aviva spain bancassurance partner for life · ape up 18% in 2003(1) new business sales (ape) in...

© Aviva plc

Aviva SpainBancassurance partner for lifeGerardo Arostegui

© Aviva plcSlide 111

• Aviva market leader

• Business development

• Shareholder value


Invested in Potential and Created Value• 5 acquisitions from

Aseval (June 2000) toCaja Granada(September 2002)

• Total Aviva investment of £505m

• Combined market share purchased 3.4%

• Profitable growth of JVs, to market share of Aviva bancassurance of 9.2% of the total life market at end 2003

0.0%

2.5%

5.0%

7.5%

10.0%

Aseval Bia Galicia Unicorp Vida Caja España Total AvivaBancassurance

Growth in Market Share Since Acquisition

Mar

ket S

hare

by

Prem

ium

Inco

me

1. Unicorp figures include Caja Granada


APE up 18% in 2003(1)

New business sales (APE) in Aviva SpainManaging a Profitable Product Mix

2002 Full Year € 301m

Source: Aviva

Life & Savings64%

Life Risk9%

Pension27%

Life & Savings50%

Pension36%

Life Risk14%

2003 Full Year € 356m

(1) APE for 2003 £ 246 m


MARKET SHARE EVOLUTION

3.5%

6.9% 7.4%

10.0%

0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003

RANKING POSITION

2000 2001 2002 2003

1º

4º5º

6º

Source: ICEA

Premium Income

Market Leader in Spain in 3 years(1)

(1) 10% market share by premium income: 9.2% for bancassurance and 0.8% for Aviva Vida y Pensiones

Aviva No 1 in Life Business


Unique Business Model Designed for Growth• Trusted partners with strong franchises• Partners incentivised for value growth• One-factory business model• Proven and successful bancassurance process• Management expertise to develop the business• Aviva brings ownership, controls and insurance

expertise


• 11.1m customers• 12.6% of clients have policies• Less than 1.5 policies per client

• 3,713 Branches• 20% growth next 5 years • Growing in new regions

• Ageing Population• Low Insurance Penetration• Strong growth forecast

Client Penetration

Branch Network

Market Growth

Drivers of Growth are Positive

Plan to Exceed Market Growth


Total Life Policies/Total Bank Clients

0.00%

10.00%

20.00%

30.00%

40.00%

2000 2001 2002 2003

Further Potential For Growth

Aseval

Caja Espana

Caja Granada

Bia Galicia

Unicorp Vida

Penetration Increase of over 30% in 2 years


Growing Network with Internal Competition

00.5

11.5

22.5

33.5

44.5

A B C D E

Targets based on Best Practice Performance by Aviva PartnersPensions Business

Protection Business Savings Business

APE

Per

Ban

k C

lient

€

APE

Per

Ban

k C

lient

€

APE

Per

Ban

k C

lient

€

Actual

Potential

Bank

Bank Bank

0

2

4

6

8

10

12

14

16

A B C D E

05

101520253035404550

A B C D E


Target – A bigger share of a bigger market

Business Development in Action

• Aligning strategy and plans between partners• Tailored training programs at partners and

branch level• Integration with bank product range• Leveraging best practice across the Aviva

network• Expanded Product Offering - Addressing the

clients’ needs


Shareholder Value – Overview

020406080

100120140160

2000 2001 2002 2003

• High margin products• Average Gross NB Margin

59% for 2003• NB IRR post tax and cost of

SM(1) 30% for 2003• NBC post tax post cost of SM

£78m• After allowing for goodwill and

expected earn-out payments deal IRRs become circa 12%

Bancassurance: new business contribution pre-tax and cost of capital (100% Level)

£m

(1) Solvency Margin


(1)Aseval provides third party administration (TPA) services for other JVs

AvivaSpain

50% ProfitsBank Partners

BancajaTPA (1)

50% Profits

ServicesFees

50% Profits

Commissions

PremiumsBenefits

50% Profits

Customer

JV Companies

One Factory Bancassurance Business Model


Spanish bancassurance protection is inherently more profitable than traditional protection business...

• Pricing: less competitive pressure

• Loyal client base• Low expenses in Spanish

bancassurance• Revenue based commission in

Spain

-200%

-150%

-100%

-50%

0%

50%

100%

1 2 3 4 5 6 7 8 9 10

0%

10%

20%

30%

40%

50%

1 2 3 4 5 6 7 8 9 10

...which leads to lower strain and significantly higher margins

Traditional UK protection product cashflow

Spanish bancassurance protection product cashflow

years

years

% o

f APE

% o

f APE


Illustrative Bancassurance Profit Signatures

• Tax efficient product• Level loading meeting customer needs• Max industry charge 2% pa, typical JV

charge 1.5%• Long duration and high retention• High margin, breakeven year 3

• Competition with bank deposit accounts• Tax advantages if held for 5 years• Higher lapses as also used for shorter

term savings• Level commissions and low costs• Lower margin but high IRR

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

1 2 3 4 5 6 7 8 9 10

Pensions – Single Premium Savings- Single Premium

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

1 2 3 4 5 6 7 8 9 10% o

f Pre

miu

m

% o

f Pre

miu

m


Illustration

% o

f Fun

d

Initial Expenses - Yr1 OnlyBank Commissions - Yr1 onlyAdmin Expenses

Year 1

2.00%

1.00%

0.00%

-1.00%

-2.00%

i

Annual Charge - Expenses = Profit

Expenses

Annual Charge - Expenses = Profit

Year 2+

Shareholder income and expenses: unit-linked pension contract


Source: ICEA

0

1

2

3

4

5

6

Aseval Avivabancassurance

cons.

Other largebancassurers

Total Spanish lifemarket

Acquisition and administration costs (% of premium, 2003)

1.55%

3.04%

6.45%

2.20%

%

Increased competitive advantage against the market

Continued Low Costs Underpin Attractive Margins


Strong Margins Supported by Pricing –Low Expenses and Scale Advantages

Source: Annual reports

No indication of margin pressures

(1) Average 30% Post COC & tax

0. 0%

20. 0%

40. 0%

60. 0%

80. 0%

100. 0%

Q4 2000

Q22001

Q42001

Q22002

Q42002

Q22003

Q42003

Average margin55%(1)

Q1 ’04 margin60%

Bancassurance Gross Margins

Increased weighting of protection

High volumes of savings


Growing Shareholder Value

• Active management of product mix• Focus on growing the value of NBC• Commission agreements reduce need for capital support• Growing economies of scale from single admin. platform• Cash generating model with low capital requirements

Blueprint for continued success


Aviva Spain summary

• Spain’s leading life business in 3 years– Strong growth prospects– Attractive product pricing– Expense advantage– Strong margins

• Shareholder value visible at early stages of business development


Company

GRUPO AVIVAMAPFRE/CAJA MADRIDCAIFORBBVA SEGUROSGENERALIBANSABADELL VIDAIBERCAJAASCAT VIDAALLIANZCASER

Source: ICEA

Aviva No 1 in Life Business

PremiumsMillion €

1.7671.7121.5961.2371.184740718704611529

Ranking

2003

123456789

10

Position

2002

431578

11121410

Appendix 1


Caixa Galicia

5%

Caja España

6%

Bancaja

17%

4%

2%

10%2%

Unicaja

13%

2%

4%CajaGranada

2% 6%2%

1%

3%19%

Source: INE

Aviva’s bancassurance network has leading market shares in territories that account or c.70% of Spanish GDP• Strong multi-regional

presence in fastest growing regions in Spain

• Growing presence in attractive areas outside home regions (Madrid, Catalunya)

• 11.1 million customers, 3,713 branches

• 3rd largest bank network

Key: %s show proportion of GDP

Appendix 2


Business Aviva’s EV Currentcommenced consideration(1) acquired customers Region

Bancaja Aug 2000 £217m £47m 2.5 m Valencia

Unicaja Oct 2001 £95m £14m 3.4 m Andalusia

Caixa Galicia Oct 2001 £93m £6m 2.0 m Galicia

Caja España Jan 2002 £88m £12m 1.5 m Castilla y Leon

Caja de Granada May 2003 £12m 0 1.7 m Andalusia

(1) Future consideration subject to performance

Source: Aviva

Spanish bancassurance partnerships at a glance

£505m £79m

Appendix 3


0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003

New business sales (APE)

Firstbancassurancedeal

Average compound growth 163% p.a. 2000 (£ 57m) – 2003 (£ 246m)

£mAPE

Transforming Aviva’s Position in the Spanish Market

Source: Aviva

Appendix 4


Positive “Cash-Flow” From Early Stages of Growth Business

0

5

10

15

20

25

30

35

40

45

50

55

00 01 02 03

Bancassurance pre-tax MSSB evolution

Source: Aviva

£m

7

16

29

50

FY

HY

FY

FY

HYHY

FY

Appendix 5

aviva spain bancassurance partner for life · ape up 18% in 2003(1) new business sales (ape) in...

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