Aviva 2001 Annual Report Download - page 4

02 CGNU plc Annual report + accounts 2001
Richard Harvey has a high-calibre executive team, with a combination
of wide experience and vigour. Under his management, we have
performed to high standards under demanding conditions.
Our employees worldwide have shown resilience, courage and
tenacity, and deserve much of the credit for the encouraging progress
that we have made this year.They deserve to have the best possible
training and assistance in their personal development. Only through
investing in them can we reach our ambitious targets and aspire to
being a world-class, customer-driven service company, creating
superior shareholder value.
In February last year the European Financial Services Round Table
(EFR) was founded, and I have the privilege of being its chairman.
Its purpose is to help create a single market for financial services in
the European Union (EU). Such an open market exists, of course,
for goods, capital and people – all of which has brought benefits for
consumers. But customers are not free to buy financial services
products wherever they choose in the EU, because the market is
closed and fragmented. Pensions are not portable owing to
differences in national tax systems. Costs can be high and
consumer protection differs.
The European Council of Ministers has agreed an action plan to
create an open and transparent market, but there is a long way to go.
The EFR will help in getting there. For the first time, heads of
Europe’s leading banks and insurance companies have agreed to
work together to create a transparent, competitive market. We will
work with national governments and the European Commission to
build the single market in a practical and consumer-friendly way.
Looking to the prospects for CGNU, I believe they show great
promise. We shall certainly encounter unexpected developments
in the world while seeing the continued consolidation of financial
services groups. We shall have to be prepared to seize attractive
opportunities.
Thus, as we streamline our business, pursue growth and undergo
continuous training, we also have to be flexible enough to master
step changes in our ambition to build an ever-stronger company.
We have strengthened our position as a leading European-based
financial services group, and continue to grow the business with a
clear strategic focus on the long-term savings market.
We have successfully completed the merger of CGU and Norwich
Union to create the UK’s leading insurance and financial services
group. Annualised cost savings of £317 million have been achieved,
which exceeded our target, and we are now together as one company.
In pursuing our strategy, we have withdrawn from markets where we
would not create superior shareholder value. We completed the sale
of our US general insurance operations in June last year and exited
the London Market. Consequently, our exposure to the atrocious
attack on America on 11 September was limited.
The whole world was shaken by those tragic events, and we feel deep
sympathy for the victims and their families.Thankfully, none of our
employees lost their lives.
Markets were seriously disturbed as a consequence of the disaster.
Solvency ratios around the world were already deteriorating, and the
fall in equity prices, then and since, has significantly reduced
shareholders’funds.
Our determination to grow faster than the average for the financial
services market has met with considerable success. Our targets have
been achieved by a combination of strong organic growth, new
bancassurance arrangements and balanced acquisitions.
Our joint venture in the UK with the Royal Bank of Scotland has
good growth potential. Our new arrangements with DBS put us in a
strong position in South East Asia. In Spain we have, in less than two
years, become a leading player through agreements with four of the
country’s leading savings banks. We have also expanded our
bancassurance partnerships in the fast-growing Italian market.
In France, the Netherlands and Poland we continue to hold leading
positions through CGU France, Delta Lloyd and Commercial
Union Polska.
In line with our strategy, we are growing our long-term savings
business aggressively. It now accounts for approximately 70% of our
annual premiums. Our general insurance operations are managed for
balanced growth, sustainable profitability, and good returns which
provide cash flow to support our long-term savings growth.
We are making progress towards the development of a world-class
fund management business, and encourage sustainable development
in our investment activities. We believe it is important to invest in
companies that uphold sound ethical policies.
We propose a final dividend of 23.75 pence, which brings the total for
the year to 38 pence.
Since the new group was formed, we have seen our life and savings
business grow by over 30% in only 18 months.To sustain the scale
and pace of profitable growth, our long-term savings operations
require continuous investment of both cash and capital.The view of
the Board is that it is not possible to maintain the current level of the
Group’s dividend whilst pursuing this strategy.
As a result, the Board proposes a re-basing of the 2002 full year
dividend to 23 pence (2001: 38 pence).Given our outlook for the
business, this strikes the appropriate balance between dividend
payments and the retention of capital to take advantage of profitable
growth opportunities. From this new base, we expect to adopt a
progressive policy of growing dividends by approximately 5% per
annum, whilst looking to sustain a target cover in a range of 1.5 to 2.0
times operating earnings after tax, measured on a modified statutory
solvency basis.
To grow long-term savings business
aggressively and profitably.
To build a world-class fund
management business.
To take a focused approach to general
insurance with disciplined underwriting
and efficient claims handling.
To build top-five positions in key markets.
To withdraw from lines of business
or markets which do not offer the
potential for market-leading positions
or superior returns.
Group strategy