aviva life insurance - philip scott presentation 2003 · protection 17% group pensions 7% the...

© Aviva plc

Aviva Life International

Philip Scott - Group Executive Director, Life International

© Aviva plcSlide 3

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 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 Avivaand 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.

© Aviva plcSlide 4

Agenda

• Introduction– Strategy– Brand– Bancassurance

• Presentations by CEOs with a focus on life business:– France– Delta Lloyd– Italy – Spain

• Themed buffet lunch• Managing guarantee risk• Key markets for longer-term growth:

– Presentation by MD, Aviva Asia Financial Services• Wrap up• Drinks reception and close

© Aviva plcSlide 5

Key messages today

• Aviva Life International is a major business:– Scale and diversity– Significance in terms of Group profitability

• A four-year strategic transformation has been implemented

• Bancassurance is a key driver of medium term performance:– Acquisition of underperforming assets– Performance improvement through scale, diversity and expertise

• ALI is Aviva’s engine of medium- and long- term growth

© Aviva plcSlide 6

Country with ALI presence

Country with other Aviva Group presence

What is Aviva Life International?

© Aviva plcSlide 7

ALI in context – Aviva Group 2003 operating profit (includes life on achieved profit basis)

38%

27%

35%

Aviva Life International* UK Life Aviva General Insurance International* Includes GI operations in France, Netherlands, Italy, Turkey and Poland

© Aviva plcSlide 8

Spain: created leading life business Singapore & HK:

bancassurancewith DBS

France:bancassurancefrom Q4 2004 China:

JV life business from 2003Italy: major new

bancassuranceagreements

Netherlands:bancassurance JV with ABN AMRO

EnteredLithuania life from Poland

India:bancassurancefrom 2002

ALI – implementing Group strategy

© Aviva plcSlide 9

Current key objectives for ALI

• Build customer relationships • Build brand equity• Generate value from bancassurance

partnerships• Develop businesses with long-term growth

potential• Increase value from Group synergies• Defend and enhance margins

© Aviva plcSlide 10

Aviva brand strategy

• 5 mass-market brands:– Aviva– Norwich Union– Hibernian– Delta Lloyd– Commercial Union

• Some niche brands (e.g. Morley, Navigator)

• Consistent brand style and personality for Aviva

• Strategy for brand is:– Aviva as the ‘default’ brand – But no ideological commitment to either single or multi-branding

Aviva branded Other brands


Aviva bancassurance• 23% of Group life & pensions sales APE• Margins 39.7%… vs group average of 26.1%

Aviva bancassurance life & pension sales (APE)

+22% vs 2002

0

300

600

2000 2001 2002 2003

£m

£541m


Bancassurance strategy

• Our strategy is multi-distribution –bancassurance is a tactic in suitable markets

• Our diverse range of partnerships is an advantage:– Credibility as a partner– Economies of scale

• Service quality is a key priority• We shall work with partner banks to provide a

comprehensive offer through channels of customer choice


ALI financial summary - operating profit

1,0391,228Total annualised premiums175187International93101Other189246Spain4835Poland158224Netherlands (including Belgium and Luxembourg) 153194Italy223241France

Europe (excluding UK)

2002£m

2003 £m

Annual premium equivalent

259357Total new business contribution before effect of solvency margin, gross of tax

3946International(5)(3)Other87134Spain103Poland2162Netherlands (including Belgium and Luxembourg) 3845Italy6970France


2002£m

2003£m

New business contribution


750831Total achieved operating profit before tax7881International(2)9Other83158Spain111104Poland200189Netherlands (including Belgium and Luxembourg) 5270Italy228220France


2002£m

2003 £m

Life Achieved Operating Profit

360503Total modified statutory life operating profit938International

(19)(4)Other2750Spain66103Poland111107Netherlands (including Belgium and Luxembourg) 2430Italy142179France


2002£m

2003£m

Modified statutory life operating profit

© Aviva plc

Aviva France

Bruno Rostain


• Aviva’s market position and prospects• Antarius (Crédit du Nord)• AFER • Financial results and conclusions• Appendix: Aviva’s unit-linked fund performance


French life market

The French Life market by distribution channel (premiums received)

Banks61%

Direct & Others 6%

Sales force16%

Brokers9%Agents

8%

Source: Fédération Française des Sociétés d’Assurances (2002)

Individual savings & pensions

76%

Protection 17%

Group pensions 7%

The French Life & Health market by class of business

(estimated at end Dec. 2003)

Bancassurance Agents Sales force Brokers Direct

France market premium incomein €bn

0

25

50

75

100

1999 2001 2003 (estimation)

Non bancassuranceCAGR = 4.4%


Existing channels have outperformed market growth

Aviva France new business

Aviva’s market position and prospects -Strong track record in existing sectors

– focus on individual savings and pension business– 3.5% market share, ranking it 7th in terms of reserves and 10th in terms of new business– higher proportion of unit-linked business than the market as a whole– high degree of control over its distribution channels

2003 premium by type of business

Savings 97%

Group pensions

0.5%

Protection 2.5%

0500

1 0001 5002 0002 5003 000

1999 2001 2003

In €m

CAGR =7.9%comparedto 4.4% forthe market

Agents Sales force Captive Brokers Other Brokers Direct

By distribution


Agents

Banks

BrokersDirect

& Others

Sales force

Aviva DirectDirect sales

UFF: a network offinancial advisors

800 staff

Epargne Actuelle:a captive broker

dedicated to AFER

Antarius(Crédit du Nord)Bank distributionfrom Oct. 2004

Aviva AssurancesTied agents

Aviva Vie Salaried network

450 staff

100%

76%

50%

51%

Other captivebrokers

Médéric Epargne

Capital link with% of ownership

Independent brokers

Joint venture

Aviva ownscustomerinterface

Aviva’s market position and prospects -High degree of control over distribution, with a focus on profitability


French Life insurance market

Life and savings turnover on a monthly average

Sources: Euronext and Fédération Française des Sociétés d’Assurances

€ bn CAC 40

“DSK” taxefficient

products commence

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Q1 041000

3000

5000

7000

Unit-linked fund turnover (monthly market average)CAC 40

Unit-linked sales are historically highly geared to market levels


Aviva’s market position and prospects -Aviva is positioned to benefit from market improvement

• Aviva France non-AFER business is mostly unit-linked, more so than the market• Aviva France’s objective is to pursue and increase its sales development in unit-

linked products supported by Aviva Gestion d’Actifs award-winning performance

Unit-linked share of individual savings

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 1Q04

Aviva France – Total

France Market

Aviva France -AFER

Aviva France -non AFER


Antarius (CdN) joint venture –Key benefits for Aviva

• Partnership with Crédit du Nord begins 1st October 2004 for a minimum of 12 years

• Exclusive distribution for most product types through CdN’s network of over 600 branches with access to a 1.2+ million strong customer base

• Collaboration in Life follows successful cooperation in General insurance

• Aviva to provide administration management and fund management of euro funds on its own systems

• The IT development costs have been taken in the Profit and Loss accounts


Antarius (Crédit du Nord) business model

50%50%

Crédit du Nord

Antarius

Antariuscontracts

Managing entity• Administration• Technical• Accounting• Legal

Aviva France

CommercialNetwork

CdN asset management• Fund management

of unit-linked funds Aviva Gestion d’Actifs• Fund management

of Euro funds


Cumulative new businessgrowth over two years

(base 100 in 2001)

+ 30 %

+ 40 %

Sogecap (+31%)

UAF / Natio Vie (+16%)ABP / Prédica (+14%)

+ 10 %

+ 20 %

0 %

Erisa / CM-CIC (+8%)CNP (+10%)

Market (+11%)

Crédit du Nord customer coverage: 17%

Antarius (CdN) outperformed peers

• 2003 new business: €769m representing around 70% of non AFER newbusiness

• Mathematical reserves at 31/12/2003: €3.4bn (of which 40% unit-linked)

Antarius (CdN) (+35%)


Benefits for Crédit du NordWhat Aviva offers

• Effective collaborative relationship already proven in General insurance

• Worldwide bancassurance experience and local product expertise

• Re-usable supporting systems

• Class leading fund management performance

• Confidence in business partnership

• No learning curve, full range of competitive products today

• Efficient platform providing cost efficiencies

• Competitive product offering and improved growth and profits

An attractive proposal for Crédit du Nord…


CAGR of new business 2004-2016 (assumes 25% unit-linked)

10%

11%

12%

13%

14%

15%

16%

17%

5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%

ProjectedIRR (p.a.)

over 12 years

Antarius - Return on investment and financing

• Funding uses existing resources in France with low initial capital paymentCost = EV + Cardif exit costs + systems development costs

• Modest statutory profit anticipated from Antarius

• This acquisition will not impact our capacity to deliver regular dividends to the Group


Antarius (CdN) - 30% improvement inAviva’s non AFER operational efficiency

Aviva’s objective is to handle Antarius volumeswithin existing cost-base

Existing business Antarius Situation post Changeexcluding AFER Antarius

and Protection business(Aviva Direct)

Operational expensesfor portfolio administration: €78m +Antarius - savings = €78m + 0%

Policies in-force: 620 000 + 208 000 = 828 000 + 33%

Technical reserves: €12.3bn + €3.4bn = €15.7bn + 28%


AFER: “unique” in the French market• Successful association for over 25 years:

– Representing funds of €30bn and over 588 000 customers– With a single product concept, sold in two versions: a euro product first and now

a multi-support• Strong customer loyalty built on low charges and strong financial

performance year after year:– 76% of new business comes from existing customers– Around 35% of new members are introduced through existing customers– Low lapse rate: 2.7%– The AFER bonus rate has always been a reference on the French market

• Efficient distribution through:– Epargne Actuelle, a captive broker, which has some 80 staff, operates in 35

agencies, with around 200 000 customers, representing 34% of AFER premium income

– Aviva Assurances tied agents• Low loadings and low administration cost (0.475% and 0.10% respectively;

see appendix 1)


In €m

100

150

200

250

AFER New Business(average monthly volumes)

AFER U.L. AFER euros % UL/Total

18,0%

11,4%

7,2%5,4%

9,9%

15,2%16,0%

152 145 143

194 195222

244

0

50

2001 2002 YTD Nov.03

Disc Dec.03

Disc Jan04

Disc Feb04

Disc March04

0%

5%

10%

15%

20%

0%10%20%30%40%

FY 2001 FY 2002 FY 2003 Q1 2004Aviva France - AFER euros French Market - euros

% Growth

AFER prospects• We are optimistic as to the

prospects for this important distribution channel following the agreement, signed in October 2003. It should unleash AFER’s potential.

• The target for 2004 is to increase the proportion of unit-linked sales


AFER Technical Provisions Euro/Unit-linked(in € bn)

15

25

35

45

1997 98 99 2000 01 02 03 04 05 06 07 08 09 10

Euros Unit-linked

%Uplift on

Total Net/NetUnit-linked

AFER MarginLNB

from 2004

6% (1) 1.3%15% 3.2%20% 4.3%25% 5.3%

(1) Actual FY 2003 % of LNB

Assumptions:

• Total AFER growth of 7%

• UL: 15% of new business

AFER unit-linked margin benefit

Margin benefit


Aviva France –a positive contribution to the Group

0

100

200

300

400

1999 2000 2001 2002 2003 1Q2004

25%

30%

35%

APE 1Q APE 2Q to 4Q NBC margin G/G Ytd

100

150

200

250

300

1999 2000 2001 2002 2003

Pre-tax Life achieved operating profit (in €m)Opening Embedded value (in €bn)

Pre-tax Life MSSB operating profit (in €m)APE (in €m) & New business margin

(gross of tax & cost of SSM in %)

1.0

1.2

1.4

1.6

1.8

2.0

2.2

1999 2000 2001 2002 2003100

150

200

250

300

350

400

1999 2000 2001 2002 2003


Pensions reform in France• Precise conditions were finalised in April 2004• First PERP products launched in Q2 2004 • Anticipated business of around €1bn in 2004, as consumers adapt to

longer-term saving commitments, thanks mostly to transfers from existing savings

• Savings rate in France is already high• Aviva France viewpoint:

– Several PERP products will be launched:– PERP AFER: decision to be taken– PERP non AFER: June 2004 launch– PERP Crédit du Nord: May 2004 launch

– The PERP is an opportunity for our networks– It is an additional product through which we can satisfy our clients’ need for

pension provision and develop regular premium business– Marketing approach to be based on informing the customers and stressing our

specialist pensions know-how, so as to differentiate our offer from the mass campaigns run by the banks


Conclusions

• Significant potential to increase higher margin unit-linked sales supported by current trends:– strong performances of Aviva Gestion d’Actifs– high degree of control over distribution networks– market recovery

• Antarius provides not only a strong return on investment, but also an opportunity to lock-in unit cost reductions on existing business

• AFER performances are strong, with scale advantage and upside unit-linked potential

• We see new PERP market as a medium / long-term growth opportunity, creating additional marketing opportunities for existing products

Lipper Fund AwardsBest fund: international convertible bonds -Victoire Convertibles

... for particular funds … for fund ranges

2003

Prix Le RevenuGold award: international bond fund over 10 years -Victoire Oblig InternationalBronze award over 10 years -Victoire Sécurité Europe

Prix L’Agéfi2nd prize over 3 years: diversified euro fund category -Victoire Profil Equilibre

Prix Investir MagazineGolden laureate for SICAV range over 5 years

Prix Mieux Vivre Votre ArgentGold award: fund management over 5 years – all sectorsSilver award: fund management over 1 year – all sectors

Prix Le RevenuInsurance sector awards:Bronze award: overall performance over 3 yearsGold award: Euro zone shares over 3 yearsSilver award: international shares over 3 years Gold award: international bonds over 3 yearsSilver award: diversified funds over 3 years

Prix La Tribune / Standard & Poor’sGold award: best provider of extended fund range over 3 yearsGold award: best provider of extended fund rangeover 1 year

Prix La Tribune / Standard & Poor’sGold award: best Euro zone equities fund over 3 years -Victoire Actions Euro

Lipper Fund AwardsBest fund: international convertible bonds -Victoire ConvertiblesBest fund: Defensive profile Europe -Victoire SérénitéBest fund: Euro zone equities -Victoire Actions Euro

2004Prix La Tribune/Standard & Poor'sGold award: best provider of extended fund rangeover 5, 3 and 1 year

Aviva’s unit-linked fund performance -Aviva Gestion d’Actifs: an award-winning asset manager


Appendix 1

0.475% on mathematical

reserves

0.10%

Acquisition

Administration

0.34%

Paid to distribution channels

Resource for the insurer to cover sales/advertising costs...

Administration costs

Margin before cost of capital and tax

3% ofnew business

2.66%commissions

Loadings

Other net costs

AFER distribution costs and charges

0.315%

0.06%


Aviva’s unit-linked fund performance -Aviva Gestion d’Actifs: the asset manager of Aviva France

• Focus on a limited number of UCITs (around 35), mainly based on Euro zoneand bonds

• Extremely low cost base as a percentage of funds under management(expenses of 2.7 bp at end 2003)

• €49bn funds under management (vs €44bn end 2002)• 72 staff - of whom 12 are specialist fund managers

The consistently strong performance of AGA is a powerful sales support for our Life operation.

Quartile ranking of AGA funds at end December 20031 year to31/12/03

3 years to31/12/03

5 years to31/12/03

Number of funds 35 35 29Top quartile 43% 77% 69%1st and 2nd quartiles 89% 94% 90%1st, 2nd and 3rd quartiles 100% 100% 97%1st, 2nd, 3rd & 4th quartiles 100%

Appendix 2

© Aviva plc

Delta Lloyd

Niek Hoek


1. Dutch life market & Delta Lloyd`s position2. ABN AMRO joint venture3. Operating efficiency4. Guarantee management5. Financial results


Powerful market with upward potential

• 4.5% of total European life premium income

• $1,345 per capita spending • 5.7% of Dutch GDP• CAGR 9.6% over 1980 - 2001• GWP life Euro 24 bn = 60% of

total GWP • 55% regular premium / 45%

single premium• 33% group life / 67% individual• Average solvency margin 229% 1.7%

2.5%

5.9%

7.4%

7.4%

10.6%

12.1%

13.3%

22.2%

Allianz

AXA

SNS Reaal

Achmea

Rabobank

DL Groep

Fortis

Aegon

ING

Source: AM Jaarboek 2003 / 2004 using 2002 data

GWP life market shares

Including ABN AMRO

The market


Life new business premium by distribution channel

57% 55%47%

22% 24%30%

16% 16% 18%

5%5%5%

1998 2002 2008

65%

9%

26%

The market Delta Lloyd - 2003

Intermediary Direct Bancassurance Others

Intermediaries will remain the main distribution channel for financial service products

APE basis

Source: Delta Lloyd own research


Multi Label - Multi Channel:A variety of choice for the customer

• Distribution channel linked to exclusive label

• Channel / label relation concerning product development, pricing and marketing

• Full range of competitive and profitable products

• No captive agents in the intermediary channel, but franchise formula

• Cross-selling potential between the sectors

• Access to a huge private, SME and corporate customer base

Health BankGILife

Labels / Channels

Intermediary

Direct

Bank

Products / Sectors

( )


The Dutch insurance market is facing significant challenges...

Challenges• Regulator taking a more

sophisticated approach on capital adequacy

• Enhanced consumer protection

• Tax reliefs on products under pressure

• Historically low long-term bond yields

Opportunities• Profitability is highly geared

to investment returns• Demographic trends remain

favourable to insurers• Government withdrawing

from social security / healthcare

• Increasing value management

... but offers a wide range of opportunities for well-positioned professional players!


1. Dutch life market & Delta Lloyd‘s position2. ABN AMRO joint venture3. Operating efficiency4. Guarantee management5. Financial results


Key benefits for Delta Lloyd

• Expands distribution capabilities with minimal channel conflict• Expands client base• Creates leading market positions in new business• Economies of scale / synergies through SSC strategy• Conversion opportunities from ‘third party’ products to JV

products• Opportunity to market full product range to ABN AMRO clients• Asset management opportunities

The right venture at the right moment with the right partner!


Framework of the ABN AMRO joint venture

• Exclusive distribution agreement with a 30 years duration• Usage of ABN AMRO brand in The Netherlands• Agreement covers existing Life and GI in-force business of ABN

AMRO• Delta Lloyd management control (51%/49%)• Fund management (own risk) provided by Delta Lloyd• Exclusive access to >500 ABN AMRO Bank shops and 78 regional

offices• Access to ABN AMRO customer base with: 4.5 million private

customers/325,000 SME’s/80,000 private banking clients• ABN AMRO achieved a stand alone top 10 position in Dutch market/

together with Delta Lloyd top 4

Target: To double penetration ratio from current levels


Achievements 12 months after start

Products & Sales• Brokered GI converted to own risk in 1Q2004 (>60% of own risk

NWP in 2003) • Reduced intermediary function for other suppliers• Stopped writing loss-making direct annuities (was 50% of book)• Full range of new pension products to cover SME demand• Successful integration of Employee Benefit Consultants (EBC)• New Flexible Pension Plan launched in 2004 (FPP product)Organisation & Synergies• Restructured organisation• Back-office integration started• Administration of new products on Delta Lloyd systems• ABN AMRO staff on DL Group payroll• Significant reduction of operational expenses - €8m achieved to date


ABN AMRO results 2003

• Life APE 72 m• Life new business contribution 23 m• LAOP 42 m• GI operating profit 22 m= Operating profit before tax and minorities 64 m 21 m• GI COR 97%

• Acquisition earnings enhancing in year 1 after goodwill amortisation of €9m• IRR for acquisition of 12%• Implied multiple for earnings of approximately 10x• Integration savings on track

KPIs Euro m / FY 2003After tax and

minorities


1. Dutch life market & Delta Lloyd‘s position2. ABN AMRO joint venture3. Operating efficiency4. Guarantee management5. Financial results


Core competence & focus+

Mar

ket e

xpos

ure

+ CoreCustomer focussed issuesAsset management

Non - coreStandard servicesBroad availability of servicesFocus: operational excellence

Insourcing

Desired Profile

Change needed Insourcing

Outsourcing

ICT Infrastructure Front Office

Group GI

Mortgages

Group Life

Unit-linked

Health

Facilities

GI Private

Banking

Life Traditional

Asset ManagementSecurities

Sourcing priorities• Mortgages• Shared-Service Centre General

Insurance• ICT infrastructure• Facilities• Unit-linked administration

Sourcing: Market exposure influences the right choice


Initiative Implementation cost Benefit

SSCs Currently being scopedLowest cost level in the market with fixed quality standards

General contract temporary staff none

• Euro 1.5 m per year• 2 years contract

IT outsourcing Euro 20 m• Euro 14 m per year• 7 years contract

Facilities outsourcing Euro 2.2 m• Euro 2.9 m per year• 6 years contract

ABN AMRO integration Euro 20m to be borne by the JV

• Restructured organisation• New SLAs with AA Bank• Link to SCCs

Sourcing of non-core activities has given the opportunity to concentrate own resources on our main business


Initiative 2003 achievement Future target

Permanent staff numbers 5% reduction in FTE 3% reduction per year

Cost reduction€50m target reduction in underlying cost base achieved

Further reduction

Margin improvementFY2003 margin to 27.7% mainly through change in product mix

Expand margins further

Group-wide focus on margin improvement and cost reductions


Guarantee management traditional individual business

Product type Interest profit to policyholder

Yield guarantee Interest profit to shareholder

Risk products nonenoneReturn exceeding technical interest

Saving products single premium

noneFixed interest ( Capital market + 50 bp )

Return exceeding fixed interest

Saving products regular premium

Interest surplusTechnical interestSpread 50-75 bp + yield surplus

Technical interest= 3 or 4 %

50 - 75 bpshareholder

Interest profitpolicyholder

Yield surplusshareholder

Investment return

Yield government bonds

Technical interest on new business 3% since 1999, others 4%


DescriptionProduct type

Separate accounts “kapitaal contract”

No guarantees

Almost all investment return for policyholders

Only small margin for shareholder

Separate accounts “garantie contract”

Benefit + tariff guarantee but no yield guarantee

Negative interest surplus will be balanced with future interest surplus

Special interest profit agreements

Default contracts Same structure as traditional savings products against regular premium (see example previous slide)

Guarantee management traditional group business

Minimal interest rate risk on separate accounts of group business


Guarantees on unit-linked life business

• Guaranteed maturity benefit (DL Mix Fund only)• Asset allocation currently circa 60% fixed interest / 40%

equities• Based on 4-2 % interest guarantee (2% since Oct 2003)• Minimum premium payment duration 10 years• Lapse before maturity means also loss of guarantee• AMC of 130-150 bp covers expenses, cost of guarantee

and margin• DL holds a separate reserve for guarantee obligations

Guarantees are being scaled-down and are priced into product


Interest profits to shareholder on Dutch life contracts (examples)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

3% 4% 5% 6% 7% 8%

Traditional SP(5% guarantee) Unit-linked Traditional RP

Large potential from higher investment returns

NPV

(int

eres

t pro

fit)

% o

f NPV

(pre

miu

m)

Total investment return


Total Delta Lloyd Life reserve Euro 14.3 bn

Policyholder account Shareholder account

• Group segregated funds 26%

• Unit-linked 11%

• Group non-linked 36%• Individual non-linked

– Savings 26%– Risk 1%

37%

Σ

63%

Σ

Considerable upside potential from investment returns for shareholder

Allocation of investment profits


Delta Lloyd has a sophisticated risk management tool box in operation• Tool box examples

– ALM models in operation for life, general & health insurance, pension funds

– Tools for scenario risk analysis– Clear asset allocation– Regular risk reports covering the whole risk map– Hedging model & strategy

• Hedging strategy– Focus on a healthy solvency margin > 150%– Specific hedging of “5% holdings”– Residual hedging through indicies (AEX, S&P 500)– Buying Put protections (90%/60%)– Selling Call protections (120%/140%)ALM models in place focus on risk reduction techniques


Analysis of credit risk & equity performance

Credit risk at year end 2003

AAA56.18%

AA19.31%

BBB11.48%

B0.81%

NR1.23%

A10.99%

Performance equity portfolio

0%

20%

40%

60%

80%

100%

120%

140%

1999 2000 2001 2002 2003

DL equity portfolioBenchmarkAEX relative

Benchmark: 2000 - 2002: 45% CBS locals, 45% AMX, 10% AEX, 2003: 65% MSCI Netherlands, 35% MSCI World

Average rating = AA - Better than peer indicies driven by 5% holdings


Sensitivity analysis solvency ratio• Actuals FY 2003 Delta Lloyd Dutch life business*

– Available assets Euro 1,778 m– Required assets Euro 753 m– Solvency ratio 236 %

• Test A– Equities - 35 %– Property - 20 %– Solvency ratio 136 %

• Test B– Equities - 35 %– Property - 0 %– Solvency ratio 165 %

* Excluding Belgium and Germany


£ m / UK GAAP

Life achieved and MSSB profit development

1,806

2,0861,866 1,806

2000 2001 2002 2003

179

221200

189

2000 2001 2002 2003

162

214

111 107

2000 2001 2002 2003

Opening Embedded value Pre - tax LAOP Pre - tax MSSB operating profit

Results affected by poor financial market conditions


Life new business volumes and margins

131

170158

224

63

2000 2001 2002 2003 1Q04

9

38

21

62

18

2000 2001 2002 2003 1Q04

6.9%

22.3%

13.3%

27.7% 28.8%

2000 2001 2002 2003 1Q04

Volumes APE Contribution - gross Margin

ABN AMRO, expense control and other management actions all having a beneficial effect on margins

£ m / UK GAAP


Conclusions

• Strong brands give DL scope to become market leader in life sales

• ABN AMRO venture delivering strong IRR of 12%• Specific projects underway to increase operational efficiency• Cost efficiencies/margin improvements achieved and targeted • Appropriate response to policyholder demand for guarantees• ALM risks under strict control• Increasing new business margins due to actions taken

Delta Lloyd - well positioned in a challenging but improving market!


AEX 1999 - 2004

339

671

218338

Dec 1999 Mar 2003 Dec 2003 Mar 2004

Interest NL 10 yr 1999 - 2003

5.5%

3.6%4.3% 4.1%

Dec 1999 Mar 2003 Dec 2003 Mar 2004

Gross Domestic Product NL

3.5%

1.2%0.2% -0.1%

1.3%

2000 2001 2002 2003 2004e

Unemployment ratio

3.8% 3.4% 4.1%5.3%

6.5%

2000 2001 2002 2003 2004e

Dutch market: Economic indicators looking more positive than one year ago

Appendix 1


Delta Lloyd Group`s position Overview key figures 2003

• Gross revenues• Gross written premium• Investment income• Total new business (Life: APE basis)

• Inflow new money (net )

• Operational expenses (2002 includes ABN AMRO)

• Ordinary result before tax• Result after tax

• Shareholder funds

• Assets under management

Euro mDutch GAAP (2003 including ABN AMRO)

7,3694,9822,210

562669753311247

2,244

41,044

Actual 2003

5,4864,3411,022

354502838158138

1,713

36,338

Actual 2002

34%15%

116%59%33%

-10%97%79%

31%

13%

Variance %

Appendix 2


Dutch group pension market

FortisAMEV / Stad Rotterdam Woudsend / AmersfoortseFortis Bank

Rabo-bank

RabobankInterpolisRobeco

Delta Lloyd

Delta LloydOHRAABN AMRO

AegonSpaarbeleg / AccentAegon Bank

Aegon

Nationale NederlandenING Bank / PostbankRVS / Movir

ING

Group pensions product

Multi-Channel distribution

Appendix 3


DescriptionProduct

Life insuranceComplete range; tailor-made to Delta Lloyd Competitive pricing to increace market share

ABN AMRO joint venture- Main product features

Life Insurance50%/50% regular/ single premium Strong mortgage productDirect annuities priced on positive Embedded value

HealthPresently mainly “Vreemd Produkt” (AAV acts as IFA)

Plan to convert “VP’s” to own product

Non-life PrivateStrong new Motor product

Over 1 million policies sold to customers

Non-life commerical2 product packages for SME’s: standard + tailor-made

Over 200,000 policies sold

Appendix 4

© Aviva plc

Aviva ItalyItaly’s pre-eminent bancassurer

Cesare Brugola


Agenda

• Growth market and Aviva’s positioning• Bancassurance partnerships• Products• Shareholder value• Future opportunities


High Growth of almost 20% Per Annum Over Last 6 Years – twice as fast as any other European market

€m

Source: ANIA - * estimates – 02.2004

Premium Income 1998 - 2004 *

*

The Italian Life Market

7000062780

55298

4632839784

35597

26483

01000020000300004000050000600007000080000

1998 1999 2000 2001 2002 2003 2004

*


Generali Group

Allianz Group

Unipol Group

Cattolica Group

Aviva Group

Monte Dei Paschi DiSiena Group

2,000,000

13,916,720

8,945,350

5,061,150

Poste Vita

2,469,878

4,000,000 6,000,000 8,000,000 10,000,000 12,000,000

4,489,480

2,819,920

2,389,900

Aviva top five by end 2005

Source: ANIA, Total Premium Income 2003

San Paolo -Fideuram Group 7,181,340

?

14,000,000

The Italian Life Market


• Italian market and Aviva’s positioning• Bancassurance partnerships• Products• Shareholder value• Future opportunities


Broadening and Building Partnerships

0

50

100

150

200

250

300

2000 2001 2002 2003

A.P

.E. E

UR

O M

illio

ns

Extended distribution through former ING Bank distributors

2004

2002

New bancassurance partnership with Banca Popolare Commercio e

Industria (now Banche PopolariUnite)

2001

Newbancassurancepartnership with

Banca Popolare diLodi

2000

Newbancassurancepartnership with

UniCredito

95.1m

202.9m

243.5m

279.5m

Annual Growth Rate: 43%

2000

New bancassurance partnership with Banca delle Marche

2004

BPU agreement extended to include

BPB branches

Source: Aviva plc


A Network of Networks…AVIVA Italia Holding SpA

100%

Commercial UnionAssicurazioni SpA

50%(Banca delle Marche 50%)

Commercial UnionLife SpA

50%(Banca delle Marche 50%)

Commercial UnionInsurance SpA

100%

Commercial UnionVita SpA

50%(UniCredit Banca 49%)

FINOA Srl50%

(Bipielle Investimenti SpA50%)

Commercial UnionItalia SpA

100%

AVIVA Vita Spa50%

(BPU S.c.r.l. 50%)

Commercial UnionPrevidenza SpA

100%

Commercial UnionVita SpA

1%

Eurovita Spa80.96%

(other Banks 19.04%)


Bancassurance through Joint Ventures…

UNICREDITO Valle d’AostaUNICREDITO PiemonteUNICREDITO Liguria

UniCredit Banca RetailUniCredit Private BankUniCredit Banca d’Impresa

CU Vita

BPL GROUP Banca Popolare di LodiBipielle AdriaticoBanco di ChiavariCassa di Risparmio di TrentoBanca Popolare di Mantova

Cassa di Risparmio di AstiCassa di Risparmio di BolzanoBanca del FucinoBanco di RomagnaBanca Popolare di Puglia e BasilicataCassa di Risparmio di CarpiCassa di Risparmio di CentoCassa di Risparmio di CesenaCassa di Risparmio di RiminiTercasBanca di Ciociaria

CU Previdenza

BPU GROUP Banca Popolare Commercio e IndustriaBanca Popolare di BergamoCARIME

Aviva Vita

Banca Delle Marche GROUP Banca Delle MarcheCARILO

CU Life

Eurovita


Banca Popolare del Cassinate CU Vita

Credito Valtellinese CU Vita

BCC di Bene Vagienna – CNBCC di Pianfei e Rocca De Baldi – CNBCC del Chianti Fiorentino – FIBanca del Mugello Fiorenzuola – FIBCC di Casalgrasso e Sant’Albano Stura – CNBCC di Caraglio e della Riviera dei Fiori – CNCassa Rurale di Folgaria –TNBCC dell’Alto Garda – TNBCC di Manzano – UDBCC di Civitanova Marche –MCBanca della Ciociaria – FRBCC di San Marzano di San Giuseppe – TABCC Don Rizzo Alcamo – TPCassa Rurale di Tenno - Val di Non – Cles – TN

* BCC = Banca di Credito Cooperativo

CU Vita

… and also Distribution Agreements


National Network over 3,400 branches and 2,500 financial advisors

UCI

BPL

BPL Eurovita

BDM

BPU

522

538

657

253

BPCICARIME

BranchesShare of APE in 2003

53%

17%

11%

7%

BCC (*)

Other12%

100%

Financial Advisors

1,750

717

167

TOTAL

Further opportunities with less developed bank networks...

N/A

2,467

336

BPB

241326380

3,420 2,467

(*) former Nad.Ned. distributors


BANK RETAIL CUSTOMERS

CU VITAUNICREDITO

23%EUR 2.25M

AVIVA VITABPCI/CARIME

2%EUR 0.4m

CU PREVIDENZAEUROVITA

BPL4,4%

EUR 0.3mCU LIFE

B.D. MARCHE2%

* EUR 0.3m

PE

NE

TRA

TIO

N

30%

20%

1,000,000 2,000,000500,000 1,500,0002003 NB PREMIUM PER BRANCH

**

*

*

*

Source : AVIVA

Opportunity to Increase Customer Penetration


0

0.5

1

1.5

2

2.5

SanPaolo IMI Unicredit MPS BancaLombarda

Intesa CRF MarketAverage

AvivaCompanies

CU Vita

Source : Estimates based on bank annual reports 2003

€ m

. –N

ew B

usin

ess

2003 New Business per Branch

Outperforming Bank Owned Distribution


0%

5%

10%

15%

20%

25%

30%

35%

40%

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

MPS

Intesa

SanPaolo IMIUnicredit

Banca Lombarda

CR Firenze

Source : Estimates based on bank annual reports 2003

1,836

3,1683,359

3,087

438

770

Insurance Reserves vs Total Assets Under Management%

Insu

ranc

e R

eser

ves

/ Tot

al A

UM

€ m. Insurance Reserves per branch

Numberof

branches

Aviva strongly positioned for the future


Aviva Italy BancassuranceModel

Life Subsidiary

Bank Branches

50%

Bank Group

100%

Dividends

Dividends

Dividends

Investment X%

Inve

stm

e nt 5

0%

Investment

Return on capital employed for Italy Life in 2003: 12% (post tax)


Investments in Italian Bank Partners

• Aviva usually takes an equity stake in the partner bank, in return for access to distribution

• The total shareholder’s strategic investment in partner banks is €694m as at 31 March 2004 The amount in listed securities is €352m

• Future agreed shareholder investments in partner banks but not yet arranged amount to €179m

• Investments purchased at market value (independent review of value for non-listed investments)

• For non-listed strategic investments, we include a protection clause in the partnership agreement relating to the realisation value of our investment in the bank


Why Bank Partners Choose Aviva…Benefits for our partnersWhat Aviva offers

Reputation for local bancassuranceexpertise; coupled with Aviva’s world-wide experience

Developed administration platform, web enabled for fast, cost effective processing at bank branch

Short time to market for new products; reputation for innovation

Strong, stable management team with an entrepreneurial approach

Strategic investment in Bank and share of JV company

No learning curve, high sales productivity potential

Proven, efficient platform, no implementation risks, low expense base

Highly responsive to market opportunities. Full range of competitive products offered

Experienced team with high motivation to ensure success

Long term shareholder in bank and growing share of profits in JV companyProven corporate governance model


Higher proportion of Unit Linked and Index Linked products, without in-house guarantees and lower capital (solvency margin) requirement.

The Market in 2003 Aviva in 2003

Source: ANIA - Individual Life total sales 2003AVIVA - New Business in 2003

Italian Life Market/Favourable AvivaProduct Mix

Unit-Index Linked 53%

Traditional 47%

Unit-Index Linked 62%

Traditional 38%


Overview of Aviva product mix/characteristics

Minimum underlying returns on SP policies purchased from Investment Banks, with counterparties rated Aa3/AA- or above. No guarantees on RP policies. (Aviva market leader with UCI)

Unit Linked

50%

Index Linked

12%

Structures purchased from counterparties rated Aa3/AA-

or above, exactly matching product benefits

Capitalisation

27%

Traditional, including Term Assurance

11%

Minimum returns between 0% and 2.5% (2.5% on single premium policies only). Normally a fixed profit margin toAviva, rather than a percentage of investment return which is variable

Similar to capitalisation policies but with a higher level of death benefit. Growing term assurance portfolio of annual premium policies covering mortgages and bank loans

Source: AVIVA 2003 New Business


Product Innovation: First insurer to launch Unit Linked products on the market

Anticipation of market needs and resistant design:

Experienced development team, with acknowledged product leadership in market place. Close working with partner throughout development process ensures success

Short speed to market:

Automated systems and processes – able to deliver product from specification to launch in 2 weeks. In 2003, a total of 25 new products were introduced through the various distribution channels

Operational Excellence: Products supplied by innovative workflow and service delivery

Worldwide product experience: World class expertise available from Aviva Group

Market Leading Product Development Success…


Strong New Business Growth

0

50

100

150

200

250

2001 2002 20030

10

20

30

40

50

2001 2002 2003

New Business Premium - APE New Business Contribution (1)

£m £m

(1) Pre tax, pre cost of capital

126m153m

194m

28m

38m

45m

49m

2004 – 1st quarter

12m

2004 – 1st quarter


Consistent New Business Margin - %

• Diversification of bank partners• Economies of scale (e.g. one system platform)• Low expense base• Product pricing disciplines• Management of product mix• Mutual benefit through the JV Life Company

20041st quarter

22.224.9

23.2 24.3

200320022001

Source : Aviva, New Business Contribution/APE on a pre tax, pre cost of capital basis


Strong Profit Record

0

5

10

15

20

25

30

35

2000 2001 2002 20030

10

20

30

40

50

60

70

2000 2001 2002 2003

Modified Statutory Profit (1) Life Achieved Operating Profit(2)

£m £m

(1) UK GAAP Basis, Gross of Tax (2) Gross of Tax

21m

26m24m

30m

29m

55m52m

70m


Source: ANIA

Leading Cost Base

Consolidated Aviva LifeCompanies

Top 15 Life Companies Aviva Companies Premium perStaff

Italian Market

2002 Expense Ratios (Life)

Expense as Proportion of

premium income

0.97%

2.16% € 5.2 m

€ 2.3 m

Total Premium per Employee (Life & Non Life)


Ageing ratio/pensions

State pension costs as a % of GDP

Traditional retirement promise as a % of final salary

Privately funded pension assets as % of GDP

By 2050, overall population reduced from 58 m to 51 m

Over 65s will increase from 22% today to 31% in 2021 and 49% in 2050

15.4% in 2002 the highest in Europe (EU average 12.2%)

Total reserves in 2003 € 37.4 bn of which € 1.3 bn Individualpolicies

2.1m PF members and 0.5m individual policies at end 2003

67.3% one of the highest in Europe

0%

25%

50%

75%

100%

2004 2021 2050

<65>65

Source: ISTAT – COVIP - ANIA

8

10

12

14

Italy France UK Europe

67%

Strong medium-term growth drivers

2,80

20

40

60

80

100

% of GDP


Replacement ratio (% final salary)(Employee, age 60, 35 years contribution)

64.865.264.165.471.867.3TOTAL

16.716.714.59.44.70.0Private pension

48.148.549.656.067.167.3State pension

205020402030202020102000Forecasted importance of private pension

Source: COVIP / Rapporto di strategia nazionale sulle pensioni

Strong medium-term growth drivers


Pensions OpportunityGovernment Pension Reforms – currently in Parliament

• Gradual postponement of retirement age towards 40 years working service

• Reduce the possibility of early retirement on a full pension and introduce incentives in order to convince employees to postpone retirement

• TFR: new rules allowing transfer to the Private sector• Reduction in pension contributions for new employees• Enhanced fiscal incentives (reduction of capital gain tax

during the accumulation period)• Increase in contribution ceiling for tax relief


Pensions OpportunityLife Assurers role

• € 13 bn contribution from employers each year to TFR

• TFR re-evaluation rate: 3.4% actual performance in 2003 versus 5.7% average for Pension Funds

• Insurers of “open” pension funds• Providers of annuities to members retiring from

service with pension fund benefits• Insurers of risk benefits• And naturally distribution of own individual products

(PIP) through bank branches• Distribution of own individual product (PIP) through

financial advisors

Aviva is Strongly Positioned for Pension Developments

Opportunities

Our plans

Source: COVIP


Aviva Italia Summary

• Italy’s pre-eminent bancassurer• Expanding its distribution network• With a cost competitive advantage• Innovative• With a fast & proven development capability• In one of the most exciting growth markets


European Bank Groups Capitalization (in € billion)

1 HSBC 143.12 RBS 76.73 UBS 70.04 Barclays 48.15 BNP Paribas 45.86 BSCH 44.17 HBOS 42.58 DB 41.19 BBVA 37.6

10 LTSB 37.411 Credit Suisse 34.612 SocGen 31.013 ABN AMRO 39.914 CA-CL 29.815 UCI 26.6

16 Dexia 17.617 Intesa 17.518 Nordea Bank 16.619 Std. Chartered 16.520 S. Paolo IMI 14.921 Danske Bank 13.622 Banco Popular 11.023 AIB 10.424 Bank of Ireland 10.325 Abbey National 10.326 Svenska 9.827 Commerzbank 9.328 HVB 9.229 SEB 8.130 Banesto 7.0

31 BCP 6.632 MPS 6.333 BPVN 5.234 Capitalia 5.235 Northern Rock 4.936 BNL 4.637 BPU 4.638 BES 4.339 Banca Lombarda 3.440 Bankinter 2.541 BPM 2.0

BPL 2.2BPL Investimenti 1.6Reti Bancarie 1.4

Source: Thomson Datastream and The Boston Consulting Group 2004

Appendix 1


% of Single Premium

Initial Charge (after commission to bank) : 2.0% Nil

Annual Charge (after commission to bank) : 0.5% 0.5%

Life Company Expenses : 0.9% 0.3%

Life Company Profit : 1.6% 0.2%

Margin (Discounted Profit Flow over 6 years) = 2.5% of single premium 25% of APE

Year 1 Years 2 - 6

Note: All figures gross of tax

The Italian Financial Model: Illustration of a Six Year Single Premium Investment Bond

Appendix 2

© Aviva plc

Aviva SpainBancassurance partner for lifeGerardo Arostegui


• Aviva market leader

• Business development

• Shareholder value


Invested in Potential and Created Value• 5 acquisitions from

Aseval (June 2000) toCaja Granada(September 2002)

• Total Aviva investment of £505m

• Combined market share purchased 3.4%

• Profitable growth of JVs, to market share of Aviva bancassurance of 9.2% of the total life market at end 2003

0.0%

2.5%

5.0%

7.5%

10.0%

Aseval Bia Galicia Unicorp Vida Caja España Total AvivaBancassurance

Growth in Market Share Since Acquisition

Mar

ket S

hare

by

Prem

ium

Inco

me

1. Unicorp figures include Caja Granada


APE up 18% in 2003(1)

New business sales (APE) in Aviva SpainManaging a Profitable Product Mix

2002 Full Year € 301m

Source: Aviva

Life & Savings64%

Life Risk9%

Pension27%

Life & Savings50%

Pension36%

Life Risk14%

2003 Full Year € 356m

(1) APE for 2003 £ 246 m


MARKET SHARE EVOLUTION

3.5%

6.9% 7.4%

10.0%

0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003

RANKING POSITION

2000 2001 2002 2003

1º

4º5º

6º

Source: ICEA

Premium Income

Market Leader in Spain in 3 years(1)

(1) 10% market share by premium income: 9.2% for bancassurance and 0.8% for Aviva Vida y Pensiones

Aviva No 1 in Life Business


Unique Business Model Designed for Growth• Trusted partners with strong franchises• Partners incentivised for value growth• One-factory business model• Proven and successful bancassurance process• Management expertise to develop the business• Aviva brings ownership, controls and insurance

expertise


• 11.1m customers• 12.6% of clients have policies• Less than 1.5 policies per client

• 3,713 Branches• 20% growth next 5 years • Growing in new regions

• Ageing Population• Low Insurance Penetration• Strong growth forecast

Client Penetration

Branch Network

Market Growth

Drivers of Growth are Positive

Plan to Exceed Market Growth


Total Life Policies/Total Bank Clients

0.00%

10.00%

20.00%

30.00%

40.00%

2000 2001 2002 2003

Further Potential For Growth

Aseval

Caja Espana

Caja Granada

Bia Galicia

Unicorp Vida

Penetration Increase of over 30% in 2 years


Growing Network with Internal Competition

00.5

11.5

22.5

33.5

44.5

A B C D E

Targets based on Best Practice Performance by Aviva PartnersPensions Business

Protection Business Savings Business

APE

Per

Ban

k C

lient

€

APE

Per

Ban

k C

lient

€

APE

Per

Ban

k C

lient

€

Actual

Potential

Bank

Bank Bank

0

2

4

6

8

10

12

14

16

A B C D E

05

101520253035404550

A B C D E


Target – A bigger share of a bigger market

Business Development in Action

• Aligning strategy and plans between partners• Tailored training programs at partners and

branch level• Integration with bank product range• Leveraging best practice across the Aviva

network• Expanded Product Offering - Addressing the

clients’ needs


Shareholder Value – Overview

020406080

100120140160

2000 2001 2002 2003

• High margin products• Average Gross NB Margin

59% for 2003• NB IRR post tax and cost of

SM(1) 30% for 2003• NBC post tax post cost of SM

£78m• After allowing for goodwill and

expected earn-out payments deal IRRs become circa 12%

Bancassurance: new business contribution pre-tax and cost of capital (100% Level)

£m

(1) Solvency Margin


(1)Aseval provides third party administration (TPA) services for other JVs

AvivaSpain

50% ProfitsBank Partners

BancajaTPA (1)

50% Profits

ServicesFees

50% Profits

Commissions

PremiumsBenefits

50% Profits

Customer

JV Companies

One Factory Bancassurance Business Model


Spanish bancassurance protection is inherently more profitable than traditional protection business...

• Pricing: less competitive pressure

• Loyal client base• Low expenses in Spanish

bancassurance• Revenue based commission in

Spain

-200%

-150%

-100%

-50%

0%

50%

100%

1 2 3 4 5 6 7 8 9 10

0%

10%

20%

30%

40%

50%

1 2 3 4 5 6 7 8 9 10

...which leads to lower strain and significantly higher margins

Traditional UK protection product cashflow

Spanish bancassurance protection product cashflow

years

years

% o

f APE

% o

f APE


Illustrative Bancassurance Profit Signatures

• Tax efficient product• Level loading meeting customer needs• Max industry charge 2% pa, typical JV

charge 1.5%• Long duration and high retention• High margin, breakeven year 3

• Competition with bank deposit accounts• Tax advantages if held for 5 years• Higher lapses as also used for shorter

term savings• Level commissions and low costs• Lower margin but high IRR

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

1 2 3 4 5 6 7 8 9 10

Pensions – Single Premium Savings- Single Premium

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

1 2 3 4 5 6 7 8 9 10% o

f Pre

miu

m

% o

f Pre

miu

m


Illustration

% o

f Fun

d

Initial Expenses - Yr1 OnlyBank Commissions - Yr1 onlyAdmin Expenses

Year 1

2.00%

1.00%

0.00%

-1.00%

-2.00%

i

Annual Charge - Expenses = Profit

Expenses

Annual Charge - Expenses = Profit

Year 2+

Shareholder income and expenses: unit-linked pension contract


Source: ICEA

0

1

2

3

4

5

6

Aseval Avivabancassurance

cons.

Other largebancassurers

Total Spanish lifemarket

Acquisition and administration costs (% of premium, 2003)

1.55%

3.04%

6.45%

2.20%

%

Increased competitive advantage against the market

Continued Low Costs Underpin Attractive Margins


Strong Margins Supported by Pricing –Low Expenses and Scale Advantages

Source: Annual reports

No indication of margin pressures

(1) Average 30% Post COC & tax

0. 0%

20. 0%

40. 0%

60. 0%

80. 0%

100. 0%

Q4 2000

Q22001

Q42001

Q22002

Q42002

Q22003

Q42003

Average margin55%(1)

Q1 ’04 margin60%

Bancassurance Gross Margins

Increased weighting of protection

High volumes of savings


Growing Shareholder Value

• Active management of product mix• Focus on growing the value of NBC• Commission agreements reduce need for capital support• Growing economies of scale from single admin. platform• Cash generating model with low capital requirements

Blueprint for continued success


Aviva Spain summary

• Spain’s leading life business in 3 years– Strong growth prospects– Attractive product pricing– Expense advantage– Strong margins

• Shareholder value visible at early stages of business development


Company

GRUPO AVIVAMAPFRE/CAJA MADRIDCAIFORBBVA SEGUROSGENERALIBANSABADELL VIDAIBERCAJAASCAT VIDAALLIANZCASER

Source: ICEA

Aviva No 1 in Life Business

PremiumsMillion €

1.7671.7121.5961.2371.184740718704611529

Ranking

2003

123456789

10

Position

2002

431578

11121410

Appendix 1


Caixa Galicia

5%

Caja España

6%

Bancaja

17%

4%

2%

10%2%

Unicaja

13%

2%

4%CajaGranada

2% 6%2%

1%

3%19%

Source: INE

Aviva’s bancassurance network has leading market shares in territories that account or c.70% of Spanish GDP• Strong multi-regional

presence in fastest growing regions in Spain

• Growing presence in attractive areas outside home regions (Madrid, Catalunya)

• 11.1 million customers, 3,713 branches

• 3rd largest bank network

Key: %s show proportion of GDP

Appendix 2


Business Aviva’s EV Currentcommenced consideration(1) acquired customers Region

Bancaja Aug 2000 £217m £47m 2.5 m Valencia

Unicaja Oct 2001 £95m £14m 3.4 m Andalusia

Caixa Galicia Oct 2001 £93m £6m 2.0 m Galicia

Caja España Jan 2002 £88m £12m 1.5 m Castilla y Leon

Caja de Granada May 2003 £12m 0 1.7 m Andalusia

(1) Future consideration subject to performance

Source: Aviva

Spanish bancassurance partnerships at a glance

£505m £79m

Appendix 3


0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003

New business sales (APE)

Firstbancassurancedeal

Average compound growth 163% p.a. 2000 (£ 57m) – 2003 (£ 246m)

£mAPE

Transforming Aviva’s Position in the Spanish Market

Source: Aviva

Appendix 4


Positive “Cash-Flow” From Early Stages of Growth Business

0

5

10

15

20

25

30

35

40

45

50

55

00 01 02 03

Bancassurance pre-tax MSSB evolution

Source: Aviva

£m

7

16

29

50

FY

HY

FY

FY

HYHY

FY

Appendix 5

© Aviva plc

Managing Guarantee Risk

Peter O’Donnell – Finance Director Aviva Life International

© Aviva plcSlide 3


• Managing guarantees in Aviva• Guarantees in major business

– France– Spain– Italy

• Valuing guarantees

© Aviva plcSlide 4

Guarantees in Life Insurance

• An important differentiator for the industry• Highly valued by customers…• Must be properly priced, valued and managed• Increasingly sophisticated approaches applied to

legacy book• New products subject to strict control processes

Only offer contracts that add value to policyholders and shareholders

Continuous Improvement in Aviva Control Processes

Asset Liability Management• Clear control framework• Duration and credit benchmarks• Investment in stochastic models• More sophisticated hedging strategies

Continuing focus on risk reduction through monitoring, management and transparent reporting

Aviva Control & Monitoring• Group policy framework• Internal capital assessment• Reporting and valuation• Risk management reporting• Global monitoring of credit• Group risk concentrations

Product Design

Product Design

ALM

Control&

Monitoring

Product Design• Pricing controls• Capital efficiency• Risk management• Risk appetite

© Aviva plcSlide 7

France: AFER is 50% of Portfolio

In-force – Total policyholder liabilities of €43,781m at 31.12.03

New business –Total APE 2003 €349m

AFER(48%)

FenetreProducts

(7%)

Other –incl. trad euro product(10%)

AFER(63%)

Protection(3%)

Unit linked –no guarantees

(9%)

Unit linked with guar’td death

benefits(15%)

Unit linked with guar’td death

benefits(17%)

Unit linked –no guarantees

(3%)

Protection(8%)

Traditional euro product(17%)

* Unit-linked includes AFER unit linked

© Aviva plcSlide 8

AFER guarantee evolves over time

2

3

4

5

6

7

8

9

10

1991 1993 1995 1997 1999 2001 2003

AFER bonus rate Gov. bond rate (TME index) Guarantee

• One fund - one guarantee

• Current guarantee is higher of:– 60% of market rates;– 65% of average

bonus rate for last 2 years

• Guarantee provides safety net to policyholders

AFER Bonus Rate against Government Bond Index (%pa)

© Aviva plcSlide 9

AFER Risk Analysis Risk Insight Controls

Credit Risk

Interest Rate Risk

Surrender Risk

• Mutualisation limits shareholder exposure

• Improves returns to policyholders

• Book value accounting smoothes returns

• Sound contract design• Stochastic analysis

confirms low inherent risk• Controlled duration risk to

enhance returns

• Principal risk is large increase in interest rates plus a large rise in surrenders

• Loss of tax benefits keeps retention rates high – 96% in 2003

• Exposure limits• Active management• Portfolio controls

• Asset allocation• Duration management• Agreed benchmarks• Active use of

derivatives

• Regular monitoring• Active duration

management• Management of capital

gains


AFER Asset Allocation

Market Value of Assets€28,600m at 31.12.03

Value of Corporate Bonds €8,947m

Corporate Bonds (32%)

Government Bonds* (50%)

Equity / Property

(2%) Floating Rate(16%)

BBB(9.2%)

A(28.2%)

<BBB(4.2%)

AAA(31%)

AA(27.4%)

* Government bonds: Includes debt issued by state and semi-state bodies


AFER: Stochastic Analysis

=Additional cost of guarantee

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Low risk of adverse scenario x low impact = low cost of guarantees

-400

-200

-

200

400

600

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97

Assumptions Distribution of in-force valuations

Σ Impact x probability

100 Illustrative scenarios1000 stochastic interest rate scenarios

+Policyholder behaviour assumptionsManagement discretion assumptions

Model

system


AFER: Analysis Confirms Low Risk

• Substantial AFER portfolio has guaranteed surrender values and low minimum returns

• Risks to shareholder are low and carefully managed

• Regulator can remove surrender guarantee ‘in extremis’

• Guarantee formulae can be adjusted with agreement of association


Spain: Low Guarantee Exposure in Current Sales Mix

In-force – Total policyholder liabilities of €6,999m at 31.12.03New Business – Total APE 2003 €354m

ULPensions

(35%)

Risk(14%)

Traditional Savings

(31%)

Unit Linked(6%)

Financial Annuities

(11%)

Other /Externalisation

(3%)

ULPensions

(30%)

Risk(1%)

Traditional Savings

(38%)

Unit Linked(11%)

Financial Annuities

(13%)

Other / Externalisation

(7%)


Close Cashflow Matching of Annuities

• Cashflow matching achieved with FI securities and structured bonds/SPVs from leading banks

• Exposed to risk of sub 2% yields from 2040

0

5

10

15

20

25

30

35

2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043

Aseval Externalisation Business

Ann

ual I

ncom

e/ou

tgo

€m

Asset Income Liability Outgo


Savings Reserves by Guarantee

211154

713779791

0100200300400500600700800900

Guarantee1%pa

Guarantee3%pa

Guarantee4%pa

Guarantee5%pa

Guarantee6%pa

Total Technical Savings Provisions of € 2,648 m

High quality fixed interest assets with very significant unrealised gains to cover the guarantees

or DGS rate if lower

€m


Asset Allocation*

Market Value of Assets€2,087m at 31.12.03

Value of rated securities€1,964m

Corporate Bonds (76%)

Cash & repo(1%)

Equity (6%)

Govt debt(12%)

BBB(8.0%)

A(46.3%)

AAA(19.9%)

AA(25.8%)

Other public debt(5%)

* Participating business


Guarantee Management in Spain

• New product range has only small manageable guarantees; e.g. 1% on Aseval savings contract

• Rapid growth of Spanish business dilutes exposure to historical guarantees

• Strict credit controls• Cash flow matching for guaranteed products• Controlled use of derivative instruments to improve

matching; e.g. structured bonds on annuity contracts

Limited legacy guarantees in Aviva Spain


Italy: Strong Focus on Unit Linked

Total 2003 new APE of €281m

Unit/IndexedLinked Bonds

(56%)

Protection (1%)

Pension Contract

(2%)

Traditional Savings

(39%)

Other Unit Linked

(2%)

Total liabilities of €9951m

Unit/IndexedLinked Bonds

(55%)

Other Unit Linked

(1%)

Traditional Savings

(43%)

Protection(1%)


89 196

7351,018

2,211

0

500

1000

1500

2000

2500

Guarantee0%pa

Guarantee2%pa

Guarantee2.5%pa

Guarantee3%pa

Guarantee4%pa

Total Technical Savings Provisions at 31.12.03 €4,248m

No new business with guarantees above 2.5%pa

Savings Reserves by Guarantee

€m


Italian Non-Linked Asset Allocation

Average Rating = AA

AA(82.2%)

A (2.4%)

<BBB (1.3%) AAA

(14%)

BBB (0.1%)

Variable rate bonds

& cash (30.6%)

Equities(1.8%)

Fixed Rate Bonds(64.0%)

Other incl. Mutual funds(3.5%)

Total non-linked assets €4,251m


Guarantee Management in Italy

• Conservative asset strategy: 93%+ in investment grade bonds

• Duration management approach followed– floating rate holdings to cover early termination

• Prudent local reserving approach– Initial estimates suggest reserves for guaranteed

products greater than fair value cost


Developing Embedded Values

• EV methods following global trend towards economic reporting

• New industry standard for embedded value reporting aligned to Aviva internal developments

• Facilitates internal Aviva developments of:– Improved ALM approaches– Consistent reserving and pricing– More transparent reporting– Aggregation and management of risk at Group level

CFO Forum development is a big step forward for the industry


Applying CFO Forum Principles

• Initial, high-level impact analysis complete• Key changes for Aviva:

– Explicit valuation of options and guarantees– Alignment of risk margins– Look-through to service and investment subsidiaries– Improved disclosures including economic sensitivities

• Aviva implementation project underway – Present CFO Forum disclosures at 2004 year-end


Managing Guarantees with Aviva Life International• Low level of risk on new products• Well managed legacy portfolio• Continuing to invest in new techniques• Product guarantees included in pricing• Improved reporting systems will increase

transparency

Multi-channel & multi-product portfolio with offsetting risks


Agenda for this afternoon

• ALI’s other markets• Presentation by MD of Aviva Asia Financial

Services • Wrap-up • Drinks reception and close


United States

• US expected to be the major source of worldwide savings growth in medium and long-term

• Aviva a strong niche player • Low interest rates hit sales in 2003 –

Aviva’s response:– Product withdrawal and redesign– Reduction of commissions – Staff redeployment to:

– Improve service levels – Bring forward new product launches

• We are confident of strong medium-term growth 0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003

£m

New business (APE) Achieved operating profit


Turkey Life

• A major growth opportunity:– 70 million population– Life insurance penetration

<0.5% of GDP• Aviva is market leader for new

business• Key to the future is pensions –

Aviva has clear advantages:– High-quality sales force (mainly

graduates) – Market-leading productivity– Culture of compliance and

customer service– Rapidly emerging brand -10

0

10

20

30

2001 2002 2003

£m



Poland and other Central and Eastern Europe• Includes Poland, Lithuania,

Czech Republic, Romania and Hungary

• Regional trends dominated by severe recession in Poland

• Scale of Polish in-force portfolio keeps profitability high

• EU accession and economic recovery promise substantial growth in the medium term 0

20

40

60

80

100

120

2001 2002 2003

£m



Australia

• Niche life business growing well

• Navigator impacted by:– Bear market– Software problems in

service delivery– Cost of correcting these

problems

Now recovering

0

10

20

30

40

50

60

70

2001 2002 2003

£m


0

200

400

600

800

1,000

2001 2002 2003S

ales

(£m

)0

1

2

3

4

5

6

7

Ope

ratin

g pr

ofit

(£m

)

Sales Operating profit

Australia Life

Australia Navigator

© Aviva plc

Asian Financial ServicesAnalyst Presentation

Charles Anderson - Managing Director -Financial Services - Asia


Aviva Asia FS kicks off…

China Start Date: January 2003

IndiaStart Date: June 2002

Singapore Purchase Date: July 2001

Hong KongPurchase Date: July 2002

Our Winning Proposition for Asia Financial Services:Aggressive development in our chosen markets of multi-distribution

focusing on effective bancassurance relationships and the disciplinedgrowth of agency salesforce.


Source: Swiss Re, sigma No. 8/2003

Asia Life Insurance market essentialsIndicators based on Year 2002 Singapore Hong Kong India China

Population size (in millions) 4.1 6.8 1,051.5 1,284.5

GDP (in billions of US$) 87 162 475 1,237

GDP growth rate (in %) 2.2% 2.3% 5.5% 8.0%

Life insurance premium volume (in mio of US$) 3,026 8,400 12,274 25,054

World market share - life premium (in %) 0.20% 0.55% 0.80% 1.63%

Life insurance premium per capita (in US$) 730.1 1,237.9 11.7 19.5

Life insurance premiums as % of GDP 3.48% 5.20% 2.59% 2.03%


Singapore

• Solid start

• Focus on profitability, ROCE

• Valuable infrastructure created

• Positioned for future growth

• Asia Springboard established


Singapore: Progress on all fronts

• Purchased 100% of ICS from DBS Group in July 2001• Concluded 10 year bancassurance deal with DBS at the same time• Total amount invested in life business of S$290m• Sold Direct Sales Force in 2002• Launched profitable bancassurance product offerings in April 2002• Achieved market leader position in the Financial Advisors (IFA)

channel in 2003• Signed NKF distribution agreement in Q1 2004• Improved service significantly

DBS DBS/Aviva Aviva AvivaAPE basis 2000 2001 2002 2003- Individual & Group

Market Share 4.0% 5.2% 6.1% 9.0%

APE (in mil GBP) 16.2 26.8 23.5 29.8


Singapore: Financial Performance

• Ratio of Goodwill to NBC: Decreased from 14.5 in 2002 to 7.8 in 2003

• 2004 performance to date– New Business up 15% compared to 2003 on an APE basis – Strong margins maintained

Key Performance Indicators 2002 2003(in million of GBP) Actual Actual Variance

APE 23.5 29.8 27.0%

Expenses 9.9 8.8 -10.6%

LAOP (gross) 12.3 14.2 15.2%

ROCE in % 10.5% 12.4% 1.9%


Singapore: New Business Mix

• Profit Margins– Second highest within Aviva Group (40.2% in 2003*) – Unit linked products more profitable than with profits – Tight expense control contributes positively

APE basis 2001 2002 2003Actual Actual Actual

% Regular Premium (RP) 21.7% 47.6% 81.5%% Unit Linked 4.3% 25.7% 43.9%RP Average Case Size (in S$) 1,068 1,104 1,877

* Margin on pre tax, pre cost of solvency basis


Singapore – Where are we heading?

• Realise full potential of DBS relationship– Out-of-branch sales – using full financial needs analysis – Increasing focus on risk products

• Further development of IFA/Broker market– Pro-actively support growth of this segment (Less than 5% in

2003)– Maintain number 1 position and improve profitability further

• International Financial Solutions– Targeting HNW and Expatriates – Business now launched

• Affinity Deals– National Kidney Foundation (1 million supporters) deal signed– Others in the pipeline


Hong Kong

• Volumes starting to flow• Efficient operating model• Differentiated market position• Further opportunities for growth


Hong Kong: Space for us to grow• HK is 6th largest life insurance market in Asia and 21st worldwide• Our approach is substantially different to other players• Our foundation is a 10 year agreement with DBS

Distribution Channels Market Now Aviva Now Aviva in 2006

Direct Salesforce 70% 0% 0%Bancassurance 20% 100% 70%IFA/Others 10% 0% 30%

Product Category by APETraditional 75% 70% 50%Unit-Linked 25% 30% 50%

* Aviva estimates


Singapore Hong Kong

Hong Kong: Operating Model • Formed in July 2002 following the acquisition of Dao Heng

Assurance and Kwong On Insurance from DBS Group for £31 million

BackofficeSupport• Finance• Products• Admin• IT

Aviva Life HK• Sales Support• Call Centre• 21 Employees

DBS Bank• Top 5 in HK• 60 branches• 300

Relationship Managers

• 1 million customers


Hong Kong: Financial Performance

• 2004 ahead of plan year to date for new business and NBC– APE significantly increased from Q1 2003

• Margins expected to be comparable to those in Singapore in 2004

Key Performance Indicators 2002 2003(in million of GBP) Actual Actual

APE 0.3 3.1

Expenses 1.3 2.4

LAOP (gross) (0.6) 1.0

ROCE in % -1.9% 3.2%


Hong Kong: Where we are heading

• Build on brand positioning as a quality long-term savings provider– Use of the bank’s brand helps to manage channel conflict

• Achieve the full potential from the DBS franchise– Extend scope of activity to other customer segments e.g.

“emerging affluent”– Conduct direct marketing activity on credit card database – over

1 million customers

• Enter the IFA market in 2004– Few global brands active in this channel– Replicate our business model to achieve significant economies

and offer local service capability– IFA represents around 10% of total HK market


India

• Huge potential

• Substantial capabilities developed

• Leadership in bancassurance

• Supportive local partner in Dabur

• Looking to increase stake from 26% to 49%


Market Share by Premium Market Share by Policies

PopulationNow:

1.05 billion

Insurable Population: 300 million

Currently Insured: 84 million

Large Untapped Potential: 216 million

Apr – Dec 2003 (9 months)

India: Potential Star of the Future• Rapidly growing middle-class of 150 million• Life market is expected to continue to grow at over 20% pa• Dominance of LIC still leaves plenty of room for growth

Private Players

6%

LIC 94%

Private Players

12%

LIC 88%

Source: Market estimates


•

•

Amex LVB

ABN

Canara

Ludhiana

2003 (17 Sales Centers)

Lucknow

Coimbatore

AhmedabadVadodra Kanpur Patna

Indore

Vizag


Cochin

Pune

Lucknow

Jaipur


Mumbai

Chennai

Kolkata

Hyderabad

Bangalore

Guwahati

Asansol

DelhiGurgaon

BBK

India: Going places…• Aviva was the last of 12 entrants - now ranked 9th • Our share of Private (non-LIC) market is over 3%• DSF headcount at 1,900• 21 branches in 18 cities • Bancassurance partners: ABN

Amro, Amex, Canara Bank, Lakshmi Vilas Bank, BBK

• As of Feb 2004, Bancassurance contributed 66% of new business whereas DSF contributed 34% (on APE basis)


250,000 customers 9 branches

400,000 customers 5 branches

27 million customers2,450 branches

2 million customers220 branches

HNI focus – 25,000 customers + 2 branches

Access to almost 30 million customersOver 2500 bank branches

India: Bancassurance partners


India: Bancassurance

• Financial terms reflect our leadership position– No upfront payments or capital payments– No creation of goodwill in our accounts

• Exclusivity secured– ABN-Amro deal for a period of 10 years– Amex deal for a period of 5 years– Canara & Lakshmi Vilas deal for a period of 6 years

• Our role in sales process is paramount– Our people embedded in bank sales network– Product mix moving in favourable directions– Product margins appear good


India: Going places…

• Current plans built around– APE in excess of GBP 70m within 5 years– Elimination of expense overruns within 7 years– Investment in the business total GBP 50m– Return of capital of 18% on IRR basis

• Currently considering how we can expand faster organically


China

• Huge potential

• COFCO a strong partner

• Solid start in Guangzhou

• Beijing and Chengdu next


Huge potential marketwith 20% to 30%

growth rate

Market getting crowdedTotal Life players: 2911 Local; 18 Foreign

Slow & Opaque Regulationof Insurance Markets

Local players dominate With overwhelming

Share of market

WTO accession Helps to open up market

earlier

Existing bancassurance models unprofitable

for insurers

Reforms still have a long way to go

European bancassurance

models yet to be deployed successfully

We have a strong &influential JV partner

Existing players Struggling tomodernize

China: Huge Potential but a Balancing Act


China: Where we are now?

• 50:50 Joint Venture• Profile of our JV partner - COFCO

– Listed in Fortune Global 500 enterprises for 9 consecutive years– 5th largest state-owned enterprise– China’s largest grains and oil import & export enterprise – Has good relationships with government– Has GI insurance broking JV with AON

• Started operation in Guangzhou in January 2003– Capitalized as a National Business (approx. GBP 40m)– Guangzhou:

– Population 7.2 million– Life premium volume at US$991 million – No. of life players: 6 locals & 7 foreign branch/JVs

– Current staff headcount at 120 and DSF headcount at 1,000– Centralised National Processing Center for country-wide underwriting,

claims and policy admin will be located in Guangzhou


Guangzhou

Chengdu

China: Where next?

• Beijing– Population 14.6 million– Life premium volume at

US$2,782 million– No. of life players: 8 locals

& 5 foreign branch/JVs– Our future China HQ– Expect to launch in 2004

• Chengdu– Population 10.4 million; Life premium volume at US$522 million– No. of life players: 6 locals only; We want to be first foreign JV player– Preparation in final stage. Hope to launch in 2004

• Future Expansion targeted to reach 10 cities by 2010– Based on economics and demographics– Seek to obtain first-mover advantage wherever we can– Aim to achieve 10% market share in each – 10 By 10 By 10

Beijing


China: What next?

• Current plans built around– APE in excess of GBP 100m within 5 years– Elimination of expense overrun within 7 years– Investment in the business total GBP 130m– Return of capital of more than 20% on IRR basis

• Currently considering further strategic options for development– Particularly in bancassurance and broker distribution


Asia Region: Further Development Opportunities• Our first priority is to realise the full potential of

our existing businesses• However, we are also alert to the additional

opportunities which will emerge in Asia:– We will only enter new geographic markets with

meaningful potential – Potential to leverage our robust regional operating

platform (Life and Navigator) for further business with banks, IFAs etc

– Sustained emphasis on competitive differentiation, based on Aviva’s proven strengths


Our Winning Proposition for Asia Financial Services:Our Winning Proposition for Asia Financial Services:Aggressive development in our Aggressive development in our chosenchosen markets of markets of multi-distribution

focusing on focusing on effective bancassuranceeffective bancassurance relationships and the relationships and the disciplineddisciplinedgrowth growth of agency of agency salesforcesalesforce

Conclusion

• Controlled but fast expansion from a low (in fact, nil) base• We are bringing our expertise and a quality approach to Asian

markets• Focus on profitability• Corporate governance in place• Differentiated position

– Not a just “me-too” approach– Bancassurance leadership in key markets

• Achieving good financial and operational results from acquisitions


Aviva – Strong growth story

• France:– Growth in net unit-linked margin – Crédit du Nord – attractive growth and shareholder economics

• Netherlands:– Turnaround from ABN Amro– Pricing and cost improvements

• Italy – continued growth at stable margins• Spain – strong growth prospects from penetration of bank clientele/

market • Asia:

– Built platform– Increased resource and focus

• Guarantees – well managed

aviva life insurance - philip scott presentation 2003 · protection 17% group pensions 7% the...

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