Aviva plc FY20 results - part 1 of 4

RNS Number : 1057R

Aviva PLC

04 March 2021

 

Start part 1 of 4

News Release

4 March 2021

AVIVA PLC 2020 PRELIMINARY RESULTS ANNOUNCEMENT

A refocused Aviva, transforming at pace

Resilient financial performance

· Operating profit ^{1, ‡ #} of £3,161m (2019: £3,184m) and IFRS profit for the year of £2,910m (2019: £2,663m)

· Core business unit operating profit^{1, ‡ #} of £2,492m (2019: £2,558m)

· Cash remittances^‡# of £1,500m (2019: £2,597m)

· Core business cash remittances^‡# of £1,359m (2019: £1,409m excluding UK Life special remittance)

Sales of Aviva France and Aviva Italy in 2021 - major progress in our strategic transformation

· On completion will significantly strengthen capital and liquidity: excess capital by c.£3.0bn and centre cash by c.£3.9bn

· Build on announced sales of Singapore, Vietnam, Hong Kong, Indonesia and Turkey

Robust financial strength

· Solvency II shareholder cover ratio^‡# of 202% (2019: 206%) and centre liquidity^‡ of £4.1bn (2019: £2.4bn)

· Solvency II debt leverage ratio^‡ of 31% (2019: 31%)

Delivering against our capital framework

· Expect £1.7bn debt reduction in H1 2021 including £800m tender offer announced today

· Investing for cash generative growth in our Core markets

· Expect to return to shareholders excess capital above 180% Solvency II shareholder cover ratio^‡#

· Total dividend of 21p (2019: 15.5p per share) with a final proposed dividend of 14p per share

Targeting sustainable growth across the UK, Ireland and Canada

· Momentum with record trading in Savings & Retirement, BPA and Group Protection

· New cumulative cash remittance^‡# target of over £5bn between 2021-23 with guidance for £1.8bn in 2023

· First major insurer globally to target Net Zero greenhouse emission status by 2040

Amanda Blanc, Chief Executive Officer, said:

"Over the past year we have supported our customers in the most challenging of circumstances. Across the whole of Aviva our people have been outstanding and I cannot thank them enough for all they have achieved.

2020 was a year of significant change for Aviva. We have taken major steps forward in simplifying the business, most recently with the sale of Aviva France and today's announcement of the sale of the rest of our Italian operations. Our strategic focus is now on the UK, Ireland and Canada where we have leading positions. We are putting customers at the heart of everything we do and I am confident we will transform Aviva's financial performance and deliver greater value for our shareholders. I recognise we have much more to do and we are getting on with it.

Our performance in 2020 demonstrates the resilience of our Core businesses and our growth potential. We delivered record sales in group protection; record sales of bulk purchase annuities; and record net flows ^‡ in savings and retirement, where we are the largest provider of workplace pensions in the UK.  

Aviva is financially strong and following the completion of the major disposals, we will be in a position to make a substantial return of capital to our shareholders. We are also announcing today an £800m debt tender offer. This allows us to accelerate our debt reduction plans and lower debt by a total of £1.7bn in the first half of this year.

Aviva is proud to be the UK's leading insurer. We are the only insurer in the UK to meet the needs of customers at every stage of their lives. Our potential is clear and we are determined to realise it for the benefit of our customers, our people and our shareholders."

#  Symbol denotes key financial performance indicators used as a base to determine or modify remuneration.

‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section.

1  Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section.

Cash remittances^‡#

	2020 £m	2019 £m	Change
Core markets	1,359	1,909	(29)%
Manage-for-value markets	127	613	(79)%
Other	14	75	(81)%
Group cash remittances	1,500	2,597	(42)%

Profit

	2020 £m	2019 £m	Sterling % change
Core markets	2,492	2,558	(3)%
Manage-for-value markets
Continuing operations1	999	899	11%
Discontinued operations2	312	251	25%
Market operating profit	3,803	3,708	3%
Corporate centre and Other Group operations	(272)	(204)	(33)%
Group debt costs and other interest	(370)	(320)	(16)%
Group adjusted operating profit3,‡#	3,161	3,184	(1)%
IFRS profit for the year4	2,910	2,663	9%

	2020	2019	Sterling % change
Operating earnings per share5‡#	60.8p	60.5p	-
Basic earnings per share	70.2p	63.8p	10%

Controllable costs^‡

	2020 £m	Restated6  2019 £m	Sterling % change
Excluding cost reduction implementation and IFRS 17 costs
Core markets	2,735	2,821	(3)%
Corporate centre and Other Group operations	250	253	(1)%
Cost reduction implementation and IFRS 17 costs7	105	64	64%
Core markets, Corporate centre and Other Group operations	3,090	3,138	(2)%
Manage-for-value markets	845	884	(4)%
Controllable costs	3,935	4,022	(2)%

Solvency II operating capital generation (OCG)^‡#

	2020 £m	2019 £m	Sterling % change
Core markets8	1,948	1,850	5%
Manage-for-value markets
Continuing operations1	6	805	(99)%
Discontinued operations2	166	62	168%
Market operating capital generation	2,120	2,717	(22)%
Corporate centre costs and Other8	108	(174)	162%
Group external debt costs	(296)	(284)	(4)%
Group operating capital generation	1,932	2,259	(14)%

Solvency II operating own funds generation^‡ and Solvency II return on capital^‡/equity^‡#

	Solvency II operating own funds generation			Solvency II return on capital/equity
	2020 £m	2019 £m	Sterling % change	2020 %	2019 %	Change
Core markets	1,740	1,853	(6)%	9.3%	10.4%	(1.1)pp
Manage-for-value markets	497	850	(42)%	6.2%	11.4%	(5.2)pp
Group centre costs and Other	(250)	(162)	(54)%	N/A	N/A	N/A
Solvency II return on capital	1,987	2,541	(22)%	8.1%	10.8%	(2.7)pp
Group operating own funds generation and return on equity9	1,691	2,257	(25)%	9.8%	14.3%	(4.5)pp

Capital Position

	31 December 2020	31 December 2019	Change
Estimated Solvency II shareholder cover ratio10,‡#	202%	206%	(4)pp
Estimated Solvency II surplus10	£13.0bn	£12.6bn	3%
Solvency II net asset value per share10,‡	442p	423p	4%
Solvency II debt leverage ratio‡	31%	31%	-

Dividend

	2020	2019
Interim dividend per share	7.00p	9.50p
Second interim dividend per share	-	6.00p
Final dividend per share	14.00p	-
Total dividend per share	21.00p	15.50p

#  Symbol denotes key financial performance indicators used as a base to determine or modify remuneration.

‡ Denotes APMs and further information can be found in the 'Other Information' section.

1  Continuing operations include our businesses in France, Italy, Poland and Other (our joint ventures in Turkey, India, China and Aviva Singlife).

2  Discontinued operations include our businesses in Hong Kong, Indonesia, Vietnam, Aviva Singapore and Friends Provident International Limited (FPI).

3  Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section.

4  IFRS profit for the year represents IFRS profit after tax.

5  Operating earnings per share is derived from the Group adjusted operating profit APM. Further details of this measure are included in the 'Other information' section.

6  Following a review of the presentation of claims handling costs, to achieve consistency in our reporting, comparative amounts have been restated by £83 million for the year ended 31 December 2019 to include previously excluded claims handling costs attributable to the Life & Health business from the UK, Ireland and Poland in controllable costs.

7  Includes costs related to initiatives taken to further reduce our cost base and IFRS 17 implementation costs.

8  Following a review of the presentation of intercompany loan interest, comparative amounts for the year ended 31 December 2019 have been amended to reclassify net interest expense from UK & Ireland Life to Corporate centre costs and Other of £69 million as a non-operating item. The change has no impact on the Group's operating capital generation.

9  Includes Group centre, debt costs and other items not allocated to the markets.

10  The estimated Solvency II position represents the shareholder view only. See note 3 for more details

Chief Executive's Overview

Being there for customers when it really matters is exactly why we exist, and I am proud of how Aviva has responded in this most dramatic of years. Our colleagues have been truly fantastic, responding quickly and ensuring that we provided excellent customer service throughout the year.

I'm pleased with how much progress we have made in the short period of time since I became CEO, but it is not lost on me that there is much more to do. Aviva has significant untapped potential, and I am determined to realise it.

Our performance in 2020 has been very resilient with operating profit ^1,‡# from Core markets just 3% lower at £2,492 million (2019: £2,558 million) despite the direct and indirect impact of COVID-19. Cash remittances from Core were £1,359 million (2019: £1,409m excluding UK Life special remittance).   Trading in many of our key markets has been strong, with record years for both our Savings & Retirement business and in bulk purchase annuities. We're also making good progress in reducing our expenses though more needs to be done to reach top quartile efficiency that we strive for across all of our Core markets.

Today, we are accelerating our debt reduction plans, which will allow us to lower debt by £1.7 billion in the first half of this year, with an announcement of an £800 million debt tender offer. This is an important first step in executing against our capital framework and after investing in the business moves us closer to returning to shareholders excess capital above 180% Solvency II shareholder cover ratio ^‡# once we have completed our major divestments. In line with previous guidance the Board has proposed a final dividend of 14 pence per share making a total dividend for the year of 21 pence per share.

We are also announcing a new target that demonstrates our confidence in Aviva's ability to deliver profitable growth and growing sustainable dividends. We aim to deliver over £5 billion of cash remittances ^‡# from our Core businesses over the next three years, which combined with reduced centre debt interest and other costs will drive strong growth in excess cash flows to fund sustainable investment in our business and growing returns to shareholders.

Our response to COVID-19

If there was ever any doubt about the importance of our purpose, 2020 provided the answer. Being there for people when it really matters is why we exist, and the past year truly put that to the test.

Colleagues

Our first priority was looking after our people, so they could continue to serve our customers. Within a month we had moved all but a handful of colleagues out of the office and set up everyone to work from home. We offered flexible working to help anyone juggling caring responsibilities and have given practical support to look after everyone's health and wellbeing, ranging from mindfulness sessions to help for those home schooling, including recycling laptops for children and online maths classes from our finance colleagues.

Customers

We recognised the financial and practical challenge of lockdown on both our individual and business customers and did what we could to help them. This included free breakdown cover and enhanced home insurance for NHS staff serving at the front line and deferred monthly payments for people experiencing financial difficulties. For businesses, we created advice on managing new risks and offered flexible insurance, so they were still covered even as they adapted to new ways of working.

Communities

We continue to play a key part in our communities. Aviva has contributed £43 million to support community partners, health services and businesses in our markets round the world. In the UK this included £5 million donated to NHS Charities Together, to help fund welfare and wellbeing for NHS employees, volunteers and patients, as well as long-term mental health support for NHS workers.

Strategy

In 2020 we announced three clear strategic priorities: focus the portfolio, transform performance and financial strength.

Focus the portfolio

Our focus is on our strongest and most strategically advantaged businesses in the UK, Ireland and Canada including Aviva Investors. These are our Core markets, where we have market leading positions, can generate attractive returns, we have a strong powerful brand, we deliver incredible customer service and we have a clear path to win. We will invest for growth across these markets.

Our businesses in continental Europe and Asia are being managed for long term shareholder value. During 2020, we completed the disposals of Friends Provident International Limited, our majority shareholding in Aviva Singapore, and our shares in joint ventures in Indonesia and Hong Kong. We have also announced the sales of our French business, our Italian operations (including Aviva Vita announced in November ), our minority shareholding in Turkey, and our entire business in Vietnam, which we expect to complete later in 2021. We are also exploring our strategic options in Poland and our other international joint ventures.

Transform performance

Aviva has fantastic franchises and exceptional long-term relationships with customers and distributors. We will invest in customer experience to provide excellent service and value for money along with delivering profitable growth for our shareholders. We have strong foundations, particularly in the UK. We must build on these foundations and go further in efficiency and performance management to ensure we are top quartile in both customer value and profitability.

Our people play a pivotal role in transforming Aviva and achieving long-term success. We have made good progress in embedding a strong performance culture by overhauling individual performance management, setting clear expectations for our leaders and emphasising the importance of close collaboration. We are also strengthening our executive leadership team with seven appointments to the Executive Committee including new CEOs for UK & Ireland Life and Aviva Investors.  

We have good momentum across our Core business. Some of the performance highlights in 2020 included:

UK & Ireland Life	· Savings & Retirement - record net flows ‡ of £8.5 billion (2019: £7.5 billion) · Bundled workplace pensions - UK's largest provider by AUM ‡ with £81 billion (2019: £71 billion) added 246,000 scheme members · Adviser platform - number 2 by net flows ‡ in the adviser platform market and assets up 18% to £32 billion · Bulk purchase annuities - record sales2 of £5,955 million (2019: £4,013 million) and VNB ‡ up 33% to £278 million (2019: £208 million) · Group Protection - record sales2 of £716 million (2019: £518 million)
General Insurance	· UK commercial lines net written premiums (NWP) up 10% to £2,008 million (2019: £1,819 million) · Improvement in market-leading broker trust scores in 2020 · Launched Aviva brand on price comparison websites for both motor and home · Canada commercial lines premiums up 7%3 to £1,021 million (2019: £961 million) · Canada personal lines internalised auto claims increasing efficiency and Net Promoter Score (NPS) to +61 (2019: +45)
Aviva Investors	· Net flows ‡ of £8.5 billion including £1.7 billion into 3rd party funds (excluding liquidity funds) · £12 billion invested in sustainable investment strategies

One of the key levers in achieving our ambition is our commitment to building a sustainable business. To that end we are launching our new sustainability strategy with an ambition to leverage our existing strengths in Environmental, Social and Governance ("ESG") to lead the UK financial services market in this field. We want Aviva to be recognised as a business that leads by example through products and services that are good for society as a whole and by influencing others to act. We have also set ourselves clear goals to help in the fight against climate change including becoming the first major insurer globally to target achieving net zero greenhouse emission status by 2040. Our ambitions also reflect our commitment to our home market as we aim to invest more in our local communities as well as £10 billion in infrastructure and real estate over the next three years to build a stronger Britain.

Financial strength

Financial strength is a critical underpin to our strategy. Our Solvency II shareholder cover ratio ^‡# of 202% (2019: 206%) has remained resilient throughout a turbulent year bolstered by Solvency II operating capital generation (OCG) ^‡# from our business and benefits from disposals of our Manage-for-value operations. These were partly offset by foreign exchange, market movements and modelling changes. Our centre liquidity ^‡ of £4.1 billion, as at the end February 2021 (2019: End of February 2020 £2.4 billion), is similarly strong having also benefited from cash remittances ^‡# as well as disposal proceeds from subsidiaries.

Our capital and centre liquidity ^‡ will be strengthened further following the sale of Aviva France and today's announcement of the sale of the remainder of our Italian operations, including an increase in excess capital of c.£3.0 billion and centre cash of c.£3.9 billion (including previously announced, not yet completed, sale of Aviva Vita). Our balance sheet will also benefit from reduced volatility in our Solvency II shareholder cover ratio ^‡# by removing exposure to guaranteed life insurance products. The transactions are expected to complete by the end of 2021.

As we have outlined in our capital framework we intend to reduce our Solvency II debt leverage ratio ^‡    below 30% and after allowing for investment in the business, we expect to return to shareholders surplus capital in excess 180% of our Solvency II shareholder cover ratio ^‡# once we have completed our major divestments.

As an important first step in executing against our capital framework we are accelerating our debt reduction plans, which will allow us to lower leverage by £1.7 billion in the first half of this year. Today's announced £800 million tender offer combined with £900 million of maturities and optional first call dates, would result in a reduction in our leverage of approximately 4pp compared to the Solvency II debt leverage ratio ^‡ of 31% as at end of 2020.

In line with previous guidance, the Board has proposed a final dividend of 14 pence per share, making a total of 21 pence per share for FY 2020 and representing a total for the year of £825 million. We intend to grow our dividend per share by low to mid-single digits over time as we benefit from growth in key segments, improved efficiency as well as lower levels of debt and associated interest. As we make further progress on focusing the portfolio, this will provide further flexibility to both invest in our business and to provide additional returns to shareholders.

Outlook

Aviva has responded incredibly well to the challenge in 2020 presented by COVID-19 and Brexit. Our Core markets have proven to be resilient and our customer service has been very strong. While the broader economic outlook remains uncertain, it is positive to see progress being made with the global vaccination effort and the economy adapting to social distancing measures. Our new cash remittances ^‡ target demonstrates our confidence that our Core markets are well positioned to grow. We will continue to move forward with our strategy to focus the portfolio, to transform performance, and ultimately to drive sustainable shareholder returns by growing profitably in our Core markets. We will also look to continue to deliver against our capital framework, by investing in the business and returning excess capital to shareholders.

Group financial headlines

Operating results

Cash remittances^‡#

Cash remittances^‡# during 2020 were £1.5 billion (2019: 2.6 billion including £500 million special dividend from UK Life and £172 million special remittance from Italy). The vast majority of these, £1,359 million (2019: £1,909 million including £500 million special dividend from UK Life) came from our Core markets. Remittances from Manage-for-value businesses were £127 million (2019: £613 million) due to regulatory restrictions and our cautious approach given the continuing economic and market uncertainty.

Profits

Operating profit^1,# of £3,161 million (2019: £3,184 million) and operating earnings per share ^4,‡ of 60.8 pence (2019: 60.5 pence) were stable. IFRS profit for the year was £2,910 million (2019: 2,663 million) while basic earnings per share increased to 70.2p (2019: 63.8p). Operating profit^1,# from Core markets was resilient at £2,492 million (2019: £2,558 million).

Operating profit^1,# remained resilient despite the negative impacts of COVID-19 as we delivered strong results in general insurance, bulk annuities, as well as our savings and retirement propositions, with lower profits from our Heritage business reflecting its gradual run-off. Our Manage‑for‑value operations also performed well on an IFRS basis. The main impact of COVID-19 was felt in general insurance where the total estimated impact amounted to a loss of £17 million. Within our Core general insurance markets, the impact was greater at £84 million, as business interruption claims net of reinsurance were only partly offset by favourable impacts of reduced economic activity in other product lines tempered by higher profit-contingent commission payments to distributors.

Cost reduction

Our approach to efficiency initiatives was also brought into focus as a result of COVID-19. Although some costs were reduced, for example travel, we incurred incremental expenditure including the IT spend required to allow all of our employees to work remotely. We also contributed £43 million to community support initiatives. Despite these headwinds we have delivered £180 million of cumulative savings since 2018. We remain on track to reduce controllable costs ^‡ by £300 million by 2022 and will deliver this solely from Core markets.

Solvency II operating capital generation (OCG)^‡#

Solvency II OCG^‡# decreased to £1,932 million (2019: £2,259 million) while Solvency II OCG^‡# excluding the impact of capital actions, non-economic assumption changes and other non-recurring items, was stable at £1,414 million (2019: £1,433 million). Total Solvency II OCG^‡# was impacted by changes made to our French life model which corrected a mis-applied rule, partly mitigated by an increase in offsetting Group diversification benefits, as well as a positive contribution from management actions of £518 million (2019: £826 million). This included positive impact of assumption changes (including longevity releases) albeit lower than in 2019.

Solvency II OCG from Core markets increased 5% to £1,948 million (2019: £1,850 million) driven by a strong performance in general insurance.

Solvency II return on equity (RoE)^‡#

Solvency II RoE^‡# was lower at 9.8% (2019: 14.3%) primarily owing to changes to modelling in our French life business which corrected a mis-applied rule, and significantly lower benefit from longevity assumption changes in UK Life. Underlying performance (excluding the impact of capital actions, non-economic assumption changes and other non-recurring items) of Solvency II RoE^‡# increased to 9.8% (2019: 8.1%) driven by underlying improvements in UK Life, due to BPA new business, and in our UK and Canada General Insurance businesses.

Capital and cash

Centre liquidity^‡

At end February 2021, centre liquidity^‡ was £4.1 billion (February 2020: £2.4 billion) with the increase primarily driven by the receipt of disposal proceeds for our Singapore, Hong Kong, Indonesia and FPI businesses, partially offset by payment of dividends.

Solvency II debt leverage 

Solvency II debt leverage ratio^‡ remained at 31% in 2020 (2019: 31%), with an increase in total debt offset by an increase in own funds. During the first half of 2020, Aviva issued £500 million of tier 2 subordinated debt in advance of redeeming £500 million of restricted tier 1 securities in July. In October 2020, we issued C$450 million of tier 2 subordinated debt pre-financing a C$450 million instrument maturing in May 2021. With high levels of centre liquidity^‡ held at Group centre we reduced our commercial paper in issue by £130 million over 2020.

Today we have announced an £800 million liability management exercise. This tender offer, alongside upcoming debt maturities and optional calls in the first half of 2021, allows us to reduce our Solvency II debt leverage ratio^‡ by c.4 percentage points by half year 2021.

Solvency II capital

At 31 December 2020, Aviva's Solvency II shareholder surplus was £13.0 billion and Solvency II shareholder cover ratio^‡# was 202%
(2019: £12.6 billion and 206% respectively). Solvency II net asset value per share^{5, ‡} was 442 pence (2019: 423 pence). Solvency II OCG^‡# of £1,932 million (2019: £2,259 million) and the benefits of disposals were offset by capital market movements driven mainly by the impact of the reduction in interest rates over the course of the year and the payment of dividends in the period.

Corporate credit rating migration and commercial mortgage portfolio

During 2020, we experienced no defaults, less than c£60 million of the bonds in our shareholder portfolio were downgraded below investment grade and less than 13% of the portfolio had been downgraded to a lower letter.

Our commercial mortgage portfolio continues to perform as expected. The average loan to value (LTV) ratio across the portfolio remains low at 61%  (2019: 56%) , loans in arrears were £34 million  (2019: nil) , equivalent to 0.5% of the portfolio, and the loan interest cover ratio was 2.74x  (2019: 2.90x) .

Dividends and capital framework

On 26 November 2020, Aviva announced a new dividend policy and capital framework that align with the Group's strategic priorities. We aim to deliver a sustainable pay-out ratio and grow dividend per share by low to mid-single digits. Under our capital framework, we expect to return to shareholders excess capital above 180% Solvency II shareholder cover ratio^‡# after allowing for investment in the business and once our Solvency II debt leverage ratio^‡ has been reduced below 30% and we have completed our major divestments.

In light of our 2020 performance and strong capital and liquidity, the Board has proposed a final dividend of 14 pence per share (2019: nil), bringing the total dividend in respect of 2020 financial year to 21 pence per share (2019: 15.5 pence per share). A second interim dividend in respect of 2019 financial year of 6 pence per share was paid in the third quarter of 2020. 

Business highlights and growth opportunities

UK and Ireland

We have a vision to grow our business in the UK. Our strategy focusses on achieving top quartile competitiveness in our home market in savings and retirement, general as well as life insurance, protection and health. To do this, we will transform operational efficiency through simplification and automation, improving customer experience, accelerating data, analytics and underwriting capabilities, and building stronger investments capabilities. We will also build cross-UK customer capabilities, make better use of digital tools, and innovate more effectively to make it easier for customers and intermediaries to deal with us.

In 2020, UK and Ireland Life operating profit^1,# decreased 3% to £1,907 million (2019: 1,974 million) with strong performances in bulk purchase annuities and Savings & Retirement and a positive but lower benefit of assumption changes offset by COVID-19 impact on new business sales of equity release and individual protection.

In UK Life and Ireland, Solvency II return on capital^‡ fell to 7.4%   (2019: 9.1%) as result of positive but lower longevity assumption benefits compared with 2019, partially offset by increased levels of BPAs and improved longevity experience . Solvency II OCG^‡# increased to £1,259 million (2019: 1,248 million) benefiting from management actions taken to optimise capital and a stable new business strain despite a significant increase in BPA sales².

Savings & Retirement

Net flows^‡ increased by 14% to £8.5 billion (2019: £7.5 billion) with higher net inflows^‡ across Workplace and our Platform business. Operating profit ^1,‡# increased to £119 million (2019: £88 million) driven by higher revenues from an increased asset base, with AUM ^‡ up 13% over 2020 to £128 billion (2019: £113 billion).

Workplace savings - Aviva is the number 1 provider of bundled workplace pensions in the UK serving 3.8 million customers with assets of £81 billion (representing an average annual growth of 12% over the last four years) and net flows^‡ of £5.3 billion in 2020. The savings and retirement market represents an enormous opportunity for Aviva in the UK. The shift to defined contribution (DC) pension saving as individuals are increasingly having to take responsibility for their financial futures as well as regulatory changes such as the introduction of auto enrolment mean that the DC workplace pension market is expected to grow from £390 billion in 2020 to more than £950 billion in 2028.

Adviser platform - In a short space of time we have built up assets of £32 billion and were ranked top 2 by net flows^‡ in 2020 with a market share of 14% of net flows^‡. The complexity and flexibility of the UK pension and savings system as well as the ageing population, which includes wealthy baby boomers reaching retirement, has accelerated the need for financial advice and for platform solutions that help financial advisers to look after their clients' assets more effectively and efficiently. This has driven growth in the adviser platform market from £400 billion in 2015 to over £750 billion in 2020 with forecast market growth to £1.3 trillion by 2025.

Annuities & Equity Release

Sales² rose 21% to £7.5 billion (2019: £6.2 billion) while value of new business (VNB)^‡ increased 25% to £356 million
(2019: £284 million), reflecting strong growth in our BPA business partly offset by lower sales of individual annuities and equity release. Operating profit^1,‡# was 6% lower at £815 million (2019: £866 million) with growth in BPA business but lower profits in individual annuities and equity release.

Bulk Purchase Annuities - In 2020, we were ranked in the top 3 bulk purchase annuity providers with sales² growing by 48% to £6.0 billion (2019: 4.0 billion) with the overall Annuity & Equity release book increasing AUM ^‡   by 11% to £75 billion (2019: £67 billion). The demand from businesses and defined benefit pension fund trustees for annuities has continued to increase with the market growing from £13 billion in 2015 to greater than £30 billion in 2020. This demand has been driven by the desire of corporates to de-risk their exposure to defined benefit pension obligations through the bulk purchase of annuities from insurance companies. At £2 trillion, the total value of defined benefit pension scheme liabilities in the UK is very high and is expected to result in a high level of demand for bulk annuities estimated to be £30 billion to £50 billion per annum across the entire market over the next five years. Aviva's financial strength as well as expertise to both price annuity business effectively and through Aviva Investors to invest profitably for the long-term means we are well placed to further succeed in this growing market.

Individual Annuities - We have retained our number 1 position in the market with individual annuity sales² of £1.0 billion (2019: £1.4 billion) as we focused on more profitable business as even lower interest rates caused by COVID-19 reduced customer demand. Following the introduction of pension freedoms in 2015 (which gave individuals greater choice in how they access their savings in retirement) the demand for individual annuities in the UK has fallen significantly, nevertheless, we expect individual annuities to remain an important option for customers when securing income in retirement.

Equity Release  - In 2020 we maintained our number 3 position in equity release mortgages with sales² of £562 million (2019: £780 million). Volumes were impacted by our ability to conduct in-person property valuations owing to lockdowns, nevertheless with £3 trillion of housing equity owned by over 55s, we expect demand for equity release mortgages to continue to grow into the future. With strong growth in property values over the last two decades, unlocking the significant value locked up in their homes is a way for many to achieve financial security in later life.

Protection & Health

Sales² were in line with prior year at £2.4 billion (2019: £2.4 billion) as record sales of group protection, up 38% to £0.7 billion, were offset by a reduction in individual protection sales². VNB^‡ from Protection & Health was stable at £167 million (2019: £168 million). Operating profit^1,‡# was 6% lower at £189 million (2019: £201 million) as competition impacted both margin and volumes in individual protection, partly offset by an improvement in group protection which benefited from improved claims experience.

Protection - We are a leading provider of both group and individual protection ranking second in each category. In 2020, our group protection business had a record year with sales² of £716 million (2019: £518 million), however our individual protection business saw lower sales² of £1,210 million (2019: 1,357 million) owing to the impact of lockdown measures on the housing market and key distributors including advisors, banks and estate agents. The protection market tends to grow in line with or slightly above inflation which provides a steady and high-quality source of earnings for Aviva. Our key sources of competitive advantage include our brand, digital propositions, underwriting discipline, and our relationships with intermediaries. We have invested in these businesses to drive future growth, while also maintaining our focus on efficiency.

Health - While we are the number 3 player in health insurance, we are the only provider of scale that can offer individual and group protection products, making our health offering not only a standalone but also complementary proposition. 2020 has illustrated the importance of health and wellbeing to individuals, but also to companies and their employees. Our digital offering, where 99% of interactions with health brokers are carried out digitally, positions us well in this increasingly important market. In 2020 we increased sales² by 1% to £513 million (2019: £507 million).

General Insurance

UK, Ireland and Canada NWP was stable year on year at £7.7 billion (2019: £7.7 billion) with strong commercial lines growth offsetting lower personal lines premiums. Operating profit^1,‡# increased by 3%³ to £500 million (2019: £488 million) as strong improvements in underlying performance were partially offset by the negative impacts of £84 million of the COVID-19 pandemic as well as lower long term investment return (LTIR). LTIR declined to £274 million (2019: £314 million) representing an average return of 2.3% (2019: 2.8%) due to lower interest rates and de-risking activity in light of the market volatility in 2020.

Core markets general insurance combined operating ratio (COR)^‡ improved by 0.9 percentage points to 96.8% (2019: 97.7%). Strong underlying performance across our Core markets was partially offset by the net negative impacts of COVID-19, which had 1.1 percentage points adverse impact on COR ^‡ , and lower benefits from weather and prior year development, which had 3.2 percentage points adverse impact on COR^‡ compared to 2019.

UK Personal Lines - Our personal lines business has market leading digital propositions which are driving high customer advocacy. NWP was 7% lower in 2020 at £2,232 million (2019: 2,399 million) reflecting the impact of lockdowns and disruption caused by COVID-19 on the branch networks of our distribution partners as well as rationalisation of unprofitable business lines. We currently have around 10% market share benefiting from the strength of the Aviva brand, strong distribution relationships, including with some of the UK's largest high street banks, as well as market leading reputation with brokers. Until recently only our Quote-me-happy and General Accident brands were available through price comparison websites (PCWs) however in late 2020 we launched our Aviva brand's motor offering on the major PCWs, with good early signs of success, and our home offering has followed.  

UK Commercial Lines - We are the largest commercial insurer in the UK with 11% market share. Our digitally transacted channels continue to perform exceptionally, while a favourable underwriting environment and strong retention rates have helped us to grow NWP in 2020 by 10% to £2,008 million (2019: £1,819 million). We focus on the small or medium-sized enterprises (SME) and the fast-growing Global Corporate and Specialty (GCS) markets. We expect growth to continue as we address under-insurance amongst SMEs and innovate and invest in our GCS offering to meet client demand for protection against emerging risks. Our success has been driven by a focus on exceptional service and a reputation as a trusted partner. This was evidenced by an increase in broker trust to 95% in contrast to the wider market - a really important measure given the disruption caused by the global pandemic and the pivotal role brokers play in distributing commercial lines products in the UK.

Canada Personal Lines - We are a top 3 insurer in Canada with NWP in 2020 of £2,075 million (2019: £2,100 million) reflecting the impact of the pandemic on our distribution partners as well as customer relief measures. The Canadian market is largely intermediated therefore we serve our customers mostly through brokers and through our partner, Royal Bank of Canada (RBC), the most recognised financial services brand in Canada. We are continuing to invest in automation and are looking to improve our digital offering, leveraging the wider Group's expertise, as demand for digital products slowly increases in this more traditional insurance market.

Canada Commercial Lines - We are a leading commercial insurer in Canada with NWP in 2020 up 7%³ to £1,021 million (2019: £961 million) as we benefit from a rate hardening environment reflecting reduced capacity and sustained historical under-pricing across the market. In common with the UK, our Canadian commercial lines business is distributed largely through intermediaries and focuses on the SME and GCS markets. We strive to offer best-in-class service and customer value underpinned by pricing sophistication to help drive even better retention and profitability in the future.

Aviva Investors

Our asset management business, Aviva Investors has £366 billion of assets under management ^‡  and has an ambition to become a leader in active sustainable investment outcomes. This includes £292 billion of assets managed for Aviva companies, making Aviva Investors pivotal to the Group's wider success. Its long track-record in private debt, infrastructure, and other real assets, has supported our growth in areas such as bulk purchase annuities.

Aviva Investors operating profit^1,‡# was 11% lower at £85 million (2019: 96 million) mainly driven by lower revenue partly offset by a reduction in controllable costs^‡. Aviva Investors revenues^‡ were impacted by lower contribution from securities lending and a reduction in origination fees reflecting lower demand for alternative strategies as risk appetites reduced in response to COVID-19. Aviva Investors maintained the positive client momentum with positive external clients' net flows^‡ of £1.7 billion (excluding liquidity funds), with significant new business wins in real assets and in credit. Total net flows ^‡ of £8.5 billion (2019: £(2.8) billion) included £8.3 billion of net flows^‡ into liquidity funds and cash.

Sustainable or ESG investing is becoming hugely important, providing active asset managers with an opportunity to meet this growing client demand and to contribute to society as a whole. Aviva Investors has a decades-long track-record of being at the forefront of sustainable investing having launched the Stewardship range of funds, the UK's first ethical fund range, back in 1984.

This heritage continues as evidenced by Aviva Investors being ranked 2^nd globally for our environmental voting track record and 5^th for responsible investment by Share Action. We continue to lead in this field having launched our climate transition engagement programme with a promise to divest from companies that are non-responsive to our expectation that all companies should adopt a goal of achieving net zero greenhouse gas emissions by 2050.

Manage-for-value markets

Our businesses in continental Europe and Asia delivered operating profit^1,‡# of £1,311 million (2019: £1,150 million), up 14%³ in constant currency term. Solvency II OCG^‡# decreased to £172 million (2019: £867 million) while Solvency II return on capital^‡ fell to 6.2% (2019: 11.4%) impacted by a correction of a mis-applied rule in the French Life model and the low interest rate environment.

During 2020, and in line with our strategy, we completed the disposals of Friends Provident International Limited, a majority shareholding in Aviva Singapore, and our share in joint ventures in Indonesia and Hong Kong. We also announced the disposals of our Aviva Vita in Italy and our business in Vietnam. In early 2021 we announced the sales of our French business and our remaining Italian operations which represent major progress in executing our strategy to focus on our strongest businesses in UK, Ireland and Canada.

#  Symbol denotes key financial performance indicators used as a base to determine or modify remuneration.

‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the Other Information in the 'Other information' section.

1  Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section.

2  References to sales represent present value of new business sales (PVNBP) which is an APM and further information can be found in the 'Other information' section.

3  Percentages are quoted in constant currency

4  Operating earnings per share is derived from the Group adjusted operating profit APM. Further details of this measure are included in the 'Other information' section.

Notes to editors

All comparators are for the full year 2019 position unless otherwise stated.

Income and expenses of foreign entities are translated at average exchange rates while their assets and liabilities are translated at the closing rates on 31 December 2020. The average rates employed in this announcement are 1 euro = £0.88 (2019: 1 euro = £0.88) and CAD$1 = £0.58 (2019: CAD$1 = £0.59).

Growth rates in the press release have been provided in sterling terms unless stated otherwise. The following supplement presents this information on both a sterling and constant currency basis.

Cautionary statements:

This document should be read in conjunction with the documents distributed by Aviva plc (the 'Company' or 'Aviva') through The Regulatory News Service (RNS). This announcement contains, and we may make other verbal or written 'forward-looking statements' with respect to certain of Aviva's plans and current goals and expectations relating to future financial condition, performance, results, strategic initiatives and objectives. Statements containing the words 'believes', 'intends', 'expects', 'projects', 'plans', 'will', 'seeks', 'aims', 'may', 'could', 'outlook', 'likely', 'target', 'goal', 'guidance', 'trends', 'future', 'estimates', 'potential' and 'anticipates', and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aviva believes factors that could cause actual results to differ materially from those indicated in forward-looking statements in the announcement include, but are not limited to: the impact of ongoing difficult conditions in the global financial markets and the economy generally; the impact of simplifying our operating structure and activities; the impact of various local and international political, regulatory and economic conditions; market developments and government actions (including those arising from the evolving relationship between the UK and the EU); the effect of credit spread volatility on the net unrealised value of the investment portfolio; the effect of losses due to defaults by counterparties, including potential sovereign debt defaults or restructurings, on the value of our investments; changes in interest rates that may cause policyholders to surrender their contracts, reduce the value of our portfolio and impact our asset and liability matching; the impact of changes in short or long-term inflation; the impact of changes in equity or property prices on our investment portfolio; fluctuations in currency exchange rates; the effect of market fluctuations on the value of options and guarantees embedded in some of our life insurance products and the value of the assets backing their reserves; the amount of allowances and impairments taken on our investments; the effect of adverse capital and credit market conditions on our ability to meet liquidity needs and our access to capital; changes in, or restrictions on, our ability to initiate capital management initiatives; changes in or inaccuracy of assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; a cyclical downturn of the insurance industry; the impact of natural and man-made catastrophic events (including the impact of Covid-19) on our business activities and results of operations; the transitional and physical risks associated with climate change; our reliance on information and technology and third-party service providers for our operations and systems; the inability of reinsurers to meet obligations or unavailability of reinsurance coverage; increased competition in the UK and in other countries where we have significant operations; regulatory approval of extension of use of the Group's internal model for calculation of regulatory capital under the UK's version of Solvency II rules; the impact of actual experience differing from estimates used in valuing and amortising deferred acquisition costs (DAC) and acquired value of in-force business (AVIF); the impact of recognising an impairment of our goodwill or intangibles with indefinite lives; changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect of legal proceedings and regulatory investigations; the impact of operational risks, including inadequate or failed internal and external processes, systems and human error or from external events (including cyber attack); risks associated with arrangements with third parties, including joint ventures; our reliance on third-party distribution channels to deliver our products; funding risks associated with our participation in defined benefit staff pension schemes; the failure to attract or retain the necessary key personnel; the effect of systems errors or regulatory changes on the calculation of unit prices or deduction of charges for our unit-linked products that may require retrospective compensation to our customers; the effect of fluctuations in share price as a result of general market conditions or otherwise; the effect of simplifying our operating structure and activities; the effect of a decline in any of our ratings by rating agencies on our standing among customers, broker-dealers, agents, wholesalers and other distributors of our products and services; changes to our brand and reputation; changes in government regulations or tax laws in jurisdictions where we conduct business, including decreased demand for annuities in the UK due to changes in UK law; the inability to protect our intellectual property; the effect of undisclosed liabilities, execution and separation issues and other risks associated with our disposals; and the timing/regulatory approval impact and other uncertainties, such as diversion of management attention and other resources, relating to announced and future disposals and relating to future acquisitions, combinations or disposals within relevant industries; the policies, decisions and actions of government or regulatory authorities in the UK, the EU, the US, Canada or elsewhere, including the implementation of key legislation and regulation. For a more detailed description of these risks, uncertainties and other factors, please see the 'Risk and risk management' section of the strategic report.

Aviva undertakes no obligation to update the forward looking statements in this announcement or any other forward-looking statements we may make. Forward-looking statements in this report are current only as of the date on which such statements are made.

This report has been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to who this document is shown or into whose hands it may come, and any such responsibility or liability is expressly disclaimed.

Aviva plc is a company registered in England No. 2468686.

Registered office

St Helen's
1 Undershaft
London
EC3P 3DQ
 

Contacts
Investor contacts	Media contacts	Timings
Jakub Rosochowski [phone]	Andrew Reid [phone] Sarah Swailes [phone]	Presentation slides: 0700 hrs GMT www.aviva.com Real time media conference call: 0730 GMT Analyst conference call / audiocast: 0830 hrs GMT https://www.aviva.com/

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