Richard Harvey Group Chief Executive

Transcription

1 Richard Harvey Group Chief Executive Opportunities in Uncertain Times UBS Warburg Conference 25 April 2002

2 Disclaimer This presentation may contain certain forward-looking statements with respect to certain of CGNU 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 CGNU s control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest t 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 CGNU and its affiliates operate. As a result, CGNU s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in CGNU s forward-looking statements. CGNU s undertakes no obligation to update the forward looking statements contained in this presentation or any other forward looking statements we may make.

3 Overview! 7th largest worldwide insurer! UK s largest insurer! Strong platform in continental Europe Premium sales* Cont. Europe Life 30% UK Life 36% International Life 4% UK General 17% Cont Europe General 7% International General 6%! Over 200 billion in assets under management! Leveraging multi-distribution capability * Ongoing businesses. Life includes retail investment sales and health premiums

4 Integration completed! Annualised cost savings of 317m achieved (target 275m)! P&L benefit of 225m in 2001! Total integration costs of 425m provided in 2000 m Annualised integration savings at Achieved Target 275m Life insurance General insurance Other operations

5 a new international brand! CGNU - a merger name! More than 50 different trading names worldwide! France rebranding example: PLC TRADING

6 AVIVA tested very positively! Tested with 15,000 consumers in 15 countries CGNU is not the most understandable nor easiest to pronounce..(aviva) reflects the group s increasingly international position.! Low cost roll-out out

7 Retain the strongest brands Netherlands UK Poland Ireland

8 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 each market! Withdraw from lines of business or markets which do not offer the potential for market-leading positions or superior returns

9 Restructuring towards life billion 20 Life vs P&C premiums 70% % 52% 30% * General Insurance Life (incl Health) * continuing operations

10 Long-term savings

11 CGNU achieving strong growth in long-term new business CAGR: 24% per annum billion 15 Mutual funds 10 5 Life & pensions

12 Move to private retirement savings underpins European growth State pension for average worker as % of final salary (i) Worker to pensioner ratios (ii) Spain Italy France Germany UK % e Sources: (i) Goldman Sachs : (ii) CES ifo: (ages / over 60s) Undeliverable state pensions

13 Achieving attractive returns on life new business (2001) Business Unit Internal Rate of Return (net of tax) UK 17% France 16% Netherlands 10% Spain 24% Italy 16% Ireland 27% Poland 22% Other 11% All Business 16%

14 Strong Continental European growth Total Life & Pensions sales France +5% Ireland +21% Italy Netherlands Spain +34% +291% +155% ,000 1,500 2,000 million

15 Continental Europe driving profitable life growth in 2001 Life achieved operating profit* 1,569 million UK and International 1,674 million UK and International Continental Europe +25% to 779 million Continental Europe * From continuing operations including life achieved operating profit before amortisation of goodwill and exceptional items

16 Building bancassurance sales momentum m 1, RBSG Spain Bancassurance sales (14% of total sales) Italy Singapore 0 3m m m m 2001

17 CGNU - 4th largest bancassurance network in Spain! Top 5 life rank (from top 30 2 years ago)! Strong multi-regional presence! Single operational platform Caixa Galicia Caja España! 8 million potential customers Bancaja! Over 3,000 branches Unicaja Source: INE Covers 70% of Spanish GDP

18 CGNU: Spanish bancassurance JV life cos Bank Customers ASEVAL Products & Administration BANCAJA 2.4m Controlling 50% stakes UNICORP VIDA BIA GALICIA UNICAJA CAIXA GALICIA 2.0m 2.3m CAJA ESPAÑA VIDA CAJA ESPAÑA 1.3m 8.0m

19 UK s largest bancassurance deal! Bank brand for products avoids CGNU channel conflict! Building growth momentum into 2002 Joint Venture Culture --- Low cost administration --- The UK s leading product range --- Train sales force to CGNU standards --- Success with 21 building societies 10m customer base Branches --- Over 25% of small business market --- CGNU owns 50% stake in NatWest Life and Royal Scottish Assurance

20 UK Life - gaining market share! Target market share of 15% by end 2005! Strong life funds ( 5bn orphan assets) Market share % 12 CGU NU NU Post Merger % 7.70% 8.08% 8.99% 10.6% 11.5%

21 UK Life: Target reduction of > 20% in unit costs % Maintenance costs / funds under management* *1999 FTSE 0.1! Scale benefits ! Merger savings % 30 Acquisition costs/ape* *Excluding commission! Targeted investment

22 2001 long-term savings sales! Total worldwide new business sales + 10% 15.0 billion! Worldwide life & pensions sales 13.5 billion + 21%! Good UK performance 7.3 billion + 10%! Continental Europe 5.5 billion + 39% Spain + 155% Italy + 291%! Difficult conditions for retail investment sales 1.5 billion (41)%

23 Property & Casualty

24 Property & casualty: Restructured risk profile! Focus on personal and small commercial lines only! Exited long-tail liability risks (US and London Market)! Exited sub scale or poorly performing businesses (eg Portugal, Germany, Brazil,)! Reduced reinsurance retention to 100m (from 250m) IMPROVED QUALITY OF EARNINGS

25 Leveraging strong market positions in P&C Rank Est. market share 1st 19% UK 1st 26% Ireland 2nd 19% New Zealand 2nd 12% Canada 4th 8% Australia Top 5 Netherlands NWP 8.4 bn UK Cont Europe ROW S C A L E B E N E F I T S PRICING CLAIMS PURCHASING POWER UNDERWRITING DATA ADMIN EXPENSES

26 Understanding our risks better. Other insurers see..cgnu s view Environment Agency Willis Ltd 2002, Intermap Technologies 1998 Digital Flood mapping the UK

27 Targeting 102% COR across the cycle Combined operating ratios* UK 102% 108% Ireland 101% 109% France 104% 133% Neths 104% 108% Aus & NZ 99% 101% Canada 107% 106% Group 102% 109% Continental European cycle c.1 year behind UK Pricing and underwriting actions *Excluding results from discontinued US US general insurance and London market businesses

28 Best P&C results from European insurers 2001 Reported COR Excl WTC CGNU 102% 102% Allianz 109% 104% AXA 113% 112% Generali 108% 108% ING 104% 104% RSA 113% 110% Zurich 111% 109% Source: Company reports

29 Financials

30 2001 results! Operating profit 1 before tax (MSSB basis 1,533m +48%) 2,004m +41%! Life achieved operating profit 1,674m +5%! New business contribution 591m +30%! Worldwide life margin 25.5% (2000: 23.9% 2 )! General insurance operating profit 945m +133%! Dividend 38.0p (2000: 38.0p)! Dividend re-based for p 1 From continuing operations, including life achieved operating profit and stated before amortisation of of goodwill and exceptional items. 2 At At 2001 economic assumptions.

31 Life policy profit recognition under different accounting bases Embedded value: Recognises value up front MSSB: Proxy for cash Profit signatures (illustrative) MSSB Profit EV Profit 0 Time

32 Fast growing life company vs High dividend payout (>4% yield) Agg MSSB operating profits (per share) 39.2p 28.3p 43.2p 110.7p Dividend (per share) 38.0p* 38.0p 38.0p 114.0p Dividend cover x1.03 x0.75 x1.14 x0.97 High payout incompatible with fast growing life business * Represents the 1999 full year dividend per share for CGU plc ( the weighted average full year dividend for CGUplc and NU plc was 34.3p)

33 Dividend re-basing...funds life growth Life growth plans MSSB profit plans Dividend cut to meet funding Capital requirements Assumed no benefit from capital markets

34 Capital - new disclosure! Post Enron environment requires greater transparency! Understanding the capital position becomes a pre-requisite requisite for investment! CGNU already has a leading disclosure position! Risk based capital disclosure with half-year results (Aug 1)

35 Return on capital! Target ROC: 10% net real 12 Post-tax tax return on capital capital (continuing operations) % % 10.8% ! Basis: Life: Achieved profit P&C: Underwriting result + normalised inv return Opening equity capital

36 Summary! Strong position in European long-term savings! Powerful distribution coming on stream! Attractive returns on life new business! Best P&C results of the European insurers