Aviva 2013 Annual Report Download - page 13

Aviva plc
Annual report and accounts 2013
11
Strategic report Governance IFRS Financial statements Other information
Chief Financial Ofcer’s statement continued
Personal motor, home and commercial property
all achieved improved combined operating ratios.
Total commercial COR was 102.9% (2012:
104.0%). Within this, large commercial lines
business drove an 11 percentage point
improvement in the commercial property
COR. However, our commercial motor COR
deteriorated 6 percentage points due to
unfavourable prior year development.
France
Our French life business had a particularly strong
year. Operating prot was up 15%, value of
new business up 39%, and cash remittances
up 16%. Although our overall market share
is relatively modest, we have an attractive
distribution offering with a large owned sales
network and existing key partnerships including
AFER, the largest savers’ association in Europe.
This has seen us accumulate over €80 billion of
assets, which generate a stable revenue stream.
Much of the success of 2013 has come from a
shift in focus away from capital intensive savings
products to unit-linked and protection products.
Canada
Our Canadian general insurance business, the
second largest in the market, produced a solid
result, despite the higher weather losses from
oods in Alberta and Toronto. The combined
operating ratio in Canada was 94.6% (2012:
93.4%), with personal lines primarily affected
by bad weather with a COR of 93.3% (2012:
90.5%). Improvement in commercial lines is,
in part, attributable to the early stages of the
implementation of predictive analytics.
Growth markets
In the growth markets of Poland, Turkey and
Asia³, VNB improved by 46%, 23% and 65%
respectively and collectively contributed 21%
of total Group VNB.
72% Cash generators
22% Future cash
generators
6% Turnaround
businesses
Value of new business split by market type (%)
As previously communicated, the partial
nationalisation of the Polish pensions market will
have negligible impact on our growth prospects.
In addition to strong new business growth,
Poland remitted £85 million in cash to Group.
In Asia, in addition to achieving strong growth in
Singapore and China we have also established a
joint venture with Astra International, Indonesia’s
largest conglomerate, which we expect to fuel
future growth. Our focus in growth markets
remains in life businesses.
Turnaround businesses
Progress has been made in our turnaround
businesses of Italy, Spain and Ireland, although
there remains signicant room for improvement.
In Spain and Italy we are moving our product
mix away from more capital intensive savings
products towards unit-linked and protection
products. We have resumed dividend payments
from Italy and Ireland.
Aviva Investors
The turnaround at Aviva Investors is, as
previously communicated, likely to take time.
The business had assets under management at
the end of 2013 of £241 billion with £5 billion
of net outows experienced in the year.
In 2013, we found evidence of improper
allocation of trades in xed income securities in
Aviva Investors by two former employees. This
occurred prior to 2013. The relevant regulatory
authorities have been notied. A thorough
review of internal control processes relating
to the dealing policy has been carried out
by management and reviewed by
PricewaterhouseCoopers (PwC). Measures to
improve controls have been implemented. There
is a total adverse impact on operating prot from
this activity of £132 million. We are taking steps
to ensure that customers will not ultimately be
disadvantaged as a result of these breaches of the
dealing policy.
As we continue to make
progress resolving our
balance sheet issues, our focus
will shift to improving
performance.
Patrick Regan
Chief Financial Ofcer
Solvency II & Global
Systemically
Important Insurers
In November 2013 the EU
agreed a set of rules on
Solvency II that are due to
come into force in early 2016.
Solvency II establishes a
consistent set of EU-wide
capital requirements and risk
management standards to
increase protection for
policyholders. In July 2013
Aviva was one of nine insurers
designated a Global
Systemically Important Insurer
(G-SIIs). G-SIIs will be subject
to more intensive supervision,
recovery and resolution
planning and will have
additional capital
requirements for systemically
risky activities from 2019
onwards. We are engaging
with local and international
regulators on these
consequential measures.
Aviva is a traditional insurer
and the designation has not
had any implications for our
customers.
3 Excluding Malaysia and Sri Lanka.