#1Aviva Presentation to the AIRB 2022 Annual Review#2About Aviva Canada We are Canada's 3rd largest property and casualty insurer with Gross Written Premiums of $5.93 Million • • • In Alberta, we have Gross Written Premiums of $344 million in auto insurance and $200 million in property insurance We have two branches in Alberta (Edmonton and Calgary) with dozens of employees We have approximately $100M invested in Alberta government bonds AVIVA 2#3Oliver Wyman Loss Trends • Aviva believes that Oliver Wyman's loss trends would be appropriate if we were living in a period of stability and certainty but we are • • • not OW recognizes that we are in unprecedented times and estimates of future trend are subject to considerable uncertainty due to COVID-19, inflation and 2020 reforms OW's future loss trends are understated because they do no include an adjustment for inflation shock (elevated inflation) All coverages (PD, BI and AB) will be impacted by inflation shock OW's Bodily Injury loss trend is understated because the 2020 reforms are not delivering the projected savings • The past is not a good indicator of the future • Board needs to look beyond data and indications and give more weight to opinions of company's actuaries AVIVA 3#4SPOT CPI RATES 0 1 7 Canadian Inflation Projections The inflation projections vary depending on the source. We selected CPI Rate Projections based on inflation-linked securities Market Data. Most sources agree that the inflation will peak in 2022 and gradually reduce by 2026 but remain higher compared to pre-2021 levels. Comparison of Canadian CPI Rate Projections (May Data) 9 8 May 31, 2022 Canada's inflation rate rose to 8.1% in June 2022, the highest since January 1983, 2 3 4 5 6 12/1/2015 4/1/2016 8/1/2016 12/1/2016 4/1/2017 8/1/2017 12/1/2017 4/1/2018 8/1/2018 12/1/2018 4/1/2019 8/1/2019 12/1/2019 4/1/2020 8/1/2020 12/1/2020 4/1/2021 8/1/2021 12/1/2021 4/1/2022 8/1/2022 12/1/2022 4/1/2023 8/1/2023 12/1/2023 4/1/2024 8/1/2024 12/1/2024 4/1/2025 8/1/2025 12/1/2025 4/1/2026 US ZCIS Rates BBG Survey Median BBG Survey High BBG Survey Low BoC Rates Selected Rates AVIVA 4#5-1 0 7 Inflation Shock Impact Inflation Shock (also known as elevated inflation) is the difference between the CPI Rate Projection and the normal average CPI in the historical years. Inflation Shock represents the increase we expect to see above the regular inflation / loss trend. 4 6 5 HN Wσ 1 2 3 1/1/2013 4/1/2013 STATIC_TOTALCPICHANGE Historical Average м 7/1/2013 10/1/2013 1/1/2014 4/1/2014 7/1/2014 10/1/2014 1/1/2015 4/1/2015 7/1/2015 10/1/2015 1/1/2016 4/1/2016 7/1/2016 10/1/2016 1/1/2017 4/1/2017 7/1/2017 10/1/2017 1/1/2018 4/1/2018 7/1/2018 10/1/2018 1/1/2019 4/1/2019 7/1/2019 10/1/2019 1/1/2020 4/1/2020 7/1/2020 10/1/2020 1/1/2021 4/1/2021 7/1/2021 10/1/2021 1/1/2022 Inflation Shock AVIVA 5 Ch#6Claims View - Auto PD Inflation Trends 70.0% 60.0% Auto Inflation Trend - With rental based on average paid (based on a 12 month change) 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% FY 2020 Jan 21 Feb 21 Mar 21 May 21 Jul21 Aug'21 Sep 21 Oct'21 Nov'21 Dec'21 Jan'22 Feb'22 Mar 22 Apr 22 May 22 -10.0% -20.0% -30.0% Total Auto Repair Total Loss net of Salvage Rental -Tease Hute the values douve die Subject to change depenomy on omny un Salvage recovery postmy. Tutai LUBS diu Daivaye miqves 2-0700 Gummer Clai sui dice void. Unter vata are persunal insurance umy. -CPI is from Stats Canada Supply chain issues continue to impact the availability of parts which will impact both parts costs and used vehicle prices. Total Auto Physical Damage inflation 13% or higher every month since February. Estimates of inflation using data prior to 2022 would grossly understate current trends. CPI: Vehicle parts, Maintenance & Repairs AVIVA 6#7Inflation Shock Alberta Inflation Shock Impact Inflation Shock by Coverage (Year over year increase by quarter) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Auto Physical Damage Auto Bodily Injury Auto Accident Benefit Personal Property Using the data and expert opinion, we estimated the degree to which the inflation shock will impact each coverage. We expect the inflation shock to be greatest for PD/Property and lowest for BI/AB. By overlaying the expected change in CPI over time (slide 3), we estimated the impact of the inflation shock in the future for each coverage. 2022Q1 2022Q2 2022Q3 2022Q4 2023Q1 2023Q2 2023Q3 2023Q4 2024Q1 Line of Business Personal Auto 2024Q2 2024Q3 2024Q4 2025Q1 2025Q2 2025Q3 202SQ4 Bodily Injury Accident Benefit Personal Property 6.3% Assumptions as of May 30, 2022. Impact on the Loss Cost at 202304 Physical Damage Impact of Inflation Shock on Loss Cost 7.4% 7.7% 7.4% 4.5% AVIVA 7#8Shock Impact - Collision Data prior to 2022 is insufficient to accurately predict the future loss trend. Inflation Shock must be added to the regular loss trend in order to capture the emerging trends in claims. Relative Cost 1.15 1.1 1.05 0.95 1 Collision 0.9 2021Q4 2022Q1 2022Q2 2022Q3 2022Q4 2023Q1 2023Q2 2023Q3 2023Q4 Assumptions as of May 30, 2022 -Trend 2.5% Trend + Inflation Shock 6.4% Loss Cost 7.7% higher with Inflation Shock AVIVA 8 DO#9Shock Impact - Bodily Injury Data prior to 2022 is insufficient to accurately predict the future loss trend. Inflation Shock must be added to the regular loss trend in order to capture the emerging trends in claims. Relative Cost 1.2 1.15 1.1 1.05 0.95 1 Bodily Injury 0.9 2021Q4 2022Q1 2022Q2 2022Q3 2022Q4 2023Q1 2023Q2 2023Q3 2023Q4 Assumptions as of May 30, 2022 Trend 5% Trend + Inflation Shock 5.8% Loss Cost 7.4% higher with Inflation Shock AVIVA 9#10Shock Impact - Accident Benefits Data prior to 2022 is insufficient to accurately predict the future loss trend. Inflation Shock must be added to the regular loss trend in order to capture the emerging trends in claims. Relative Cost Accident Benefits 1.35 Loss Cost 4.5% higher with Inflation Shock 1.3 1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 2021Q4 2022Q1 2022Q2 2022Q3 2022Q4 2023Q1 2023Q2 2023Q3 2023Q4 Assumptions as of May 30, 2022. Trend 12% Trend + Inflation Shock 12.7% AVIVA 1#11Bill 41 - November 2020 Reforms Too early to fully understand impact of reforms but there are early indications • Early indications: • Pre-judgment interest change has reduced costs Expanded income replacement benefit and increased health care fees have added costs • Minor Injury definition change is not delivering savings - expected reform factor of -18% will not materialize . Less claims going into Minor Injury than anticipated. Definition is not capturing: · Injuries that last longer than 6 months because of the McLean v. Parmar decision Psychological injury or Post Traumatic Stress Disorder (PTSD) because these are not clinical sequelae of a minor soft tissue injury AVIVA 11#12AVIVA Thank you Insurance - Home | Auto | Leisure & Lifestyle | Business | Surety