Aviva PLC

Hey, good morning everyone and thank you for joining us for our full year 2024 results presentation. So as always, I'll give you a brief update on our performance before Charlotte takes you through the results in more detail. Then I'll cover the strategic progress that we're making and we'll finish with an opportunity for questions. As you can see, we're off site today because our usual space at 80 Fenchurch Street is being reconfigured, but we will be back there next time. So let me start with the key messages. Today's numbers once again demonstrate that we have delivered what we said we would, increasing the momentum built up over the last four and a half years. We're extending our track record of performance with consistent year-on-year growth and strong and reliable earnings. And we are delivering for our shareholders. But we're not stopping here. The proposed acquisition of DirectLine presents a clear opportunity to further accelerate our strategy and ambitions. And as I say time and time again, there is so much potential for us to go after. And I have real confidence in our ability to unlock this and to deliver the next phase of Aviva's growth. So let's get into the results. As you can see, we've had another excellent year. We are growing. right across the group. We are delivering for customers with more people turning to Aviva to protect their future. And we are serving more of their needs with a better experience. We are also well on track to hit our 2026 targets. Both operating profits and underlying own funds generation are at double digits with stronger cash remittances. Finally, we continue to deliver for our shareholders. Today, we are announcing a final dividend of 23.8 pence per share, with our total dividend per share at 7% year-on-year. These results are only possible because our colleagues believe in what we are doing. They can see the impact that we have on 20 million lives, and their insistence on doing the right thing for customers is the driving force behind our success. So a very big thank you to the whole Aviva team. They are the best at what they do. Underpinning these results is our powerful diversified model. We've shown once again that it is working with strong growth in all our businesses. In UK and Ireland general insurance, Jason and the team delivered 16% growth. We have expanded with large wins in global corporate and specialty and commercial lines. and we're continuing to power up personal lines. In Canada, Casey and the team have delivered double-digit growth and supported customers through a challenging cap season with a leading claims net promoter score. And in insurance, wealth, and retirement, Doug and the team are taking the business from strength to strength, posting impressive growth across the board. In wealth, we hit 50 billion pounds of assets on the advisor platform, extending our number one UK wealth position with nearly £200 billion of assets. In protection and health, we are growing strongly and profitably, with protection sales at 42%. Finally, in retirement, we delivered record bulk purchase annuity volumes, with continued support on asset origination from Mark and the team in Aviva Investors. If meet ambition for 15 to 20 billion pounds of BPA volumes over three years. Now let me touch on the proposed acquisition of DirectLine. We are really excited about what Aviva will bring to this business and what we can achieve together. The transaction will create a leader in UK personal lines, accelerating in capital light and bringing the best of Aviva to millions more customers. So rationale is just as attractive. We will deliver £125 million in cost synergies. That is over and above DLG's existing commitment. And we will unlock material capital benefits over time. This will enable us to further enhance shareholder distribution. So we have set up our integration office and there is already significant work underway to make sure that we hit the ground running from day one. And we look forward to sharing more detail with you in due course. So before I hand over to Charlotte, I want to take a moment to look back and reflect on just how far we've come. For the last four and a half years, we've transformed Aviva. We have built a clear track record of execution, delivering on our promises to our customers, our people, and of course, to our shareholders, returning 10 billion pounds of capital. This has established Aviva as the UK's go-to diversified provider for insurance, wealth, and retirement. But this is not our finish line, not by a long shot. There is still so much more to go after, and we are confident and excited about the next phase. So that's the high-level view. I'm now going to hand over to Charlotte, who will take you through the results in more detail.

Thanks, Amanda, and good morning, everyone. I'm delighted to present another set of great results. At Aviva, we've built a consistent track record of growth momentum and increasing profits. And this continued in 2024 with another year of strong performance as demonstrated across the key metrics. Operating profit was up 20% to nearly £1.8 billion. and underlying own funds generation, or OFG, was up 18% to £1.5 billion. As you may recall, OFG in 2023 benefited from the impact of the partnership extensions with Diligenta and FNZ. Therefore, and as expected, total OFG was 4% lower in 2024. Operating capital generation, known as OCG, was up 1%, or 17% on an underlying basis. This supported increased cash remittances of £2 billion. Return on equity was a healthy 13.6% on a Solvency II basis, aligned to how we run the business. And our capital position was a strong 203%. Now, trading across the business units continues to show real momentum. We achieved double-digit growth in GI premiums, in IWR sales, and in wealth net flows. And the combined ratio, often referred to as core, remains broadly consistent with the prior year. A great result, given the extreme weather events experienced in Canada in Q3. So I'll start my run-through of the businesses by looking at general insurance across the group, where our positive track record continues. In the last couple of years, we've delivered 12% annual premium growth. And over the same period, we've achieved margin expansion from a 1.5 point improvement in the underlying core. In the higher interest rate environment, and with a bigger book of business, investment returns increased as well. So together, these have resulted in a material uplift to operating profit, which has now reached almost £1 billion. Looking forward, we remain focused on pricing appropriately to maintain the strong rate adequacy of the book. And we expect continued improvement in the combined ratio, subject, of course, to normal weather conditions. So I'll now unpack the details of the GI businesses, starting with UK and Ireland. Premiums were up 16% to £7.7 billion overall, with 22% growth in personal lines and 12% in commercial. Three quarters of personal lines growth came from new business, mainly retail, which now makes up the majority of the portfolio. Pricing actions drove the remainder of the growth. commercial lines, including Probitas, which includes Probitas, which has been part of the group since early July. And in our six months of ownership, we have written £117 million of premiums at mid-'80s core and expect this business to grow further. Now, this includes 20% of the total amount – sorry, this excludes 20% of the total amount written by Probitas as some capital was provided by third parties, and we'll look to fully align this going forward. The UK&I undiscounted core was 94.9%, almost two points better than 2023. This reflects the benefits from pricing actions taken in 2023, as well as the mixed shift towards that higher margin retail business. Prior year development, or PYD, was about a point adverse, largely in line with the first half, reflecting some strengthening of reserves in commercial lines, partly offset by personal injury reform in Ireland. These impacts, alongside higher investment returns, gave an impressive 57% increase in operating profit. Premiums grew strongly in Canada as well, up 11%. Personal insurance was up 13%, around three quarters of which came from pricing action, including double-digit increases in Ontario Motor. Commercial was up 7%, more evenly split between pricing and new business. And we also achieved good levels of new business growth across auto, property and in GCS. The core of 98.5% reflects the impact of severe weather in Q3 from the four large catastrophe events, or CATs. Our lost impacts are in line with our market share in the affected areas. And to give you some idea of the scale of these events, 2024 is the worst insured year for Canadian weather on record, with over $8.5 billion of Canadian dollars of losses. around four points adverse to long-term averages. And while PYD remains positive at 2.7 points, it was less beneficial than in 2023. And commercial lines experienced a more normal loss profile when compared to the favourable previous year. And so as a result, operating profit was lower at £288 million. But importantly, the underlying core was more than a point better due to the benefit of pricing actions and improvement in auto theft, which has been closer to long-term averages. So I'll now move to IWR. Overall, we're growing operating profit and at the same time building the store of future profits on the balance sheet in the contractual service margin known as CSM. Now you'll recall last year I spoke to you about the accounting mismatch that impacts the way assumption changes are reflected in operating profit. So it's important to look through this to see the trend of 8% operating profit growth. Releases from the CSM have been growing annually at around 13% and are by far the most material contributor of operating profit for annuities, protection and heritage. At the same time, due to the growing business, the CSM has increased 9% to £7.8 billion, even after taking into account the releases. This is building more value, which will translate into greater operating profit in the future. And it's important to note that the accounting rules of IFRS 17 mean that the CSM doesn't include the future value of our wealth and health businesses. both of which also have highly attractive profitability growth profiles. I'll now run through more detail business by business, starting with protection and health. Protection sales were up 42% following completion of the AIG acquisition in April. Excluding AIG, sales were 5% lower, reflecting market contraction in individual protections. Protection operating profit was up 26%, reflecting a higher opening CSM following 2023 portfolio growth, inclusion of AIG and improved mortality experience. Enforced premiums in the health business were up 10% from strong new business and pricing actions. An operating profit of £66 million includes a 30% improvement for the second half from the earn-through of pricing, better claims experience, and some seasonality. This was achieved at low 90s core, as previously indicated. And we continue to invest in the business and remain confident in the ambition for £100 million of operating profit by 2026. So now let's go to wealth. where we are the largest player in the UK and have reached almost £200 billion of assets under management. Net flows represented 6% of opening AUM for the third year in a row, clear proof of the resilience of the business. Workplace inflows grew 16%, but outflows were a little elevated. particularly in Q4 amid speculation of tax changes ahead of the autumn budget. Net flows to the advisor platform were up a very strong 69% as our attractive proposition shows good performance and increased demand. We continue to invest in direct wealth and I'm pleased to see net flows almost trebled following the relaunch of the proposition. Our investment has increased by £15 million and we expect the impact of this investment cost on profitability to have peaked in 2024. So overall, wealth operating profit grew 29% to £129 million as we work towards our ambition of £280 million by 2027. The last segment to cover is retirement. where we wrote £7.8 billion of high-quality bulk purchase annuities, or BPAs. This brings the volume to £17.7 billion across three years, completing our £15 to £20 billion ambition. The new business remained self-funding and had a higher proportion of gilts than usual, given the yield relative to corporate credits. This has led to an efficient capital strain for the volumes written, below our typical guidance of 3-4%, and really strong IRRs in the mid-teen percentage range, up from the usual low-teen guidance that we give. Our focus going forward is on change, generating strong returns on the amount of capital allocated to the business, and therefore we expect similar BPA volumes of £15-20 billion again over the coming three years. Individual annuities were up 15% in the higher-rate environment, while the equity release market has contracted further. New business margin for retirement was a strong 3.2%, and the business was supported by high-quality illiquid assets of £3.2 billion sourced by Aviva Investors, with no asset gap remaining at the year-end. Operating profits for retirement improved by 14%, reflecting the higher opening CSM and improved investment returns. OFG was lower as the prior year included material longevity releases, which didn't repeat in 2024. So that concludes the detail on the businesses. I'd now like to take a moment to remind you of our capital allocation and performance management framework. And this is a slide that I come back to each time we speak to frame my comments. There's clear evidence from our results that we are delivering sustainable growth in earnings and cash, which is the first tile on this slide. When combined with our balance sheet strength, this gives us the firepower to execute across the rest of the framework. growing the regular dividend, investing in the business to drive efficiency and growth both organically and through M&A, and returning capital to shareholders. And the examples on this slide demonstrate the framework in action and illustrate the strength of our performance culture and grip. All of this enables us to work our diversified business model to deliver great results. to turning through the balance sheet, which remains strong, with a cover ratio of 203%. We generated 15 points of operating capital over the year, and you can find the slide showing the full solvency development in the appendix as usual. Our asset portfolio, which is defensively positioned, continues to perform well, and our leverage ratio has reduced to 29%, in line with our preference to operate below 30%. our consistent performance and financial strength has allowed us to do some compelling M&A at attractive returns. And the DLG transaction, which will close around the middle of this year, will enable us to upgrade our dividend policy. So we'll go through all the details again, but there are a few points worth re-emphasising. The dividend cash costs for 2025 will continue to grow by mid-single digits. reflecting the organic growth in our business. In addition, there will be a mid-single digit uplift in the 2025 DPS following completion of the deal. So shareholders will receive two mid-single digit increases in DPS. And this combination will more than offset the impact on DPS from pausing the share buyback this year. And of course, we will continue to grow the cash cost of the dividend by mid-single digit each year thereafter. And we expect to return to our cadence of regular and sustainable returns of capital in 2026. And when we do that, we intend to increase the size of the buyback to account for the higher share count. So bringing all this together, our capital profile is now even more attractive. And when you couple this with the clear profitable growth expectation we expect to achieve across the group, we are building a truly compelling proposition for investors. And Amanda will come back to this shortly. As part of the capital allocation performance framework, we make deliberate and disciplined investment decisions to drive profitable growth. This builds further scale in our core markets, ensures we have the people in frontline roles to serve our growing customer base, and enables automation and the AI solutions to assist our workforce and enable them to be more efficient. As we have made these investments, the operating jaws have widened. Growth in operating profit was double the growth in controllable costs. So to assess the performance, we focus on efficiency ratios of the businesses. In general, as insurance, our distribution ratio improved by just under a point, reflecting the retail growth in personal lines, continued automation, and scalable operations. In IWR, the AIG acquisition increased controllable costs, but with limited impact to assets. So excluding this, asset growth drove a small improvement to the cost-asset ratio, and we continue to focus on efficiency and simplify our operations through the partnership extensions announced last year, which are progressing really well. In Aviva Investors, growth in AUM and cost efficiencies have led to a five-point improvement in the cost-income ratio. And we are making good progress on efficiency across the group. But there is still more to go after. This time last year, we upgraded our group financial targets. And clearly, the direct line transaction will result in material change to the group financial results. We'll give you more details of what that means for our targets post-completion. When we expect to refresh current targets to take into account the bigger group. Irrespective of that, though, we remain very confident in delivering the standalone group targets we have set. Our target for £2 billion of operating profit by 2026 translates to an annual EPS growth of around 12% from earnings growth and a shrinking share count. And we remain on track for £1.8 billion of OFG by 2026. absorbing a headwind of around £100 million from Solvency UK reform, which changed the transitional run-off shape from 2025 onwards. We've also met our existing ambition for a 12% return on equity, and delivering our OFG target is expected to result in a further improvement of more than 3.5 points, which would take us to mid-teens return on equity. And finally, we're targeting the £5.8 billion of cash remittances, so more than £5.8 billion of cash remittances over the period 24 to 26. The cash component of the DLG transaction will be funded from internal resources, and remittances related to the transaction will be considered special in nature and will be reported outside and in addition to the usual amounts. So, to sum up, it's been an excellent year for Aviva once again. Aviva continues to grow, is financially strong, and we have a firm grip on performance management and our use of capital. With that, I hand back to Amanda. Okay.

Thanks, Charlotte. Now, as always, I'm going to cover the strategic progress that we're making, and I'll start with the five reasons why we think Aviva is a great investment. First off, we're the UK's go-to diversified insurer with a majority capital life portfolio. We have the benefit of geographic diversification with material businesses in Canada and Ireland. Nobody in this market can replicate our successful model. Second, we have a consistent customer-centric strategy with investment for the future and its delivering. Third, we have strong organic growth in all our markets. accelerated with targeted and strategic M&A. Fourth, we have a track record of delivery, with a reputation for execution built over the last four and a half years. And finally, we deliver superior returns for shareholders. And as you've just heard from Charlotte, we will be further enhancing distributions with the acquisition of DLG. So let me elaborate on each of these points, focusing particularly on strategy and growth in particular. So I'll start with our unique model, which gives us a competitive advantage. As you know, we refocused our portfolio in my first two years as CEO. Today, we have a diversified but focused portfolio with complementary businesses. We are operating at scale with leading positions in all our markets. And we have the crucial advantage of our customer franchise with more than 20 million customers. Because of the breadth of our product offering, we are uniquely able to look after those customers throughout all of the key moments in their lives. Nobody else can do this. Now, I know that many of you will have seen this slide before, but it is actually important because it truly sums up the power of Aviva. From a junior ISA, insurance on your first car, your workplace pension with auto-enrollment, support with starting and growing a business, right through to transitioning into retirement, we are there to meet the needs of our customers. And we bring all of this together with a mobile-first experience on the My Aviva app, which is our single digital front door. As a result, more people will continue to choose Aviva and stay with us for longer because we can meet their needs throughout their lives. And that is why we will grow sustainably and profitably whatever market challenges that we face. Turning now to our customer-centric strategy, which is the main focus for today's update. We know that our strategy to be the go-to customer brand for insurance wealth and retirement is the right one for Aviva. And because it's delivering results, you shouldn't be surprised that it remains unchanged. We are laser focused on our execution through our four strategic priorities, growth, customer, efficiency, and sustainability. And we're doing so at pace. Individually, they're all important, but collectively, they power our strong momentum. Shifting our earnings mix towards capital light is a core element of our growth strategy. This is important because it allows us to deliver stronger growth, better returns, with less capital. That is highly attractive proposition for our shareholders. And we're already making great progress here. Our portfolio is majority capital light today. We will be approaching 70% capital light in just two years with our current plans. With DLG, we will be able to go further as we unlock the synergies from this transaction. And we see no shortage of growth opportunities in all our markets. There's £1.8 trillion worth of assets in UK wealth. growing at double digits. Insurance markets are expanding with a total of £130 billion of premiums across the UK, Canada and Ireland. And we can now tap into over £200 billion of premiums in our global corporate and specialty business. Importantly, there are clear structural trends underpinning all of this, from greater investment in the UK economy to growing populations in Canada and Ireland. Now, it's one thing to see the opportunity on growth and another to capitalise on it. So let me give you a few examples of how we're doing just that. In UK General Insurance, we've agreed a new partnership with Nationwide for home insurance. And following completion of the proposed acquisition of DLG, we will be able to further accelerate into the retail segment. In Canada, we launched four new damage repair centres, continuing to transform our claims capabilities with supply chain insourcing. And we've seen benefits in distribution income from Optium, a leading provider of vehicle replacement insurance that we acquired last year. In global corporate and specialty, the acquisition of Provitas gave us access to the Lloyds market. We are now a top dual platform player in the UK, And in the last six months, we have launched seven new lines of business and delivered numerous large client wins. In protection, we're progressing with the integration of AIG at pace with new business now on Aviva's platform. And finally, in wealth, we have a huge opportunity with our comprehensive offering. To better meet customer needs, we are connecting our propositions across workplace, advice, succession wealth, and direct wealth. This has helped us to recapture over £1 billion of outflows from heritage into IWR. We also capture 65% of workplace flows into Aviva Investors. And we're bringing private markets to retail investors with our new venture and gross capital long-term assets fund. So as you've heard, we're already the number one UK wealth player with almost £200 billion of assets. That number has grown by 85 billion since 2020, which is a real indicator of just how far we can take this business. Now, customer is the glue that holds our model together. We have the largest customer franchise of any UK insurer with 17 million customers. And with DLG, this is likely to exceed 20 million, creating a leading franchise in UK financial services. So we have valued customers, but we're also deepening our relationship with them. We have now established a single view of all UK customer data. We've been unlocking marketing permissions, and we can now directly speak to almost 9 million of them. And we hit 7 million registered MyAviva users just a few weeks ago. And what we're doing here is achieving results. Today, more than 40% of our new sales are to existing customers. These multi-policy holders are better protected and more engaged. They stay with us for longer, and they buy more from us. So it's a win-win for our customers and Aviva, and of course, ultimately, for our shareholders. And the story is just as powerful for large corporates, where over one-third of our clients have products across multiple Aviva business lines. Our customer base gives us a huge advantage. In fact, everything that we have delivered is down to our customer-centered strategy and the investments that we've been making here. But there's still a lot more to go after. We're making progress on the priorities that we set as the customer in focus session. We've grown our customer base, welcoming 1.3 million net new customers in the last 12 months alone. We're serving more of their needs. We now have 5.4 million individual customers in the UK with two or more policies. That is the highest that it's ever been. And we're delivering an even more engaging mobile experience with our MyAviva app, where the online experience score is now above 70%, which is up 15 percentage points compared to the old app. Our approach to efficiency is critical for translating our growth into improved profitability. It also provides the best possible customer experience. Here, we are transforming our operations through automation and through the strategic partnerships. We're also simplifying our IT architecture. We've reduced our applications in the UK by half. And artificial intelligence is another crucial enabler. Now, we've been using traditional AI and machine learning for almost a decade, so it's not new to us. But we do have a big opportunity with generative AI. So I'd like to cover that in a bit more detail. We know that generative AI has the potential to deliver efficiencies right across the industry. And with the size of our customer base, we have a bigger opportunity than most to drive benefits from gen AI for our customers. So we're rolling out co-pilot technology to give our workforce even more time to focus on what matters most, which is solving our customers' financial problems. We're also developing use cases like claims summarization. So now, instead of putting customers on hold, our agents can immediately view relevant information and suggest appropriate next steps. This is already used by 40% of our motor claims agents. and it reduces call handling time and improves customer experience. And we're going even further. We will be embedding Gen AI on calls to support agents in real time, including with call wrap activities. This is just one of many examples, and we have had similar success in medical underwriting in our health business. Importantly, we're able to test and learn at speed through our in-house Gen AI platform called Oasis. And with over 150 use cases in the pipeline, including more transformative ones, there is incredible potential for much more. As an insurer and a long-term investor, sustainability and climate change clearly affect both our customers and Aviva. Being no gas, recent storms in the UK, wildfires in Canada serve as a reminder of the reality that we face and that we have to manage. Today, we're publishing the second iteration of our climate transition plan, which you can find on the website. This reinforces our ambitions and translates them into tangible actions. And recognizing the importance of social action, we've invested over 11 billion pounds in UK real estate and infrastructure since 2020, supporting job creation in our local communities. So now, Moving to a slide that is really important and worth dwelling on just for a moment, our performance track record. Over the last four and a half years, we have grown year on year. And by operating more efficiently, we're creating greater profitability and cash generation. And we're building on this momentum by investing in the business and unlocking further opportunities with targeted M&A. All of this gives me real confidence in our ability to further accelerate performance and deliver on our targets. And finally, I'd just like to reinforce our commitment to deliver superior returns to shareholders. As you can see, our track record here is rock solid. Since 2020, we've returned £10 billion in capital and dividends to shareholders. That's around 75% of our current market cap and a very attractive yield for our shareholders. And the DLG acquisition will allow us to grow our dividend and unlock greater capacity for shareholder distribution. So to conclude, I want to leave you with a few takeaways. Aviva is a very different business to the one that I inherited. We are now in the unique position as the UK's leading diversified insurer with fantastic businesses in Canada and Ireland. We have achieved a huge amount, but we are far from being done We know that there is so much more to go after, and I personally remain laser-focused on accelerating capital-like growth, unlocking our customer advantage, and delivering for our shareholders. We are stronger, we are bolder, and we are executing on our strategy. Myself, Charlotte, and the rest of the team are really excited for the next phase of growth. Thank you for listening. I'm sure you have lots of questions, and I know you all have a very busy day, so let's get on to the Q&A.