Aviva 2006 Annual Report Download - page 32

Aviva plc
Annual Report and Accounts 2006 28
UK continued
Life EEV operating return was 26% higher at £744 million (2005:
£589 million) reflecting higher levels of new business contribution
and improved performance from our in force book. Total experience
variances in the year were £140 million adverse (2005: £95 million
adverse) driven by exceptional expenses and lower than expected
persistency experience. Positive experience variances in areas such
as credit and morbidity have continued, but at a lower level than
in 2005.
Adverse exceptional expenses of £149 million (2005: £151 million
adverse) are due to our ongoing investment in projects to deliver
simpler products to the customer, and the continuing simplification
of systems and processes used to administer the existing book.
It is anticipated that the operational changes announced in
September 2006 will serve to reduce, but not completely eliminate,
this cost in 2007.
Persistency experience has continued to be adverse at £66 million
(2005: £78 million adverse) particularly in relation to bonds and the
re-broking of regular premium pensions business following A-Day.
This is after a £75 million release from specific A-Day provisions
made in 2005, in line with expectations.
Business review continued
iAviva launches
six-steps website
Aviva’s online financial education initiative, six-steps,
was launched in November 2006. The website, at
www.six-steps.org, is based around six simple steps
that people can follow to help them take control
of their finances and prepare for their retirement:
1. Take control
2. Know yourself
3. Save little and often
4. Invest for the future
5. Protect yourself, and
6. Get advice
The site features a retirement planner to help people
understand their financial position better. Users can
fill it in and save it online, or they can print it out and
take it to a financial adviser.
U
Find more examples of Forward thinking in our
UK businesses at www.aviva.com/forwardthinking
As a result of further analysis of recent customer behaviours, we
have changed the basis on certain persistency assumptions. This has
included consideration of factors such as the increasing portability
of pension products after A-Day, customer outlooks being based on
shorter time horizons and advisers more actively managing their
customers. This has resulted in a strengthening of persistency
assumptions by £224 million. Offsetting this, the company has
clarified the financial obligations of its with-profit funds in relation
to our pension deficit, resulting in a £126 million benefit.
Additionally, we have early adopted PS06/14 (non-profit reserving
changes) resulting in a £50 million benefit. Other assumptions have
also been reviewed, and while none are of individual significance, in
aggregate they produce a further benefit of £108 million. In parallel
with these assumption changes, we have begun to execute a wide-
ranging customer retention strategy, and we are confident that this,
along with an updated assumption set, will reduce future
experience variances and place the business on a sustainable
basis going forward.
Our bancassurance joint venture with RBSG has continued to
perform well with growth in both sales and margin. The joint
venture now accounts for more than 10% of our life and pension
sales. Strong growth was supported by new product launches and
agrowth in sales advisers. There are now over 760 sales advisers
and further investment in 2007 will increase adviser numbers to
over 1,000.
We continue to review the possibility of a reattribution of the
inherited estate of two of our with-profit funds, CGNU Life and
Commercial Union Life Assurance Company. Wehave formally
announced the appointment of Clare Spottiswoode as an
independent policyholder advocate, and written directly to
potentially eligible customers. At this stage, no decision has
been taken to proceed with a reattribution, which will only take
place if there is agreement on a fair outcome for both customers
and shareholders.
We recognise that we still have moreto do to deliver the level
of customer service to which we aspire. In 2007, we will develop
new ways for customers to interact with us, grow our direct to
consumer channel, launch simpler products and introduce a
self-service capability,enhancing the overall experience for our
customers. We will pay particular attention to those customers
who aretraditionally underprovided or underinsured.
In the corporate market we will continue to quote on bulk
purchase annuity business, only writing business where this adds
value. Wewill also use our unique ability to combine life, general
insurance and healthcareproducts to grow our position in
the corporate benefit market.
We are confident that we will grow at least in line with anticipated
market growth of 5%-10% in 2007. We will simplify our business
model by reducing duplication, continuing to focus on reducing our
number of systems. We will improve our processes, both to drive
value and efficiency for our shareholders and to provide better
service for our customers. We will thereby enhance our position
and safeguard the interests of our shareholders and customers.