Aviva 2002 Annual Report Download - page 21

07 Aviva plc
Annual report + accounts 2002
Richard Harvey
Group Chief Executive
Investing for future growth
With long-term savings business generating 72% of our total
premiums, and 92% of our new business sales coming from
Europe, we regard the development of our European long-term
savings operations as the cornerstone of our future success.
There is significant scope for our business to grow further.
Governments across Europe are introducing reforms to encourage
people to make increased provision for their retirement and reduce
the pressure on state schemes. In times of financial uncertainty,
customers will seek the reassurance and expertise of trusted brands
like ours. We can provide savings products that offer a degree of
capital security or a fixed rate of return for investors wary of falling
share prices. We are also confident that demand for equity-backed
investments will improve as the markets recover in the medium
to long term.
We see the planned expansion of the European Union in 2004 as
an opportunity for our business. We already have an established
operation in Poland and smaller businesses in a number of the
other prospective member countries, where greater accessibility
should encourage foreign investment, stimulate economic growth,
increase the standard of living and give people more freedom to
invest in financial products and services.
Among our strengths is the ability to understand our customers
and provide what they need through a variety of sales channels,
tailored to individual markets. We have agreed new distribution
partnerships in France, the Netherlands, Italy, Spain and Hong
Kong, which will increase our reach through bancassurance alone
to some 35 million potential customers worldwide. We are building
new operations in India and China, both markets with huge long-
term growth potential, and launched a new version of our online
fund administration platform, Navigator, in Singapore.
Being financially flexible enables us to pursue attractive
opportunities for the profitable development of our business.
We accepted an unsolicited offer in October 2002 to sell our
general insurance businesses in Australia and New Zealand for
£651 million. This was an excellent deal for Aviva’s shareholders,
with the price more than twice the net asset value of the
businesses.
Our cash-generative general insurance operation is an integral part
of the group’s business portfolio. We are the number one general
insurer in the UK and Ireland and have top-five positions in
Canada, the Netherlands and Singapore. Continued investment in
product innovation, for example our Pay As You Drive™ motor
insurance scheme in the UK, and new facilities, such as our call
and claims processing operation planned in India, will help us
maintain a leadership position in our markets and high levels of
customer service 24 hours a day.
Another important development is our new name, Aviva.
Our trading operations now have the strength of an international
financial services brand behind them. We have introduced the new
Aviva identity very cost-efficiently, with the rebranding in each
country being paid for largely from existing marketing budgets.
Short-term outlook
In common with the rest of the insurance and financial services
industry, we face considerable challenges in the short term.
Investment markets continue to be turbulent and investors are
discouraged by financial uncertainty.
We have to deal with a changing regulatory framework and the
need to reduce costs to match the amount of business we expect
to write. We will continue to invest in projects that will enable us
to enhance our low cost operating model and reduce our future
cost base.
The tough environment will test us in many respects throughout
2003. Even so, I am driving the business hard, using our
experience, size and expertise to provide the right products and
services for our customers in each market.
Long-term outlook
The opportunities for our business in the longer term remain
excellent. People still need to make financial provision for the
future. We envisage growth from the strong market positions we
have built in our life and pensions business. Our innovative general
insurance operations have reduced their risk exposure and
improved the quality of their earnings. Furthermore, our capital
position is a solid foundation to support further growth.
One of our greatest strengths is the quality of the people who
work as a team at the heart of our business. Our employees
worldwide have a first-class track record of delivering results,
and I thank them all for their dedicated efforts.
In the current financial climate, integrity, prudent management and
consistent performance are more important than ever. That is what
I am determined we shall deliver. I am confident that the longer-
term opportunities will allow us to grow our business for the
benefit of our customers and shareholders alike.
Continuing operations
Discontinued operations
Operating profit before tax* £million
1998
1999
2000
2001
2002
1,637
1,608
1,325
1,935
1,720
1,856
1,824
853
1,983
1,798
*From continuing and discontinued operations, including life achieved operating profit
and stated before amortisation of goodwill and exceptional items.
Worldwide business mix† £billion
1998
1999
2000
2001
2002
18.4
23.1
26.4
27.8
27.9
†With reference to premium income from continuing operations.
General insurance
Total long-term business including health