Aviva 2005 Annual Report Download - page 30

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Aviva plc 2005 Business review
Business review continued
During 2005, we launched a new series of the Guaranteed Fund
and developed a number of property fund offerings that have
proved attractive to investors. We also continue to achieve
significant improvements in the quality of our operational data,
which enable us to provide a better experience for customers.
We increased our sales by 18% to £665 million (2004:
£561 million) benefiting from strong sales of single premium
business during the year. Our life EEV operating return was
£20 million (2004: £40 million), impacted by adverse experience
variances. Variances were predominantly as a result of lapses on
unit-linked pension business. Our new business contribution of
£16 million (2004: £19 million) with a new business margin of 2.4%
(2004: 3.4%), reflects investor preference for lower-margin single
premium products and the lower level of lower protection sales.
During 2006 and into 2007, the maturing of special savings
incentive accounts (SSIAs) will provide an opportunity for increased
sales. We anticipate that a significant amount of the maturing
monies will be invested in pension and saving products.
Other European operations
Our other European operations are based in the Czech Republic,
Germany, Hungary, Lithuania, Romania, Turkey and NUIL in Dublin.
Our Turkish life and pensions business is ranked second and fourth
in the life and pensions markets respectively. We have top-10
businesses in Lithuania, Hungary and Romania, and are ranked
12th in the Czech Republic.
Our business in Germany adapted its sales focus in 2005, with
sales of profit-sharing savings products and credit life products
performing well.
In Turkey, our main products are unit-linked savings and protection
plans, together with group and individual pensions. Sales are mainly
through our direct sales force. We aim to be the leading long-term
savings provider in Turkey and will achieve this by developing our
direct sales force and exploiting pension opportunities as the
market continues to grow rapidly. We are also exploring other
distribution opportunities, including bancassurance. Single premium
pension sales were boosted by transfers from existing life policies
ahead of an October 2006 regulatory deadline.
Our other European operations are seeking to achieve strong
organic growth with unit-linked savings products focused on
high-net-worth individuals. We are looking to grow our direct
sales forces and improve performance while investigating other
distribution channels, particularly brokers and banks. For example,
during 2005 volumes increased in our Czech business through a
bancassurance deal with Zivnostenka Banka, and in our Romanian
business through our distribution agreements with BRD and
ABN AMRO.
We have opened a representative office in Moscow while
we continue to evaluate opportunities in the Russian market.
In October 2005, we completed the disposal of our 50%
shareholding in Eurovida, our Portugese life joint venture to
Banco Popular Portugal for a profit.
We generated a life EEV operating return of £33 million (2004:
£22 million) through our other European operations. Total life
and pension sales were £739 million (2004: £804 million).
Business segment performance: Long-term savings
and fund management continued
Poland
In Poland, we are developing a multi-distribution strategy, built
upon the strength of our direct sales force which currently number
over 3,000 sales people. We have strong product manufacturing
capabilities covering single and regular premium life business aimed
at both individuals and groups. Our pension business sells a unit-
linked regular premium product in the compulsory private pension
market. We are the largest pension provider in Poland, with a 28%
market share, and have the second-largest life insurance business,
with a 12% market share.
We aim to become Poland’s market leader in long-term savings
by improving new business sales while maintaining our in-force
portfolio. Specifically, we intend to increase the size of our direct
sales force while improving productivity, reposition our existing
products and build a significant bancassurance distribution channel.
During 2005, we made further progress in terms of developing new
products, extending distribution and improving systems. We also
signed a new bancassurance agreement with Deutsche Bank.
We were also pleased to be named life insurance company of
the decade by Home & Market magazine.
Our life EEV operating return increased to £128 million (2004:
£93 million) due to increased experience profits and operating
assumption changes including mortality profits of £23 million
(2004: £6 million). Our new business sales grew, in local currency
terms, by 4% to £285 million (2004: £241 million). New business
contribution was £14 million (2004: £11 million), resulting in a
margin of 4.9% (2004: 4.6%).
During 2006, we expect the Polish life market to continue the
favourable trend shown in the latter part of 2005 and we are
well placed to benefit from this development.
Ireland
Hibernian is the third-largest life and pensions provider in Ireland,
with a 10% market share. We provide a broad product range,
with a strong emphasis on pension products. We distribute
primarily through brokers but are seeking to develop sales through
financial institutions.
Our objective is to be Ireland’s leading provider of long-term savings
and protection products through a range of business partners.
We are developing strategies to increase our market share and
distribution profile significantly. To that end, we have announced
a new bancassurance partnership with Allied Irish Banks (AIB) to
create a leading force in the Irish life and pensions market and
bringing further opportunities for growth. In January 2006, we
acquired all the shares of AIB-owned Ark Life in exchange for
24.99% of the joint venture and a balancing cash payment of
a195.4 million. This is a transformational deal for our Irish life
business and increases our share of the Irish life market to 16%.
We will have exclusive access to Ireland’s largest retail bank,
with over 280 branches and 1.6 million customers. Additionally,
the management of the investments of the current Ark Life
policyholders, totalling a3.0 billion at 30 September 2004,
will transfer to a wholly owned subsidiary of Morley Fund
Management.