Our values Care, Commitment, Community and Confidence. These values guide the decisions we make and define what it means to be part of Aviva.
Transform performance: In our Core markets we will transform performance to deliver greater customer trust, engagement and retention, and profitable growth for our shareholders. We will do this by making it easier for our customers to engage with us, capitalising on the Aviva brand, driving targeted growth and simplifying, digitising and automating the business.
Read more in the ‘Our strategy’ and ‘Our business model’ sections.
Number of markets in 2020 at or above average: Read more about our performance and financial targets in the ‘Key performance indicators’ and the ‘Chief Financial Officer’s report’ sections.
R Symbol denotes key performance indicators used as a base to determine or modify remuneration. 1 Group adjusted operating profit is an APM which is used by the Group to supplement the required disclosures under IFRS. Please refer to note B in the ‘Accounting Policies’ section and to the ‘Other Information’ section within the Annual Report and Accounts for further information. 2 This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of our financial performance. Further information on APMs, including a reconciliation to the financial statements
So how was 2020 for you? We’ve heard “unprecedented” so many times in recent months, the word has almost lost all meaning. The year was dramatic, certainly. It was also chaotic and traumatic for all of us. COVID-19 and the UK’s exit from the EU have shaken what we once took for granted and we are still far from the new normal, whatever that might look like.
Where we have at times in the past underachieved and underwhelmed, we have now reset the course. Amanda Blanc, our new CEO, has articulated an ambitious vision built around our three Core markets of the UK, Canada and Ireland. As part of this we aim to become the UK’s leading insurer, and the go-to customer brand. And we have a clear strategy to realise that vision. By focusing the portfolio, transforming our performance, and ensuring our financial strength, we will unlock Aviva’s undoubted potential.
Realising that potential will, of course, depend on delivery. A sensible strategy is only the starting point and Amanda is determined to move at pace to do what we say we will. There is a long way yet to go, but we have made a good start and there are clear signs that we are heading in the right direction. You can read more about this progress in the following pages.
And it is by focusing on what our customers need and solving problems rather than just selling products that we will live up to our purpose – to be “with you today, for a better tomorrow”. It is important that we can do so, not only for our customers and you, our shareholders, but also to fulfil our wider responsibilities to the communities where we live and work, as well as the wider economy.
Our response to COVID-19 If there was ever any doubt about the importance of our purpose, 2020 provided the answer. Being there for people when it really matters is why we exist, and the past year truly put that to the test.
I want to finish by paying tribute to all my colleagues in Aviva who have been working so hard to support people in such challenging circumstances. In an exceptional year they have been nothing short of exceptional. I thank everyone for their remarkable and continuing efforts and I am frankly both in awe and humbled at what they have achieved. Thank you all so very much.
We are proceeding with £1.7 billion of debt reduction including a £800 million liability management exercise. This tender offer together with upcoming maturities of debt instruments will contribute to a material reduction in debt in the first half of 2021, consistent with our target of delivering a sub-30% Solvency II debt leverage ratio1 once we have completed our major divestments. This is an important first step in executing against our capital framework.
We want Aviva to be a place where people can be themselves, and we want our workforce to reflect the customers and communities we serve. This means offering market-leading benefits and challenging ourselves to do more to build a workplace – and society – that works for all.
In 2020 the death of George Floyd and the #BlackLivesMatter campaign also received prominent attention at Aviva. In September, we published our BlackLivesMatter action plan and committed to change by supporting colleagues, educating our people and doing more to act for change in the wider community.
Tackling the climate crisis To create a better tomorrow, we need to look after the planet we call home. This is a key strategic issue for us as a company. Left unchecked, climate change will undermine our actuarial assumptions, diminish investment returns for our customers and shareholders and shrink our insurable market.
We have committed to an ambition to be a Net Zero company by 2040, the most ambitious goal set by any major bank or insurance company in the world today. As part of this, we have set the target to be net-zero in our own operations, and to have cut the carbon intensity of our investment by 60%, both by 2030.
We were the first global insurer to be operationally carbon neutral and we’ve already reduced the carbon emissions from our operations by 76% since 2010. This year we continued our work to create more renewable energy capacity, opening one of the UK’s largest combined solar carport and energy storage at our offices in Perth.
In the UK we set a new 2050 net-zero emissions target for our auto-enrolment default pension funds, giving more of our customers the opportunity to invest their pensions towards building a world they would like to retire into. We also called on the UK government to legislate for other default pension funds to follow suit.
Strategic report Governance IFRS financial statements Other information 2. Transform performance Aviva has market leading positions and exceptional relationships with customers and intermediaries but to date has not translated these into superior financial performance.
We have a clear focus on correcting this by transforming the performance of our Core markets. This will be achieved through targeted growth, where we have leading market positions, accelerating our simplification, digitisation and automation and delivering higher levels of customer engagement through digital platforms.
We have reinvigorated our executive leadership team with seven appointments including new CEOs for UK & Ireland Life and Aviva Investors. We have made good progress in embedding a strong performance culture by overhauling individual performance management, setting clear expectations for our leaders and emphasising the importance of close collaboration.
Strategic report Governance IFRS financial statements Other information 3. Financial strength Financial strength is a critical underpin to our strategy. Our Solvency II shareholder cover ratio1 of 202% (2019: 206%) has remained resilient throughout a turbulent year bolstered by Solvency II operating capital generation1 from our Core markets and benefits from disposals of our Manage-for-value markets.
These were partly offset by foreign exchange, market movements and modelling changes. Our centre liquidity1 of £4.1 billion, as at the end of February 2021 (2019: End of February 2020 £2.4 billion), is similarly strong having benefitted from cash remittances1 and disposal proceeds.
We intend to grow our dividend per share by low to mid-single digits over time as we grow across our Core markets, improve efficiency, reduce debt levels and associated interest costs.
While the broader economic outlook remains uncertain, it is positive to see progress being made with the global vaccination effort and the economy adapting to social distancing measures.
The world is changing fast. We continue to anticipate and adapt to the forces around us so that we can keep on serving our customers well, protecting them today and helping them build a better tomorrow. The most pressing issue facing us all continues to be the global pandemic. Despite the grounds for hope offered by vaccination programmes, governments are still engaged in a careful balancing act between containing the spread of the virus and limiting damage to the economy and society from those containment measures. As well as the human cost, the situation has led to widespread economic harm across many sectors and a significant impact on health services. It has also substantially accelerated a number of existing megatrends.
We see the following issues as the key factors affecting our external environment: Political and macroeconomic impact Political and macroeconomic factors impact the operating environment of our businesses in the UK and abroad. These include the COVID-19 driven economic downturn and high debt levels, low interest rates, and geopolitical tensions, e.g. between the US and China. The UK also faces economic headwinds resulting from the end of the ‘Brexit transition period’ and a new trading relationship with the European Union (EU).
Read more about our risk management in the ‘Risk and risk management’ section of this Strategic report.
Ageing Across the world, populations are ageing due to better standards of living, improvements in medical science, and declining fertility rates. This is putting traditional retirement models under pressure and creating challenges and opportunities around funding and care in later life.
Climate Change Climate change has increased the frequency of extreme weather events, leading to increased political focus and regulation, as well as growing consumer awareness of the economic and social consequences of climate change, and the impact of their saving and investment decisions.
Big Data and AI Artificial Intelligence (AI) is unlocking the value of Big Data and bringing new levels of efficiency and productivity. It also presents new challenges around the ethical use of data, for example in the use of algorithms for decision making, or COVID-19 track and trace systems that use location data.
New risks New risks are emerging as a result of technological advances and behavioural changes such as the use of personal data and sharing of information, the need for uninterrupted access to services, and the demise of traditional jobs, as well as development of new skills and capabilities. This creates a need for new saving, retirement and insurance solutions.
Financial strength Financial strength, resilience and sustainability underpin our strategy. Our focus here is on maintaining strong solvency and liquidity and reducing debt. This will increase our financial flexibility and provide options for excess capital deployment, our priorities for which are: • Debt reduction to achieve a Solvency II debt leverage ratio1 below 30%; • Returns to shareholders when our Solvency II shareholder cover ratio1 is above 180%, the upper end of our working range; and • Investment in our Core markets where we see attractive opportunities to do so.
Our values We have redefined our values to help us to deliver our ambitions. Developed with our employees, they will guide the decisions we take. Aligned to our purpose and strategy, they define what it means to be part of Aviva. Our new values are Care, Commitment, Community and Confidence, see the ‘Our values’ section for more detail.
Our values In February 2021 we redefined our values to help us to deliver on our ambitions. Developed with employees from across the Group, they will guide the decisions we take as individuals and as an organisation. Aligned to our Purpose and Strategy, they define what it means to be part of Aviva: Commitment Because we stand up for what we believe in. We act with courage, keep our promises and take ownership of our work. We understand the impact we have on the world and take seriously the responsibility that brings with it. We will play our part in tackling the climate crisis. We commit to a better tomorrow.
Care Because we understand the positive difference we make in our customers’ lives every day. We truly listen to see beyond the policyholder to a person with plans and dreams. We solve problems for our customers, and for each other. We build relationships that no-one else can. Empathy is our strongest force.
Aviva helps our 31.6 million customers make the most out of life, plan for the future, and have confidence that if things go wrong we will be with them to put it right.
Our channels Our customers can engage with us through multiple distribution and service channels (both digital and nondigital ): • Direct to customer; • Intermediaries, including tied agents and brokers; and • Strategic partnerships and bancassurance arrangements.
CCuussttoommeerrss ppaayy uuss pprreemmiiuummss wwhhiicchh wwee rreeiinnvveesstt to provide them with income in their retirement via a lump sum or regular payments, or by releasing the money tied up in their property.
£30.6 billion Paid out in benefits and claims to our customers in 2020
5.1 million People helped through £54.5 million of community investment in 2020
Savings and Investments • Individual savings • Workplace savings • Advice and guidance • Investments and asset management
We use a number of financial and non-financial metrics to help the Board and senior management assess performance against our strategic priorities (focus the portfolio, transform performance, financial strength) and our purpose (with you today, for a better tomorrow).
We have updated our financial targets to reflect the focus of the Group: • Cumulative cash remittances1 from our Core markets – > £5 billion in 2021-23 inclusive • Cost reduction – targeting £300 million reduction in controllable costs1 in our Core markets by 2022 • Solvency II debt leverage ratio1 – < 30%
The KPIs to assess performance against these targets and our strategic priorities have been included in the analysis below and in the Chief Financial Officer’s report.
Customer Net Promoter Score® (NPS®)R NPS® is our measure of customer advocacy and we use it in seven1 of our markets to measure the likelihood of a customer recommending Aviva relative to our competitors.
Number of markets in 2020: at or above market average: below market average: Employee engagement We give our people the freedom to act in line with our values to create an environment in which they can thrive through collaboration and recognition. We measure this through our annual global ‘Voice of Aviva’ survey.
2020: Carbon emissions reduction We are an operationally carbon-neutral company, offsetting the remaining emissions through projects that have benefitted the lives of over one million people since 2012. We measure our carbon emissions against our 2010 baseline.
Group adjusted operating profit1 R Group adjusted operating profit1 supports decision making and internal performance management. It is considered a useful measure of performance as it enhances the understanding of the Group’s operating performance over time.
Group adjusted operating profit1 was £3,161 million (2019: £3,184 million) mainly reflecting lower operating profit across all Core markets, except Canada. Our Core markets were impacted by unfavourable trading conditions as a result of the COVID-19 pandemic, partially offset by positive underlying performance.
IFRS profit for the year increased to £2,910 million (2019: £2,663 million) mainly due to the profit on disposal of a number of businesses during the year, offset by lower positive investment variances and economic assumption changes compared to 2019.
2020: Operating earnings per share2,3 R Operating earnings per share (EPS)2,3 illustrates the profitability associated with each share owned by our shareholders. Operating earnings per share2,3 is considered meaningful because it enhances the understanding of the Group’s operating performance.
Operating earnings per share2,3 increased to 60.8p (2019: 60.5p), mainly due to the reduction in Group adjusted operating profit1, more than offset by lower tax and direct capital instrument (DCI) interest.
2020: Basic earnings per share Basic earnings per share (EPS) illustrates the profitability after tax associated with each share owned by our shareholders.
2020: Solvency II return on equity2 R Group Solvency II return on equity2 shows how efficiently we are using our financial resources to generate a return for shareholders.
Group Solvency II return on equity2 has decreased to 9.8% (2019: 14.3%) due to changes made to the French Life model which corrected a mis-applied rule and a lower longevity assumption release than in 2019, partially offset by strong underlying performance by Core markets.
Cash remittances1 from our markets decreased to £1,500 million (2019: £2,597 million) driven by our decision to retain capital locally and regulatory constraints resulting from financial market volatility due to COVID-19.
2020: Controllable costs1,2 Controllable costs1,2 are representative of the underlying day-to-day expenses and operational overheads involved in running the business.
2020: £3,935 million 2019 restated: £4,022 million2 2018 restated: £4,052 million2
Solvency II debt leverage ratio1 remains stable at 31% (2019: 31%). This was due to an increase in debt and Solvency II total regulatory own funds over 2020.
2020: Estimated Solvency II shareholder cover ratio1 R The estimated Solvency II shareholder cover ratio1 is one of the indicators of the Group’s balance sheet strength.
Reported COR1 has improved from 2019, with a better COR1 in Canada and UK Personal lines, offset by adverse movements in UK Commercial lines and Ireland.
R Symbol denotes key performance indicators used as a base to determine or modify remuneration. 1 This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of our financial performance. Further information on APMs, including a reconciliation to the financial statements
(where possible), can be found in the ‘Other Information’ section within the Annual Report and Accounts. 2 Following a review of the presentation of claims handling costs, to achieve consistency in our reporting, comparative amounts for the year ended 31 December 2019 have been restated by £83 million (2018: £84 million) to include previously excluded claims handling costs attributable to the Life & Health businesses from the UK, Ireland and Poland in controllable costs.
COVID-19 affected customer activity and the broader economic environment. Despite this our Core markets proved their underlying strength. Our people continued to serve our customers very well, demonstrating the importance of our long-term relationships with our customers and distributors.
shareholder cover ratio1 202% 206% (4)pp — Solvency II debt leverage ratio1 31% 31% — — Group adjusted operating profit3,
IFRS profit for the year 2,910 2,663 247 9% Operating earnings per share1,4 60.8p 60.5p 0.3p — Basic earnings per share 70.2p 63.8p 6.4p 10% Controllable costs1,5 3,935 4,022 (87) (2)% Solvency II return on equity1 9.8% 14.3% (4.5)pp — Solvency II operating capital
Our continued financial strength and growing centre liquidity1 means we remain well positioned to handle any further turbulence, while also delivering on our commitment to reduce debt, invest in our business and provide additional returns to shareholders.
(where possible), can be found in the ‘Other Information’ section within the Annual Report and Accounts. 2 2019 excludes a special dividend from UK life of £500 million. 3 Group adjusted operating profit is an APM which is used by the Group to supplement the required disclosures under IFRS. Please refer to note B in the ‘Accounting Policies’ section and to the ‘Other Information’ section within the Annual Report and Accounts for further information. 4 This measure is derived from the Group adjusted operating profit APM. Further details of this measure are included in the ‘Other information’ section of the Annual Report and Accounts. 5 Following a review of the presentation of claims handling costs, to achieve consistency in our reporting, comparative amounts for the year ended 31 December 2019 have been restated by £83 million to include previously excluded claims handling costs attributable to the Life & Health businesses from the UK, Ireland and Poland in controllable costs.
Group adjusted operating profit2 remained resilient despite the negative impacts of COVID-19 as we delivered strong results in general insurance, bulk annuities, as well as our savings and retirement propositions, with lower profits from our Heritage business reflecting its gradual run-off. Our Manage-for-value operations also performed well on an IFRS basis. The main impact of COVID-19 was felt in general insurance where the total estimated impact amounted to a loss of £17 million. Within our Core general insurance markets, the impact was greater at £84 million, as business interruption claims net of reinsurance were only partly offset by favourable impacts of reduced economic activity in other product lines tempered by higher profit-contingent commission payments to distributors.
Solvency II operating capital generation (OCG)1 Solvency II OCG1 decreased to £1,932 million (2019: £2,259 million) while Solvency II OCG1 excluding the impact of capital actions, non-economic assumption changes and other non-recurring items, was stable at £1,414 million (2019: £1,433 million). Total Solvency II OCG1 was impacted by changes made to our French life model which corrected a mis-applied rule, partly mitigated by an increase in offsetting Group diversification benefits, as well as a positive contribution from management actions of £518 million (2019: £826 million). This included positive impact of assumption changes (including longevity releases) albeit lower than in 2019.
Capital and cash Centre liquidity1 At end February 2021, centre liquidity1 was £4.1 billion (February 2020: £2.4 billion) with the increase primarily driven by the receipt of disposal proceeds for our Singapore, Hong Kong, Indonesia and FPI businesses, partially offset by payment of dividends.
Solvency II debt leverage Solvency II debt leverage ratio1 remained at 31% in 2020 (2019: 31%), with an increase in total debt offset by an increase in own funds. During the first half of 2020, Aviva issued £500 million of tier 2 subordinated debt in advance of redeeming £500 million of restricted tier 1 securities in July. In October 2020, we issued C$450 million of tier 2 subordinated debt pre-financing a C$450 million instrument maturing in May 2021. With high levels of centre liquidity1 held at Group centre we reduced our commercial paper in issue by £130 million over 2020.
Corporate credit rating migration and commercial mortgage portfolio During 2020, we experienced no defaults, only c.£60 million of the bonds were downgraded in our shareholder portfolio below investment grade and less than c.13% of the portfolio had been downgraded to a lower letter.
Our commercial mortgage portfolio continues to perform as expected. The average loan to value (LTV) ratio across the portfolio remains low at 61% (2019: 56%), loans in arrears were £34 million (2019: nil), equivalent to 0.5% of the portfolio, and the loan interest cover ratio was 2.74x (2019: 2.90x).
Dividends and capital framework On 26 November 2020, Aviva announced a new dividend policy and capital framework that align with the Group’s strategic priorities. We aim to deliver a sustainable pay-out ratio and grow dividend per share by low to mid-single digits. Under our capital framework, we expect to return to shareholders excess capital above 180% Solvency II shareholder cover ratio1 after allowing for investment in the business and once our Solvency II debt leverage ratio1 has been reduced below 30% and we have completed our major divestments.
Business highlights and growth opportunities UK and Ireland We have a vision to grow our business in the UK. Our strategy focusses on achieving top quartile competitiveness in our home market in savings and retirement, general as well as life insurance, protection and health. To do this, we will transform operational efficiency through simplification and automation, improving customer experience, accelerating data, analytics and underwriting capabilities, and building stronger investments capabilities. We will also build cross-UK customer capabilities, make better use of digital tools, and innovate more effectively to make it easier for customers and intermediaries to deal with us.
In 2020, UK and Ireland Life adjusted operating profit2 decreased 3% to £1,907 million (2019: £1,974 million) with strong performances in bulk purchase annuities and Savings & Retirement and a positive but lower benefit of assumption changes offset by COVID-19 impact on new business sales3 of equity release and individual protection.
Workplace savings – Aviva is the number one4 provider of bundled Workplace pensions in the UK serving 3.8 million customers with assets of £81 billion (representing an average annual growth of 12% over the last four years) and net flows1 of £5.3 billion in 2020. The savings and retirement market represents an enormous opportunity for Aviva in the UK. The shift to defined contribution (DC) pension saving as individuals are increasingly having to take responsibility for their financial futures as well as regulatory changes such as the introduction of auto enrolment mean that the DC workplace pension market is expected to grow from £390 billion in 2020 to more than £950 billion in 20285.
‘Other Information’ section within the Annual Report and Accounts for further information. 3 Reference to sales represents present value of new business premiums (PVNBP) which is an APM, further details can be found in the ‘Other Information’ section within the Annual Report and Accounts. 4 Broadridge, UK Defined Contribution and Retirement Income 2019. 5 Broadridge, DCMI 2019. 6 Fundscape, advised-only channel, 9M20 7 Fundscape, Q3 2020 report 8 Lane, Clark & Peacock (LCP) pensions de-risking update, October 2020 9 Lane, Clark & Peacock (LCP) BPA Seminar, January 2021
Connected to our communities Aviva has been taking care of people for more than 300 years. We live in the same streets and work in the same towns. We recognise the strength that comes from our connection to one another and are deeply invested in our communities.
As a multinational company and one of the UK’s largest companies we play an important part in the economies and societies in which we operate through the taxes we pay. In 2019 we were the 8th largest corporate contributor of tax in the UK and in 2020 we paid £1,052 million in corporate income taxes globally, including £779 million in the UK.
In the UK, the Aviva Foundation* continued to invest unclaimed assets of shareholders through grants to charities and social enterprises. In 2020 the Foundation committed over £4 million to 10 non-profit organisations and social enterprises that can help our communities and vulnerable customers. This included funding the Financially Resilient Communities Programme, a consortium of local and national charities, working with communities to improve financial advice available for deprived communities. * The Aviva Foundation is administered by Charities Trust under charity registration
1 ABI – 12 months to end Q320. 2 Reference to sales represents present value of new business premiums (PVNBP) which is an APM, further details can be found in the ‘Other Information’ section within the Annual Report and Accounts. 3 Aviva analysis of public company disclosures. 4 This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of our financial performance. Further information on APMs, including a reconciliation to the financial statements
General Insurance UK, Ireland and Canada net written premiums (NWP) was stable year on year at £7.7 billion (2019: £7.7 billion) with strong commercial lines growth offsetting lower personal lines premiums. Adjusted operating profit4 increased by 3%9 to £500 million (2019: £488 million) as strong improvements in underlying performance were partially offset by the negative impacts of £84 million of the COVID-19 pandemic as well as lower long term investment return (LTIR). LTIR declined to £274 million (2019: £314 million) representing an average return of 2.3% (2019: 2.8%) due to lower interest rates and de-risking activity in light of the market volatility in 2020.
Canada Personal Lines – We are a top 38 insurer in Canada with NWP in 2020 of £2,075 million (2019: £2,100 million) reflecting the impact of the pandemic on our distribution partners as well as customer relief measures. The Canadian market is largely intermediated therefore we serve our customers mostly through brokers and through our partner, Royal Bank of Canada (RBC), the most recognised financial services brand in Canada. We are continuing to invest in automation and are looking to improve our digital offering, leveraging the wider Group’s expertise, as demand for digital products slowly increases in this more traditional insurance market.
Canada Commercial Lines – We are a leading commercial insurer in Canada with NWP in 2020 up 7%9 to £1,021 million (2019: £961 million) as we benefit from a rate hardening environment reflecting reduced capacity and sustained historical under-pricing across the market. In common with the UK, our Canadian commercial lines business is distributed largely through intermediaries and focuses on the SME and GCS markets. We strive to offer best-in-class service and customer value underpinned by pricing sophistication to help drive even better retention and profitability in the future.
Aviva Investors Our asset management business, Aviva Investors has £366 billion of assets under management5 and has an ambition to become the global leader in active sustainable investment outcomes. This includes £292 billion of assets managed for Aviva companies, making Aviva Investors pivotal to the Group’s wider success. Its long track-record in private debt, infrastructure, and other real assets, has supported our growth in areas such as bulk purchase annuities.
Aviva Investors maintained the positive client momentum with positive external clients’ net flows5 of £1.7 billion (excluding liquidity funds), with significant new business wins in real assets and in credit. Total net flows5 of £8.5 billion (2019: £(2.8) billion) included £8.3 billion of net flows5 into liquidity funds and cash.
Information’ section within the Annual Report and Accounts for further information. 5 This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of our financial performance. Further information on APMs, including a reconciliation to the financial statements
During 2020, and in line with our strategy, we completed the disposals of Friends Provident International Limited, a majority shareholding in Aviva Singapore, and our share in joint ventures in Indonesia and Hong Kong. We also announced the disposals of Aviva Vita in Italy and our business in Vietnam. In early 2021 we announced the sales of our French business and our remaining Italian operations which represent major progress in executing our strategy to focus on our strongest businesses in UK, Ireland and Canada.
We operate through businesses in our Core markets in the UK, Ireland, Canada and our other international businesses which are managed for long-term shareholder value: Core markets • UK & Ireland Life • General Insurance: UK & Ireland and Canada • Aviva Investors
In Ireland our strategy is to transform and grow the business. Having successfully integrated Friends First Life Assurance Company DAC, we’re focused on delivering a single product range to the market and we are committed to making it easier for intermediaries to do business with Aviva. Ireland Life is currently fourth in the market, holding a 13% share6, and the business has set an ambitious target to become the market leading intermediary provider.
With our diverse product range we are well placed to meet the changing needs of customers through their lives, from the accumulation stage to retirement. Our strong financial position enables us to provide security to customers while investing in our proposition, improving connectivity for our intermediary partners, and bringing to the market innovative health and wellbeing solutions.
4 Following a review of the presentation of claims handling costs, to achieve consistency in our reporting, comparative amounts have been restated by £78 million for the year ended 31 December 2019 to include previously excluded claims handling costs attributable to UK & Ireland Life in controllable costs.
5 Association of British Insurers (ABI) – 12 months to end Q320. 6 Aviva calculation based on Milliman 2019 Report estimating market size based on responses received from some companies within the Irish life market. 7 Office for National Statistics.
Operational highlights Products Savings & Retirement Our Savings & Retirement business is a leader in both the workplace and retail markets, we are the UK’s largest bundled Workplace provider1 giving us scale and our Retail business continues to grow strongly. Aviva Save, a solution for existing customers’ cash savings, launched internally in December 2020 and reached the external market in January 2021. Our products are supported by guidance and advice and offer access to open architecture asset solutions including Aviva Investors who provide expertise in ESG investing. We have been working closely with Aviva Investors to develop tailored underlying investment solutions such as our approach to ESG investing and Smooth Managed Fund. We also continue investing in our platforms for workplace, advisers and direct customers to enhance the experience, service and propositions on offer. Our new business is capital efficient and transparent, with profits being derived from assets under management (AUM)2 fees less costs.
Through our individual annuities we provide an income to approximately one million customers. We have a long and proud record in providing equity release (lifetime mortgages) to customers who need it, lending over £500 million to customers in 2020.
Equity release was impacted by COVID-19 movement restrictions during the year which reduced many intermediaries’ ability to write new business as well as our ability to value properties. We addressed this by introducing remote valuations to our equity release lending process, giving customers access to funds released through their properties. Despite lower volumes, our market share remains strong and we are the third largest provider of equity release mortgages in the UK3.
Protection & Health Aviva is the only provider of scale in the UK covering health, group protection and individual protection. We have number two3 positions in protection markets and are third6 in the health market. We have developed strong relationships with our intermediary partners, including financial advisers, estate agents and other third parties. We have invested for growth in these markets, focusing on our digital proposition and bringing new health & wellbeing to market. Pricing and underwriting discipline as well as cost efficiency are key drivers for profitability in this sector.
We aim to differentiate our individual and group protection offering by going beyond simply offering financial support to our customers and providing health and wellbeing support focusing on prevention and best in class customer service. Our data analytics and underwriting capabilities give us a strong advantage in a competitive market.
Ireland Life Our core lines of business in Ireland are pre and post-retirement unitlinked contracts, unit-linked savings & investment contracts, in addition to protection and annuity contracts.
1 Broadridge, UK Defined Contribution and Retirement Income 2019. 2 This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of financial performance. Further information on APMs, including a reconciliation to the financial statements
• Our Pre-Retirement Pension Savings Products proposition was delivered in Q3 2020.
Customers Across the UK Life business we delivered year-on-year improvements across multiple customer service measures.
These improvements were achieved despite the enormous resourcing and systems challenges, brought about from the continued impact of COVID-19. At the height of the crisis, we moved all staff to working from home while maintaining service levels.
We are very proud to have won a number of industry awards for the service we provide to our customers. This includes Best Customer Service Provider at the 2020 Health Insurance & Protection awards, Best Claims Management/Claims Team at the 2020 Cover Excellence Awards and Best Equity Release Customer Service at the 2020 What Mortgage Awards. Our Workplace proposition won the Best Use of Technology for Benefits category at the Workplace Savings and Benefits Awards in October 2020 and the Retail Adviser Platform won Best Use of Platform Technology at the Schroders Platform Awards in December 2020. We were also ranked first place by Kagool in their FTSE 100 Digital Census for communications support offered to customers during the height of the COVID-19 crisis from March to May.
Our Protection business is built upon strong relationships with our partners. Our distribution network includes intermediaries, banks, single-tie agreements with three of the largest estate agencies and a digital direct offering.
Our ongoing focus on building our digital capability has transformed how we engage with customers and brokers. We now offer 94% digital coverage for protection demands and 99% of interactions with Health brokers are now carried out digitally.
In Ireland we continue to focus on intermediaries as our core distribution channel. In 2019, the intermediary channel accounted for 74% of total market sales on an annual premium equivalent (APE)1 basis.
Key business strategic priorities for 2021 • Maintain strong growth in UK Savings through our leading
Our strength of distribution, brand recognition, digital innovation, and high level of service are what set us apart for our customers and intermediaries. TNPS (Transactional Net Promotor Score) and broker trust scores continue to be market leading across all areas, with our UK claims service being ranked world class. The quality of our service has enabled us to hold long-term relationships with four of the UK’s six largest banks to provide their insurance solutions.
We are recognised as being market leading in our digital capability. Our “Ask-It-Never” technology deployment into banking partners, market leading Commercial digital trading platform, and machine learning based pricing are some of the reasons why intermediaries partner with us. 2020 saw the launch of the Aviva brand on price comparison websites, complementing our General Accident (GA) and Quote Me Happy (QMH) brands. Our UK business has been through a reorganisation and we have begun a restructuring program in Ireland which we will complete during 2021. The platforms are now in place for growth in a competitive market.
Commercial lines In Commercial lines, our strategy is to leverage our strong distribution and superior products and risk management to grow market share in targeted customer segments. A favourable underwriting environment, and strong retention rates driven by service and broker sentiment, allows us to deploy digital and automated solutions where speed and simplicity is valued, while offering technical and bespoke service for more complicated risks with our large, corporate clients.
In the large corporate & specialty markets, there has been a prolonged period of under-pricing on global property, increased frequency in natural catastrophes and prior year reserving issues on non-UK casualty and Directors’ & Officers’ Insurance. The market is now experiencing hardening for the first time in almost two decades and rates are trending upwards. This provides us with an opportunity to continue our strong growth trajectory, at attractive technical rates, and tackle historically poor performing business. In Ireland, our Commercial lines appetite will now expand into larger risks.
We continue to work with our existing customers to resolve complex issues and key challenges facing the industry, including care home and cladding risks.
In the year, the FCA sought guidance through a legal Test Case to determine whether specific, disputed policy wordings called for the payment of business interruption claims arising from the COVID-19 pandemic. Aviva was not a party to the Test Case, but fully supported the process. The test case did not require any change to our customer approach, nor require further provisions. Throughout this period, where cover was confirmed, we have adjusted claims and made payments and will continue to do so.
During 2020, the FCA published their General Insurance Pricing Practices Report. We support the FCA’s intent to bring greater clarity and consistency to consumers across general insurance pricing. This will be a significant area of focus for us over the next 12 months.
The market continues to experience a trend towards digitisation, further accelerated by pandemic-induced lockdowns.
Operational highlights Products We have been simplifying our business structure to provide simple digitised customer journeys and establish an efficient operational base.
We have delivered a profit turnaround by simplifying products and IT infrastructure, increasing our investment in digital customer journeys while cutting overall costs and improving the sophistication of our pricing models. We have made several changes to our travel product for existing customers to ensure we continue to provide strong protection for COVID-19 related claims.
To cut complexity from our business, we have removed 111 products from UK Personal lines this year and to simplify our home product, we halved the number of pages in our policy document during Q420. The process of simplifying our product and IT architecture allows us to focus on customers’ greatest needs. In 2021, we will continue progress towards our target of 65% reduction in products by the end of 2022, vs 2020 baseline.
Customers Many customer highlights this year were delivered in direct response to the COVID-19 pandemic: • Seamlessly transitioned to remote working and maintained operational service throughout the pandemic. • Provided financial hardship support for customers experiencing financial difficulty. • Enabling policy changes for cover that is no longer required. This included mileage changes, removing add-ons, and offering prorata refunds to travel insurance customers who are no longer able to travel.
• Provided risk management and prevention guidance to business customers, virtually and on-site.
• Tailored, bespoke offerings for our mid-market, corporate and multinational clients.
Investment in digital and claims management has enabled UK motor customers to start and complete their claims online with no underwriter touch points. Customers are demonstrating a preference towards digital interactions, with 80% taking the opportunity to book in their car repairs online.
Distribution channels Our retail businesses across UK and Ireland now service over 3.3 million customers. We have a multi-channel distribution for Personal lines that includes selling direct to customers through MyAviva and price comparison sites, as well as relationships with several of the UK’s leading banks, affinity partners and brokers. In Commercial lines, which is distributed via intermediaries, we enjoy strong relationships with brokers of all sizes that allows us to cater for both Global & Corporate and SME clients.
In the UK, our extensive communication campaign in support of our brokers and their customers was recognised and our market leading broker trust score of 92% increased to 95% during the pandemic. Over 9,000 brokers have joined one of our #backtobusiness webinars.
Growth in UK SME digitally traded business grew by 16% in 2020 as a result of our accelerated technology, proposition and product offering in Digital. Our award-winning Fast Trade platform is a resilient business model that has maintained service performance throughout the COVID-19 pandemic for our customers. In 2020, we have invested in our E-trade platform and launched Aviva Connect, our innovative broker platform, to operationally support the execution of our digital agenda and add value to our customers through speed and simplicity. In Ireland, we are investing in our small Commercial E-Trade offering to avail of the opportunity in this space.
Key priorities for 2021: • Deliver simple, end-to-end digital experience for our retail customers, and continue to automate and accelerate our digital capabilities to support our commercial clients.
• Ongoing focus on becoming more cost efficient, as we cut complexity from the business.
Overview Business strategy overview Canada represents the eighth3 largest Property & Casualty market globally with estimated gross written premium of $CAD60 billion4. Aviva Canada holds the number three position4 with an 8% market share, offering a range of GI products to nearly 2.4 million customers. We are a well-diversified business across our Personal and Commercial portfolios, with a national footprint and multi-channel distribution capabilities.
We are investing for growth and our ambition is to be the leading insurer in Canada by becoming the undisputed choice for our customers, distributors and our people. Our strategy, aligned to the Group strategic pillars is to (1) sustain leading performance through execution excellence, (2) transform the service experience through digital, and (3) lead the market with customer centric innovation.
Our people (who scored 15% higher on engagement than the top quartile for Canadian financial services companies) continue to be a significant advantage for our business.
Personal lines Our retail business is predominantly sold through brokers and under RBC Insurance, under the most recognised financial services brand in Canada. Here, our focus is to improve pricing sophistication and operational efficiency. Our specialty products, such as pleasure-craft, recreational vehicles (RV), classic cars and snowmobiles, continue to be a profitable growth driver and our product range, service, broker relationships and best-in-class claims service set us apart in the market. Our investment in Digital Direct will ensure that our Direct book grows rapidly and sustainably, allowing us to respond to shifting consumer preferences.
Commercial lines We will leverage our market leading customer reach to support our smallest customers by providing easy transactional solutions for our broker partners, while positioning to grow through improved service via operational efficiency and attractive pricing. In our larger and more complex business segments, our focus is on competing through underwriting expertise. Additionally, we will accelerate our growth in our Corporate Risks segment leveraging Customer Risk Management, and an improved proposition (cross border/multinational). Our surety business has an extensive client network and will look to navigate any economic recovery with underwriting discipline.
Market overview Given the COVID-19 impact on the economy, customers and our people, there is much uncertainty in the insurance market.
Canada continues to be in a low-interest rate environment, similar to the 2009 recessionary period, and the Bank of Canada is not expected to pursue additional rate increases until the economy demonstrates a return to above-potential pace. Recessionary conditions have affected consumer spending, with higher debt levels and unemployment in 2020.
In Commercial insurance, reduced capacity and sustained market-wide under-pricing over the years has led to a significantly hardening market during 2020. A number of small businesses have closed as a result of the pandemic and many companies are operating below capacity, which is likely to suppress new business policy count.
Industry consolidation of both insurers and distributors continues. In addition to insurers growing market share through acquisition, there is also a continued drive to control distribution through the vertical integration of brokers.
In 2020 our gross written premium increased year-on-year and despite the pandemic, we have seen strong new business performance and policy retention.
2 Adjusted operating profit is an Alternative Performance Measure (APM) which is used by the Group to supplement the required disclosures under IFRS. Please refer to note B in the ‘Accounting Policies’ section, note 5 ‘Segmental Information’ and ‘Other Information’ within the Annual Report and Accounts for further information.
Commercial lines Our Commercial insurance business is made up of SME (20% of overall business) and GCS (15% of overall business), where we offer Commercial auto, property and casualty products across various customer and industry segments. Our focus for these businesses continues to be around pricing and underwriting fundamentals with strong distribution and client management capabilities.
Despite COVID-19, we ended the year with above average market growth in SME (c.8%) and in GCS (c.10%) due to hard market conditions. As capacity in the market continues to be strained, we plan to deliver strong premium and customer growth in target segments through 2021 (particularly SME Middle Market, Surety and Corporate Risk). The impact of COVID-19 on net claims for 2020 was $CAD269 million. This incorporates reported and expected future claims primarily in relation to business interruption losses related to COVID-19. Notwithstanding this, numerous class action lawsuits have been brought against Aviva Canada and the wider insurance sector relating to business interruption coverage. We expect to be engaged in defending these actions of a number of years.
Distribution channels In Canada, we have nearly 2.4 million customers; one of the largest customer bases in the Property & Casualty market. We have a strong, long-standing relationship with our network of over 800 independent brokers and a partnership with Royal Bank of Canada (RBC), the largest bank1 (market share 20%) and most valuable number in Canada1, with a significant portion of high net worth customers. However, shifting consumer behaviours and an evolving Canadian distribution landscape highlight the importance of accelerating our direct-to-consumer proposition.
We are continuing to invest in our broker channel through the modernisation of our policy system which will deliver an improved broker experience via a new broker portal, additional connectivity, and new self-serve capabilities.
Additionally, we have plans to build our Direct channel into a meaningful business for customers who wish to transact with Aviva digitally and in order to truly diversify our channel mix.
Key priorities for 2021: • Continue to strengthen our insurance fundamentals including pricing, underwriting, claims management, data science and risk and control capabilities.
By combining our insurance heritage and DNA with our skills and experience in asset allocation, portfolio construction and risk management, we provide a range of asset management solutions to our institutional, wholesale and retail clients.
We have a highly diversified range of capabilities, with expertise in real assets, solutions, multi-assets, equities and credit.
Our strategy is to support Aviva becoming the UK’s leading insurer and the go-to customer brand.
The key drivers of our strategy are • Customer: deliver our customers’ investment needs, placing ESG
and a rigorous risk and control culture at the core of our future strategies
• Simplification: streamline our business to become more efficient and deliver better customer outcomes
• Growth: continue to grow in both our Aviva client and external businesses
We differentiate ourselves in the market through our engaged approach and demonstrable leadership in sustainability, both through ESG propositions and how we invest. On climate change, where we are unable to influence companies to demonstrate a substantial commitment to tackle global warming as an investor, we are willing to use the ‘ultimate sanction’ of divesting.
Our leadership position in ESG is recognised with various industry awards and ratings: • Aviva Investors scores are above average in all modules of the
Operational highlights Products Concerns over the economic disruption caused by COVID-19 led to significant volatility in financial markets and elevated levels of investor activity throughout 2020.
Client appetite for lower-risk investment strategies was the primary driver of lower revenue for the year.
External net inflows of £1.7 billion in the period were driven by positive gross flows of £8.3 billion, with significant new business wins in Real Assets (£1.8 billion) and Credit (£3.2 billion).
Consistent delivery of strong investment performance is key to meeting our customers’ investment needs and remains a key priority.
• Aviva shareholder, where we develop investment solutions to support Aviva’s growth ambitions, primarily in the UK bulk purchase annuity and individual annuity markets.
Information’ section within the Annual Report and Accounts for further information.
Our external client distribution channels mainly comprise: • Large asset owners, including insurance companies, consultants, pension funds, and sovereign wealth funds; • Global financial institutions such as large private banks; and • In the UK, wholesale intermediaries to the retail customer including IFAs and wealth managers.
Key business strategic priorities for 2021 • Continued improvement in investment performance to deliver enhanced investment returns for our clients • Ongoing focus on simplifying our business to deliver efficiency benefits • Continuing to focus on our leadership position in sustainability through both ESG and how we invest
During 2020, we completed the disposals of a majority shareholding in Friends Provident International Limited, a majority shareholding in Aviva Singapore and our joint ventures in Indonesia and Hong Kong. We have also announced the disposals of our Italian joint venture, Aviva Vita, and our entire business in Vietnam.
Life new business Present value of new business premiums (PVNBP)1 12,834 15,240 Value of new business on an adjusted Solvency II basis
General insurance new business Net written premiums (NWP) 1,687 1,610 Combined operating ratio (COR)1 93.5% 96.6%
The COVID-19 pandemic highlights the need to consider re-adjusting operating losses coverage. In this context, in cooperation with the French Ministry of the Economy and Finance, the French Insurance Federation set up a working group to develop a framework for providing insurance for a systemic crisis, such as a global pandemic, via a public–private partnership.
Operational highlights Products In late 2018 the French government proposed new laws that seek to shift savings and investment towards the real economy, bringing about further opportunities for our savings and retirement business.
A key pillar of our strategy is to grow our pension business and to continue to transform our savings business mix to position us for longer-term low/negative interest rates while continuing to serve our customers’ needs through the provision of attractive unit-linked and capital-light products.
Distribution channels France operates through a diversified distribution network: the 4th largest agent network in France (approximately 1,000 tied agents), over 1,000 active brokers, and strong capabilities in wealth management through UFF (over 1,200 financial advisors) and Epargne Actuelle (1st Life broker in France). Our direct business is the second largest for General Insurance in France.
Our general insurance motor business represents the primary line of business in the Italian market, and we have improved its profitability thanks to a fixing programme (established in the second half of 2017) that reviewed our agency network to improve overall profitability across the motor business. In 2020, the motor business has been positively impacted by the restrictions to mobility caused by COVID-19 lockdown. We continue to improve the non-motor business, a more profitable general insurance segment which is still under-penetrated in Italy compared to other European countries. In particular, non-motor business has seen positive volume growth of 4% year-on-year.
Operational highlights Products In Italy, our hybrid product, a pivot of our distribution strategy in the savings business, offers customers a combination of attractive yields, stable performance with a partial capital guarantee together with protection and health riders. During the year we have consolidated on the success of the product introducing features to make the with profits component capital light. Since its launch in 2017 we have seen a compound annual growth rate of 44% to €3.1 billion (£2.7 billion) demonstrating its increasing attractiveness in the market.
Moreover, we’re finalising the insourcing of the contact centre with around 75% expected to be completed by the second half of 2021 and we have improved the MyAviva self-service capability.
Distribution channels In 2020 we have continued with our strategy to diversify the distribution network. We have: • Signed a new 10-year distribution agreement with Banca Patrimoni
1 The sale of Aviva France was announced on 23 February 2021 and is subject to consultation and customary conditions, including regulatory approvals, and is expected to complete by the end of 2021. Please see note 4(f) for further information. 2 CQP: Cessione del Quinto della Pensione; CQS: Cessione del Quinto dello Stipendo 3 Ranking ANIA (Italian National Association of Insurance Companies)
Key priorities for 2021 • Focus on optimising shareholder value under manage-for-value strategy • General Insurance growth gaining scale, by increasing volumes with digital and improving business mix • In our Life business we look to continue structuring capital light products attracting new distributors to recover size after the Aviva Vita sale.
Poland Overview In Poland we are the number two1 life insurer in the market with one of the largest life tied agent salesforces and two key bancassurance partnerships with Santander and ING. Our Polish business is efficient, has very strong brand recognition, and through innovation in product development and digitisation we are in a strong position to outperform the market.
We are number ten1 in the General Insurance market with well diversified distribution channels, including direct tied agents, brokers and bancassurance partnerships with Santander and ING. We also operate in the pension and asset management markets. We are the second largest pension fund in terms of AUM1 and fifth largest asset manager of open-ended investment funds.
Our personal life portfolio consists of unit-linked insurance with a significant protection element. The focus of new business sales has switched to pure protection distributed through tied agents and bancassurance partnerships.
Our General Insurance business has experienced a stable year with strong NWP growth of 12% in commercial property.
Distribution channels Aviva Poland has one of the largest agency networks in Poland which is the main distribution channel for the life business.
The MyAviva platform is very well embedded in Poland and 2020 has seen us reach over 500,000 active customers, introduce a series of new functionalities, and hit over 100,000 transactions.
Although, the COVID-19 pandemic has impacted new sales volumes we have consolidated our market leading position in the pensions market by focusing on improving customer persistency and developing better remote sales capabilities. Our new credit linked product not only enabled us to maintain our protection market share but has also increased our profitability with increased penetration and adjusted prices. In 2020, we have also implemented customer solutions such as a mobile application and customer journeys and segment based services to provide a better digitally enabled customer experience.
In February 2021, we announced the disposal of Aviva Turkey, see note 4(f) for further information.
China In China, we continue to have an excellent relationship with our partner COFCO. In 2020 our joint venture continued to focus on its core agency channel, maintaining a team of more than 12,000 agents nationwide as of December 2020 despite severe COVID-19 disruption early in the year. Throughout the year we have performed resiliently despite the challenges of COVID-19. This is as a result of our well-developed digital capability which allowed the business to rapidly adapt to lockdown and digitally accept and underwrite 99.5% of new policies. We also increased the number of online users of our health platform by 320,000 in the year.
Our joint venture won a number of awards this year, including two in the China Finance Summit 2020 which recognised our success in brand and innovation, as well as three other awards including the Annual Impactful Joint Venture Insurance Company, Ark Award of Value Growth Insurance Company and Excellent Life Insurance Company of the Year.
In doing so we, have a preference for retaining those risks we believe we are capable of managing to generate a return.
Our risk appetite framework This refers to the risks that we select in pursuit of return on capital deployed, the risks we accept but seek to minimise and the risks we seek to avoid or transfer to third parties, including quantitative expressions of the level of risk we can support (e.g. the amount of capital we are prepared to put at risk). In 2020, we integrated climate into our risk appetite framework – see ‘Our climate-related financial disclosure’ for more information.
Types of risk inherent to our business model: Risks customers transfer to us • Life insurance risk includes longevity risk (annuity customers living longer than we expect), mortality risk (customers with life protection), expense risk (the amount it costs us to administer policies) and persistency risk (customers lapsing or surrendering their policies).
• General insurance risk arises from loss events (fire, flooding, windstorms, accidents etc). Health insurance exposes the Group to morbidity risk (the proportion of our customers falling sick) and medical expense inflation.
• Market risks result from fluctuations in asset values, including equity prices, property prices, foreign exchange, inflation and interest rates.
• Asset management risk is the risk of customers redeeming funds, not investing with us, or switching funds, resulting in reduced fee income.
Market risk • Equity price1 • Property • Interest rate • Foreign exchange • Inflation
• Risk appetites set to limit exposures to key market risks • Active asset management and hedging in business units • Scalable Group-level equity and foreign exchange hedging programme • Pension fund active risk management • Asset and liability duration matching limits impact of interest rate changes and actions taken to manage guarantee risk, through product design
Life and health insurance risk • Longevity1 • Persistency • Mortality and morbidity • Expenses
• Risk selection and underwriting on acceptance of new business • Longevity swaps covering pensioner-in-payment scheme liabilities • Product development and management framework that ensures products and propositions meet customer needs • Use of reinsurance on longevity risk for our annuity business, including the bulk annuity buy-in transaction with the staff pension scheme
• Extensive use of data, financial models and analysis to improve pricing and risk selection
• Commercial paper issuance • Use of our limit framework covering minimum liquidity cover ratio and minimum Group Centre liquidity • Contingency funding plan in place to address liquidity funding requirements in a significant stress scenario
Asset management risk • Fund liquidity • Performance and margin • Product • Retention risks
Operational risk • Conduct • Legal & regulatory • People • Process • Data security • Technology • Brand and
Operational risk should generally be reduced to as low a level as is commercially sensible.
Life insurance risks Impacted because of increased mortality and morbidity as a result of COVID-19
Individual Life Protection – Mostly reinsured and we have strict underwriting criteria that limits our exposure to cohorts of the population at highest risk of COVID-19.
Group Life Protection – Potential greater net exposure, however we have taken pricing actions to limit our exposure from new business.
The impact of COVID-19 on our annuity products has been limited over 2020. However, we will continue to closely monitor the impact on the future longevity experience of our portfolio.
General insurance risks Primarily impacted as a result of business interruption and travel disruption consequential to government action to contain the COVID-19 virus spread
Travel – COVID-19 wording has been clarified to eliminate ambiguity, pricing adjusted to ensure risk is appropriately priced and further reinsurance cover has been purchased.
Credit & Market risks Impacted as financial markets have reacted to the potential economic impact of government actions to manage the pandemic and central bank monetary policy to mitigate the impact.
As a result of the significant financial market impact of COVID-19, particularly to credit and equity markets and interest rates, we took a number of actions to reduce our exposure to credit, equity and interest rate risk across all our markets. Actions include purchasing tactical derivative hedges, asset disposals and reallocations and reducing new business sales in certain markets and products.
Principal emerging trends and causal factors This table describes the emerging trends and causal factors impacting our inherent risks, their impact, future outlook and how we take action to manage these risks. We consider the individual and aggregate impact from these trends when designing and implementing our risk management processes: Key trends and movement Risk management Outlook
We limit the sensitivity of our balance sheet to investment risks. While interest rate exposures are complex, we aim to closely duration-match assets and liabilities and take additional measures to limit interest rate risk. We hold substantial capital against market risks, and we protect our capital with a variety of hedging strategies to reduce our sensitivity to shocks. We regularly monitor our exposures and employ both formal and ad hoc processes to evaluate changing market conditions. Other actions taken in the past include reducing sales of products with guarantees and shifting our sales towards protection and unit-linked products.
The Group remains exposed to the uncertain economic impact of COVID-19 and the decision for the UK to leave the European Union. Areas of uncertainty include: credit downgrades and defaults, interest rate reductions and falls in property prices. We continue to manage our key interest rate exposures, specifically in Italy and France. We have action plans in place to manage exposures should they move outside our risk appetites.
UK-EU relations – the nature of the UK’s relationship with the EU and the EU’s treatment of 3rd countries in respect of financial services has implications for our business model, in particular for our asset management and insurance businesses in the EU and how our UK and EU businesses interact.
Following the end of the decision for the UK to leave the European Union transition period, in 2021 we will continue to actively monitor developments in EU policy towards 3rd countries such as the UK, which could impact our business model and identify contingent management actions to address these. Specifically in respect of: relevant financial services equivalence decisions and the implications where not granted; additional restrictions to asset management delegation rights as a non-EU manager; limitations on reinsurance back to the UK by our EU subsidiaries; limitations on outsourcing back to UK-based experts by EU subsidiaries; restrictions on use by EU insurers (including Aviva’s Irish subsidiary) of UK branches for passporting; and restrictions on brokers ability to place business in the UK and restrictions over the transfer of personal data from the EU to the UK and other 3rd countries, including intra-group transfers for data processing.
EU pronouncements over recent years have expressed concerns over the systemic risk posed by dependence of the EU on critical financial infrastructure and services provided by 3rd countries, in particular the UK. Later in 2021 the EU will begin further consultations on changes to regulation of EU domiciled investment funds (AIFMD, UCITS) which may propose restrictions on delegation of asset management activities to the UK. In light of the ECJ’s judgement in the Schrems II case, the EU in 2021 will also be revisiting the safeguarding of EU personal data transferred to 3rd countries such as the UK and the legal obligations on the data transferor to ensure data is protected notwithstanding the existence of standard contract clauses (SCCs).
In the UK pressure on public finances may result in further erosion of tax relief for pension savings, and increase in Insurance Premium Tax. Also in the UK, the FCA following the conclusion of its consultation are expected to issue regulations preventing existing customers being charged higher premiums on renewal than new customers. The regulator in Ireland has expressed similar concerns over renewal pricing. In Canada, where motor premium increases are approved by provincial regulators, pressure to minimise these will persist. In Poland pension reform which could radically impact the pensions industry has been delayed until 2021, while regulatory pressure on charges on unit-linked products is likely to increase.
EU intends to conclude its review of Solvency II in 2021, while at the same time we expect greater clarity on how the UK might seek to diverge from Solvency II to better suit the needs of UK insurers and policyholders. Both reviews could impact the amount of prudential capital our businesses are required to hold in the UK and EU.
‘Our climate-related financial disclosure’ sets out how Aviva incorporates climate-related risks and opportunities into governance, strategy, risk management, metrics (e.g. Climate Value-at-Risk) and targets. We commit to aligning our business to the 1.5°C Paris Agreement target and plan to be a Net Zero company by 2040.
Aviva has invested significantly in cyber security introducing additional automated controls to protect our data and critical IT services. This investment has enhanced our ability to identify, detect and prevent cyber-attacks and we regularly test ourselves through our own ‘red team’ hackers to test our cyber defences and crisis management protocols. Aviva encourages a cyber aware culture by regularly undertaking activities such as employee phishing exercises, computer-based training and more regular communications about specific cyber threats.
Medical advances and healthier lifestyles – these contribute to an increase in life expectancy of our annuity customers and thus future payments over their lifetime may be higher than we currently expect.
We expect regulatory scrutiny (including PRA’s CP19/30 – Outsourcing and Third Party Risk Management) of outsourcing arrangements to remain high following financial difficulties faced by some providers.
• Our first priority for capital deployment is to reduce to and then maintain our Solvency II debt leverage ratio1 below 30%. • Once we have achieved this, to the extent that we have both excess capital above the top of our working capital range for the Solvency II
We actively manage our centre liquidity1 including stress testing our forecast cash remittances1 and centre liquid assets in order to support our dividend and deleveraging ambitions.
Capital deployment and allocation framework The Group’s economic value-added (EVA) framework ensures that we deploy our capital based on a robust assessment of value creation. EVA is calculated as the own funds generated less the Group’s cost of capital and this EVA approach is closely related to our Solvency II return on equity1 metric.
We use EVA to support strategic decision making, such as transformation projects or merger and acquisitions, business capital allocation, pricing, hedging, reinsurance and asset allocation.
(where possible), can be found in the ‘Other Information’ section of the Annual Report and Accounts. 2 Group adjusted operating profit is an APM which is used by the Group to supplement the required disclosures under IFRS. Please refer to note B in the ‘Accounting Policies’ section and to the ‘Other Information’ section within the Annual Report and Accounts for further information.
1 Regulation was introduced in France that allows French insurers to place the Provision pour Participation aux Excédents (PPE) into Solvency II own funds. At 31 December 2019 PPE was included in the France local regulatory own funds but was excluded from the estimated Group regulatory own funds, subject to confirmation of the appropriate treatment at Group level. The treatment has since been confirmed and PPE is included in the estimated Group regulatory own funds at 31 December 2020.
2 The 31 December 2019 Solvency II position includes three pro forma adjustments that relate to the disposal of FPI (£nil impact on surplus), the disposal of Hong Kong (£nil impact on surplus) and the potential impact of an expected change to Solvency II regulations on the treatment of equity release mortgages (£0.2 billion). The 31 December 2020 Solvency II position does not include proforma adjustments. Note that from 31 December 2020 no pro forma adjustments will be made for planned disposals.
3 This is an Alternative Performance Measure (APM) which provides useful information to enhance the understanding of financial performance. Further information on APMs, including a reconciliation to the financial statements (where possible), can be found in the ‘Other Information’ section of the Annual Report and Accounts.
Financial strength is key to the Group’s strategy and the Group’s estimated Solvency II shareholder cover ratio3 has remained resilient throughout a turbulent year and is 202% at 31 December 2020 (2019: 206%). The movement in the Solvency II shareholder surplus over the period is shown in the table below: Shareholder view
Our capital management ensured a stable solvency position in a tough economic environment: • We have maintained a stable new business strain despite higher volumes of bulk-purchase annuity volumes in the UK reflecting disciplined pricing and efficient use of reinsurance to conserve capital. In Europe, we have lowered with-profits volumes protecting solvency in the low interest rate environment.
• We maintained an active and disciplined approach to investment risk in 2020 which included reducing equity, interest rate and credit risk by changes in investment mix and additional hedging in response to the impact of the economic downturn from COVID-19.
Solvency II operating capital generation3 Solvency II OCG3 measures the amount of Solvency II capital the Group generates from operating activities. Capital generated enhances Solvency II surplus which can be used to support sustainable cash remittances3 from our business, which in turn supports the Group’s dividend as well as funding further investment to provide sustainable growth. Solvency II OCG3 by division is summarised in the table below: Solvency II OCG3 2020 £m
Solvency II operating own funds generation1 and Solvency II return on capital/equity1 Solvency II operating own funds generation1 and Solvency II return on capital/equity1 was first introduced in November 2019 and is now embedded in our management of capital. Solvency II return on equity (RoE)1 is calculated as: • Operating own funds generation less preference dividends, DCI and tier 1 note coupons divided by; • Opening value of unrestricted tier 1 shareholder own funds. Unrestricted tier 1 shareholder own funds represents the highest quality tier of capital and includes instruments with principal loss absorbing features such as permanence, subordination, undated, absence of redemption incentives, mandatory costs and encumbrances.
Cash remittances1 The table below reflects actual remittances1 received by the Group from our businesses, comprising dividends and interest on internal loans. Cash remittances1 are eliminated on consolidation and hence are not directly reconcilable to the Group’s IFRS statement of cash flows.
Core markets 1,359 1,909 Manage-for-value markets3 127 613 Other 14 75
3 We use a wholly owned, UK domiciled reinsurance subsidiary for internal capital and cash management purposes. Some remittances otherwise attributable to the operating businesses arise from this internal reinsurance vehicle. 4 UK & Ireland Life cash remittances include £250 million (2019: £nil) received in February 2021 in respect of 2020 activity. 5 UK & Ireland General Insurance cash remittances include £74 million (2019: £83 million) received in February 2021 in respect of 2020 activity. 6 Canada General Insurance cash remittances include £115 million (2019: £141 million) received in February 2021 in respect of 2020 activity.
Unrestricted Tier 1 20,850 20,377 Restricted Tier 1 1,317 1,839 Tier 2 6,740 5,794 Tier 36 355 337
Solvency II debt leverage ratio1 remains at 31% (2019: 31%). An increase in total debt was offset by an increase in Unrestricted Tier 1 own funds over 2020. The net increase in debt was driven by the issuance of 4.000% £500 million Tier 2 notes in June 2020 and 4.000% C$450 million Tier 2 notes in October 2020. These issuances were partially offset by redemption of the Group’s 5.9021% £500 million direct capital instrument in July 2020 and a reduction in commercial paper over 2020. For details of subsequent events relating to borrowings see note 52(g).
Note that: • Unrestricted Tier 1 capital includes Aviva’s ordinary share capital and share premium which are high quality instruments with principal loss absorbing features such as permanence, subordination, undated, absence of redemption incentives, mandatory costs and encumbrances. • Restricted Tier 1 includes preference shares and subordinated debt. None of these instruments include principal loss absorbency features and all qualify as restricted Tier 1 capital under transitional provisions. • Tier 2 capital consists of dated subordinated debt. The features of Tier 2 capital include subordination, a minimum duration of 10 years with no contractual opportunity to redeem within 5 years, absence of redemption incentives and mandatory costs and encumbrances. • Tier 3 capital consists of subordinated debt and net deferred tax assets after taking into account the ability to offset assets against deferred tax liabilities. The features of Tier 3 capital include subordination and a minimum duration of 5 years.
Responsibility Acting responsibly and sustainably means we can look after our customers and our people, help build thriving, resilient communities, and protect the planet.
Our people • Our aim is for our people to achieve their potential within a diverse, collaborative and customerfocused organisation. See Our people
Build resilient communities • We will help people handle the life-changing effects of a hotter planet. We will help more people get access to financial education and services. We will work towards healthier, more diverse, more inclusive communities that are better placed to bounce back from a crisis. See Corporate responsibility
Protect the planet • Aviva is a trusted climate change leader and we remain committed to tackling this vital issue. See Climate-related financial disclosure
Our Board considers it crucial that the Company maintains a reputation for high standards of business conduct. The Board is responsible for setting, monitoring and upholding the culture, values, standards, ethics and reputation of the Company to ensure that our obligations to our shareholders, employees, customers and others are met and Management drives the embedding of the desired culture throughout the organisation. The Board monitors adherence to our policies and compliance with local corporate governance requirements across the Group and is committed to acting where our businesses fall short of the standards we expect.
Our culture Our culture is shaped by our clearly defined purpose – with you today for a better tomorrow. As the provider of financial services to millions of customers, Aviva seeks to earn their trust by acting with integrity and a sense of responsibility at all times. We look to build relationships with all our stakeholders based on openness and transparency. We value diversity and inclusivity in our workforce and beyond, and the ‘Our people’ section of this report sets out how that underpins everything we do.
• 2020 has been dominated by COVID-19 and its impact on our customers, our people and the communities in which we operate. For our customers we moved quickly to expand our remote working capability to maintain strong levels of service for individual and commercial customers. We have provided extensive support for our people throughout the period of restrictions, focusing on wellbeing and mental health support, as well as practical assistance for working at home. Aviva has played a significant role in helping our communities, contributing more than £40 million to support community partners. While COVID-19 has been a tragedy for public health and the global economy, Aviva has continued to demonstrate resilience both in terms of financial strength and performance. Nonetheless, in the wake of the unprecedented challenges of COVID-19 we announced on 8 April 2020 the withdrawal of the recommended 2019 final dividend. This reflected the highly uncertain impact on the economy of COVID-19 and the urging of regulatory authorities publicly to exercise restraint in paying dividends. On 6 August 2020 at the Interim Results Announcement we declared a second interim dividend for 2019. On 26 November 2020 we provided an update on our dividend policy and declared an interim dividend for 2020. On 4 March 2021 we declared a final dividend for 2020.
Consistent with our strategic priorities, on 11 September 2020 we announced the sale of a majority shareholding in Aviva Singapore. The sale of Aviva Singapore was a first step in focusing our portfolio and demonstrated execution against our strategic priorities. On 30 November 2020 we announced completion of the transaction. During the fourth quarter we announced the sale of a major part of our Italian life business, Aviva Vita, with completion expected in the first half of 2021. We also announced completion of the disposals of our Indonesian joint venture and our Hong Kong joint venture. Finally, on 23 February 2021, we announced the sale of our French business, and on 24 February 2021 we announced the exit from our Turkish joint venture.
Stakeholder engagement The table below sets out our approach to stakeholder engagement during 2020: Stakeholders Why are they important to Aviva? What is our approach to engaging with them?
• As part of our COVID-19 response the Board discussed and supported the activities to support customers, including premium deferrals and the prioritisation of existing customers, particularly vulnerable customers, over new business.
Our people Our people’s well-being and commitment to serving our customers is essential for our long-term success.
• Through employee forums, global internal communications and informal meetings, the directors engage with our people on a wide range of matters and act on the outputs of our annual global engagement survey.
• Our people share in the business’ success as shareholders through membership of our global share plans.
• The Board recognises the benefits of a diverse workforce and an inclusive culture and as a result there has been significant activity and investment on Diversity and Inclusion, with a priority on gender and ethnic minorities particularly following the Black Lives Matter movement.
• An important part of our culture is the promotion of high legal, ethical, environmental and employee related standards within our business and among our suppliers. Before working with any new suppliers, we provide them with our Third-Party Code of Behaviour, and our interaction with them is guided by our Business Ethics Code 2020.
• The Board received an update on supplier risks and performance in December 2020, including how we treat suppliers fairly and equitably.
• Aviva and the British Red Cross have been working in strategic partnership since 2016 to build safer and stronger communities in the UK and beyond. Many of our people have volunteered in support of this work including as Community Reserve Volunteers and through a Global Mapathon, to help map some of the world’s most vulnerable communities, who otherwise could not easily be reached by aid organisations in times of crisis.
• During 2020 Aviva significantly increased community investment in light of COVID-19 to support vulnerable customers and the communities in which the Company operates. This included Aviva and the Aviva Foundation donating £10 million to the British Red Cross and other National Societies to support communities across our markets, including the creation of a hardship fund in the UK to provide financial support to those most in need.
• Since the end of 2018, through the Aviva Foundation, over £7 million has been granted to organisations delivering public benefit projects aligned to Aviva’s purpose, values, and expertise. The Aviva Foundation will continue these investments through 2021. For further information, see the ‘Corporate responsibility’ section of this Strategic report.
• More on how the Board incorporates climate-related risks and opportunities into our governance, strategy and risk management operations is included in ‘Our climate-related financial disclosure in this Strategic report.
• We maintain a constructive and open relationship with our regulators and have a programme of regular meetings between the directors and our UK regulators.
• The CCRC provides focus over this area through its oversight of the regulatory relationship and landscape.
Aviva’s diverse workforce includes over 28,000 colleagues, with more than 15,000 colleagues in our home market in the UK.
Our people are committed to doing their best for our customers every day and that didn’t change in 2020 despite the challenges of an exceptional year. Our focus has been on keeping them safe and supporting them so they can continue to look after our customers.
Our approach The focus of our global People teams is to transform the performance of Aviva through our people. The People strategy has been refreshed in line with our evolving business strategy and has the following aims: • Drive a step change in accountability and a more balanced performance culture with the customer at the heart of what we do. • Upskilling and reskilling our people around the capabilities required now and in the long-term. • Risk management embedded in every employee’s role and responsibilities. • Clearly defined behaviours for all our people aligned to our values that run through all our people interventions.
Once we could begin to open our offices again, we made sure they were COVID-19 secure and initially prioritised access for those employees who needed to come in for their job or for health or wellbeing reasons. Although it was not office-life as colleagues knew it, with temperature checks on arrival, one-way systems, and social distancing, feedback from those who returned was positive.
Engaging our people In 2020 our global employee opinion survey, the Voice of Aviva, showed another solid uplift in engagement, with 80% of colleagues saying they would recommend Aviva as a great place to work. The rise was driven by stronger belief in the Aviva strategy (up 12 points) and greater trust in senior leaders (up 7 points). Our colleagues are much clearer about our plans and how they can contribute to the business’ success.
Feedback on Aviva’s culture shows strong improvements in speed of decision-making and on customer and risk-focused behaviours. Three in four colleagues are having performance conversations quarterly or more often. This is an important lead indicator of wider leadership behaviour – listening to, coaching, recognising and supporting teams and also driving a step change in performance.
Our representative bodies meet regularly with members of the Group Executive Committee as well as members of their respective senior leadership teams. We believe that by doing so we encourage a culture of trust and open and honest communication that will help us ensure that our organisation is a better place to be. In 2020, Amanda Blanc, Group CEO, also attended and presented to the European Consultative Forum.
Diversity and Inclusion We want Aviva to be a place where people can be themselves, and we want our workforce to reflect the customers and communities we serve. It’s a fundamental part of living up to our purpose, key to continuing as a sustainable and successful business, and it helps contribute to fairer, more equal communities.
The death of George Floyd and the #BlackLivesMatter campaign received prominent attention at Aviva. The organisation heard directly from colleagues through safe listening sessions, two-way leadership communications and widespread use of our internal social media platforms. In September, Aviva published its BlackLivesMatter action plan on www.aviva.com and is committed to change by supporting colleagues, educating its people and acting in the wider community. Aviva are founder signatories of the CBI Race Ratio and the Canadian Black North Initiative.
Ethnicity • In 2019, a data campaign #ThisIsMe was launched to collect the diversity data of UK colleagues. The completion rate has progressed from 10% in 2019 to 53% in 2020. The data will be used to drive evidence-based actions and help set targets for ethnicity.
• In early 2020, an ethnic minority leadership programme was piloted with 18 employees and has proved very successful. It will run as one of Aviva’s leadership programmes in 2021 alongside the female leadership programme.
• In 2020, Aviva was a founder member of the CBI, Change the Race Ratio campaign.
Health and wellbeing The challenges of 2020 have shown the strength of the Wellbeing programme at Aviva. Our colleagues’ health and wellbeing continue to be at the forefront of decision making as we support our customers, our people and our business.
During the COVID-19 pandemic, we provided support to our people leaders and colleagues through two evolving guides – ‘Leading Virtually’ and ‘Working Virtually’ – sharing hints, tips, advice and resources to support individuals whether they were trying to balance work and home schooling or faced lockdown living alone. Leaders were encouraged to regularly check on the wellbeing of their team to make sure that working remotely, or ‘out of sight’, didn’t result in a loss of connection, and were provided with advice on topics such as motivation and isolation. So, while we may have been physically distanced, we encouraged our colleagues to remain socially connected.
We have also been sharing advice to help colleagues avoid the ‘always on’ culture that can surface when working from home, and with colleagues working flexible hours.
Feedback from our people globally suggests we’re getting this right. During lockdown we regularly asked our colleagues the question ‘I feel Aviva is sufficiently supporting my health and wellbeing in the current environment’. The positive response to the question ranged from 84% to 87% and was broadly echoed in the subsequent Voice of Aviva survey, with 79% of our colleagues saying they felt Aviva was supporting their health and wellbeing.
• DigiCare+ Workplace – this new app provides colleagues with access to a yearly health check (via pin prick blood test), second opinion service, digital GP, mental health and nutritionist support.
Aviva exists to be with people today for a better tomorrow. Acting responsibly and sustainably means we can look after our customers, protect the planet, and help build resilient communities that can thrive.
Building a better tomorrow Aviva has been taking care of people for more than 300 years. We aim to use our empathy and expertise to tackle the challenges facing our world. We have reviewed our responsible and sustainable business approach and over the coming years will focus our efforts on taking action on climate change, offering products that meet our customers’ evolving needs, and building stronger communities better placed to bounce back from a crisis.
Acting now on climate change To create a better tomorrow, we need to look after the planet we call home. Our approach to tackling climate change is backed by our long history as a leader in sustainable practices.
More details of our approach can be found in the ‘Climate-related financial disclosure’ section of this document and at www.aviva.com/climaterelated -financial-disclosure.
The table below fulfils the requirements of the UK Streamlined Energy and Carbon Reporting (SECR) framework, including our operational energy and carbon emissions. Aviva UK uses the Department for Environment, Food and Rural Affairs (DEFRA) methodology for carbon reporting and non-UK markets use emission factors from the International Energy Agency (IEA).
To date globally we have achieved a 76% reduction in CO₂e against our 2010 baseline (2019: 66%). This has been aided in 2020 by the reduction in travel and operational emissions as a result of COVID-19. This means we have exceeded our 2030 carbon reduction target (of 70% against a 2010 baseline). We will now be focusing on making our operations and supply chain Net Zero.
We have also offset any remaining emissions to ensure our business impacts have been ‘carbon neutral’ since 2006. We have helped make over 1.2 million people’s lives better since 2012 through our carbon offsetting projects. This includes our new long-term development project to provide clean cooking stoves in India.
Scope 1 (tCO2e) 11,749 8,386 14,207 9,354 16,198 10,780 Scope 2 location-based (tCO2e) 17,834 8,269 21,340 11,969 25,012 13,864
Total location-based emissions (tCO2e) 34,664 18,565 50,175 27,839 58,949 33,405 Carbon offsets3 (tCO2e) (34,664) (18,565) (50,175) (27,839) (58,949) (33,405)
Energy consumption (MWh)4 118,472 73,811 146,562 90,417 150,421 96,000 Scope 2 market-based (tCO2e) 7,738 — 9,370 192 11,166 93
Intensity ratios: Scope 1 & 2 location-based emissions (tCO2e) / £ million GWP 0.97 1.14 1.14 1.61 1.44 2.09 Total location-based emissions (tCO2e) / £ million GWP 1.14 1.27 1.61 2.11 2.06 2.83 Total location-based emissions (tCO2e) / employee 0.98 1.18 1.43 1.67 1.57 1.93 1 Assurance on emissions figures is provided by PricewaterhouseCoopers LLP and available at www.aviva.com/CRkpisandassurance2020 2 Emissions are included where Aviva has operational control, including JVs 3 Carbon offsetting through the acquisition and surrender of emissions units on the voluntary and compliance markets 4 Includes scope 1 and 2 energy kWh and fuel from company car use Notes: Scope 1: natural gas, fugitive emissions (leakage of gases from air conditioning and refrigeration systems), oil, and company owned cars. Scope 2: electricity Scope 3: business travel and grey fleet (private cars used for business), waste and water Location-based: A location-based method reflects the average emissions intensity of grids on which energy consumption occurs Market-based: A market-based method reflects emissions from electricity that companies have purposefully chosen
Purposeful products: Putting the customer at the centre We are committed to developing insurance and investment products and services that meet our customers’ needs and support their values.
In 2020 the impacts of COVID-19 were felt by our customers across the world. Aviva’s markets responded with a raft of adjustments to products and services to meet these unexpected needs. This included support for Aviva UK direct, Quotemehappy and General Accident home, motor and personal van customers who were experiencing severe financial difficulties as a result of COVID-19, by deferring their monthly payments and spreading payments over the remaining term of their policies.
We contacted customers who were within two years of their retirement date offering support and guidance through market volatility and extended our existing working from home cover to our home insurance customers free of charge. We also supported businesses’ shifting to home working, providing them with the same level of protection whilst they carried out their activities from employees’ homes.
We also put measures in place to support key workers, including extending cover for UK customers who are NHS workers to include additional breakdown, courtesy cars, priority repairs and enhanced home insurance cover at no additional cost. We insured personal vehicles for use in the course of healthcare work and delivery of food and essentials to elderly or vulnerable people in Ireland and free breakdown cover for healthcare workers in Canada. Aviva France’s package of support ranged from premium and rent deferrals, to the creation of a solidarity fund for people who could not defer.
More generally, in order to deliver great customer outcomes, we are committed to helping our 31.6 million customers protect what’s important to them and save for a bright future.
We know the importance of providing excellent customer service, as demonstrated through our businesses’ Net Promoter Scores® (NPS®), which are our measures of customer advocacy. Seven out of seven of our businesses are at or above the market average NPS®, which quantifies the likelihood of a customer recommending Aviva.
But we know that we do not always get it right and we take any complaints and feedback we receive seriously and investigate them thoroughly. Our customer service commitment is reflected in the Customer Experience Business Standard all our markets abide by (see the policies section of www.aviva.com/social-purpose).
Building resilient communities The COVID-19 pandemic has put an unprecedented strain on communities across the world. Aviva was proud to act fast by working with trusted partners to support those who needed help.
For example, in the UK, we pledged £18.5 million for the Association of British Insurers (ABI) COVID-19 support fund, as well as £5 million to NHS Charities Together, to help fund welfare and wellbeing for NHS employees, volunteers and patients; assistance for patients leaving hospital, and long-term mental health support for NHS workers. Other markets also supported local initiatives, including Italy’s donation of $200,000 to support the Mutual Aid Fund instituted by the Mayor of Milan, Aviva Poland’s support to Warsaw University who sought materials for printing PPE, and Aviva Singapore’s pledge to support Sayang Sayang Fund to extend help to healthcare professionals and specific communities that may be particularly impacted.
In addition to the donations given to specifically support COVID-19 this year, we committed £11.5 million to other local projects, making total community investment £54.5 million in 2020. Overall, this has helped 5.1 million people (2019: 1.2 million).
These additional community initiatives included a continuation of the Aviva Community Fund in France, Italy, the UK and Ireland. For example, following a successful pilot in 2019, a new look Aviva Community Fund officially launched in the UK in January 2020, in partnership with Crowdfunder UK, and ran on a quarterly cycle.
Our people continue to play a vital role in our community activity, and despite the restrictions put in place as a result of COVID-19, in total, our people globally have contributed more than 29,200 volunteering hours to support their local communities throughout 2020. They also gave or fundraised £1.8 million.
In 2020 the Aviva Foundation in the UK continued to invest unclaimed assets of shareholders through grants to charities and social enterprises. In 2020 the Foundation committed to giving £4 million to 10 non-profit organisations and social enterprises that, working with our business, can support our communities and vulnerable customers. This included funding the Financially Resilient Communities Programme, a consortium of local and national charities, working with communities to improve financial advice available for deprived communities.
At a Group level, the Chief Risk Officer provides Aviva’s Customer, Conduct and Reputation Committee (CCRC) with regular reporting on financial crime matters. These include Aviva’s anti-bribery and anti-corruption programme.
Our malpractice helpline, Speak Up, makes it easy to report any concerns in confidence, with all reports referred to an independent investigation team. In 2020, 41 cases were reported through Speak Up (2019: 89), with none related to bribery and corruption concerns. 25 cases reached conclusion, and 16 remain under investigation.
Secretary, is the Aviva Group Executive Committee member responsible for corporate responsibility and sustainability, and the topic has been covered by the CCRC four times during the course of 2020, as well as twice at the Aviva plc Board.
Details of the Company’s compliance with the Code, as well as the activities of the CCRC, can be found in the Directors’ and Corporate Governance report in the Annual Report and Accounts and online at www.aviva.com/investors/corporate-governance.
We also continue to work with trusted partners to enhance our approach. To mark United Nations Human Rights day on the 10th of December, we organised a Human rights and Modern Slavery workshop with the Slave Free Alliance, where through role play and solving business dilemmas, we worked with our people, including key people leaders, executives, Corporate Responsibility practitioners, risk business partners, procurement and supply chain colleagues, to understand the complexities of modern slavery and human trafficking, be able to spot the signs of it and know how to respond in the event that a case is identified. We remain committed to working with the UN Global Compact and key like-minded organisations as part of the UK Working Group on modern slavery.
Finally, we use our influence and connections to bring others together and enhance the industry’s wider understanding of, and impact on human rights. Moreover, we continue to work with the World Benchmarking Alliance (WBA) on the Corporate Human Rights Benchmark (CHRB).
To understand more about our wider Human Rights and Modern Slavery approach please consult our modern slavery statement1, as well as our Human Rights Policy and the Aviva Business Ethics Code 2020, which can all be found on aviva.com.
During 2020 AI continued to enhance their responsible investment processes. This work has included: • Targeting £10 billion of investments into UK infrastructure and real estate projects over the next three years, as pension funds and insurers continue to increase their appetite for such investments.
• Embedding our responsible investment philosophy, which sets out our responsible investment commitments as a business; • Continuing to implement specific ESG integration policies for each of our investment functions: Credit, Equities, Multi-Asset and Macro, Real Assets and Solutions; • Continuing the development of new products and solutions that meet the specific needs and values of our clients, including building a Sustainable Outcomes Funds Range linked to the United Nations Sustainable Development Goals (SDGs); and
We also continue to play our role as a responsible asset owner engaging with the companies, projects and assets we own on issues such as climate change, human rights and diversity. For example, as part of Climate Action 100+, Aviva Investors co-filed a resolution at BP to provide clarity on how the company’s strategy is consistent with the goals enshrined in the Paris Agreement. As a result, BP committed to being Net Zero for oil and gas extracted, significantly reduce carbon intensity for traded energy, and outlined a roadmap including a 40% reduction in oil and gas over the next decade while increasing new energy capex by ten times to £5 billion.
We recognise the need to encourage change not just with the companies we invest in, but in our industry and economy as a whole. Aviva is a founder member of the United Nations Global Investors for Sustainable Development (GISD) Alliance, which advises global policymakers on how to generate greater investment in sustainable development.
In October 2020, Amanda Blanc, Aviva Group CEO, attended the annual GISD meeting and talked about the coalition Aviva is leading to create an International Platform for Climate Finance (the IPCF) to bridge the gap between public financing needs and large scale private sector investment on climate change, as well as about the World Benchmarking Alliance (WBA). We co-founded the WBA alongside the United Nations Foundation and others to establish public, transparent and authoritative league tables, ranking companies on their contribution to the SDGs. In 2020, the WBA published a suite of rankings addressing food and agriculture, digital inclusion and gender equality and empowerment.
In 2020, the Plc Board reviewed and approved the 2021-2023 business plan, which incorporates our climate metrics, operating risk limits and tolerances. This allows climate-related risks and opportunities to be further embedded in our day-to-day decision making in line with our wider risk appetite. In 2021, the Plc Board also reviewed and approved our new climate change plan as well as our Net Zero Asset Owner Alliance target.
Further, in line with the Powering Past Coal Alliance (PPCA) Finance Principles we commit to avoiding exposure to equity and debt instruments of companies that plan to generate electricity from unabated coal beyond the PPCA timeframe1.
In April 2020, we added a further 42 thermal coal mining and power companies to our investment Stoplist and removed one which met our engagement criteria. This took the total number of companies with revenue from coal on the Stoplist to 59. We have divested any equity holdings we had in the Stoplist and expect to run-off existing fixed income where there may be detrimental financial impact of doing so immediately.
We integrate consideration of long-term sustainability issues into the products and services we offer. We continue to develop our customer ESG strategy and offer climate conscious and ethical funds such as the stewardship fund range. For example, in the UK we have added these funds as a default strategy option for our corporate pension customers. In France we offer Socially Responsible Investment (SRI) options. Both our French and UK businesses have added AI Climate Transition European Equity and Global Equity Funds to savings and investment platforms.
Insurance – We seek to grasp opportunities to support the transition to a low carbon economy and promote activities that will secure a better future for our customers and wider society.
When paying out claims, we also have the opportunity to reduce our environmental impact through repair and restoration where possible. In the UK, our improved drying process after flood claims reduces the associated carbon emissions.
As the frequency and intensity of extreme weather increases, we have where possible been working to reduce the impact on our customers’ lives, livelihoods and build resilience to climate change. We put specific information in the media to help customers minimise the impact of particular storms or floods.
We sponsored a new code of practice for flood resilience released in January 20203. The code covers all aspects of prevention and resilience to make properties more resilient to flood. We have also been working with Business in the Community supporting an online tool for small business resilience – ‘Would you be ready?’.
Operations – As a business it is important that we lead by example focusing on reducing our environmental impact through energy efficiency, clever use of technology and communications, using renewable energy sources and minimising the carbon intensity of our car fleet. Our operations have been carbon neutral since 2006, through reducing our emissions year-on-year and offsetting any remaining emissions. Our ambition over time is that our business operations should have a positive climate impact. We have already reduced our emissions by 76%5.
1 Noting that coal power phase-out is needed by no later than 2030 in the OECD and EU and no later than 2050 in the rest of the world. 2 3 4 In line with PPCA Finance Principles. 5 Assurance on emissions figures is provided by PricewaterhouseCoopers LLP and available at www.aviva.com/CRkpisandassurance2020
Since 2010, we have had a long-term reduction target of 70% by 2030, which we have now met ten years earlier than promised. We are committed to using 100% renewable electricity Group-wide by 20251. In 2019, we commissioned a ‘first of its kind in the UK’ solar carport installation for our Norwich office.
The Corporate Responsibility section includes an expanded table featuring our energy use and carbon emissions data to reflect the new requirements of the UK Streamlined Energy and Carbon Reporting (SECR) framework.
Accountability and Leadership – We are strong advocates of the need for listed companies to publish consistent information to help make better decisions and promote the transition to Net Zero carbon emissions by 2050. More accurate information will help financial institutions to manage climate-related risks and grasp opportunities to support the transition. It will also help our customers and investors understand how their money is invested and so make more informed decisions.
Risk management, metrics and targets Rigorous and consistent risk management is embedded across Aviva through our risk management framework. This framework sets out how we identify, measure, monitor, manage and report on the risks to which our business is, or could be, exposed (including climaterelated risks). In 2019, we updated our risk policies (including our risk management framework policy). In 2020, we updated our business standards (a key component of our risk management framework) to further integrate climate-related risks and opportunities across all risk and control management activities.
We integrated climate into our risk appetite framework, defined our climate risk preference and incorporated climate risks into our 20212023 business plan, to facilitate risk-based decision-making. Aviva considers climate change to be one of the most material long-term risks to our business model and its impacts are already being felt. Given its materiality and proximity, we are acting now to mitigate and manage its impacts both today and in the future. Through these actions, we continue to build resilience to climate-related transition, physical and liability (litigation) risks including the risk of assets becoming stranded.
We have developed models and tools to assess and monitor3 the potential impact on our business of different Intergovernmental Panel on Climate Change (IPCC) scenarios. Each IPCC scenario describes a potential trajectory for future levels of greenhouse gases and other air pollutants. These can be mapped to likely temperature rises: 1.5°C (aggressive mitigation), 2°C (strong mitigation), 3°C (some mitigation) and 4°C (business as usual). The IPCC Global Warming of 1.5°C report, published in October 2018, highlights the need to take dramatic action now to keep warming below 1.5°C and the potential severe consequences if this is not achieved.
Climate VaR includes the financial impact of transition risks and opportunities. This covers the projected costs of policy action related to limiting greenhouse gas emissions and projected profits from green revenues arising from developing new technologies and patents. In addition, it captures the financial impact of physical risks from extreme weather (e.g. flood, windstorm and tropical cyclones) and chronic effects (e.g. rising sea levels and temperature), although we recognise that the most extreme physical effects will only be felt in the second half of the century. We also recognise that there is a growing trend in climate-related litigation and have assessed its potential exposure accordingly.
1 Via our RE100 commitment. RE100’s purpose is to accelerate change towards zero carbon grids, at global scale. Aviva has signed up to the commitment pledging to purchase or generate 100% of our global electricity from renewable sources by 2025. 2 International Platform for Climate Finance to be created at Glasgow COP26 by the UN Climate Change Framework Convention Conference Presidency to help UN member states ensure that their public and private finance flows become consistent with the pathway towards low greenhouse gas emissions and climate-resilient development set out within the Paris Agreement target. 3 We developed a dynamic tool that allows us to monitor our climate metrics and supports our risk management, governance and reporting processes. 4 Low carbon infrastructure debt and equity; such as Solar photovoltaics (PV), offshore & onshore wind, new energy centers reducing users’ demand for energy, waste to energy, green hydrogen generation, battery storage, low carbon public transport & electric vehicle charging infrastructure and energy efficient buildings. Green bonds that meet Climate Bonds Initiative’s requirements, Social bonds and Sustainability bonds, Green loans and specific climate-related funds (such as the Climate Transition fund range). To determine the scope of our green assets, we have used “our and our customers assets” this includes all shareholder, with-profits and unit linked assets but excludes Aviva Investors’ third-party client mandates.
Our carbon foot printing intensity has reduced compared to last year in line with our 25% NZAOA reduction target by 20253. The utilities sector is the largest single contributor to the carbon intensity. Our objective over time is to reduce the carbon intensity to align our investment portfolio to the Paris Agreement target. To achieve this, our first goal is to drive change in the companies we invest in through direct engagement. We also reserve the right to reduce our exposure to the intensive companies who are not making the transition to a low carbon economy and move capital towards those who are.
Weather-related losses – We build the possibility of extreme weather events into our pricing to ensure it is adequate and monitor actual weather-related losses versus expected weather losses by business (net of reinsurance). Catastrophic event model results are supplemented by in-house disaster scenarios. Our general insurance business exposure is limited by being predominantly in Northern Europe and Canada. We require our general insurance businesses to protect against all large, single catastrophe events in line with local regulatory requirements, or where none exist, to at least a 1-in-250year event.
We fully expect existing frameworks, tools and metrics will evolve over time and improve in the light of new research, data and emerging best practice. To this end, we are working collaboratively with the UN Environment Programme Finance Initiative, peers, academics, professional bodies, regulators, governments and international agencies to build robust, comprehensive and effective tools and approaches. These will enable the potential business impacts of climate-related risks and opportunities to be assessed and promote more informed understanding of climate-related risks and opportunities by investors, lenders, insurance underwriters, investment managers and others.
Central Services UK Limited information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information (the “Information”) from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness, of any data herein and expressly disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose. The Information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for, or a component of, any financial instruments or products or indices. Further, none of the Information can in and of itself be used to determine which securities to buy or sell or when to buy or sell them. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
3 The target is set using carbon intensity by revenue metric (scope 1 and 2) covering credit, equities and direct real estate holdings. 4 In 2019, the methodology was based on scope 1 emissions.
Ca rb on in te ns ity d at a co ve ra ge
In this section Page Chair’s Governance Letter 65 Our Board of Directors 66 Directors’ and Corporate Governance report Nomination and Governance Committee report Risk Committee report Audit Committee report Customer, Conduct and Reputation Committee report Other statutory information Directors’ Remuneration report
Remuneration Committee report 93 Remuneration in context 96 Directors’ Remuneration Policy 98 Annual report on remuneration 104
Governance at Aviva Our Corporate Governance Report describes how the Board and its Committees operated during 2020. The COVID-19 pandemic changed how many of us worked during 2020, and the Aviva Board was no different. We had to find new ways of working to continue governing the Group for the benefit of our customers, our shareholders and our people.
For the Aviva Board this has resulted in tangible changes. We met remotely and more frequently to understand and consider how the pandemic was affecting our business operations, our risk and control environment and the markets in which we operate. Our people moved to homeworking, as did many of our customers, and our businesses had to adapt. We monitored the financial markets’ response to the pandemic, and the impact of those market movements on Aviva. Despite this our operational and financial strength has meant that we have continued to be there for our customers.
While 2020 has been a challenging year operationally, the Board continued to focus on our strategy and how we deliver sustainable, longterm growth for our shareholders. Following the appointment of Amanda Blanc as Group CEO, we have reset our strategy to focus on our three core markets − the UK, Ireland and Canada – and we are focused on transforming our performance and ensuring our financial strength. The Board played a key role in providing challenge and input into the new strategy to ensure that the strategy promotes the long-term sustainable success of the Company, generates value for shareholders and contributes to wider society. The pandemic will not last forever, and the Board has continued to set aside time to look to the future and not just focus on the challenges of today, and our strategy will support Aviva in the challenges we face in the years ahead.
Board Changes The Board has seen several changes during the year. Sir Adrian Montague retired as Non-Executive Chair on 27 May 2020 and retired from the Board on 31 May 2020 after eight years on the Board (six as Chairman). I was appointed Non-Executive Chair on 27 May 2020. Following my appointment as Chair, Patrick Flynn was appointed as Senior Independent Director, on 7 September 2020.
With the appointment of Amanda and me to the Group CEO and Chair roles respectively, we needed to replenish the Board membership. On 1 December 2020, Mohit Joshi and Jim McConville were appointed as Independent Non-Executive Directors, with Jim also becoming Chair of the Customer, Conduct and Reputation Committee. Subsequently on 1 January 2021, Pippa Lambert also joined the Board as an Independent Non-Executive Director. Jim, Mohit and Pippa are great additions to the Board, and I look forward to working with them. Details of the search and selection process for all these appointments are set out in the Directors’ and Corporate Governance report.
Dividend The Aviva dividend is of course important to our shareholders, but on 8 April 2020, we announced the decision to withdraw the recommendation to pay the 2019 final dividend to ordinary shareholders. This decision was taken in the wake of the unprecedented challenges presented by COVID-19 and our regulators and other supervisory bodies urging restraint on dividend payments. The Board continued to keep the dividend under review as the year progressed, both in terms of the COVID-19 pandemic and our strategy to focus on our businesses in the UK, Ireland and Canada, and was pleased to declare a 2019 second interim dividend of 6.0p on 6 August 2020. On 26 November 2020 we announced a new dividend policy and capital framework supported by the capital and cash generated in the core markets and a 2020 interim dividend of 7.0p. Then in March 2021, we announced a final 2020 dividend of 14p. The Board believes that the dividend policy and capital framework announced is sustainable and will be resilient in times of stress.
Preference Shares On 26 October 2020 the FCA published the outcome of its investigation into Aviva’s announcement on preference shares made in March 2018. The FCA found that Aviva contravened certain provisions of the Listing Rules and the Disclosure Guidance and Transparency Rules by failing to take reasonable care to ensure that information in the announcement was not misleading and did not omit anything likely to affect the import of the information in the announcement. We have accepted the FCA decision and lessons have been learned. We are sorry for the uncertainty created by the March 2018 announcement and in July 2018 set up a discretionary goodwill scheme for impacted Preference Shareholders.
Code Compliance We have complied with the 2018 UK Corporate Governance Code (the Code) throughout the year, other than for a short period with provision 12 of the Code, when there was a period between the appointment of a new Senior Independent Director and when I became Chair. A full explanation is provided in the Directors’ and Corporate Governance report. We set out how we have applied the principles of the Code in the Directors’ and Corporate Governance report and describe how we have performed our duties under s.172 of the Companies Act 2006 within the Strategic report.
Amanda Blanc ■ Position: Group Chief Executive Officer (CEO) Nationality: British Committee Membership: N/A Tenure: 1 year 2 months. Appointed to the Board as a Non-Executive Director in January 2020 and as CEO on 6 July 2020 Skills and Experience: Amanda started her career as a graduate at one of Aviva’s ancestor companies, Commercial Union. Since then she has held senior executive roles across the insurance industry. Amanda was previously CEO at AXA UK & Ireland, and CEO, EMEA & Global Banking Partnerships at Zurich Insurance Group. Amanda has also held executive leadership positions at Towergate Insurance Brokers, Groupama Insurance Company and Commercial Union. Amanda was previously a management consultant at Ernst & Young, working on transformational assignments. Amanda has served as Chair of the Association of British Insurers; Chair of the Insurance Fraud Bureau and President of the Chartered Insurance Institute. Amanda’s broad executive experience in the insurance industry makes her well qualified to continue to build Aviva as a highperforming, innovative and customer-centric business. External Appointments: Chair of the Welsh Professional Rugby Board and a member of the UK Government’s Financial Services Trade Advisory Group.
Jason Windsor ■ Position: Chief Financial Officer Nationality: British Committee Membership: N/A Tenure: 1 year 6 months. Appointed to the Board and as Chief Financial Officer in September 2019 Skills and Experience: Jason became Interim Chief Financial Officer on 1 July 2019 and was previously Chief Financial Officer of Aviva UK Insurance. Jason joined Aviva in 2010 and has extensive experience of the Group, including as Chief Capital and Investments Officer, and as a member of the Executive Committee. Jason has a proven track record as CFO of the UK Insurance business and an in-depth understanding of Aviva and its markets and brings a strong analytical and commercial perspective to his role as Group CFO. External Appointments: N/A.
Belén Romana García ▲ Position: Independent Non-Executive Director Nationality: Spanish Committee Membership: Risk Committee (Chair), Audit Committee, Customer, Conduct and Reputation Committee, Nomination and Governance Committee
Pippa Lambert ▲ Position: Independent Non-Executive Director Nationality: British Committee Membership: Remuneration Committee, Customer, Conduct and Reputation Committee, Nomination and Governance Committee Tenure: 2 months. Appointed to the Board in January 2021 Skills and Experience: Pippa was previously Global Head of Human Resources at Deutsche Bank where she was responsible for leading the development of a successful and progressive HR transformation program, focused on improving the group’s culture, diversity and inclusion and digital agendas. Prior to that, Pippa was Group Head of Reward at the Royal Bank of Scotland from 2011 to 2013 where she worked closely with the RBS Board on the redevelopment and restructure of the bank’s compensation and benefit program. Pippa’s skill set will contribute significantly to the Board in areas relating to people and reward matters. External Appointments: Trustee at Breast Cancer Haven and a member of the Senior Salaries Review Board.
Kirstine Cooper ◆ Position: Group General Counsel and Company Secretary Nationality: British Committee Membership: N/A Tenure: 10 years 3 months. Appointed as Company Secretary in December 2010 and a member of the Executive Committee in May 2012 Skills and Experience: Kirstine has over 25 years’ experience at Aviva and is a trusted advisor to the Board. As a qualified solicitor Kirstine is able to execute the role of Company Secretary by advising the Board on governance issues and the regulatory environment. Kirstine established the legal and secretarial function as a global team and is responsible for the provision of legal services to the Group. She also leads the Group investigations team. During March 2016 to March 2017, Kirstine was the Commissioner on the Cabinet Office’s Dormant Assets Commission which was tasked with identifying new pools of dormant assets and working with industry to encourage the contribution of these assets to good causes. External Appointments: Trustee of the Royal Opera House and Non-Executive Director of HM Land Registry. Kirstine is also Insurance and pension champion for an expanded Dormant Assets scheme.
The full biographies for all our Board and Executive Committee members are available online at www.aviva.com/about-us
The Strategic report discloses information on our engagement with our employees, suppliers, customers and other stakeholders. In line with the Companies Act 2006 Regulations, further information on how the directors have performed their duties under section 172 of the Companies Act 2006 is also contained in the Strategic report.
Changes to the Board There were several changes to the Board during 2020. Following a thorough external and internal selection process, George Culmer was appointed as Non-Executive Chair of the Company on 27 May 2020. George succeeded Sir Adrian Montague, who retired from the Board on 31 May 2020. Sir Adrian had been appointed to the Board in January 2013 and became Senior Independent Director in May 2013, and Chairman in April 2015. George was appointed as a NonExecutive Director of the Company on 25 September 2019 and was appointed as the Senior Independent Director with effect from 1 January 2020. George brings extensive experience in insurance and broader financial services to the role.
On 6 July 2020, Maurice Tulloch stepped down as Group Chief Executive Officer (CEO) and retired from his position on the Board. Maurice joined Aviva in 1992 and held a number of senior positions in the business during his time with the Company. He joined the Board in 2017 and was appointed as Group CEO in March 2019. After a rigorous search process, involving the assessment of highly talented internal and external candidates, the Board unanimously agreed to appoint Amanda Blanc as Group CEO. Amanda Blanc had joined the Board as a Non-Executive Director on 2 January 2020. She was formerly CEO at AXA UK & Ireland, and CEO, EMEA & Global Banking Partnerships at Zurich Insurance Group.
We were delighted to appoint two Non-Executive Directors to the Board on 1 December 2020. Jim McConville has assumed the role of Chair of the Customer, Conduct and Reputation Committee and is a member of the Audit, Risk and Nomination and Governance Committees. Mohit Joshi has become a member of the Risk and Nomination and Governance Committees. Jim was previously Group Finance Director of Phoenix Group, where he was responsible for all aspects of the Group’s financial strategy and management and during which he led the transition programme bringing Phoenix and Standard Life Assurance together. Prior to that, he was Chief Financial Officer of Northern Rock from 2010 to 2012, and prior to that, he worked for Lloyds TSB Group (now Lloyds Banking Group plc) in a number of senior finance and strategy related roles. Mohit is the President of Infosys, a global leader in next-generation digital services and consulting.
We were also delighted to appoint a further Non-Executive Director to the Board on 1 January 2021 with significant experience in global financial services, people strategies and transformation programmes. Pippa Lambert has become a member of the Remuneration, Nomination and Governance and Customer, Conduct and Reputation Committees. Pippa was previously Global Head of Human Resources at Deutsche Bank where she was responsible for leading the development of a successful and progressive HR transformation programme, focused on improving the group’s culture, diversity and inclusion, and digital agendas. Prior to that, Pippa was Group Head of Reward at the Royal Bank of Scotland from 2011 to 2013 where she worked closely with the RBS Board on the redevelopment and restructure of the Bank’s compensation and benefits programme.
The Board As at the date of this report the Board is comprised of the Non-Executive Chair, two Executive Directors and seven independent Non-Executive Directors (NEDs). Details of the role of the Board and its committees are described in this report. The duties of the Board and of each of its committees are set out in the respective Terms of Reference. Our committees’ Terms of Reference can be found on the Company’s website at www.aviva.com/committees and are also available on request from the Group Company Secretary. The Terms of Reference list both matters that are specifically reserved for decision by our Board and those matters that must be reported to it. The Board delegates clearly defined responsibilities to its committees and reports from the Audit; Customer, Conduct and Reputation; Nomination and Governance; and Risk Committees are contained in this report. A report from the Remuneration Committee is included in the Directors’ Remuneration report.
Board diversity and inclusion Diversity at Aviva includes, but is not limited to, gender and ethnicity, and is inclusive of all strands of diversity including skills and experience, geographic and social background, disability and sexual orientation. Supporting and embracing diversity and inclusion, and valuing difference, are integral parts of our culture. The ways in which we seek to put into practice these values are set out in our Board Diversity and Inclusion Statement, which supports our Nomination and Governance Committee’s approach to succession planning. This is closely linked to our Group-wide Global Inclusion and Diversity Strategy (Diversity Strategy), which sets out how we implement our policies to increase diversity and inclusion throughout the Group. Board diversity is monitored by the Nomination and Governance Committee which reviews the balance of skills, knowledge, experience and diversity of the Board and leads on succession planning for appointments to the Board and the senior executive team. Our Board skills matrix supports this approach enabling us to map the range of diversity of skills, knowledge and experience of the Board and link these to our strategy.
The charts below illustrate the diversity of the Board and senior management as at the date of this report.
Tenure 5-10 years 3 — 3 4 years — — — 3 years — — — 2 years — — 2 1 year 2 2 5 <1 year 3 — 4
Board activities during 2020 Strategy and business plans • Approved the revised strategic priorities for the Aviva Group, which were announced in conjunction with our Interim Results on 6 August 2020. The three strategic priorities for the Group are: focus the portfolio, transform performance and financial strength
• Implemented a new dividend policy and capital framework, aligned with Aviva’s strategic priorities; to deliver further value to shareholders by returning excess capital above 180% Solvency II shareholder cover ratio1, once our target Solvency II debt leverage target ratio1 has been reached
Oversight of risk and risk management • Received and discussed reports from the Chief Risk Officer (CRO), and assessed the Group’s significant risks and regulatory issues
• Approved the Group’s risk appetite and risk policies which provide the risk framework for managing risk across the Group
• Reviewed the effectiveness, challenges and management action plans in relation to the Group’s Operational Risk and Control Management Framework
• Reviewed the Group’s strategy on climate related financial risk in line with regulatory requirements
COVID-19 • Assessed the impact of the COVID-19 pandemic on our customers, our people and the communities in which we operate • Approved a rapid expansion of our remote working capability to maintain strong levels of service for individual and commercial customers
Financial reporting and controls, capital structure and dividend policy • Discussed reports provided by the Group Chief Financial Officer and by the Group’s committees on key matters of financial reporting, providing the opportunity for the Board to input and challenge where necessary
• Monitored the Group’s financial performance and financial results, withdrew and subsequently reintroduced dividend payments to ordinary shareholders due to significant uncertainties presented by COVID-19
• Assessed the Group’s capital and liquidity requirements, arising from the Group’s strategy and Group Plan, in addition to the challenges presented to the Group’s markets by COVID-19
People, culture, succession planning and Board effectiveness • Oversaw the search process, reviewed candidates and approved the appointment of George Culmer as Non-Executive Chair and Amanda Blanc as Group CEO following recommendations from the Nomination and Governance Committee
• Following recommendations from the Nomination and Governance Committee, approved the appointment of the two Non-Executive Directors to the Board during 2020 and one Non-Executive Director to the Board at the beginning of 2021
• Discussed the current Group culture, its alignment with strategy, and how it has been further strengthened during the year
Stakeholder engagement We report on our stakeholder engagement and other relevant matters in the ‘Section 172 (1) statement and our stakeholders’ section of the Strategic report. This outlines how the Board has engaged with our principal stakeholder groups. The Board considers stakeholder engagement, including engagement with our workforce to be a matter of strategic importance.
Board and committee structure The Board is collectively responsible for promoting the long-term, sustainable success of the Company through delivering excellent outcomes for our customers, seeking to generate value for shareholders while fulfilling our responsibilities to our stakeholders and contributing positively to the societies in which we operate.
One of the Board’s key roles is to determine our shared purpose and to set and uphold the Group’s values, standards and ethics which combine to create our corporate culture. We recognise that there is a clear link between our culture and our conduct, both with regards to our customers and to the way in which governance operates in the Group, and our policies, processes and behaviours in relation to these issues are closely monitored by the Board. The Board is also responsible for setting the Group’s risk appetite and monitoring the operation of our control’s frameworks. It also seeks to maintain an appropriate dialogue with shareholders on strategy and remuneration.
The Board has established certain principal committees to assist in fulfilling its oversight responsibilities, providing dedicated focus on the areas set out below. Each committee chair reports to the Board on the committee’s activities after each meeting. Full details of the responsibilities of the Board committees are set out later in this report and in the Directors’ Remuneration report.
Assists the Board in its oversight of Board composition; Board and senior executive succession; talent development; diversity and inclusion initiatives; operation of the Group governance framework; and Aviva’s subsidiary governance principles.
Assists the Board in its oversight of customer, conduct and reputation issues including operational risks related to customer and business conduct; the Group’s customer strategy and customer conduct obligations; oversight of the Group’s brand, reputational risk profile, data governance and data privacy; and corporate responsibility.
Time commitment It is vital to the proper functioning of our Board and committees that each Non-Executive Director is able to commit sufficient time to their role in order to discharge their responsibilities effectively. In January 2020 the Nomination and Governance Committee assessed the Non-Executive Directors’ time commitment considering both the time required for Aviva Board and committee appointments and the number and nature of the directors’ external commitments. All Non-Executive Directors have demonstrated they have sufficient time to devote to their present role within Aviva, including during any potential periods of corporate stress. George Culmer became a Non-Executive Director of Rolls Royce plc on 2 January 2020 and Belén Romana García became a Non-Executive Director of Bolsas y Mercados Españoles on 30 July 2020. The time commitment and potential conflicts involved were assessed by the Nomination and Governance Committee which determined that George and Belén had sufficient time to commit to the Aviva Board and committee appointments.
The Senior Independent Director (SID) reviewed the time commitment of the Chair.
Independent advice All directors have access to the advice and services of the Group Company Secretary in relation to the discharge of their duties on the Board and any committees they serve on. Furthermore, any directors may take independent professional advice at the Company’s expense. During the year, no directors sought to do so.
The Company arranges appropriate insurance cover in respect of legal actions against its directors and has also entered into indemnities with its directors as described in the ‘Other Statutory Information’ section in this report.
The role of the SID is to provide a sounding board for the Chair and to serve as an intermediary for the other directors where necessary. The SID should be available to shareholders should they have concerns they have been unable to resolve through normal channels, or when such channels would be inappropriate.
A structured and tailored induction programme was prepared for each of our three new Non-Executive Directors appointed. This covered, amongst other matters, the current strategic and operational plan; meeting packs and minutes from recent board meetings; stakeholder engagement; organisation structure charts; a history of the Group; role profiles; and all relevant policies, procedures and other governance material. The induction also included meeting key members of the management team. Any knowledge or skill enhancements identified during the directors’ regulatory application process would also be addressed through their induction programme.
Board calendar During 2020, 28 Board meetings were held, of which thirteen were scheduled meetings and fifteen were additional meetings called at short notice. The additional meetings were primarily called to address the impact of the COVID-19 pandemic. In addition, the Board delegated responsibility for certain items to specially created Board committees, which met nine times to discuss these particular items.
If any Directors are unable to attend a meeting, they can communicate their opinions and comments on the matters to be considered via the Chair of the Board or the relevant committee chair.
The Board usually visits different markets each year, however, due to the COVID-19 pandemic, no international visits were held during 2020. In June 2020, the Board held its annual strategy meeting via teleconference to review progress against our strategic priorities plan and to consider how it should be further developed to ensure we deliver on our commitments to our shareholders and our stakeholders. Following the meeting, revised strategic priorities for the Aviva Group were announced on 6 August 2020.
Michael Mire9 28/28 4/5 13/13 12/12 11/11 1 George Culmer acted as a Non-Executive Director in the period 1 January 2020 until 27 May 2020 when he was appointed Chair. During this period George was recused from the Nomination and Governance Committee meetings regarding his appointment. George was unable to attend one Board meeting due to illness and one Risk Committee due to a prior commitment. 2 Sir Adrian Montague acted as Chair until 31 May 2020 when he retired from the Board and the Nomination and Governance Committee. During this period Sir Adrian was recused from the the Nomination and Governance
Committee meetings regarding his succession 3 Amanda Blanc acted as Non-Executive Director from 2 January 2020 until 6 July 2020 when she was appointed as CEO. 4 Maurice Tulloch acted as Group CEO until 6 July 2020 when he retired from the Board. 5 Jason Windsor did not attend two Board meetings which concerned the CEO search process. 6 Patricia Cross was unable to attend one Board meeting and a Nomination and Governance Committee meeting due to a prior commitment. 7 Mohit Joshi was appointed to the Board as a Non-Executive Director on 1 December 2020. 8 Jim McConville was appointed to the Board as a Non-Executive Director on 1 December 2020. 9 Michael Mire was unable to attend one Customer, Conduct and Reputation Committee meeting due to a prior commitment.
A new dividend policy and capital framework was put in place on 26 November 2020 aligned with Aviva’s strategic priorities. As we focus the portfolio, we expect to build excess capital over time. We will deliver further value to shareholders by returning excess capital above 180% Solvency II shareholder cover ratio1, once our Solvency II debt leverage target ratio1 has been reached. The Board expects to exceed the original target of £1.5 billion debt deleveraging by the end of 2022.
We understand that our financial plans can only be achieved through being with people when it really matters, throughout their lives – to help them make the most of life. Looking after our customers, people and wider community has been a priority for Aviva during the ongoing pandemic. The Board met 28 times during the year, focusing on Aviva’s customers and assessing the impact of COVID-19 on them, in addition to revising the strategic priorities for the Aviva Group.
During 2021, the Board’s agenda will focus on driving delivery of the Group’s strategic priorities.
We will seek to ensure that we successfully simplify Aviva’s portfolio, transform our performance and improve our efficiency. The Board will closely monitor and drive enhancements in our risk and control environment and will continue to assess and respond to changes in the uncertain external economic and social environment; including those related to the ongoing impact of COVID-19. The Board will seek to ensure that as a business, we maintain our focus on managing operational resilience and potential risks around our IT estate. We will closely review our progress towards meeting the financial targets outlined in our strategic update in November 2020 which will support our new dividend policy and capital framework and our goal of delivering further value to shareholders. Our Board strategy session in June 2021 will be used to review our three-year strategic plan and to set out strategic priorities for the year ahead.
Culture will also remain a key area, and we will continue to engage with our stakeholders and integrate their interests and concerns into our decision-making processes. Succession planning and the continued development of the talent pipeline will also remain an area of focus for both the Board and the Nomination and Governance Committee.
Board evaluation The effectiveness of the Board is vital to the success of the Group. The Board undertakes a rigorous evaluation process each year to assess how it, its committees and individual directors are performing. The Board decided that the 2020 evaluation be undertaken through an internal questionnaire prepared in conjunction with Lintstock, with the outcomes reported in January 2021. Lintstock also provides evaluations to other operating subsidiaries in the Aviva Group.
Outcomes from the 2019 Board evaluation and steps taken in 2020 Focus area Theme Feedback/actions Strategy oversight Enhanced information to support the Board’s strategy implementation activities
The Board’s reporting schedule was revised to increase the frequency of Strategy and Transformation agenda items. These changes supported the Board with its discussion of strategic matters and early input into associated proposals during the strategic review. The Board created a Group Chief Operating Officer (COO) role with responsibility for supporting strategy implementation and providing associated updates to the Board.
Developing and enhancing the information the Board receives on key performance Indicators
We made certain changes to the performance reporting received by the Board, including the introduction of more granular market reporting and external perspectives and benchmarks. These changes further support the Board’s insight into potential issues facing our operating subsidiaries in their markets.
Committee effectiveness As part of the Board effectiveness review process, each committee considers the feedback from the Board evaluation exercise and develops an action plan as appropriate.
Frameworks for risk management and internal control The Board is responsible for promoting the long-term success of the Company for the benefit of shareholders, as well as taking account of other stakeholders including employees and customers. This includes ensuring that an appropriate system of risk governance is in place throughout the Group. To discharge this responsibility, the Board has established frameworks for risk management and internal control using a ‘three lines of defence’ model and reserves for itself the setting of the Group’s risk appetite. Further details are contained on the following pages.
In-depth monitoring of the establishment and operation of prudent and effective controls in order to assess and manage risks associated with the Group’s operations is delegated to the Risk, Customer, Conduct and Reputation and Audit Committees which report regularly to the Board. However, the Board retains ultimate responsibility for the Group’s systems of internal control and risk management and has reviewed their effectiveness for the year. The frameworks for risk management and internal control play a key role in the management of risks that may impact the fulfilment of the Board’s objectives. They are designed to identify and manage, rather than eliminate, the risk of the Group failing to achieve its business objectives and can only provide reasonable and not absolute assurance against material misstatement and loss. The frameworks are regularly reviewed and were in place for the financial year under review and up to the date of this report.
They help ensure the Group complies with the Financial Reporting Council’s (FRC) guidance on Risk Management, Internal Controls and Related Financial and Business Reporting.
Internal controls Internal controls facilitate effective and efficient operations, the development of robust and reliable internal reporting and compliance with laws and regulations. Group reporting manuals in relation to IFRS and Solvency II reporting requirements and a Financial Reporting Control Framework (FRCF) are in place across the Group. The FRCF relates to the preparation of reliable financial reporting, covering both IFRS and Solvency II reporting activity.
The FRCF process follows a risk-based approach, with management identification, assessment (documentation and testing), remediation (as required), reporting and certification over key financial reporting related controls.
First line – management monitoring The Group Executive Committee and each market Chief Executive Officer are responsible for the application of the RMF, for implementing and monitoring the operation of the system of internal control and for providing assurance to the Audit, Customer Conduct and Reputation and Risk Committees and the Board.
Third line – internal audit The third line of defence is Internal Audit. This function provides independent and objective assessment on the robustness of the RMF and the appropriateness and effectiveness of internal control to the Audit, Customer, Conduct and Reputation and Risk Committees, market audit committees and the Board. Further information can be found in the Audit Committee report.
The Risk Committee The Customer, Conduct and Reputation Committee The Audit Committee
Works closely with the Risk Committee and is responsible for assisting the Board in its oversight of operational risk across the Group, particularly the risk of not delivering good customer outcomes and compliance with our corporate governance principles. During 2020 the CCRC was designated as a sub-committee of the Risk Committee.
Works closely with the Risk Committee and is responsible for assisting the Board in discharging its responsibilities for the integrity of the Group’s financial statements, the effectiveness of the system of internal controls and for monitoring the effectiveness, performance and objectivity of the internal and external auditors.
Assessment of effectiveness of risk management With the exception of business units where Aviva disposed of the majority of its shares, each business unit Chief Executive Officer and Chief Risk Officer is required to make a declaration that the Group’s governance, and system of internal controls are effective and are fit for purpose for their business and that they are kept under review through the year.
The Risk Committee, on behalf of the Board, have reviewed the effectiveness of the systems of internal control and risk management. This review occurs annually. In addition, Internal Audit plays a significant role in contributing to the routine ongoing assessment of the Group’s Risk & Control Management framework. There has been regular reporting to the committees throughout the year to ensure that outstanding areas of improvement are both identified and remediated. While there has been substantial progress during the year there remains a number of areas where significant work is still required.
The reports to the Audit and Risk Committees refer to the need to sustain the embedding of controls in a number of areas where significant remediation progress has been made in 2020, such as cyber security, risk management through major change and financial crime prevention; and the need to continue to make further improvement in a number of other areas, such as data management, controls testing (including cyber), risk culture and model risk management. Specific areas for improvement were also identified in Canada and France. The Risk Committee, working in conjunction with the Audit Committee, on behalf of the Board, will continue to monitor progress throughout 2021.
The risk management framework of a small number of our joint ventures and strategic equity holdings can differ from the RMF outlined in this report but with a strong focus on local regulatory compliance. We continue to work with these entities to ensure appropriate management of risks and to align them, where possible, with our framework.
Communication with shareholders The Company places considerable importance on communication with shareholders. The Executive Directors have an ongoing dialogue and a programme of meetings with institutional investors, fund managers and analysts which are managed by the Company’s Investor Relations function. The Chair met several of the Group’s major shareholders during 2020. At these meetings a range of issues were discussed within the constraints of information already made public, to understand shareholders’ perspectives. On 26 November 2020 we streamed a presentation to update investors and analysts on our strategy and financial objectives in conjunction with our third quarter announcement. Shareholders’ views are regularly communicated to the Board through the Group CEO’s, and Group Chief Financial Officer’s reports and weekly briefings from the corporate brokers and the Investor Relations function. The SID was available to meet with major investors to discuss any concerns that could not be resolved through normal channels.
During the year, the Committee led the selection process for my appointment as Non-Executive Chair with effect from 27 May 2020, the appointment of Amanda Blanc as the Group Chief Executive Officer (Group CEO) with effect from 6 July 2020 and the appointment of Patrick Flynn as Senior Independent Director (SID) with effect from 7 September 2020. The Committee also led the process for the appointment of Mohit Joshi, Jim McConville and Pippa Lambert as Independent Non-Executive Directors. Mohit Joshi and Jim McConville joined the Board on 1 December 2020 and Pippa Lambert joined on 1 January 2021. The Committee also considered a range of governance matters, including the implementation and embedding of the Group Governance Framework for the oversight of the Group’s subsidiaries.
Committee membership Sir Adrian Montague retired from the Committee on 27 May 2020 and Amanda Blanc retired from the Committee on 6 July 2020 following her appointment as Group CEO. I would like to thank them both for their contribution. The members of the Committee as at 31 December 2020 are shown in the table below. I was appointed as Chair of the Committee on 27 May 2020. Mohit Joshi and Jim McConville joined the Committee on 1 December 2020 and Pippa Lambert joined the Committee on 1 January 2021. Details of members’ experience and qualifications are shown in the ‘Our Board of Directors’ section, and their attendance at Committee meetings during the year is shown within the Directors’ and Corporate Governance report.
Non-Executive Directors Following five years as Non-Executive Chairman and seven years in total on the Board, Sir Adrian Montague retired as Non-Executive Chairman and as Chair of the Nomination and Governance Committee on 27 May 2020, and from the Board on 31 May 2020. The Committee initiated a process to identify a successor as Chair after Sir Adrian had indicated in January 2020 that he intended to retire. I expressed an interest in becoming Chair, and accordingly recused myself from the selection and recruitment process. The Committee agreed that Amanda Blanc, at that time another Independent NonExecutive Director, lead the recruitment. The Committee approved the search criteria for the role and engaged MWM to identify suitable potential candidates. The role criteria focused on individuals who had undertaken a successful executive career; had significant insurance or financial services experience; FTSE 100 Board Chair or Senior Independent Director experience; experience of transformation and demonstrable leadership ability. The Committee considered a longlist of candidates and assessed these against the candidate profile. A shortlist of two candidates was produced following this process. The Committee interviewed both candidates, and recommended my appointment as Chair, with effect from 27 May 2020. The appointment was approved by the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA).
Talent management The Committee monitors the development of the Group Executive Committee (ExCo) to ensure that there is a diverse supply of senior executives and potential future Executive Board members with the appropriate skills and experience. The appointment of the new Group CEO in July 2020 brought renewed focus to ensuring that the Company has the best leaders and an optimal organisational structure. During 2020, the Committee received updates from the Chief People Officer on the development plans and talent profiles of the ExCo in line with the Group’s succession plans. The Chief People Officer also provided strategic workforce planning updates in response to the challenges presented by COVID-19.
The Committee also considers the initiatives to enhance, strengthen and diversify the talent pipeline across the wider Group and members of the Committee remain involved in various initiatives, including the ongoing Accelerating Leadership from the Inside Out (ALIO) and ALIO Ethnic Minorities programmes to support the development of future female and ethnic minority leaders.
Diversity Diversity and inclusion continue to be an area of focus for the Committee and the Board. The Board is committed to having a diverse and inclusive leadership team which provides a range of perspectives and insights and the challenge needed to support good decision making. Diversity at Aviva includes, but is not limited to, gender and ethnicity, and is inclusive of all strands of diversity including skills and experience, geographic and social background, disability and sexual orientation. The Board is pleased to have met the Parker Review Committee’s target for all FTSE 100 boards to have at least one director from an ethnic minority background by 2021. The Company also ranks as number 45 on the Stonewall UK Workplace Equality Index.
In August 2020, the Board adopted a Diversity and Inclusion statement which supports the Committee in its approach to succession planning. The Board’s Diversity and Inclusion statement, which is in line with the overall Group Diversity and Inclusion strategy, is available on the Company’s website at www.aviva.com/corporate-governance.
Conflicts of interest and independence During 2020, the Committee reviewed the balance of skills, experience and independence of the Board. The Committee conducted a review of individual director conflict authorisations as recorded in the Conflicts of Interest register. The register is maintained by the Group Company Secretary and sets out any actual or potential conflict of interest situations which a director has disclosed to the Board in line with their statutory duties. In order to form a view of a director’s independence consideration was also given to other external appointments held by each director.
For Non-Executive Directors, independence in thought and judgement is vital to facilitating constructive and challenging debate in the boardroom and is essential to the operational effectiveness of the Board and Committees of Aviva. The Committee determines a Non-Executive Director’s independence in line with Provision 10 of the Code and satisfied itself that the Non-Executives met the criteria for independence and that the Chair of the Board met the criteria on appointment to that role.
Governance The Committee monitors the Group’s compliance with the 2018 UK Corporate Governance Code and other areas of regulation and guidance. The Group Company Secretary provides updates to the Committee on governance matters, legal and litigation risks which have the potential to impact the reputation of the Group.
The Committee considers succession planning for material subsidiaries around the Group and, where appropriate, approves changes to the composition of the material subsidiary boards. The Committee also reviews the outcomes of the board evaluations completed by subsidiaries across the Group and monitors the action plans developed by subsidiary boards to reflect those outcomes.
Strategic report Governance IFRS financial statements Other information 2021 priorities In 2021 the Committee will continue to focus on succession planning at the Board and senior management level to develop a strong and diverse talent pipeline. The Committee will also continue to further strengthen its oversight and engagement with the governance arrangements of our subsidiary entities.
Committee activities during 2020 Evaluation and annual assessment • Assessed the Non-Executive Directors’ independence • Considered and recommended to the Board the election/re-election of each continuing director ahead of their election/re-election by shareholders at the Company’s 2020 AGM
• Reviewed the external appointments and time commitments of the Non-Executive Directors
• Considered specific steps to be taken in relation to diversity in Board and executive succession planning, including meeting the Parker Review Committee’s target for all FTSE 100 boards to have at least one director from an ethnic minority background by 2021
Succession planning • Continued to focus on succession planning arrangements at both
Talent pipeline • Reviewed the career and development plans for the Executive
Committee members to ensure that there is an adequate talent pool of potential Executive Directors
Governance Code and other areas of regulation and guidance • Assessed the embedding of an enhanced Group Governance
During the year the Committee held additional meetings to focus on the COVID-19 global pandemic and received regular updates on the developing risks including the broader view of risk coverage by business units response, the prioritisation decisions around risk management, the Company’s scenario planning and the impact on the Group’s capital and liquidity. The Committee also spent significant time on the ongoing volatility of interest rate risk exposure and financial stability risk arising from the clearing and settlement considerations connected to the UK’s exit from the European Union (EU).
The Committee held joint sessions with the Customer, Conduct and Reputation Committee (CCRC) in order to further support the oversight of conduct risk management. In November 2020, the Committee further assessed its role again, and concluded that the oversight of conduct risk topics would be enhanced if the CCRC became a sub-committee of the Risk Committee. This further aligned the oversight of conduct risks with other operational risks.
The Committee continued to review and oversee the strengthening of the Group’s operational risk profile and control environment, supported by the development of the operational risk dashboard.
Committee membership George Culmer and Amanda Blanc stepped down from the Committee on 27 May 2020 and 6 July 2020 when they became Chair and Chief Executive respectively. The members of the Committee as at 31 December 2020 are shown in the table below. Jim McConville and Mohit Joshi joined the Committee on 1 December 2020 and bring significant experience in retail financial services and operational and IT transformation. Details of members’ experience, qualifications and attendance at Committee meetings during the year are shown within the Directors’ and Corporate Governance report.
In addition to the risks inherent in the Group’s investment portfolio, the Committee reviews the Group’s operational risks, including significant changes to the regulatory framework.
COVID-19 During the year the Committee spent a substantial amount of time on the impact of COVID-19 and the operational, economic and insurance exposure. The Committee met on a more regular basis and held additional meetings to receive updates on the solvency position of the Group; the balance sheet and capital related management actions that were being taken; the operational readiness of the Group; the insurance risk exposure; and engagement with the regulators.
During 2020 there was significant market volatility and changing government stimulus and the overall recovery analysis continued to adapt to these changes.
The Committee considered the overall impact of COVID-19 on the Group strategy and the consequences and trade offs made over the period, structural change and customer behaviour. The Committee’s working scenario for COVID-19 was considered more prudent than the scenario devised by the Monetary Policy Committee of the Bank of England. The Committee welcomed that customer actions taken by the Group in response to COVID-19 had been positive and were generally ahead of the regulatory agenda.
The Committee also received deep dive sessions into the Company’s cloud model and associated opportunities including cloud governance, controls and assurance, the developing regulatory position and the Group’s Cyber position in order to provide a holistic view of the risks and opportunities to the Group.
The Committee also received a deep dive session on France and its capital position and sensitivity to interest rate risk volatility. As part of this the Committee discussed the risk appetite based on the current strategy, the actions and plans taken during 2020 and currently underway, contractual commitments both to customers and our commercial partner and other strategic options. As part of the review of France the Committee focused on the misapplication of regulatory rules which had taken place and requested an overview of the additional validation work that was conducted in response.
The Committee requested updates on the Canadian risk environment, insurance risk and learnings on GI policy wordings and control processes. The Committee challenged the processes to ensure they were leading to the right customer outcomes.
Global Climate Change During the year the Committee received an emerging risk deep dive on global climate change, including the current context, interconnected risks, alternative scenarios and the work being undertaken in Aviva to address the issue of climate change as part of Aviva’s new climate strategy. The Committee also considered the regulatory expectations and data assurance processes that would be part of the climate related financial disclosure.
• Reviewed and recommended for Board approval the Group’s risk policies
• Approved the Group’s SII capital risk tolerances by risk type • Approved recommendations made by the Group CRO in his 90 day observations • Approved mobilisation of the Risk Improvement Delivery
Liquidity Risk Management Plan • Approved the scenarios for Group-wide stress testing to support the Group Recovery Plan • Reviewed the risks to the 2021-2023 Group Plan
• Reviewed the findings from France actuarial model review undertaken by Ernst & Young
• Monitored the impact of the UK’s exit from the EU • Reviewed the most significant emerging risk scenarios affecting the delivery of the Company’s strategy
Regulatory, governance and internal audit • Received risk and control updates from certain business units as part of an updated programme of risk deep-dive reviews • Reviewed the Group Own Risk and Solvency Assessment (OSRA)
outsourcing and cyber risk Major Control Improvement Topics, and monitored and challenged progress by management
• Approved the refresh of SII related Group Business Standards Reviewed and approved the annual objectives and performance of the Group CRO Reviewed the effectiveness of the systems of internal control and risk management
• Reviewed the adequacy and quality of the risk function • Assessed the performance of all Group business units against the 2020 Group Risk and Control Goal
The primary purpose of the Committee is to provide oversight of the process to ensure our half and full year financial statements and quarterly operating updates are suitable for publication. The Committee provides the Board with assurance as to the integrity of the Group’s financial reporting and, together with the Risk Committee, monitors the effectiveness of our internal control environment. The Committee monitors the adequacy and effectiveness of our system of control over financial reporting and the effectiveness, performance, objectivity and independence of our internal and external auditors. The Committee also monitors our whistleblowing arrangements. The Audit Committee responsibilities are set out in full in its Terms of Reference.
The Committee also focused on the Group’s financial reporting, our system of internal controls over financial reporting and Financial Reporting Control Framework (FRCF), and the performance of the internal and external auditors.
The Committee had commenced a competitive tender process for the external auditor, however as a result of COVID-19 the Committee, following approval by the Financial Reporting Council (FRC), agreed to defer the external audit tender, by two years, until 2022, as the requirement to have an open, transparent process could not be met.
Effectiveness reviews The Committee undertakes a review of its effectiveness annually. More information can be found in the Directors’ and Corporate Governance report.
Evaluations of the External Auditor and Internal Audit function are also conducted on behalf of the Committee each year.
Whistleblowing The Committee Chair is the whistleblowers’ champion for the Group and has responsibility to oversee the integrity, independence and effectiveness of the Group’s policies in relation to whistleblowing. The Committee receives reports on the number of cases reported to the Speak Up service, the proportion of reports that are designated as instances of whistleblowing, the number of substantiated cases and summaries of the action taken. The Committee continues to look for opportunities to further enhance the Speak Up service.
Activities performed during 2020 Financial statements and accounting policies • Recommended to the Board for approval the Quarter 1 update, 2020 half year, Quarter 3 update and full year financial statements • Approved the IFRS and SII technical provisions with the 2020 half and full year financial statements • Recommended to the Board for approval the SII Solvency and
Financial Condition Report • Reviewed and challenged the technical provisions relating to the
• Reviewed and challenged the correction of mis-applied rules in the French actuarial model and the resulting impact on solvency
• Reviewed and challenged the going concern assumptions for 2020 and the principles underpinning the Longer-Term Viability Statement
• Reviewed the Group Chief Actuary’s report on significant issues related to the technical provisions of SII and IFRS
• Reviewed the Auditor’s compliance with the independence criteria set out in the Code
Internal audit • Reviewed reports from the Chief Audit Officer (CAO) • Reviewed and approved changes to the Internal Audit Charter and
Business Standard • Reviewed and approved the Internal Audit Plan • Assessed the independence of the CAO • Assessed the effectiveness of the Internal Audit function • Held private meetings with the CAO without management present • Reviewed the objectives of the CAO
Technical Provisions. The Committee reviewed and challenged the assumptions used in the calculation of the Best Estimate Liability component of the technical provisions required under SII, and the expense impacts on SII reserves across our life and general insurance businesses.
The Committee reviewed and challenged the longevity, expense and credit default assumptions used for the quarterly operating updates, and 2020 half year and full year financial statements. The process around the setting of longevity assumptions was a particularly significant area for review as those judgements could continue to have a material impact on Aviva’s SII and IFRS results. During 2020, the Committee worked closely with the Audit Committee of the Group’s UK Life subsidiary, Aviva Life Holdings UK Ltd, to review the detailed analysis and to validate changes observed in recent mortality experience and the resulting impact on the existing longevity assumptions. In particular, the Committee reviewed the rate of annuitant mortality change reflecting recent experience in the UK market. Following assessment of the proposed assumption changes the Committee considered and noted proposed changes and their expected impact on the financial statements.
Technical Provision Models. The Committee reviewed management’s assessment of the Group’s Technical Provision models, including details of additional controls that were being implemented to increase the level of confidence in the output of these models. This included a review of the key French life business unit actuarial models and the impact of low or negative interest on the model following an extended period of historical low interest rates. This review included the correction of mis-applied regulatory rules which resulted in a reduction in solvency, together with benefits from better modelling in a negative interest rate environment, and the resulting impacts on solvency.
COVID-19 assumptions. The Committee also reviewed the assumptions proposed for the setting of Technical Provisions in respect of the COVID-19 pandemic. This included the impact of the pandemic on future mortality, credit spreads and property growth as well as the impact on general insurance claims.
The Committee reviews and recommends to the Board Quarterly. Half Year and Full Year disclosures and the impact of accounting judgements on those disclosures. The Committee reviews and recommends to the Board the Annual Solvency and Financial Condition Report.
Product Governance provisions. The Committee also assessed two provisions in respect of product governance issues for heritage book customers in the UK Life business. The first was in respect of advice to customers transferring from defined benefit pension to personal pension arrangements. The second related to past communications to a specific sub-set of policyholders that may not have adequately informed them of switch-in options into with-profits funds that were available to them.
Impact of COVID-19. The Committee reviewed the impact of COVID-19 on the Group financial results, and in particular disclosures around the impact of the pandemic on Business Interruption insurance and motor collision frequency in the General Insurance business, and the impact on General Insurance reserves including the operation of reinsurance arrangements. The Committee also reviewed the impact on investment assets valuations. The Committee reviewed the maintenance of allowances for potential future downgrades to corporate bonds introduced in 2020 and the subsequent release of these allowances at 31 December 2020.
Fair, Balanced and Understandable. The Committee reviewed the Quarterly, Half Year and Full Year results to support the Board conclusion that taken as a whole, these reports were fair, balanced and understandable and provided the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. This assessment was particularly significant in the context of the transparency of disclosures during the COVID-19 pandemic and the importance to shareholders of understanding the Group’s position during this time.
Internal Controls The Committee provides oversight of the system of internal control over financial reporting.
Review of the effectiveness of the Operational Risk and Control Management (ORCM) system. The Committee reviewed a number of reports to allow the evaluation of the effectiveness of controls and any failings or weaknesses. The Committee continued to challenge and drive the ongoing implementation and how this supports a risk aware culture and strong internal control framework.
Legal and regulatory reports. The Committee received quarterly reports on current and emerging legal and regulatory matters and any potential impact on Aviva’s financial statements.
Internal Audit The Committee has responsibility for overseeing the work, effectiveness and independence of the Internal Audit Function.
Annual Plan and Budget. The Committee reviewed and approved the 2020 Internal Audit plan and budget and monitored progress against this plan. In May 2020 the Internal Audit Plan was revised to take account of the impact of COVID-19 on the work of the Internal Audit Function and on the operations and business subject to review. Progress against the Internal Audit plan was closely monitored to ensure completion of the plan by year end.
Quarterly Reports. The Committee also received quarterly control reports from the Internal Audit function and challenged management on the actions being taken to improve the effectiveness of the governance and risk and control framework of the organisation. The quarterly Internal Audit reports contain control environment metrics including: the status of Internal Audit opinions that are rated as unsatisfactory or where major improvement is needed; key issues identified, emerging trends and their impacts on the organisation’s risk profile; and the status of management actions to resolve issues identified. During 2020 the Committee has met with market CEOs where the status of the control environment and metrics was considered to require focus.
External Audit Plan and Budget. The Committee reviewed and approved the 2020 audit plan presented by PwC and progress against the plan.
Request for Additional Actuarial Models Assurance. The Committee requested that PwC undertake additional assurance activity in relation to the French life asset and liability management actuarial model following the correction of the misapplication of regulatory rules which resulted in a reduction in solvency. The Committee reviewed and agreed the scope of additional assurance work. The scope of this assurance work included performing an independent baselining review to check the validity of certain models and validate the operating effectiveness of the associated controls.
Tender of External Audit. Under Competition and Markets Authority regulations, Aviva is required to tender for the provision of the external audit every 10 years. PwC was appointed for the first time for the 31 December 2012 financial year end and therefore a mandatory re-tender was required for the year ending 31 December 2022. The Committee initiated the external audit tender process during 2020, which had anticipated a series of meetings and direct engagement with potential external audit candidates, however COVID-19 restrictions had inhibited this tender process. The Committee agreed to request a two-year extension to PwC’s appointment to 2022. The FRC approved the request for the two-year extension.
Audit Partner. The Committee reviewed the process to select Alex Bertolotti to replace Andrew Kail as lead PwC audit partner, including interviewing potential candidates and validated that he was an appropriate replacement.
IFRS 17 is a new insurance accounting standard issued by the International Accounting Standards Board (IASB) due to take effect on 1 January 2023. IFRS 17 is expected to have a significant impact on reporting of the Group’s financial performance.
COVID-19 impact The Committee assessed the potential increase in uncertainty as a result of COVID-19.
With effect 1 January 2020, the Committee revised its remit to focus on the oversight of customer, conduct and reputation issues. Consequently, the Committee changed its name to the Customer, Conduct and Reputation Committee (previously the Governance Committee) and in November 2020 the Committee became a subcommittee of the Risk Committee.
Committee purpose The main purpose of the Committee is to assist the Board in overseeing our customer and conduct obligations, the development of our reputation, our regulatory engagement on conduct matters, shaping the culture and ethical values of the Group and our approach to corporate responsibility.
During 2020, a review of the terms of reference was carried out, in order to provide greater clarity to the Committee’s role and to allow the Committee to focus on the material conduct, customer and reputation matters across the Group. It was agreed that the Committee should act as the custodian of the Aviva purpose on behalf of the Board and oversee the development of metrics to give insight on how Aviva was performing against the purpose.
COVID-19 response During 2020, the Committee focused on supporting customers and the wider community through the global COVID-19 pandemic. The Committee provided oversight of Aviva’s response to customer demand during the pandemic across the Group. Service levels remained stable across all markets largely due to employees working from home with the stability of customer service remaining a key priority. The Committee received and assisted in the development of structured management information (MI) data to support its oversight of the impact on our customers.
The Committee reviewed reports on the conduct risks generated by COVID-19 across Aviva markets, the response of local regulators, and the support provided to the communities in which we operate. Aviva supported customers and communities through charitable donations and additional support for essential workers and those who were vulnerable. This included payment deferrals for customers in the UK, donations to the NHS and British Red Cross, a €149 million pledge to support the economy in France, free life insurance cover for key workers in Poland and a range of actions to support customers in our businesses in Italy, Ireland and Canada.
The Committee recognised the importance of the identification and fair treatment of vulnerable customers, and throughout the year the first line continued to receive training in identifying and providing additional support to vulnerable customers.
Conduct and compliance The Committee continued to pay close attention to Aviva’s conduct risk agenda, conduct risk profile, compliance obligations and the wider regulatory landscape. The Committee reviewed the Group’s regulatory risk profile and conduct risk data analytics capability.
Through the implementation of the Conduct Risk Policy, conduct risk reporting across the business units is also being further developed and aligned to the new conduct framework. This is being used as the reporting framework for the Committee’s conduct reports ensuring appropriate oversight and escalation across the Group’s conduct risk exposures.
Corporate responsibility and Sustainability The Committee continued to monitor our approach to corporate responsibility and sustainability.
2021 priorities In 2021, the Committee will continue to focus on the impact of COVID-19 on our customers and the wider customer and conduct agenda. The Committee will also oversee the further development of our purpose and monitor reputational risks to the Group.
Corporate responsibility and Sustainability • Continued to drive the corporate responsibility agenda and monitored compliance with the Group’s corporate responsibility strategy
Operational Risk Director • Reviewed potential financial crime risks and any actions required in response • Reviewed the implementation of the data governance and data privacy framework • Reviewed the Group’s relationship and interaction with regulatory bodies and actions taken in respect of regulatory developments
• Our people – Inclusive diversity – details of our employment policies
• Our business relationships – suppliers, customers and others • Our strategy – Delivering on a clear plan of action • Important events since the financial year end • Future developments
Details of significant post balance sheet events that have occurred after 31 December 2020 are disclosed in note 65.
Our policy on hedging The hedging policy is disclosed in note 60.
Dividends Dividends for ordinary shareholders of Aviva plc are as follows: • Paid second interim dividend for 2019 of 6 pence per ordinary share (2019: nil pence) • Paid interim dividend for 2020 of 7 pence per ordinary share
(2019: 9.25 pence) • Proposed final dividend of 14 pence per ordinary share
Subject to shareholder approval at the 2021 AGM, the final dividend for 2020 will become due and payable on 14 May 2021 to all holders of ordinary shares on the Register of Members at the close of business on 9 April 2021 (payment date approximately four business days later for holders of the Company’s American Depositary Shares (ADS)).
Dividend policy In light of our 2020 performance and resilient capital and liquidity, the Board has declared a final dividend of 14 pence per share (2019: nil), bringing the full year dividend in respect of 2020 financial year to 21 pence per share (2019: 15.5 pence per share). On 26 November 2020, Aviva announced a new dividend policy and capital framework that align with the Group’s strategic priorities. We aim to deliver a sustainable pay-out ratio and grow dividend per share by low to mid-single digits. This level of dividend is sustainable and resilient to stress, and is covered by the capital and cash generated from the core markets of UK, Ireland and Canada.
Under UK company law, we may only pay dividends if the Company has ‘distributable profits’ available. ‘Distributable profits’ are accumulated, realised profits/(losses) not previously distributed or capitalised, less accumulated, unrealised losses not previously written off based on IFRS. Even if distributable profits are available, we pay dividends only if the amount of our net assets is not less than the aggregate of our called-up share capital and non-distributable reserves and the payment of the dividend does not reduce the amount of our net assets to less than that aggregate.
September 2020 3 On 8 April 2020 the Board withdrew its recommendation to pay the 2019 final dividend, referencing the unprecedented challenges COVID-19 presents for businesses, households and customers and the adverse and highly uncertain impact on the global economy
Share capital During the year, 7,361,275 ordinary shares were allotted to satisfy amounts under the Group’s employee share and incentive plans. At 31 December 2020 the: • issued ordinary share capital totalled 3,928,490,420 shares of 25 pence each (83% of total share capital) • issued preference share capital totalled 200,000,000 shares of £1 each (17% of total share capital)
Disclosure guidance and transparency rule 5 – major shareholders The table below shows the holdings of major shareholders in the Company’s issued ordinary share capital in accordance with the Disclosure Guidance and Transparency Rules (DTRs) notified to the Company as at 31 December 2020 and 3 March 2021. Information provided to the Company under the DTRs is publicly available via the regulatory information services and on the Company’s website.
Directors The directors as at the date of this report, together with their biographical details and details of Board appointments, resignations and retirements are shown earlier in the report.
Financial instruments Group companies use financial instruments to manage certain types of risks, including those relating to credit, foreign currency exchange, cash flow, liquidity, interest rates, and equity and property prices. Details of the objectives and management of these instruments are contained in the ‘Risk and risk management’ section and in note 59 on risk management.
The going concern and longer-term viability review includes consideration of the Group’s current and forecast solvency and liquidity positions over a three-year period through management’s 2021-2023 business plan and evaluates the results of stress and scenario testing. The Group’s stress and scenario testing considers the Group’s capacity to respond to a series of relevant financial, insurance or operational shocks should future circumstances or events differ from the current assumptions in the business plan, focussing on the impacts on Group solvency, cash remittances and liquidity. The range of scenarios allow for the potential impacts of COVID-19 both directly on the claims and operations of the Group, and also on the wider macroeconomic environment, and considers the potential risks associated with the UK’s negotiations with the European Union on their future relationship.
Even in severe downside scenarios, no material uncertainty in relation to going concern and longer-term viability has been identified, due to the Group’s strong solvency and liquidity positions providing considerable resilience to external shocks, underpinned by the Group’s approach to risk management (see note 59).
It is fundamental to the Group’s longer-term strategy that the directors manage and monitor risk, taking into account all key risks the Group faces, including longer-term insurance risks, so that it can continue to meet its obligations to policyholders. The Group is also subject to extensive regulation and supervision under the Solvency II regulatory framework.
Longer-term viability statement The directors have assessed the prospects of the Group in accordance with Provision 31 of the 2018 UK Corporate Governance Code, with reference to the Group’s current position and prospects, its strategy, risk appetite, and the potential impact of the principal risks and how these are managed. Based on this assessment, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year assessment period to 31 December 2023.
• The overall co-ordination of the production of the Annual Report and Accounts is overseen by the Chief Financial Controller to ensure consistency across the document
• Comprehensive reviews of drafts of the Annual Report and Accounts are undertaken by members of the Aviva Leadership team and other members of senior management and, in relation to certain parts of the report external legal advisers and the External Auditor
• An advanced draft is considered and reviewed by the Disclosure Committee
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements and the Directors’ Remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for making, and continuing to make, the Company’s Annual Report and Accounts available on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s and the Company’s position, performance, business model and strategy.
Each of the current directors whose names and functions are detailed in the ‘Our Board of Directors’ section and in the Directors’ and Corporate Governance report confirm that, to the best of their knowledge: the Group financial statements, which have been prepared in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU), give a true and fair view of the assets, liabilities, financial position and profit of the Group; and the Strategic report and the Directors’ and Corporate Governance report in this Annual report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Location in the Annual Report and Accounts 12 Shareholder waivers of dividends IFRS Financial Statements – note 35 13 Shareholder waivers of future dividends IFRS Financial Statements – note 35
• Our Annual Report on Remuneration, summarising remuneration outcomes for 2020 and intended operation of the Policy in 2021.
The Committee recognises the opportunity and importance of ensuring that our remuneration framework for all colleagues supports our strategic agenda, while also being aligned with our purpose and values as an organisation.
Throughout the review process, shareholders have provided constructive and helpful feedback on the proposals and I would like to thank them on behalf of the Committee.
Individual performance will continue to be assessed and act as a modifier on the scorecard outcome as the Committee recognises the critical importance of individual accountability.
1 This measure is derived from the Group adjusted operating profit Alternative Performance Measure (APM). Further details of this measure are included in the ‘Other Information’ section of the Annual Report and Accounts.
Secondly, we believe we can make our Environmental, Sustainability and Governance (ESG) agenda a key differentiator for Aviva. Two key parts are our environmental and diversity and inclusion goals. • Climate change is an existential challenge and we would like to take a more prominent role in helping to solve these issues, for the benefit of our customers, shareholders and society. Through our investment strategy we can significantly influence the biggest carbon emitters, and are putting in place a comprehensive climate strategy, including our announcement in March 2021 that we plan to become a Net Zero carbon emissions company by 2040
We are proposing to retain the flexibility of the current Policy for up to 20% of the LTIP to be based on strategic performance metrics although would engage with shareholders before changing the weighting in future years.
• Shareholding requirements – To increase alignment we are increasing the Group Chief Financial Officer (CFO)’s shareholding requirement from 200% to 225% of salary (the Group Chief Executive Officer (CEO)’s requirement is unchanged at 300%)
• Post-cessation shareholding requirement – EDs will be required to hold their full shareholding requirement for two years following cessation
Nevertheless, the impact of COVID-19 is seen in a number of areas across the business, including business interruption claims, reduced customer activity in life businesses, lower asset values, additional expenditure on operational readiness, and risk management initiatives. Our financial performance has been very resilient, despite the direct and indirect impact of COVID-19 and we made good progress in reducing our expenses, though more needs to be done.
It noted the impact of the global pandemic and the decision to suspend the dividend in April, a decision based on prudence following conversations with regulators, rather than a question of affordability. Consequently, the initial formulaic outcome against the 2020 bonus scorecard prior to any adjustments was determined to be 116.55% (out of a maximum of 200%).
This resulted in an adjusted scorecard outcome of 111.8% which has been capped at 100%.
2018-20 LTIP As a result of our performance over 2018-20, the 2018 LTIP lapsed in full. This reflected below threshold performance against both the adjusted operating earnings per share (EPS)1 and the relative TSR targets.
Discretion • Discretion was applied in determining the annual bonus outcome, notably the decision to cap the bonus scorecard at 100% to align with the shareholder experience
Taking into account our Policy and shareholder expectations, and reflecting Amanda’s significant executive experience in the insurance sector, the Committee determined Amanda’s remuneration as detailed below. • A salary of £1 million per annum • Reimbursement of costs associated with renting suitable accommodation in London, up to an after-tax maximum of £2,500 per month during the first 18 months of employment
• Our standard benefits package for EDs, including private family medical insurance, life insurance, and reasonable travel benefits
• Pension allowance of 14% of salary, aligned with the rate available to the majority of our UK workforce
• A maximum annual bonus opportunity of 200% of salary, delivered one-third in cash and two-thirds in shares deferred over three years
Departure of Maurice Tulloch Maurice stepped down as Group CEO with effect from 6 July 2020 in good leaver circumstances (as determined by the Committee in its discretion) for his outstanding awards under the Annual Bonus Plan (ABP) and LTIP.
Maurice will be required to retain his shares held on departure for two years following cessation of employment and is subject to postactivity restrictions which allow the Committee to reduce or recover awards if certain employment is taken elsewhere.
While he remained eligible for a 2020 annual bonus in respect of the period up to and including 5 July 2020, when he left active service with Aviva, the Committee determined, taking all factors into account including Aviva’s performance for the first half of 2020, shareholder experience during that period and the wider economic context, that Maurice would not receive a 2020 annual bonus.