Investor FAQs

Information correct at 31 December 2008

How are your employees incentivised and your directors remunerated?

• Our directors remuneration is based broadly on the same components of reward as other employees.

  In addition, directors and other senior employees participate in an Annual Bonus Plan (ABP), “One Aviva, twice the value” bonus plan (OATTV) and a Long Term Incentive Plan (LTIP).

  The Annual Bonus Plan is intended to motivate directors to achieve the annual business plan, based on a series of key financial, employee and customer performance indicators (KPIs), which make up 70% of the bonus opportunity, and personal objectives (30%). The ABP awards are made 1/3rd in cash paid immediately and 2/3rd deferred shares, which vest after 3 years.

  The “One Aviva, twice the value” bonus plan was introduced in 2008 to emphasise the chief executive’s clear strategic imperative for the group to deliver growth in Earnings Per Share (EPS), with a target of doubling EPS in five years from an end 2007 baseline. No other element of executive remuneration is focused on EPS growth, and this bonus scheme directly aligns a portion of executive remuneration to this key strategic goal.

  The Long Term Incentive Plan is intended to promote achievement of the Company’s longer-term objectives, to aid the retention of key personnel and to align executive interests to those of shareholders. Shares under the LTIP do not vest for 3 years and only then if demanding performance conditions are met. Performance is assessed based on our shareholder return ranking against a comparator group of financial services companies and our performance against our Return on Capital employed targets.

  Further detail on directors’ remuneration can be found in the report of the remuneration committee in the Annual Report and Accounts.

• Our employees are rewarded in a variety of ways in order to help them achieve their full potential and objectives with Aviva; annual bonuses are only one element of our reward package.

  The total remuneration of our UK employees includes a basic salary, annual bonus, share-based schemes and other benefits. In addition to this, flexible working opportunities are available to over 90% of our employees worldwide as well as extensive learning and development opportunities both at a business unit and group level.

  Annual bonuses are paid to employees based on both business unit and individual performance.

  Our share-based schemes give our UK employees the opportunity to become shareholders of Aviva to help to align their interests with those of our other shareholders and to enable them to participate in our success. The Share Award scheme may, at the discretion of the board, give UK employees an allocation of free shares. The level of this award takes account of Aviva’s UK financial performance subject to a maximum award of £3,000. Our Share Incentive Plan and Share Save Scheme also give our UK employees the chance to buy Aviva shares via deductions from their basic pay.

• In addition to the above Aviva provides good Pension, Life Assurance and ill-health benefits. Employees can also benefit from a number of employee discounts on our core Life and Insurance products and our tax efficient benefits scheme, which allows individuals to make savings on Home computer equipment, childcare and bike usage.

What were Aviva’s sales and profits in 2009?

Sales	£m
Worldwide long-term savings new business sales*	35,875
General insurance and health premiums	9,193
Worldwide sales	45,068
MCEV operating profit before tax	3,483
IFRS operating profit before tax	2,022

* Present value of new business premiums plus investment sales.

What are the key financial measures used by Aviva?

The key financial measures used to assess performance at a group level are set out below:

Earnings per share

To demonstrate our commitment to our vision of “One Aviva, twice the value”, we announced our ambition in February 2008 to double IFRS earnings per share by 2012. This ambition is based on total IFRS return, including investment volatility and non-operating items over the weighted average number of shares.

Our IFRS earnings per share for 2009 was 37.8 pence (2008: 36.8 pence loss). This mainly reflects the improvement in financial markets in 2009. Economic and investment return assumptions during the year were in line with our long-term expectations with a positive variance of £77 million (2008: £2,544 million adverse).

Proposed ordinary dividend per share and dividend cover

Our intention is to increase the total dividend on a basis judged prudent using a dividend cover in the 1.5 to 2.0 times range as a guide, while retaining capital to support future business growth.

Our board has recommended a final dividend of 15.00 pence per share (2008: 19.91 pence). This brings the total dividend for the year to 24.00 pence and a dividend cover of 1.8 times (2008: 1.9 times) based on IFRS operating earnings after tax.

This is in line with last year's decision to reduce the dividend to a sustainable level from which it can grow.

Group operating profit before tax

We aim to achieve steady sustainable growth in our operating profit, both on a MCEV and IFRS basis. In seeking to achieve this growth, we continue to adopt strict financial management disciplines underpinned by strong corporate governance.

In 2009 MCEV operating profit increased 3% to £3,483 million (2008: 3,367 million). IFRS operating profit reduced 12% to £2,022 million (2008: £2,297 million).

These results reflect higher long-term and savings results offset by lower general insurance and health profits and increased group debt costs.

Worldwide sales

Total worldwide sales decreased by 12% in 2009 to £45,068 million (2008: £51,377 million).

Long-term and savings sales decreased 11% to £35,875 million (2008: £40,240 million) mainly reflecting the tough economic climate. General insurance and health sales of £9,193 million (2008: £11,137 million) were down 17% reflecting the focus on writing for profit rather than volume.

Return on equity shareholders’ funds

Return on equity shareholders' capital is calculated as after-tax operating return, before adjusting items, on opening equity shareholders' funds, including life profits on a market consistent embedded value (MCEV) basis.

The improvement in 2009 to 16.2% (2008: 11.0%) reflects the increase in the post-tax MCEV operating result and the impact of lower opening equity shareholder's funds following falls in asset values in 2008.

For further information on Aviva's performance measures, including graphs and non-financial measures, see the Key Performance Indicators page.

What is the split of Aviva’s business between the various regions in which it operates?

Regional analysis of total sales

What is Aviva’s dividend policy?

Our intention is to increase the total dividend on a basis judged prudent using a dividend cover in the 1.5 to 2.0 times range as a guide, while retaining capital to support future business growth.

What is Aviva’s strategy?

Our purpose is to deliver prosperity and peace of mind to our customers. We will do this by realising our vision: “One Aviva, twice the value”.

Our priority is to realise the full potential of Aviva’s existing businesses. By working together across our businesses, we will optimise our performance in the global marketplace and maximise the value we can generate for all our stakeholders.

In support of our purpose and our "One Aviva, twice the value" vision, Aviva provides a composite portfolio of life and pensions, general insurance, health insurance and asset management products through a multi-channel distribution approach. Working together across regions under one Aviva brand provides greater financial stability and flexibility through diversification and a reduced reliance on any one channel, product, country or customer group. Progress on our current strategic priorities is set out below.

Our strategy and priorities need to be responsive to any changes in the external environment that may provide opportunities or cause strategic risks. These potential changes include capital market developments, an evolving regulatory environment, changes in the competitive landscape, development of major trends (such as climate change, changing consumer behaviour and improving longevity) or the emergence of potential discontinuities (such as a pandemic). We manage these risks and opportunities through disciplined risk management.

View more information about our strategy.

What actions has Aviva taken in support of its strategy?

To achieve our vision, we are focused on delivering against our five strategic priorities:

• Manage composite portfolio
  We are fully committed to maintaining the composite nature of the group. We firmly believe in the benefits of life insurance, general insurance and asset management as complementary parts of an overall business model that balances cash flow, returns and long-term value creation, and delivers prosperity and peace of mind to customers.

• Build global asset management
  Launched in September 2008, Aviva Investors is a clear example of the “One Aviva, twice the value” strategy in action. Integrating our global asset management businesses under one umbrella, Aviva Investors is now a leading asset manager, operating in 15 countries with £250 billion of funds under management. We plan to grow Aviva Investors and significantly increase its contribution to group profits.

• Allocate capital rigorously
  Capital management will continue to be a key focus. Capital is treated as a scarce resource, and is allocated to provide the highest sustainable returns for shareholders. We continuously seek improvements in capital structure and efficiency.

• Multi-channel customer reach
  We sell our products in 28 countries in ways that our customers choose to buy them. We will get closer to our customers through better understanding of their needs and by providing products and services that customers want. We will continue looking for the right distribution in the right markets.

• Boost productivity
  We constantly look for ways to boost our productivity, to support sustainable growth, increase our competitiveness, improve our services, and deliver higher value to our customers. Working together as “One Aviva”, we deliver operational excellence through shared services, shared knowledge, rationalised systems and effective outsourcing.