Aviva plc Worldwide long-term savings new business Nine months to 30 September 2002

Transcription

1 Aviva plc Worldwide long-term savings new business Nine months to 30 September October 2002 Worldwide long-term new business sales of 10.6 billion (: 10.4 billion) Worldwide total bancassurance sales up 83% at 1,973 million Worldwide life and pensions sales up 7% on an APE* basis UK life and pensions sales up 4% on an APE* basis Continental European life and pensions sales up 9% on an APE* basis and now represent 38% of worldwide life and pensions new business Worldwide new business contribution at 416 million, with new business margin of 23.8% *Annual premium equivalent (APE) is the UK industry s standard measure of new regular premiums and 10% of single premiums. All growth rates are quoted at constant rates of exchange. Richard Harvey, Group Chief Executive, commented: These are solid sales in generally tough markets. Our financial strength, broad product range and growing distribution continue to give us competitive advantage. Our bancassurance operations in the UK, Italy and Spain have performed particularly well. As the largest life and pensions provider to Europe, we are strongly positioned to benefit from the increased need for private provision as savings markets recover. Our outlook for long-term savings markets for the rest of the year remains cautious as we expect consumer confidence to continue to be affected by economic conditions and turbulent equity markets. Enquiries: Analysts/Investors: Philip Scott, Group Executive Director UK Life +44(0) Tony Wyand, Group Executive Director Continental Europe +44(0) Steve Riley, Investor Relations Director +44(0) Media: Hayley Stimpson, Director of External Affairs +44(0) Chris Hughes, Financial Dynamics +44(0) There will be a conference call today for wire services at 7:45am on +44(0) This conference call will be hosted by Philip Scott, Group Executive Director UK Life and Tony Wyand, Group Executive Director Continental Europe. There will be a conference call today for analysts and investors at 9:30am (UK time) on +44(0) This conference call will be hosted by Philip Scott, Group Executive Director UK Life and Tony Wyand, Group Executive Director Continental Europe. Replay will be available for two weeks until 7 November. The dial in number for replay is +44(0) and the pass code is

2 New business contribution 3 Total new business sales Annual premium equivalent sales 2 9 months to Local 9 months to Local 9 months to Local 30 September currency 30 September currency 30 September currency 2002 growth growth growth 1 Life and pensions United Kingdom 5, % 231 (5%) France 1,382 (6%) 168 (2%) 52 2% Ireland 279 (28%) 85 10% 23 4% Italy % % 23 24% Netherlands (including Belgium and Luxembourg) % 117 3% 14 (12%) Poland 57 19% 37 (13%) 9 28% Spain % 97 28% 49 43% Other Europe % 62 1% (5) (193%) International % % % Total life and pensions 9,856 5% 1,746 7% 416 4% Investment sales United Kingdom 429 (40%) 55 (30%) Netherlands 59 (14%) 6 (14%) Poland Other Europe 62 (34%) 6 (34%) International % 22 39% Total investment sales 774 (25%) 89 (20%) Total long-term savings 10,630 2% 1,835 6% Navigator sales 669 (10%) (not included above) 1. Growth rates are calculated based on constant rates of exchange 2. Annual premium equivalent (APE) is the UK industry s standard measure of new regular premiums and 10% of single premiums 3. Stated before the effect of solvency margin United Kingdom: With the benefits of the breadth of our product range and multi-distribution capability, total life and pensions sales in the UK increased 4% to 954 million (: 915 million) on an Annual Premium Equivalent (APE) basis. This was despite the ongoing turbulence and low investor confidence in equity markets which, as we indicated at the half year, persisted through the third quarter and which we expect to continue for the rest of the year. Norwich Union remains a leading life and pensions provider with a share of the UK life market in excess of 12%. Total UK life and pensions sales for the nine months were maintained at 5.3 billion (: 5.3 billion). Bonds sales in the third quarter were lower at 627 million (third quarter : 864 million) in a challenging market, and contributed to total year-to-date sales of 2.3 billion (: 2.6 billion). This reduction in sales reflected investors continuing preference for non-equity related products. In response to customer demand, we continue to broaden our product range with a series of new bonds which offer investors some capital or income protection. We have also recently introduced a special offer Anniversary Bonus on our with-profit bonds. Early indications are that this initiative has been well received and we are therefore confident that we will retain our share of the overall bond market. Total sales through our joint venture with the Royal Bank of Scotland Group (RBSG) were up 130% to 677 million (: 294 million), including single premium with-profit bond sales of 416 million (: nil). We have continued to expand our product range available through the joint venture and further new initiatives are planned later this year and new products for These results include sales of 131 million (: 147 million), representing our 50% share of sales written through the joint venture life company, and sales of 416 million (: nil), representing 100% of single premium with-profit bond sales, written through Norwich Union. Sales of annuities increased by 33% to 731 million (: 549 million), reflecting our attractive terms in the market. Mortgage product sales, primarily protection business, were also higher at 52 million (: 36 million). Pension sales increased to 2.1 billion (: 1.9 billion) including stakeholder sales of 510 million (: 143 million). We have created a leading position in the stakeholder market and continue to improve our margins, by reducing commissions and by focusing on large group schemes for new business. We continue to monitor our commission rates.

3 Sales of retail investment products were 429 million (: 715 million) reflecting our planned reduction in sales in the collective investment CAT marked market and the general lack of investor enthusiasm for equity-related products. We plan to launch new retail investment products in New business contribution for the year to date was 231 million (: 242 million), with a new business margin (the ratio of new business contribution to sales measured on an annual premium equivalent basis) of 24.2% (full year : 25.8%). The discrete third quarter margin of 24.1% reflects lower volumes, partially offset by the continued beneficial changes in the product mix. Although not included in the new business figures, our market leading Equity Release business continued its strong growth with third quarter sales of 108 million (third quarter : 58 million) and year to date sales of 230 million up 57% (: 146 million), benefiting from a strong brand, innovative product design and excellent customer service. France: Sales of single premium fixed interest AFER products through our French life business continued to grow, with sales up 9% at 741 million (: 674 million). This reflects customers continuing preference for fixed interest investments, and the strength of AFER s brand and its position as the largest savings organisation in France. Total sales of unit-linked and other savings products were 23% lower at 510 million (: 659 million), achieved against the background of an overall market for unit-linked products which decreased 32% in the first eight months of Sales of protection business were 131 million (: 129 million). New business contribution was 52 million (: 50 million) with margins of 31.0% (full year : 33.9%). CGU France recently announced two deals to extend its distribution capability. Firstly, in July, we announced discussions with Mederic, a French mutual life company, to establish a partnership. We expect this agreement will be finalised by the end of CGU France will offer a range of life products to Mederic s customers through a new joint venture life company and as a part of this deal, CGU France will sell its group protection business to Mederic. Secondly, in October, we announced an agreement in principal for a bancassurance partnership with Crédit du Nord, a French banking group and subsidiary of Société Générale. The agreement, which is subject to contract and regulatory approval, will make Abeille vie, a subsidiary of CGU France, the sole partner of Crédit du Nord for all new life business sold from late At this time, Abeille vie will acquire a 50% shareholding in the life insurance subsidiary of Crédit du Nord, through which the life business is sold. As a separate transaction, Crédit du Nord transferred the management of its pension scheme to Abeille vie during the third quarter. New business premiums for this transfer amounted to 33 million and are reflected in unit-linked and other savings business. Ireland: New business sales at Hibernian Life & Pensions, our top-five provider of life and pensions products, increased by 10% to 85 million (: 76 million) measured on an APE basis. Total regular premiums increased 48% to 63 million (: 42 million). Regular premium life product sales, up 89% to 31 million (: 16 million), benefited from the Government's Special Savings Incentive Account (SSIA), adding one-off sales of 23 million before its closure on 30 April Sales of regular premium pensions, up 22% to 32 million (: 26 million) reflected continuing success in the executive and group pensions markets. Continuing the trend of the first half of the year, new single premium life sales were 138 million (: 230 million) as investors continued to adopt a cautious approach to unit-linked and with-profit bond investments. Single premium pension sales were 78 million (: 110 million), due to limited opportunities for new group scheme mandates as a result of difficult investment conditions. Uncertainty remains in the individual pensions market ahead of the introduction of the Government's new pension plan, the Personal Retirement Savings Account (PRSA), now expected in March In preparation for this launch, we are leveraging Norwich Union s experience in the UK stakeholder market and developing a market-leading product for the new scheme. Total new business contribution amounted to 23 million (: 22 million) with margins of 27.2% (full year : 28.5%).

4 Italy: In Italy, total sales rose by 31% to 772 million (: 585 million) underlining the strength of our distribution through our bancassurance partners. Sales through our agreement with UniCredito Italiano's (UCI) subsidiary, Cassa di Risparmio di Torino increased by 35% to 545 million (: 402 million). UCI's branch reorganisation, reported at the half year, is now underway. While this has not had a significant adverse effect on sales to date, we expect a challenge in maintaining our sales momentum to continue for the rest of We are confident that the reorganised branch network will offer us enhanced opportunities over the longer term. Sales at Banca Popolare di Lodi, where more branches have now come on stream, increased strongly to 173 million (: 34 million), following new products launches. Sales through Banca delle Marche were 28 million (: 36 million). As announced in July 2002, our new bancassurance partnership with Banca Popolare Commercio e Industria, an agreement which we have reached together with UCI, is expected to complete by the end of Total new business contribution for the period amounted to 23 million (: 19 million) with margins of 21.7% (full year : 22.2%). Netherlands (including Belgium and Luxembourg): Delta Lloyd, our top-five life and pensions business in the Netherlands, reported total sales of 667 million (: 584 million). We have seen the adverse impact of taxation changes dampened down by the effects of increased increments on existing annuity contracts as investors make further provision for retirement savings. As a result, Delta Lloyd increased its market share with single premium sales of 329 million (: 158 million). Total pension sales were 242 million (: 309 million) but further increments on existing business are expected in the fourth quarter. In Belgium we are beginning to see the benefits of our distribution channel with Bank Nagelmackers. Following the integration of the bank network in the first half of the year, we have launched new products, which coupled with an advertising campaign has resulted in sales increasing to 98 million (: 55 million). Investment sales were 59 million (: 69 million) reflecting continuing investor caution. New business contribution was 14 million (: 16 million) with a new business margin of 12.0% (full year : 22.3%). Poland: CU Polska is the leading provider of individual life and private pensions, with a 19% share of the life market measured by total premium income and a 29% share of the private pensions market measured by total assets under management. New life and savings business increased by 12% to 33 million (: 30 million) despite continuing difficult economic conditions. Pension sales increased to 24 million (: 19 million), against a background of a relatively low number of new entrants to the employment market who are eligible to buy private pensions. CU Polska commenced a new operation selling mutual funds late in the second quarter of the year. Sales of 2 million (: nil) have been recorded to date. Spain: In Spain, where Aviva has a top-five life business, total sales grew by 27% to 612 million (: 479 million) as our new bancassurance partnerships continue to develop. New business contribution amounted to 49 million (: 34 million) with margins of 50.4% (full year : 46.5%). New business sales through Bancaja were 433 million (: 441 million) reflecting a continuing competitive market for savings products. Total new business sales through our agreements with Unicaja, Caixa Galicia and Caja España, grew encouragingly to 139 million (: nil). Further new products are planned during the coming months, based on the success of products sold through the Bancaja network.

5 In September 2002, we announced a new bancassurance partnership with Caja de Granada and our existing bancassurance partner, Unicaja. This new bancassurance partnership is expected to complete shortly. This consolidates our position as the fourth largest bank network which will have some 3,500 branches and access to approximately nine million potential customers. Other Europe: Total life and pensions sales from our other European businesses increased by 20% to 208 million (: 172 million). In Germany, total new business premiums grew strongly by 50% to 105 million (: 69 million), including an increase of 101% in single premiums to 82 million (: 40 million) driven by an extension of our distribution reach. In Turkey total new business premiums were at 16 million (: 16 million). Single premium sales from our Dublin-based offshore life and savings business were 63 million (: 68 million) while investment sales of our Luxembourg UCITS were 62 million (: 93 million), reflecting the continuing challenging conditions in investment markets. International: In our International business, life and pension sales grew by 43% to 669 million (: 473 million). Our United States business contributed total life and pension sales of 377 million (: 250 million), up 55%, reflecting continuing demand for fixed annuity products. In Australia, total life and pension sales amounted to 181 million (: 202 million). Year to date sales of unit trusts were up 39% to 222 million (: 157 million). However investor confidence in equity-related products held back sales in the third quarter. Although not included in the new business figures, sales of Navigator, a market-leading master trust, were also impacted by lower investor confidence in equity markets and were lower at 669 million (: 733 million). In Singapore, our bancassurance partnership with DBS Group Holdings Limited (DBS) generated total sales of 108 million (: 11 million). Sales from our bancassurance partnership with DBS in Hong Kong are expected to commence in the fourth quarter We also launched our Navigator master trust in Singapore at the start of the fourth quarter and expect it to be fully operational by mid In India, our new partnership with Dabur Group, where we own 26% of the joint venture, was launched in June 2002 and has now sold over 3,000 policies, mainly through our direct sales force. We recently announced agreements to distribute our products through ABN AMRO Bank and to customers of American Express. In China, we own 50% of a new life joint venture with COFCO, a state owned export and import business and we anticipate this becoming operational in early 2003, subject to final regulatory approval.

6 Notes to Editors 1. Aviva is the UK's largest insurer and one of the top-five life companies in Europe with substantial positions in other markets around the world, making it the world s seventh-largest insurance group based on gross worldwide premiums. In the UK Aviva operates under the Norwich Union brand. Aviva's principal business activities are long-term savings, fund management and general insurance, with worldwide premium income and retail investment sales from continuing operations of more than 28 billion for the year ended, and assets under management of 214 billion at 30 June New business figures have been translated at average exchange rates applying for the period. The average euro rates employed in this announcement are 1 euro = 0.63 (nine months to 30 September : 1 euro = 0.62; year to : 1 euro = 0.62). 3. All growth rates are quoted in local currency. 4. Definitions: Annual premium equivalent (APE) is a UK industry standard for calculating life, pensions and investments new business levels. It is the total of new regular premiums and 10% of single premiums. New business contribution is the present value of the projected stream of after-tax distributable earnings from new life and pensions sales. New business contribution before tax is calculated by grossing up the new business contribution after-tax at the full corporation tax rate for UK business and at appropriate rates of tax for other countries. New business margin is a UK industry standard calculation based on new business contribution (before the effect of solvency margin) divided by sales measured on an APE basis. 5. Cautionary statements The cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward looking statements made in this press release. Forward looking statements are based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed. Aviva plc is a company registered in England No Registered office St Helen's 1 Undershaft London EC3P 3DQ

7 Statistical supplement CONTENTS Analyses 1 Detailed worldwide long-term savings new business analysis 2 Analysis of UK long-term savings by distribution channel sales and APE 3 Detailed analysis of new business contribution 4 Principal economic assumptions

8 Detailed worldwide long-term savings new business analysis SUPPLEMENT 1 Single Regular Total 9 months to 9 months to Local 9 months to 9 months to Local Local 30 September 30 September currency 30 September 30 September currency currency 2002 growth 2002 growth growth m m m m United Kingdom Individual pensions 1,179 1,117 6% (15%) 4% Group pensions % % 26% Mortgage % 44% Annuities % % Bonds 2,251 2,637 (15%) - 1 (100%) (15%) Other life (36%) % (15%) Total life and pensions 4,794 4,847 (1%) % - Peps/Isas/Unit trusts/oeics (41%) % (40%) 5,210 5,554 (6%) % (5%) France AFER (excluding unit-linked) % % Unit-linked & other savings (25%) % (23%) Protection business % (19%) 1% 1,349 1,436 (7%) % (6%) Ireland Life & savings (41%) % (32%) Pensions (30%) % (20%) (37%) % (28%) Italy Life & savings % % 31% % % 31% Netherlands (including Belgium and Luxembourg) Pensions (26%) % (22%) Life % (24%) 77% Total life and pensions % (9%) 17% Unit trusts (14%) (14%) % (9%) 14% Poland Life & savings % (22%) 12% Pensions (10%) 32% Total life and pensions % (17%) 19% Mutual funds % (17%) 25% Spain Life & savings % % 24% Pensions % % 61% % % 27% Other Europe Life & pensions % (7%) 20% UCITS and other (34%) (34%) % (7%) 1% International Life & pensions % % 43% Unit trusts % % % % 42% Total long-term savings 9,772 9,660 1% % 2% Analysed: Life & pensions 9,011 8,634 4% % 5% Investment sales 761 1,026 (26%) % (25%) Total long-term savings 9,772 9,660 1% % 2% Navigator sales (not included above) (10%) (10%)

9 SUPPLEMENT 2 Analysis of UK long-term savings by distribution channel Sales Single Regular Total 9 months to 9 months to Local 9 months to 9 months to Local Local 30 September 30 September currency 30 September 30 September currency currency 2002 growth 2002 growth growth m m m m IFA - life and pensions products 3,324 3,579 (7%) % (6%) - investment products (45%) % (44%) 3,572 4,030 (11%) % (10%) Bancassurance partnership with RBSG - life and pensions products % % 272% Other partnerships/direct - life and pensions products 934 1,129 (17%) % (14%) - investment products (34%) % (33%) 1,102 1,385 (20%) % (17%) Total UK long-term savings 5,210 5,554 (6%) % (5%) Annual premium equivalent Life and pensions sales Investment sales Total sales 9 months to Local 9 months to Local 9 months to Local 30 September currency 30 September currency 30 September currency 2002 growth 2002 growth 2002 growth m m m IFA 701 (2%) 32 (36%) 733 (4%) Bancassurance partnership with RBSG % % Other partnerships/direct 188 4% 23 (21%) Total UK long-term savings 954 4% 55 (30%) 1,009 2%

10 Detailed analysis of new business contribution SUPPLEMENT 3 (a) Before the effect of solvency margin Annual premium equivalent (1) New business contribution (2) (3) New business margin (4) Life and pensions business 9 months 9 months 9 months 9 months m m m m 9 months months Full year United Kingdom % 26.5% 25.8% Europe (excluding UK) France % 29.5% 33.9% Ireland % 28.9% 28.5% Italy % 24.8% 22.2% Netherlands (including Belgium and Luxembourg) % 14.3% 22.3% Poland % 18.0% 18.4% Spain % 45.4% 46.5% Other (5) 2 (8.0%) 3.3% - International % 6.4% 12.1% 1,746 1, % 24.6% 25.5% (1) Annual premium equivalent represents regular premiums plus 10% of single premiums. (2) Before effect of solvency margin. (3) New business contribution before the effect of solvency margin includes minority interests in 2002 of 41 million (nine months to 30 September : 31 million). This comprises minority interests in France of 3 million (nine months to 30 September : 3 million), Italy 11 million (nine months to 30 September : 8 million), Spain 26 million (nine months to 30 September : 19 million) and Poland 1 million (nine months to 30 September : 1 million). (4) New business margin represents the ratio of new business contribution to annual premium equivalent, expressed as a percentage. (b) Including the effect of solvency margin (1) 9 months 9 months 2002 Life and pensions business m m United Kingdom Europe (excluding UK) France Ireland Italy Netherlands (including Belgium and Luxembourg) (1) 1 Poland 7 5 Spain Other (9) 1 International (1) The effect of solvency margin represents the impact of holding the minimum European Union (EU) solvency margin (or equivalent for non-eu operations) and discounting to present value the projected future releases from the solvency margin to shareholders.

11 Principal economic assumptions SUPPLEMENT 4 New business contribution has been calculated using the economic assumptions set at the end of the previous year, as shown in the tables below. United Kingdom France Risk discount rate 7.7% 7.4% 8.6% 8.5% Pre-tax investment returns: Base government fixed interest 5.0% 4.7% 5.1% 5.0% Ordinary shares 7.5% 7.2% 7.1% 7.0% Property 6.5% 6.2% 6.6% 6.5% Future expense inflation 3.7% 3.7% 2.5% 2.5% Tax rate 30.0% 30.0% 36.4% 37.8% Ireland Italy Risk discount rate 9.3% 9.1% 7.6% 7.5% Pre-tax investment returns: Base government fixed interest 5.3% 5.3% 5.3% 5.3% Ordinary shares 8.3% 8.3% 8.3% 8.3% Property 6.8% 6.8% 6.8% 6.8% Future expense inflation 4.0% 5.0% 3.3% 3.3% Tax rate 16.0% 20.0% 41.0% 43.0% Netherlands Poland Life Risk discount rate 8.0% 8.0% 18.5% 20.0% Pre-tax investment returns: Base government fixed interest 5.1% 5.0% 12.5% 12.5% Ordinary shares 8.1% 7.9% 12.5% 12.5% Property 6.6% 6.5% n/a n/a Future expense inflation 2.5% 2.5% 9.2% 9.2% Tax rate 25.0% 25.0% 28.0% 28.0% Poland Pensions Spain Risk discount rate 16.9% 17.3% 8.3% 8.4% Pre-tax investment returns: Base government fixed interest 12.5% 12.5% 5.3% 5.4% Ordinary shares 12.5% 12.5% 8.3% 8.4% Property n/a n/a 6.8% 6.9% Future expense inflation 9.2% 9.2% 3.2% 4.0% Tax rate 28.0% 28.0% 35.0% 35.0%