Aviva 2005 Annual Report Download - page 31

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Business review
Aviva plc 2005
International business
Our international operations are based in Australia, USA, Hong
Kong, Singapore, India and China and all trade under the Aviva
brand. The product ranges, distribution channels and strategies
of each operation vary according to local market conditions.
Our USA operation has adopted a niche-based strategy, based
on retirement and estate planning with distribution through
independent agents and banks. During 2005, six new products
were launched, including two fixed-indexed annuities and a
deferred annuity tailored for the bank channel. During 2006,
we expect sales growth through our existing lines of business
supported by the recent ratings upgrade to A+ from A.M. Best.
We expect favourable demographic trends for the life industry
in the USA.
Aviva Australia provides wealth management services through the
Navigator platform, and life products. Both operations are ranked
ninth in their respective markets. Growth will be achieved through
expanding independent adviser distribution and will be supported
by our recent alliances with key adviser groups and institutions.
Aviva Australia was awarded the prestigious Money Management
DEXX&R 2005 risk company of the year.
Aviva Singapore and Hong Kong employ a multi-channel
distribution strategy alongside a strong partnership with banking
group Development Bank of Singapore (DBS). In Singapore we are
ranked fifth and in Hong Kong 24th. Our business in Singapore
remains the market leader in the developing broker market as
well as the employee benefits and healthcare segment.
We aim to broaden and deepen business opportunities with
DBS whilst developing the independent financial adviser and
international financial solutions market.
In both China and India, we are actively pursuing growth in
cities and provinces with significant long-term potential. Aviva India
is a leader in the bancassurance market and is now ranked seventh
overall among private insurance companies. We have recently
entered into a significant new bancassurance agreement with
Centurion Bank of Punjab, a leading private bank, thereby
extending our market-leading bancassurance position. This latest
agreement brings the total number of bancassurance agreements
to 18. We also doubled our direct sales force to 6,700 and in
addition, there are more than 1,800 people in training due to join
soon, allowing us to expand our representation in smaller cities.
In China, our joint venture, Aviva-COFCO, operates a multi-channel,
multi-product strategy. We distribute individual products through
direct sales force, agencies, brokers and bancassurance; and sell
group business both directly and through intermediaries.
We now have the fourth largest foreign joint venture (out of a
total of 22), based on first year premiums. We seek to obtain
“first mover” advantage in new cities wherever possible, supported
by a centralised back office function. During 2005, Aviva-COFCO
increased the total number of major cities where it is licensed to
four, with sales offices in a further five cities. We have recently been
granted permission to apply to open a branch in Jinan, the capital
city of Shandong province, and are looking forward to the rapid
development of this new market.
Overall, the life EEV operating return from our international
businesses was £99 million (2004: £83 million). We generated
life and pension sales growth of 21% to £1,260 million (2004:
£1,024 million) with encouraging performances in Asia and
the USA. Our new business contribution increased by 33% to
£49 million (2004: £36 million) with a new business margin of
3.9% (2004: 3.4%), benefiting from improved business mix
and volumes.
Continued economic growth in both China and India offers high
potential returns in the longer term. New products, branches and
sales offices will cater for the anticipated high growth rates.
On 1 February 2006, we acquired a 51% interest in Eagle Insurance
Limited (Eagle), the third-largest insurer in Sri Lanka, for a cash
sum of £15 million. At the same time, Eagle entered into a
bancassurance agreement with National Development Bank
Limited, Sri Lanka’s biggest development bank and Eagle’s other
major shareholder.