Investor & Analyst Seminar on the UK General Insurance Business 20 May 2003

Transcription

1 Investor & Analyst Seminar on the UK General Insurance Business 20 May 2003

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 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, 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.

3 Strategic Overview Patrick Snowball

4 We ve asked you here today To share our strategic insights and the NUI Management team s thinking on how we will be setting the agenda for the GI market... sustaining our position as UK s No 1 Insurer and a reliable source of quality earnings for Aviva

5 AVIVA and NUI Aviva achieved operating profit of 1,798m* MSSB Operating Profit Other GI 14% UK Life 33% General Insurance operating profit of 959m* UK GI operating profit of 611m UK GI 32% Cont. Europe & Intl Life 21% Representing c.17% of Aviva NWP......and 32% of MSSB operating profit from key business areas * From continuing and discontinuing operations

6 NUI continues to be the Clear Market Leader Market Share Others 49% Allianz 4% Churchill 4% NUI 16% R&SA 10% ZFS 6% D.Line 5% AXA 6% 5.5bn GWP 5bn premium income 18,000 staff 771 locations in 5 households We 1 in insure 5 vehicles on the road 1 in 5 households We insure 1 in 4 vehicles on the road 700,000 UK businesses 700,000 UK businesses 1.9 million claims in 2002 (36,000 per week) Source: Data Monitor - based on 2001 GEP figures

7 A Team that Delivers What we promised in 2001: Norwich Union Will... Continue to deliver shareholder value Use its scale to lead the market to the benefit of its shareholders and customers Use our market leading position to win in the emerging market place

8 Against a backdrop of Change and Uncertainty Terrorism Flooding Changing Customer Expectations Capacity Constraints Pressure on traditional distributors Falling stock-market Increasing litigation Emergence of new forms of distribution Impact of Technology Mergers among insurers on Internal Processes New insurers Increasing Regulation Reinsurance

9 Against a backdrop of Change and Uncertainty Terrorism Capacity Constraints Pressure on traditional distributors New insurers Flooding Changing Customer Expectations Falling stock-market We continued to deliver: UK GI Operating Profit of 611m Retained low cost position Dominant position in the market 9 Product Launches Led industry response to Flooding Regulation and Personal Injury Increasing litigation Emergence of new forms of distribution Impact of Technology Mergers among insurers on Internal Processes Increasing Regulation Reinsurance

10 Our View of Core Markets Distribution is changing market as much as product More than one underwriting cycle Personal market : - Motor - rate increases in line with inflation - Homeowners - attitude to insurability for flooding Commercial market hardening with rate increases over next 18 months Balanced portfolio gives us choice and sustainable profits

11 A Strategy that delivers Quality of Earnings A focus on less volatile GI business - personal and SME s A balanced personal and commercial portfolio - allowing us to manage the cycle An integrated approach to multi channel distribution - maximising the strength of our brand Disciplined underwriting and pricing - profit before volume Strong financial controls - ROCE consistently above Group hurdle rate Scale and expertise - driving cost efficiency and market influence

12 The Challenges Ahead in Personal Lines The growth in customer diversity and expectation Importance of factors while shopping have changed since % 35% 30% 25% 20% 15% 10% 5% 0% Best quality Best choice Cheape st price Saving the most time Most personal service Source: nvision

13 The Challenges Ahead in Personal Lines The entry and success of branded distributors Ins Customers (millions) Supermarket Potential Sainsbury Estimates based on reported figures Tesco 2007

14 Trends in Distribution 20, Significant Consolidation among Brokers Number of Brokers Commercial Brokers Brokers Personal CPs & Direct Personal Brokers % of Market GWP Shrinking volume of personal lines business controlled by Insurance Brokers Strong growth in Direct Branded selling channels (Corporate Partner & Source: NUI Analysis; ABI (2002) and Datamonitor (2002) 0 Direct) Greater stability in the Commercial market

15 Insurance Companies face a Choice Spontaneous Awareness - Financial Services 30% 20% Over time insurers will face a choice 10% 0% HSBC Abbey National Norw ich Union Direct Line RSA AXA Cornhill The Research Business International - Q % 40% 30% 20% Lloyds TSB Trust Scores Q Norw ich Union Nationw ide Direct Line RSA Churchill Zurich AXA Zurich TRBI - Q Become a white label insurance supplier to other brands - Leverage the insurer s brand and relationship with end customer (either direct or with partners) Many insurers do not have a choice but we do

16 Opportunities to Broaden the Earnings Stream 1. By focusing on how customers will buy insurance Customers focus on products/services that include insurance Customers focus on insurance Growing willingness to buy a range of products from trusted brands Increased customer satisfaction and multiple product holding leads to higher retention Market dynamics and technology are challenging the boundaries of the insurance sector and the nature of risk

17 Opportunities to Broaden the Earnings Stream 2. By increasing the access we have to customers Insurers focus on (supply to) Customers Insurers focus on (supply to) Retailers/ Intermediaries Long term profitability is higher if you have access to customers Access to customers via direct channel or by working with partners The more insurers are pushed into a white label position the lower the margins.. although can bring short term financial benefit and scale to supply chain

18 A Strategy to deliver Profitable Growth Delivering enhanced service levels and value to customers Extending our range of customer offerings by leveraging our supply chain Building the appeal of our propositions and the brand to counter the pressure of product commoditisation Working with our distribution partners to maximise the value delivered to customers and protect margins Innovating in product design and risk assessment

19 An Improved Formula for Success Increase Customer Access Maintain position as a low cost provider Strong financial disciplines and underwriting control Philosophy Cost effective incident management and claims handling Focus on Personal and SME Wider Customer Propositions

20 Recap We have delivered our promises The quality and consistency of earnings is central to our strategy Our strengths are a source of competitive advantage We have a sound road map for long term growth and success NUI is one of the few insurers that can chose its future and so protect and enhance earnings