aviva uk: goldman sachs conference, june 2008

8/7/2019 Aviva UK: Goldman Sachs Conference, June 2008

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Insurance Excellence in UK P&C

Igal Mayer, Chief Executive, Norwich Union InsuranceGoldman Sachs European Financials Conference Berlin 2008



Disclaimer

This presentation may include oral and written “forward-looking statements” with respect to certainof 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 similarmeaning. By their nature, all forward-looking statements involve risk and uncertainty because theyrelate to future events and circumstances which may be beyond Aviva’s control, including, amongother things, UK domestic and global economic and business conditions, market-related risks suchas fluctuations in interest rates and exchange rates, the policies and actions of regulatory

g , p g y

authorities, the impact of competition, the possible effects of inflation or deflation, the timing impactand other uncertainties relating to acquisitions by the Aviva Group and relating to other futureacquisitions or combinations within relevant industries, the impact of tax and other legislation andregulations in the jurisdictions in which Aviva and its affiliates operate, as well as the other risksand uncertainties set forth in our 2007 Annual Report to Shareholders. As a result, Aviva’s actual

future financial condition, performance and results may differ materially from the plans, goals andexpectations set forth in Aviva’s forward-looking statements, and persons receiving thispresentation should not place undue reliance on forward-looking statements.

Aviva undertakes no obligation to update the forward-looking statements made in this presentationor any other forward-looking statements we may make. Forward-looking statements made in thispresentation are current only as of the date on which such statements are made.



European Financials Conference:Climbing a wall of uncertainty



An increasingly global company

£60billion

Sales

Asia Pacific

North America

10%

9% 25%General

Insurance

FY 2007 sales£49bn(1)

12%

(1) 2007 total long-term savings new business sales and G.I. and health net written premiums

£30billion

UK life

FY 2007FY 2000

75%LongTerm

Savings

Europe 40%

29%

24%

5%

34%

34%

3%



One Aviva, twice the value

Purpose

Vision

Purpose

Prosperity &peace of mind

Vision

One Aviva,twice the value

Regional / BU strategies

Group strategy and targets

Strategicpriorities

• Manage compositeportfolio

• Build global AssetManagement

• Allocate capitalrigorously

• Increase customerreach

• Boost productivity

Targets

• 98% meet or beat COR• Long Term Savings

growth targets• £350m cost savings by

end 2009• Double IFRS EPS by

2012 at the latest• 1.5 – 2 x dividend cover• 12.5% ROCE

UK

Market leadership

●Address legacy● Transform business

model

●Exploit UK synergies

●Generate capital

N. America

Double scale

● Focus: top 5 inchosen segments

● Integrate '07

● Expand products,distribution ’08+

Europe

Scale, growth, capital

●Seize unique growthopportunities

● Leverage scale

●Generate capital

Asia Pacific

Scale, growth

● Prioritised portfolio

● Regional operatingmodel

● Investment required

Asset Management

Asset Management

Aviva Investors• Globally integrated business •Transform the investment model • Increase third party business



Our priorities: realising the potential of ‘One Aviva’

Our purpose

• The leading UK P&C insurer• Capital generator for the group

Purpose

Vision

Purpose

Vision

ur pr or es• Delivering across the cycle:

- Expense management

- Building core insurance capability

- Flattening the impact of claimsinflation

- Winning customers & brokers

A Focus on Insurance Excellence

Strategic

prioritiesTargets

UK Europe N.AmericaAsia

Pacific

Strategic

prioritiesTargets

UK Europe N.AmericaAsia

Pacific

Market leadership

● Address legacy

● Transform business

model

● Exploit UK synergies

● Generate capital

UK



The UK market leader

• Consolidated market – top 6 insurershave over 50% market share

• Aviva is the largest P&C insurer in UK

• Top 1 or 2 position in all our major

Aviva14.4%Rest of Market

37.6%

RBSI(including

Direct Line)

12.3%

• Unique business model- Balanced mix of personal and commercial

- Multi-distribution

- Powerful brands

• Consistently delivering performance- 98% or better COR since 2004

1

- £3.9bn operating profit over last 5 years

RSA8.5%

AXA

6.5%

Zurich5.6%

AIG5.2%

Allianz4.0%

BUPA3.4%

HBOS2.5%

Source: Datamonitor 2007

Our composite model and scale delivers market advantage

(1) Excludes impact of 2007 summer floods



Unparalleled distribution reach

DIRECT BROKERS PARTNERSBanking AffinityRetail

3,000

Leading shares in each channel

#1 in the SME

market

Insurer of the year2003 to 2007

… over 100 others Powerful brands

brokers



Forward Focus: Insurance Excellence

Retailer

Insurer

Historical retail focus to build distribution



Insurance excellence

Building core insurance capability

Forward Focus: Insurance Excellence

Expense management & scale benefits

Operational excellence & customer service

Pride and passion for insurance

Retailer

Insurer

Focus on the fundamentals



Insurance Excellence: A New Operating Model

Sales

Simplified structure

an

Marketing

pera ons

Underwriting,Pricing and

Product

Support Functions



UK best of breed expense ratio1

applied to NUIchannel / product mix

NUI

Expenses

UK Best of

Breed

Personal Lines

Motor 16.1% 12.3%

Breed Co.2

Best of

Direct Line, Fortis

Insurance ExcellenceExpense management - the promise of scale

Ambition to deliver industry leading expense ratio

(1) Expense ratios exclude CHE and commission(2) Based on leading cost performance in channel, weighted to reflect NUI mix

Source: FSA Returns (2006)

. .

Creditor 1.3% 1.3%

RAC Rescue 27.5% 27.5%

Commercial Lines

Motor 13.8% 8.2%

Property 16.3% 15.2%

Liability 11.6% 11.6%

NUI Total 13.9% 12.0%

,

NU

NU

Brit

Axa

NU




• Programme 1: Prioritisation and focus e.g.

• £76m reduction in marketing spend

• £33m reduction in IT costs

1

Inflation andone-off

Costs 1

(38)

(125+)

(200)

• £52m less change activity

• Total £200m savings already in train for 2008

• Expense ratio reduced from 13.9% to 12.4%

(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs (2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)(3) Additional benefits exist outside overhead cost base

3Starting RAC 2006 C&E Prog. 1 2008point integration

2

savings

Expense

ratio

13.9%

Expenseratio

12.4%

Ambition to deliver industry leading expense ratio




1


Costs 1

(38)

(125+)

(200)

Progress has been good:

• 114 less senior managers than last

Programme 1: Confident in our delivery



2

savings

Expense

ratio

13.9%

Expenseratio

12.4%

–

• IT project spend halved

• Marketing campaigns consolidated




• Further activity planned to realise ambition

• Programme 2: Re-engineering service andprocessing centres

• Dealing with inherited legacy

• Fewer products from over 70 to under 20

1


Costs 1

(38)

(125+)

(200)

• Right first time – reduce “follow upenquiry” by 50%

Programme 2 focus on re-engineering our service offering



2

savings

Expense

ratio

13.9%

Expenseratio

12.4%



UK best of breed expense ratio1

applied to NUIchannel / product mix

NUI

Expenses

UK Best of

Breed

Personal Lines

Motor 16.1% 12.3%

Pro ert 11.0% 9.7%

Breed Co.2

Best of

Direct Line, Fortis

Direct Line, NU


Delivering the promise of scale

Creditor 1.3% 1.3%RAC Rescue 27.5% 27.5%

Commercial Lines

Motor 13.8% 8.2%

Property 16.3% 15.2%

Liability 11.6% 11.6%

NUI Total 13.9% 12.0%

NUNU

Brit

Axa

NU

Aim to be UK low cost producer



Insurance ExcellenceBuilding core insurance capability

Premium rating leadership

• Motor rates: 16% Q4 2006• Household rates: 10% Q3 2007• Commercial rates: 5% November 2008

Demonstrating leadership in the market

-8.0%

-6.0%

-4.0%-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Liability Property Motor ZERO

Commercial Lines Trends

Progress being made but marketProgress being made but market

conditions are still toughconditions are still tough

3.1%1.6%

1.1%



Insurance ExcellenceFlattening impact of claims inflation

• Track record of delivering significant

cost reduction

• 2007: Delivered >£75m benefit

• 2008 lans in train to deliver £100m+

Impact of claims initiatives on inflation (Major Classes)

Flattening the impact of inflation through to 2010

of sustainable benefits across:

– bodily injury costs

– recoveries

– credit hire bill

– claims settlement

• Efficiency makes it easier for our

customers

Commercial Motor - Average Settlement Cost

2000 2001 2002 2003 2004 2005 2006 2007

%

Personal Motor Household Commercial Motor Commercial Property Commercial Liability

Underlying Inflation Inflation after Benefits



Customers

• Summer floods 2007 – 50% by Xmas, 80% by Easter

• World class 80% net promoter score in RAC

• Re-launch our flagship, Norwich Union Direct

Insurance ExcellenceWinning customers & brokers

Winning in a highly competitive market

Brokers

• Insurer of the Year – five years running

• Grew file count in a shrinking 2007 market• Clear commitment to independent brokers

• Will sign up to deals based on sustainable, long

term models



One Aviva, twice the valueOutlook

• UK GI cash generator to fuel global growth

• Progress to date

Insurance Excellence

• More to come

• Rates Motor / home = >inflation

Commercial = positive territory

• Commitment remains to 98% of better globally



Insurance Excellence in UK P&C

Igal Mayer, Chief Executive, Norwich Union InsuranceGoldman Sachs Insurance Conference Berlin 2008

aviva uk: goldman sachs conference, june 2008

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