Aviva 2005 Annual Report Download - page 29

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Business review
Aviva plc 2005
Netherlands (including Belgium and Luxembourg)
Delta Lloyd is a top-five financial services group based in the
Netherlands, with operations in Belgium, Luxembourg and
Germany, which is reported in Other Europe. We offer a
comprehensive range of life and savings products in both the group
and individual markets and have a multi-channel distribution
strategy. We have a bancassurance joint venture with ABN AMRO,
sell products directly to customers under our OHRA brand and via
independent financial advisers under our Delta Lloyd brand.
Our vision is to be a trusted financial services provider by excelling
in customer service, innovation efficiency and financial position and
challenge for the number one position in the Dutch life market.
During 2005, the development of our venture with ABN AMRO
has continued, with the introduction of new products to complete
our range. We have adapted our existing pension products and
introduced new ones in anticipation of changing pension laws that
come into effect during 2006, with a particular focus on sales to
small-to-medium sized enterprises. Given continuing low interest
rates, we have increased provisions to cover our commitments in
respect of contract guarantees. In Belgium, a major reorganisation
has substantially improved our operating model and has brought
improvements to our cost base and we will focus on strengthening
our distribution. In December 2005, we completed the sale of
our 80% holding in ENNIA Caribe Holding NV, a Dutch Antilles
and Aruba-based insurer, to Banco di Caribe NV in Curaçao for
a cash consideration. The sale had no material impact on our
financial position and is in line with our strategy of focusing
on our core markets.
Our EEV operating return of £318 million (2004: £277 million)
included favourable operating assumption changes and a higher
contribution from new business. Our life and pension sales grew
to £2,407 million (2004: £2,168 million) with a 9% increase in
sales through the bancassurance joint venture with ABN AMRO to
£543 million (2004: £493 million), in a market characterised by low
investment returns. We generated a new business contribution of
£88 million (2004: £80 million), reflecting strong sales with a steady
new business margin of 3.7% (2004: 3.7%).
Italy
Aviva Italy is the seventh-largest life insurer, with a market share
of 5.5% at the end of December 2005. We sell profit-sharing,
unit-linked and structured investment bond products predominantly
to individuals but we also sell group business. Our distribution is
principally through our bancassurance partnerships and we have
significant relationships with UniCredit Group, Banca delle Marche,
Banche Popolari Unite and Banca Popolare Italiana. Our agent
network and financial sales force currently trade under the
Commercial Union brand but will re-brand as Aviva during 2006.
Our main goal is to increase profitability by strengthening our position
in the life insurance market. To achieve our goal, we continue to
work with our bancassurance partners and aim to increase customer
penetration. We also seek to improve value for customers through
product innovation, and to maintain a cost-efficient operation.
During 2005, our agreement to expand the number of Banche
Popolari Unite branches in which our products are sold generated
strong growth. In all, we introduced or improved 50 products
during the year.
Our life EEV operating return increased to £96 million (2004:
£79 million), reflecting the new business growth and the return
on our additional investment in the BPU Group at the start of
2005. We outperformed the local market by achieving sales
growth of 27% to £2,294 million (2004: £1,799 million),
benefiting from product innovation and the extension of our
bancassurance agreement with Banche Popolari Unite to a further
380 branches. New business contribution increased to £59 million
(2004: £48 million) due to significantly higher sales, representing
a new business margin of 2.6% (2004: £2.7%).
The long-term savings market has significant medium-term growth
potential. The prospects for continuing growth in 2006 are good
and we expect to increase our access to the UniCredit Group
branch network.
Spain
Aviva Spain operates in the long-term savings, pensions
and protection markets through a multi-distribution platform.
We are the second-largest life insurer with a 9% market share.
Our distribution is dominated by five bancassurance partnerships
with Bancaja, Caja España, Caixa Galicia, Unicaja and Caja de
Granada. The majority of our products are marketed through
the brands of our bancassurance partners. We use the Aviva
brand in relation to our Aviva Vida y Pensiones (AVP) business,
which distributes products through an agency-based network.
We are based in Madrid, with operating companies in other
major Spanish cities.
We aim to maintain our position as a leading player in the Spanish
market through sustained profitable growth. We will concentrate
on consolidating relationships with existing bancassurance partners,
maintaining an emphasis on higher-margin protection and pension
products, and maintaining a cost-efficient operation. We will also
pursue additional bancassurance arrangements while improving
penetration in our current partnerships. We are further developing
our adviser-based business in AVP.
During 2005, we launched new financial annuity, unit-linked
and protection products to enhance our market proposition.
We continue to focus on increasing penetration of the banks
customer bases and cross-selling in all of our major relationships.
Our life EEV operating return rose to £214 million (2004:
£180 million) due to higher new business contribution as a
result of a beneficial change in product mix. Total sales were
£2,013 million (2004: £2,110 million) and we achieved an
underlying growth, excluding one-off sales, of 6%. New business
contribution increased significantly by 22% to £175 million
(2004: £143 million), improving the new business margin to 8.7%
(2004: 6.8%) as we continue to focus on higher margin protection
and pension products. The growth outlook in the Spanish
long-term savings and pension market continues to be positive.