aviva spain bancassurance partner for life · spanish bancassurance partnerships at a glance...
TRANSCRIPT
-
© Aviva plc
Aviva Spain
Bancassurance partner for life
Gerardo Arostegui
10 November 2003
-
© Aviva plc
Disclaimer
This presentation may contain certain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Aviva’scontrol including among other things, UK domestic and global economic business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Aviva and its affiliates operate. As a result, Aviva’sactual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Aviva’s forward-looking statements.
Aviva undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements we may make.
-
© Aviva plc
• Market potential
• Aviva’s market position and model
• Products
• Shareholder Value
2
-
© Aviva plc
Strong medium-term growth drivers
Dependency ratios are increasing...
…Spanish PPS (i) one of the most generous…
…underdeveloped private savings market
010203040506070
1995
2000
2010
2020
2030
2050
(Dep
ende
ncy
ratio
%)
UK EU Spain
0
25
50
75
100
UKFra
nce
Germ
any
Italy
Spain
(Rep
lace
men
t rat
io %
)
0
20
40
60
80
100
Spain
Germ
any
EU UK
(Inve
stm
ents
/GD
P %
)Source: European Commission, CEA
3(i) PPS = Public pension schemes
-
© Aviva plc
• Market potential
• Aviva’s market position and model
• Products
• Shareholder Value
4
-
© Aviva plc
Aviva is the market leader in H1 2003 ……...from top 30 in 2000
Life insurance ranking 1H 2003
AvivaMapfre + C MadridLa CaixaBBVAGeneraliC CatalunyaIbercajaB SabadellCAMAllianzSCH
1,071846762615609411380358251234208
70-14
-1-10593841
-27-38
-51
129.48.56.96.84.64.24.02.82.62.3
Premiums (€m)
Growth(%)
Market Share(%)
Source: ICEA5
-
© Aviva plc
Spanish bancassurance partnerships at a glance
Business Aviva’s EV Number ofcommenced consideration(1) acquired customers Region
Bancaja Aug 2000 £217m £47m 2.4 m Valencia
Unicaja Oct 2001 £95m £14m 2.0 m Andalusia
Caixa Galicia Oct 2001 £93m £6m 2.3 m Galicia
Caja España Jan 2002 £88m £12m 1.3 m Castilla y Leon
Caja de Granada May 2003 £12m 0 0.9 m Andalusia
£79m£505m
(1) Future consideration subject to performance.Source: Aviva
6
-
© Aviva plc
Aviva’s bancassurance network has leading market shares in territories that account for c.70% of Spanish GDP
Caixa Galicia
5%
Caja España
6%
Bancaja
17%
4%
2%
10%2%
- Strong multi-regional presence in fastest growing regions in Spain
- Growing presence in attractive areas outside home regions (Madrid, Catalunya)
- 9 million customers, 3,672 branches
- 4th largest bank network
Unicaja
13%
2%
4%CajaGranada
2% 6%2%
1%
3%19%
Key: %s show proportion of GDP
Source: INE 7
-
© Aviva plc
An under penetrated bank client base
Life insurance & pension reserves as % of total customer funds 2002
18.0%
14.9%13.5%
13.3%12.6%
12.0%10.0%
7.1%6.9%5.7%5.6%
4.8%
2.9%3.6%
4.2%
16.0%La Caixa
Bancaja
Ibercaja
Caixa Catalunya
Banco Popular
Banco Atlántico
Banco Pastor
Pensions penetration
Life insurance penetration
Mapfre - Caja Madrid
Banco Sabadell
CAM
BBVA ex-America
SCH ex-America
Caja España
UnicajaCaixa Galicia
Bankinter
Caja Granada(1) 1.7%
8(1) Company data. Includes funds currently at CASER and other providers Source: ICEA, Inverco, Annual reports
-
© Aviva plc
Agents, specialised life sales force and brokers
Bancassurance
(1) 50% + management control(2) In the case of Agencia Caja Granada 50% stake is owned by Unicorp Vida. Aviva has, therefore, 25% economic exposure
Exclusive and perpetual distribution agreementsThird party agreements
Aviva Spain
• Management control• Exclusive and perpetual
distribution agreements• One “factory”, 87 people• Economic alignment through
50/50 JV
Key features
50%(1)100% 50%(1)
50%
50%
Aviva VidaUnicorp VidaBia Galicia
C. España VidaAg. C. Granada(2)
UnicajaCaixa GaliciaCaja EspañaCaja Granada
Bancaja
Aseval
TPA
One factory business model
9
-
© Aviva plc
A proven and successful bancassurance process
Prompt alert
Client comes into
branch
Physical presence activated
Explanatory phase
Product simulation
Customer acceptance
/ data completion
Health issue
No health issue
Issue proposal to insurer
Not accepted
Accepted Issue policy by insurer
Issue policy in branch
Analyse Bank client database
Selection of target customer (CRM)
Storage in database accessible in branches
Client data
Product offer
Selling arguments
Source: Aseval 10
-
© Aviva plc
An attractive proposal for our partners…
What Aviva offers Benefits for our partners
• Broad-based partnership
• Worldwide bancassurance experience and local product expertise
• Developed platform, Aseval
• World class best practices
• Upfront and earn-out payments and means to increase income from life and pensions business
• Earn-in components to protect Aviva
• Broader financial services
• No learning curve, full range of competitive products today
• Access to proven, efficient platform, no implementation risks
• Implementation of value creation measures in life and pensions business
• Main effects• - strengthen capital base for further
growth• - focus on high margin products• - further motivates organisation to push
life and pension sales while reducing the risk assumed by Aviva
11
-
© Aviva plc
• Market potential
• Aviva’s market position and model
• Products
• Shareholder Value
12
-
© Aviva plc
Overview of Aviva product mix / characteristics
Risk• 41% of our risk premiums bundled with bank loans.• Client less sensitive to policy pricing, leading to high margins.
• Pension plans focus on fixed income ( 79% of our AUM).• Attractive tax treatment which increases with duration. This leads to
high margins and duration, which leads to strong NBV margins.
Pensions
Unit-linked • Unit-linked products are similar to other markets.
• Make up majority of life savings products.• Offer guaranteed rates over first 3 or 6 months of plan. Aviva
continuously re-prices guarantees as market conditions change, securing a stable financial margin.
Capitalisation
13
-
© Aviva plc
Flexing the product mix
New business sales (APE) in Aviva Spain
Discrete Q3 20032002 Full Year
Source: Aviva 14
Life & Savings64%
Life Risk9%
Pension27%
Life & Savings66%
Pension15%
Life Risk19%
-
© Aviva plc
• Market potential
• Aviva’s market position and model
• Products
• Shareholder Value
15
-
© Aviva plc
Transforming Aviva’s position in the Spanish market
020406080
100120140160180200
1997 1998 1999 2000 2001 2002 9m2003
£m A
PE
New business sales (APE)
First bancassurance deal
16
-
© Aviva plc
Strong growth in profitability
Bancassurance: new business contribution pre-tax and cost of capital
Bancassurance: Life achieved pre-tax operating profit
0
10
20
30
40
50
60
70
80
90
2000 2001 2002 6m 2003
( £ m
)
0102030405060708090
100
2000 2001 2002 9m 2003
( £ m
)
17
-
© Aviva plc
Strong margins supported by pricing, low expenses and scale advantages
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Q4 2000
Q22001
Q42001
Q22002
Q42002
Q22003
Bancassurance Quarterly Margins
Average margin54%
29% Post COC & tax
18Source: Annual reports
-
© Aviva plc
Spanish protection products are inherently more profitable than UK products...
1 2 3 4 5 6 7 8 9 10
• Pricing: less competitive pressure
• Loyal client base
• Low expenses in Spanish bancassurance
1 2 3 4 5 6 7 8 9 10
UK protection product cashflow
Spanish protection product cashflow
19
years
years
...which leads to lower strain and significantly higher margins
-
© Aviva plc
Low costs underpin attractive margins
• One factory efficiency benefits whole network
Acquisition and administration costs (% of premium, H1 2003)
Source: ICEA
0
1
2
3
4
5
6
Aseval (Aviva) Other largebancassurers
Total Spanish lifemarket
(%)
1.35%1.95%
5.65%
20
-
© Aviva plc
Profitable “cash-flow” from early stages of growth business
0
5
10
15
20
25
30
35
00 01 02 6m 03
Bancassurance pre-tax MSSB evolution
Source: Annual reports
£m
7
16
29
23FY
HY
FY
FY
HY
HY
21
-
© Aviva plc
Growing Embedded Value
• £505m (£448m goodwill(i)) invested in Spanish bancassurance• Aviva’s 50% share: NBC Post COC, Post Tax £26.5m for 9m 2003• Current implied multiple of 12x NBC to goodwill
Bancassurance EV evolution (Aviva 50% share)
(i) Includes estimated value of deferred consideration
0
50
100
150
200
2000 2001 2002 6m 2003
( £m
)
Total acquired
EV
EV value generation
47
161
79
134
106
57
7979
22
-
© Aviva plc
0,0%
2,5%
5,0%
7,5%
10,0%
12,5%
15,0%
17,5%
-75% -45% -15% 15% 45% 75%
IRR
Outperformance of 10 year business plan
Shareholder returns linked to value creation vs 10 year business plans
• Incentivisation− earn-outs
• Protection− capped future
payments
− earn-ins
− conservative
projections
− exit penalties at
market value
Key features
Minimumprice
Earn-inpayments
Earn-outpayments
Maximum price
23
Example bancassurance business case
Source: Aviva
-
© Aviva plc
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
24
-
© Aviva plc
Appendix
25
-
© Aviva plc
Main features of Aviva’s bancassuranceproducts
Risk (linked) Coverage Main features• Linked to
personal loans/mortgages
• “SeguroFinanciación”
• “SeguroPréstamos”
• Death • Financial entity beneficiary for outstanding debt on personal loans/mortgages. Excess of sum assured over outstanding debt paid to beneficiaries appointed by insured
• Optional single /regular premium or annual renewable for mortgages
Risk (non-linked) • Death• Total disability• x2 sum assured on accident• Overdraft settlement• Critical illness (only for Vida Oro)• x3 sum assured on car accidents
(optional Vida Oro)• 2nd medical opinion on critical
illness
• Annual renewable insurance maturing when beneficiary turns actuarial age of 70 (complementary coverage concludes at 65)
• Sum assured grows automatically by 5% every year
• Overdraft settlement up to a maximum limit of Eur 3,000
Product Description
26
-
© Aviva plc
Main features of Aviva’s bancassuranceproducts (continued)
Product Description
Savings Coverage Main features• Survivorship: Payment of
accumulated savings at settlement of plan
• Death: technical reserve of survivorship +extra 10%
• Survivorship: payment of immediate annuity
• Death: Payment of initial premium + extra 5%
• Minimum guaranteed variable yield• Quarterly yield higher than minimum
established by DGS• Surrender penalty in first 2 years• Minimum duration of plan: three years + 1
month• Optional single/regular premium
• Guaranteed annuity with underlying investment over 30 years
• Only eligible above actuarial age of 55• Ability to withdraw (without penalty), at
any time, at market value of underlying investment
Annuities
Savings products reprice quarterly, minimising interest rate risk for Aviva
27
-
© Aviva plc
Main features of Aviva’s bancassuranceproducts (continued)
Product Description
Unit-linked Coverage Main features• Survivorship: payment of
market value of
participation at settlement
or withdrawal
• Death: payment of market value on death + 10% of
contributions
• Investment risk is borne by policyholder• Flexible asset mixed based on policyholder
risk/return preference
• Ability to switch funds within basket of investment funds without penalty
• Optional single/regular premium• Ability to withdraw without penalty• PPA • Retirement
• Death• Disability
• Half-year guaranteed variable yield higher than minimum established by DGS (Spanish regulator)
• Favourable tax treatment• Exceptionally cash granted in event of
unemployment or critical disease
28
-
© Aviva plc
Main features of Aviva’s bancassuranceproducts (continued)
Product Description
• Pensions • Retirement• Death• Disability• In the three events lump
sum equals to market
value of pension assets
• Investment risk is borne by pension-holder• Exceptionally cash granted in event of
unemployment or critical disease
• Favourable tax treatment similar to that of the pensions plan
• Payment is lump sum, income or combination of both
• Ability to switch without penalty and at market value accumulated pension
assets between plans of different
pension managers
29
DisclaimerAviva is the market leader in H1 2003 ……...from top 30 in 2000Spanish bancassurance partnerships at a glanceAviva’s bancassurance network has leading market shares in territories that account for c.70% of Spanish GDPAn under penetrated bank client baseFlexing the product mixTransforming Aviva’s position in the Spanish marketStrong growth in profitabilityStrong margins supported by pricing, low expenses and scale advantagesSpanish protection products are inherently more profitable than UK products...Low costs underpin attractive marginsProfitable “cash-flow” from early stages of growth businessGrowing Embedded ValueAppendixMain features of Aviva’s bancassurance productsMain features of Aviva’s bancassurance products (continued)Main features of Aviva’s bancassurance products (continued)