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CNBC Transcript: Interview with Mark Wilson, CEO of Aviva

Following are excerpts from a CNBC interview with Geoff Cutmore and Karen Tso, and Mark Wilson, CEO of Aviva.

GC: Mark Wilson is the CEO of Aviva. Mark great to have you back with us on the programme here. Just talk us through these then, how good do you feel about the quarter?

MW: Morning Geoff, morning Karen. If you have a look at our 2015 results, they were about growth and stability amongst, I guess, this backdrop of market volatility. How do we feel about it? Well, it's beaten consensus pretty much across the board. Have a look at operating profit, that's as you say, up 20%. Our value of new business, our key measure of sales, that's up 24% and that's now 12 consecutive quarters of growth. If you have a look at our asset management business - a key area for our future – that's had a pretty good performance too, that's up 33% and it's passed the important 100 million pound barrier, so all in all, I think a highly satisfactory set of results.

GC: What's the feeling these days about the balance between paying out and keeping shareholders happy, lifting the dividend, and maintaining a decent solvency ratio and reassuring the regulators that everything looks good on the balance sheet. Just talk us though the current thinking.

MW: Yeah sure. Well the pay-out at the moment, so as you said, we raised at 15% this year. Now remember that's on the back of a big increase last year as well. So that's 38% increase over the past 2 years. And you mentioned the balance sheet, I think in the insurance sector generally, the solvency too has been a massive overhang for quite some time. We're pretty satisfied where we've come out. We came out at 180%. That's clearly well above what the market was expecting today. That means we have about 9.7 billion pounds of excess surplus. So I think Aviva's really gone from having one of the weaker balance sheets 3 years ago to certainly one of the strongest and most resilient and the good thing about our balance sheet, it's not that, it's extraordinary resilient to all these market movements. Even if you have a look at the trough of this last market turmoil, it only took about 5 basis points off our ratios. So it's very strong it's very resilient and I think investors should take a bit of comfort from that.

KT: The 180% you mentioned on solvency too Mark, this is as you say, higher than market had anticipated. Why did you bolster this amount when expectations were much lower – about 10-20% lower?

MW: Well I said a few years ago I wanted us to be like a Swiss clock and be regular and produce earnings that were growing all the time. To do that, you've got to have a bit of a fortress balance sheet. Now we've done that. We're actually at the top of our range so working range is up to 180%. We're generating more capital. We've said that there's going to be more capital coming out of the Friends Life transaction. Add all that together, that gives us options. It's a bit of a unique position for us to be in. Having options on what we do with that capital, but it's a high quality problem.

GC: Just in terms of that cash, I think the market would be very pleased to see the release of that surplus capital. And as you point out, 1.2 billion is a nice chunk of change. Mark where does that go? You're a young man with ambition. Is there a big deal for you?

MW: Well thanks for the description Geoff, but what we've got, you won't see any big deals in the near future. What we've said is that is there is a lot of uses for that cash. We've done a recent bolt-on acquisitions, like in Canada the RBC insurance deal. That was pretty good and very creative. You've seen other things as well, we could. We just need to run the business operationally. We might restructure debt, possibly, that's another option. And of course there's always that option there to focus on which is about maybe giving some of that capital beck to shareholders. But to be clear, we're not there yet. I would characterise, I guess, like the English Rugby team. A couple of years ago they weren't winning many games, that had a few strategy issues. Now they've got the strategy right, they're winning quite a few and we're a bit like that. But we're not All Backs quite yet.

KT: I'm not sure the central Bank's winning any big games today Mark with its cut though to the interest rate. And speaking of interest rates, I want to talk about the ECB because we're now in a world where we're looking at negative deposit rates today which would make it a further step in that direction of 10 basis points possibly more if Mario Draghi surprises us. What are your expectations and what does this environment mean for you?

MW: Well we've been following it closely and I guess the ECB disappointed a bit last time. We're probably around market consensus, we think it's going to be around 10 percent, and 10 basis point lower and perhaps also 10 billion of QE. And we'll see if he does stick by his mantra of whatever it takes. But probably much less than that's going to disappoint the market a bit. But when it comes to us though, it doesn't actually impact us that much. Our balance sheet's resilient and our back book is so well-matched that it doesn't make that much difference and our new business really doesn't have those guarantees in it. So of all the insurance companies, we're probably in pretty good shape for interest rate cuts.