Aviva 2013 Annual Report Download - page 33

Aviva plc
Annual report and accounts 2013
31
Market focus continued
Strategic report Governance IFRS Financial statements Other information
Full year performance
UK & Ireland Life
2013
£m
2012
£m
Cash remitted to Group 370 150
Operating capital generation 595 688
Life operating prot: IFRS basis 952 892
Expenses
Operating expenses 607 736
Integration and restructuring costs 59 71
666 807
Value of New Business (VNB) 441 412
IFRS prot before tax 717 107
In 2013 we delivered solid results across our
key nancial metrics, despite a challenging
macroeconomic and regulatory environment. We
increased our dividend to Group to £370 million,
improved life operating prots by 7%, reduced
operating expenses by 18% to £607 million and
improved VNB by 7%. This reects our focus on
cost efciency and pricing discipline.
The performance of our business in Ireland has
started to improve. A dividend of £70 million was
paid in July 2013, life operating prot was up at
£22 million from £5 million in 2012, VNB was up
at £6 million and operating expenses were down
38% to £38 million. The improvements reect
cost reductions and a strategic shift in the
business mix to more protable risk products,
away from low margin pensions.
UK & Ireland Life operating prot increased
by 7% primarily due to greater efciency and an
improved result in our Irish life business. Our large
back book of business ensures an element of
earnings stability and gives the opportunity for
future efciency improvements.
During the year, we increased the provisions for
commerical mortgage defaults by £300 million
due to impairments above the long-term trend.
Following an extensive review, we reorganised
our commercial nance team.
Our focus on achieving our nancial targets has
not reduced our commitment to our customers.
Despite the level of transformational change seen
during 2013, our Customer Transaction Net
Promoter Score® has increased to +23, four
points higher than 2012. We continue to receive
external recognition for improvements to service,
winning 47 awards during 2013, including Best
Protection Provider (Money Marketing), Best
Annuity Provider (Professional Adviser), six gold
awards (Money Marketing Service), and Health
Insurance company of the Year for a fourth year
running at the Health Insurance Awards.
The market in 2014
We are well positioned to take advantage of any
market recovery and the long-term structural
trends in our target markets.
We are seeing increased activity in the
protection market as the mortgage market
becomes more buoyant. The annuities market
is in a long-term growth phase as the UK
population ages, and a greater proportion of
employees retire with a dened contribution
pension scheme. Automatic enrolment reaches
its peak period for new joiners in 2014, whilst
our platform business continues to grow as
investment funds move to modern platforms.
Whilst these trends are positive, the
unprecedented regulatory focus on the UK life
insurance industry continues.
In February 2014, the Financial Conduct
Authority (FCA) reported on its review of
annuities, with a focus on customer outcomes
and a concern that too few customers shop
around in the open market. The FCA concluded
that many customers are not getting the best
available retirement income and is launching a
market study on retirement products. This is a
view that Aviva supports. We offer the same rates
to our existing pension customers and open
market customers and have launched a ve point
plan for the industry to raise standards and help
customers get a better deal in their retirement.
In 2013, the Department for Work & Pensions
published a Workplace Pension charges
consultation paper. The paper made a number
of proposals relating to charge caps, adviser
commission and disclosure of information. The
original planned implementation date of April
2014 has now been delayed for at least a year.
We expect the impact on us to be immaterial. We
took action in 2000 to cap charges on our group
and individual pension book, pricing at 1% or
less. New schemes are currently being written at
charges well below the proposed charge caps.
We are leading the debates affecting our
customers and are condent our underlying
strengths and commitment to our customers
position us well in 2014.
Our ve point plan
on annuities
At Aviva, we encourage
customers to shop around
for the best annuity.
However many more people
could get better deals. We
are calling on the industry to
help customers get a better
deal on their retirement
income. This is our plan:
§Consumers must be
given clear guidance to
help them understand
the choices available and
the importance of
comparing rates
§Providers must obtain
medical information and
ensure customers
understand the potential
benets this can have on
increasing their income
§Both existing and open
market customers should
be given competitive
annuity rates
§The limitations of
‘restricted’ panels should
be made clear to
customers
§Customers should take
care when shopping
around for an adviser.
Our businesses
have performed
strongly through
signicant market,
regulatory and economic
change, and are well
positioned to sustain
improvements in cash
ow and growth.
David Barral
CEO, Aviva UK & Ireland Life
For more information on nancial
performance see ‘Other Information –
Financial and Operating
Performance’ in our annual report
and accounts