Aviva 2013 Annual Report Download - page 10

Aviva plc
Annual report and accounts 2013
8
Group Chief Executive Ofcer’s statement continued
Over the last 12 months there has been
substantial focus on the intercompany loan (ICL)
and 2013 has seen considerable progress in this
area. As at the end of February 2014, the ICL was
£4.1 billion (Q1 2013: £5.8 billion), reduced by a
cash contribution of £0.45 billion and non-cash
measures of £1.25 billion. We have reached
agreement with the PRA on the appropriate level
and plans for the ICL and will complete
implementation of our plans by the end of 2015.
Our target level for the loan is £2.2 billion. We
plan on using a further £0.45 billion of cash and
£1.45 billion of other measures to achieve the
£2.2 billion target. The cash is to come from
existing liquidity, putting no extra strain on our
ongoing cash generation.
Our external leverage ratio is at 50% (2012:
50%) of IFRS tangible capital. On a more broadly
recognised S&P6 basis, this ratio has reduced to
32% (2012: 33%). We have recently stated our
intention to call two tranches of bonds, with
principal of £240 million and coupon above 10%.
Over time we expect to reduce our external
leverage ratio to below 40% of tangible capital.
People
One of the priorities in 2013 was to strengthen
the management team to bring in new skills into
the Group and progress has been made in this
area. We have appointed new leaders in asset
management, human resources, IT, Europe,
Asia, UK General Insurance and transformation
through a combination of senior internal
promotions and external hires.
I would like to thank Pat Regan for his many
contributions to the Group over the past four
years and in particular for his support of me over
the past year. I wish him well in his future career
in Australia.
We have announced that Tom Stoddard will
succeed Pat as CFO. Tom is a high calibre
individual who will provide sound judgement
and challenge.
An essential part of the company’s
transformation is embedding a higher
performance culture across Aviva. We are
introducing a new set of values which will guide
the day-to-day actions of our 28,000 people.
These values provide the framework on which
decisions are being made. These values are:
Create legacy, Kill complexity, Never rest and
Care more.
One of the strengths of Aviva is the dedication
and commitment of our people. This has been
exemplary in 2013 and I would like to thank them
for their tireless work on behalf of our customers
and shareholders.
Outlook
In summary, our performance in 2013 shows
progress towards delivering what we said we
would. Our turnaround is intensifying as we focus
more on improving operational performance. We
plan on using big data to be more disruptive in
predictive analytics, take advantage of our brand
strength to grow our digital direct business and
drive further efciency through automation. We
will be selective in our investments with a clinical
approach to the allocation of capital.
As a business it is important that we build on
the progress made in 2013. Aviva is a self-help
story with a balanced and increasingly focused
portfolio of businesses. The tendency with
self-help or turnaround businesses is to focus on
the successes rather than the issues and as a
result become complacent. I want to guard
against this happening at Aviva. Have we made
progress? Yes, some. Is it a little faster than
anticipated? Probably. Have we unlocked the full
potential at Aviva? No, there is more to come.
Mark Wilson
Group Chief Executive Ofcer
Have we made
progress? Yes, some.
Is it a little faster than
anticipated? Maybe.
Have we unlocked the
potential at Aviva?
No, there is more to come.
Mark Wilson
Group Chief Executive Ofcer
To read more about our
strategic framework,
purpose and values,
turn to page 19
Key statistics
in 2013
£8.3bn
Economic capital5
surplus
(2012: £5.3bn)
£4.1bn
Intercompany loan as
at 28 February 2014
5 The economic surplus represents an estimated unaudited position. The capital requirement is based on Aviva’s own internal assessment and capital management policies, measuring the amount of
economic capital at risk in a 1-in-200 year loss event over a one year time horizon. The term ‘economic capital’ does not imply capital as required by regulators or other third parties.
6 Standard & Poor’s.