Insurance Excellence in UK P&C

Igal Mayer, Chief Executive, Norwich Union Insurance

Goldman Sachs European Financials Conference Berlin 2008
 Disclaimer

This presentation may include oral and written “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. These forward-looking statements sometimes use words such as
‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar
meaning. By their nature, all forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances which may be beyond Aviva’s control, including, among
other things, UK domestic and global economic and business conditions, market-related risks such
as fluctuations in interest rates and exchange g rates,, the p policies and actions of regulatory
g y
authorities, the impact of competition, the possible effects of inflation or deflation, the timing impact
and other uncertainties relating to acquisitions by the Aviva Group and relating to other future
acquisitions or combinations within relevant industries, the impact of tax and other legislation and
regulations in the jurisdictions in which Aviva and its affiliates operate, as well as the other risks
and uncertainties set forth in our 2007 Annual Report to Shareholders. As a result, Aviva’s actual
future financial condition, performance and results may differ materially from the plans, goals and
expectations set forth in Aviva’s forward-looking statements, and persons receiving this
presentation should not place undue reliance on forward-looking statements.

Aviva undertakes no obligation to update the forward-looking statements made in this presentation
or any other forward-looking statements we may make. Forward-looking statements made in this
presentation are current only as of the date on which such statements are made.
European Financials Conference:
Climbing a wall of uncertainty
 An increasingly global company

£60 FY 2007 sales

billion £49bn(1)

Asia Pacific 9% 25%

Sales North America 10% General
Insurance
12%
UK GI
£30
billion 29%
UK life
75%
3%
Long
5%
Term
24% Savings
Europe 40%
34%

34%

FY 2000 FY 2007
(1) 2007 total long-term savings new business sales and G.I. and health net written premiums
One Aviva, twice the value

Purpose
Prosperity &
peace of mind
Purpose
Vision

One Aviva,
twice the value
Vision
Strategic Targets
priorities

• Manage composite • 98% meet or beat COR

portfolio • Long Term Savings
• Build global Asset growth targets
Management • £350m cost savings by
• Allocate capital
rigorously
end 2009
• Double IFRS EPS by
Group strategy and targets
• Increase customer 2012 at the latest
reach • 1.5 – 2 x dividend cover
• Boost productivity • 12.5% ROCE

Aviva Investors
Asset Management • Increase third party business
• Globally integrated business • Transform the investment model

UK Europe N. America Asia Pacific

Market leadership Scale, growth, capital Double scale Scale, growth
● Address legacy
● Transform business
● Seize unique growth
opportunities
● Focus: top 5 in
chosen segments
● Prioritised portfolio Regional / BU strategies
● Regional operating
model ● Leverage scale ● Integrate '07 model
● Exploit UK synergies ● Generate capital ● Expand products, ● Investment required
● Generate capital distribution ’08+
Our priorities: realising the potential of ‘One Aviva’

Our purpose
• The leading UK P&C insurer
Purpose

Vision
• Capital generator for the group

Strategic
Targets
Our priorities
O i iti
UK priorities

• Delivering across the cycle:

Market leadership
UK Europe N.America
Asia
Pacific
- Expense management
● Address legacy

● Transform business
- Building core insurance capability
model
- Flattening the impact of claims
● Exploit UK synergies
inflation
● Generate capital
- Winning customers & brokers

A Focus on Insurance Excellence

 The UK market leader

Aviva • Consolidated market – top 6 insurers

14.4%
Rest of Market have over 50% market share
37.6%
• Aviva is the largest P&C insurer in UK
RBSI
(including
Direct Line) • Top 1 or 2 position in all our major
12.3%
classes
• Unique business model
RSA
8.5% - Balanced mix of personal and commercial
HBOS - Multi-distribution
2.5% AXA - Powerful brands
6.5%
BUPA
3.4% Zurich • Consistently delivering performance
5.6% 1
Allianz - 98% or better COR since 2004
4.0% AIG - £3.9bn operating profit over last 5 years
5.2%
(1) Excludes impact of 2007 summer floods
Source: Datamonitor 2007

Our composite model and scale delivers market advantage

Unparalleled distribution reach

DIRECT BROKERS PARTNERS

Banking Retail Affinity

3,000
brokers

ƒ #1 in the SME
market
ƒ Powerful brands … over 100 others
ƒ Insurer of the year
2003 to 2007

Leading shares in each channel

Forward Focus: Insurance Excellence

Insurer
Retailer

Historical retail focus to build distribution

Forward Focus: Insurance Excellence

Insurance excellence

Building core insurance capability

Expense management & scale benefits

Operational excellence & customer service

Retailer
Pride and passion for insurance
Insurer

Focus on the fundamentals

Insurance Excellence: A New Operating Model

Sales
and
d O
Operations
ti
Marketing

Underwriting,
Pricing and
Product

Support Functions

Simplified structure
Insurance Excellence
Expense management - the promise of scale

1
UK best of breed expense ratio applied to NUI
channel / product mix

NUI UK Best of Best of

2
Expenses Breed Breed Co.
Personal Lines
Motor 16.1% 12.3% Direct Line, Fortis
Property 11 0%
11.0% 9 7%
9.7% Direct Line
Line, NU
Creditor 1.3% 1.3% NU
RAC Rescue 27.5% 27.5% NU
Commercial Lines
Motor 13.8% 8.2% Brit
Property 16.3% 15.2% Axa
Liability 11.6% 11.6% NU

NUI Total 13.9% 12.0%

Source: FSA Returns (2006)
(1) Expense ratios exclude CHE and commission
(2) Based on leading cost performance in channel, weighted to reflect NUI mix

Ambition to deliver industry leading expense ratio

 Insurance Excellence
Expense management - the promise of scale

Inflation and
one-off
(38)
• Programme 1: Prioritisation and focus e.g.
Costs11
(125+)

• £76m reduction in marketing spend

(200) • £33m reduction in IT costs

Expense
• £52m less change activity
ratio
13.9%
• Total £200m savings already in train for 2008

Expense
• Expense ratio reduced from 13.9% to 12.4%
ratio
12.4%

3
Starting RAC 2 2006 C&E Prog. 1 2008
point integration savings

(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs
(2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)
(3) Additional benefits exist outside overhead cost base

Ambition to deliver industry leading expense ratio

 Insurance Excellence
Expense management - the promise of scale

Inflation and (38)

one-off

Progress has been good:

Costs11
(125+)

(200)
• 114 less senior managers than last
year – simplifying our business
Expense
ratio
13.9% • IT project spend halved

• Marketing campaigns consolidated

Expense
ratio
12.4%

3
Starting RAC 2 2006 C&E Prog. 1 2008
point integration savings

(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs
(2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)
(3) Additional benefits exist outside overhead cost base

Programme 1: Confident in our delivery

 Insurance Excellence
Expense management - the promise of scale

• Further activity planned to realise ambition

Inflation and (38)
• Programme 2: Re-engineering service and
one-off
Costs11
(125+)
processing centres
• Dealing with inherited legacy
• Fewer products from over 70 to under 20
(200)
• Increasing self service
Expense • Right first time – reduce “follow up
ratio
13.9% enquiry” by 50%

Expense
ratio
12.4%

3
Starting RAC 2 2006 C&E Prog. 1 2008
point integration savings

(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs
(2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)
(3) Additional benefits exist outside overhead cost base

Programme 2 focus on re-engineering our service offering

 Programme 2: Re-engineering service &
processing centres

Operations Today 2010 End State Vision

Personal
Personal
Mixed
Mixed
Commercial Commercial
Dundee Noida
Glasgow Perth Perth Noida
Bishopbriggs
Bishopbriggs

Leeds
Bradford
Belfast Sheffield Pune Pune
Liverpool Manchester
Manchester
Manchester
Cheadle Stretford Cheadle Stretford
Leicester Leicester
Norwich Norwich
Birmingham
Birmingham
Ipswich
Bristol Bangalore Chennai Southend Bangalore
Basildon
Basildon Southend
Southampton
Worthing
Exeter

Offshore locations to be confirmed following

ongoing commercial negotiations with offshore
partners

Operational & service excellence

 Programme 2: Re-engineering service &
processing centres

Create 7 Centres of Excellence

\ 1) PL Sales and Servicing (incl. HNW and IB) 4) Liability and Bodily Injury Claims
Centres of 2) Commercial Lines Sales and Servicing 5) Personal Motor Claims
2010 End State Vision Excellence 3) Collections 6) Commercial Motor Claims

7) Household Claims (incl. Commercial Property)

Personal Primary Customer Access Channels (As Is / To Be) - Illustrative

Contact Channel Sales Servicing Claims Reporting Claims Tracking
Mixed
Levers Web Self service 50% / 60% 0% / 39% 0% / 5% 0% / 30%
Commercial Direct
Telephony 50% / 40% 100% / 61% 100% / 95% 100%/ 70%

SS EDI 80% / 85% 0% / 5% 0% / 30%

P th
Perth N id
Noida
Bishopbriggs
Telephony 20% / 15% 100% / 95% 100% / 70%
Broker
SS eBroking 4% / 40% 0% / 5% 0% / 30%

Telephony 96% / 60% 100% / 95% 100% / 70%

Web Self service 5% / 24% 0% / 18% 0% / 5% 0% / 30%

CP
Pune Telephony 95% / 76% 100% / 82% 100% / 95% 100% / 70%
Manchester
Manchester
Cheadle Stretford
Leicester ƒ We will create seven Centres of Excellence to
Norwich
consolidate like functions, simplify processes and drive
overall performance to best-in-class standards
Southend Bangalore

Offshore locations to be confirmed following

ongoing commercial negotiations with offshore
partners

Operational & service excellence

Insurance Excellence
Expense management - the promise of scale

1
UK best of breed expense ratio applied to NUI
channel / product mix

NUI UK Best of Best of

2
Expenses Breed Breed Co.
Personal Lines
Motor 16.1% 12.3% Direct Line, Fortis
Property
ope ty 11.0%
0% 9.7%
9 % Direct Line,, NU
Creditor 1.3% 1.3% NU

Aim to be UK
RAC Rescue
low cost
27.5% 27.5%
producer
NU
Commercial Lines
Motor 13.8% 8.2% Brit
Property 16.3% 15.2% Axa
Liability 11.6% 11.6% NU

NUI Total 13.9% 12.0%

Delivering the promise of scale

Insurance Excellence
Building core insurance capability

Premium rating leadership

• Motor rates: 16% Q4 2006

• Household rates: 10% Q3 2007
• Commercial rates: 5% November 2008
10.0%
8.0%
6.0%
Commercial Lines Trends
4.0%
3.1%
2.0% 1.6%
0.0% Progress being made but market 1.1%
-2.0% conditions are still tough
-4.0%
-6.0%
-8.0%

Liability Property Motor ZERO

Demonstrating leadership in the market

 Insurance Excellence
Flattening impact of claims inflation

Impact of claims initiatives on inflation (Major Classes)

• Track record of delivering significant
cost reduction
• 2007: Delivered >£75m benefit

0
• 2008 pplans in train to deliver £100m+
Personal Motor Household Commercial Motor Commercial Property Commercial Liability
%
Underlying Inflation Inflation after Benefits of sustainable benefits across:

Commercial Motor - Average Settlement Cost

– bodily injury costs
– recoveries
– credit hire bill
– claims settlement
• Efficiency makes it easier for our
2000 2001 2002 2003 2004 2005 2006 2007 customers

Flattening the impact of inflation through to 2010

Insurance Excellence
Winning customers & brokers

Customers

• Summer floods 2007 – 50% by Xmas, 80% by Easter

• World class 80% net promoter score in RAC
• Re-launch our flagship, Norwich Union Direct

Brokers

• Insurer of the Year – five years running

• Grew file count in a shrinking 2007 market
• Clear commitment to independent brokers
• Will sign up to deals based on sustainable, long
term models

Winning in a highly competitive market

 One Aviva, twice the value

Sales
and Operations
Marketing

Retailer Underwriting,
Pricing and
Product
Insurer
Support Functions

Create 7 Centres of Excellence

1) PL Sales and Servicing (incl. HNW
4) Liability and Bodily Injury Claims
10.0%
\ and IB)
2) Commercial Lines Sales and Servicing 5) Personal Motor Claims

2010 End 3) Collections 6) Commercial Motor Claims

8.0%
State Vision 7) Household Claims (incl. Commercial Property)

6.0%
Personal
Primary Customer Access Channels (As Is / To
Mixed
Contact Channel Sales
Be) - Illustrative
Servicing Claims Reporting Claims Tracking
4.0%
Web Self service 50% / 60% 0% / 39% 0% / 5% 0% / 30%
Commercial Direc
t Telephony 50% / 40% 100% / 61% 100% / 95% 100%/ 70%
2.0%
SS EDI 80% / 85% 0% / 5% 0% / 30%
Perth Noida
Bishopbriggs Telephony 20% / 15% 100% / 95% 100% / 70% 0.0%
Brok
er SS eBroking 4% / 40% 0% / 5% 0% / 30%

Telephony 96% / 60% 100% / 95% 100% / 70% -2.0%

Web Self service 5% / 24% 0% / 18% 0% / 5% 0% / 30%

Pune
CP
Telephony 95% / 76% 100% / 82% 100% / 95% 100% / 70%
-4.0%
Manchester
Manchester
Cheadle Stretford -6.0%
Leicester
Norwich
-8.0%
Southend Bangalore

Liability Property Motor ZERO

Offshore locations to be confirmed following ongoing commercial
negotiations with offshore partners
 One Aviva, twice the value

Sales
and Operations
Marketing

Retailer Underwriting,
Pricing and
Product
Insurer
Support Functions

Create 7 Centres of Excellence

1) PL Sales and Servicing (incl. HNW
4) Liability and Bodily Injury Claims
10.0%
\ and IB)
2) Commercial Lines Sales and Servicing 5) Personal Motor Claims

2010 End 3) Collections 6) Commercial Motor Claims

8.0%
State Vision 7) Household Claims (incl. Commercial Property)

6.0%
Personal
Primary Customer Access Channels (As Is / To
Mixed
Contact Channel Sales
Be) - Illustrative
Servicing Claims Reporting Claims Tracking
4.0%
Web Self service 50% / 60% 0% / 39% 0% / 5% 0% / 30%
Commercial Direc
t Telephony 50% / 40% 100% / 61% 100% / 95% 100%/ 70%
2.0%
SS EDI 80% / 85% 0% / 5% 0% / 30%
Perth Noida
Bishopbriggs Telephony 20% / 15% 100% / 95% 100% / 70% 0.0%
Brok
er SS eBroking 4% / 40% 0% / 5% 0% / 30%

Telephony 96% / 60% 100% / 95% 100% / 70% -2.0%

Web Self service 5% / 24% 0% / 18% 0% / 5% 0% / 30%

Pune
CP
Telephony 95% / 76% 100% / 82% 100% / 95% 100% / 70%
-4.0%
Manchester
Manchester
Cheadle Stretford -6.0%
Leicester
Norwich
-8.0%
Southend Bangalore

Liability Property Motor ZERO

Offshore locations to be confirmed following ongoing commercial
negotiations with offshore partners

Building Aviva from the inside

One Aviva, twice the value
Outlook

• UK GI cash generator to fuel global growth

• Progress to date

• £200m cost savings in train

• More to come

• Rates
ƒ Motor / home = >inflation
ƒ Commercial = positive territory

• Commitment remains to 98% of better globally

Insurance Excellence
Insurance Excellence in UK P&C
Igal Mayer, Chief Executive, Norwich Union Insurance
Goldman Sachs Insurance Conference Berlin 2008