Aviva plc (AV) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Aviva's 2021 Annual General Meeting. I'm George Culmer, and I'm pleased to be speaking to you at my first AGM as your Chair. And while I'm new to the role, I'm not new to Aviva. I've known this business for a long time, first, as a competitor; and then more recently, as part of the Board. And I joined Aviva and then took on the role of Chair because I'm determined to help make Aviva the success that our customers, our people and our shareholders deserve it to be, one that is true to its purpose of being with you today for a better tomorrow. Now joining me here in St Helen's is CEO, Amanda Blanc; your CFO, Jason Windsor; and Kirstine Cooper, our Company Secretary. And with us via video linker, your Board, and I'd especially like to welcome Mohit Joshi, Jim McConville and Pippa Lambert, who are new to the Board this year and who bring with them a wealth of valuable and relevant experience. I'd also like to wish Pippa a happy birthday. Now our AGM is an important moment. It lets us update you on the company's progress and, more importantly, it gives us a chance to hear directly from you. And while we can't, due obviously to COVID restrictions, all be in the room, we have this year invited shareholders to not only attend but also for the first time take part in the meeting electronically. This means you will be able to vote online and ask questions. Now I can confirm that in line with our Articles of Association, we have the necessary quorum of shareholders in the room and joining virtually. The notice of meeting was made available to shareholders in March and sets out the resolutions being put to the meeting today. I do not intend to read out each resolution However, I will cover these within the formal part of the meeting later on. In order to give you time to place your votes online, I now declare voting open on all resolutions on the Lumi site for any shareholder, proxy or corporate representative, who is entitled to vote. Voting will remain open for the duration of the meeting. In terms of technology, the voting icon should appear on your navigation bar. From here, you will find that resolutions are set out in the notice of meeting and the voting choice is displayed. Simply select the option that corresponds with how you wish to vote. Once you have selected your choice, the option will change color and a confirmation message will appear to indicate your vote has been cast and received. There is no submit button. If you make a mistake or wish to change your vote, simply select the correct choice. If you wish to cancel your vote, select the cancel button. You can also submit your questions using the online meeting platform. If you wish to ask a question, please click on the message icon located in the navigation bar at the top of your screen. Type your message into the Ask A Question box and click the arrow button to the right-hand side of the message box. I hope it's all clearer to you than it is to me. If any person attending the meeting online is having any difficulties, there is a user guide that you can access through the platform on the Information tab that should address any questions you might have. So now without further ado, we can get underway. In terms of backdrop and for reasons of which you will all be acutely aware, 2020 was clearly a traumatic year with significant impacts and consequences that will no doubt play out for months and years to come. What matters for Aviva is how we have responded and how we continue to respond to these events and how we ensure that we are there for our customers and there for our communities. Whether that was often things like enhanced cover for NHS staff and deferred payments for customers in financial difficulty or contributing GBP 43 million to support health services and community partners around the world, it is my strong belief that Aviva has been there. Now since my appointment this time last year, we've welcomed Amanda Blanc as our new CEO, and we have a new strategy, a new clarity in where we are heading as a business. We have focused Aviva on our 3 core markets of the U.K., Canada and Ireland. where we have scale and long-term competitive advantages. As part of that, we aim to become the U.K.'s leading insurer and the go-to customer brand. Amanda will shortly set out more detail on what's been delivered so far. What I would say is that we've already done much and that we have moved at pace. I also though have no doubt that Amanda will rightly say that there's still much more to do. What I have noticed is that as I talk to our people, it feels like the organization has a spring in its step. Okay. I'm biased, but I feel there is a growing confidence and pride in what we do and, importantly, what we're capable of doing in the future. Before handing over to Amanda, I'd just like to touch on 2 matters. The first is the dividend. As you know, the enormous uncertainty around the economic impact of COVID led us to announce the withdrawal of the 2019 final dividend, an action that was aligned with the guidance from our regulators. I'm acutely aware of the importance of the dividend, especially for our individual shareholders, and this was not a decision that we took lightly. I'm also, therefore, pleased that we were able to confirm a second interim dividend for 2019 of 6p in August and for 2020 an interim dividend of 7p and a final dividend of 14p, giving 21p per share for the year. Looking ahead, our continued financial strength and our ability to deliver a sustainable ordinary dividend is a key element of our strategy, and Amanda will speak more on that in a moment. The second matter I'd like to mention is our determination as a business to act in a responsible, sustainable way. As I wrote in this year's annual report, if the pandemic has taught us anything, it is that we are ever more closely connected in this world. Companies cannot create value without looking beyond shareholder interest to see the benefits or harms that they contribute to society. That is why this year, we have unveiled a new ambition on sustainability. Our aim is to lead by example on climate change to do our part to build stronger communities and to run ourselves as a sustainable business. As part of that ambition, we have set a goal to become a carbon Net Zero company by 2040, and we are also committed to seeking an advisory vote from this meeting on our climate-related financial reporting, which is covered under Resolution 4. We are the first major insurer to do this, and it underlines the importance we place on transparency and accountability when it comes to taking action on the climate crisis. Sustainability is not just some nice to have. It is a fundamental strategic issue for us all and central to our long-term success. Finally, I'd like to close by paying tribute to all my colleagues in Aviva, who have been working so hard over the last 12 months. The challenges we have all faced have been exceptional and their response has been even more so. I'd like to thank everyone for their remarkable and continuing efforts, and I'm frankly, both in awe and humbled at what they have achieved. Thank you all so very much. I will now hand over to Amanda.

Thank you very much, George, and hello, everyone. I'm delighted to have this chance to speak to you all this afternoon. It's only been 10 months since I joined the business, but as I'm sure you know, a lot has gone on in that time. And I want to be as clear as I can with you about what we have done, what we are doing, and how we intend to take Aviva forward. Because this is as much your business as it is anyone else's. And the backing of our shareholders and your belief in what we are doing is going to be vital to our success. I am acutely aware that Aviva has underwhelmed many of our shareholders for some time now, and I am very conscious of the expectations you have. I intend to meet those expectations and build a business that satisfies everyone, our customers, our people and, of course, all of you. Now being there for our customers when it matters, being with them today for a better tomorrow is the whole reason that we exist. And I'm incredibly proud of how our people have stepped up and lived up to that purpose in the last 12 months. Despite all the difficulties, the stress, the uncertainty, having to juggle personal and work lives from home, our people have consistently gone way above and beyond, and they have continued to provide an excellent service to our customers, just when they needed us most. I want to take this moment to recognize that and to once again thank all my colleagues for what they've achieved in the most challenging of circumstances. It really is inspiring, and it fills me with optimism that the best is yet to come. Last year, when I became CEO, I set out 3 strategic priorities for the business, 3 areas we needed to deliver on. They were: focus the portfolio, concentrating on our core markets where we have the scale and capability to win; financial strength, ensuring we have the strong foundations from which to build and grow this business; and transforming performance, so that we can unlock our enormous potential and grow this business sustainably over the long term. Moving at pace is a bit of a mantra for me, and I'm pleased to report we are making excellent progress on all fronts. We said we'd focus on our strongest businesses in the U.K., Ireland and Canada, and manage our international businesses for long-term shareholder value, and that is exactly what we have done. In just 8 months, we've announced the sale of 8 businesses: France, Singapore, Italy, Hong Kong, Indonesia, Vietnam, Turkey and Poland. That strengthened our capital and our liquidity. That's realizing significant value for you, our shareholders. We said we'd ensure we're financially strong, and that is exactly what we are. We have a healthy capital surplus of GBP 13 billion. Our cover ratio stands at over 200%, and we have over GBP 4 billion of center liquidity. We have accelerated debt reduction plans, and we will have redeemed GBP 1.9 billion of debt by early June. As we complete on our disposals in the months ahead, our priorities for deploying excess capital continue to be: reducing our debt, investing to grow our core businesses and returning substantial capital to you, our shareholders. Speaking of which, I'm turning to that all-important question of your dividend. In November, we set out our intent to deliver sustainable ordinary dividend. In line with the new shape of the group, that dividend will be covered by capital generation, cash remittances and growth from our core businesses. And we intend to increase that dividend per share by low to mid-single digits over time as we grow the business, improve efficiency and reduce debt. Our third strategic focus is to transform performance in our core business. We've made a good start and can report some decent early progress. Despite the challenges we all faced in 2020, our financial and trading performance was robust. We even had some record trading results in key growth areas: 8% year-on-year commercial lines growth; GBP 6 billion of bulk purchase annuity and new business sales, representing a record for Aviva; GBP 8.5 billion of savings and retirement net inflows; and we are ahead of our plans to deliver GBP 300 million of cost savings by the end of 2022, with GBP 180 million already achieved. So we're on our way. But I want us to do more and move faster to create a real shift in the way we operate to serve our customers because those customers are why we exist, all 18 million of them across the U.K., Ireland and Canada. Everything depends on our customers and how we serve them. That's where success comes from. That's where the growth comes from. We need to build our business around each one of them, serving their needs seamlessly and efficiently regardless of whether they are a business, an individual or an intermediary. And we want to serve more of those needs for more of our customers. So we've articulated a big vision. We want to lead in all our markets, Canada, Ireland and, of course, the U.K. In Ireland, where we have a strong market position, we're going to broaden our appetite in general insurance to bring more of what we do to more mid- to large organizations, safely expand into new specialty risks and make better use of digital to simplify customer experience. In our Irish Life business, we are investing in our distribution teams, automating more and more of our processes and ensuring stronger collaboration with a wider business so our customers in Ireland can benefit from more of the products and services Aviva has to offer. In Canada, where we have a strong foundation as a top 3 player, we will secure the growth we need by providing all of our customers with a greater consistency of experience, being easier to do business with and providing them with an unmatched claims experience. We are very fortunate to have 2 strong businesses in Ireland and Canada, businesses that have a genuine claim to be leading in their local markets. But to give them the best chance of fulfilling that ambition, we have to have a leading position here, our home market in the U.K. We've said we're going to be the U.K.'s leading insurer and the go-to customer brand in the country for all of our customers' insurance, protection, savings and retirement needs for individuals, corporates and their respective intermediaries, not just in one area, but all of them, not just good but the best. Here in the U.K., in our home market, we have the unique position of being able to serve people across the whole of their lives. We are the only insurer who can be there from buying their first car through to starting a family and the responsibilities that come with that, to saving for their future and making sure they have a comfortable income when they retire. We're already #1 in general insurance and workplace pensions. We're #2 in protection and health and a top 3 player across annuities and equity release. And there's opportunities for growth in all of them. For example, 1 in 4 people in the U.K. are forecast to be over 65 by 2039, presenting a massive opportunity for our individual savings and retirement business. If we look at the bulk purchase annuity market, current forecasts estimate GBP 30 billion to GBP 50 billion of flows per annum over the next decade. That's a tremendous opportunity for us to sustain the record volumes we have delivered in 2020 and to go further. In commercial lines, we are witnessing one of the hardest rate markets in living memory. We have achieved good growth in 2020, but we can do more. We will be better at serving our customers, making it easier to do business with us by simplifying, automating and digitizing the business. We'll be better at engaging with customers and being clear about how we can support them. You will have seen we've launched a new brand campaign for the first time in years, helping our customers understand better who we really are, why we exist and how we can be there for them throughout their lives. And we'll be better at presenting ourselves to our customers in a coherent and a consistent way, whatever they need, however they come to us. We've revamped our values and performance management to build a unified culture where everyone thinks, behaves and acts as 1 business, completely and relentlessly focused on serving those customer needs. I'm beginning to sound like a broken record, but I make no apology for that. Because like I said, those customers are why we're here. It's pretty simple. If we can satisfy those customer demands and needs, everything else will flow from that. And what they want and expect is not all that complicated when you boil it down. They want fair prices, a trusted brand that delivers on its promises, and, of course, excellent service. And they want all this from a company that will act in a sustainable and responsible way. We've been a recognized leader in so-called ESG issues, environment, social and governance, for many years. But this year, we've said we have to do more. As the U.K. leading insurer, we have a responsibility to lead in the way in the face of the climate emergency. So we are the first major insurer or bank in the U.K. to target carbon Net Zero by 2040. As George said, this is a key strategic issue for us as a company, as it should be for all companies. We cannot function if our society, economy and, ultimately, the planet cannot function. We're not doing this just because it's the right thing to do. We're also doing it because it makes sound commercial sense. Our plan covers the carbon emissions we produce ourselves. It covers emissions contributed by our suppliers, and it covers as far as possible the investments we make for our customers and our shareholders. Meeting these commitments will be hard, but we cannot wait for everything to be neatly laid out before we move the organization in the right direction. In this, just as in everything else, pace matters. It has been a busy few months, like I said. We've done a lot. And in a few moments, you'll see a short video, picking out just some of this year's highlights. But I'm under no illusions. We are not done yet, not by a long way. I know you're expecting more. You're right to expect more. I expect more. I know you're going to be looking at us to produce sustained, tangible improvement in our financial performance. I know this. And I'm convinced we have the right people, the right motivation and the necessary will to do just that. I know we've got what it takes. Thank you, all, for your continued support, and thank you for listening. [Presentation]

Okay. Thank you very much, Amanda. Moving now to your questions. Your Board are here both in the room and by video link to answer any questions you may have on the business of the meeting. In the interest of time, we will collate questions of a similar nature into batches and we'll answer them all together. We hope to get through all the questions within the next hour. If there are any still outstanding at that stage, we will make sure they are answered in writing and posted on our website. As this is a shareholder meeting, we will not be taking customer questions or other customer matters, and we will refer your question to the right colleague who will be in touch shortly following the meeting. We've asked a colleague in the room to read out the questions as they are submitted. So Andrew, it's over to you.

The first 2 questions are from Mr. [ David Hobson ]. I noticed divestment of investments in fossil fuel use industries. Surely, your first priority should be to gain the highest return on investment for your shareholder and seek best value.

Okay. Thank you, Mr. [ Hobson ], for your questions. Look, as I said in the annual report and accounts and in my presentations, I do strongly believe that companies cannot create value without looking beyond shareholder interest to see the benefits or harms they contribute to society. I firmly believe this is in the best interest -- best long-term interest of businesses, shareholders, customers, communities. And we firmly believe that we can and we will generate strong and sustainable returns and do the right thing for the environment. It's not a question of choosing. And to us, this clearly represents best value for everyone.

With 20% fewer claims on motor insurance and homes in lockdown with heating on, resulting in fewer burst pipes and fires due to constant vigilance, surely, there should have been greater scope to increase the dividend further, making up for previous shortfalls?

Okay. So it's a good question. Look, again, as you heard from Amanda and you'll have seen from yourself, in 2020, Aviva delivered robust results and a strong financial position. As you say in this also yes, there were benefits from changes in circumstances caused by COVID. There are also COVID-related additional charges and costs. Regarding the dividend, though, as I said earlier, we fully recognize the importance of the cash dividend to all shareholders and particularly ordinary shareholders, individual shareholders. What matters, though, is that, that dividend is resilient and sustainable. People know what they're getting and they know what they expect to get. And I believe our new dividend policy, which is explicitly linked to the cash flow, capital generation and growth of our core businesses in the U.K., Canada and Ireland, is precisely that. And as you've heard, going forward, we intend to grow dividend per share by low to mid-single digits as we benefit from growth in our core businesses, we benefit from improved efficiency, and we benefit from lower levels of debt costs. I would also emphasize that Aviva is financially strong. And following the completion of the major disposals, we'll be in a position to make a substantial return of capital to our shareholders.

The next question is from Ms. [ Allison Downs ]. I live in Suffolk, close to the site at the proposed new twin nuclear power station, Sizewell C, and was pleased to see Aviva's response. As reported in the Sunday Telegraph that the ESG impact of nuclear is far from clear at this time, and we are not actively involved in any such investments. The ESG case for Sizewell C continues to weaken. It cannot help the U.K. reach its new target of a 78% reduction in CO2 emissions by 2035, since it is not projected to be operating before 2034, and such projects are notorious for delays. Additionally, EDF admits it would take 6 years to offset 6.2 million tonnes of CO2 emitted during construction. The proposed RAB financing model for Sizewell C could contribute to fuel poverty with consumers required to pay a nuclear tariff during construction, years before any electricity is generated. In light of the above, can you please confirm that Aviva will not invest in Sizewell C?

Okay. Thank you, Ms. [ Downs ], for your question. I mean, this is clearly an important topic, and I think one that will only become ever more so. As you said and as the article stated, the U.K. government is looking at expanding nuclear capacity, and this is a core part of its efforts to achieve Net Zero emissions by 2050. Currently, we believe -- we consider the potential ESG impact in all of our investment decisions. However, as reported, we believe the ESG impact of nuclear is at this time still far from clear. To answer your question, I can therefore confirm that we are not currently actively involved in any such investments. I would also say though that we do think a debate is needed on this topic, and we fully intend to be involved in that debate.

The next 2 questions are from Mr. [ John Harvey Leacock ]. In carrying out their role, does the Customer, Conduct and Reputation Committee occasionally at random read customer complaints and consider also the content of the reviews appearing on the 2 Aviva Trustpilot sites? 79% and 65% classed as bad, when contrasted with more favorable reviews for, say, Admiral, 25% bad; and LV, 3% bad on Trustpilot.

Okay. All right. Thank you, Mr. [ Leacock ], for your -- well, 2 questions. Just to answer the first one. Look, as you heard from Amanda, our strategy and our success depends on putting our customers at the heart of everything that we do. Now of course, we're not going to get everything right first time, and it's important when we fall short that we fix it quickly and also that we look into the reasons why things went wrong, so we can make sure it doesn't happen again. The Customer, Conduct and Reputation Committee, to which you refer, that's a committee of the Board. It's chaired by Jim McConville, and its main purpose is to set the standards and policies for the group to provide oversight of our conduct in relation to customers and to ensure good customer outcomes are being delivered. I regularly review customer complaints and will correspond with and reply to and the Customer, Conduct and Reputation Committee regularly looks at areas of customer concern and how these can be swiftly resolved. Amanda attends and the executive attends those sessions. And this will continue to be a massively important area of our. As regards to Trustpilot, yes, no, this is an interesting one. This is a way of getting feedback, which is invaluable. But it is very fair to say, though, at the start we had technical items of the system actually collecting a balance of scores. That has now been corrected. And what I'm delighted to say that at the beginning of this week our score was something like 4.4, which puts us ahead of those competitors that you spoke about. And I'd like to say, I think this is where we should be.

The nation's physical and mental health has been badly affected by COVID-19 issues. So will the Board consider, if not done already, instructing health and life underwriters to take a pragmatic view in underwriting future risks presented, unless this is forbidden by reinsurance treaties? In asking this question, I am particularly concerned that certain members of our population may be penalized unfairly in view of the use of the words, cohorts of the population as highest risk of COVID-19 in comments about individual life insurance risks as per Page 39 of the annual report?

Okay. Again, well, thank you, Mr. [ Leacock ]. You obviously know a bit about the industry. Look, I should start by saying that the Board and management share your concern that the company takes the appropriate, the right, the pragmatic approach with its customers and potential customers with regards to all matters COVID-19. And I like to think that over the last year or so, Aviva has done precisely that. Regarding your specific question, I mean, as you imply, underwriting lives is about assessing risks. And obviously, COVID-19 is a new risk and one that continues to evolve with both the emergence of the variants and, obviously, the success of the widespread vaccinations. Nevertheless, it's our strong desire working with our reinsurers, as you point out, to revert as soon as possible to our pre-COVID-19 underwriting appetite. And what I would say is, in the meantime, we are adopting a pragmatic approach. And I think that view is shared, I believe, by our regulators. These aren't just buying words. Real life examples of this would be things like proactively postponing tests, which would otherwise be declined and proactively working with customers to secure cover. And I am pleased to say that our acceptance rate for life insurance remains well above the 90% level.

The next question is from Mr. Philip Meadowcroft. The 2020 annual report contained evidence we have repeatedly seen over the past 2 decades or so that Aviva Investors makes a negligible 3% contribution to group operating profit. In 2020, GBP 85 million out of a group total of GBP 3,161 million. The report states that 80% of the funds managed by Aviva Investors belong to Aviva, arising from managing Aviva investment funds of one form or another. Aviva Investors is simply unable to become a significant asset management company because it attracts too little non-Aviva business as well as delivering non stellar investment performance in many Aviva categories like unit trusts. Has the Aviva Board ever undertaken a granular review of Aviva Investors and the validity of the ROI it delivers? If the Board has, there has clearly not been a strong and positive reaction. And if it hasn't, isn't that a serious dereliction of responsibility? Put simply, when will Aviva Investors become a substantial contributor to group operating profit? Or would it be better to employ our CEO's disposal skills to offload parts of our Aviva Investors business, which lack scale and significant contribution to group business?

Okay. Thank you, Mr. Meadowcroft, for your question. Thank you for joining the meeting. Those are strong words. Let me say a few words upfront, and then I'll just ask Amanda to give more detail. First of all, I think as is very clear with the strategy we've set and the action we have taken, the Board and management took a very long, hard look at the group, and that very much included Aviva Investors. And we concluded, and we all very much believe that Aviva Investors has a critical role in the future of this group and brings key skills and key attributes as we move forward and seek to grow and develop Aviva for the benefit of our customers and our shareholders. To your points, is it's performance currently where we'd like it to be? No. But we have taken action, and we will continue to take action. And with that, I'll ask Amanda just to give a bit of detail in terms of things.

Thanks, George, and thank you for the question, Mr. Meadowcroft. So look, I've been very clear that while Aviva Investors is a key part of the group, we also have an expectation that its performance has to improve. Mark Vesey, the new CEO of Aviva Investors, and I are completely focused on taking the necessary steps to drive improvement across this business. As George said, of course, the Board has taken time to review all of our businesses and concluded that Aviva Investors has the potential to grow, particularly as it focuses on its key strength in real assets, private debt, infrastructure, equities and credit capabilities, which it excels and which are rooted in its insurance heritage. I think, furthermore, the Aviva Investors have some significant strategic value to the group as a whole. It plays a key role in delivering investment capabilities that are critical to supporting our growth strategy. It's a key enabler of our bulk purchase annuity strategy, originating high-quality, high-yielding and capital-efficient assets that we can use to back our annuity liabilities, and that gives us an important competitive edge compared to some of our peers. In our savings and retirement business, its design and management of ESG default funds as well as the low-cost multi-asset solutions has helped us to secure our position as the U.K. leading workplace pension provider. And Aviva Investors' decade-long track record at the forefront of sustainable investing means that it's ideally placed to meet the growing demand from clients and customers in this area as well as helping Aviva to reach its Net Zero emission by 2040, a goal that we announced earlier this year, as the first major insurer anywhere to do so. So all this means that we would expect Aviva Investors to become a bigger contributor to the profits of the group.

Dear Chair, my name is Michael Kind, and I'm asking a question on behalf of ShareAction. My question is in relation to Aviva's use of Annual General Meeting attendance and its stewardship practices. COVID-19 has led to much debate about the future of the AGM. A recent ShareAction paper argued that investors should embrace the value of attending AGMs now and in the future. AGMs are a brilliant opportunity for investors to enhance their understanding of investee company's approaches to ESG. Investors are given the opportunity to hear from and interact with a wider range of voices, including the entire company Board as well as retail and institutional investors. Key company stakeholders may also be present. This opportunity to listen to and exchange views has clear value in comparison to other engagement opportunities. Moreover, it is a brilliant opportunity for investors to demonstrate to end beneficiaries that they are serious about stewardship. For example, earlier in the year, BMO Asset Management attended the Compass AGM to understand what the company had put in place to prevent a repeat of the food parcels scandal. Do Aviva plan to make use of investee companies' AGMs in your stewardship practices this AGM season and in the future?

Okay. Thank you for your question, Mr. Kind. And the short answer is yes. We believe we know ShareAction does important work in this area, and I'd like to think you would agree with me that Aviva has also been a leading voice in shareholder activism for many a year. Aviva and Aviva Investors are committed to being responsible stewards of our clients' money. And that means using our influence with press companies to embrace more sustainable practices, to hold boards, management teams accountable where they fall short. And to do this, we make use of every tool available to us. That's private meetings with management, filing shareholder resolutions. And of course, as you say, voting at company AGMs. And I think we cast out -- it's something like more than 6,000 AGMs and EGMs every year. Mostly, obviously, this is done electronically. But by exception, we will also attend where we feel our presence and contribution will add value to that meeting. So yes, I'm in agreement with your question, yes.

My name is Stuart Laidler. And I'm asking a question today on behalf of ShareAction, a responsible investment charity. We are facing an unprecedented collapse of life on earth. The 2019 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, or IPBES report, raised serious warnings about the unsustainable decline of both animal and plant species on our planet with 1 quarter facing threatened survival. And last year, for the first time, the World Economic Forum placed all 5 of its top global risks in the category of natural environment, while also warning that $44 trillion, over half of the world's GDP, is dependent on nature and the services it provides. As allocated of capital and stewards of companies, the financial sector has a critical role in helping mitigate biodiversity loss and helping sustain a habitable planet. Yet while investors are starting to make progress on other global systemic issues like climate change, our own research of the world's asset management community finds only extraordinarily little progress, if at all, on this critical issue. However, we see progress is possible. BNP Paribas Asset Management, for example, has committed to no deforestation, no peat and no exploitation targets across its portfolio holdings by 2030. Meanwhile, BlackRock are considering biodiversity as a factor in routine voting items. We ask for Aviva to lead by example by committing to take the following steps. One, to develop and publish an investment and engagement policy on biodiversity to cover all assets under management beginning with policies targeting high-risk sectors and outlining clear expectations for companies. The policy should include prioritization of the topic of biodiversity within its company engagement program and be supported by a robust escalation policy. Two, to join the Finance for Biodiversity Pledge with the ambition to set science-based nature targets by 2024 at the latest and to support key collaborative initiatives such as the Taskforce on Nature-Related Financial Disclosures. In the meantime, ShareAction is willing to meet with representatives from Aviva to discuss this in further detail.

Okay. Look, thank you for your question, Mr. Laidler. We clearly recognize that nature is critical for our society, our economy and our businesses to thrive. And that urgent action is needed from us all to protect our ecosystems. And I'll ask Amanda, if it's all right to just comment on some of the specific actions that we are taking.

Okay. Yes. Thanks, George. So look, Aviva has a long history of engagement on biodiversity topics, such as deforestation, world heritage sites and more recently plastics. I can actually confirm that we are currently joined together a biodiversity policy, and we'll be looking to work with stakeholders before publishing it. As a sign of our intent in this area, I can also confirm that we've already signed up to the Terracotta initiative. And we're currently signing up to the Finance for Biodiversity Pledge. Climate change is inextricably linked to biodiversity loss. So we cannot solve either problem in isolation, we recognize that. So we think that there's a lot to learn about how the finance sector can tackle biodiversity loss from our approach to climate change. And so we will also be looking at initiatives like the Taskforce on the Nature-Related Financial Disclosures using our own experience of TCFD.

The next question is from Mr. [ Adam McGiven ]. Our company is a shareholder and bondholder in Adani Ports and Special Economic Zone, a company which last month was removed from the Dow Jones Sustainability Index and has been linked to both a massive thermal coal mining expansion in Australia and the Myanmar military. The company in Myanmar is in business -- it is in business with is under U.K. government sanctions. Recently, close to a dozen investors have publicly divested or restricted investment in this destructive company, including PIMCO, State Street and Nordea. Is our company comfortable being invested in a company such as Adani Ports? Will it reconsider this investment? Commentary from Aviva Chief Investment Officer, David Cumming in an article titled Stranded published on the Aviva website in February discussed 2 options facing fossil fuel companies: firstly, a managed decline where CapEx is restricted to only those projects that fit within a set carbon budget and excess capital returned to shareholders; or secondly, using free cash flow to diversify into alternative low-carbon businesses. Reporting in the Financial Times in January also stated Aviva will divest from fossil fuel companies that failed to appropriately address climate change over the next 1 to 3 years. Is it fair to conclude that Aviva will divest from fossil fuel companies that failed to articulate a clear detailed Paris-aligned plan to manage down fossil fuel production in the very near future? Also, given the historical rarity of successful business transformations, how weary is Aviva of fossil fuel companies diversification claims? Our company through Aviva Investors Global Services Limited is listed as one of the shareholders of Adaro Energy, a major Indonesian coal company with 87% of its revenue from coal mining with 1.1 billion tonnes of coal reserves. If all this coal is burned, as Adaro intended to be, it will release 2.2 billion tonnes of gases into the atmosphere, nearly equivalent to the annual emissions of India. Adaro Energy does not have any credible plans to demonstrate how it will phase out coal and diversify its business in a manner consistent with the Paris climate agreement. Given our company's well-established commitment to sustainability, will Aviva review the impact of Adaro Energy's coal business on climate change and consider not investing in Adaro Energy in the future?

Okay. Thanks for that, Mr. [ McGiven ], and, obviously, it's important topics in there. There are also a number of questions. I think you're asking both our stance on fossil fuel companies in general and our compliance with Paris climate agreement and also specific questions on Adani and Adaro. Look, on fossil companies we announced in January that we will make specific requests of 30 systemic important carbon emitters and have a time line between 12 and 36 months to evidence action. If we fail to see evidence of serious engagement, we will put them on our stop list and divest of any assets held. Within next year also divested companies making more than 5% of the revenue from thermal coal, again, unless they're signed up to science-based targets. On the specific companies you mentioned, I can confirm we have already taken action to reduce our active holdings. And as it stands today, we hold something like less than 0.01% of each of their shares and a very, very low level of their debt. So action has been taken. That was a good call.

The next question is from Mr. [ Peter Miller ]. Will the Board agree to suspend the sale of the Gomm Valley development site until a full review has been carried out of Aviva's prior commitments to the community setting its fiduciary duties and ESG aspirations?

Okay. Look, thank you for that and for your question with sale of our interest in Gomm Valley real estate development. Now this is just outside High Wycombe in Buckinghamshire and is garnering quite a lot of interest at the moment. Let me just set out the background and where we are on this. Aviva took over management of the site in 2016 as part of the Friends Life acquisition. And over the past 5 years, we've worked with a number of parties on the potential development of the site. In the middle of last year, we reviewed the project and instructed a third-party to explore evaluation. Subsequently, we determined that the fund which owns the site is no longer in a position to support a potential development. A conclusion reached acting in the best interest of our customers in this fund who are saving for their retirement through this particular fund. We subsequently received a number of offers. And alongside price, we considers elements, including the certainty of the transaction completing. Additionally, we were clear in our minds that we would only sanction a sale to a responsible and reputable new owner. It is also worth noting, of course, that any plans a new owner may have for the development of this site would still be subject to all the usual local authority planning processes and full public scrutiny. There is no current planning permission approved for this site. Now I understand not everyone will agree with or like some of the decisions we make, but they're made in good faith and after careful and thorough consideration of all factors, including the interests of our customers that's saving for their retirement. Look, I hear your question, but I should say we have no plans to suspend the sale process.

The next question is from Mr. [ Cliff Wait ]. If the Remuneration Committee had known of the public censure of Aviva by the FCA in 2020 when they decided the bonus awards for 2018, would they have applied more than a 5% reduction? The Aviva Remuneration Committee on malus and clawback Page 100 of the annual report says that clawback can apply for a scenario or event, which causes material reputational damage to the company. Is Aviva saying that a public censure by the FCA is not material reputational damage? My third and fourth questions relate to the fifth bullet on Page 100, any regulatory investigation or breach of laws, rules or code of conduct. The FCA censure clearly falls under this category, in my opinion. So why did Aviva not use this policy to clawback the 2018 bonuses? And why did Allen & Overy think this was not a reasonable basis? Please can you explain and publish the reasons why Allen & Overy gave Aviva this advice.

Okay. Thank you. The question is obviously on a topic, where there's been much public interest. Look, the shareholders are aware. This question relates to the company's announcement regarding its preference shares, which was made, I think, in March 2018. Now the company has already taken significant action, including publicly apologizing for the issue, making hold those who had suffered losses and reducing executive directors' bonuses not by 5%, but by 17.5%. Now at the 2019 AGM, as I might recall, we also committed to review the remuneration action taken for the whole Board once the FCA investigation have been finalized, which occurred in October 2020. Following the FCA's decision, I therefore initiated an independent review of the decisions around remuneration in relation to the Board and this issue. Now this involves establishing a subcommittee of the Board, which I chaired and which comprise Board members who were not involved in the original issues -- not at the company at the time. We, as the subcommittee, in turn commissioned independent law firm, A&O, as you say, who were again not previously involved with the original decision. Now that review by A&O concluded that the action taken, as you say, on the executive directors at the time was appropriate and that there was no basis for further action in relation to the nonexecutive directors. The subcommittee, as I said, which is chaired by myself, accepted the conclusions of that review.

The next question comes from a shareholder who has requested not to be named. Given the very large cash surplus that presently exists and which will further increase from the sale proceeds of recently agreed disposals, can the Board now give the meeting a clear idea of their intentions for the capital that is deemed to be in excess of current requirements?

Okay. Thank you for your question. And obviously, you've heard Amanda speak about this a few moments ago. And obviously, last November, Amanda and Jason outlined a new and clear capital framework. And under this framework, we will reduce leverage, that's borrowing, that's debt, below 30%. We will invest in those core businesses, which we're determined to grow. And we will return capital in excess of the 180% Solvency II cover ratio and return that capital obviously to shareholders. And we've been clear that we are fully expecting, as we've said, to make a substantial return of capital to our shareholders. Now in terms of progress, as we announced in our results in March, we're taking important first step by paying back debt and reducing the leverage, reducing the borrowing. That includes, again, as you've heard, GBP 1.9 billion of debt being repaid in the first half of this year, which will lower leverage by -- take us to about 27%. Now this will utilize a significant position of our current excess cash. And we currently expect to receive the cash from our disposals of France, Poland, Italy, which, in aggregate, I think, is around something like GBP 5 billion in Q4 and Q1 of 2022. But I would say again that we are fully expecting to make a substantial return to our shareholders.

The next 3 questions come from Mr. [ Sunil Kumar Paul ]. Firstly, can you please put debt and dividend in the contents of the annual report?

Okay. Well, thank you for that. I think this is a question that the CFO would know. I think it's this one. Jason, would you be just kind to respond to that?

Sure. Thank you. We do have in the contents something called capital management, which does include lots of information on the capital of the organization, including a lots of detail on the debt, and the dividend is covered in detail on Page 1 and in the Chairman's report very upfront. But thank you for the question.

We're just waiting for the next question, which is, sir, what do you mean by narrow shareholder interest in your statement? Why should our interest in investing to get a return be considered narrow?

I don't think it is narrow, and I don't recognize the term. I don't doubt -- I'm sure you've been through it and then I said. But if I said it, it isn't narrow. As shareholders, you own the company. You participate on all aspects. You're involved in all aspects. All aspects of the business are relevant to you. So I don't recognize or remember using the word narrow. I assume I did. What I can assure you, though, is that I won't be doing so again as we move forward because I don't think, to your question, they are narrow interest.

This question is to the Chief Executive. Madam, if it is not confidential, can you please highlight why do you think past Board could not realize the significant untapped potential of Aviva, which you have seen?

Okay. Thank you for that question. Look, it is really not for me to comment on what's gone before. What I always like to comment about is where I want to take the business. And what I'm interested in is looking to the future. But if you want me to comment on why I believe there is such potential, it is because, today, we're focused on -- our attention on the core markets, U.K., Ireland and Canada, where we've got leading positions and where I believe that we have the potential to win. And I think that strategy is very clear. It's centered on customers, as I've spoken about earlier, and serving their needs throughout their lifetime. We also are building the strategy around digital. I mean that's the way the world works now. It's a fundamental part of our business as has been demonstrated by the success during 2020, and we will continue to invest in this area. So we're focused on delivering robust growth and we're allocating our capital, our resources, our investments to these targeted areas where we believe there will be clear market growth opportunities and where we have leading positions. And of course, there is also a new management team in place, and I'm really confident that these are the right ingredients for Aviva to really fulfill its true potential.

The next question is from Mr. [ Richard Peter Parkins ]. The annual report mentioned several times a correction in the interpretation of a regulatory rule in the French subsidiary. Breaking regulatory rules is a serious matter. Could the Board provide an explanation of what rule was broken and how? What the effect was on the numbers in the financial reports and whether there is likely to be any penalty against Aviva?

Okay. I'll start there and then I'll ask Jason to comment as well. And Mr. [ Parkins ], I agree entirely in terms of the seriousness of not compliant or braking, as you say, regulatory rules. It is our responsibility as a Board. It's our responsibility as management to run this group in accordance with the rules and regulations that pertain in all the territories within which we operate. And it was hugely disappointing to find ourselves contributing some of the local requirements in France. In terms of the specifics, I'll just ask Jason to comment on some of the things that happened within France.

Thank you, George. The rule that we referred to was the way that policies would have been credited in very negative interest rates. We never actually reached those very negative interest rates, and it was picked up as part of our review. And as a consequence, there was no impact on customer policies, and there was no impact on profit. But there was an impact on our capital position, which we've disclosed in the annual report. That impact was 2 percentage points on the group solvency ratio, which, as George mentioned, was over 200% at the end of the year and also GBP 250 million on operating capital generation. The Board has overseen a thorough review of the model, both the plc and the French board. And we have made the French and the U.K. regulators fully aware of the matter which we've now resolved.

The next question is from Mr. [ Philip Adrian Clark ]. Our new CEO is correct when she says shareholders are underwhelmed by Aviva's performance over recent years. This is well captured by the TSR graph on Page 114, which shows Aviva lagging a very long way behind the comparator group. Now we have new management. Can you tell us what you perceive the reasons for historic poor performance? And how quickly Aviva's performance will be above the comparator group median line on the TSR graph?

Okay. Look, I will -- actually, I'll take that in a sense of -- as Amanda said earlier to a previous question, I don't think there's anything to be gained by looking in detail in terms of what did or didn't happen in the past. I think what matters is where we are now and where we are taking this company. And as you've heard today, as you've read in the report, we have a new strategy, we are moving at pace, and we are taking decisive action within the business so that we focus on those areas, as I said, where we think we have long-term competitive advantages and where we believe we can outperform. I'm not going to give any quantification of where we think that performance might take us. But I think, as I said in my presentation, my goal and Amanda's goal is to take Aviva to where it deserves to be. And that's not just for its customers, colleagues. It's most obviously for its shareholders. And the performance has not been as positive as it should be. It's certainly my aspiration, like its Amanda's aspiration, that going forward, you are going to see a positive performance for the company that hopefully will be reflected in that share price.

The next question is from Mr. [ Anthony Lee ]. Under the latest Chief Executive, Aviva is divesting itself of most of its foreign subsidiaries. This increasingly limits its operations to the U.K. Doesn't this place a disproportionate amount of risk on the future of the U.K., especially in the post-Brexit period and in the new era of COVID? By selling off those assets, Aviva may be getting cash now, but the temporary boost to shareholders is at the cost of compromising future revenue and growth.

I'll take that. Look, it's a good question. It's a thoughtful question. I would say this, wouldn't I, but I fundamentally believe that what we're doing is the right thing in terms of focusing on those markets, on those entities where we have the biggest strengths, where we know the markets best, and we think we are most able to capitalize and realize the potential of this business. Yes, as you say, I switched from some sort of diversification and some sort of global exposures down to an exposure on the U.K. I am personally more optimistic about the U.K. than you might imply within your question. I would also say that we have serious and we have sizable businesses within Canada and Ireland. But I think, first and foremost, as managers of this business, it's imperative that we focus on those that we think are going to be the long-term winners. And the positions that we had overseas didn't have the strength, didn't have the attributes that we have in the U.K. And I entirely think that it's still the right thing to focus on those businesses where we think we can win, and we think we can see that in the long term. And as I said, I am actually more optimistic about the U.K. than your question might imply.

This is another question from Mr. [ Anthony Lee ]. When Aviva sold its French business for EUR 3.2 billion, it agreed to a specific indemnity concerning known price arbitrage contracts over and above existing provisions. Previous management have downplayed the threat from these contracts. Although Aviva may believe the risk is minimal, the fact that they had to provide this indemnity to the purchaser surely shows that the risk is real. What is Aviva's liability?

Thank you for the question, Mr. [ Lee ]. Look, I don't think we, as a management team, have downplayed or talked incorrectly about this. I think we've -- we spent a lot of time understanding these contracts, understanding these risks in any form of transaction you're going to get, indemnities you're going to get, warranties. And the one we've got fully shares that risk between ourselves and the purchaser, Macif, Aéma. The size of that indemnity is one that has no material impact upon our capital position. It's one where the provisions that we carry have been agreed, have been signed off by things like the French regulator, ACPR. So I don't think there's been any misleading or deliberate downplay, and I think we have an good assessment of those risks and the mitigants that surround those risks. And I said the indemnity, the warranty that we cover shares those risks. And in terms of capital one has to put behind that, the amounts really are not material. So coming out of France, we had a good deal. It was the right deal for the business. We have a good counterparty who understand that market, who understand that business. It will be the right deal for our colleagues, right deal for our customers. And again, I think fundamentally, it is the right deal for Aviva in terms of focusing back down on the U.K.

We now come to the final question, which is from Ms. [ Elsa Alberta McPherson ]. I have been experiencing problems obtaining notice of the AGM and voting documents by post since the 29th of March. These have not been received, although requested on several occasions. As a result, I have not been able to vote. Can the Board confirm that this process is speeded up in the future?

Okay, Ms. [ McPherson ]. Obviously massive apologies for the difficulties that you have had and sincere apologies if you have been unable to vote. I will ask Kirstine to basically just say a few words in terms of what we can do to perhaps improve processes as we move forward.

Thank you, Ms. [ McPherson ]. As you know, the notice of meeting was published on the 25th of March and sent to shareholders who requested hard copy documentation on or about that date. Your election, I note, was not to receive hard copy documents, but we can change your election, if you wish. I apologize if you've tried to do this without success. And we will absolutely follow up a new inquiry off-line with our registrar, Computershare, following the meeting. In terms of process, we issue our Annual General Meeting documents at the earliest opportunity, and we will continue to do so. I would also add that you are now logged in to the meeting through the Lumi system. And so, therefore, you do have the ability to vote today.

Okay. Thank you, Kirstine. And thank you, Andrew. Look, I believe that was our last question. I just want to say thank you to everyone who took the time to submit questions today. And for those of you who we've not had time to answer your question, we will post answers on our website. I now propose that we move to the formal part of today's agenda. I'd like to alert everyone that this is your last opportunity to vote on the resolutions if you have not already done so. And the system will close in a few minutes' time. As I said, I will take the notice of meeting as read. However, I would like to draw your attention to the items of business. Firstly, Resolution 1. The directors are proposing to receive and consider the annual report for the financial year ending 31 December 2020. Resolution 2 is proposed to approve the directors' remuneration report. And this resolution is advisory only and is a means for shareholders to provide feedback to the Board. Resolution 3 relates to the approval of a remuneration policy, which has been updated to ensure continued alignment with best practice and was last approved by the shareholders of the 2018 AGM. In relation to Resolution 4, as I previously mentioned, we are this year asking shareholders to approve our climate-related financial disclosure for the first time. In Resolution 5, the directors are recommending a final dividend for the year ended 31 December 2020 of 14p per share. The dividend is payable on the 14th of May to ordinary shareholders whose names are on the register of members at the close of business on the 9th of April. Resolutions 6 to 15 concern the reelection of all directors who retire in accordance with the company's articles. In Resolutions 16 and 17, we are seeking approval for the reappointment and remuneration of our current auditor, PwC. A competitive tender process for the auditor had commenced during 2020. However, result of COVID-19 and following approval by the FRC, it was agreed to defer the tender by 2 years. Resolution 18 covers political donations. I know that shareholders have raised concerns in the past about the company is seeking authority for this matter, and I would like to be clear that it is not the company's policy to make political donations or incur political expenditure and it has no intention of doing so. Resolution 19 refers to the authority conferred on the directors to allot shares. Resolutions 20, 21, 23 and 27 to 30 inclusive are being proposed as special resolutions. Resolutions 20 and 21 relate to the disapplication of preemption rights and seek authority in line with the guidelines to give the Board maximum flexibility in order to raise capital. However, the directors have no present intention of exercising this authority. In regard to Resolutions 22 and 23, shareholders will recall that in 2020, we requested shareholder approval for the company to issue Solvency II instruments to support the future capital management of the company, should it be necessary. This authority expires at the end of this AGM and the Board is seeking renewed authority to allow the company to continue to have this flexibility. The Board believes that it is prudent to have these authorities in place although there is no present intention of exercising them. Resolutions 24, 25 and 26 relate to the approval of the renewal of certain updated Aviva share plans for the next 10 years. Finally, Resolutions 27 to 29 relate to authority for the company to purchase its own shares. And Resolution 30 relates to the authorization for the company to call general meetings on no less than 14 days notice. Now as a final reminder, if you have not placed your votes, please do so now. And then, therefore, remains to me to say those shareholders who could not attend today have been voting on the resolutions and the final results of the voting will be announced to the London Stock Exchange and posted on the company's website as soon as possible. With that, thanks to all of you for taking part, and I will now formally conclude today's meeting. Thank you very much.