AVIVA plc

Richard HarveyGroup Chief Executive

Higher risk vs lower growth

The challenge ahead

Merrill Lynch Conference10 October 2002

Disclaimer

This presentation may contain certain “forwardThis presentation may contain certain “forward--looking statements” looking statements” with respect to certain of with respect to certain of Aviva’sAviva’s plans and its current goals and plans and its current goals and expectations relating to its future financial condition, performexpectations relating to its future financial condition, performance ance and results. By their nature, all forwardand results. By their nature, all forward--looking statements involve looking statements involve risk and uncertainty because they relate to future events and risk and uncertainty because they relate to future events and circumstances which are beyond circumstances which are beyond Aviva’sAviva’s control including among control including among other things, UK domestic and global economic and business other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interesconditions, market related risks such as fluctuations in interest rates t rates and exchange rates, the policies and actions of regulatory authoand exchange rates, the policies and actions of regulatory authorities, rities, the impact of competition, inflation, deflation, the timing impathe impact of competition, inflation, deflation, the timing impact and ct and other uncertainties of future acquisitions or combinations withiother uncertainties of future acquisitions or combinations within n relevant industries, as well as the impact of tax and other legirelevant industries, as well as the impact of tax and other legislation slation and other regulations in the jurisdictions in whichand other regulations in the jurisdictions in which AvivaAviva and its and its affiliates operate. As a result, affiliates operate. As a result, Aviva’sAviva’s actual future financial actual future financial condition, performance and results may differ materially from thcondition, performance and results may differ materially from the e plans, goals and expectations set forth in plans, goals and expectations set forth in Aviva’sAviva’s forwardforward--looking looking statements.statements.

Aviva’sAviva’s undertakes no obligation to update the forward looking undertakes no obligation to update the forward looking statements contained in this presentation or any other forward statements contained in this presentation or any other forward looking statements we may make.looking statements we may make.

Aviva agenda

gRisks reduced in many areas

gMarkets are difficult short-term, ….. but longer-term growth prospects remain excellent

gCash generative operating model

Lower insurance industry risk

g Increased company governance

gCapital re-structuring

g Improving capital management techniques (RBC)

gRealistic pricing (terrorism / weather / liability)

gUK Life: - investment risk often borne by policyholder- reserving for risks more stringent

Regulatory

Rating agencies

Transparency

Aviva: Risk reduction in general insurance

EXITSUS GILondon marketBrazil GISpain GIGermany GIBelgium GIFrench brokercommercial GI

South Africa GIPakistan GI

g Exited long-tail exposures

g Immunised group from substantial increase in asbestosis claims

g 9/11 claims under £35m

gReinsurance retention £100m

The rewards of focus in general insurance

* Combined operating ratio* Combined operating ratio

2002 2001% %

UK 101 103France 100 103Ireland 100 104Netherlands 102 104Aust & NZ 102 103Canada 103 104

GROUP 101 103

COR6 months% of total group

non-life premiums

546658

12

Aviva: Scale advantages in UK general insurance

10

15

20

25

1997 1998 1999 2000 2001

Credit Suisse

Norwich Union

AXA

AllianzRSA

Zurich

%UK general insurance expense ratios

Source: FSA returns

UK life regulatory risks?

g Sandler

g Lower charges do not stimulate savings

g Attribution of orphan estate is potentially attractive

gDepolarisation

g RBOS JV products to stay bank branded (NU manufactured)

g NU expects to be a net beneficiary overall

UK life - market concentration

gWinners have strong brands and scale advantages

g Lower unit costs critical to value generation

gChange management skills central to success

Market share %

0

2

4

6

8

10

12

1996 1997 1998 1999 2000 2001

NU Post MergerCGU NU

11.5%10.6%8.99%5.16% 7.70% 8.08%

Aviva: UK life - Target reduction of >20% in unit costs

Acquisition costs / APE* *Excluding commission

Acquisition costs / APE* *Excluding commission

10

15

20

25

30

1999 2000 2001 2002 2003 2004

%%

Aviva agenda

Risks reduced in many areas

Markets are difficult short-term, ….. but longer-term growth prospects remain excellent

Cash generative operating model

Increased deposits in the short-term …. …... will flow back into long-term savings

European investment mix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002E 2003E 2004E 2005E 2006E 2007E 2008E 2009E 2010E

Deposits

Bonds

Mutual Funds

Equities

Life/Pensions

Other

Source: Deutsche Bundesbank, Banque de france, Banca d’Italia, ONR, Banco de España, BVI, AFG-ASFFI, Assogestioni, AUTIF, Inverco, CEA, Goldman Sachs Research estimates

Significant scope for European life & pensions

g Pensions reform across Europe raising public awareness of need to save

g Savings ratios to increase

0

20

40

60

80

100

120

140

UK France Germany Italy Spain USA

EUR ‘ooos Savings per capita, 2001

Source: Deutsche Bundesbank, Banque de France, Banca d’Italia, ONS, Banco de España, National Statistical Offices, Euromonitor Federal Reserve, US Census.

Aviva: Investing into lower penetrated insurance markets and structural bancassurance growth

Spain: Spain: created top 5 created top 5 LTS businessLTS business

New marketsNew markets-- HungaryHungary-- LithuaniaLithuania-- IndiaIndia-- ChinaChina

Singapore & Singapore & HKHKbancassurancebancassurancewith DBSwith DBS

Italy: Italy: created top 6 created top 6 LTS businessLTS business

UK:UK: bancassurancebancassuranceJV with RBOS JV with RBOS

Almost half of LTS business from outside of UKAlmost half of LTS business from outside of UK

France:France:bancassurancebancassurancefrom 2004from 2004

Different bancassurance models for different markets

50% equity

50% equityFee

Fee

Joint Board aims to maximise value of JV

Bank

-Sales

-Marketing

-CRM

g Equity JVs for RBOS and Spain

gCommission based in Italy, Singapore & HK

gHurdle rates of >10% IRR

Insurer

-Products

-Admin

-Asset mgt

Bancassurance sales doubled in H1 02

Total Increasesales in sales£m

g Royal Bank of Scotland Group 391 339%

g Italy 504 87%

g Spain 352 31%

g DBS (Singapore) 97 n/a

BancassuranceBancassurance accounts for 20% ofaccounts for 20% of AvivaAviva life & pension saleslife & pension sales

Life & pension new business up 11% H1 02

30030070070000 7575 150150 225225

Int'lInt'l

Spain Spain

NethsNeths

ItalyItaly

IrelandIreland

FranceFrance

UKUK

Life and pension sales Life and pension sales -- APE £m APE growthAPE growthAPE £m

+ 12%+ 12%

-- 10%10%

+ 30%+ 30%

+ 25%+ 25%

-- 15%15%

+ 26%+ 26%

+ 44%+ 44%

Aviva agenda

Risks reduced in many areas

Markets are difficult short-term, ….. but longer-term growth prospects remain excellent

Cash generative operating model

Aviva has a cash generative model

PostPost--tax statutory operating profitstax statutory operating profits££bnbn 6 months 20026 months 2002

Profit from inProfit from in--forceforce 0.70.7Cash strain from new nonCash strain from new non--profit businessprofit business (0.3)(0.3)

Life statutory profits Life statutory profits (after new business strain)(after new business strain) 0.4 0.4 General insurance & healthGeneral insurance & health 0.30.3Corporate / otherCorporate / other --BorrowingBorrowing (0.2)(0.2)

PostPost--tax operating profitstax operating profits 0.50.5DividendDividend (0.2)(0.2)

Retained to fund growthRetained to fund growth 0.30.3

Additional required solvency marginAdditional required solvency margin (0.1)(0.1)Retained after solvency marginRetained after solvency margin 0.20.2

High quality High quality earningsearnings

Lower Lower dividend cost dividend cost to meet to meet organic organic growth growth requirementsrequirements

UK life with-profit free asset ratio

Free asset ratio* Including Excludingimplicit implicititems items

31 Dec 2001 14.7% 10.8%

30 June 2002 14.1% 10.1%

gNo allowance in FAR calculation for liabilities to move……but with-profit bonuses are on a glide-path

gFSA moving to realistic “risk based” analysis

* incorporating resilience rules as at 30 June 2002

Free asset ratio definition: total assets less total liabilities / total liabilities

UK life with-profit: orphan estateRealistic measure of with-profit strength

00

22

44

66

31 Dec 0131 Dec 01 30 Jun 0230 Jun 02

££5.2bn5.2bn££4.7bn4.7bn

££bnbn

g Resilient to equity market falls

g Orphan estate is after a realistic estimate of policyholders’ reasonable expectations

g With-profit funds of £48bn at 30 June

Strong and resilient capital base

g £350m per annum funds from dividend saving

g Cash generative general insurance business

g Strong realistic with-profit life fund position

g AA rating (“very strong security”) reaffirmed by S&P

g Aviva reviewed end July (FTSE-100 sub 4,000)

Sufficient capital to fund organic growthSufficient capital to fund organic growth

Aviva summary

gRe-structuring of general insurance has reduced risk, improved focus and produced excellent results for shareholders

gLong-term savings growth will come from strong and developing market positions………but difficult short-term outlook

gCapital: cash generative model: sufficient for organic growth

Appendix

Aviva positioning

g 7th largest worldwide insurer

gUK’s largest insurer

g Strong platform in Continental Europe

6m 2002 premiums / sales*Cont.

Europe Life 30%

UK Life35%

UK General

17%

Cont Europe General 7%

InternationalGeneral 6%

International Life 5%

70%Life* 30%

General

* Continuing operations. Life includes retail investment sales and health premiums* Continuing operations. Life includes retail investment sales and health premiums

Aviva: Great market positions

Depth not width

General insurance

Top 5UK

NetherlandsCanada

AustraliaNew Zealand

IrelandSingapore

Scale in chosen markets

Long term savingsTop 5

UKNetherlands

SpainIrelandPolandTurkey

Singapore

Top 10Italy

FranceAustralia