Aviva plc (AIVAF) CEO Amanda Blanc on Q4 2021 - Earnings Call Transcript

Aviva plc (OTCPK:AIVAF) Q4 2021 Earnings Conference Call March 2, 2022 3:30 AM ET

Company Participants

Amanda Blanc - Group Chief Executive Officer

Jason Windsor - Chief Financial Officer

Conference Call Participants

Ashik Musaddi - Morgan Stanley

Farooq Hanif - JPMorgan

Oliver Steel - Deutsche Bank

Blair Stewart - BofA

Andrew Crean - Autonomous Research

Larissa Van Deventer - Barclays

Greig Paterson - KBW

Will Hardcastle - UBS

Barrie Cornes - Panmure Gordon

Nasib Ahmed - UBS

Oliver Steel - Deutsche Bank

Unidentified Company Representative

All right. Good morning, everyone. Welcome to Aviva. Before we start the presentation some formalities, the usual disclaimer and forward-looking statements notice. In particular, I'll just draw your attention quickly to the bottom section of the slide, which covers the B share and illustrative consolidation ratio, both of which you'll be hearing more about during today's presentation.

And with that, I'd like to invite Amanda Blanc, our CEO up to the stage.

Amanda Blanc

Thank you, Rufus. Good morning, everyone. Thank you for joining us for our 2021 results presentation. So ahead of our positive update, I just wanted to acknowledge that today's results are obviously taking place against the backdrop of a great human tragedy in the Ukraine. And we know that everyone in the room and listeners will join us in hoping for a swift and peaceful end to the fighting there.

So for those of you in the room, I am delighted to finally see you in person I thought you only existed on those Zoom screens and actually since the first time I was appointed CEO now nearly two years ago. So a really, really big welcome to you. So what can you expect today? Firstly, I'm going to take a few minutes to update you on the strategic progress we're making and detail several important strategic updates.

Secondly, Jason will take you through the 2021 financial results and our capital management plans in greater detail. And lastly I'll talk to you about our ambitions and plans for the next phase of our strategy and why I believe that we're only just starting to realize the full potential of Aviva. We will then of course take your questions. So let's get started.

Since I was appointed Aviva's CEO, my entire focus has been on three priorities: focusing the portfolio, rebuilding the financial strength and transforming Aviva's performance. In the last 20 months, we've moved with conviction and pace and we've made tremendous progress on all fronts. Our success has been built upon our people. And before we get into the detail I would like to thank all of my colleagues across Aviva for their hard work, dedication and commitment, especially under the challenging circumstances of the COVID pandemic.

In recognition of that effort, we are giving each of our 22,000 employees £1000 in Aviva shares to say thank you. Aviva is now a much more focused stronger and higher-performing business. And I believe we've laid the foundations for the next phase of our strategy, which is delivering Aviva's promise.

I'll talk about where we go from here later this morning. But first I'd like to recap on the journey that we've been on starting with refocusing the portfolio. Over the past 12 months, we have completed eight disposals and collected £7.5 billion in proceeds. Aviva is now a much simpler business with market-leading propositions in our attractive core markets: the UK, Ireland and Canada. We have a very strong customer franchise, a diversified and highly complementary mix of businesses that serves all of our customers' needs and strong synergies in our model. And this means that we can now focus all of our efforts on targeted areas where we can win and profitably grow.

We've also bolstered our financial strength. The success of the disposals means that we've been able to rebuild our financial strength and deliver a substantial return of capital to shareholders. External debt was reduced by £1.9 billion, reducing our Solvency II leverage ratio to below 30% and lowering our debt costs by £100 million annually.

Our Solvency II cover ratio is above our 180% working level. And we have healthy center liquidity and attractive and sustainable cash generation from our core businesses supporting investment in growth opportunities. And today we are fulfilling our commitment to shareholders by announcing an increased total capital return of £4.75 billion. But it's the transformation of the performance that gets me really excited. We have excellent momentum across the board as you can see from this slide. Let me highlight a few facts and figures.

Aviva is growing and profitably. Life new business sales grew by 23%, driven in part by bulk purchase annuities with a record of £6.2 billion of volumes at robust margins. General Insurance premiums are up 6% and at the highest level for over a decade with a combined ratio of 92.9% including record premiums and profits in Canada this year.

Savings & Retirement net flows were up 17% exceeding £10 billion, which is a record for Aviva. Importantly, our customer franchise in the UK is growing, customer experience scores are improving and we continue to build on our position as the number one trusted insurance brand in the UK. And we aren't just bringing in more business. We're doing it in a much more efficient way than before. We have delivered a £244 million cost reduction and we've completed the actions to meet our £300 million commitment in 2022. And now we're going further. And we saw the beginning of the transformation in Aviva Investors with improved fund performance, increased external fund flows and a 7% reduction in the cost/income ratio.

Now all of this ultimately translated into cash generation, a 22% increase in cash remittances to £1.66 billion. And as you can see, the strategy is delivering results. We have a strong operating momentum within the businesses. And we're demonstrating areas that we have targeted and we are confident in the outlook for Aviva. This improved performance and successful execution of the strategy allows us to make four important announcements today: capital return, updated dividend policy, investment in the business and more ambitious targets.

Starting with the capital return to shareholders. Today, we are announcing a capital return of £4.75 billion, a figure well in excess of our original promise of at least £4 billion. This means that we will have returned the entire £7.5 billion of disposal proceeds through both debt reduction and capital returns, fulfilling the commitment that we made to our shareholders when we set out our intention to focus the portfolio. The £4.75 billion is comprised of £1 billion share buyback and which we announced in August last year and is due to complete this month and the additional £3.75 billion announced today. Jason will talk you through mechanics of this further distribution in more detail shortly. But we're moving ahead rapidly, targeting completion by the middle of the year subject to shareholder approval.

Moving on to our updated dividend policy. We are very confident in what we are doing and we want investors to share that confidence in Aviva's future and to have clarity on our dividend prospects. For 2021, we have declared a dividend of just over 22p per share up 5% year-on-year. Following the share consolidation, which will accompany the capital return, for 2022 we anticipate an illustrative dividend of around 31.5p per share, a step change increase of around 40% on 2021. For 2023, we anticipate an illustrative dividend of 33p per share and sustained low to mid single-digit growth in the dividend per share thereafter. Again, I will let Jason talk you through the nuances of the illustrative share consolidation ratio. But this is an attractive payout level. It gets all the best jobs. And crucially, we believe it is sustainable for the long-term. Moreover, surplus capital above our 180% solvency ratio which is not reinvested in the business is available for return to shareholders over time.

We are also making strategic investments in the business to ensure that we keep winning our performance and financial strength have allowed us to invest a further £200 million to support the next phase of cost reduction and £300 million to accelerate our organic growth plans. And I am really excited to announce the acquisition of Succession Wealth today for £385 million, which accelerates our ability to offer financial advice to six million of our workplace and individual pensions and savings customers. And it enhances Aviva's position in the UK's fast-growing UK wealth market. More on that later. Such has been the pace of our progress that we're able to make several important upgrades to our group targets. We're upgrading our cumulative cash remittances target to greater than £5.4 billion. We are announcing a new target of £1.5 billion Solvency II own funds generation by 2024, this is a key indicator of growth. And we're extending our cost saving target further to £750 million.

So, to conclude this section, 2021 was a year of strong progress and we now have the foundations in place for the next phase of our development; delivering on Aviva's promise. We have a unique position of market strength and a clear strategy deliverable plans to drive profitable growth and sustainable cash generation. You can already see this happening real-time in our results today.

With that let me now hand over to Jason who's going to take you through the detail of the results and our capital management approach.

Jason Windsor

Thanks Amanda and good morning everyone. I'm pleased to take you through what's been a really encouraging year with robust financial performance giving us momentum as we go into 2022. I'll start with a few words on some of the key numbers in today's update which reflect the excellent progress we've made in 2021.

First, cash remittances were up 22% to £1.66 billion. As such we're on track to achieve our target of greater than £5 billion of remittances over 2021 to 2023. Our year-end Solvency II position was obviously very strong at 244%.

Pro forma for the B share, the planned debt reduction and the acquisition of Succession Wealth, our Solvency II ratio will be 186%. Own funds generation was stable at £1.2 billion.

As Amanda just mentioned, we're announcing a new target for own funds generation of £1.5 billion per year by 2024. This demonstrates our ability to grow the business profitably. We continued to make very good progress on efficiency with costs down to £2.86 billion, which is an 8% reduction compared to our 2018 baseline.

Trading performance was excellent across Life and Savings and General Insurance. Life sales were up 23% driven by another year of significant growth in Savings & Retirement and another strong year for BPAs. Gross written premiums in General Insurance were up 6% to £8.8 billion.

Moving on to some of the detail now starting with cash generation. Our businesses delivered strong cash remittances up 22% and on track to meet the target we set last year. And today we're announcing a new target to deliver greater than £5.4 billion in cash remittances for the three years 2022 to 2024.

It's an ambitious target which reflects the confidence we have to grow the cash remittances from our businesses and the actions we're taking to transform performance across the group.

Our new target when combined with lower debt interest and lower head office costs will increase free cash flow supporting sustainable growth in dividends. Our Solvency II cover ratio on a shareholder basis increased from 202% to 244%. The increase was largely owing to disposal proceeds, as well as operating capital generation, and a little help from rising interest rates.

The 2021 year-end position of 244% is after the £1 billion share buyback £1.5 billion reduction in subordinated debt and around £830 million of dividend payments made last year. This strong position enables us to announce today the new £3.75 billion B Share Scheme.

We estimate the capital cover ratio would have been approximately 186% at year end 2021, allowing for the total shareholder return, the planned debt reduction, and also the acquisition of Succession Wealth.

And following engagement with the trustees, we've chosen to commit £75 million of funds to support our UK defined benefit pension schemes. In terms of cash, our £6.6 billion of center liquidity at the end of February would be around £1.7 million on a pro forma basis, slightly above our target level of around £1.5 billion. Our pro forma debt leverage will be 28% within our target range of below 30% after factoring in our planned £1 billion debt reduction, and indeed we've got £500 million of expensive debt maturing on April 21st.

Leverage remains in range when allowing for today's announced acquisition. On this forward-looking basis, we will continue to have significant financial flexibility. As a reminder, under our capital framework, we do consider capital above 180% over time as excess. Any such excess would be available for further return to shareholders, higher investment into the business, or indeed M&A, like the acquisition we announced this morning.

I'll now turn to today's dividend guidance. Our dividend strategy is to offer shareholders reliable growth in dividends built on the sustainable cash generation of the businesses. Our capacity for sustainable dividends is backed by our cash remittance target, which in turn is supported by the growth in own funds generation to £1.5 billion per year by 2024.

Today, we've announced a total dividend for 2021 of £0.2205, up 5% and equating to a cash cost for the full year of around £830 million. As you've already heard, we've also announced today a clear guidance on dividends for the next two years, reflecting our confidence in the outlook for Aviva.

For 2022 financial year, we estimate a dividend payment of approximately £870 million, which allowing for the share consolidation announced today is equivalent to a per-share amount of £0.315, which will be around 40% higher than this year's dividend per share. Please note, DPS is based on an illustrative consolidation ratio. The actual consolidation is expected to be published in April in the shareholder circular.

For 2023, we estimate growth of around 5% in the payment to approximately £915 million, which would be equivalent to a per-share amount of £0.33. Again DPS is based on illustrative share consolidation. Thereafter, we would expect low to mid-single-digit growth in dividends per share. These dividend amounts represent an attractive cash payout level, balanced against long-term sustainability.

And of course, the buildup of surplus capital of 180% gives potential for further shareholder returns over time. As mentioned earlier, we intend to pay out £3.75 billion to shareholders via B Share Scheme by midyear. Together with our £1 billion share buyback which is just over 88% complete the total £4.75 billion cash return is comfortably ahead of our promise to return at least £4 billion by the middle of 2022. The B Share Scheme is an appropriate mechanism to return capital following the disposals and it can be executed rapidly.

Let me now take a moment to highlight the key elements. First, this is of course subject to shareholder approval, which will be sorted at a general meeting on May 9th with full details to be set out in a circular in April, and as you'd expect subject to market conditions and the company's financial position not deteriorating materially. Under the proposed scheme, shareholders will receive one B share for each existing ordinary share.

The B shares will then be promptly redeemed. Shareholders will receive in cash around £1.01 for each existing share. The proposed share consolidation will take place at the same time with the aim of keeping the market price of Aviva shares at about the same level as just before the B share scheme.

An illustrative ratio for the consolidation is 75 new ordinary shares for 100 existing shares. The actual ratio will be published in the circular. So at this stage, with the strategy drawing to a close, we can completely focus on our performance and growth ambitions.

Turning now to cost savings, against our existing target of £300 million of cost reduction by the end of 2022, we've achieved £244 million, of cost savings in 2021. We've now delivered all of the actions required to meet that target. On top of this, we've also absorbed around £130 million of cost inflation since 2018 hence gross savings achieved to date are over £370 million.

Whilst this is considerable progress, we remain focused on improving our efficiency further and we are today announcing an upgraded cost target of £750 million, including inflation by 2024. Using our current inflation assumptions, this new target equates to a £400 million lower cost base against 2018, which is £100 million higher than our current target.

We expect implementation costs to achieve this target to be around £200 million, and to be incurred across 2022 and 2023. As a reminder, this is inclusive of absorbing the stranded costs following the divestments. This is an ambitious target, but we have a number of levers to deliver this like the further rationalization of products and further IT simplification.

I'll now turn to the business unit performance starting with UK & Ireland Life. Given we're covering a lot of ground today, I'll keep my comments on these market pages reasonably brief, and of course, I'm happy to answer questions after the presentation.

UK & Ireland Life has had a good year with evidence of improving performance across almost all of our key business lines. Importantly cash remittances have risen 21% to £1.2 billion. Headline own fund generation and profits are down in the period primarily as a result of two things; first, we had significantly lower benefits from one-offs and management actions than in 2020. The contribution from this line item for profit in the full year 2021 is positive £77 million in line with our guidance of £0 million to £200 million, but this is nearly a £400 million delta compared with the prior year of £469 million.

Secondly despite excellent trading and a healthy return on capital, which I'll come back to. Annuities was impacted by the lower spread environment when compared with the strong prior year.

I'll now take you through the key business lines starting with Savings & Retirement. It's been an excellent year for savings and retirement with profits and AUM up 24% and 19%, respectively. This really is one of our standout businesses, newly established just over five years ago and it's great to see it going from strength to strength. Over £5 billion of net inflows for each of adviser platform and workplace ensured the business reached an important milestone this year, achieving £10 billion of net inflows one-year earlier than our target. This is a result of having well-designed and reliable platform, excellent service levels and our very strong relationships with intermediaries.

Our ambition is to grow net flows by at least 10% a year over the next three years. Profits grew strongly in the period and we expect this to continue as we focus on efficiency and benefit from operating leverage as the platform asset base grows.

Next, Protection & Health, which Doug Brown and I showcased in November at our own focus event. Protection & Health is well-positioned capital generative with good growth prospects. Despite sales being slightly lower, strong margin improvement and experience drove a 13% increase in VNB to £188 million and a 21% increase in operating profit. Our aim is to grow the VNB of this business to help achieve the ambition of 5% to 7% per year increase in VNB across all of our Life businesses.

Moving on to Equities -- sorry, Annuities & Equity Release. As I mentioned, the low credit spread environment was a key factor in the lower VNB and the operating profit in the period for annuities. Importantly and as we indicated at Q3 we secured our reinsurance and purchased in Q4 around £850 million of good quality illiquid assets originated by Aviva Investors with significantly increased margins in the second half. Even after this, gilts and supers were 46% of assets backing new business for the year, compared to 21% in 2020 giving us much more optionality for the future. Consequently as I've repeatedly guided, margins remained the levels seen in previous years. We do continue to make a very healthy return on capital with IRR over 13%. BPA trading has been very strong with our highest level of sales on record with £6.2 billion of premiums written in 2021. This bodes well for the growth of this business and the long-term cash generation it will drive over time.

Turning to General Insurance now. We've seen strong profitable growth in 2021 in our GI business. Cash remittances were up 38% to £417 million and operating profit was up 52% to £762 million, driven by a combination of improved underlying performance and a reduction in COVID-19 related claims compared with the prior year. This was partly offset by lower levels of frequency benefits. Costs were down 5% across General Insurance, which is good progress.

Our COR was 92.9% a four-point improvement. Prior year development added 0.4% to the reported COR with a small release in the second half, following a small strengthening in the first. Whilst there are some manageable headwinds in these markets, we're confident in continuing to meet our ambition to achieve a combined ratio of below 94% across General Insurance going forward.

In the U.K., we had a very good year. Commercial line premiums were up 15%, while achieving an improvement in COR to 94.6%. Our January in-focus event showcased the strength of our proposition and our ambitions for the future. And these results are evidence of the great work that Adam, Nick Major and the team are all doing.

In personal lines, premiums are marginally lower down 2%. This is a good result given the backdrop of soft motor pricing and significantly lower levels of travel insurance in the year. Our launch of the Aviva brand on the price comparison websites has been a notable success, with an increase in premiums of 23% through this channel.

Combined ratio has risen 2% primarily due to lower frequency benefits. Canada had an exceptional year in 2021 not least with its highest level of premiums and highest profits on record. Commercial line premiums were up 10%, while delivering a combined ratio of 86.8%. We benefited from the favorable rate environment, high policy retention and our pivot toward mid-market is proving very successful. In personal lines, premiums were up 3%, despite rate reductions introduced earlier in the year in Ontario. And the combined ratio was a very healthy 92.6%.

Turning now to Aviva Investors, which has been through a lot of change in the past year under Mark Versey's new leadership. With a renewed focus on efficiency and our core strengths of real assets, infrastructure credit and sustainable equities it's starting to show results, but with much more to come. Operating profit was up 64% to £41 million with the cost/income ratio reduced seven points to 86%, although, we're targeting much further improvement here within an ambition to be lower than 75%.

External net flows improved to £3.3 billion in the year and 69% of funds under management were above the one-year benchmark for performance. So that concludes my business review.

In summary a really encouraging year. We've completed our disposal program, we've repaid debt and we're delivering on our promise to shareholders to return £4.75 billion of capital. We made excellent operational progress in 2021 and financial performance is encouraging giving us momentum as we move into 2022. And this has put us in a strong and confident position able to give you clear guidance on dividend outlook.

And with that, thank you and back to you Amanda.

Amanda Blanc

Okay. So having completed the refocus of the portfolio and improved the financial strength of Aviva, what I'd now like to talk about is our strategy about the very significant opportunities and plans we have to grow our business profitably and about why I'm certain we can and will deliver on Aviva's promise. So we have the right strategy. We have built it around customers and their needs and their challenges.

We've been working at pace to execute on four strategic priorities: growth, customer, efficiency and sustainability. And I think we're making really good progress on all fronts, but we are only just getting started. And the progress we've made has given us so many more opportunities to go after.

Firstly, let me start with growth, and how we are building on a unique position of market strength. Aviva combines market-leading positions across every one of our business lines insurance, wealth and retirement with strong synergies in our model that are the source of real competitive advantage. Each of our business lines plays a crucial role.

Our insurance and wealth businesses are our customer acquisition engines, fueling our top line growth and enhancing our returns. Our BPA business drives our long-term cash generation, while our heritage business provides a rich theme of customer opportunities for our wealth and retirement businesses, as well as supporting our dividend policy. The clear synergies within our model are a real source of competitive advantage.

We can deliver more value to our customers with our outstanding brand, distribution strength, great product and customer engagement and service. We can do it more efficiently through our scale, our shared capabilities, the people and investments and we can capture more of our value chain with our in-house asset manager Aviva Investors. And we realized a substantial benefit from diversification in our portfolio £2 billion in capital benefit alone. These are attractive growth opportunities across all of our markets.

In Wealth, we see a £1.6 trillion market opportunity growing to £2.1 trillion in 2024 that we are playing into with our workplace and our individual Wealth businesses. In Insurance we're in a desirable and growing market and operating in the most attractive market segments in those markets. And Retirement is another area where our aging population naturally leads to a growing need for retirement solutions for both corporates and individuals.

Aviva's -- position and model is truly unique. We have a tremendous asset and a platform for which we can successfully expand and develop further. My first priority area is targeted growth and as you will see we have ambitious, but deliverable plans. The Wealth business is central to our growth ambition. We're building an integrated wealth offering, which I'll talk about in more detail on the next slide. We continue to work and grow our workplace pension business adding over 200,000 new customers to the Aviva franchise every year.

We're investing to further enhance the leading Master Trust proposition to make the most of this £460 billion market growth opportunity and we are seeing some of the strongest flows in the market onto our advisory platform.

A final point to note as you can see on this slide we are renaming our Savings & Retirement business, Wealth. We believe this is better aligned to our ambition and how the business is growing.

Aviva investors and our UK Life business are working so closely together to drive growth in BPA wealth and external funds with our award-winning real asset origination capabilities and a leading suite of climate transition and ESG funds. And we will continue to participate at scale in the UK BPA market.

And of course, profitably growing our Insurance business is a critical priority. We've outlined our growth plans in UK Commercial, in GI, and in Protection & Health businesses during our recent in-focus sessions, which I hope you all enjoyed. I won't repeat those here except to say that we are also going after attractive growth opportunities in UK retail personal and high net worth segments where we have added capabilities with digital innovation and the AXA XL high net worth acquisition.

And in Canada, we are focused on growing personal lines through digital direct and accelerating growth in our commercial lines in mid-market and the much larger multinational business. And as I've said earlier, we're investing £300 million, £100 million a year for a £100 million operating profit in 2025.

Coming back to Wealth. This is an exciting opportunity for Aviva and an area where we can really drive the growth of the group and now is the right time for us to go after it.

We have a clear vision. We've been working to develop a truly differentiated Wealth offering for our customers that meets their needs across all of their life stages, provide them with a full range of solutions from pensions to investments and retirement; and full flexibility around advice from guidance to hybrid to full advice.

This offering plays to Aviva's unique strength as a customer company with over 6 million customer base, customer acquisition engine, and real scale opportunities. We have so many components in place already; our market-leading workplace pensions, our advisory platform; retirement solutions; and the award-winning Wealthify proposition for early savers, but there are still some gaps that we need to fill.

And with this in mind, we're ambitious about the growth potential in this space. We have £150 billion of assets under management today and our aim is for double-digit growth in net fund flows going forward. So, we're moving at pace to build out the required capabilities and I'm so delighted this morning to be announcing the acquisition of Succession Wealth.

Succession Wealth is a leading national independent advice firm of 200 planners that offers high-quality financial advice to 19,000 clients with a £9.5 billion worth of assets and has a track record of consolidating advice firms and delivering improved customer outcomes. There is a strong strategic rationale for this acquisition.

The addition of Succession Wealth will allow us to better support the six million of our workplace pension and individual pension customers as they go through critical life decisions such as the transition to retirement and to recapture a material part of the £6 billion of annual maturing outflows from our heritage and workplace business.

And combined with our existing market-leading investment management and platform capabilities, we'll now have a stronger proposition for Succession Wealth's own existing customers. We're expecting a double-digit return on our investment over the medium-term through accelerated growth.

Succession's highly experienced incredible management team will continue to run and grow the business working closely with our Wealth colleagues. And I'm really looking forward to welcoming James and the team to the Aviva Group.

Turning next to customers. Customers are at the heart of what we do. That's really easy to say, but our customers truly are central to our strategy, and this is what sets us apart from our competitors and gives us such confidence. We work hard to deliver on our customers' expectations.

And we have in our armory a trusted brand that stands behind its promises; transparent products at fair prices; excellent services and support in the critical times such as the recent storms; easy omni-channel access digital phone, face-to-face strong intermediary relationships; and we are acting in a sustainable and ethical way.

Therefore, my second priority is to ensure that Aviva consistently does more to deliver an outstanding customer experience and innovation to customers. Digital experience is central to our customer engagement strategy and how we bring the full breadth of Aviva's products and services to all of our customers, what I like to call One Aviva. And it is increasingly how our customers want to interact with us.

We're already making great progress here. For example, six million of our customers are registered on MyAviva today, and our ambition is to get to more than eight million by 2024. Today nearly 70% of our direct sales are completed online and we aspire to get that to 85%. However, there are some areas that we need to improve.

We know that self-service capability improves customer satisfaction and drive down costs at the same time. And we know that a more intuitive mobile app experience opens up easier and more efficient customer purchasing. Today nearly 50% of our customers indicate that they are satisfied with our self-service capability but that's not good enough. Our ambition is to take that to 70% satisfaction by 2024.

So, as part of our growth investment, we are investing here in particular to fix, to connect and to enhance our digital customer journeys. And most importantly, as you can see on the right, we are building engaging mobile experience and services and we are harnessing data to deliver compelling richer and more personalized engagement. Ultimately, better experience will drive customer NPS, which will drive product holdings.

Innovation is also critical to sustaining our relevance to our customers over time as their needs and technology evolved. I'm really pleased with our progress over the last 12 months and we've got a new three-pronged approach. We are building and scaling up new propositions at pace.

We're testing a new idea every week. We're partnering with fintechs and insurtechs to build the next-generation businesses and tap into future profit pools. And we invest directly into the start-up ecosystem to bring learnings back into the core organization. We've got some real great successes here.

You've all heard me talk about Wealthify, which is the award-winning robo-advisor that is doubling its AUM every six to nine months and is expected to reach £1 billion of AUM by the end of the year.

Another great example is Aviva Zero, just launched last week, a new proposition and a platform that has been built and launched in under six months. Aviva Zero is the new green proposition in the UK motor market with in-built carbon offset that uses our data capabilities to deliver a step change in customer experience and costs. I'm really excited about its potential to be a source of future growth for us.

The third priority area I would like to talk about is efficiency. We will maximize our growth opportunities when we operate at top quartile efficiency. We've made excellent progress on our cost targets, which has been underpinned by strong momentum on levers such as IT simplification and the rationalization of our product suite. There is clearly more to go after. No area of Aviva is out of scope.

We have real ambition for the next couple of years and we are investing £200 million to complete our cost reduction program. One area I would like to highlight today is the reduction in our property footprint. We have already exceeded our original aim of a 30% reduction and I am delighted to announce that we will be moving our headquarters to 80 Fenchurch Street, over the course of 2023. This will deliver a 47% reduction in our head office footprint, significant cost savings and an improvement in carbon footprint.

And I've been asked many times what I mean by top quartile efficiency. This slide gives you a feel of how we think about it for each business, what we're aiming for and what we are doing. As you can see we are not there yet. But we have made some progress in 2021 and some good progress and our plans are in place to achieve this ambition by 2024. Much of the improvement will be driven by cost reduction as we fully implement the changes to our operating model continue to simplify digitize and automate our business and of course optimize outsourcing. But also as we grow our business with a great leverage of scale and cost discipline, our productivity will improve. The bottom line is that my management team and I are laser-focused on cost and we will deliver here.

Finally my fourth priority area is sustainability. Our customers are increasingly demanding the company's act in a sustainable and ethical way. Aviva has a powerful 30-year sustainability heritage and I am determined that we will continue to lead UK financial services on sustainability.

We were the first major insurer globally to commit to being net zero by 2040, across our operations, the supply chain, underwriting and investment. And of course, sustainability is more than climate action. We play our part in building stronger more resilient communities for example. We are investing £10 billion in UK infrastructure and real estate. We are committed to reinvesting 2% of our profits into the communities in the UK, Ireland and Canada. We are changing the way we do business and using our influence to encourage others to do the same.

So far, we have deployed £7.6 billion into green assets and a further £783 million into sustainable transition loans. We played a leading role at COP26 and we were a founding partner of the Net-Zero Insurance Alliance, which was launched last July. We're aligning our underwriting and investment policies to our climate transition plan. And we are working to offer more of our simple ESG choices to our customers, such as Aviva Zero or our award-winning ESG fund propositions. And there is much more still to do.

So to conclude, we have made rapid and substantial progress and built the foundations for the next phase of our strategy. We have built significant momentum and our strategic execution is delivering results. From this platform, we have been able to return substantial capital to our shareholders, put in place an attractive and sustainable dividend policy and also invest strategically in the business. We have upgraded our financial targets for growth, cost and cash generation. And we believe our plan represents a compelling investment case for Aviva.

We have done what we said we would do. And while we take satisfaction in that, we know we are only just getting settled into our stride. We are only just beginning to exploit the rich theme of growth opportunities that are available to us. We are only just starting to reap the potential benefits of our investments and we are only just beginning to accelerate our performance. We have the strategy, we have the leadership and we have the people in place to deliver on our promise and fulfill this potential that we all know Aviva have.

Now it's time to take your questions. If Jason and Rufus [ph] could please join me on the stage. Thank you.

Question-and-Answer Session

A - Unidentified Company Representative

All right. If you could just wait for microphone to come and then just state your name and institution as usual. So let's start with Ashik.

Ashik Musaddi

Thank you. Good morning. Amanda, good morning. Jason, this is Ashik Musaddi from Morgan Stanley. Just a couple of questions I have is I mean, first of all, is on the cash plan. I mean clearly you have upgraded the cash £5.4 billion which kind of implies that annually as well the £1.3 billion net number that you had given would be higher as well. And that compares with your dividend cost of say around £900 million.

So that leaves like £600 million -- £500 million, £600 million. I can clearly see you have plans to put money at work for organic growth some inorganic growth. But any thought process -- might be a bit early I agree. It's still early for talking about that £500 million, £600 million. But any thought process how you're thinking about that extra cash you'll be generating.

The second thing is you're going closer to 180% which has been your stated target in past, but we are in a tough world at the moment although the risk is a bit more centered around Central/Eastern Europe not here at the moment, but you never know when the risk overflows as well. So how do you think about this 180%? I mean are you taking any, sort of, positive expectation that the UK regulatory change that is coming through because of Solvency II review is going to benefit your 180% you'll be about 200%. So that -- are you taking those things into benefit, or are you just sticking with the original plan of 180% ignoring anything else at this point?

And just one last question. I mean the £300 million you're saying that you'll be investing in growth gives you £100 million of extra profit. Clearly you have laid out reasonable strategies et cetera, but -- what will be the biggest chunk of that operating profit gearing basically on that £300 million investment because clearly I mean it's a big 33% return on investment on that £300 million so that's how I'm thinking? Thank you.

Amanda Blanc

Okay. Thank you for that. So we'll start with the last question and we work backwards from there. So on the £300 million in the growth investments so I think the way we're looking at this is right across the group Ashik. So there's no one silver bullet which means that if we just do that we'll deliver the £100 million profit. So the significant investments will be in the Wealth businesses. So in things like the Master Trust proposition looking at direct savings and the opportunities that exist there; accelerating our growth in UK GI.

So Adam's here and we've invested in Aviva Zero, which we launched last week; supporting the BPA growth which we continue to see there will be opportunities in that growth as we move forward; there's a digital direct proposition in Canada; and enhancing our digital customer experience which will in turn lead to more products per customer.

So I think the way you should look at this is it's pretty sort of good risk management. We're not saying that we have to deliver one thing to deliver that £100 million of profit. We basically outlined and what we try to do on the slides because of course it's really easy to put it on the slides.

We wanted to show you what the actual projects were. So when you get a chance to go back and you look at the slide on the left-hand side of the slide you'll see exactly what each of the projects are in that growth space. And obviously we've not broken down the individual investments which I'm sure you'd like us to do but we're not going to do that so that and -- to give you the confidence that that's what we've planned for.

On the 180% target and the sort of consequences of what's going on externally look I think today we've given you the pro forma following the acquisition of Succession Wealth. We've returned a good chunk of money to shareholders at £4.75 billion. We've also shown we want to invest in the business. And we want to allow ourselves flexibility to do things like -- as we've done with the growth investment and the M&A of Succession Wealth.

So I think that we've got clear plans in place. We've also said that the capital framework is set and if over time there is excess capital that isn't going to be invested in the business that we will return that to shareholders. But I think it's just too soon to be able to say that bearing in mind the environment in which we're operating and all of the announcements that we've made and committed to today.

On Solvency II review we've not built that into the plan. Of course, we don't know what the details of that are yet. Obviously, we are really encouraged by the John Glen announcement last week. We've been working really hard on that and I can see Hugh Francis sitting here who's done a fantastic job on that.

We were pleased with the risk margin announcement. There's more uncertainty around the matching adjustment, but it's more positive than it was. So I think we came away from last week feeling sort of encouraged about that and we will wait to see the detail. On your first question Jason did you want to pick that up?

Jason Windsor

Sure. You're right. The cash flow target which is upgraded does give us more flexibility and then part of that is to create some opportunity to invest and Amanda's outlined some of that. Some of that will come from the balance sheet which is very strong. We'd come into this with significant cash. We've also got some opportunities to reinvest that once we've got the capital and the cash generated gives us some choices and I think we can -- we set out the framework for that.

Unidentified Company Representative

Okay. Next question Farooq.

Farooq Hanif

Farooq Hanif from JPMorgan. Firstly, on Aviva Investors if you are given the ability to widen what kind of assets -- illiquid assets you can invest in towards let's say the more optimistic end of whatever it is that John Glen said. What's the scale of ambition in terms of illiquids and real assets in Aviva Investors? And will you also be looking to isolate a principal capital unit within that which is where you're originating that we can see separately?

Secondly on Succession Wealth. You mentioned it's been an IFA consolidator. Is that also going to be part of the strategy going forward? And in the when you're capturing the GBP 6 billion of outflows from workplace and heritage how are you going to physically do that? Is it simply just making sure you reach all the customers? Are you targeting a certain base? If you could talk a little bit more about how you capture that.

Amanda Blanc

Okay. I'll pick up the second one. Jason if you want to pick up the point on the illiquids?

Jason Windsor

Sure. The Treasury's review as Amanda said is a welcome development and it took out some of the more downside scenarios the PRA have been exploring earlier or just at the back end of last year. We're not fully sure as to exactly what it means but it does give us choices. Mark and his team have set up great capability in the UK to invest across a whole suite of different green and other infrastructure type assets. And we have got flexibility and we have some sort of seeds of ideas around what we can do if it could become broader both on the balance sheet, but also potentially into the DC schemes and I think that could be interesting. I think no one quite knows how to do that but actually accessing the DC scheme is another potential leg up in our ability to invest into the longer-term asset base.

Amanda Blanc

On Succession Wealth so first of all, I think it is a fantastic business and we're sort of super excited that the team are joining us. And yes, they will continue with their strategy of consolidation because that's an important part of what they do. But for us absolutely critical is each year as we've said many times, we lose GBP 6 billion of AUM of customers that come to the end of their natural product. And they would quite often say can you give me some advice on what I should now do and we are not in a position to be able to do that at scale.

And so they go and we know there's a significant number of them will go elsewhere and they would take advice before they buy the next product. Now what we have and we've worked very hard over the last few months is looking at the product and the process that we would put in place to be able to capture more of that -- of those assets that leave us so that we can bring them and keep them in Aviva as well as of course the 6 million existing Aviva customers that we have the opportunity to sell to. So, we think there's a sort of multifaceted opportunity with Succession Wealth and we are pretty excited about this. And the fact that it's a wholly owned part of Aviva means that we can work really closely with that team.

Unidentified Company Representative

Okay. Oliver?

Oliver Steel

Thank you. Oliver Steel, Deutsche Bank. So three questions. The first is I mean you say that this GBP 500 million GBP 600 million of excess cash remittance excess cash generation each year gives you sort of flexibility. But I wonder if you can just give us a bit more of an outline as to where you see the gaps that might require M&A? And then within that how much Succession Wealth might actually use up, if it's going to continue to consolidate?

And then a couple of slightly more detailed questions on the targets or the ambitions which you're setting. First is on the GI combined ratio. So you beat the 94% target very, very comfortably in 2021. You've got something like three points of cost savings coming through across the UK and Canadian GI, but you're not really changing that 94% combined ratio targets. So what's going against you in that target? And then secondly, on the Annuity new business profit. You admitted that 2021 was a low margin, but you've only got 5% to 7% growth targeted for the next few years?

Amanda Blanc

Okay. Thank you. I'll pick up the first one of those. And Jason, if you can pick up the second and third. On the excess and the flexibility, the gaps that might require M&A actually you will have seen from the slide that we put up there that we don't really have many gaps in our offering. We're in a fantastic position and that's why we're quite excited about the future, Oliver. So we don't really think there are any glaring gaps. The one that there was, was really scale in the advice and I think we have filled that with the acquisition this morning. And in terms of how much of the £500 million will be used by Succession Wealth, we're not going to talk about how much budget we're giving them for M&A. Clearly, there will be a high bar for any M&A that they do and that will have to meet the required returns, and I think they've proven that they can do that and they will continue to do that. But they've been a consolidator of small IFA businesses around the country and we wouldn't think that the footprint of that consolidation would change. It would be that type of business that they would be buying. Jason?

Jason Windsor

Yeah. I could probably say on that, it's likely to be within the envelope of their own profitability to give you some measure of the sort of scale that that's likely to be. On the combined ratio, yes, it's less or better than 94%. So we've not sort of said that that's the pure target. I think there is some opportunity to improve. The UK was slightly above though, this year kind of slightly below. I think you -- we don't think Canada that's a sustainable level of combined ratio and Canada wasn't particularly strong 2021. So as we put that together, we see some tailwinds from as you say from cost reduction continued strong performance in commercial personal lines. And there's still all to play for I think with plenty of opportunity for us in UK personal lines to do better.

Amanda Blanc

Annuity margins?

Jason Windsor

On Annuity margins, I think actually 2021 is not a bad level of margin to think about projecting forward from around 3.6% I think VNB margin. We manage it to produce a return on capital. Obviously, we had a high allocation to gilts, which therefore requires less capital to write the business, but obviously less margin as well at the same time, so you can manage your overall capital is our primary way that we allocate and we drive pricing in that area. We'll see some -- spreads have widened in the last five days or so. So who knows exactly where they'll settle? But I think something around that sort of 3.5% possibly slightly better than that margin and then delivering something around low-teens IRR is the way that we've configured the business.

Unidentified Company Representative

Okay. Next question Blair?

Blair Stewart

Thanks very much. This is Blair Stewart from BofA. A couple of questions. The Succession deal looks very much like a strategic acquisition and a good one at that, but it's certainly not a financial acquisition at least on the face of it. So how do you weigh up the strategic versus the financial, given that buying your own shares back would give you a 15% return at least given the valuation. Just coming back to that question about residual cash, I guess. And then you've said that you don't think there's any other major gaps in your -- in what needs to be done which it does suggest that shareholders should be looking for more capital to be returned, correct me if I'm wrong?

Second question is just on the Annuity side. I'm slightly surprised with some of your comments Jason that I would have thought that two-thirds investment in gilts was a little bit disappointing and below what you would normally target. Does that reflect a new view on the correct asset allocation for annuities, or is it an inability or weakness on the asset origination side that you can look to improve on? So I think just coming back to the question earlier, why is the Annuity side not going to improve from here?

And finally, maybe some comments on the initial impressions and observations of the U.K. P&C market post the FCA review and what's going on with the various pricing in motor and home. Thank you very much.

Amanda Blanc

Okay. Thanks for that. I'll pick up one and three, and Jason can pick up the point on annuity. So I think you said strategic and not financial, look, it's our job to look for the strategic opportunities that exist for the medium to long-term of this business. And when we look at advice capability, and we look at the wealth market, and we look at the AUM that we are losing each year, because we cannot give that advice capability, it is clearly a gap that we need to fill.

And what you see here is the financial metrics of the deal. What you don't see is, I guess, the other side of the equation, which is the benefit that it's going to give Aviva over time. And we will, as we've always done come back to you as we are sort of proving what we do. But we really believe that our customers need this whether it's a sort of hybrid advice capability, or a full advice capability and we will build upon that. We believe our customers need and want that. And we believe that as allowing those customers to go to other platforms to go to other places to buy those products, when we are perfectly capable of doing it is a miss strategically for us. So that's a really important thing.

I think the other thing to note is that currently on the platform we play in the sort of low margin end of it. This will allow us to take higher margin. So that's the bit that's sort of not factored into the overall when you're looking at just the pure financial price of the deal. So this is us thinking about the future the medium to long-term of Aviva. And I think your point around therefore, there's no other major gaps and more capital to be returned, we've said and I think we've been clear about the capital framework, we will return excess capital if we believe we can't invest it well. And we continue -- we reaffirm that commitment. We affirmed it on stage. We're reaffirming it now. But also we do see opportunities to invest in the business, as we've shown you this morning. It's our job to do that right, find the right opportunities and deliver a good investment and we need to prove then that we can deliver that good investment.

On U.K. P&C post the financial -- post the pricing there was a lot of Ps in there post the pricing practices. Actually relatively calm. I think we spoke a lot last year, so many questions when we did these sort of sessions would be, there would be so much thrown up into the air and who knows what the outcome would be. And I think we always said that Aviva felt we were in a very strong position, because of our brand positioning and that has proven to be the case. We've seen retention levels improved, of course, we've seen the new business prices go up, renewal prices go down in the market generally.

But for us, we feel like -- we've executed it well and sort of looking at the team in the room that have done that I think we've executed it well. And I think we feel quite confident now about how we look forward post pricing practices. And we've always welcomed that review. Jason?

Jason Windsor

So on the annuity side, I don't -- I think, you said two-thirds. I said 46% of the assets for. So backward I noticed. Other way around.

Amanda Blanc

It was just a test.

Jason Windsor

You're doing more math. But I think just on that the constraint is only really quality and value on the public side. We didn't see much value in corporate bonds in 2021 with the spread side. On the illiquid side actually, it's a pretty good performance. We're pleased with that and that's a strength to build on. And Mark and his team have got lots of great plans for the future. So I don't think there's any real constraints there, but obviously, it's a lot of work to continually produce that sort of level year after year.

Unidentified Company Representative

Okay. Andrew?

Andrew Crean

Hi. It's Andrew Crean from Autonomous. Three questions if I can. Firstly, have you got any comments on how IFRS 17 may shake down? Obviously, there'll be initial comments. Secondly, I noticed your Solvency II ROE target. You've changed the basis of it, which adds about 2, 2.5 points to your return, but you haven't changed the 12% target. Could you talk a bit about that?

And then thirdly we've talked a bit about bolt-on M&A, but what about transformation? Are you happy with the balance of your business? I'm thinking particularly the very heavy load of life versus property casualty. And even within life the heavy balance of IFA platform versus D2C, whether you would as a firm consider changing the balance through transformational M&A?

Amanda Blanc

Okay. Thanks, Andrew. Those first two questions seem perfect for Jason.

Jason Windsor

Sure. So on IFRS 17, I think we've committed towards what I've said verbally for the last year, but we've shied away from numbers, we're not quite ready to provide reliable estimates to the impact. So our comments around the implementation of IFRS 17, it's a huge program. It's actually in a pretty good place. But we do expect the annuity profit recognition to be very different, and that will impact the NAV. It will create this big CSM and it will also impact the level of new business profitability going forward.

No impact to the targets, cash and capital and targets across the organization. We don't expect it to be impacted by that. You'll hear more from us on that later in the year. On the ROE target, yeah, we looked at that. When we set it up, we had a much different group with obviously France and Singapore and Poland and lots of other things. So we also found that managing the ROE target with the challenges of TMTP amortization transitionals for those of you that don't follow that is actually really very difficult. The way that, the reset mechanism works. So we try to look through that and say how much capital is real capital, but the actual year-on-year movement in that is really very difficult for us to manage, so we knock that out. We're putting a charge for that capital, it's real capital into the ROE and that rebalances and shows a smoother way that that actually develops.

The calibration of the target is largely reflecting just the higher weight into UK Life. Put simply, UK Life is as everybody knows a slightly lower return-on-capital business. So I still think the greater than 12% ambition from 10.7% that we hit in 2021 is actually showing – shows progress across the group.

Amanda Blanc

On the M&A and transformational M&A, I think that hopefully what you've taken from this morning is that we're really focused on transforming the performance of the business that we have that we – and this is largely going to be an organic strategy. We filled the capability gap with Succession Wealth and we really feel that that is going to enhance our capabilities further. And there's always going to be a real high bar for M&A investment. And so Andrew, we're just really focused on delivering the performance of the business that we have today.

Unidentified Company Representative

Okay. Next question. Larissa is that you? Okay. My eyesight is not quite good enough.

Larissa Van Deventer

Larissa Van Deventer from Barclays. I want to revert back to the comments you made on bulk annuities please, and three questions in that regard. The first one, you mentioned bulk annuities as a potential area for growth. Is that something you would consider doing increasingly more capital allocation towards? Second one is, you mentioned optimism about the current situation of bulks. Can you comment on the pipeline, and specifically, if you consider 2021 to be representative at about £30 billion in the market or whether you think there's potential for growth? And then related to that, do you foresee margin compression in the space with it becoming increasingly competitive, or do you believe that I believe it's a 3.5% margin you mentioned is sustainable?

Amanda Blanc

Jason?

Jason Windsor

So, yes, we would allocate more capital, if we could get the return. We do see that, as a growth segment for us. It's unlikely to double, right? We are moderating. We don't want to become a pure BPA business, but we see that as an opportunity to grow. We see the market growing. I haven't got the final figures to where the market was this year, but it was slightly lower. I think if it grew to sort of £35 billion-plus to £50 billion within the year that would actually relieve some of the margin pressure. It has been – it is more competitive today than it was in 2016, I think everybody knows that, partly because of volumes partly probably, because more people going after it. We're still making a very healthy return on it, and managing that as I said a moment ago to the question managing that conundrum between capital assets and actual liability pricing is something that we do very intensively. But we make a good – we make a really good return on it and it continues to provide a really good source of profit and cash growth into the future.

Unidentified Company Representative

Greig?

Greig Paterson

Good morning, everyone. Greig Paterson, KBW. Three questions. One is inflation assumptions on your DB scheme and your annuity. Did you change the long-term expectation assumptions? And if not, is there a possibility of that happening in 2022 causing a headwind to Solvency II? Question one. Second one is, just can you elaborate Jason on you said, there was an injection into the DB scheme that's going to create a headwind to Solvency II. I wonder if you could just sort of quantify what that is. And as a third point, in terms of your acquisition of the IFA network and that it's an acquisitive network. I was wondering if you have a budget for it acquiring further IFAs and what that would be.

Amanda Blanc

Jason?

Jason Windsor

Okay. On the -- I think your first question was inflation assumptions. I mean we mark-to-market our assumptions all the time, I'm staring at my Chief Capital Officer in the front row. But we do it all the time each period. We have an active process to do that. On the DB scheme with the government changing from RPI to CPI, not the other way around, that's been a hot debate around the way to actually bring that in by 2030. But we made that choice and that cost us quite a bit in 2020. We are up with events on inflation. Of course, like many, we don't know what it will be near term but our longer-term expectation is it to return more to trend.

On the DB scheme itself, we haven't actually had to put money into it formally. We are providing support through a contingent capital amount of £75 million, as I said. That's the sort of thing people do when you do big capital returns and it just sort of made sense. The fund is really well funded and you can see that from the IAS position. You can see it from any basis that you look at. This is an extremely well-funded scheme, which is one reason why it's able to sort of periodically enter into buyouts.

Amanda Blanc

And on Succession Wealth M&A, I think we sort of answered the question earlier. We would see them continuing to -- the consolidation within the market as they have been doing and the same sort of type of deals that they have been doing. And yes, there is a budget for that but we won't tell you what -- exactly what that budget is. We don't spill it.

Greig Paterson

Smallish?

Amanda Blanc

Yes. No, no, no. They buy small IFA businesses across the country.

Jason Windsor

Yes. I'd just point out to what I said earlier. The envelope of their P&L, we're not looking to commit another £300 million £400 million. It would be little bolt-ons of teams and small firms.

Unidentified Company Representative

Okay. Next Will?

Will Hardcastle

Thanks. Will Hardcastle, UBS. Two or three questions on the P&C side. Chiefly first of all just on the year-to-date reforms and pricing that we've seen, are you able to give us any quantification on yours and whether that's you gain or lose market share?

Secondly, inflation was touched on there quickly but how are we seeing it on the P&C side, more thinking about the back book moves on the PYD. Did anything change for inflation this time around?

And thirdly, just thinking about the trade-off here, we've had higher investment yields. You've got getting cost saves coming through on P&C. How should we think about the trade-off between even better combined ratio prints versus the ability to put the foot down on growth a little bit and the trade-off at a sub 94% return on capital -- sorry sub 94% combined ratio on a return on capital basis. Thanks.

Amanda Blanc

Yes. Okay. In terms of the year-to-date performance on pricing is that what you asked Will?

Will Hardcastle

Yes. That's right.

Amanda Blanc

Yes. So I mean obviously, we've seen motor rates come down last year. But I think the most recent indication is there's a start of an increase because people are building in inflation. You would expect that to be the case. We talked a little bit about our own inflation experience. We're able to manage that through the fact that we have the Solus motor repair network, which is the second largest network in the country that really helps.

But the great thing about General Insurance, of course, is you can keep pricing you can price continuously. So, as you're seeing inflation trends coming through, the team are pricing in those inflation trends. So we would expect to continue to do that as we go through the year.

On the higher investment yields and would we put our foot down on growth. So, I think that the growth that we've seen has been balanced sort of fairly equally between the rating and new business. And where we price for new business, we're very confident about the technical price for that business.

And I'm looking at Nick Major, who's sort of sat in the audience because most of our growth has come from commercial lines. Because the market has been particularly hard as you know, and because of our really strong distribution capability and our position with brokers, in effect we are able to choose quality and be able to select risks and we will continue to do that.

We would never ever in General Insurance, just to be clear, drive growth over profit. That would just be crazy. And we know that -- we know the consequences of doing that would be significant.

So when we talk about growth in the Savings & Retirement business, where we're opening the jaws of the platform, it's very different to saying to the GI guys, go for it. That's not what we would do. We would be very careful -- we're very careful about the segments in which we operate in and then the technical pricing that sits around that.

And, of course, our own risk management capabilities that sit around that. So, Adam and the team are really, really clear. So we would never be putting them under pressure to grow particularly if we don't need to.

Unidentified Company Representative

Barrie?

Barrie Cornes

Morning. It's Barrie Cornes from Panmure Gordon. Just a couple of questions for me please. First of all, I just wondered how sustainable do you think the Canadian commercial combined is? It's obviously a very strong performance.

And the second question I had was in terms of the cost reduction program that you talked about this morning, the increase is auguring well, but you have faced some criticism on service levels. I just wondered how you feel you can maintain or improve service levels with cost reduction program in place.

Amanda Blanc

Okay. Jason do you want to pick up Canada and I pick up the service levels?

Jason Windsor

I mean, as I said, Canada had an exceptional year, 86.8%, I think, and commercial was a strong year. I didn't think that is a combined ratio that you can bake in across the entire period. Having said that, rate strength remains good, keeps coming through.

And inflationary pressures in Canada are not probably as high as we see here in the UK. So we still continue to expect Canada commercial to have a very good 2022, but perhaps not quite at that level across the board.

Amanda Blanc

On the cost reduction program. So this, of course, is a fine balance. So where -- the cost reduction program is not all about people coming out. I mean, I think it's really important to say that, that's about 50% of the cost reduction so far. But we've also taken a significant amount of cost out of our property portfolio, we showed you that.

We're reducing our IT estate. And of course, as we reduce the number of old platforms and systems that we have, they're much cheaper to run than -- sorry, the new platforms are much cheaper to run than those old platforms which are going out of service. So we are moving on to more modern technology.

The other point around service levels is, we've seen through the pandemic and we've seen generally that customers are much more prepared to self-service on certain points. So if we can digitize our customer journeys and we have a target to digitize from 51%, which is where we are today, to 75%, then we can take a lot of that service pressure away from our colleagues in the operations, so that they can focus on the customer interactions that really matter.

And the simple interactions can be done by customers themselves or by intermediaries and we have a connect platform for brokers and the app for our direct customers. So I think it's -- there's no one answer as ever with cost reduction.

It's about digitizing, automating, simplifying the business, moving on to more modern technology and we believe that that will come up with a good result for our customers. And our NPS scores Barrie are at 43. It's quite a positive score and hopefully, everybody appreciates that.

Unidentified Company Representative

Okay. Nasib?

Nasib Ahmed

Nasib Ahmed from UBS. Sorry, we're double teaming here. I've got my questions. So just on the Wealth business and including Succession Wealth, can you give a bit more color on the margins? I know, it's going to depend on the level of advice our customers are taking, but just the average margins and how they compare to peers.

And then secondly, just following up on the Aviva Investors questions. How does your capability compare to peers? And also, I noticed the Allianz sort of partnership of investing in real assets in London and that seems like an asset in development, which probably isn't funded by the annuity scheme. So is that eventually sort of a manufacturing of assets to go into the annuity scheme? And have you done these sorts of asset investments before. Thank you.

Amanda Blanc

Okay. Jason, you have to pick those up.

Jason Windsor

Sure. So the Succession margins, we've given you an EBITDA figure in the 2022, pro forma figure for the actions that we expect them to take, which is good progress. I couldn't tell you how it benchmarks relative to peers.

I think, it's actually -- it's pretty good. But we do have opportunities through, we touched on this a bit in the release, through the value chain to improve margin further, to offer our platform, which is good for us -- actually good for customers, because it's lower rate than the platform they use at the moment. So, it can work nicely for both of us and potentially further on the investment solutions. So, part of the business case is to take the EBITDA that they produce and then improve it through integration into Aviva. So we see a positive outlook for margin across that and part of the business case is assets plus margin growth within that.

I think on the real assets side, again, I sort of mentioned this earlier, we do have opportunities to invest more expansively, either off the group balance sheet or through Aviva Investors and they will work closely in originating those ideas. There's a bit of a time slow burn on that stuff, but we have got appetite to do that. We've got the capability to do that. We've got the financial resources to do it and that will set us up well. It will take quite a bit of time for those opportunities to come through. But certainly, that is something that we could add to the armory.

Unidentified Company Representative

Okay. Oliver?

Oliver Steel

Oliver Steel, Deutsche Bank. Sorry, I've got one more question. The low to mid-single-digit growth that you're talking about in the dividend beyond 2023, how should we think about that in terms of sort of being representative of your sort of own underlying growth in the business? And more specifically, does it include anything for deployment of the excess cash generation?

Amanda Blanc

Okay. Jason?

Jason Windsor

It's some way out. We are trying to balance the opportunity for long-term reliability and long-term growth of the dividend. Of course, the Board will make its mind up at the time. So we're trying to give some guidance today, as to where that we see the outlook for cash growth in the context. But that level of reliability and growth that we are seeking to demonstrate over the next three years, I think will set the organization up well for success. But we think that's about the right level. Back to the point that came up earlier. If we hit all these cash flow targets and we hit all these cost targets which I'm sure we will that will provide some choices around what we can do with excess cash and capital.

Unidentified Company Representative

Okay. I think that's it. Amanda, over to you for closing comments.

Amanda Blanc

Okay. So, I guess -- I'm not going to go through the presentation again, you'd probably be pleased to hear that. I just want to say, thank you very much for coming in. Hopefully, we've given you plenty of food for thought this morning, the capital return, the new targets the performance of the business and the projection on the dividend policy. So, thank you very much for coming in and we hope to be able to do this again shortly. Thank you, very much.