Aviva 2014 Annual Report Download - page 269

Aviva plc Annual report and accounts 2014
265
Pensions Ireland Ltd) was transferred to Aviva Life and Pensions
UK Ltd (UKLAP) becoming a branch of UKLAP.
Market and competition
Over the last few years, the Retail Distribution Review and Auto-
Enrolment have transformed the way that long-term savings
products are bought and sold.
The changes to annuities announced by the UK Chancellor
of the Exchequer in the Budget in March 2014 are intended to
give increased flexibility as to how customers can access their
pension from April 2015. These changes are having a significant
impact across the market and have seen many customers defer
their decision regarding their pension, exacerbating the general
market decline for individual annuities.
In addition, The Department of Work and Pensions (DWP)
announced a charge cap of 75 basis points from April 2015,
plus the removal of active member discounts (AMDs) from April
2016. We implemented these changes in 2014, ahead of the
regulatory requirement.
The UK long-term savings market is highly competitive and
we consider our main competitors to be Standard Life,
Prudential, Legal & General, Scottish Widows, Just Retirement
and Royal London.
The growth in the life and pensions market in Ireland was
evident in 2013 and has continued into 2014. The life insurance
market in Ireland is relatively concentrated. We consider our
main competitors to be Bank of Ireland Life, Irish Life, Zurich Life
and Friends First.
Products
In the UK, we provide a comprehensive product range focused
on both the consumer and corporate markets. The pensions and
'at retirement' products we offer include personal pensions,
equity release, annuities and income drawdown. Our annuity
offerings include immediate life, enhanced, fixed-term annuities
and with-profits pension annuities. We provide a number of
traditional life insurance products, including level-term,
decreasing-term (with or without critical illness), guaranteed
whole life insurance, and guaranteed lifelong protection plans.
Our savings and investment products include ISAs, investment
bonds, funds, base rate trackers, investments with guarantees
and with-profits products.
In Ireland, our long-term insurance and savings business
offers a wide range of products with our focus being on
protection, annuities and a focused set of accumulation
products. Our protection products include life insurance,
mortgage protection, specified illness and guaranteed and
whole life cover products. The pension range covers retirement
and investment products including open market annuities,
enhanced annuities and government personal retirement
savings accounts (PRSA) schemes.
Distribution
We have a multi-distribution strategy, which means we sell our
products through intermediaries, corporate partners, in the
workplace, and directly to customers. We are a leading provider
in the UK intermediary market with 10.7%2 share. The direct to
consumer platform is due to be launched in early 2015, offering
new retirement propositions and investment products.
In the UK, we have exclusive distribution deals for the sale of
protection products with Royal Bank of Scotland, Barclays,
Santander, Tesco and the Post Office.
We remain committed to building on our existing
relationships and distribution partnerships as well as to growing
our workplace and direct channels.
UK & Ireland General Insurance
Business overview and strategy
The UK and Irish businesses are managed under a single
management structure and work is progressing to leverage the
scale and expertise that we believe exists in the UK to benefit
the Irish business.
We are a leading general insurer in both the UK and Ireland
with market shares of 10.5%3 and 13.3%6 respectively. We
employ around 7,000 people and operate from a number of
locations throughout the UK and Ireland, including Norwich,
Perth, Glasgow, London and Dublin.
We focus on personal and commercial insurance. In the UK
we hold top three positions in the motor and property markets3.
We believe our key strengths include underwriting and pricing
sophistication, claims and cost management and excellent
customer service. Our aim is to deliver cash and profitable
growth by focussing on the fundamentals of the insurance
business to maximise underwriting returns and we have a
portfolio strategy to deliver greater stability of earnings.
Market and competition
The UK is the 5th largest non-life insurance market in the
world7. In 2013, the top four companies had a 31.4%3 share of
the general insurance market.
The UK and Ireland general insurance markets are cyclical in
nature and remain very competitive, particularly in personal
lines, where the market is highly commoditised.
Following significant premium rate increases in recent years
in response to rising claims costs and frequencies, the UK
personal motor market has continued to see rate reductions in
2014 reflecting intense competition and regulatory change.
Challenging economic conditions also apply to other UK classes
of business, although there are some signs of rates hardening in
the commercial market. In Ireland, the market remains
challenging, reflecting the economic downturn, increased
competition and market contraction of 6% in 20136.
In the UK our main competitors are Direct Line Group, RSA,
The Admiral Group, AXA, Zurich, LV, Allianz and Ageas. In
Ireland, our competitors include RSA, AXA, Zurich, FBD, Allianz
and Liberty.
Products
We provide a wide range of general insurance products both in
the UK and Ireland. In the UK we have a business mix of
approximately 60% personal lines and 40% commercial lines.
Our UK personal products include motor, home and travel
insurance. Our UK commercial products include motor, property
and liability insurance for small and medium size enterprises
(SMEs) and the larger UK Corporate and Specialty Risks market.
In Ireland our products include property, motor, travel,
agricultural and business insurance and our health insurance
business provides products for both the personal and
commercial sector.
Distribution
We have a multi-distribution strategy. Our personal products are
sold directly to customers over the phone and through our
websites, via brokers and through corporate partnerships. Our
Quotemehappy and General Accident insurance products are
also available through price comparison websites. For
commercial insurance, we focus on broker distribution and
believe that independent brokers remain the best source of
advice for business customers.
6 Irish Insurance Federation, 2013
7 Swiss Re Sigma Study (World Insurance 2013)
Other information
Aviva plc Annual report and accounts 2014 |265