Insurance Excellence in UKGI Focus on Profit. Igal Mayer, 3 rd June 2009

Transcription

1 Insurance Excellence in UKGI Focus on Profit Igal Mayer, 3 rd June 2009

2 Disclaimer This presentation may include oral and written 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. These forward-looking statements sometimes use words such as anticipate, target, expect, estimate, intend, plan, goal, believe or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which may be 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, the possible effects of inflation or deflation, the timing impact and other uncertainties relating to acquisitions by the Aviva Group and relating to other future acquisitions or combinations within relevant industries, the impact of tax and other legislation and regulations in the jurisdictions in which Aviva and its affiliates operate, as well as the other risks and uncertainties set forth in our 2008 Annual Report to Shareholders. 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, and persons receiving this presentation should not place undue reliance on forward-looking statements. Aviva undertakes no obligation to update the forward-looking statements made in this presentation or any other forward-looking statements we may make. Forward-looking statements made in this presentation are current only as of the date on which such statements are made.

3 Overview

4 An increasingly global company 60 billion Asia Pacific North America UK GI 11% FY 2008 sales 51.4bn (1) 7% 22% 14% 10% General Insurance 30 billion 3% 5% 24% 34% UK Life Europe 26% 42% 40% 78% Long Term Savings 34% FY 2000 FY 2008 (1) 2008 total long-term savings new business sales and G.I. and health net written premiums

5 Manage the composite portfolio Diversity, cash flow, resilient product range Long Term savings General Insurance Composite

6 Increase customer reach Access to customers through preferred channels Multi-distribution Direct Sales Bancassurance Independent Agents

7 Key financials - FY 2008 / Q Strong Full year 2008 operating results Life & pensions sales up 11% to 36,283m General insurance result improved and combined operating ratio on target at 98% Operating profits: IFRS up 4% to 2,297 million and MCEV up 10% to 3,358 million Total profits impacted by adverse investment variances Full year 2008 dividend maintained at 33.0p Resilient Q trading Q life and pension sales up 11%, with margins maintained Group COR in line with 98% meet or beat target Strong balance sheet Strengthened reserves and provisions, with immaterial actual losses to date IGD surplus of 2.5 billion at 31 March 2009, with increased equity hedging 40% fall reduces surplus by 200m, 40% rise increases surplus by 800m Net asset value per share at 31 December 2008: IFRS 416p and MCEV 486p Consistent strategy, with focus on capital management

8 The right strategy Strategic priorities Manage composite portfolio Build global Asset Management Allocate capital rigorously Increase customer reach Boost productivity Purpose Prosperity & peace of mind Vision One Aviva, twice the value Targets 98% meet or beat COR 500m cost savings by 2010 Double IFRS EPS by 2012 at the latest x dividend cover on IFRS post tax operating earnings Focus on target to double IFRS EPS by 2012 Increasing emphasis on capital efficiency Decreasing emphasis on sales targets Asset Aviva Management Investors Globally integrated business Transform the investment model Increase third party business UK Market leadership Address legacy Transform business model Exploit UK synergies Generate capital Europe Scale, growth, capital Seize unique growth opportunities Leverage scale Generate capital N. America Optimise business mix, growth & margin Generate net capital returns Contribute to doubling IFRS EPS by 2012 Asia Pacific Scale, growth Prioritised portfolio Regional operating model Investment required

9 Strong presence in our home market m IFRS operating profit by region Competitive strength from market leadership in the UK Half of IFRS regional operating profits derived from UK businesses UK Life & GI Europe North America, Asia Pacific & Aviva Investors Central charges UK Life Highest ever sales in 2008 UK Life market share jumped 3% to 14% in Q May investor day UK GI Transformational change progressing Visible signs of rate hardening Voted General Insurer of the year for sixth year running

10 UK General Insurance

11 UK General insurance Current position 2008 Performance (UKGI only) Operates in the mature UK market Aviva UKGI enjoys a 14% market share - the largest UK P&C insurer Top one or two position in all our major classes Focus on insurance excellence Generation of capital and cashflow for Aviva General insurance operating profit of 566m General insurance COR of 99% (2007: 106%) General insurance net written premiums (NWP) of 4,981m (2007: 5,440m), down 8% Expense ratio improved to 12.1% (2007: 13.9%), reflecting benefits from cost saving initiatives Diversified portfolio Diversified portfolio of products and distribution channels Commercial - Broker Commercial - Other Personal - Broker Personal - Partnership Personal - Direct RAC income stream Strategy There are 7 strategic priorities: Win the Customer Win the Broker Building Core Insurance Capability Claims Inflation Busting Delivering the Promise of Scale Lean Manufacturing Win our People

12 Unparalleled customer reach DIRECT BROKERS PARTNERS 3,000 brokers Powerful brands RAC - Best roadside assistance provider 2006 to 2008 #1 in the SME market Insurer of the year 2003 to 2008 over 100 others

13 UKGI s 7 strategic priorities Win the Customer NUD fightback RAC membership Partnerships moments of truth Win the Broker War for distribution Building Core Insurance Capability Sophisticated pricing Rating leadership Price & product optimisation Claims Inflation Busting Sustainable benefits year on year Delivering the Promise of Scale Sub 11% expense ratio Halve IT costs Exploit UK synergies Lean Manufacturing Mass customisation Service & process centre reengineering Win our People No1 for employees Build core insurance skills Pride & passion for insurance

14 UKGI s 7 strategic priorities RESHAPING THE BOOK BUILDING CORE INSURANCE CAPABILITY DELIVERING THE PROMISE OF SCALE Win our People No1 for employees Build core insurance skills Pride & passion for insurance

15 Web Application All web applications are built on the NUD in a Box standard Integrated All partner integration Partner is provided using Application NUD in a Pipe With Mass Customisation we can point everyone to the same engine and each "partner" will get the correct product and price. MI Broker Webs Aviva Web Call Centre Screens Partner Webs NB Quote Policy Administration Real-time Store QTE Pricing Price Risk Broker Integration MTA Data Feeds RAC Panel Partner Integration Reshaping the book Direct Fightback Direct is direct Sophisticated pricing Moments of Truth Profitable & growing medium sized brokers Unique package Increase market share Profitable & growing smaller brokers Unique package Increase market share Panel 11 panel insurers 30-40% share Brokers e-platform Direct is Direct Small Brokers & National Accounts Personal Lines: A Crystal-Clear Strategy Partners: Moments of Truth 3 rd rd Party Data Leverage Membership Panels / Aggregators PERSONAL LINES Multi channel approach Direct means direct RAC Panel for aggregators Re grow with brokers Price competitive sophisticated pricing Financial strength & reassurance Truly global peer group Leveraged marketing Common Pricing/Products Single Product Platinum Cover Gold CoverValue Cover Buildings & Hi Contents Sums Blanket gh Hig Blanket Blanket er her Low Platform Specified Inner Inne Inne Insured Inn Limits r r er Limi Limi Frozen Food Unlimited Li t t Single 200 Limit Process 400 Limit mit Loss of 12,000 Limit 6,000 Limit rent and aone Unlimited Price 1,000 List 1,000 COMMERCIAL LINES Grow small/medium independent brokers Reduce commission significantly Raise rates significantly Retain Insurer of the Year for 7 th year Products Pubs restaurants RAC Self employed RESCUE Manufacturing & wholesaling Property owners Shop & salon Fast Trade e-broking portal Straight thro processing Fast referrals Office surgery Sustainable growth and sustainable distribution cost

16 Reshaping the book Summary By 2011 our UKGI book will have changed Direct grows Brokers grow Partnerships fall RAC steady in Rescue but doubles in size for insurance Motor grows Home falls Creditor falls Commercial lines grow Right balance of volume and profit

17 TOTAL IB CHC Large Property Owners CHC Complex Schemes CCI General Combined CTC Construction Combined Commercial Property Owners OSP/PRP etc 2 Yr Core 2 Yr Core 2 Yr Core 2 Yr Core 2 Yr Core 2 Yr Core 2 Yr Core 2 Yr Core 2 Yr Core Region 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR 2 Yr GWP NECR West & South Wales % % % % % % % % % London NB % % % % % % % % % Belfast NB % % % % % % % % % Total % % % % % % % % % 2009 Plan Core NECR 32.0% 37.8% 38.0% 42.5% 32.2% 46.0% 47.3% 37.9% 38.7% Key : NECR worse than Target by 5% points NECR within +/- 5% points of Target NECR better than Target by 5% points Red Rate Target % % % % % % % % % Amber Rate Target % % % % % % % % % Green Rate Target % % % % % % % % % Overall Rate Target % % % % % % % % % CPO CMT Motor Trade AGR Agriculture CME General Commercial Combined (legacy Bonus) Package Products Building core insurance capability Frequency 21% 19% 17% 15% 13% 11% 9% 7% 5% Credit Loss Ratio - Retro 120% 110% 100% 90% 80% 70% 60% 50% ARI Sep 08 Written Frequency Segment Sep 08 Loss Ratio Make/Model Motor Dec 08 Home Vogue Vogue SE HST HSE HST SC HSE SC Personal Lines transforming pricing Sep 08 Mass Customisation Total Premium Combined peril 3 rd PTY DAMAGE 3 rd PTY INJURY Total ACC DAMAGE Total Total Premium Premium Premium Total Premium Multi peril Mar 09 Multi Peril 3 rd Party Data CUE Price Optimisation 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% Rating Jan - 07 Feb -07 Mar - 07 Apr - 07 May - 07 Jun -07 Jul -07 Aug - 07 Sep -07 Oct - 07 N ov -07 D ec - 07 Jan - 08 Feb -08 Mar - 08 Apr - 08 May - 08 Jun - 08 Jul - 08 Aug - 08 Sep -08 O ct - 08 Nov -08 D ec -08 Jan -09 Feb -09 Mar - 09 Apr pts improvement in 2008 Trend positive so far Q1 09 Commercial Lines transforming underwriting 1, % Commercial Rates to Apr % 1, % 1, % 120.0% 1, % 100.0% 1, % % % % 0 0.0% CTB Other PROPERTY LIABILITY (Incl PI) MOTOR (Fleet/Minifleet) ZERO GWP 3-Year Core ECR Exit 60% & carry 30% rate uplift on rest GWP ( M) Cleanse the Book 3-Year Core Claims Ratio Monitor, Mentor Measure South % % % % % % % % % London City % % % % % % % % % Midlands % % % % % % % % % Scotland & NI % % % % % % % % % North East % % % % % % % % % North West % % % % % % % % % East % % % % % % % % % National Accounts % % % % % % % % % Leicester NB % % % % % % % % % Birmingham NB % % % % % % % % % ManchesterNB % % % % % % % % % Glasgow NB % % % % % % % % % Unallocated % % % % % % % % % Hawkeye Case level management Investment in underwriting Insight on geographical risk

18 Building core insurance capability Aviva Risk Index Expected loss ratio vs actual frequency Frequency 21% 19% 17% 15% 13% 11% 9% 7% 120% 110% 100% 90% 80% 70% 60% Loss Ratio 5% ARI Segment Loss Ratio - Retro Sep 08 Written Frequency 50% Expected loss ratio based on 2005 / 06 sample used as to assess ARI benefit Actual Written frequency of policies written in September 08

19 Building core insurance capability Aviva Risk Index Retention & cancellations Cancellation Rate 35% 30% 25% 20% 15% 10% 5% 0% 75% 70% 65% 60% 55% 50% ARI Ritz Segment Segment NB Cancellation Rate (Oct 08) Retention Rate (Feb - Apr 09) Retention Rate Retention rate is overall retention between February and April 2009 Cancellation rate for new business written in October

20 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr % 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% Building core insurance capability Rating Commercial Rates to Apr 09 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 PROPERTY LIABILITY (Incl PI) MOTOR (Fleet/Minifleet) ZERO Signs of hardening but market remains tough Demonstrating leadership in the market 6.3% 5.7% 3.0%

21 Delivering the promise of scale Self Service Operational & IT excellence to deliver sub 11% expense ratio Centres of Excellence Mass Customisation & Lean Manufacturing c900 Applications IT Roadmap <300 Applications Sustainable service excellence & benefit of scale

22 Delivering the promise of scale Two major programmes Operations2010 Personal Mixed Commercial Perth Bishopbriggs Manchester Cheadle Stretford Leicester Norwich Southend IT2010 Bangalore Pune Noida Migration to Centres of Excellence on schedule 60% in place 10 major processes redesigned & in implementation, e.g. motor claims, with Q1 technology release completed Continuous improvement capability implemented to support new processes Annualised savings tracking to plan with costs also on target Service levels maintained or improved through transition Professional Broking Sentiment Survey no1, May 09 Direct/RAC customer satisfaction ahead of 2008 for Q1 09 Flightpath to Delivered Benefit IT2010 benefits IT2010 benefits End -game benefits Front loaded cost efficiencies achieved for 2008 & on track to deliver full benefits by 2010 Datacentre outsource deal completed with EDS 355m 258m 210m 180m <180m

23 Delivering the promise of scale Progress on expenses Progress ahead of what was promised in October 2008 Inflation Oneoffs C&E 38m Phase 1 Cost Reduction Phase 1 Target : 200m Sales & Marketing IT Support Services Change Phase 2 Target: 150m Phase 1 Cost Reduction 09 & 10 Inflation Oneoffs Phas Phase e 2 2 Cost Cost Reduction Operations IT Expense Ratio 150m 150 m HY 2008 FY % 12.8% 12.1% <11% Full year 2008 ratio of 12.1% achieved Remaining phase 2 savings on track

24 and as we became Aviva in the UK GENERAL CUSTOMERS Communicated to 9m GI / 7m Life customers New aviva.com/.co.uk >40 websites rebranded BROKERS/IFAs >80% awareness in 4 months 16,000 pieces of literature reviewed & >40% made obselete Get me Get the plot EMPLOYEES 3,000 managers attended This is Our Story cinema presentations Get it done All staff involved in This is Us team sessions GI - 3,000 brokers contacted Life - 30k distributors contacted Building Aviva from the inside out

25 Summary Expenses 13.9% 12.1% sub 11% Commission 25.9% 25.1% targeted commission action Total Distn 39.8% 37.2% 30% world 10 point improvement Loss Ratio 66.0% 62.1% sophisticated pricing disciplined underwriting Focus on Profit

26 Investor Presentation May 2009