Earnings Document

News Release

10 August 2022

Aviva plc 2022 Interim Results Announcement

Continuing momentum with strong first half results demonstrating benefits of diversified business model

Confident outlook for 2022 despite challenging market backdrop

Further capital returns - anticipate launching share buyback with our full year 2022 results

Solvency II OFG‡		Solvency II pro			General insurance		Operating		2022 interim
		forma cover ratio1	COR‡		profit‡,2		dividend

Amanda Blanc, Group Chief Executive Officer, said:

"Sales are up, operating profit is higher, our financial position is stronger. This has been an excellent six months for Aviva.

Our scale and diversification give us resilience and opportunity, enabling Aviva to withstand the challenging economic climate. Our market leading positions and our unique ability to look after a wide range of customers' needs are clear advantages and have driven robust operating performance. Trading has been encouraging across all our major businesses in insurance, wealth and retirement.

Even so, we are very conscious of the pressures currently facing many of our customers, especially the more vulnerable. In response we have launched new, low cost, insurance products, and we are increasing the range and amount of support we provide to communities, businesses and our own people during this challenging time.

Delivering for our shareholders is at the core of our strategy. Our liquidity and capital position is extremely healthy and we are declaring an interim dividend of 10.3p, in line with our full year 2022 dividend guidance of c.31.0p. We are increasingly confident in Aviva's prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full year results."

Strong first half results demonstrating benefits of diversified business model

• Solvency II operating own funds generation‡ up 46% to £538m (HY213: £369m)
• Operating profit‡,2 up 14% to £829m (HY213: £725m)
• General insurance gross written premiums (GWP) up 6%4 to £4,694m (HY213: £4,366m) with a strong 94.0% COR‡ (HY213: 91.6%)
• UK & Ireland Life sales5 up 4% to £16.8bn (HY21: £16.2bn) with VNB‡ up 13% to £300m (HY21: £265m)
• Solvency II retuon equity‡ 10.9% (HY213,6: 7.4%), 12.3% (HY213,6: 8.8% ) excluding Heritage
• Baseline controllable costs‡,7 down 2% to £1,342m (HY213: £1,372m) reflecting continued focus on efficiency
• Cash remittances‡ of £798m (HY213: £1,063m) in line with our expectation and medium term target
• IFRS loss after tax of £633m (HY21: £198m loss), largely reflects adverse market movements, with no impact on capital or cash remittances‡
• Interim dividend per share of 10.3p (HY21: 7.35p), up 40%, in line with our dividend guidance for 2022

Capital position is strong - new share buyback anticipated with full year 2022 results

• Solvency II shareholder cover ratio‡ of 234% (2021: 244%) and centre liquidity‡ (July 22) of £2.7bn (Feb 22: £6.6bn)
• Estimated Solvency II shareholder cover ratio pro forma1 for planned £1bn further debt reduction, pension scheme payment, and the acquisition of Succession Wealth of 213%
• Solvency II debt leverage ratio‡ of 30% (2021: 27%). We expect this to retubelow 30% as we complete additional deleveraging over time
• Given our strong capital position and prospects, we anticipate commencing a new share buyback programme with our 2022 full year results, subject to market conditions and regulatory approval
• Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to retusurplus capital regularly and sustainably

Footnotes are shown on page 2

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Continuing strong operating momentum into first half of 2022

• Wealth showed resilience in challenging conditions with net flows‡ of £5.0bn (HY21: £5.2bn). Workplace added 150,000 new customers in the period, while our Advisor platform attracted the 2nd8 highest net flows‡ in the market
• Annuities & Equity release sales5 up 12% to £2,762m (HY21: £2,466m) and Solvency II operating OFG‡ up 18% to £169m (HY21: £143m) driven by growth in BPAs and Equity Release. Outlook remains positive with higher BPA volumes and margins expected in H2
• Protection & Health VNB‡ up 5% to £100m (HY21: £95m) reflecting strong performance in Group Protection and Health partly offset by higher interest rates which impacted Individual Protection
• UK & Ireland General Insurance GWP, up 5% to £2.8bn (HY21: £2.7bn), and COR‡ of 95.6% (HY21: 93.6%). UK commercial lines performed strongly with GWP up 12% while personal lines was 1% lower as we maintained pricing discipline to mitigate the impact of claims inflation. We will continue to take the necessary actions to price appropriately for the inflationary environment in the second half
• Canada GWP up 12% (6% at constant currency) to £1,854m (HY21: £1,661m) and a COR‡ of 91.7% (HY21: 88.8%). We saw excellent growth in both Commercial and Personal lines with GWP up 11% and 4% respectively at constant currency
• Aviva Investors external net flows‡ recovered well in Q2 to £0.2bn in the first half (Q1 2022: £0.2bn net outflows), however remain lower than
  the prior year (HY21: £1.1 billion) given the volatile market conditions in the first half of 2022
• International investments operating profit‡,2 flat at £55m with sales5 8% lower due to lockdowns in China

Outlook

Our strong first half results reinforce our confidence in the prospects and outlook for our business, as our strategy to transform performance continues to build momentum. While recognising the challenging economic backdrop, we remain well positioned to drive growth and meet our Group targets.

In UK & Ireland Life we expect to see continued growth. We anticipate higher BPA volumes in the second half as well as improving margins. In Wealth and Protection & Health we expect a continuation of first half trends for the remainder of the year. We also expect the completion of our acquisition of Succession Wealth during the second half.

In General Insurance, we expect the rating environment to remain favourable in commercial lines, while in personal lines we will continue to price appropriately to manage inflation.

We remain firmly focused on improving efficiency and are on track to meet the first stage of our cost target to reduce baseline controllable costs‡,7 by £300m (net of inflation) over 2018-22. We are continuing to execute the actions necessary to deliver the upgraded target we set out in March to reduce costs by £750m (gross of inflation) by 2024.

Cash remittances‡ remain on track to meet our target of >£5.4bn cumulative (2022-24). Solvency II operating own funds generation‡ also on track to meet our target of £1.5bn per annum by 2024.

• Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section | 1 Solvency II pro forma cover ratio is the estimated Solvency II shareholder cover ratio at 30 June 2022 adjusted for £1bn further debt reduction, pension scheme payment and acquisition of Succession Wealth | 2 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section | 3 Comparatives presented are from continuing operations | 4 Constant currency | 5 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section | 6 Following a review of the basis of preparation of Group Solvency II Retuon Equity comparative for the six months ended 30 June 2021 has been restated. See section '4.ii - Solvency II retuon capital/equity' for details | 7 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline | 8 Latest data available as at Q1 2022 (Fundscape)

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Chief Executive's Overview

Overview

I'm pleased to report Aviva has had an excellent first half of 2022 despite the challenging environment.

Our strong first half performance is a timely reminder of the benefits of Aviva's diversified, high quality and focused business model and mix. This provides in-built resilience and opportunity for the Group, allowing us to withstand difficult market conditions. The Group is now focused on growing in those areas where it has market leading positions and expertise, and where it can generate attractive returns. Aviva is well balanced across its insurance, wealth and retirement propositions in the UK, Ireland and Canada.

Strong first half results

Profitability improved across the Group during the first half. We are building clear momentum in our operating performance and we have made progress against the financial targets we set out in March.

Solvency II operating own funds generation (OFG), an important measure of value creation at Aviva and one of our key targets, was up 46% to £538 million (HY21: £369 million). We saw improved volumes and margins in Bulk Purchase Annuities (BPAs), further performance improvement in UK GI Commercial lines together with increased GI investment returns, as well as lower Group interest costs following our debt reduction actions.

Group adjusted operating profit1 was also up, by 14%, to £829 million.

Cash remittances to the Group centre of £798 million in the first half were in line with our target for over £5.4 billion of gross cash remittances over 2022-24, and this supported a strong centre liquidity position of £2.7 billion as at end July.

In UK & Ireland Life we delivered robust sales2 growth of 4% to £16.8 billion, with volumes in Annuities & Equity Release up 12% and in Health & Protection up 6%. In our Wealth business net flows of £5.0 billion represented 7%3 of opening assets under management, although were lower than last year due to the challenging market conditions. UK&I Life value of new business (VNB), a key measure of the profitability of new business, was up 13% to £300 million, driven by a 50% increase in Annuities & Equity Release as BPA margins improved versus the first half of last year.

Trading momentum in General Insurance continued in the first half, and we saw gross written premiums of £4.7 billion, an increase of 6% at constant currency . Commercial Lines delivered double digit premium growth with strong new business, rate increases and high retention levels. Personal Lines premiums were up 1% at constant currency, with UK Personal Lines down 1% reflecting our resolute focus on returns in a difficult market. The Group combined operating ratio (COR) was an excellent 94.0% demonstrating our underwriting discipline and tight management of claims inflation, with the 2.4pp increase versus the first half of 2021 reflecting a retuto more normal claims frequency and weather patterns.

External net flows in Aviva Investors recovered well in Q2 to £0.2 billion in the first half (Q122: £0.2 billion net outflows), however remain

lower than the prior year (HY21: £1.1 billion) given the volatile market conditions in the first half of 2022. Overall, Aviva Investors saw total net outflows of £4.3 billion in the period reflecting expected outflows from internal assets, mainly Heritage, and withdrawals by clients previously part of the Group, mainly in France.

Our focus on cost efficiency continues. First half baseline controllable costs4 fell 2% to £1.3 billion as we maintained our cost discipline despite the inflationary environment. We remain on track to meet our £300 million (net of inflation) cost reduction ambition by the end of this year. We are also very focused on delivering our £750 million (gross of inflation) ambition by 2024, although offsetting inflationary pressures will determine how much falls through to the bottom line.

Finally, our balance sheet is strong. On a pro forma basis5, our Solvency II shareholder cover ratio was 213% at 30 June 2022 (with a headline Solvency II shareholder cover ratio of 234%), benefitting from operating capital generation in the period as well as positive market movements. Our asset portfolio is well positioned with diversification across asset classes, strong credit ratings, and low loan-to-value ratios in our commercial mortgage portfolio.

Interim dividend and commitment to further capital returns

The Board of Directors has declared an interim dividend of 10.3 pence per share, up 40% (HY21: 7.35 pence), with a cost of c.£289 million

(HY21: £286 million). This is consistent with our full year 2022 dividend guidance of c.31.0 pence6 (approximately £870 million).

Given our strong capital position and prospects, we anticipate commencing a new share buyback programme with the 2022 full year results, subject to market conditions and regulatory approval.

Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to retusurplus capital regularly and sustainably.

Delivering Aviva's Promise

We aim to be a leading player in every major segment where we operate. Where we are already number one, we plan to build further on that position. Where we are not, we are pushing hard to get there. We're focusing on four areas to make that a reality:

Customer: delivering leading customer experience and engagement. Aviva already has the benefit of being the no.1 insurance customer franchise in the UK. But we're aiming to go further, by enhancing our digital capability to provide customers with a simpler, more personalised offering, with the products they need, when and how they need them. Our aim is to look after more customers and more of their needs so that they stay with us for longer.

1 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section | 2 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section | 3 Net flows annualised as a percentage of opening assets under management | 4 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline | 5 Solvency II pro forma shareholder cover ratio is the estimated Solvency II shareholder cover ratio at 30 June 2022 adjusted for £1 billion further debt reduction, pension scheme payment and acquisition of Succession Wealth | 6 The Board has not approved or made any decision to pay any dividend in respect of any future period

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We've been there for our customers during the first half. In February the UK suffered three storms in a single week. We received over 19,000 claims, so colleagues from across the business, including in Canada, helped to process them in good time, settling 10% of claims on the day of notification. That's One Aviva in action, making a real difference for our customers.

Growth: continued targeted growth in our priority areas across the Group. We have great capabilities, partnerships, and market positions, and we're ideally equipped to capitalise on big customer trends.

In the first half we saw continued excellent growth across the Group, including in our General Insurance businesses, in Protection & Health and in Annuities & Equity Release. In Wealth, where market conditions have been challenging, net flows have remained strong. We're expanding revenue streams too, where there are the right opportunities. For example Aviva Zero, our digital motor insurer in the UK with in- built carbon offset feature, which launched earlier this year, has now sold over 10,000 policies. Also in the UK, we have just announced the acquisition of a high net worth business from Azur, which will move us to number one in that segment.

Efficiency: we are targeting top quartile efficiency and cost reduction. That means reducing the number of old systems and products, making it easier for customers and brokers to deal with us, automating processes, and reducing our property footprint. Our baseline controllable costs fell 2% in the first half despite the inflationary pressures, demonstrating our firm grip on Aviva's cost base.

Sustainability: continuing to lead the UK financial services sector on sustainability and living up to our responsibilities to people and the planet, changing the way we do business and using our influence to help others do the same.

In May, our Sustainalytics ESG risk rating improved to 11.3, now ranking Aviva 5th1 out of 288 global insurers (up from 25th) and ahead of all UK Financial Services peers. Importantly, we've been supporting our colleagues, customers, and communities in the face of economic pressures and the cost-of-living crisis. We have made financial commitments to communities to provide advice and support to vulnerable people and businesses, continued to provide affordable but robust products and premium deferral options, and we are making a one-off payment to help 7,000 of our colleagues.

Summary

Overall, Aviva is in excellent health and our strategy is delivering results. We enter the second half of 2022 with confidence and while we remain mindful of market and macro-economic challenges, we are on track to meet all of our financial targets. There is still much to do, but we expect to make continued good progress to deliver Aviva's promise for our customers and shareholders.

Amanda Blanc

Group Chief Executive Officer

9 August 2022

Other operating highlights

UK & Ireland Life • Wealth - strong net flows of £5 billion (HY21: £5.2 billion), pleasing performance in challenging markets

• Workplace pensions - 150,000 net new customers. AUM 8% lower at £88.5 billion reflecting impact of lower equities
• Adviser platform - #22 by net flows in the adviser platform market with net flows £2.4 billion. Total platform AUM 7% lower at £40.3 billion (2021: £43.1 billion)
• Annuities - BPA sales3 of £1.9 billion (HY21: £1.6 billion), including £0.8 billion of Aviva staff pension scheme
• Equity release - sales3 up 27% amid heightened market activity and introduction of a new proposition
• Group protection - sales3 up 31% reflecting excellent retention and new scheme wins
• Ireland Life - margin improvement with VNB up to £16 million (HY21: £10 million) driven by rationalised product offering

General Insurance • UK commercial lines GWP up 12% to £1,430 million (HY21: £1,280 million)

1 As at 9 August 2022 | 2 Latest data available as at Q1 2022 (Fundscape) | 3 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section

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R Symbol denotes key performance indicators used as a base to determine or modify remuneration | ‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section |1 International investments include Aviva's interest in joint ventures/associates in Singapore, India and China | 2 Group adjusted operating profit is a non-GAAP APM and is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section. | 3 IFRS (loss)/profit for the period represents IFRS (loss)/profit after tax | 4 Operating earnings per share is derived from the Group adjusted operating profit APM. Further details of this measure are included in the 'Other information' section. | 5 Normalised EPS is calculated as if the share consolidation completed on 16 May 2022 as part of the £3.75 billion capital return, had taken place on 1 January 2022 | 6 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline | 7 Following a review of the basis of preparation of Group Solvency II Retuon Equity and Market Solvency II Retuon Capital, comparative amounts for the six months ended 30 June 2021 have been restated. In the numerator, Transitional Measure on Technical Provisions (TMTP) run-off has been replaced with the economic cost of holding equivalent capital to the opening value of TMTP on a shareholder basis and, for Group Solvency II Retuon Equity only, the denominator has been adjusted to exclude excess capital above our target Solvency II shareholder cover ratio. Further details can be found in the 'Other information' section.

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