and IFRS operating profit (before group debt and interest costs)

DL 11%

DL 14%

DL 14%

UK 26%

UK 47%

Europe Europe Europe50% 35% 44%

Other regions 24%

Other regions 18%

UK 44%

Other regions 12%


6

Andrea Moneta

Aviva Europe CEO



The three key things I want you to take away today

Quantum Leap to become the

undisputed leader

‘One Aviva, twice the value’ delivered

by 2012

Great franchise in the world’s largest

market


8

Our Quantum

Leap

Making money and creating

value

Conclusions and

Q & A

Focussessions

Our opportunity in Europe


800m+ population

€40tr personal financial assets

€4tr L&P assets


A huge market with significant growth potential

€4tr premiums innext five years

Life & pensionsLife & pensions

CompositeComposite

Large mature markets Emerging markets withsignificant potential

Source: CEA, AXCOAviva Analysis 2009

Aviva’spresence


Leadership is there to be grasped

• Highly fragmented market

• Macro, micro and industry trends

• Opportunity in adversity

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe

Notes:• Market size, taken from 2007 CEA data, deflated to account for business written outside of Europe and other non-primary insurance

income • Source: CEA, ABI, AEGON Reports and Accounts• Includes UK

Making moneyand creating

value

European Insurance Market Shares(Life and Non-Life GWP)

European Market Shares, 2007(Life and Non-Life GWP)

7.3%

6.3%5.8%

4.8%

3.0%2.4% 2.4%

1.7% 1.7% 1.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Allianz

Genera

li

Axa

Aviva

CNP

Zurich

Crédit A

grico

le

Ergo

AEGON

Fortis

Mar

ket S

hare


Aviva is uniquely positioned

Strengths in 15 markets

Covering 80% of GDP and premium

Share of GDP L&P PVNBP GI NWPH1 09 €m H1 09 €m

France 14.5% Top 10 2,733 631

Ireland 1.4% Top 5 478 Top 5 294

Italy 11.7% Top 10 2,461 190

Lithuania 0.2% Top 5 49 -

Poland 2.7% Top 5 572 20

Russia 8.5% Top 5 14 -

Spain 8.1% Top 5 1,394 -

Turkey 3.7% Top 5 134 53

Czech Rep 1.1% 17 -

Hungary 0.8% Top 10 26 -

Slovakia 0.5% 1 -

Romania 1.0% Top 5 41 -

Belgium 2.6% Top 10 465 -

Germany 18.6% 177 -

Netherlands 4.4% Top 5 1,351 Top 5 758

79.8% 9,913 1,946

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Source: IMF

AvivaRegion



In different stages of development



OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Developed markets

Source: AXCO

High potentialmarkets

0

2

4

6

8

10

- 10,000 20,000 30,000 40,000 50,000

GDP per Capita (PPP) (€)

Life

Insu

ranc

e Pe

netra

tion

(GW

P/G

DP)

%

IrelandFrance

Italy

SpainPoland

Czech Rep

Hungary

Romania

Turkey Russia

Belgium

Netherlands

Germany

LithuaniaSlovakia

Market bubble size proportionate to premiums



OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

0%

10%

20%

30%

40%

50%

60%

70%

80%

0 5 10 15 20 25

Allianz

Generali

Zurich

AXA

AEGONING

Groupama

Credit AgricoleCNP

Source: CEA, Aviva Analysis2009




With an enviable competitive footprint

Number of markets

Reg

iona

lisat

ion*

* Regionalisation (Continental Europe) defined as premium generated outside home market and UK as a percentage of total premium generated in Europe

Bubble size proportionate to premiums



Capabilities across all product lines and distribution channels





OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Source: CEA, 2009

Life Distribution Models



Two clear leading brands

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Capabilities across all product lines and distribution channels






A clear strategy to exploit the European opportunity

Quantum Leap – ‘game changing’ for the industry

Aviva Europe

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Delta Lloyd

IPO – ‘strategic management’


Our Quantum

Leap


value

Conclusions and

Q & A

Focussessions


All data in the following sections refers to Aviva Europe excluding Delta Lloyd


Our Quantum Leap is transforming our business

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

From twelve businesses to one

From the packto undisputed

leader


19

We set the vision and defined the journey

By extracting value and building capabilities

Which will deliver our ‘Twice the value’ commitment by 2012

Today we focus on the first phase

Thanks to our QUANTUM LEAP in the industry

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Time

2X

2008

Consolidation and reorganisation

of existing businesses

Value

today

Integration of new businesses

Repositioning and new growth


Our Quantum Leap is built on three pillars

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value


Single operating model

• Markets focused on distribution with a strong centralised support

• Synergies in IT, operations, customer service with pan European sharing of services

• Centralisation of production, keeping strong “radar” for each market/segment

• State of the art governance

Customer management& Marketing

Governance

IT, O

pera

tions

& S

hare

d S

ervi

cesDistribution

Product

In markets

Pooled

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value


CathrynRiley

IT and Operations

AndrewMoffat

Human Resources

TimHarris

Finance

StephenMarini

ProductsCustomer

Management and Marketing

Alfredo Montalbano

22

• A winning team united by one bold vision and very clear accountability

• 377 years of experience

• Pan European leadership… local market knowledge

Strong management and clear accountability

Bancassurance Retail

DavidAngulo

Adam Uszpolewicz

7

Markets

Markets

Mar

kets

Jean Pierre Menanteau

Stuart Purdy

IgnacioIzquierdo

Andrea Battista

Maciej Jankowski

Andrey Dubinin

Janos Bartok

GIErtan Firat

Life*Meral Egemen

Pan-European governance

ShahRouf

AstaUngulaitiene

KarelVesely

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

*Joint venture with Sabanci Holding


Seven key strands that impact all aspects of our business

…. being executed ruthlessly

Executing a clear and bold master plan

Retail ProductsCustomerManagement & Marketing

IT & Operations

FinanceHuman Resources

Banca Retail ProductsCMM IT & Ops FinanceHR

Customer ManagementGrow revenue and profitability – making sales and marketing as effective and efficient as possible

Products and Investment ManagementCentralised product development and investment management – single product catalogue

Cost & ProductivityRight size the cost base to deliver sustainable savings from 2009 and beyond

GI Claims ManagementLeverage Aviva best practice to reduce claims unit costs

Shared ServicesCentres of excellence and shared processes to reduce costs and support our vision

DataSingle database to facilitate CRM and provide insightful real time MI

GovernanceSingle legal entity – state of the art capital and risk management

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value


From To

This is our Quantum Leap

Multiple, complex products

Twelve federated businesses

Multiple systemsand processes

Complex legal entity structure

Sub optimal capital allocationand risk management

Fungible capital, state of the art capital and risk processes

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Simplified structure under single holding company

Shared systems and processes

Customer centric product catalogue and shorter time to market

One Pan European Business

One Head Office

Pan European distributionorganisation


Our journey has started

New management & accountability in place

Pan European capital allocation & risk management

PLC Board approve vision & strategy

Launch of Quantum Leap

30 Sep 08

01 Apr 09

01 Jan 09

21 Nov 08

… and it’s already delivering …

continued …

Centralised procurement 30 Apr 09

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value



Pan European retention initiative

Single change portfolio

Pan European GI claims laboratory

Delta Lloyd strategy and relationship clarified

1 May 09

6 Aug 09

5 Jul 09

12 May 09


continued …

Pan European holding company 12 Oct 09

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value



Robust set of financial results


OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value



Life- sales flat in difficult market - margins improved due to action on

product mix, partly offset by customer preference for guarantees

GI- COR improving due to rate- leading the market in Ireland and

France on pricing action

Expenses- 7% improvement after absorbing

wage cost inflation

IFRS Operating Profit- lower asset values and expected

return rates

HY1 08 HY1 09 Local Currency Growth

Life and pension sales €8,039m(1) €7,920m Adv 1%

Margin 3.7%(1) 3.8% Fav 0.1pp

GI and health volumes €1,249m(2) €1,188m Adv 5%

GI COR 97% 96% Fav 1pp

Expenses(3) €606m €578m Fav 7%

IFRS operating profit €524m €464m Adv 11%

(1) Restated to show underlying position; 4.0% including one-off CajaMurcia transfer and Pillar II pension legislation change in Romania(2) HY 08 restated on a like-for-like basis reflecting the acquisition of the Irish health business in May 2008(3) After adjusting for FX, acquisitions, inflation and restructuring

Achieved in tough times

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value


606578 593

1516 44

300

350

400

450

500

550

600

650

Cost base falls 7% in real terms after absorbing wage cost inflation

7% reduction


€m

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

HY 2008 Inflation Cost savings BaU cost baseHY 2009

Published cost base HY 2009

Rebranding and

restructuring costs


• 98% of assets classified as FV1 or 2

• 99% of total investments carried at FV

• €67bn debt securities of which 95% are investment rated including 35% AAA - rated


Supported by a high quality balance sheet

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Total investments€bn Total Fair

value 1Fair

value 2 Other

Debt Securities - Government 25 23 2 -Debt Securities - Corporate bonds 39 25 14 -Debt Securities - Other 3 1 2 -Total Debt Securities 67 49 18 -

Equity 4 3 - 1Property (including investment property) 2 - 2 -Other (including unit trusts) 26 24 2 -Loans 1 - - 1Cash 13 13 - -TOTAL 113 89 22 2

Aviva Europe – Making a Quantum Leap22 October 2009 Page 31


Channel View – a well balanced mix

Bancassurance

Retail

€173m Life EBat 98bps*

€(36)m Life NBat 4.3% margin

€3m GIat COR 91%

€275m Life EBat 66bps*

€(42)m Life NBat 3.0% margin

€118m GIat 96% COR

• Significant retail franchise with cash generative back book

Life EB €275 m

GI profit €118 m

Life NB €(42)m

Total retail profit €351 m

• Profitable bancassurance life business, with exciting GI opportunity

Life EB €173 m

GI profit €3 m

Life NB €(36)m

Total retail profit €140 m

€4.5bn

€4.6bn

€82bn

€31bn

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

(100)

(50)

-

50

100

150

200

250

300

350

400

1H 0

9 €m

IFR

S O

pera

ting

Prof

it

Notes:• EB & NB denote net IFRS operating profit or loss on Life existing business and new business respectively• Return on assets bps calculated as annualised Life EB IFRS Operating Profit divided by average assets under management, expressed as basis points

H1 09 salesH1 09 sales

H1 09 Investments


Product view - a diverse product portfolio

• Life IRR 13%, impacted by tough market conditions (17% in FY08)

• Highly profitable protection business currently less than 10% of sales – significant opportunity

H1 09 IFRS Operating Profit

€370m Life3.8% margin13 % IRR

€121m GI96% COR12.4% ROE

RetailBanca

MainlyRetail

GI & Health COR

Personal 99%Commercial 90%

General Insurance 96%Health 98%Aviva Europe 96%

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

• GI COR improving and 96% for first half 2009

Payback PeriodLIFE & PENSIONS Margin IRR (Years)

Savings and pensions 2.0% 9% 8.2Protection 22.0% 31% 5.7Annuity 3.7% 9% 8.4

Aviva Europe 3.8% 13% 7.8


Bancassurance: committed and growing

GI Bancassurance Growth (2004-08)Life Bancassurance Market Shares (2000–08)

Source: CEA, ANIA, ICEA, 2009

• Consistently dominated life distribution in key markets- before, during and after the financial crisis

• Significant GI growth opportunity

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Italy FranceSpain

Italy

2000

2001

2002

2003

2004

2005

2006

2007

2008

2000

2001

2002

2003

2004

2005

2006

2007

2008

n.a. n.a.0%

10%

20%

30%

40%

50%

60%

70%

80%

2000

2001

2002

2003

2004

2005

2006

2007

2008

Ban

cass

uran

ce s

hare

of L

ife M

arke

t (%

)

6.1%7.1% 7.3%

7.9%

10.2%

1.1%1.6% 1.7% 1.8% 2.10%

0%

2%

4%

6%

8%

10%

12%

2004 2005 2006 2007 2008

Ban

cass

uran

ce S

hare

of G

I Mar

ket (

%)

Spain

Italy


Bancassurance: our leading position

• 46 agreements• Over 20,000 branches• Access to over 30m bank customers

Other insurersAviva

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Source: The Banker, 2008

0

5

10

15

20

25

30

35

40

45

50

No.

of p

artn

ers

• Successfully executing our strategy

• Increasing number of high quality partners


Bancassurance: mutually compelling agreements

• Perpetual agreements with robust exit clauses

• Growth at marginal cost

• Aviva retains management control

• Alignment of partner interests• Single distribution platform drives cost

effectiveness

Deliver high value through a state of the art business model

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

• New business margin 4.3%

• New business IRR 15%


Bancassurance – an exciting opportunity

Undisputed leading partner of choice

Significant mix & growthopportunities

• Leverage unique business model • Aviva in a box - scalable bancassurance

platform• Managed through multiple points of contact

• Focus on protection• GI growth opportunity• Leverage low cost per policy• Grow at marginal cost

Common channelapproach

• Improve customer retention by 10%• Grow protection sales by 30%,

increasing margin• Triple current GI contribution

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value


European Retail Market

• €620bn market(€260bn Life, €360bn GI)

• Aviva Retail share 4.3%*– Life 7.8%– GI 1.8%

• Retail market growth (2005–08) 3.5% p.a.

Source: CEA, AXCOAviva Analysis 2009

European Retail Market(Life and GI)

Total Life and GI GWP

Aviva Life Retail Market Share

Aviva GI Retail Market Share

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

France Italy Spain Ireland Poland CEE AvivaEuropeMarkets

Shar

e of

Mar

ket

Retail Life Retail GI

€105bn €58bn €35bn €15bn €10bn €23bn

2.5% 1.0% 0% 20.0% 0.4% 0.8%

€246bn

10.1% 0.7% 2.7% 11.1% 8.4% 6.0%

1.8%

7.8%

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

* Retail premiums in Aviva Europe markets total €246bn


0

2,000

4,000

6,000

8,000

10,000

12,000

2005 2006 2007 2008

Retail – a great and growing franchise

• 9 million customers

• Diverse distribution

- IFAs/Brokers (8,000)

- DSF (10,000)

- Phone/Web

• Captive networks generate 75% of new business

• Large and profitable life back-book

• Profitable GI business with growth potential

Retail – steady growth builds significant franchise

€m

GI NWP

Life PVNBP (2008 & 2007 MCEV, 2006 & 2005 EEV)

Aviva Europe Retail sales

CAGR +6%

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value


Retail – an exciting opportunity

New tools

• Single channel ownership• Performance benchmarking • De-couple distribution from production

• Innovative front end • Product bundling and dynamic pricing• Remunerate for value

New governance

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

Improve performance2009-2012

• Increase productivity by 30%• Increase customer retention by 10%• Lower network costs by 10%


Our Quantum

Leap


value

Conclusions and

Q & A

Focussessions



Now let's look in detail

OurQuantum

Leap

Focussessions

Conclusions andQ&A

Our opportunity in

Europe


value

aviva uk: analyst day part 1

Documents