Aviva 2013 Annual Report Download - page 19

Aviva plc
Annual report and accounts 2013
17
Strategic report Governance IFRS Financial statements Other information
Our business model continued
We provide:
Life insurance
Customers take out life policies
and annuities to protect
themselves from uncertainty. That
uncertainty might be whether savings
will last through retirement or the risk of
losing the family income after an accident.
The premiums paid and the income
generated from investing these premiums
are used to pay claims and benets, cover
costs and reinvest in the business. What is
left generates prot for shareholders.
General insurance
Customers buy general insurance
policies to protect themselves
from loss in the event of damage to their
property or injury. The premiums paid and
the income generated from investing these
premiums are used to pay claims. After
claims have been paid and costs accounted
for, the surplus can be used to strengthen
the nancial reserves we hold or returned to
shareholders. These reserves ensure we
remain a strong business, and are able to
meet our nancial obligations to customers.
Asset management
and pensions
Customers trust us with their
money, and we invest it on their behalf to
generate investment return. Prot is
generated by the difference between the
charge levied on funds under management
and the costs incurred in acquiring and
managing assets. Although margins are
small for each pound invested, we create
value from having signicant scale.
Our customers are served through:
Direct – sales people
and online
Customers expect to be able
to buy our products when and where
they want to. Online self-service and
over-the-telephone service are primary
channels for us. In many of the markets
we operate in, we have a strong direct
sales force and agency presence selling
face-to-face to our customers.
Independent vendors
(IFAs3, brokers)
Many of our products have
long-term nancial implications and
customers often prefer to seek expert
advice to help them make the right
decision. We work closely with IFAs
and brokers to help meet the needs
of these customers.
Banks and other
corporate partners
Banks and our afnity brands
provide a third route to market. In a number
of markets, such as Spain, Turkey and Italy,
this is how the majority of our products are
sold. We have around 100 relationships
with banks and afnity brands across
our businesses.
Managing our business:
Underwrite risk
Underwriting and pricing
expertise, coupled with the
data we hold, allow us to write protable
business within our risk appetite. Our
underwriters assess each customer’s
risk to ensure that on aggregate we can
cover claims, cover our costs and make a
prot, all while remaining as competitive
as possible.
Manage assets and liabilities
We carefully invest customer
premiums to maintain sufcient
funds to pay claims. At the same time
we reduce risk by using reinsurance and
wherever possible we match liabilities to
assets. For example, money received for
annuities is invested into assets which will
continue to pay a return for the long term,
such as corporate bonds.
Our brand attracts
and retains customers
and employees
It makes excellent business sense for
us to keep our customers and our
employees for the long term. There are
signicant costs for us in setting up a new
customer and it takes time to recover these.
Our strong brand and customer service are
key to retaining customers.
52% UK & Ireland and other
18% France
6% Italy
5% Spain
7% Poland and Turkey
9% Canada
3% Asia
Adjusted operating profit split by geography
3 An Independent Financial Adviser (IFA) is a person or organisation authorised to give independent advice.