Aviva 2013 Annual Report Download - page 41

Aviva plc
Annual report and accounts 2013
39
Market focus continued
Strategic report Governance IFRS Financial statements Other information
Full year performance
Canada
2013
£m
2012
£m
Cash remitted to Group 130 136
Operating capital generation 177 192
Operating prot: IFRS basis 246 277
Expenses
Operating expenses 378 401
Integration and restructuring costs 911
387 412
Combined Operating Ratio (COR) 94.6% 93.4%
IFRS prot before tax 104 245
During the year total cash remitted to Group
was £130 million and this is in line with the
cash remitted in 2012 on a local currency basis.
General insurance operating prot was
£246 million (2012: £277 million), an 11%
reduction compared with the prior year (9%
reduction on a local currency basis). The reduction
was driven by the impact of the severe weather
events seen during 2013. The oods in Alberta
and Toronto were the rst and third largest
insurance catastrophe loss events ever to hit
the industry in Canada.
As a result there has been a 2.3 percentage
point deterioration in the combined operating
ratio for personal and commercial property. This
was partially offset by lower expenses and when
normalising catastrophe activity and excluding
the two 1-in-100 year severe weather events,
the COR would have been 92.3%.
Business volumes have increased during 2013,
with net written premiums up 3% to £2,250
million (2012: £2,176 million, 5% growth on a
local currency basis), driven by rating increases
in personal and commercial property and growth
in new business volumes across most lines,
with particularly strong growth seen in
western Canada.
Operating expenses were £378 million
(2012: £401 million), a reduction of 6% reecting
the continued focus on expense management
and the benets of cost savings initiatives.
In October 2013 we announced the
appointment of Greg Somerville as President
and CEO of Aviva Canada. Greg has extensive
experience in the property and casualty insurance
industry and has been part of the Aviva Canada
Executive Committee since 2004.
The market in 2014
In 2014 we expect that industry premiums will
grow at a low single digit rate. Overall premium
growth is likely to be tempered by the proposed
auto rate reductions in Ontario, as part of
regulatory motor reform. We expect any potential
impact on protability from the lower rates to
be largely offset by cost reduction measures
and other initiatives that form part of the
regulatory reform.
In personal property, we expect the current
hard market conditions to continue due to
severe and catastrophic weather events in recent
summers which have negatively impacted the
industry’s results.
In commercial lines, we believe that the
elevated level of catastrophes in 2013 together
with improving economic conditions, particularly
in the manufacturing sector, will translate into a
rmer market.
We expect to see further market consolidation
amongst both insurance carriers and brokers,
reshaping our competition.
Distribution trends continue to point towards
customers increasingly preferring self-service.
This favours direct-to-customer models. The
broker channel is now beginning to adapt to
self-serve consumer needs whilst still offering
advice and choice.
In 2014, we expect competitors to increase
signicantly their usage based insurance product
lines such as pay-as-you-drive, an area in which
we have experience. This, together with personal
auto rate reductions in Ontario, will drive further
marketing investment by our competitors.
Aviva is well-positioned to take advantage of
the heightened competitive environment and
further drive improvement in earnings and
cash ow.
We are entering
into 2014 with good
momentum, with a focus on
providing solutions to
our customers.
Greg Somerville
CEO, Aviva Canada
Our community
fund
Every year Aviva donates
CAN$1 million in funding
to community projects
through the Aviva
Community Fund
competition in Canada.
Projects are invited to
compete for funding and
the winners are announced
each January. Last year’s
winner was the Riehl
Skatepark in Pelham,
Ontario, named after Isaac
Riehl, a 14 year-old boy who
died after being hit by a car
while skateboarding. One of
his classmates applied to the
fund to build a skateboard
park. Aviva awarded the
project CAN$115,000 and
the sum was immediately
matched by local
government. The park has
now been built, and local
children can skate in safety.
For more information on nancial
performance see ‘Other Information –
Financial and Operating
Performance’ in our annual report
and accounts