Aviva 2009 Annual Report Download - page 23

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Performance review
Aviva plc Information on the company continued
Corporate responsibility
Annual Report and Accounts 2009
or profit sharing percentage. Under joint venture agreements,
the costs of running the venture are often split between the
partners.
Fund management
The fund management businesses manage the funds of Aviva’s
general insurance and long-term insurance and savings
operations and provide investment management for institutional
pension funds, as well as developing and selling retail
investment products. Our main brand for fund management is
Aviva Investors. The main fund management operations are in
the UK, France, the Netherlands, Ireland, the US and Australia.
All sales of retail fund management products are included in our
long-term insurance and savings business sales.
Market position
Aviva Investors is ranked twenty fourth globally and third based
in the UK by assets under management, according to Cerulli
Associates’ December 2008 ranking of asset managers by assets
under management. Aviva Investors operates under a single
brand in 15 countries across our regions of the UK, Europe,
North America and Asia Pacific. The other fund management
businesses of Aviva comprise our collective investment business
with the Royal Bank of Scotland Group in the UK, Delta Lloyd in
the Netherlands and our Navigator wrap administration business
in Hong Kong and Singapore. Total worldwide funds managed
by Aviva managers at 31 December 2009 was £250 billion, the
substantial majority of which currently relates to Aviva’s
insurance and savings operations.
Brands and products
Our business in the UK manages investments including equities,
fixed income, property, hedge fund and socially responsible
investments (SRIs) on behalf of institutional, pension fund
and retail clients. We also sell retail ISAs, unit trusts, OEICs and
structured products under the Aviva Investors and the Royal
Bank of Scotland Group (RBSG) brands.
Operating segments
Each operating segment has a member of our executive
management team who is responsible for it and who is
accountable to the group chief executive for the operating
performance of their segment. The full membership of our
executive management team is set out on page 82. This
structure for our operating segments is intended to ensure
the Group’s ability to take advantage of market opportunities,
improve speed of response, eliminate duplication of effort,
and encourage the sharing of best practice in the interests
of our customers and shareholders, while providing
local knowledge.
United Kingdom Aviva Life
Business overview and strategy
Our UK life insurance business is a leading long-term insurance
and savings provider in the UK with a market share of 10%
based on 2009 ABI returns. Our main operations are based
in York though we have a significant presence in Norwich,
Eastleigh, Bristol and Sheffield. We also have outsourcing
relationships with a number of partners including Swiss Re,
Scottish Friendly and International Financial Data Services
(IFDS) in the UK, and WNS in India. We employ over 9,000
people and have more than seven million customers as at
31 December 2009.
We believe that we provide a broad product offering, with
a wide distribution reach throughout the UK. We identify brand,
financial strength, with-profits performance, investment
performance and rates on protection products as our key strengths.
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
Our core strategy is to leverage our extensive distribution
network and customer base to increase profits in a mature but
evolving marketplace. We seek to outperform the UK market
while delivering enhanced margins. To achieve this, our strategy
includes the rigorous use of capital, further improving customer
retention, reducing new business acquisition costs while
boosting productivity, all of which will drive greater value for
shareholders.
We aim to maintain market leadership through balanced
distribution and broad product mix and the simplification of
processes, services and costs.
Market and competition
The UK long-term insurance market is highly competitive.
However, there is a potential annual savings gap of some
£30 billion, the difference between what an individual saves
today, and what they need to save in order to pay for a
comfortable standard of living in retirement, as well as a
potential protection gap of £2.3 trillion, which is the difference
between the life insurance and financial protection cover an
individual has and the amount they need to meet their needs,
according to the ABI and Swiss Re respectively. We believe these
shortfalls offer significant opportunities for long-term insurance
companies within this market.
In 2009 the long-term insurance and savings markets have
continued to be affected by the turbulent economic conditions,
the slowdown in the housing market and regulatory impacts,
such as the ban on the sale of single premium payment
protection insurance.
We consider our main competitors to be Prudential, Legal &
General, AEGON, Standard Life and Lloyds Banking Group. The
principal competitive factors for our life insurance business in
the UK are:
— Financial strength and ratings
— Brand strength and customer advocacy
— Focus on customer and quality of service
— Range of product lines and quality of products on offer
— Strength of distribution channels
— Pricing
— Investment management performance
Products
We provide an extensive product range in the UK that covers
pensions, annuities, protection, bonds and savings and equity
release products, as well as investment products. We hold
strong positions in each of our key markets of savings,
protection, and annuity products based on APE in 2009
according to ABI returns.
We write both non-profit and with-profit business.
Non-profit business means that shareholders retain 100%
of the distributed profits. With-profit business means that
policyholders are entitled to at least 90% of the distributed
profits, with shareholders receiving the balance.
The with-profit products share profits and losses of the
with-profit fund with its investors. This is achieved through a
system of bonuses. In deciding the regular bonuses Aviva aims
to smooth the return of the policyholder’s plan. As bonuses
are added to the plan, valuable guarantees build up. These
guarantees are unique to with-profits investments. At the close
of the plan the investor receives a terminal bonus based on the
performance of the fund.
We provide a number of traditional life insurance products
including level-term, decreasing-term and guaranteed whole
life insurance, guaranteed lifelong protection plans and critical
illness cover products.
Performance review