Annual Report And Accounts 2019 - Aviva

Strategic reportGovernanceIFRS financial statementsOther informationChairman’s statementChairman’sstatementIn November 2019, Aviva signed up to the United Nations-convenedNet Zero Asset Owners Alliance which brings together some of theworld’s biggest pension funds and insurers to commit to net zerogreenhouse gas emissions in their investment portfolios by 2050. Weare also committed to aligning our business to the target set out inthe Paris Climate Agreement of limiting global warming to 1.5oCabove pre-industrial levels.Our communities2019 was a year of change for Aviva. We reshaped our strategy andsenior leadership team, while also facing a period of uncertainty inthe external business environment, driven by lower interest rates andthe UK decision to exit from the European Union.On 4 March 2019, after a competitive process that included highlyrespected and experienced internal and external candidates, theBoard was delighted to appoint Maurice Tulloch as Group ChiefExecutive Officer (CEO). During the year, with the support of theBoard, Maurice initiated a review of our strategy in order to simplifyAviva into a leading international savings, retirement and insurancebusiness delivering sustainable growth for shareholders and supportfor our communities. This strategy will allow us to fulfil our vision toearn our customers’ trust as the best place to save for the future,navigate retirement and insure what matters most to them.Our purposeThroughout all of this change, it has been and continues to be ourcore purpose which illuminates our path forward. We are proud tosay not only to our customers but to our people, our partners and ourcommunities, that we will be with you today, for a better tomorrow.This means our customers can count on us to be there for them ifthings go wrong and to put it right, and to help them plan for theirfuture. While the exact words used to express our purpose may haveevolved, this continues to be the underlying promise that wenavigate our company by, just as it has been over the last 323 yearsof our corporate history.Our customersThe absolute commitment our people show to our customers everyday also remains unchanged. I have always believed that theirdetermination to live up to our value of ‘Care More’ is one of ourgreatest assets. This is one of the reasons why it was so important toincorporate our people’s perspective as we set about creating a newarticulation of our shared purpose.The human connections that our people forge with our customersreally are special. We are there to support them through some of themost important decisions or emotional moments in their lives. Bydrawing on our expertise and empathy to give them the best possibleoutcome, we can make a real difference to people when it mattersmost. And in doing so, we will ensure our financial strength and longterm future.Our stakeholdersIn the Strategic report we describe how the Board takes into accountthe interests of all our stakeholders. As an insurance company, wealso understand better than most the imperative to act with urgencyand conviction to help combat climate change. Although ourenvironmental credentials are well-established, we are committed todoing more, both on our own account and in alliance with others. Wehave invested 6 billion in green assets since 2015 alone, including 3.8 billion in low carbon infrastructure (predominantly solar andwind power) and 2.2 billion in green and sustainable bonds. Weexpect this to increase significantly in the future.As a company, we have always understood that our duty of carereaches far beyond our customers to encompass all those who maybe touched by our actions. Whether it is through the use of thevolunteering leave granted to every UK employee each year, orthrough our strategic partnership with the British Red Cross, ourpeople combine forces to build a future we all want to live in. Thisyear also saw the further development of the Aviva Foundation whichwas created to use unclaimed shareholder assets to support goodcauses. The Foundation has so far committed 3.7 million in fundingto projects that will support our communities and vulnerablecustomers when they need it most. This has included donations to apilot project to provide a counselling package to vulnerable homeinsurance customers experiencing trauma following a serious eventsuch as flooding; and funding a national programme to help peopleover the age of 50 increase their employability skills and to promote,among businesses, the benefits of being an age-friendly employer.Changes to the BoardWe have made a number of changes to our Board compositionduring 2019 in addition to the appointment of Maurice Tulloch asGroup CEO. Andy Briggs and Tom Stoddard stepped down from theBoard and looked to pursue other opportunities; we wish them bothevery future success. After a period as interim Group Chief FinancialOfficer (CFO), Jason Windsor, formerly CFO of Aviva UK Insurance,was appointed permanently to the role and also joined the Board ofDirectors on 26 September 2019.After nine years of distinguished service, including as Chair of the RiskCommittee, Mike Hawker retired from the Board on 31 March 2019.Following his appointment as Chairman of the Royal Mail, KeithWilliams stepped down from the Board on 23 May 2019. On31 December 2019, Glyn Barker and Claudia Arney both retired fromthe Board; Glyn after eight years including a period as SeniorIndependent Director and Claudia to focus on her expanded nonexecutive roles elsewhere. I am extremely grateful to them all for thevaluable contributions they have made to the Board andCommittees of Aviva plc.We were delighted to welcome three new Non-Executive Directors toour Board this year, all with deep knowledge and experience of thefinancial services industry. Patrick Flynn, previously Chief FinancialOfficer of both ING and HSBC Insurance joined our Board on 16 July2019. Patrick became Audit Committee Chair on 4 November 2019.George Culmer was appointed as a Non-Executive Director of theCompany on 25 September 2019, having previously been ChiefFinancial Officer of Lloyds Banking Group and RSA Insurance Groupplc. George assumed the role of Senior Independent Directorfollowing the departure of Glyn Barker. We also announced theappointment of Amanda Blanc with effect from 2 January 2020.Amanda was previously CEO at AXA UK & Ireland, and CEO, EMEA &Global Banking Partnerships at Zurich Insurance Group.Aviva plc Annual report and accounts 201902

Strategic reportChairman’s statementGovernanceIFRS financial statementsOther informationContinuedFinally, on 21 January 2020, I announced my intention to retire asChairman during 2020. When I became Chairman in 2015, the Boardasked me to commit to serving for at least five years. Now thatMaurice has launched Aviva’s strategy, a new senior managementteam is in place and the Board has been refreshed, it is also time fora new Chairman. In the meantime, I remain committed to this greatorganisation which I am confident will deliver for all its stakeholders.It has been my privilege to serve as Chairman, and I would like tothank the Board and indeed all my colleagues at Aviva for theirsupport during the last five years.Our performanceIn 2019, we further strengthened our Solvency II capital position1 andgrew Group adjusted operating profit2 by 6% to 3,184 million(2018 restated3: 3,004 million). Group adjusted operating profit2benefited from improved performance in Canada and lowerexpenses and debt costs. IFRS profit before tax4 increased to 3,374 million (2018: 2,129 million), including higher Group adjustedoperating profit2 and positive investment variances driven by lowerinterest rates and equity market gains.DividendAt the full year 2018 results, we announced our move to a progressivedividend policy. In line with this policy, the Board proposes a finaldividend for 2019 of 21.40 pence per share (2018: 20.75 pence pershare).Looking aheadAviva faces the future with great optimism – accepting that it will holdchallenges, and confident that our strategy and resources mean thatwe are well positioned to meet them and to prosper. This has been ayear of evolution for us. With our new leadership now in place, we arealigned behind our strategy to create great outcomes for ourcustomers and other stakeholders, and to deliver sustainable growthfor our shareholders.Sir Adrian Montague CBEChairman4 March 20201234This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of financial performance. Further information on APM’s, including a reconciliation to the financial statements(where possible), can be found in the ‘Other Information’ section of the Annual report and accounts.Group adjusted operating profit is an Alternative Performance Measure (APM) which is used by the Group to supplement the required disclosures under IFRS. Please refer to note B in the ‘Accounting Policies’ section and to the‘Other Information’ section within the Annual report and accounts for further information.During 2019 the Group adjusted operating profit APM has been revised and now includes the amortisation and impairment of internally generated intangible assets to better reflect the operational nature of these assets (seenote 1(b) of the Annual report and accounts). Group adjusted operating profit continues to exclude amortisation and impairment of intangible assets acquired in business combinations. Comparative amounts have beenrestated resulting in a reduction in the prior period Group adjusted operating profit of 112 million. There is no impact on profit before tax attributable to shareholders’ profit.Profit before tax attributable to shareholders’ profit.Aviva plc Annual report and accounts 201903

Strategic reportGovernanceIFRS financial statementsOther informationChief Executive Officer’s reviewChief ExecutiveOfficer’s reviewIn the UK, we separated management of our life and generalinsurance businesses, and our digital operations have beenintegrated back into the businesses to improve efficiency andcustomer delivery. Globally, we have reorganised our portfolio ofmajor markets and strategic investments into five divisions with clearalignment of business model. Our objective is to compete and win inour markets by providing great customer outcomes and excelling atthe fundamentals.OverviewAviva made important changes to its business and leadership in 2019and began to build operating momentum. This is reflected in ourimproved results, which included: Solvency II return on equity1,2,3 of 14.3% (2018: 12.5%); Growth in Solvency II net asset value per share, up 31 pence to 423pence (2018: 392 pence); Increased Solvency II capital surplus2 and Solvency II shareholdercover ratio2,3 at 12.6 billion and 206% respectively(2018: 12.0 billion and 204% respectively); Group adjusted operating profit4 up 6% to 3,184 million(2018 restated5: 3,004 million); and Strong growth in operating earnings per share3,6, up 8% to 60.5pence (2018 restated5: 56.2 pence).The Board of Directors has declared a final dividend of 21.40 penceper share (2018: 20.75 pence). This results in a full year dividend for2019 of 30.9 pence per share (2018: 30.0 pence), an increase of 3%.Aviva has many positive attributes: high quality businesses, skilledand dedicated staff, a leading focus on sustainability and ESG and alarge, loyal base of customers and intermediary partners. Our brandresonates with our customers and partners due to our track recordof helping people to manage life’s uncertainties by saving for thefuture, drawing a secure income in retirement and insuring whatmatters most to them.My goal is for Aviva’s portfolio of businesses to be best in class. Wewill achieve this through a relentless focus on the customer andcommercial rigour as we execute our business plans and we willreallocate capital to maximise performance. In short, we will runAviva better.In 2019, our customer numbers were up 2% to 33.4 million and weimproved growth in premiums and managed assets. There is muchmore to do, simplifying our business, reducing costs and navigatingcompetitive markets to make Aviva a stronger, simpler and bettercompany.COVID-19 presents a new uncertainty in 2020. Our primary focus isthe operational readiness and safety for our customers and staff,such that we continue to deliver on our promises. Our scale, diversityand the strength of our balance sheet allows us to meet anyshort-term challenges.Structure, leadership and cultureIn 2019, we made a number of changes to optimise ourorganisational structure and leadership. These changes werenecessary to simplify our ways of working, improve operationalefficiency and resilience. We now have greater focus, commercialrigour and accountability throughout the organisation.1234567Aviva’s leadership team has been strengthened and we haveassembled a diverse and talented leadership group with provensuccess within their respective fields. With a mixture of internalpromotions and external hires, my new team brings the expertise,ambition and focus required to grow our business profitably. Thenew team will help shape our culture, which remains focused onproviding the highest standard of service and value for customers,maintaining leadership on environmental and social issues, while atthe same time

The Strategic report is only part of the Annual report and accounts 2019. The Strategic report was approved by the Board on 4 March 2020 and signed on its behalf by Maurice Tulloch, Chief Executive Officer. More information about Aviva can be found at www.aviva.com Non-Financial Information Statement