Aviva PLC

Good morning everyone and thank you for joining our full year 2023 results presentation. I'm delighted to welcome you to our new head office for the very first time, hope you like it. I'm going to start with a brief update on our full year performance, covering the highlights of today's announcement before Charlotte is going to take you through our results in more detail. Then I'll update you on the strategic progress that we're making and we'll finish with an opportunity for any questions. So before we do that, I want to set the scene with a broader view of what these results demonstrate. Our momentum. Aviva is moving faster than before. We're delivering consistent quarter-on-quarter growth, strong and reliable earnings, and cash generation. And we're exceeding our targets. The credit for that goes to my Aviva colleagues. for everything that they do to support our customers, whether that's helping a family recover from a devastating flood claim, consolidating someone's pension pot to help them plan for retirement, or developing a new service such as our Canadian Auto Care Centres. Our people work tirelessly to help solve our customers' financial puzzles. So a very big thank you to the whole Aviva team. On top of strong performance today, we're also investing for Aviva's future. Our performance, together with these investments, gives us the confidence to upgrade our targets and our dividend guidance today and to announce our next £300 million share buyback. So why are we so confident? Well, we continue to grow right across the business. In general insurance, premiums are up 13%. and we've had over 8.3 billion of net flows into our wealth business. We're more efficient. Our costs were down 1% on last year and that's despite the difficult inflationary environment. We're more profitable with operating profit up 9% on the prior year and this has translated into excellent cash remittances of almost 1.9 billion pounds and a strong capital position. So this and the track record that we have worked hard to develop over the last three years shows that the business model that we have built brings resilience and opportunities and that we are pursuing the right strategy which is centered around our customers. It also reflects our consistent framework for deploying resources and managing performance across the group and Charlotte will talk more about that in a minute. Executing that strategy has allowed us to deliver precisely what we said we would, strong and reliable momentum on both growth and performance, providing the confidence to invest in our future. We're already seeing the benefits of our £500 million investment in customer experience, growth and efficiency. We've grown our UK customer base by more than 470,000 in the past year. and we're on track for the £100 million uplift in operating profit that we are committed to. And we've simplified the business, delivering £757 million of gross cost savings since 2018. We're well positioned to accelerate our organic growth through further investment in the business and we're supplementing this with Boton M&A. Our acquisition of the AIG UK protection book will bring more new customers to Aviva. In Canada, Optium will strengthen our specialty lines business with a growing stream of distribution income. And earlier this week, we announced the acquisition of Probitas, a high quality, fully integrated platform in the Lloyds market. This will expand the market opportunity for our global corporate and specialty business. Moving now to group targets. Over the last three years Aviva has consistently delivered on its promises, so much so that we have now delivered our cost reduction and our OFG targets one year early. And we're on track to exceed our cash remittance target. So today we can announce that we are upgrading our group targets to reflect our strong position and confidence in Aviva's future growth. We have a new operating profit target of £2 billion by 2026, reflecting a strong annual growth rate. And we're refreshing Solvency II operating own funds generation and cash remittances with bigger ambitions. Turning now to capital return and the dividend. We're committed to continuing to deliver superior returns to our shareholders. Year in, year out. Today, we announced our next £300 million share buyback programme, which starts immediately. And with our confidence in Aviva's performance trajectory and the positive outlook for cash generation, we're also upgrading our dividend guidance today. Our track record in this space is rock solid. Over the last three years, we've returned over £9 billion in capital and dividends to shareholders. That's over 70% of our current market cap and a very attractive yield for our shareholders. So that's a high level view. I'm now going to hand over to Charlotte who will take you through the performance and the upgraded target in more detail.

Thanks Amanda and good morning everyone. It's fantastic to welcome you to our new office to discuss another set of great results for Aviva. Before I get to the results, I want to share with you some detail about our framework for deploying resources and managing performance across the group. In the 18 months since I joined Aviva, I've worked hard to refine this framework to ensure both grip and agility. This underpins our confidence in delivering consistent and dependable long-term value creation for Aviva. At its heart are the first two tiles on this slide. First, sustainable growth in earnings and cash. Second, a strong balance sheet. We continually look across our diversified group to optimize how capital and other resources are allocated and reallocated. I'm always working with the businesses to optimize our response to trading opportunities, market conditions, and cost challenges. We've built a strong performance culture that drives the delivery of profitable growth and maintains a really robust balance sheet. The power of the capital generation meets our commitment to grow regular dividends, the third tile. And, combined with balance sheet strength, this gives the firepower to execute across the rest of this framework. The fourth tile is investing in the business to fuel further organic growth in earnings and cash generation at the right hurdle rates. And we continually monitor and challenge the delivery of benefits and returns on this investment. We have invested most of the £500 million that was planned for organic growth and efficiency back in 2022, and this is delivering the additional profit goals that we set out. In addition, we continually scan and assess possible inorganic opportunities. Our portfolio is now majority capital light and we've demonstrated our ability to execute high quality bolt-on M&A in our core markets to accelerate this growth. These have been done at attractive valuations to generate strong returns and we will continue to do this. The final tile is very important. We look to return surplus capital to shareholders. Today's £300 million share buyback will further reduce the share count, enhancing growth in dividend per share going forward. And we continue to anticipate regular and sustainable capital returns in the future. I'll now take you through the 2023 results. I am proud that they demonstrate the strength of our performance culture in applying the framework I've just described. Delivering great results from our diversified business model and investing to create long term value. So starting with our 2023 results at a high level. Aviva's performance has been excellent once again. Growth momentum has continued across the board, particularly as we accelerate the capital light areas. Profits continue to grow year on year. Operating profit was up 9% to almost £1.5 billion, and OFG up 12% to just over £1.7 billion. Costs continue to fall, down another 1% in 2023, which is a fantastic achievement against significant inflationary headwinds. And we've exceeded our £750 million cost target a year earlier than planned. Our capital position remains extremely robust at 207% and trading trends across the group have been strong. For example, we've achieved double digit growth in general insurance premiums and in IWR operating value added grew 13% to over £1.8 billion. Moving now to the business units in more detail, starting with UK and Ireland general insurance. Premiums were up 16% to £6.6 billion, including double-digit growth in both personal and commercial lines. Just over half of the personal line's growth was from rating actions, as we continued to rate ahead of inflation. A little under half was from volume, driven by new propositions such as Aviva Zero and high net worth. I'm also pleased with the progress made in growing the retail business in the UK, which has a higher margin and was a feature of the plans discussed at our Personal Lines In Focus session last January. Retail premiums grew 41% in 2023 and now make up 51% of the UK's Personal Lines premium, up from 45% a year ago. Commercial lines premiums increased by 10%, again split relatively evenly between rate and volume and across both SME and GCS. Our undiscounted core remains very strong at 96.8% despite high reinsurance costs, claim frequency trends, the storms and the continued inflationary environment. Crucial to this is the grip we have over claims cost management. The underlying current year claims ratio improved in the second half of 2023, as strong rating actions earned through. And we're seeing this trend continue in 2024. On a discounted basis, core was an impressive 93.6. Operating profit was up a superb 63%, supported by the impact of higher yields on the investment result. By now, I'm sure you've seen Monday's exciting announcement that we are acquiring Probitas, a high-quality, fully integrated Lloyds platform. Entering the Lloyds market supports our ambition for capital-like growth and significantly expands the market opportunities in our global corporate and specialty business. Strategically, the portfolio is extremely well aligned with GCS, both in terms of footprint and business mix. Over half of the business probitized rights is in the UK, Ireland, and Canada. And it predominantly underwrites across property, casualty, and financial lines, and has no exposure to US domicile casualty risk. So the deal gives us access to the Lloyds market to write business lines and geographies that we already have the expertise and appetite to underwrite. And we've already had great feedback from our brokers as this acquisition will enable us to service even more of their customers. Finally, and importantly, the financial returns are really strong with the transaction expected to deliver high teens IRR. Turning now to Canada, where the picture is similar to the UK. Premiums grew 10%, driven by rating actions and strong new business volumes. The undiscounted combined ratio was a very good 95.3 and exhibited similar trends around reinsurance costs and claims frequency. On a discounted basis, core was 91.4. Now specific to Canada were the impacts of heightened car theft in Ontario, Wildfire and other cat events particularly in Q3 and the beneficial prior year development. Operating profit was up an impressive 18% to £399 million with improved investment returns. Moving to IWR next, I'll start with the overall performance before getting into the segments in more detail. We delivered strong top line growth right across IWR. Driven by health, protection, workplace and annuities, capitalizing on favorable market conditions. At this point, I want to talk about the long-term value creation in IWR. And as I'm sure you'll recall, IFRS 17 introduced the concept of a Contractual Service Margin, or CSM, primarily for our annuities and protection businesses. It's a really important measure of long-term value creation. Growth in the CSM leads to a higher stock of future profit and gives greater visibility of the profits to be recognised smoothly over time. A strong retirement performance in 2023 led to growth in the CSM of 12%, exceeding the unwind rate of 9.9%. Now building on this, Operating Value Added, which combines the operating profit with the growth in CSM, is the best way to look at IWR's performance under IFRS 17, because it recognises the value at the time it's generated. So with that in mind, I'm very pleased to report that Operating Value Added was very strong at £1.8 billion, excellent growth of 13%. Importantly, the operating value added is free from the distorting interest rate mismatch effect that can arise in operating profit from assumption changes. These assumption changes, such as longevity, are recognised in the CSM and released to operating profit over the life of the policies. The value of the assumption changes recognised in the CSM is measured at the interest rate that prevailed when the business was originally written. However, the change in the best estimate liability for the same assumption changes is measured at current rates. The impact of this mismatch in rates is recognised in operating profit immediately. So, in a lower interest rate environment, 2022 operating profit benefited from this mismatch by £222 million, as opposed to an £82 million negative in 2023. Through a £300 million downward swing, we should look through when assessing our underlying performance. As such, we are pleased with the operating profit of £994 million. Exceeding the impact of the interest rate mismatch on assumption changes, operating profit was up 10%. Finally, leaving IFRS 17 behind and applying the Solvency 2 lens on performance, OFG for IWR was almost £1.3 billion, up 7%, driven by improved investment returns from higher yields. Now I'll unpack the performance of IWR businesses in a little bit more detail, starting with protection and health, where sales grew 16% to £415 million. In health, The demand for private cover continues to rise, fuelling a 41% increase in sales. We are investing in this business to support further growth and ensure we deliver high quality customer service. The cost of this investment, combined with changing customer trends in product usage, have impacted the operating profit this year, but the low 90s core remains very strong. Protection sales were up 5% driven by growth in individual protection despite the more subdued mortgage market. Operating profit was impacted by some adverse mortality experience and assumption changes in individual protection. Now whilst this flows through to negatively affect operating value added, it was largely offset by growth in the CSM from the value of profitable business written. Onto wealth next. So while the environment remains challenged, the business continues to attract strong flows which were resilient at 6% of opening AUM. Workplace continued to go from strength to strength with net flows of £6.9 billion, up 19% supported by new scheme wins and the impact of salary inflation on contributions. In platform, although investment activity remains subdued, we are well placed when appetite returns, with a highly regarded proposition that we continue to invest in. Operating profit of £100 million included £28 million of ongoing investment, made to ensure we capture the significant growth opportunity as outlined in our In Focus session back in October. In the annuity business, we grew BPA volumes by 24% to £5.5 billion. We always take a disciplined approach in this market to ensure strong margin and efficient capital strain and by sourcing high quality assets through our experts in Aviva Investors who originated £2.6 billion of real assets in 2023. We expect to write healthy volumes again in 2024. Always focused on the capital efficiency of our businesses, it's noteworthy that during 2023, our book of business was self-sustaining in its use of capital. In the higher rate environment, demand picked up for individual annuities, while sales in equity release were lower, reflecting market contraction. Retirement new business margin improved in Q4 as a result of strong trading performance. The full year margin was 4%. and we were very pleased that operating value added was up 24% to £1.6 billion. Operating profit excluding the interest rate mismatch on the assumption changes was up 22% reflecting releases from the growing stock of future profit together with improved investment returns. Turning next to costs, I'm delighted to report that we have achieved our £750 million cost programme a year earlier than planned. Controllable costs are down 12% from the original 2018 baseline. Fantastic achievement in any period, even more impressive in an inflationary environment. We've seen double digit reduction in costs across most of the group and achieved this whilst investing in the business. And although costs in Canada are higher over the period, our Canadian business already had and continues to have market leading efficiency. The increase in costs there reflect further investment for growth. We remain laser focused on our costs and continue to seek further operational efficiencies. And with the £750 million cost target delivered early, our ambition now moves to maintaining or achieving top quartile efficiency for the businesses. You'll continue to see the results of our focus on this going forward. That takes me to an important element of today's results as we go further on cost efficiency and customer service in IWR. Earlier this year, we announced 15-year extension agreements with two key existing partners to help further streamline our cost base. With Diligenta, the agreement will reduce the number of legacy platforms, and with FNZ, the extension will introduce more heritage products onto their platform. This will bring both efficiency and simplification to the business. Our customers will benefit from an improved proposition and a modern IT platform that will enhance their experience. And we will also achieve further simplification of our IT estate as we consolidate the number of strategic partners and reduce the number of legacy platforms and IT applications. The financial benefits from extending these two partnerships are very attractive. Some important numbers to highlight. Firstly, from a capital perspective, the benefits already locked into the agreements with the partners drive an initial operating OFG benefit of £208 million. Overall, we anticipate the extension agreements will lead to an uplift of over £1 billion of cumulative OFG and more than £700 million in cumulative cash remittance capacity over 10 years. The full extent of the 2023-2028 restructuring costs were recognised in 2023 as a non-operating charge. Now applying the IFRS lens, we expect an annual operating profit benefit that rises to over £100 million in 10 years' time, with a significant majority of this annual benefit expected to be realised later in the timeframe. and costs to achieve this will be recognised below the line with £61 million incurred in 2023 and a further £300 million in the next five years equating to an annual similar average cost. Moving now to the development in OFG which was up 12% to £1.7 billion at a headline level. As you can see from the yellow box on this slide, it included the initial benefit of £208 million from the IWR partnership extensions that I've just covered. The underlying growth of 28% to £1.3 billion was driven by strong business growth right across the group. Management actions which included longevity assumption changes were closer to a more typical level of £243 million in 2023. You'll recall that they were particularly elevated in the previous year at £542 million. Therefore, the 2023 run rate OFG was about £1.5 billion, achieving our target of £1.5 billion by 2024 a year earlier. And this strong progress in run rate OFG means that today we've extended our target to £1.8 billion by 2026. Turning next to the balance sheet, which remains extremely robust, our solvency to cover ratio is a very healthy 207% and well placed to withstand market movements. The full solvency movements are shown in the appendix and included a strong 14 points of operating capital generation. Our defensively positioned asset portfolio of £85 billion continues to perform well and we saw net upgrades over the course of the year. Our leverage position remains comfortable at 30.7% or 28.9% excluding the Tier 2 issuance back in November. And as you can see from this slide, we have plenty of further opportunities to manage our leverage in line with our preference to be under 30% over time. As Amanda outlined earlier, given the significant progress we've made, we are today announcing upgraded group targets. Following the implementation of IFRS 17, we're introducing a new operating profit target of £2 billion by 2026. And as I explained earlier, we are now extending our OFG target to £1.8 billion by 2026. This represents very attractive growth in underlying OFG. And finally, we're extending our cash remittance target to at least £5.8 billion of cumulative remittances over the period 24 to 26, as we continue to grow sustainable capital generation from the businesses. So in summary, it's been another great year for Aviva. We have even greater confidence in the business, a growing track record of delivery, and evidence of our ability to deploy resources effectively, to optimize trading conditions across our markets, and maximizing the long-term value of our diversified business models. With that, I'll hand back to Amanda.

Thank you very much, Charlotte. So you've heard about the strong delivery last year and I want to give you the five reasons why we think Aviva is a great investment. Firstly, we are the UK's leading diversified insurer with a complimentary portfolio Growing our capital light businesses. Nobody in this market can replicate that successful model. Secondly, we have a consistent strategy which is working with investment identified for the future. Thirdly, we have strong organic growth in all our markets which are accelerated through selective bolt-on M&A. This is evidence in the numbers that we're producing and we're confident that we can sustain that performance. Fourth, we now have a track record of delivery built over the last three and a half years. And fifth, we deliver superior returns for shareholders with growing dividends and regular capital returns. So let me elaborate on each of these points and I'll start with why our unique model and strategy give us this sustainable competitive advantage. Three and a half years ago we made a conscious decision to refocus our portfolio on the UK, Ireland and Canada where we have the right and of course the will to win. Now we have a focused but diversified portfolio. We have market leading positions across the board and we're operating at scale. We have an unrivalled growing customer franchise of more than 19 million customers. There is no shortage of growth opportunities in the markets that we play in. And as Charlotte has said, we continue to be rigorous and disciplined in where we invest our capital, looking for the right opportunities, whether organic or inorganic, across our markets. We also have a complementary portfolio which benefits our customers across all their needs and provides Aviva with resilience and opportunities. Our general insurance, protection and health and wealth businesses drive customer acquisition, growth and higher returns. Retirement and heritage deliver cash generation underpinning our current and future dividends. And with Mark and the team at Aviva Investors, we have a core enabler of the growth in our wealth and retirement businesses and our sustainability agenda. We know that our strategy to be the go-to customer brand of choice across insurance, wealth and retirement is the right one for Aviva. It centers around four strategic priorities of growth, customer, efficiency and sustainability. And we're making great progress on executing that strategy. It's unlocking the competitive advantage of Aviva's model and creating momentum for the future. And because it's delivering real progress and results, You should not be surprised that it remains completely unchanged. We're often asked about growth opportunities. But let me tell you, there are no shortage of opportunities out there. To just give you a couple of examples. The wealth market is expected to grow 10% per annum from 1.6 trillion to 4.3 trillion over the next decade. And increasing pressures on the NHS are fueling double digit growth in health. We also see strong growth opportunities across our GI business and in retirement. And regulatory developments in the UK, such as the Solvency Reforms and the Mansion House Compact, create further opportunities for us to invest in the UK economy. Turning now to Aviva's growth. As you have seen today, we're growing across the board, accelerating our capital light businesses, where we see higher returns and growth prospects, and changing the mix of our earnings over time. In wealth, Doug and the team continue to take our business from strength to strength, winning 477 new workplace schemes, delivering double digit AUM growth on the advisor platform and expanding our lead generation capability for Succession Wealth. And with 170 billion pounds of assets across our wealth businesses, We are now the number one UK wealth player. Across protection and health, we are growing and you'll hear more about our health business at our next In Focus session, which will be in April. In UK and Ireland general insurance, Jason and the team are cementing our number one position with over 40% growth in personal lines retail and continuing commercial lines growth. In Canada, Tracy and the team are growing commercial lines with an 88% combined operating ratio and we're building out our RBC partnership in personal lines. Retirement remains a core component of our business and future growth ambitions come from this and we are delivering disciplined growth across BPAs and individual annuities. Looking next at customer. A crucial enabler of our growth is our unrivalled customer franchise. We have the largest of any UK insurer and both similar scale to the UK's leading banks. And more customers are coming to Aviva every day, with our UK customer numbers growing by more than 470,000 last year. We now have 6.3 million MyAviva users, which is up nearly 2 million since 2020. The range and quality of our products and services generate loyalty and mean our customers want more of what we do for them. Today, over 4.8 million customers in the UK have two or more policies with us. That is up 150,000 on last year. And our unparalleled brand, we are the number one for trust, consideration and awareness. That gives me great confidence that we will continue to grow our customer franchise. But we are not complacent. We continue to prioritise delivering the right outcomes for our customers. For example, we pass on all the benefit of interest paid on cash balances on our investment platform and we do not have early exit charges. Realising our ambitions will ultimately come down to how we live up to our promise to our customers. So we are investing and innovating to build even deeper relationships with our customers. So it's easy to say, but let me give you a couple of examples of how we're doing that. Since launching Aviva Zero in March 2022, we have sold over half a million policies, including more than 150,000 policies bought by Aviva customers. In pension consolidation, we've invested in enhancing digital customer journeys and we've launched a market leading AI driven pensions tracing service with Fabric. This helps our customers to trace their pensions in minutes and puts them in control of their retirement savings. And we're already reaping the benefits with flows into workplace at more than 50% year on year. As you know from the Wealth in Focus session this year, we're relaunching our direct wealth proposition around a clear market gap in hybrid advice. And because we offer insurance wealth and retirement, we're uniquely able to look after our customers throughout all of the key moments in their lives. From their first workplace pension with auto enrollment, home insurance on their first property, right through to helping them prepare for and transition into retirement. Aviva is there to meet lifetime customer needs. As a result, more customers will stay with us for longer, allowing Aviva to grow sustainably and profitably whatever market challenges we face. We are a go-to brand that our customers can trust to be with them today for a better tomorrow, whatever stage of life they are at. That trust is built on our ability to deliver on the promises that we make. In an increasingly complex and uncertain world, we need to continue to adapt our business to make sure that we can respond to changing customer needs. First and foremost, that means running our business in the most efficient way possible. So we have been transforming our operations, delivering more than £30 million in indemnity benefits from motor claims process improvements alone, and reducing our property footprint by 40%. We continue to leverage our group model, delivering £300 million in cost synergies every year. We've captured over £4 billion of workplace net flows into Aviva Investors in 2023. And we're putting technology and innovation at the core of the business. We're developing enterprise IT capabilities and key strategic partners, and generative AI and data capabilities alongside participation in Microsoft's co-pilot early access program. We've transformed the performance of Aviva over the last three years. We have grown quarter on quarter, year on year, and by operating more efficiently, we are turning that into improvements in profitability. And through dividend growth and regular share buybacks, we're sustainably delivering superior returns to our shareholders. With our strong momentum and continued investment in the business, we have real confidence in our ability to extend this track record. Our strategy remains unchanged. We are laser focused on execution and we are well positioned to secure future growth with a new set of upgraded group targets. So in summary, It's been another excellent year and we hope you share our confidence in the future of Aviva. Thank you very much for listening. I'm sure you have lots of questions, so I'm going to ask Charlotte to join me on stage and we will move to Q&A. Thank you very much.