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InterviewwithMarkWilson Date:7March2013 2012preliminaryresultsvideointerviewwithMarkWilson MarkWilson,chiefexecutiveofficer,Avivaplc SimonMeadows,interviewer SimonMeadows:HelloMark,sothisisyourfirstsetofresultsforAvivawhatareyour impressions? MarkWilson:HelloSimon.Itsbeenaninterestingcoupleofmonthsinthejob.Inthat timeIveseenshareholders,Iveseenregulators,mydiarysbeenfullofstaffand customers.Iveevenspenttimeonthephoneslisteningtoourcallcentrepeople.Ithink Iunderstandtheissuesveryclearlywhatthebusinessisgoingthrough.Wehave insuranceinourDNAafter300yearsandthecoreunderlyinginsurancebusinesseshave performedwellonthewhole.Thatreallycomesthrough.Butyouknowwhat,overa numberofyearswehavedisappointedandevenangeredsomeofourshareholders.Our investmentperformanceasastockhaslaggedsomepeers.JohnMcFarlaneandthe boardinJulylastyeartookafreshlookatthecompany.Theylookedatthecompany throughadifferentsetofeyesandtheyrealisedtheissuesthathadtobeaddressed. Theycameupwithaplanthatwasright.Thatplanmeantthatwedisposedofsomeof thelargebusinessesandyoucanseeabitofthenoiseinournumbersthisyearfrom thosedisposalstheymade.Butitwastherightplan,andreallyyoucanseethatcoming throughintheresults. SimonMeadows:SoMark,giveusyourperspectiveonresults,giveussomedetail. MarkWilson:WellSimon,theseresultshavedominatedbythe3bnlossandthatcanbe mainlybeattributedtothe3.3bnwritedownonthesaleoftheUSbusiness.Thats beenwellsignalledtothemarketsothatshouldntbeasurprisetoanyone.Underthat, theunderlyingbusinessesperformedverywell.Andofcourse,abitmorenoiseinthose numbersaswehavequiteafewrestructuringcoststhatweputinthroughtheyear.The focusoflastyearwasongeneratingcapital,strengtheningourbalancesheet.Thatwas theplanputinbytheboard,andthathasbeenachievedverywellindeed.Infact,ifyou havealookatoureconomiccapitalsurplus,thatsgonefromabout130%toover170% thatsdoublingoursurplus.Thatsanimportantmeasureforaninsurancecompany. SimonMeadows:SoMark,youvetalkedabouttheimportanceofastrongbalance sheet,butwhatdoesthatmeantoyou?

MarkWilson:Ithinkitmeanstwothings:arobustbalancesheetmeansyouhaveto havearobustcapitalposition,andIthinkweveachievedalotofthat.Werenowwell intoourtargetrange.Andalsoyoumusthaveanacceptablelevelofleverageordebt. Andwhenitcomestodebt,wehavetwoaspectstoit:internalandexternal.Theboard andJohnMcFarlanemadeitveryclearlastyearthatdebtwasanissuetothegroupand hadtobeaddressed.Nowisthetimetoaddressthatissue.Andsowehaveclearplansin place.Ontheinternalleveragewewillpaydown600millionoverthenextthreeyears. Ontheexternalleveragewewouldliketogetdowntounder40%leverageratioordebt ratio,andthesearebothachievabletargets. SimonMeadows:Idliketoaskaboutyourinvestmentthesis.Whatisyourthinkingon that? MarkWilson:WhenIwastalkingtoinvestors,onethingcameacrossveryclearly.They allaskthesamequestion:whyholdthestock,orwhybuythestock?Icallthisour investmentthesis.WhatsthecentralreasonofwhyAviva?Ithinktheresacompelling answertothat.Itsaboutcashflowandgrowth,inthatorder.Avivasabigbusiness.It hasahugeinforcebookof28bn,ithasover300bnintermsoffundsunder managementandthatcanbeahugecashflowgeneratingmachineifwedoitright.So ourthesisisaboutcashflowplusgrowth,inthatorder. SimonMeadows:Thisallsoundsveryinteresting.Obviouslypeoplewillbekeentoknow howyouregoingtoachievethis? MarkWilson:Tobuyandsellinvestorthesisofcashflowplusgrowth.Youneedto believeafewthings.One,thatwehavearobustbalancesheetwiththeacceptablelevel ofleverage;two,thatwecanexecuteourplans,especiallyontheseturnaroundsamber cells;three,thatwecangeneratethecashflowsoutofourbookandoutofourback booktogetprogressivedividendsgoingforward.Youhavetobelievethesethingsto believetheinvestorthesis.Sotodothat,weregoingtofocusourlargebusinesseson cashflowgenerationaboveallelse.Thatsmanagingthecompactbooks,thatsgetting therightproductswiththerightprofitsignatures,thatsmanagingexpensesveryclosely indeed.Thatsallachievable.Onsomeothercountries,likeperhapsTurkey,Polandand Asia,itsmoreaboutgrowth.Andtheyllbemeasuredbyvalueofnewbusiness primarily,butnotattheexpenseofcashflowandnotattheexpenseofcapital. SimonMeadows:NowMark,historicallysomehavequestionedwhetherAvivashouldbe acompositeinsurer.Whatsyourtakeonthat? MarkWilson:Simon,ifthequestionisshouldwebeacomposite,thenitsthewrong question.Thefundamentalprincipleofinsuranceisaboutdiversity.Itsabouttakingthe riskfromonepersonandspreadingitovermany.Thatsdiversity.Itsaboutcashflows anddiversity.AvivahasscaleinLifeInsurance,inGeneralInsuranceandinfund management.Theyarethreestrongcorebusinessestothegroup.Inanyonemarketwe

maybeinoneofthosebusinesslines,twoorthree.Theinterestingthingisthatwhen youhavemorethanonebusinessline,itshouldgiveyoumoreconsistencyofearnings becausetheearningsflowfromthosethreebusinesslinesarentcorrelated.Alsotheres substantialcapitalbenefitsthroughbeingadiversifiedinsurancegroup.Thosebenefits allowustoreduceourcapitalsubstantially,becausewecandiversifyrisk.Thatsagood thing.Itsagoodthingfromaninvestmentperspective.Thequestioniscanwemanage complexityandIthinkthemovesthatthegrouphastakenoverthepast12monthsto simplifythegroup,tohavefewercountriestofocuson,reducesthatcomplexity substantially.Weneedtocontinuealongthatjourneyandwerenotthereyet.Sooneof ourfocuseswillbesignificantlysimplifythegroupbuthavediversityofearningsfrom thosethreecorebusinesslines.Itsprettyfundamental. SimonMeadows:NowMark,youarereducingthedividend.Whatsthebackgroundto that? MarkWilson:Leadinguptotheannouncementtherewasdefinitelytwoschoolsof thought.Ononehandyouhadanalystswhosaid,Youknowwhat,Avivasgotenough liquidityfromthesalesanddisposalstokeepthedividendthatwasatthatlevel.Onthe otherhandyouhadanalystswhoweresaying,fundamentallytheunderlyingbusinesses haventbeenearningenoughtokeepthatsamelevelofdividend.Bothofthese argumentsareright.ThequestionthattheboardandIhadtoaddresswasaboutour overallbalancesheetandleverageposition,bothinternalandexternal.Tobelieveour investmentthesis,asIsaidbefore,youhavetobelievewehavearobustbalancesheet withclearplansinplacetoreduceleverage.Wehadtofixthisquestiononceandforall andthatswhatwevedone. SimonMeadows:Imsureyouveanticipated,ofcourse,thatsomeinvestorswontbe comfortablewiththis.Howdoyouthinktheyllreact? MarkWilson:Ithinksomeinvestorswouldcertainlybedisappointed.Idalsohopethat wouldbemitigatedtoanextentbythefactthatwehaveeliminatedthescripoption. Nowthescripisdilutiveandabadthingforshareholdersanditisalsonotconsistent withourcashflowthesis.Thescripinfacthasbeendilutivebyabout16%overthepast8 years,andthatsalot.Whatwewantisaclean,simpleinvestmentstoryofcashflowand growth.Byrebasingthedividend,bypayingdowninternalandexternaldebt,andby eliminatingthescrip,IthinkthatsaverypositivestorytogoforwardandputsAvivaona verysoundfooting. SimonMeadows:Lookingforward,whatareyourprioritiesfor2013? MarkWilson:Ithinktheycanbesummedupinthreethings:cashflow,simplicity, balancesheetstrength.Onthecashflowweneedtofocusthebusinessesongettingthat cashflowout,thatspartofourinvestmentthesis.Onthesimplicity,weneedtosimplify thebusinessfurther.Oneofthekeythingsweneedtodoisdevelopourcustomerthesis:

asimplepropositionthatcustomersknowtheycanexpectfromAviva.Thatsgoingto takeanumberofmonthsworkthisyear.Thebalancesheetstrengthisaboutreducing thedebtandcontinuingthegoodworkthathasbeendoneoverthepast12months.You know,itsimportantnottoforgetfundamentalunderlyingbusinessesarefirstclass.Our insuranceexpertisereallyisrightupthere.Anditsthebusinessesthataregoingto generatethecashflowsthataregoingtokeepourcustomershappy,andultimatelyare goingtogetthereturnsfortheshareholders.Wehaveastrongbusiness,wehavea strongteam,theannouncementsmadeputusontherightfootingforthefuture. SimonMeadows:Markthankyouverymuchforyourtime. MarkWilson:Simon,thankyou.