Aviva 2013 Annual Report Download - page 35

Aviva plc
Annual report and accounts 2013
33
Strategic report Governance IFRS Financial statements Other information
Market focus continued
Full year performance
UK & Ireland General Insurance
2013
£m
2012
£m
Cash remitted to Group 347*150
Operating capital generation 374 376
Operating prot: IFRS basis 489 502
Expenses
Operating expenses 818 826
Integration and restructuring costs 24 170
842 996
Combined Operating Ratio (COR) 97.2% 98.6%
IFRS prot before tax 387 248
*FY13 dividend remitted from UKGI of £347 million was received by Group in January
2014.
Overall performance in 2013 has been good, with
improvements seen in most of the key nancial
metrics that we use to measure progress against
our investment thesis of ‘cash ow plus growth’.
Our dividend has risen to £347 million (2012:
£150 million), benetting in part from the one-off
impact of the Group restructuring undertaken
during 2013.
The combined operating ratio has improved to
97.2% (2012: 98.6%), reecting a combination
of more disciplined underwriting, favourable
weather experience compared to 2012 (despite
the stormy end to 2013) and lower expenses.
Total expenses have fallen by 15% to £842
million (2012: £996 million). This has been driven
by a substantial reduction in restructuring costs
from 2012, which included the impact of the
Ireland transformation programme and
simplication of the UK business operation.
Operating prot is marginally lower at £489
million (2012: £502 million), with the impact of
the improved underwriting performance offset
by a reduction in investment return. This primarily
reects the lower rate of return received on the
internal loan in 2013 compared to that previously
received in 2012.
We have signicantly strengthened our senior
management team, most notably with the
appointments of Maurice Tulloch as CEO in
September (Maurice was previously CEO of
Aviva in Canada, our second largest general
insurance business), Colm Holmes as CFO,
Steve Treloar as MD of UK Direct and, most
recently, we announced the appointment of
Ian Foy as MD Personal Lines.
In July we appointed Alison Burns as CEO
of our Irish business and John Quinlan as MD
of our general insurance company in Ireland.
We expect this strong leadership team to drive
the business forward.
The market in 2014
Market conditions for private motor and home
insurance remain highly competitive in the UK
and Ireland and we expect this to continue
throughout 2014. Consumers are price conscious
and we do not expect this to change. Our market-
leading capabilities in predictive analytics will
become increasingly important as success in this
environment depends on being able to price risk,
and serve customers effectively.
In the UK motor insurance market, legal
reforms such as the ban on referral fees may
reduce claims settlement costs and reduce
premiums. However there is uncertainty over the
impact of these reforms and the Competition
Commission review. This uncertainty will remain
until a new ‘normal’ for claims patterns and costs
establishes itself.
In commercial lines, the fragile economic
environment has stied business investment and
growth in recent years, and whilst the economic
‘green shoots’ are likely to give welcome uplift
to business volumes, we expect the rating
environment to remain generally soft in 2014.
We continue to see capital owing into the
market which has the effect of suppressing
commercial rates.
We continue to be an active participant with
the Association of British Insurers on the design
and implementation of Flood Re, whose primary
purpose is to ensure that ood insurance remains
accessible and affordable to those domestic
properties at high risk of ood. The severe ood
events of the winter only serve to re-emphasise
the importance of this market solution to all
parties: customers, insurers and Government.
We expect further regulatory interest in the
conduct of the UK general insurance market
and we will continue to build on our strong
relationships with the regulators to preserve
the competitiveness and accessibility of the
UK market.
Aviva Drive app
We have re-entered the
telematics market with
’Aviva Drive’, a new app
which won the Insurance
Times ‘Innovation of the
Year’ award. It provides
discounts on motor
premiums based on
customers’ individual driving
habits. Over the course of
2013 the app was
downloaded 215,000 times
and we recorded nearly four
million miles’ worth of
driving data. In 2014, we
will build on this data to
provide enhanced rating
insight, increase customer
engagement and improve
personalisation.
We are investing in
the latest technology
to serve our customers
more effectively.
Maurice Tulloch
CEO, Aviva UK & Ireland General Insurance
For more information on nancial
performance see ‘Other Information –
Financial and Operating
Performance’ in our annual report
and accounts