(Source: MARKETWIRE)
News release
4 November 2009
Aviva plc third quarter 2009 interim management statement
AVIVA REPORTS GBP27 BILLION WORLDWIDE SALES, SIGNIFICANT BALANCE SHEET
IMPROVEMENT AND POSITIVE 2009 TOTAL PROFIT OUTLOOK
Managing for - Worldwide total sales and life and pensions
profit sales both reduced by 11% due to lower consumer
demand and strategic actions
- Group margin in line with full year 2008 at
2.1%
- Outlook for 2009 total profitability remains
good
Strong uplift in - Enhanced IGD solvency surplus of GBP3.7 billion
capital and balance
sheet - 25% increase in MCEV NAV per share
at 520 pence from half year 2009
Increasing pace of - Successful partial IPO of Delta Lloyd,
transformation completion of sale of Australian life
business, UK reattribution and US listing
- Europe strategy to deliver synergies and
improve distribution and customer focus
- New executive team responsibilities announced
and new CFO appointed
Andrew Moss, Aviva's group chief executive, commented: "In recent months Aviva
has completed a number of strategic initiatives which, together with improving
financial markets, significantly increased our capital and balance sheet
strength. The outlook for the group's total profitability in 2009 is good
despite a reduction in sales driven by continuing customer caution and active
management of sales volumes to optimise profitability."In the past three
months we've completed the sale of our Australian life business, listed on the
New York Stock Exchange, announced future management changes and begun to send
a total of GBP0.5 billion to 805,000 UK customers as a result of our inherited
estate reattribution. "Yesterday's successful IPO of part of our holding in
Delta Lloyd was another significant milestone for Aviva, giving us further
opportunity to reallocate capital to other parts of the group. The changes we
have made increase our financial flexibility and position Aviva well for the
future."
Key financial highlights
Restated(1) Local
9 months 9 months Sterling currency
2009 2008 change change
GBPm GBPm % %
Total life and pensions sales 24,060 27,014 (11)% (19)%
(PVNBP)(2)
Total investment sales(3) 3,042 3,374 (10)% (16)%
Total long-term savings 27,102 30,388 (11)% (19)%
New business margin 2.1% 2.0%
30 30 Sterling
September June change
2009 2009 %
GBPm GBPm
MCEV Net asset value per share 520p 416p 25%
IFRS Net asset value per share 409p 349p 17%
IGD solvency surplus GBP3.7bn GBP3.2bn 16%
(1) Restated numbers reflect the move from European Embedded Value
(EEV) to Market Consistent Embedded Value (MCEV) basis
(2) All references to sales in this announcement refer to the present
value of new business premiums (PVNBP) unless otherwise stated. PVNBP
is the present value of new regular premiums plus 100% of single
premiums.
(3) Investment sales are calculated as new single premium plus the
annualised value of new regular premiums.
Information
Investor contacts Media contacts
Andrew Moss Hayley Stimpson
+44 (0)20 7662 2286 +44 (0)20 7662 7544
Philip Scott Sue Winston
+44 (0)20 7662 2264 +44 (0)20 7662 8221
Charles Barrows Andrew Reid
+44 (0)20 7662 8115 (0)20 7662 3131
Susie Yeoh James Murgatroyd/Matthew Newton
+44 (0)20 7662 2117 (Finsbury)
+44 (0)20 7251 3801
Timings Contents
Real time media conference call News release
07:30am (GMT) Overview...................1
Analyst conference call Business review............3
09:30am (GMT) Capital management.........7
Supplementary schedules...11
Media
There will be a conference call today for real-time media at 0730 hrs
(GMT). The conference call will be hosted by Andrew Moss, group chief
executive.
The Aviva media centre at www.aviva.com/media includes images, company
information and news release archive. Photographs are available on the
Aviva media centre at www.aviva.com/media.
Analysts
There will be a conference call today for analysts and investors at
0930 hrs (GMT) on +44 (0)20 7162 0125 (quoting "Aviva, Andrew Moss",
pass code 849792). This conference call will be hosted by Andrew
Moss, group chief executive.
Replay will be available until 18 November 2009 on +44 (0)20 7031
4064. The pass code for the whole conference call, including the
question and answer session, is 849792 and for the question and answer
session only the pass code is 2682077.
Page 1
OVERVIEW
Key milestones The period since the half year has been marked by the
delivered achievement of a number of milestones in the ongoing
transformation of Aviva.
We announced yesterday the successful IPO of our Dutch
business, Delta Lloyd, on Euronext Amsterdam,
which will realise gross proceeds of GBP1.03 billion
for a 42% stake. This is a significant strategic
milestone which will provide Aviva with the
flexibility to explore balance sheet restructuring and
further growth opportunities while enhancing the value
and liquidity of our retained stake in Delta Lloyd. It
was the largest IPO to complete in Western Europe this
year and we are delighted with the result.
In September we received final approvals for the
reattribution of the inherited estates of two of
our with profit funds. This month UK policyholders
participating in the reattribution will start
receiving payments totalling GBP0.5 billion, in time
for Christmas.
In October Aviva established a secondary listing in
the US and started trading on the New York Stock
Exchange through its level two ADR programme.
The US is a strategically important market from both a
customer and shareholder perspective. For certain US
investors this is a more convenient way to hold Aviva
shares and we expect our US shareholder base to
increase. It also brings significant additional
visibility for the Group in the world's largest
savings market.
On 1 October we completed the sale of our Australian
life business and wealth management platform realising
proceeds of GBP0.45 billion.
The financial benefits of Aviva's ongoing
transformation, such as maintaining group margins and
overall cost reductions, remain on track
as we announced at the half year and these are key
points of differentiation for Aviva as the economic
outlook in the markets in which we operate remains
uncertain.
New executive We have recently announced new responsibilities and
responsibilities succession in our executive team. Pat Regan will join
Aviva and succeed Philip Scott as chief financial
officer in February next year. Mark Hodges, who joined
the group board in 2008, will lead our combined UK
life and general insurance businesses and Igal Mayer
will move to head our operations in North America from
1 January to succeed Tom Godlasky. Andrea Moneta, CEO,
Europe, has joined the group board and is leading the
restructuring of our business in Europe.
Sales The sustained nature of the economic downturn
profitability continues to impact customers' keenness and ability
maintained to save, with many prioritising the repayment
of debt over new long-term savings commitments. In
this environment, Aviva has delivered long-term
savings sales of GBP27,102 million (2008 restated:
GBP30,388 million) a reduction of 11%(1) reflecting our
focus on profitability rather than volume of sales in
the current economic climate.
Our focus on improving the profitability of new
business meant that our UK life and pension sales
reduced by 25% but the margin for the year to
date improved to 2.5% (HY09: 2.1%). In Europe
(excluding Delta Lloyd) sales for the year to
date were resilient at GBP9,770 million (2008: GBP9,830
million) and benefited from favourable movement in the
euro. This was achieved whilst maintaining margins at
3.8% (HY09: 3.8%). Delta Lloyd sales were 11% lower at
GBP2,835 million reflecting lower levels of corporate
pension business in 2009. In North America, US sales
for the first nine months were down at GBP3,742
million (2008: GBP3,810 million), reflecting a focus
on the optimisation of capital through moderating
annuity sales and growing our life insurance business.
Finally, in Asia Pacific, economic conditions improved
in the third quarter but sales were 22% lower as
customers remained cautious about investing in unit-
linked savings products.
(1) All growth percentages quoted in this announcement are on a sterling
basis unless stated otherwise.
(2) Comparatives given are Q3 2008, unless stated otherwise
Page 2
Our broad distribution capability continues to serve
us well. Bancassurance life and pension sales were
resilient, 5% higher than the prior year at GBP7,043
million (2008: GBP6,736 million), benefiting from the
strength of the euro and demonstrating the value of
this revenue stream both to Aviva and to our bank
partners.
Work to improve the quality and sustainability of
earnings has also continued in the general insurance
business, both in the UK and overseas, resulting in a
combined operating ratio (COR) of 98% for the first
nine months of this year. However, premium volumes
have reduced, reflecting our stance on writing for
value not volume.
Increasing Our capital position has been further strengthened
financial following management actions and improved market
flexibility and conditions. Our IGD surplus stood at GBP3.7 billion as
balance sheet at 30 September (HY09: GBP3.2 billion). This does not
strength yet include the GBP0.4 billion uplift from the sale of
our Australian business, the additional GBP0.5 billion
from the Delta Lloyd IPO or the deduction of
GBP0.5 billion for policyholder payments as part of the
reattribution exercise.
The strength and quality of our balance sheet has been
further underlined by the significant recovery
reported today in our MCEV net asset value per share
from 416p to 520p. On an IFRS basis net asset value
per share has increased from 349 pence at 30 June 2009
to 409 pence at 30 September 2009.
At the full year 2008 we established significant
provisions against future asset default experience in
our UK life business, taking the total default
provisions in respect of this business to GBP1.1
billion. As at the end of the third quarter 2009,
these remain unutilised, with no material default
experience in either our commercial mortgage
or corporate bond portfolio.
Following the improvement in the US credit markets,
unrealised losses on debt securities in our US
business moved from a net unrealised loss of GBP2.4
billion at 31 December 2008 to a net unrealised gain
of GBP0.4 billion at 30 September 2009.
Outlook We are making significant progress against our five
year strategy to transform Aviva. A number of key
initiatives have been delivered in the last quarter
which will allow us to consider opportunities created
by the economic downturn from a position of
considerable financial flexibility and strength.
Our total profitability outlook for 2009 remains good.
Management actions have been taken across the business
to maintain and improve margins where possible and
reduce costs. We have seen a strong rebound in
financial markets which, if sustained to the end of
the year, will have a positive effect on our overall
profits.
Page 3
BUSINESS REVIEW
Long-term savings
United Kingdom
In the UK, our focus remains on the successful delivery of our strategy
of product innovation, operational efficiency and disciplined financial
management. We believe this, combined with our broad product range,
wide distribution reach and potential for realising further value from
our significant existing book of business leaves us exceptionally well
placed to continue to deliver value for our shareholders and
customers.
Market conditions remained challenging and consequently life and
pensions sales were 25% lower at GBP6,664 million (2008: GBP8,845
million), with collective investments sales of GBP631 million (2008:
GBP1,243 million). Despite this, our life and pensions market share has
increased to 10.8%(1) (Half Year 2008: 10.4%).
As in the first half of 2009, we continued to focus on improving the
profitability of new business while maintaining rigorous capital
discipline.