Aviva PLC

Right, good morning everyone. Welcome to Aviva. Before we start the presentation, some formalities, the usual disclaimer and forward-looking statements notice. In particular, I'll just draw your attention quickly to the bottom section of this slide, which covers the B-share and illustrative consolidation ratio, both of which you'll be hearing more about during today's presentation. And with that, I'd like to invite Amanda Blanc, our CEO, up to the stage.

Thank you, Rupert. Good morning everyone. Thank you for joining us for our 2021 results presentation. So ahead of our positive update, I just wanted to acknowledge that today's results are obviously taking place against the backdrop of a great human tragedy in the Ukraine. And we know that everyone in the room and listeners will join us in hoping for a swift and peaceful end to the fighting there. So for those of you in the room, I am delighted to finally see you in person. I thought you only existed on those Zoom screens, actually since the first time I was appointed CEO now nearly two years ago. So a really, really big welcome to you. So what can you expect today? Firstly, I'm going to take a few minutes to update you on the strategic progress we're making and detail several important strategic updates. Secondly, Jason will take you through the 2021 financial results and our capital management plans in greater detail. And lastly, I'll talk to you about our ambitions and plans for the next phase of our strategy and why I believe that we're only just starting to realise the full potential of Aviva. We will then of course take your questions. So let's get started. Since I was appointed Aviva's CEO, My entire focus has been on three priorities. Focusing the portfolio, rebuilding the financial strength and transforming Aviva's performance. In the last 20 months we've moved with conviction and pace and we've made tremendous progress on all fronts. Our success has been built upon our people. And before we get into the detail, I would like to thank all of my colleagues across Aviva for their hard work, dedication and commitment, especially under the challenging circumstances of the COVID pandemic. In recognition of that effort, we are giving each of our 22,000 employees £1,000 in Aviva shares to say thank you. Aviva is now a much more focused, stronger and higher performing business. and I believe we've laid the foundations for the next phase of our strategy, which is delivering Aviva's promise. I'll talk about where we go from here later this morning, but first I'd like to recap on the journey that we've been on, starting with refocusing the portfolio. Over the past 12 months, we have completed eight disposals and collected seven and a half billion pounds in proceeds. Aviva is now a much simpler business. with market-leading propositions in our attractive core markets, the UK, Ireland and Canada. We have a very strong customer franchise, a diversified and highly complementary mix of businesses that serves all of our customers' needs and strong synergies in our model. And this means that we can now focus all of our efforts on targeted areas where we can win and profitably grow. We've also boasted our financial strength. The success of the disposals means that we've been able to rebuild our financial strength and deliver a substantial return of capital to shareholders. External debt was reduced by £1.9 billion, reducing our solvency to leverage ratio to below 30% and lowering our debt costs by £100 million annually. Our Solvency 2 cover ratio is above our 180% working level. And we have healthy central liquidity and attractive and sustainable cash generation from our core businesses, supporting investment in growth opportunities. And today we are fulfilling our commitment to shareholders by announcing an increased total capital return of £4.75 billion. But it's the transformation of the performance that gets me really excited. We have excellent momentum across the board, as you can see from this slide. Let me highlight a few facts and figures. Aviva's growing unprofitably. Life's new business sales grew by 23%, driven in part by bulk purchase annuities, with a record of £6.2 billion of volumes at robust margins. General insurance premiums are up 6% and at their highest level for over a decade, with a combined ratio of 92.9%, including record premiums and profits in Canada this year. Savings and retirement net flows were up 17%, exceeding £10 billion, which is a record for Aviva. Importantly, our customer franchise in the UK is growing. Customer experience scores are improving and we continue to build on our position as the number one trusted insurance brand in the UK. And we aren't just bringing in more business, we're doing it in a much more efficient way than before. We have delivered a 244 million cost reduction. and we've completed the actions to meet our £300 million commitment in 2022. And now we're going further. And we saw the beginning of the transformation in Aviva Investors with improved fund performance, increased external fund flows and a 7% reduction in the cost-income ratio. Now all of this ultimately translated into cash generation. a 22% increase in cash remittances to £1.66 billion. And as you can see, the strategy is delivering results. We have a strong operating momentum within the businesses and we're demonstrating areas that we have targeted and we are confident in the outlook for Aviva. This improved performance and successful execution of the strategy allows us to make four important announcements today. Capital return, Updated dividend policy, investment in the business and more ambitious targets. Starting with the capital return to shareholders. Today we are announcing a capital return of £4.75 billion, a figure well in excess of our original promise of at least £4 billion. This means that we will have returned the entire £7.5 billion of disposal proceeds through both debt reduction and capital returns. Fulfilling the commitment that we made to our shareholders when we set out our intention to focus the portfolio. The £4.75 billion is comprised of a £1 billion share buyback, which we announced in August last year and is due to complete this month. and the additional £3.75 billion announced today. Jason will talk you through the mechanics of this further distribution in more detail shortly. But we're moving ahead rapidly, targeting completion by the middle of the year, subject to shareholder approval. Moving on to our updated dividend policy. We are very confident in what we are doing and we want investors to share that confidence in Aviva's future and to have clarity on our dividend prospects. For 2021, we have declared a dividend of just over 22 pence per share at 5% year on year. Following the share consolidation, which will accompany the capital return, for 2022, we anticipate an illustrative dividend of around 31.5 pence per share, a step change increase of around 40% on 2021. For 2023, we anticipate an illustrative dividend of 33 pence per share and sustained low to mid single digit growth in the dividend per share thereafter. Again, I will let Jason talk you through the nuances of the illustrative share consolidation ratio. But this is an attractive payout level. He gets all the best jobs. And crucially, we believe it is sustainable for the long term. Moreover, surplus capital above our 180% solvency ratio that is not reinvested in the business is available for return to shareholders over time. We are also making strategic investments in the business to ensure that we keep winning. Our performance and financial strength have allowed us to invest a further £200 million to support the next phase of cost reduction and £300 million to accelerate our organic growth plans. And I am really excited to announce the acquisition of Succession Wealth today for £385 million, which accelerates our ability to offer financial advice to 6 million of our workplace and individual pensions and savings customers. And it enhances Aviva's position in the UK's fast-growing UK wealth market. More on that later. Such has been the pace of our progress that we are able to make several important upgrades to our group targets. We are upgrading our cumulative cash remittances target to greater than £5.4 billion. We are announcing a new target of £1.5 billion solvency to owned funds generation by 2024. This is a key indicator of growth. And we are extending our cost saving target further to £750 million. So to conclude this section, 2021 was a year of strong progress and we now have the foundations in place for the next phase of our development, delivering on Aviva's promise. We have a unique position of market strength and a clear strategy, deliverable plans to drive profitable growth and sustainable cash generation. You can already see this happening real time in our results today. With that, let me now hand over to Jason who's going to take you through the detail of the results and our capital management approach.

Thanks Amanda and good morning everyone. I'm pleased to take you through what's been a really encouraging year with robust financial performance giving us momentum as we go into 2022. I'll start with a few words on some of the key numbers in today's update. which reflect the excellent progress we've made in 2021. First, cash remittances were up 22% to 1.66 billion. As such, we're on track to achieve our target of greater than five billion pounds of remittances over 21 to 23. Our year-end Solvency II position was obviously very strong at 244%. Pro forma for the B share, the planned debt reduction and the acquisition of succession wealth Our Solvency II ratio would be 186%. Owned funds generation was stable at 1.2 billion. As Amanda just mentioned, we're announcing a new target for owned funds generation of 1.5 billion pounds per year by 2024. This demonstrates our ability to grow the business profitably. We continue to make very good progress on efficiency with costs down to 2.86 billion which is an 8% reduction compared to our 2018 baseline. Trading performance was excellent across life and savings and general insurance. Life sales were up 23% driven by another year of significant growth in savings and retirement and another strong year for BPAs. Gross risk and premiums in general insurance were up 6% to 8.8 billion. Moving on to some of the detail now, starting with cash generation. Our business has delivered strong cash remittances up 22% and on track to meet the target we set last year and today we're announcing a new target to deliver greater than 5.4 billion in cash remittances for the three years 22 to 24. It's an ambitious target which reflects the confidence we have to grow the cash remittances from our businesses and the actions we're taking to transform performance across the group. Our new target when combined with lower debt interest and lower head office costs will increase free cash flow supporting sustainable growth in dividends. Our 72 cover ratio on a shareholder basis increased from 202 to 244%. The increase was largely owing to disposal proceeds as well as operating capital generation and a little help from rising interest rates. The 21 year end position of 244% is after the billion pound share buyback, one and a half billion reduction in subordinated debt and around 830 million of dividend payments made last year. This strong position enables us to announce today the new 3.75 billion pounds B share scheme. We estimate the capital cover ratio would have been approximately 186% at year end 21, allowing for the total shareholder return, the planned debt reduction, and also the acquisition of succession wealth. And following engagement with the trustees, we've chosen to commit 75 million pounds of funds to support our UK defined benefit pension schemes. In terms of cash, our 6.6 billion of sense of liquidity at the end of February would be around 1.7 billion pounds on a pro forma basis, slightly above our target level of around 1.5 billion. Our pro forma debt leverage would be 28% within our target range of below 30% after factoring in our planned billion pound debt reduction. And indeed, we've got 500 million pounds of expensive debt maturing on April the 21st. Leverage remains in range when allowing for today's announced acquisition. On this forward-looking basis, we will continue to have significant financial flexibility. As a reminder, under our capital framework, we do consider capital above 180% over time as excess. Any such excess would be available for further return to shareholders, higher investment into the business, or indeed M&A, like the acquisition we announced this morning. I'll now turn to today's dividend guidance. Our dividend strategy is to offer shareholders reliable growth in dividends built on the sustainable cash generation of the businesses. Our capacity for sustainable dividends is backed by our cash remittance target, which in turn is supported by the growth in owned funds generation to one and a half billion pounds per year by 2024. Today, we've announced the total dividend for 2021 of 22.05 pence, up 5%, and equating to a cash cost for the full year of around 830 million pounds. As you've already heard, we've also announced today clear guidance on dividends for the next two years, reflecting our confidence in the outlook for Aviva. For 2022 financial year, we estimate a dividend payment of approximately 870 million pounds, which allowing for the share consolidation announced today is equivalent to a per share amount of 31.5 pence, which will be around 40% higher than this year's dividend per share. Please note DPS is based on an illustrative consolidation ratio. The actual consolidation is expected to be published in April in the shareholder circular. For 2023, we estimate growth of around 5% in the payment to approximately £915 million, which would be equivalent to a per share amount of 33 pence. Again, DPS is based on illustrative share consolidation. Thereafter, we would expect low to mid single digit growth in dividends per share. These dividend amounts represent an attractive cash payout level balanced against long-term sustainability. And of course the build-up of surface capital of 180% gives potential for further shareholder returns over time. As mentioned earlier, we intend to pay out £3.75 billion for shareholders via a B-Share scheme by mid-year. Together with our £1 billion share buyback, which is just over 88% complete, The total £4.75 billion cash return is comfortably ahead of our promise to return at least £4 billion by the middle of 2022. The B-Share scheme is an appropriate mechanism to return capital following the disposals and it can be executed rapidly. Let me now take a moment to highlight the key elements. First, this is of course subject to shareholder approval which will be sought at a general meeting on May 9th with full details to be set out in a circular in April and as you'd expect is subject to market conditions and the company's financial position not deteriorating materially. Under the proposed scheme shareholders will receive one B share for each existing ordinary share. The B shares will then be promptly redeemed. Shareholders will receive in cash around 101 pence for each existing share. The proposed share consolidation will take place at the same time with the aim of keeping the market price of Aviva shares at about the same level as just before the B share scheme. An illustrative ratio for the consolidation is 75 new ordinary shares for 100 existing shares. The actual ratio will be published in the circular. So at this stage of the strategy drawing to a close, we can completely focus on our performance and growth ambitions. Turning now to cost savings. Against our existing target of £300 million of cost reduction by the end of 2022, we've achieved £244 million of cost savings in 2021. We've now delivered all of the actions required to meet that target. On top of this, we've also absorbed around £130 million of cost inflation since 2018, hence gross savings achieved to date are over £370 million. Whilst this is considerable progress, we remain focused on improving our efficiency further and we are today announcing an upgraded cost target of £750 million including inflation by 2024. Using our current inflation assumptions, this new target equates to a £400 million lower cost base against 2018, which is £100 million higher than our current target. We expect implementation costs to achieve this target to be around £200 million to be incurred across 2022 and 2023. As a reminder, this is inclusive of absorbing the stranded costs following the divestments. This is an ambitious target, but we have a number of levers to deliver this, like the further rationalisation of products and further IT simplification. I'll now turn to the business unit performance, starting with UK and Ireland Life. Given we're covering a lot of ground today, I'll keep my comments on these market pages reasonably brief. And of course, I'm happy to answer questions after the presentation. UKNR Life has had a good year with evidence of improving performance across almost all of our key business lines. Importantly, cash remittances have risen 21% to £1.2 billion. Headline-owned fund generation and profits are down in the period, primarily as a result of two things. First, we had significantly lower benefits from one-offs and management actions than in 2020. The contribution from this line item for profit in the full year 21 is positive 77 million pounds, in line with our guidance of 0 to 200 million pounds. But this is nearly a 400 million pounds delta compared with the prior year of 469 million pounds. Secondly, despite excellent trading and a healthy return on capital, which I've come back to, annuities was impacted by the lower spread environment when compared with the strong prior year. I'll now take you through the key business lines starting with savings and retirement. It's been an excellent year for savings and retirement with profits in AUM up 24% and 19% respectively. This really is one of our standout businesses, newly established just over five years ago and it's great to see it going from strength to strength. Over five billion of net inflows for each of Advisor Platform and Workplace ensured the business reached an important milestone this year achieving 10 billion pounds of net inflows one year earlier than our target. This is a result of having well-designed and reliable platform, excellent service levels and our very strong relationships with intermediaries. Our ambition is to grow net flows by at least 10% a year over the next three years. Profits grew strongly in the period and we expect this to continue as we focus on efficiency and benefit from operating leverage as the platform asset base grows. Next, protection and health, which Doug Brown and I showcased in November at our InFocus event. Protection and health is well positioned, capital generative with good growth prospects. Despite sales being slightly lower, strong margin improvement and experience for over 13% increase in VNB to £188 million and a 21% increase in operating profit. Our aim is to grow the VNB of this business to help achieve the ambition of 5-7% per year increase in VNB across all of our life businesses. Moving on to annuities and equity release. As I mentioned, The low credit spread environment was a key factor in the lower VNB and the operating profit in the period for annuities. Importantly, and as we indicated at Q3, we secured our reinsurance and purchased in Q4 around £850 million of good quality illiquid assets originated by Viva Investors, which significantly increased margins in the second half. Even after this, Gilts and Supras were 46% of assets backing new business for the year, compared to 21% in 2020, giving us much more optionality for the future. Consequently, as I've repeatedly guided, margins remain the levels seen in previous years. We do continue to make a very healthy return on capital, with IRR over 13%. BPA trading has been very strong with our highest level of sales on record with £6.2 billion of premiums written in 2021. This bodes well for the growth of this business and the long-term cash generation it will drive over time. Turning to general insurance now. We've seen strong profitable growth in 2021 in our GI business. Cash remittances were up 38% to £417 million and operating profit was up 52% to £762 million, driven by a combination of improved underlying performance and a reduction in COVID-19 related claims compared with the prior year. This was partly offset by lower levels of frequency benefits. Costs were down 5% across general insurance, which is good progress. Our core was 92.9%, a four point improvement. Prior year development added 0.4% to the reported core, with a small release in the second half following a small strengthening in the first. Whilst there are some manageable headwinds in these markets, we're confident in continuing to meet our ambition to achieve a combined ratio of below 94% across general insurance going forward. In the UK, we had a very good year. Commercial line premiums are up 15% while achieving an improvement in core to 94.6%. Our January in focus events showcase the strength of our proposition and our ambitions for the future and these results are evidence of the great work that Adam, Nick Major and the team are all doing. In personal lines, premiums are marginally lower down 2%. This is a good result given the backdrop of soft motor pricing and significantly lower levels of travel insurance in the year. Our launch of the Aviva brand on the price comparison websites has been a notable success with an increase in premiums of 23% through this channel. Combined ratio has risen 2% primarily due to lower frequency benefits. Canada had an exceptional year in 2021, not least with its highest level of premiums and highest profits on record. Commercial line premiums were up 10% while delivering a combined ratio of 86.8%. We benefited from the favourable rate environment, high policy retention, and our pivot toward mid-market is proving very successful. In personal lines, premiums were up 3%, despite rate reductions introduced earlier in the year in Ontario, and the combined ratio was a very healthy 92.6%. Turning now to Aviva Investors, which has been through a lot of change in the past year under Mark Bursey's new leadership. With a renewed focus on efficiency and our core strengths of real assets, infrastructure, credit and sustainable equities, it's starting to show results, but with much more to come. Operating profit was up 64% to £41 million, with the cost-income ratio reduced 7 points to 86%, although we're targeting much further improvement here, with an ambition to be lower than 75%. External net flows improved to £3.3 billion in a year and 69% of funds under management were above the one-year benchmark for performance. So that concludes my business review. In summary, a really encouraging year. We've completed our disposal programme, we've repaid debt and we're delivering on our promise to shareholders to return £4.75 billion of capital. We've made excellent operational progress in 2021, and financial performance is encouraging, giving us momentum as we move into 2022. And this has put us in a strong and confident position, able to give you clear guidance on dividend outlook. And with that, thank you, and back to you Amanda.