October 14, 2008
To our valued Distribution Partners and Producers:
Last week, an article appeared in a London newspaper estimating that Aviva has seen at least 30% of its surplus capital wiped out by the collapse in global equity markets. The article was reprinted on a U.S.-based wire service, and we have been told that some competitors were, unfortunately, circulating the story and attempting to negatively influence producers in an attempt to harm Aviva USA. While the attached Update was provided to you late last week, I want each of you to know that the article was speculative and did not include a response from our company.
Last Thursday, Andrew Moss, CEO of Aviva, held an investor and analyst briefing in London to provide an update on Aviva's continuing strong position in the current economic environment, with Aviva's surplus capital estimated to have grown from $3.2 billion at June 30, 2008 to $3.4 billion at September 30, 2008. He also provided further information on how we have protected Aviva from further drops in the equity markets.
It is important for you to understand that the term “surplus capital” referred to above is not the same as the term “capital and surplus.” When we talk about our surplus, we are describing the regulatory value of the available excess assets on top of the required minimum regulatory buffer. Or, put in another way, if Aviva were to pay all its liabilities and hold a prudent amount of buffer capital as required by the regulator, we would still have a further surplus of $3.4 billion (as at 30 September 2008). The term “capital and surplus” typically represents a company's entire capital, including additional paid in capital and retained earnings. At June 30, 2008, the total capital of Aviva on an IFRS basis was $22.7 billion.
These are difficult times for many of our customers because some of them have investments that have fallen in value dramatically. Fortunately, the principal in their indexed annuity is protected from market risk and they are receiving at least the minimum guaranteed rate of return. Aviva has protected its customers’ funds for over 312 years and the Company's financial strength should provide peace of mind to each one of our customers.
Thanks for being part of Aviva!
Sincerely,
Mark V. Heitz
President, Sales & Distribution
October 10, 2008
Update on Aviva plc’s Strong Capital Position
Note:
The Times of London ran a story about Aviva plc on Sunday, October 5, 2008 that included a sensational headline and speculated that Aviva plc’s surplus capital had fallen dramatically. At an analysts briefing in London this week, Aviva plc’s CEO Andrew Moss confirmed Aviva plc’s strong capital position (which has increased since June) by saying:
We have confirmed that Aviva’s surplus regulatory capital* has increased to an estimated £1.9 billion, or US$3.4 billion1 (at September 30, 2008), from the previous level of £1.8 billion, or US$3.2 billion (at June 30, 2008).
In addition, Aviva has strengthened its protection against further declines in global equity markets through increased hedges so that, even in the event of a further 40% fall in the value of equities, our surplus regulatory capital would only be reduced by £700 million, or US$1.25 billion. This is a significant improvement compared to the position as of June 30, 2008, when a 40% fall would have reduced Aviva’s surplus regulatory capital by £1.3 billion, or US$2.3 billion.
As of June 30, 2008, Aviva plc’s total assets were £327.8 billion, or US$584.3 billion, and total shareholder equity2 was £12.7 billion, or US$22.7 billion.
What is surplus regulatory capital?
Insurers need to be able to meet their commitments to policyholders at all times, even in the case of unforeseen losses, so all insurers must have regulatory capital available to meet these commitments.
To allow for the unforeseen losses, regulators make Aviva plc, like other carriers, hold extra capital over and above its liabilities, which can act as a ‘buffer’ to ensure absolute protection for policyholders.
But when we talk about our surplus we are describing the regulatory value of the available excess assets on top of the required minimum regulatory buffer.
Or, put another way, if Aviva were to pay all its liabilities and hold a prudent amount of buffer capital as required by regulators, we would still have a further surplus of £1.9 billion, or US$3.4 billion (as of September 30, 2008).
1
GBP numbers have been translated using the exchange rate of $1.7824 = £1.00 as of Sept. 30, 2008.
2 Total shareholder equity includes preference shares and direct capital instruments.
News release
9 October 2008
AVIVA HOLDS ANALYST BRIEFING AND CONFIRMS STRONG CAPITAL POSITION
Aviva plc (“Aviva”) is today holding an investor and analyst briefing. Alain Dromer, CEO Aviva Investors and Igal Mayer, CEO UK General Insurance, along with their teams will set out in more detail their plans for their businesses.
Andrew Moss, CEO, will take the opportunity to provide an update on Aviva’s continuing strong position in the current economic environment with Aviva’s surplus regulatory capital estimated to be £1.9 billion at 30 September 2008, compared to £1.8 billion at 30 June 2008.
In addition Aviva has strengthened its protection against further falls in global equity markets through increased hedges, such that even in the event of a further 40% fall in equity markets, its surplus regulatory capital would only be reduced by £0.7 billion. This is a significant improvement when contrasted with the position as at 30 June 2008 when a 40% fall in equity markets would have reduced the surplus regulatory capital by £1.3 billion.
Andrew Moss commented: “We are focused on accelerating transformational change to deliver a unified and more profitable company. This is clearly demonstrated both by the creation of Aviva Investors and the reshaping of our UK General Insurance business to focus on insurance excellence and deliver the promise of scale.
“We are pleased to confirm that in the face of the recent market turmoil, Aviva’s capital position remains strong. Our active capital management ensures the group remains robust in the face of the current economic adversity, providing security for our customers and investors alike, and ensuring that the group is well positioned as confidence returns.”
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Enquiries:
Media
Hayley Stimpson, media relations director +44 (0)20 7662 7544
Sue Winston, head of group media relations +44 (0)20 7662 8221
Vanessa Rhodes, senior group media relations manager +44 (0)20 7662 2482
James Murgatroyd/Ed Simpkins, Finsbury +44 (0)20 7251 3801
Analysts
Charles Barrows, investor relations director +44 (0)20 7662 8115
Jessie Burrows, head of investor relations +44 (0)20 7662 2111
Susie Yeoh, investor relations manager +44 (0)20 7662 2117
A presentation for investors and analysts will be held today at 9:00am (BST) at the offices of Aviva Investors, No 1 Poultry, London, EC2R 8EJ. The presentation slides will be available on the Group’s website,
www.aviva.com/investors/presentations.cfm from 9.30am (BST).
Notes to editors:
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Aviva is the leading provider of life and pension products in Europe with substantial positions in other markets around the world, making it the world’s fifth largest insurance group based on gross worldwide premiums at 31 December 2007.
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Aviva’s principal business activities are long-term savings, fund management and general insurance, with worldwide total sales of £49.2 billion at 31 December 2007 and funds under management of £359 billion at 30 June 2008.
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The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.
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For broadcast-standard video, please visit www.thenewsmarket.com/aviva.