Aviva 2009 Annual Report Download - page 14

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Aviva plc Aviva UK
Annual Report and Accounts 2009
A leader in our home market
From 1 January 2010 we have brought together
the Aviva UK life and general insurance
businesses, creating a new organisation led by
one chief executive officer. In 2009, in addition
to completing the rebranding to Aviva, both
businesses have continued their extensive
transformation programmes, which will make
significant improvements to customer service,
and they have delivered combined cost savings
of £450 million, a year ahead of plan.
Strategy
Our core strategies for the UK business are:
— to leverage our extensive distribution network and customer
base to increase profits in a mature but evolving marketplace
— to maintain market leadership through balanced distribution
and broad product mix, improved customer retention and
the simplification of processes, services and costs
Aviva UK
Total sales were £14,261 million in 2009, down 24% on
2008. IFRS operating profit for the year decreased 15% to
£1,165 million reflecting the impact of lower premiums and
lower investment returns. These results are discussed in more
detail on page 44 of this report.
The rebrand to Aviva in the UK took place on 1 June 2009.
Our successful advertising campaigns, highlighting Aviva’s
products and services and encouraging customers to ‘get the
Aviva deal’, have increased recognition and awareness of the
Aviva brand significantly.
UK life business
Market environment
During 2009 the overall long-term savings market declined by
17%1. This contraction, for the second consecutive year, was
primarily driven by falls in the pension and bond markets as
lower consumer confidence, limited salary increases and higher
unemployment reduced customers’ propensity to save and
invest for the future. Specific regulatory events, such as the
cessation of sales of single premium creditor business, also
impacted the market. Despite this, we have maintained a
disciplined focus on profitability, significantly improving our
new business margin.
Performance
In the UK life market, Aviva has built a leading position across
a broad product range. We have gained competitive advantage
through our financial strength, product development and taking
actions to simplify the business making it easier for customers.
We delivered new propositions recognising consumer
needs, including offering 12-months, free life cover to new
parents, the launch of a With-Profit Guaranteed bond and
recently re-opening our Wrap and Sipp platforms to new
business. Our innovative Simplified Life protection product
continues to go from strength to strength with a 147% increase
in new applications compared to 2008, whilst our market-
leading individual annuity pricing capability attained record new
business volumes for this product in the fourth quarter of 2009.
1 Source: Association of British Insurers (ABI)
As a result of our major simplification and efficiency initiatives,
designed to better meet customer needs, we have outsourced
the administration of almost three million policies to industry
experts: Swiss Re, Scottish Friendly and International Financial
Data Services. We have decommissioned over 300 IT systems,
delivered a more flexible cost base and made £100 million of
annualised cost savings.
We have continued to invest in our e-commerce offerings
with the launch of further new propositions to help our
customers and distribution partners. ‘Customer Portal’ and
‘Aviva for Advisers’ provide secure online access to over
4.5 million policies, enabling customers and advisers to manage
their Aviva life products quickly and easily at a time convenient
to them. We were also the first in the industry to offer a virtual
online guide as part of our innovative ‘Pension Tracker’, making
it possible for almost 1.5 million customers to manage their
Aviva pension plans online. This approach contributed to Aviva
winning the Personal Finance ‘Pension Provider of the Year’
award voted for by customers and judged on proposition
quality, brand, service and sustainability.
Throughout 2009 our commitment to deliver service
excellence has driven improved satisfaction and advocacy
results. By listening to and understanding what matters most
to our customers and distributors, we can ensure they have
a better service experience.
Outlook
We expect the market to remain challenging in the short term
as the impact of the recession continues to influence demand
for investment and savings products. Longer term, major
regulatory changes including the Retail Distribution Review
and Solvency II will be implemented. Our strategies will enable
us to exploit the opportunities emerging in our market as we
continue to build on our e-commerce and service capability and
product and distribution breadth.
Fair reattribution payments
Following the announcement in May 2009 of a new, more
flexible offer – and the subsequent FSA and High Court
approval in September – the reattribution of our inherited
estate completed on 1 October. Our objective was always to
create a reattribution that was fair to both shareholders and
policyholders, making sure that customers had a choice of
whether they wished to accept the offer, depending on their
personal circumstances. As a result, over 87% of eligible
policyholders voted during the election process, with 96% of
these voting in favour of the offer. By the end of 2009, the
majority of the £471 million reattribution payment had been
distributed to those policyholders who accepted the offer.
Long-term and savings sales £m
09 9,963
08 13,343
07 14,548
06 13,812
05 10,345