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Aviva Preliminary Results 2011

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Disclaimer
Cautionary statements:
This should be read in conjunction with the documents filed by Aviva plc (the Company or Aviva) with the United States Securities and Exchange Commission (SEC). This announcement contains, and we may make verbal statements containing, forward-looking statements with respect to certain of Avivas plans and current goals and expectations relating to future financial condition, performance, results, strategic initiatives and objectives. Statements containing the words believes, intends, expects, plans, will, seeks, aims, may, could, outlook, estimates and anticipates, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aviva believes factors that could cause actual results to differ materially from those indicated in forward-looking statements in the presentation include, but are not limited to: the impact of difficult conditions in the global capital markets and the economy generally; the impact of new government initiatives related to the financial crisis; defaults and impairments in our bond, mortgage and structured credit portfolios; changes in general economic conditions, including foreign currency exchange rates, interest rates and other factors that could affect our profitability; the impact of volatility in the equity, capital and credit markets on our profitability and ability to access capital and credit; risks associated with arrangements with third parties, including joint ventures; inability of reinsurers to meet obligations or unavailability of reinsurance coverage; a decline in our ratings with Standard & Poors, Moodys, Fitch and A.M. Best; increased competition in the U.K. and in other countries where we have significant operations; changes to our brands and reputation; changes in assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; a cyclical downturn of the insurance industry; changes in local political, regulatory and economic conditions, business risks and challenges which may impact demand for our products, our investment portfolio and credit quality of counterparties; the impact of actual experience differing from estimates on amortisation of deferred acquisition costs and acquired value of in-force business; the impact of recognising an impairment of our goodwill or intangibles with indefinite lives; changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect of various legal proceedings and regulatory investigations; the impact of operational risks; the loss of key personnel; the impact of catastrophic events on our results; changes in government regulations or tax laws in jurisdictions where we conduct business; funding risks associated with our pension schemes; the effect of undisclosed liabilities, integration issues and other risks associated with our acquisitions; and the timing impact and other uncertainties relating to acquisitions and disposals and relating to other future acquisitions, combinations or disposals within relevant industries. For a more detailed description of these risks, uncertainties and other factors, please see Item 3, Risk Factors, and Item 5, Operating and Financial Review and Prospects in Avivas Annual Report Form 20-F as filed with the SEC on 24 March 2011. Aviva undertakes no obligation to update the forward looking statements in this announcement or any other forward-looking statements we may make. Forward-looking statements in this presentation are current only as of the date on which such statements are made.

Agenda

Operational performance and strategic progress Financial results Looking ahead Q&A

Andrew Moss Patrick Regan Andrew Moss

Objectives for 2011

Improving operating performance

Allocating capital to chosen markets where we can grow and earn the highest returns

Simplifying the portfolio

Balance sheet strength

A volatile year
10 year sovereign yield
8%

Equity volatility
60% 50%

6%

40%
4%

30% 20%

2% 10% 0% Jan-11 Italy Spain France UK 0% Jan-11

Dec-11

VFTSE Index

V2X Index (EuroStoxx)

VIX (S&P 500) Dec-11

Credit spreads
250 120 110 200 100 150 90 80 100 70 50 Jan-11 60 Jan-11

Equity markets

US CDX

EUR iTraxx

Dec-11

FTSE 100

EuroStoxx

S&P 500

Dec-11

Focus on value and increasing profitability


IFRS operating profit
2,550m 2,503m 13.3% 6%
2,026m Ex DL 2,155m Ex DL Target 12% Target 98% Target 97%

Life IRR
14.4% 97.1%

GI COR
96.8%

Target 12%

2010

2011

2010

2011

2010

2011

Operating capital generation


2.1bn 1.7bn
Target 1.5 1.8bn

IFRS NAV
454p 435p 25.5p

Dividend
26.0p

Target 1.5bn

2010

2011

2010

2011

2010

2011

Track record of growth in Life


Operating profit Net operating capital generation
1.3bn 2.1bn 2.0bn
305m 245m

0.8bn

0.4bn 1.6bn US & Asia


137m 893m 898m

2009

2010

2011

Europe

761m

IRR
14.4%
850m 920m

13.3% 10.6%

UK

672m

2009

2010

2011

2009
All numbers exclude Delta Lloyd. 2009 excludes Australia.

2010

2011

Track record of growth in GI


Operating profit
99.4% 907m 849m 762m Aviva Re & Other Canada Europe
97m 222m 144m 64m 113m 87m 254m 32m

COR

97.1%

96.8%

2009

2010

2011

97m

Sales
8.3bn
508m

424m

476m

7.7bn 7.3bn

UK

2009

2010

2011 2009 2010

2011

All numbers exclude Delta Lloyd

Progress in the UK

Market leading brand recognition

400,000 new motor customers


25% market share individual annuities 15% market share in protection

Unparalleled customer reach through intermediaries, corporate partners and direct

9,000 IFA firms

UK General Insurer of the Year Best Pension Provider of the Year UK Health Insurer of the Year

Progress in the UK
Life
IFRS operating profits
920m 850m

L&P sales
11.3bn 10.3bn 15.0%

IRR
15.2%

8%

GPP, annuities, protection

Payback 7 years

Payback 7 years

2010

2011

2010

2011

2010

2011

GI

IFRS operating profits*


508m 476m 11% 391m Ex RAC 433m Ex RAC 4.0bn

NWP*
4.4bn
96%

COR*
96%

2010
*UKGI exc. Aviva Re

2011

2010

2011

2010

2011

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Europe: resilience in a tough environment


IFRS operating profits Resilient life result 13% growth in bancassurance sales IRR up to 11.4% (2010: 9.4%) Strong GI result

Tied agency network AFER Bancassurance

France

467m

Spain

216m

IRR of 23.3% (2010: 21.6%) Record operating profits

Bancassurance

Poland*

167m

IRR of 24.3% (2010: 25.3%) Consistently strong results

Direct & Bancassurance

Italy*

140m

Sharply decreased volumes to improve margins Combining with the UK to improve profitability

Bancassurance

Ireland

91m

Direct & Brokers

Russia & Turkey*


* Life profits only

5m

Growth potential

Direct & Bancassurance

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Europe: resilience in a tough environment


Life
IFRS operating profits
13.5bn 893m 898m 10.1bn
Pensions, WP savings

L&P sales
10.9bn

New business IRR


14.2% 13.0% 7.8bn
Payback 7 years Payback 7 years

3.4bn 2010 2011 2010

Unit linked, Protection

3.1bn 2011 2010 2011

GI

IFRS operating profits


113m 1.66bn 64m 77%

NWP
1.73bn 103%

GI COR
101%

2010

2011

2010

2011

2010

2011

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Canada & USA: record profits


Canada IFRS operating profits
254m
2.0bn 222m 14% 95%

NWP
2.1bn 97%

COR

2010

2011

2010

2011

2010

2011

USA

IFRS operating profits


4.7bn 197m 174m 13% 3.7bn

L&P sales
3.9bn
Indexed annuities

IRR
14.4% 14.1%

2.8bn

1.0bn 2010 2011 2010

Life

1.1bn 2011 2010 2011

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Continuing profit growth in Asia Pacific


IRR Life sales
13%
1.8bn 1.6bn 6% 11%

1.1bn 2009

2010

2011

Underlying IFRS operating profit*


45m

4m (31)m

2009

2010

2011

2009 excludes Australia. * Underlying operating profit excludes Singapore reserve release in FY09, FY10 excludes China GAAP adjustment, FY11 excludes HK reserve release

2009

2010

2011

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Growing external sales in Aviva Investors


Fund management IFRS operating profits
98m 99m

Aviva Investors net external sales*


5.6bn

2.4bn

(0.2)bn 2010 2011 2009 2010 2011

Strategy materially unchanged, with record net external sales in 2011 Business review in light of a challenging industry outlook Focus on key strengths of fixed income, real estate and multi-asset solution for institutional clients Equity capability retained in core markets

* excluding liquidity funds

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A fitter and stronger Aviva

2009
Profitability Life IRR 10.6% GI COR 99.4%

2011
Life IRR 14.4% GI COR 96.8%

Operating capital generation

Capital generated 1.0 billion

Capital generated 2.1 billion

Markets

30 countries

21 countries

Efficiency

Cost base 5.1 billion Headcount 54,700

Cost base 4.1* billion Headcount 36,600

Balance sheet

Economic capital surplus 140%

Economic capital surplus** c.145 - 150%

Operating profit
* **

2.0 billion

2.5 billion

on a continuing basis on 29 February 2012

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Patrick Regan
Financial results

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Objectives for 2011

Improving operating performance

Allocating capital to chosen markets where we can grow and earn the highest returns

Simplifying the portfolio

Balance sheet strength

18

Sharply increased operating capital generation


Life generation
2.3bn 2.1bn 0.6bn 0.6bn

Non-life generation

Net operating capital generation


2.1bn

1.7bn

2010

2011

2010

2011

Life investment
(1.2)bn (0.9)bn

Non-life investment

2010

2011

0.2bn 0.1bn

2010

2011

2010

2011

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Sharply increased operating capital generation


Life generation
2.3bn 2.1bn 0.6bn

Non-life generation
0.6bn

Net operating capital generation


2.1bn Net operating capital generation 1.7bn
2010 Corporate costs 2011 2010

2011* 2.1bn (0.1) (0.5)


2011

Group debt & other costs

Life investment
(1.2)bn

Non-life investment
(0.6)bn

Available to fund the dividend


(0.9)bn

1.5bn

2010

2011

0.2bn 0.1bn

2010

2011

2010

2011

* All amounts net of tax and minority interests

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Sharply increased operating capital generation


Life generation
2.3bn 2.1bn 0.6bn 0.6bn

Non-life generation

Net operating capital generation


2.1bn

1.7bn

2010

2011

2010

2011

Life investment
(1.2)bn (0.9)bn

Non-life investment

2010

2011

0.2bn 0.1bn

2010

2011

2010

2011

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Focus on profitable growth


Life investment
1.5bn
UK

IRRs
2009* 2010
15% 13% 14% 11% 13.3%

2011
15% 14% 14% 13% 14.4%

1.2bn 0.9bn

UK Europe USA Asia Pacific

14% 13% 7% 6% 10.6%

Europe

USA Asia Pacific

Overall
*2009 excludes Australia

2009

2010

2011

Life sales
30bn

Average reserves
269bn 28bn 253bn 237bn

28bn
UK

Europe

USA Asia Pacific

2009

2010

2011

2009

2010

2011

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Increased operating profit


IFRS operating profits
m
2,200 135m 31m (37)m

2010 Life UK Europe


2,155m

2011 GI* 579 109 222 (6) 904 98 Life 920 898 197 108 2,123 GI* 552 137 254 (8) 935 99 (207) (138) (611) (46) 2,155 348 2,503

850 893 174 71 1,988

North America Asia Pacific


2,100

Total Life / GI Fund Management


2,026m

Other, non-insurance Corporate costs

(177) (143) (557) (87) 2,026 524 2,550

2,000

Group debt costs Pension costs Operating profit ex DL


1,900

Delta Lloyd
FY10 Life GI & Health Other FY11

Operating profit

* GI & Health

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Summary IFRS life profit drivers


m UK Aviva Europe North America Asia Pacific Operating profit 2010 850 893 174 71 1,988 2011 920 898 197 108 2,123

Key: 2010 Pre-tax operating profit 1,988 2,123 7%

Driver 2011 Variance

Income 4,391 4,612 5%

DAC/AVIF amortisation and other (346) (371) (7)%

Expenses and commissions (2,057) (2,118) (3)%

New business income 1,033 1,037 0%

Investment return 2,606 2,760 6%

Acquisition expenses and commissions (990) (995) (1)%

Admin expenses and renewal commissions (1,067) (1,123) (5)%

Underwriting margin 752 815 8% 24

Total IFRS life investment return


Key: Investment return 2,606 2,760 6% 2010 Driver 2011 Variance

Unit linked margin 920


AMC (bps)
Average reserves (bn)

Participating business 569


Bonus (bps)

Spread margin 688


Spread (bps) Average reserves (bn)

Expected return on shareholder assets 429


8 Equity

976
111 109

6%
(2)

556
54 51

(2)%
(3)

813
108

18%
116

415

(3)%
(0.3) ppt (0.6) ppt 0.1 ppt

7.2% 6.9%

82.8

89.6

8%

Average reserves 106.3 109.8 (bn)

3%

63.9

70.0

10%

Property 6.2% 5.6% Bonds 4.8% 4.9%

Reserve growth reflects market growth


UK now includes 100% of RBS JV assets

Final UK special distribution ended in 2010 Partly offset by increases in Europe

Spread margin benefitted from higher US returns Increase in reserves reflects business growth

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Strong GI profit growth


GI & Health underwriting result
224m 203m

Current year COR at best estimates


103.6% 99.1% 96.4%

66m

2009

2010

2011

2009

2010

2011

GI & Health LTIR


770m 749m 750m

36 million net reserve strengthening across the 9 billion book of reserves Continuing to reserve at better than best estimate

2009

2010

2011

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Controlled growth in UK Motor


UK direct motor NWP
115
Indexed frequency

UKDI car bodily injury frequency Market*

18% 13%

100

Higher risk customer sales 2009

11%

85

Aviva

70

2010

2011

2006
Two - year rolling average

2007

2008

2009

2010

2011

51% 49% 43%

High quality risk selection Rated ahead of claims inflation No unusual BI claims experience

Lower risk customer sales

2009
* 3rd party working group

2010

2011

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IFRS total return

2010 Operating profit*


Profit before tax continuing operations Discontinued operations (Delta Lloyd) Total profit before tax

2011 2,155
813 (726) 87

2,026
1,545 895 2,440

* excluding Delta Lloyd

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IFRS total return

m 2010 Operating profit Delta Lloyd as an associate Integration & restructuring costs Other exceptional items Investment variances & assumption changes Profit or loss on disposals Goodwill and intangibles amortisation and impairments Profit before tax continuing operations 2,026 (225) 276 (479) 163 (216) 1,545 2011 2,155 157 (268) (81) (1,152) 565 (563) 813

Total operating EPS 53.8p (2010: 55.1p)

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Net Asset Values

595p 457p

Pence per share NAV at December 2010 Profit and investment variances

IFRS 454p 6p

MCEV 533p (64)p

EEV 621p

Dividends (net of scrip)

(15)p
25p (21)p

(15)p
25p (11)p (26)p

EEV IFRS

Pension fund Delta Lloyd sell down Foreign exchange and other movements NAV at December 2011

(14)p
435p

(27)p
441p 595p

29 Feb 2012 estimate

2011 29 February 2012 estimate 457p 511p

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Balance sheet
IGD solvency surplus
3.3bn 2.2bn

1.6bn UK annuity provisions

3bn notional equity put options

2011

29 Feb 2012 estimate

2bn notional euro currency cap & collar

Economic capital surplus*


c.145%-150% c.125%

Credit risk hedges in place

Reduced level of product guarantees across the portfolio Operating capital generation continues to strengthen the balance sheet

2011

29 Feb 2012 estimate

*The economic capital surplus represents an estimated unaudited position. The capital requirement is based on Avivas own internal assessment and capital management policies. The term economic capital does not imply capital as required by regulators or other third parties. Pension scheme risk is allowed for through five years of stressed contributions.

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Andrew Moss
Looking ahead

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Looking ahead:

A changing world

Were well positioned


Sharply improved operational capital generation

Eurozone outlook improved, but still tough Competitive and profitable in our chosen markets Low interest rate environment Benefits of a diversified portfolio Regulatory uncertainty Beating profitability targets RDR & auto-enrolment in the UK Continuing strong credit track record

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Objectives for 2012

Improving operating performance

Allocating capital to chosen markets where we can grow and earn the highest returns

Simplifying the portfolio

Balance sheet strength

34

Increasing the targets for 2012

13% Life new business IRR with a payback period of less than 10 years

97% Group COR

1.6 billion - 1.9 billion net operating capital generation

400 million cost and efficiency savings by end 2012

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Q&A

36

Appendix

37

Delta Lloyd

Total IFRS operating profit (100% basis)


Analysis of operating profit 556m m
2010 Up to May 6 After May 6 2011 Aviva share After May 6 non-Aviva share 2011

Life 330

GI 146

FM 103

Other1 (55)

Total2 524

524m

185

11

(6)

191
157 348 208 556

2010

2011

1Operating 2Operating

profit other segment includes (4)m of debt costs (FY10 (12)m) profit reflects 100% consolidation to 6 May 2011; 42% associate share thereafter.

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A strong balance sheet


Shareholder assets*
FY11 bn Government bonds Corporate bonds Asset backed securities Other Debt securities Mortgages and loans Cash Equities Properties Other investments Total investments Other assets Total shareholder assets 13.3 39.0 5.2 1.1 58.6 20.7 8.6 1.3 1.1 2.1 92.4 25.0 117.4 FY11 % 14% 43% 6% 1% 64% 23% 9% 1% 1% 2% 100% 2011 bn Greece Spain Portugal Ireland Total

Limited exposure to higher risk European debt**


S/H funds Senior bank debt S/H funds Subordinated bank debt S/H funds sovereign debt Participating funds Sovereign debt

0.6 0.6

0.2 0.2

0.3 0.2 0.5

0.8 0.2 0.3 1.3

Italy

0.1

0.8

5.6

*Including Delta Lloyd as an associate ** Net of non-controlling interests, excluding policyholder assets

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