AVIVA plc Richard Harvey Group Chief Executive. Managing complexity. 6 October 2004 Merrill Lynch conference

Transcription

1 AVIVA plc Richard Harvey Group Chief Executive Managing complexity 6 October 2004 Merrill Lynch conference

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 uncertainty because they relate to future events and circumstances which are beyond Aviva s control including among other things, UK domestic and global economic 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, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Aviva and its affiliates operate. As a result, Aviva s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Aviva s forward-looking statements. Aviva undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements we may make. 2

3 Managing complexity Enemy of success? Regulatory environment Accounting changes Evolving customer Global business Distribution EU insurance-related initiatives since 1990! *As of 15 May 2004 Source: CEA *

4 Managing complexity Enemy of success? OR Potential competitive advantage? Regulatory environment Accounting changes Evolving customer Global business Distribution Leverage scale advantages Re-use best ideas Resource and expertise to manage change 4

5 Managing complexity for advantage Distribution techniques Volume vs value General insurance pricing / underwriting 5

6 Distribution: reaching the customer Customer evolution: More women working Divorce Increased wealth Ageing populations Customer interaction evolves Contact via: Face to face + Letter + Telephone + Internet + Global networks Channels: DSF Bancassurance Advice 6

7 Distribution models vary by markets Life & pensions sales Poland UK France Italy Spain Source: Datamonitor / Aviva Bancassurance IFA / broker Tied agents Direct sales force Other 7

8 Aviva distribution aligned to country models Distribution key to capturing customer in Europe Multidistribution Direct sales Bancassurance 8

9 Leveraging bancassurance skills (23%* of Aviva s life & pension sales) 9 * APE FY 2003

10 Transferring DSF & bancassurance skills into India & China savings markets China Start Date: Jan 2003 India Start Date: June 2002 Canara Bank Lakshmi Vilas Bank ABN AMRO American Express Punjab & Sind Bank Beijing Chengdu Guangzhou Singapore Purchase Date: July 2001 Hong Kong Purchase Date: July

11 China: positive life launch (10x10x10) Chengdu (from 9/04) First foreign JV player No. of life players: 6 locals only Population 10.4 million; Beijing (from 9/04) No. of life players: 8 locals & 5 foreign branch/jvs Population 14.6 million Our China HQ Guangzhou (from 1/03) No. of life players: 6 locals & 7 foreign branch/jvs Population 7.2 million Secured Sino-British Life Insurance Company brand 11

12 Managing complexity for advantage Distribution techniques Volume vs value General insurance pricing / underwriting 12

13 Volume vs value Achieved profits Statutory profits Value creation methodology Supports financing and dividends Best assessment of pricing / margin / IRR Manage cashflows Payback periods / financing techniques Managing profitability and cashflows Profit recognition (Illustrative policies) Profit (100) Life achieved profit MSSB + inv inc on net assets Year 13

14 Pricing, cost savings and mix benefiting net shareholder life margins and ROCE % Aviva new business net shareholder margins¹ (after tax, solvency & minorities) % Aviva ROCE 12.7% 13.4%* % m m m 2004 (1) Year to date margins * Annualised 14

15 NU Life using leading position and cost levers to focus on margin Tightening terms on pensions Outsourced 950 jobs 1,300 jobs offshored by end 2005 H1 2004: Life & pensions sales (APE) +3% New business contribution +8% % 24 Norwich Union life margins * 2002 restated for the effect of change in economic assumptions H

16 Managing complexity for advantage Distribution techniques Volume vs value General insurance pricing / underwriting 16

17 UK general insurance: sustainable model Strong management team across period Leveraged scale advantages (esp bulk purchase for claims: Supply chain savings over 200m (annualised) in 2004) Creating new competitive advantages COR target of 100% for Norwich Union performance COR % Pre merger with CGU Post merger Digital flood 105 Telematics * H Offshore capability * 2000 excluding floods 17

18 Digital flood mapping 28% of properties within this postcode area flood: SY3 7 Properties that don t flood Properties that DO flood 18

19 Use large scale and complex data for more accurate underwriting of household risks Norwich Union UK household claims costs by peril Theft Weather Escape of Water Fire Other Accidental Damage Subsidence

20 Telematics for motor insurance Pilot study underway (5,000 installations) For PAYD insurance For new income Ability to understand risk at different level Truly new product with market change potential: increasing market share new customer relationship Convergence with policy initiatives for road charging and congestion Development of extensive intellectual property Information sales Customer choice with control of premium 20

21 UK motor data Traffic Density Monday Tuesday Wednesday Thursday Friday Saturday Sunday 21

22 UK motor data Traffic Density Collisions Monday Tuesday Wednesday Thursday Friday Saturday Sunday 22

23 UK motor data Traffic Density Collisions Age Road Deaths Monday Tuesday Wednesday Thursday Friday Saturday Sunday 23

24 PAYD potential for young drivers Delivery: Part of Telematics Pilot PAYD insurance year olds Off-peak rate X Peak night rate multiple X Customer benefit: Affordability in return for safer driving Control of cost NUI cover and service Longer life expectation Norwich Union benefit: Manages risk down in large, high risk segment Reduced severe bodily injury claims ~ 30% of cost Increased market share of higher premiums Competitive and profitable prices Increased stability of customer base 24

25 Aviva s technology platform for UK offshoring Voice & data network sharing technology. An integrated voice & data network for UK, extended to offshore locations IP Telephone Controlled & managed in UK Existing Telephone Systems New IP Telephone System Computer System Data Netw ork Aviva s private IP Aviva s private IP telecommunications telecommunications Netw ork Netw ork International netw ork links Offshore IP Call Centre Aviva Data Centre Norw ich, UK Onshore IP Call Centre Thin Client PC No local storage of any programs or data. View of data available for duration of transaction only. All applications & data remains in UK UK India / Sri Lanka 25

26 UK general insurance: offshoring reduces costs India 40% reduction in claims handling cost Service quality on par with UK Substantial level of UK claims handling capacity in India by end

27 Aviva managing complexity and scale to create competitive advantage Premier life and savings distribution model across Europe Optimum position to capture upturn Leveraging expertise into Asian savings markets Building a higher return business Improved net margins and ROCE UK life opportunity (growth on our terms) General insurance: built sustainable performance model 27

28 Appendix 28

29 Aviva overview Leading pan-european life insurer Focused general insurance business Exited long-tail general insurance business in premiums / sales* ( 30bn) 71% 72% Life** 29% Life* G.I. Bancassurance expansion, but multichannel Cont. Europe Life 34%** UK Life 33%** Intl. Life 4%** UK General 17% Cont Europe General 7% Intl. General 5% * Net written premiums from continuing operations. ** Life includes retail investment sales and health. 29

30 Strategy Grow long-term savings aggressively and profitably Build a world-class fund management business Focused approach to general insurance business Build top 5 positions in selected markets Withdraw from lines of business or markets which do not offer the potential for market-leading positions or superior returns 30

31 Strong market positions Rank Life Market share Life (est.) Rank GI Market share GI (est.) UK 1 12% 1 14% France 10 4% Top 15 2% Netherlands 4 11% 4 8% Spain 2 11% - - Italy 7 4% n/a <1% Ireland 3 11% 1 22% Canada % Poland 1 15% - - Singapore 5 9% - - Turkey 2 14% Top 15 2% Australia Top 10 4%

32 Results highlights for H Total sales incl inv products 7,889m +7% Life and pensions sales (APE) 1,224m +2% New business contribution 324m +10% Life margins improved 26.5% (H %) General insurance COR 97% (H %) Interim dividend 9.36p +4% Strongly covered ROCE 13.4%* (FY %) (FY %) 32 * Annualised