Cesare Brugola - Aviva Italy presentation 2004 · Aviva Italy Bancassurance Model Life Subsidiary Bank Branches 50% Bank Group 100% Dividends Dividends D i v i d e n d s Investment

© Aviva plc

Aviva ItalyItaly’s pre-eminent bancassurer

Cesare Brugola

© Aviva plcSlide 77

Agenda

• Growth market and Aviva’s positioning• Bancassurance partnerships• Products• Shareholder value• Future opportunities


High Growth of almost 20% Per Annum Over Last 6 Years – twice as fast as any other European market

€m

Source: ANIA - * estimates – 02.2004

Premium Income 1998 - 2004 *

*

The Italian Life Market

7000062780

55298

4632839784

35597

26483

01000020000300004000050000600007000080000

1998 1999 2000 2001 2002 2003 2004

*


Generali Group

Allianz Group

Unipol Group

Cattolica Group

Aviva Group

Monte Dei Paschi DiSiena Group

2,000,000

13,916,720

8,945,350

5,061,150

Poste Vita

2,469,878

4,000,000 6,000,000 8,000,000 10,000,000 12,000,000

4,489,480

2,819,920

2,389,900

Aviva top five by end 2005

Source: ANIA, Total Premium Income 2003

San Paolo -Fideuram Group 7,181,340

?

14,000,000

The Italian Life Market


• Italian market and Aviva’s positioning• Bancassurance partnerships• Products• Shareholder value• Future opportunities


Broadening and Building Partnerships

0

50

100

150

200

250

300

2000 2001 2002 2003

A.P

.E. E

UR

O M

illio

ns

Extended distribution through former ING Bank distributors

2004

2002

New bancassurance partnership with Banca Popolare Commercio e

Industria (now Banche PopolariUnite)

2001

Newbancassurancepartnership with

Banca Popolare diLodi

2000

Newbancassurancepartnership with

UniCredito

95.1m

202.9m

243.5m

279.5m

Annual Growth Rate: 43%

2000

New bancassurance partnership with Banca delle Marche

2004

BPU agreement extended to include

BPB branches

Source: Aviva plc


A Network of Networks…AVIVA Italia Holding SpA

100%

Commercial UnionAssicurazioni SpA

50%(Banca delle Marche 50%)

Commercial UnionLife SpA

50%(Banca delle Marche 50%)

Commercial UnionInsurance SpA

100%

Commercial UnionVita SpA

50%(UniCredit Banca 49%)

FINOA Srl50%

(Bipielle Investimenti SpA50%)

Commercial UnionItalia SpA

100%

AVIVA Vita Spa50%

(BPU S.c.r.l. 50%)

Commercial UnionPrevidenza SpA

100%

Commercial UnionVita SpA

1%

Eurovita Spa80.96%

(other Banks 19.04%)


Bancassurance through Joint Ventures…

UNICREDITO Valle d’AostaUNICREDITO PiemonteUNICREDITO Liguria

UniCredit Banca RetailUniCredit Private BankUniCredit Banca d’Impresa

CU Vita

BPL GROUP Banca Popolare di LodiBipielle AdriaticoBanco di ChiavariCassa di Risparmio di TrentoBanca Popolare di Mantova

Cassa di Risparmio di AstiCassa di Risparmio di BolzanoBanca del FucinoBanco di RomagnaBanca Popolare di Puglia e BasilicataCassa di Risparmio di CarpiCassa di Risparmio di CentoCassa di Risparmio di CesenaCassa di Risparmio di RiminiTercasBanca di Ciociaria

CU Previdenza

BPU GROUP Banca Popolare Commercio e IndustriaBanca Popolare di BergamoCARIME

Aviva Vita

Banca Delle Marche GROUP Banca Delle MarcheCARILO

CU Life

Eurovita


Banca Popolare del Cassinate CU Vita

Credito Valtellinese CU Vita

BCC di Bene Vagienna – CNBCC di Pianfei e Rocca De Baldi – CNBCC del Chianti Fiorentino – FIBanca del Mugello Fiorenzuola – FIBCC di Casalgrasso e Sant’Albano Stura – CNBCC di Caraglio e della Riviera dei Fiori – CNCassa Rurale di Folgaria –TNBCC dell’Alto Garda – TNBCC di Manzano – UDBCC di Civitanova Marche –MCBanca della Ciociaria – FRBCC di San Marzano di San Giuseppe – TABCC Don Rizzo Alcamo – TPCassa Rurale di Tenno - Val di Non – Cles – TN

* BCC = Banca di Credito Cooperativo

CU Vita

… and also Distribution Agreements


National Network over 3,400 branches and 2,500 financial advisors

UCI

BPL

BPL Eurovita

BDM

BPU

522

538

657

253

BPCICARIME

BranchesShare of APE in 2003

53%

17%

11%

7%

BCC (*)

Other12%

100%

Financial Advisors

1,750

717

167

TOTAL

Further opportunities with less developed bank networks...

N/A

2,467

336

BPB

241326380

3,420 2,467

(*) former Nad.Ned. distributors


BANK RETAIL CUSTOMERS

CU VITAUNICREDITO

23%EUR 2.25M

AVIVA VITABPCI/CARIME

2%EUR 0.4m

CU PREVIDENZAEUROVITA

BPL4,4%

EUR 0.3mCU LIFE

B.D. MARCHE2%

* EUR 0.3m

PE

NE

TRA

TIO

N

30%

20%

1,000,000 2,000,000500,000 1,500,0002003 NB PREMIUM PER BRANCH

**

*

*

*

Source : AVIVA

Opportunity to Increase Customer Penetration


0

0.5

1

1.5

2

2.5

SanPaolo IMI Unicredit MPS BancaLombarda

Intesa CRF MarketAverage

AvivaCompanies

CU Vita

Source : Estimates based on bank annual reports 2003

€ m

. –N

ew B

usin

ess

2003 New Business per Branch

Outperforming Bank Owned Distribution


0%

5%

10%

15%

20%

25%

30%

35%

40%

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

MPS

Intesa

SanPaolo IMIUnicredit

Banca Lombarda

CR Firenze

Source : Estimates based on bank annual reports 2003

1,836

3,1683,359

3,087

438

770

Insurance Reserves vs Total Assets Under Management%

Insu

ranc

e R

eser

ves

/ Tot

al A

UM

€ m. Insurance Reserves per branch

Numberof

branches

Aviva strongly positioned for the future


Aviva Italy BancassuranceModel

Life Subsidiary

Bank Branches

50%

Bank Group

100%

Dividends

Dividends

Dividends

Investment X%

Inve

stm

e nt 5

0%

Investment

Return on capital employed for Italy Life in 2003: 12% (post tax)


Investments in Italian Bank Partners

• Aviva usually takes an equity stake in the partner bank, in return for access to distribution

• The total shareholder’s strategic investment in partner banks is €694m as at 31 March 2004 The amount in listed securities is €352m

• Future agreed shareholder investments in partner banks but not yet arranged amount to €179m

• Investments purchased at market value (independent review of value for non-listed investments)

• For non-listed strategic investments, we include a protection clause in the partnership agreement relating to the realisation value of our investment in the bank


Why Bank Partners Choose Aviva…Benefits for our partnersWhat Aviva offers

Reputation for local bancassuranceexpertise; coupled with Aviva’s world-wide experience

Developed administration platform, web enabled for fast, cost effective processing at bank branch

Short time to market for new products; reputation for innovation

Strong, stable management team with an entrepreneurial approach

Strategic investment in Bank and share of JV company

No learning curve, high sales productivity potential

Proven, efficient platform, no implementation risks, low expense base

Highly responsive to market opportunities. Full range of competitive products offered

Experienced team with high motivation to ensure success

Long term shareholder in bank and growing share of profits in JV companyProven corporate governance model




Higher proportion of Unit Linked and Index Linked products, without in-house guarantees and lower capital (solvency margin) requirement.

The Market in 2003 Aviva in 2003

Source: ANIA - Individual Life total sales 2003AVIVA - New Business in 2003

Italian Life Market/Favourable AvivaProduct Mix

Unit-Index Linked 53%

Traditional 47%

Unit-Index Linked 62%

Traditional 38%


Overview of Aviva product mix/characteristics

Minimum underlying returns on SP policies purchased from Investment Banks, with counterparties rated Aa3/AA- or above. No guarantees on RP policies. (Aviva market leader with UCI)

Unit Linked

50%

Index Linked

12%

Structures purchased from counterparties rated Aa3/AA-

or above, exactly matching product benefits

Capitalisation

27%

Traditional, including Term Assurance

11%

Minimum returns between 0% and 2.5% (2.5% on single premium policies only). Normally a fixed profit margin toAviva, rather than a percentage of investment return which is variable

Similar to capitalisation policies but with a higher level of death benefit. Growing term assurance portfolio of annual premium policies covering mortgages and bank loans

Source: AVIVA 2003 New Business


Product Innovation: First insurer to launch Unit Linked products on the market

Anticipation of market needs and resistant design:

Experienced development team, with acknowledged product leadership in market place. Close working with partner throughout development process ensures success

Short speed to market:

Automated systems and processes – able to deliver product from specification to launch in 2 weeks. In 2003, a total of 25 new products were introduced through the various distribution channels

Operational Excellence: Products supplied by innovative workflow and service delivery

Worldwide product experience: World class expertise available from Aviva Group

Market Leading Product Development Success…




Strong New Business Growth

0

50

100

150

200

250

2001 2002 20030

10

20

30

40

50

2001 2002 2003

New Business Premium - APE New Business Contribution (1)

£m £m

(1) Pre tax, pre cost of capital

126m153m

194m

28m

38m

45m

49m

2004 – 1st quarter

12m

2004 – 1st quarter


Consistent New Business Margin - %

• Diversification of bank partners• Economies of scale (e.g. one system platform)• Low expense base• Product pricing disciplines• Management of product mix• Mutual benefit through the JV Life Company

20041st quarter

22.224.9

23.2 24.3

200320022001

Source : Aviva, New Business Contribution/APE on a pre tax, pre cost of capital basis


Strong Profit Record

0

5

10

15

20

25

30

35

2000 2001 2002 20030

10

20

30

40

50

60

70

2000 2001 2002 2003

Modified Statutory Profit (1) Life Achieved Operating Profit(2)

£m £m

(1) UK GAAP Basis, Gross of Tax (2) Gross of Tax

21m

26m24m

30m

29m

55m52m

70m


Source: ANIA

Leading Cost Base

Consolidated Aviva LifeCompanies

Top 15 Life Companies Aviva Companies Premium perStaff

Italian Market

2002 Expense Ratios (Life)

Expense as Proportion of

premium income

0.97%

2.16% € 5.2 m

€ 2.3 m

Total Premium per Employee (Life & Non Life)




Ageing ratio/pensions

State pension costs as a % of GDP

Traditional retirement promise as a % of final salary

Privately funded pension assets as % of GDP

By 2050, overall population reduced from 58 m to 51 m

Over 65s will increase from 22% today to 31% in 2021 and 49% in 2050

15.4% in 2002 the highest in Europe (EU average 12.2%)

Total reserves in 2003 € 37.4 bn of which € 1.3 bn Individualpolicies

2.1m PF members and 0.5m individual policies at end 2003

67.3% one of the highest in Europe

0%

25%

50%

75%

100%

2004 2021 2050

<65>65

Source: ISTAT – COVIP - ANIA

8

10

12

14

Italy France UK Europe

67%

Strong medium-term growth drivers

2,80

20

40

60

80

100

% of GDP


Replacement ratio (% final salary)(Employee, age 60, 35 years contribution)

64.865.264.165.471.867.3TOTAL

16.716.714.59.44.70.0Private pension

48.148.549.656.067.167.3State pension

205020402030202020102000Forecasted importance of private pension

Source: COVIP / Rapporto di strategia nazionale sulle pensioni

Strong medium-term growth drivers


Pensions OpportunityGovernment Pension Reforms – currently in Parliament

• Gradual postponement of retirement age towards 40 years working service

• Reduce the possibility of early retirement on a full pension and introduce incentives in order to convince employees to postpone retirement

• TFR: new rules allowing transfer to the Private sector• Reduction in pension contributions for new employees• Enhanced fiscal incentives (reduction of capital gain tax

during the accumulation period)• Increase in contribution ceiling for tax relief


Pensions OpportunityLife Assurers role

• € 13 bn contribution from employers each year to TFR

• TFR re-evaluation rate: 3.4% actual performance in 2003 versus 5.7% average for Pension Funds

• Insurers of “open” pension funds• Providers of annuities to members retiring from

service with pension fund benefits• Insurers of risk benefits• And naturally distribution of own individual products

(PIP) through bank branches• Distribution of own individual product (PIP) through

financial advisors

Aviva is Strongly Positioned for Pension Developments

Opportunities

Our plans

Source: COVIP


Aviva Italia Summary

• Italy’s pre-eminent bancassurer• Expanding its distribution network• With a cost competitive advantage• Innovative• With a fast & proven development capability• In one of the most exciting growth markets


European Bank Groups Capitalization (in € billion)

1 HSBC 143.12 RBS 76.73 UBS 70.04 Barclays 48.15 BNP Paribas 45.86 BSCH 44.17 HBOS 42.58 DB 41.19 BBVA 37.6

10 LTSB 37.411 Credit Suisse 34.612 SocGen 31.013 ABN AMRO 39.914 CA-CL 29.815 UCI 26.6

16 Dexia 17.617 Intesa 17.518 Nordea Bank 16.619 Std. Chartered 16.520 S. Paolo IMI 14.921 Danske Bank 13.622 Banco Popular 11.023 AIB 10.424 Bank of Ireland 10.325 Abbey National 10.326 Svenska 9.827 Commerzbank 9.328 HVB 9.229 SEB 8.130 Banesto 7.0

31 BCP 6.632 MPS 6.333 BPVN 5.234 Capitalia 5.235 Northern Rock 4.936 BNL 4.637 BPU 4.638 BES 4.339 Banca Lombarda 3.440 Bankinter 2.541 BPM 2.0

BPL 2.2BPL Investimenti 1.6Reti Bancarie 1.4

Source: Thomson Datastream and The Boston Consulting Group 2004

Appendix 1


% of Single Premium

Initial Charge (after commission to bank) : 2.0% Nil

Annual Charge (after commission to bank) : 0.5% 0.5%

Life Company Expenses : 0.9% 0.3%

Life Company Profit : 1.6% 0.2%

Margin (Discounted Profit Flow over 6 years) = 2.5% of single premium 25% of APE

Year 1 Years 2 - 6

Note: All figures gross of tax

The Italian Financial Model: Illustration of a Six Year Single Premium Investment Bond

Appendix 2


Cesare Brugola - Aviva Italy presentation 2004 · Aviva Italy Bancassurance Model Life Subsidiary Bank Branches 50% Bank Group 100% Dividends Dividends D i v i d e n d s Investment

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