Aviva PLC

Good morning, everyone. It's absolutely fantastic to see you all here. Thank you for joining us for our full year 2022 results presentation. So I'm going to start today with a brief update on our full year performance, covering the key parts of today's announcement. Then Charlotte will take you through our results in more detail, and then I'll update you on the strategic progress that we're making here at Aviva. And then finally, of course, we move into your favorite bit, which is the Q&A. So before we get stuck in, I wanted to start by thanking all of my Aviva colleagues for their contribution to the results that we have announced this morning. In the face of a very challenging year, the team really delivered. and every single customer that chooses Aviva, every single life or business that we protect, every single claim that we handle well is down to our people and their ability to deliver for our customers. And we can only present these results because of what they do every day. So a very big thank you to the Aviva team. So turning then to the results and Aviva had an excellent 2022. As you will have seen, we delivered strong results throughout the year. We have demonstrated consistent and reliable momentum. And we've done that by focusing on disciplined profitable growth and tight cost control. Our capital position remains very strong and has proven resilient in the face of considerable market volatility. We have demonstrated that once again, that our strategy is the right one, and that the diversified business model that we have built is working. Importantly, together with delivering this strong performance, we have also invested for Aviva's future, just as we said we would. We've invested to improve customer experience, to drive through the cost reduction, and in both on M&A where it makes sense. We completed a £4.75 billion capital return programme during 2022. And the momentum and consistency in our performance, together with our capital strength, now allows us to go further as we said we would. So today we have announced the new £300 million share buyback scheme, which starts immediately. Delivering on our promise to be disciplined in our capital management. We have also delivered on our dividend promise for the year. And today we announced a further upgrade to our dividend guidance. More on this later. Finally, we have been actively supporting our customers, communities and colleagues as the UK wrestles with financial inclusion and the worst cost of living challenge that we have seen for decades. So looking then at the results, Aviva is growing. Value of new business is up 15%. Gross written premiums are up 8%. And we've had over £9.1 billion of net flows into the wealth business. Our costs continue to fall and we're down 3% on last year. We've maintained our focus on cost discipline despite the significant inflationary pressures. Profitability is strong with own funds generation up 37% and operating profit up 35% on last year. We've delivered an impressive overall combined operating ratio of 94.6% despite the impact of inflation and adverse weather in the UK. This demonstrates the benefits of the scale and diversification of our general insurance businesses in the UK, Ireland and Canada. Finally, cash generation of £1.8 billion was up 11% on the previous year. And with good visibility of cash remittances over the coming years, we expect to exceed our three-year cash target. These results are testament to the progress that we've made over the past two years. We have simplified the business, built resilience, and further embedded a performance culture at Aviva. As we have said repeatedly, our strategy is very deliberately customer-led. Putting customers first is critically central to everything that we do. And we're bringing this to life on a daily basis. In 2022, we paid £23 billion in claims and benefits. We launched Quote Me Happy Essentials, helping customers access lower-cost insurance products. We committed £9 million to support communities through the UK's Citizens Advice and the Money Advice Trust. And we've supported 9,000 of our colleagues with one-off payments to help with rising energy costs. We made it easier for customers to do business with us by making over 200 improvements to MyAviva and Aviva Connect. And we had half a million new MyAviva registrations. And I want to highlight this because it is important. My Aviva customers are more than twice as likely to buy a second policy from us. We continue to enjoy strong net promoter and online experience scores, and we are seeing the benefits of all of our actions in our ability to grow our franchise. We have over 18.7 million customers, including 15.5 million in the UK. More than one in four adults in the UK is an Aviva customer. and this year we've won over 370 new workplace schemes. We have scale, but we're also delivering growth. And despite the challenging backdrop, growth remains positive right across Aviva's insurance, wealth and retirement businesses. In insurance, Jason and the team in Canada grew commercial lines by 14% with great performance in mid-market and GCS. In personal lines, they grew our key RBC partnership and our direct channel. In fact, Aviva is now the number two insurer in Canada. Just one more to go, Jason. In the UK, Adam and the team delivered 13% growth in our GI commercial SME business. And we also saw strong growth in group protection and health. In wealth, workplace net flows were up 14% to £6 billion, driven by strong retention, new scheme wins, and the inflationary impact on salaries. In Aviva Investors, Mark and the team delivered positive net flows of £1.3 billion for our external clients in an extremely volatile year. And Aviva Investors were recently ranked third in ShareAction's report on the responsible practices of the world's largest asset managers. Finally, in our retirement business, we transacted on 50 BPA deals in 2022 with £4.4 billion of premiums at very strong margins. The BPA pipeline is positive as we look to 2023 and beyond. And we announced an £850 million buy-in transaction with the Arcadia scheme just last month. We've also seen strong growth in individual annuity sales, external, which were up nearly 70%. We know that we continue to face into a very challenging macro environment. But we have momentum, which is fueled by the right strategy, the right people, and the right purpose. Turning now to capital return and dividend. Charlotte will talk through our capital framework in a minute, but our commitment remains for a strong and sustainable ordinary dividend, supplemented by regular and sustainable returns of surplus capital over time. Today we delivered on our commitment to further shareholder returns. As you will have seen, we announced a new £300 million share buyback programme starting immediately. This takes total capital returns to shareholders to over £5 billion since 2021. As I said earlier, we have also upgraded our dividend guidance today, recognising that share buybacks will otherwise reduce the overall share count. Our confidence in the performance trajectory of Aviva and in the positive outlook for cash generation means that we now expect to grow the cash cost of our dividend by low to mid single digits. So in summary, our plan and strategy to transform Aviva remains unchanged. It centers around our four strategic priorities of customer, growth, efficiency, and sustainability. It is the right strategy for Aviva and we are making great progress in executing on it. And it is unlocking the competitive advantage of Aviva's model. In turn, our strategy is delivering higher quality and more consistent financial performance that will benefit our shareholders. And this underpins our confidence in the delivery of our targets. As you will hear later, we are on track to exceed our OFG and cash remittance targets and to deliver on cost reduction. I'm now going to hand over to Charlotte, who's going to go through the financials. And after that, I'll come back and update you further on our strategic progress before we head to Q&A. Over to you, Charlotte.

Thanks Amanda, and good morning everybody. I'm delighted to take you through the highlights of an excellent year for Aviva. We've continued to see positive momentum across the group, and we've delivered great results across all key metrics. Owned funds generation was up 37%, supporting the growth in sustainable cash remittances, which were up 11% to 1.8 billion pounds. There was a strong improvement of underlying operating profit, up 24%, with total operating profit up 35% to £2.2 billion. And importantly, costs continue to fall, down 3% on the prior year. Now, despite market volatility in the second half of the year, our capital position remains robust at 212%. This is 207% on a pro forma basis and 196% after payment of the final dividend and the completion of the share buyback. These results really demonstrate that our diversified model is working. Now let me talk you through the business unit highlights before returning back to the group performance and balance sheet. and I'll start with UK and Ireland Life, which operates across insurance, wealth and retirement. This business has had a great year. We've seen strong growth across the key profitability measures. Total operating profit and OFG were up 34 and 44% respectively. with the core business performance very strong. Underlying operating profit was up 21% and underlying OFG up 17%. On new business, VNB is up 15% to 767 million pounds. This is a very good result achieved against the headwind of higher interest rates. And it is well ahead of our ambition of five to 7% growth per annum. and importantly, we've seen margin improvement across all three segments. So now I'll go through the components of the UK and Ireland life result in a bit more detail, starting with protection and health. Sales were up 6%. We saw strong growth in group protection and health, up 29% and 14% respectively. partly offset by individual protection where APE was up but PVMBP was down or lower because of higher interest rates. This is a strong outcome given the prior year benefited from the impact of stamp duty relief. Across protection and health, we also achieved a higher VMB up 18% and saw margins improve. Operating profit was flat as we didn't see the repeat of 2021's favourable claims experience in group income protection, which also impacted the relative owned funds generation. Moving now to our wealth business, which has performed well in a challenging environment. Net flows of £9.1 billion across workplace and platform were extremely robust at 6% of opening AUM. In workplace, net flows were up an impressive 14% to £5.8 billion as we saw new scheme wins, strong retention and the benefits of wage inflation coming through on contributions. In platform, we were number two measured in net flows. Now consistent with the market, we saw reduced demand with net flows of 3.9 billion pounds, which is down 32% amid market volatility and the impact of cost of living inflation for our customers. We expect platform net flows to remain challenging in the near term. But that said, we are well-placed to capture available flows with a platform that is highly regarded in the market for its functionality and competitive pricing. On assets under management, completing the succession wealth acquisition added £3 billion. Owned funds generation saw a strong increase in 2022, up 96%. This was driven by new business, a growing in-force book and improved cost efficiencies, including a one-off expense provision release. Excluding this one-off effect, OFG was up 50%. Operating profit was lower due to the impact of market volatility on revenues and because of an adjustment to cost allocations. Excluding this impact, it's broadly flat. Lastly, in our retirement business, of the 6.2 billion of sales, bulk annuity volumes were 4.4 billion pounds as we maintained our pricing discipline, especially in the thin markets of Q4, where trustees focused their attention on liquidity in the wake of the LDI crisis. Equity release saw strong growth in sales of 17%, partly offset by individual annuities where we maintained pricing discipline. We had another solid year of asset origination supporting the annuity business, a key area of strength where the Aviva Investors team have again proved the value of the business in supporting UK Life. The higher allocation of liquids and pricing discipline meant the margins on BPAs improved to 5.1% and VNB increased by 6%. OFG and operating profit for the retirement business increased by 34% and 32% respectively, benefiting from both the improved asset mix as well as favourable experience variances. Now looking forward, we continue to see a positive outlook for BPAs in the medium term, due to the improved funding positions from the higher rate environment and the very evident increased appetite from trustees to de-risk. Now moving to our general insurance business, where we have deliberate diversification across geographies, products and channels. This means we're able to grow the business in a targeted and profitable way, as we did in 2022, where premiums were up 11%. Group core was 94.6%, which is an excellent result, especially when considering the return to more normal claims frequency, as well as the inflationary environment for which we continue to price appropriately. The quality of the underlying result was extremely strong with low reliance on prior development and weather broadly in line with long-term averages. Operating profit was at 1% as more normal claims frequency and elevated inflation impacts were more than offset by improved reinvestment yields. In UK and Ireland, premiums grew 7% to 5.7 billion pounds. Within that, commercial lines grew 12%, evenly split between rate and volume. In personal lines, premiums were up 2% with our principal focus on maintaining pricing discipline in the inflationary environment. We have high expectations for this business as we outlined in January. The core of 96.1 for UKGI is a really good result. It demonstrates strong risk selection, disciplined growth and our proactive response to inflation. We continue to leverage and invest in our claims processes and the value of our SOLUS network to ensure good customer outcomes and strong claims cost management. Operating profit was down 5% as an improved investment result mostly offset frequency and inflation impacts. In Canada, we had another fantastic year, and the business is going from strength to strength, achieving further profitable growth. We enjoyed strong growth in both commercial lines and personal lines. In commercial, premiums were up 14% in constant currency, owing to strong new business growth in mid-market and large corporate. Personal lines grew 6% in constant currency and we put through rate increases in Ontario Auto and made great progress with our key RBC partnership. We achieved a very strong core of 92.5%. Now this is a little higher than the prior year, as similar to our UK experience, in Canada we also saw claims frequency return to more normal levels. Within the claims ratio, there was a very modest impact for positive prior year development and favorable weather impacts as we experienced minimal CAT activity in the year. Higher investment returns also helped to increase the operating profit by 6%. Now, before we move away from general insurance, I'd like to update you on our recent reinsurance renewals. You'll be aware that it's been a very challenging market, but we were able to fully place our CAT reinsurance program. We achieved lower risk adjusted rate increases than the double digit averages seen in the market, which in turn we are now pricing for. Like most, we did raise our retentions given the market capacity and pricing, but return periods are still below many of our peers and retention levels are broadly flat when allowing for portfolio growth. We were also pleased to renew our CAT-AG cover to protect capital and earnings in the case of multiple events, an important differentiator versus many in the market. Now the changes to the reinsurance program have led to an increased capital requirement. But importantly for Aviva, this is only about five points on the group cover ratio, which is lower than it would be for a standalone GI business. Another benefit of our diversified model. Overall, it was a good outcome and supportive of our strategy and growth plans. Turning now to Aviva Investors, the business has been making good progress with its strategy and structure and focus. However, because of the extremely difficult market conditions for all asset managers, on the face of it, the results don't yet demonstrate this. Assets under management, about 45 billion pounds lower than last year, mostly driven by the impact of weak investment markets. External net flows remained positive at £1.3 billion and included about £0.6 billion in Q4 as we ended the year well. Importantly, we have completed a number of structural cost reduction initiatives which have delivered £50 million of savings. This includes major outsourcing of both operations and loan servicing. These are critical levers to improve efficiency, continue the turnaround and allow progress towards our target cost income ratio when revenue strengthens. And whilst the revenue outlook remains uncertain, we have started this year well, and the team is fully focused on the path ahead. and as I've spoken about earlier, Aviva Investors plays a critical role for the group, particularly for the retirement and wealth businesses. So that completes the review of the individual business units. So let me return now to the group and I'll start with the progress we're making towards our group targets. I'm pleased to report the controllable costs are down 3% year on year. to 2.8 billion pounds, which represents 11% reduction from the 2018 base. This is continued good progress towards our 750 million pound cost reduction target. We've achieved a further £200 million of cost reduction or 7% in 2022, which takes the total to £575 million and means we are firmly on track to meet our target by the end of 2024. And once we reach this target, to repeat what we've said in the past, we intend to maintain this strong focus on efficiency to deliver top quartile efficiency ratios for each of our businesses. Now, as well as making great progress on efficiency, I'm pleased to say we've been growing at the same time. So let's start with own funds generation, where our target is to achieve £1.5 billion annually by 2024. Own funds generation grew by 37% year on year. Now 2022 includes the benefit of higher balance sheet actions of £597 million, more than we typically expect to see. Principally, they're due to positive longevity benefits and expense assumption changes reflecting the cost reductions achieved by the group. So on an underlying basis, OFG was up 15% to £1 billion as we saw strong growth coming from our wealth and BPA businesses. Given our progress, we expect to exceed our target of 1.5 billion pounds by 2024, even allowing for a more normalized level of management actions. And while the actual amount of management actions may differ in any given year, we expect these typically to be around 200 million pounds. This capital generation is translating into growth in cash remittances, which were up 11% to 1.8 billion pounds. Our cash remittance target is for more than £5.4 billion between 2022 and 2024 and we expect to exceed the £5.4 billion. Moving now to capital. Our shareholder solvency to cover ratio remains extremely robust at 212%. Our balance sheet showed resilience in the face of market volatility in 2022. We maintained a strong capital position throughout. The development from fall year 21 was driven by a combination of 3.75 billion pound capital return, dividends, the acquisition of succession wealth, and 500 million of debt reduction. We've generated about 14 points of solvency from operating capital generation through the year, and we've benefited from 17 points of non-operating capital generation, principally from the impact of rising rates. We still have further debt reductions to complete and the £75 million that was committed to the pension schemes was made in Q1. Taking these items into account, our pro forma cover ratio is 207%. And then taking the final dividend and the share buyback into account, our estimated cover ratio will be about 196%. Our pro forma leverage ratio is 30% and centre liquidity at the end of February is £2.2 billion. Finally, just a reminder of our capital management policy, which remains unchanged and is predicated on a solvency to cover ratio of about 180, central liquidity of around 1.5 billion pounds and a leverage ratio of under 30. We also seek to maintain AA credit ratings. So to recap, surplus capital has three main purposes. First, we are investing in the business to drive targeted profitable growth and efficiency, which as 22's results demonstrate is performance enhancing. Secondly, we continually screen potential bolt-on M&A opportunities that are in line with the strategy in our core markets and meet or exceed high hurdle rates. Examples are the recent acquisition of Succession, Azure, XL, High Net Worth. Third, we make additional returns to shareholders, releasing excess capital as we have announced today. and we anticipate further returns in the future with our preference being that these are regular and sustainable. So in summing up, I've now been at Aviva for six busy and productive months. During this time, I've lived the market turbulence following the mini budget in September. I've led the business and performance reviews as well as the forward planning and resource allocation round. And I visited most parts of our group to really understand our culture and customers and how we serve them. This stage of Aviva's journey is all about delivery, execution, and focused growth in our core markets. We're making great progress with this, and we're firmly on track to exceed our OFG target, to beat our cash remittances target, and to live on cost reduction. We've launched the new share buyback of 300 million pounds, and we have upgraded our dividend guidance. Thank you. And with that, I'll hand back to Amanda.

Okay, it's great to have Charlotte here for her first full annual results at Aviva. So you've heard about our strong delivery last year. Now I want to talk to you about why we're optimistic for the future. So in 2020, I set out three clear commitments to focus the portfolio, to rebuild financial strength and to transform performance. We delivered a focused portfolio and financial strength with our divestments, which generated excellent value for shareholders. What you are now seeing is the transformation of the performance of this business. We've come a long way in 2022, but there is still much more to go after. So let me tell you about our strategic progress and how we're investing in Aviva's future to secure that performance, that cash generation, and ultimately dividends. So Aviva has a bright future. I can say this with confidence because we have strong, focused businesses with market-leading positions, an unrivaled customer franchise, and the number one brand in the market. And this is a fantastic position of strength to build on. We know it's tough out there with the cost of living crisis, high inflation, and macroeconomic uncertainty. But even in these difficult times, we are driving growth from a rich seam of opportunities across our business. So let me give you some examples. There is substantial pent-up demand for pension risk transfers, which we will capitalise on with our leading BPA offering. Increased pressure on the NHS means more people are looking to take out private medical cover, and we have a strong proposition here. There is growing demand for pension, savings and retirement solutions because of low unemployment and an aging UK population. And we can capitalize on this. Even regulation can offer opportunities to grow. Solvency II reform will allow us to put more money into infrastructure across the UK, including schools, hospitals, social housing and green energy. That's positive for our business, but it's also positive for customers and for communities. All of these opportunities gives us the confidence to continue to invest in our business. During 2022, you remember that we committed a billion pounds of investment back into Aviva. We're putting £500 million into accelerating organic growth and efficiency improvements over three years. We acquired Succession Wealth to close the capability gap in advice. And we have recently acquired the Barclays Home Insurance Back Book, allowing us to further enhance our market-leading position in home insurance in the UK. And we have made bolt-on acquisitions to grow our high net worth general insurance business. So we have the right strategy, but we're only really just starting to realize the full potential of this business. The investments that we are making will further strengthen our competitive advantage across customer, diversification, and scale. And we will ensure a strong future for Aviva for many years to come. Now let's take each of those four strategic priorities in turn, starting with customer. So we obviously want more customers to stay with us for longer so that we can look after more of their needs. And we're making really good progress here, as you heard from me earlier. So what's next for customers? We are building an engaging mobile-led customer experience. We've already driven over 600 million pounds of gross fund flows through our enhanced MyAviva digital pension journey. So we know that we can generate results here. Thank you very much. Thank you. We will also partner with key employee benefits consultants to bring the best of Aviva to our customers. This will help us to grow the number of corporate customers who hold more than one product from Aviva, which is already about 30%. We're also investing in innovation. And as we know, this is critical for us to stay relevant over time. And I'm really pleased with the momentum that these investments are generating for us. Just let me give you two examples of new services. Last March, I talked about the launch of Aviva Zero, which is a disruptive carbon-conscious proposition in motor. We have now sold over 100,000 policies in the first year and offset over 300 million miles of driving. Today, I'm excited to talk about our new AI-led service, which is powered by Fabric, which helps customers trace and combine their pensions. This is all going to be available for our workplace and direct customers. Now let's move on to growth. Each of our businesses plays a critical role in our portfolio. with insurance and wealth leading the way, while our retirement business continues to play a major role in supporting our cash generation. So what's next in growth? In insurance, our ambition is to achieve above market growth. We will continue expanding our commercial and GCS capability in Canada and in the UK. We will build on our leading position in UK high net worth, and we will leverage Aviva's distribution network to supercharge health SME. In wealth, we're aiming for at least 10% annual increase in net fund flows. We continue to enhance our master trust proposition, which will further our market leadership in workplace. We are now focused on building our direct wealth offering, and an integrated wealth proposition will help us to recapture some of the 6 billion of annual fund outflows. And Doug will host an in-focus session, which will go into more detail on wealth in September. and in retirement we're taking advantage of the growing BPA market by enhancing our BPA proposition and we're building a team of advisors that can help support growth in equity release. So now let's turn to efficiency. Despite the extremely high inflation across our core markets, we have exceeded our original 2022 cost savings target, and we are firmly on track to deliver the £750 million of gross cost reduction by the end of 2024. We've simplified customer journeys. We have reduced our property costs. We have streamlined our IT and our product set, all of which generate efficiencies. And we have reduced costs at the group center too. All of this points to a new culture of operational efficiency that we are embedding across the group. So what's next? We're committed to delivering top quartile efficiency in each of the business lines and realizing more of the benefits of scale. In general insurance, we've already hit our targets in the UK. Our business in Canada is also, as you can see, very efficient, but we are not stopping there. These are dynamic targets which we will continually reassess. We will deliver more through product simplification and streamlining our commercial lines operations in Canada. In the life business, DAG has already done a great job of managing the cost base. Now we're focusing on really transforming the operations to make things simpler, reducing the number of platforms and consolidating our outsourcing partners. On Aviva Investors, we've secured 50 million pounds worth of cost-free savings in 2022 through the operating model transformation and middle and back office outsourcing, which leaves the business leaner and more focused on the customer. And we will see the impact of all of these actions flow through to the efficiency ratios as the macroeconomic environment normalizes. So finally, let's turn to sustainability. We continue to lead the pack on climate action, working towards our ambition to become a net zero company by 2040. We are now ranked fifth amongst global insurers by Sustainalytics. And I'm proud of how much we've done here, including donating £38 million to restore Britain's lost temperate rainforests. This is part of a broader £100 million programme to help address climate change through support for biodiversity, which has been incredibly well received by customers. So what's next for sustainability? This year, one of our biggest pushes is on social action. We're stepping up our ambition with our Communities Regeneration Programme, injecting £25 billion into the UK economy over the next 10 years. And we will continue to use 2% of our profits in supporting our communities every year. Now, to conclude today's presentation. You've heard we've had an excellent year. We've delivered strong and resilient financial performance quarter by quarter, and importantly, we have grown. Our plan is working, and the combination of insurance, wealth, and retirement brings clear benefits, as is evidenced by the numbers that we have reported here today. We have leading positions in our core segments, we have high-performing businesses, and we have a formidable brand. We have the right strategy which is unlocking the unique advantages of our model across the customer, diversification and scale. We have full confidence in our medium term targets. We are generating an attractive and growing cash dividend and we are aiming for regular and sustainable capital returns alongside this. We have delivered and we will continue to deliver. But we are far from believing that we have achieved what needs to be done. We know that there is so much more to go after to satisfy our big ambitions. We are always restless for more. So we have the strategy, we have the leadership, we have engaged and committed people, and now we have these results to show that we can and we will deliver on Aviva's promise. So thank you for listening. I'm now going to ask Charlotte to join me on the stage and we will open up for questions. So if you can put your hand up if you have a question and then please say your name and your institution before you ask your question and just give us a minute to get ourselves on the seats and our glasses on. Thank you very much. Right. Okay. So where can I go first? Right. I am going to go to Alan, please.