Strategy

Our strategy has three key elements:

1. Increasing geographic focus;
2. Benefiting from the combination of life and general insurance;
3. Building on our core capabilities.

This is reinforced by a commitment to clear financial deliverables in the near-term.

1. Increasing geographic focus

We will focus on 12 markets where we have strength and scale. In determining our focus we will judge markets on their potential to generate both $100 million of IFRS operating profits and a 12% return on capital employed, or $1 billion of franchise value for younger businesses.

Europe opportunities: focus on eight markets

• UK and Europe represents the largest life and pensions market in the world, offering the greatest absolute growth over the next five years;
• Focus on eight markets for risk and savings products in Europe, namely UK, France, Spain, Italy, Poland, Ireland, Turkey and Russia.

North America: focus on growing profits organically

• We will focus on growing profits organically in Canada and the US;
• In Canada we will focus on being a great underwriting company;
• In the US we will diversify the business mix by organically growing our life protection business to achieve a top 10 position whilst continuing to build on our core annuity business.

Asia Pacific: focus on growing franchise value

• We will pursue franchise growth through organic investment;
• We will focus on the high priority markets of China and India;
• We will exit low priority markets, such as Taiwan.

2. Benefiting from the combination of life and general insurance

Our life and general insurance (GI) operations are excellent businesses in their own right, but in addition to their inherent strengths there are significant advantages of running these businesses under one roof.

Capital

• The combination of our businesses provides capital benefits by diversifying risks;
• Aviva can hold 30-40% less capital to write new GI business than the GI business would need to hold on a standalone basis. It is anticipated that this benefit will be reinforced under Solvency II.

Cash flows

• The diversity of our business drives more resilient cash flows and earnings than single line insurers through the cycle;
• Half of Aviva’s net cash flow is generated from general insurance businesses.

Cost and efficiency

• There are clear scale benefits and cost synergies to having life and general insurance under one roof, including the operational benefits of shared back-office functions, IT and finance resources;
• There is also the opportunity to transfer key skills and capabilities across the group.

Customer and distribution

• Differentiation of our life, general insurance and asset management businesses through the power of Aviva’s global brand;
• Our combination of businesses provides cross-selling opportunities, with our single, trusted brand which is able to meet our customers’ complete insurance needs;
• This makes Aviva an attractive business partner and has allowed us to develop a global leadership in bancassurance.

Supported by Aviva Investors, a global asset manager

• Aviva Investors is dedicated to building and providing focused investment solutions for clients;
• Aviva Investors continues to target growth in third party assets to drive franchise value.

3. Building on our core capabilities

We will succeed by building on four core capabilities: marketing & distribution expertise, financial discipline, technical excellence, and operational effectiveness. We already perform well in these areas, but by focusing our efforts and resources, we aim to excel at each of them, and enhance Aviva’s position as a leading insurer.

• Marketing and distribution expertise: We will capitalise on our “best-in-class” multi-channel distribution capabilities including bancassurance leadership, by building on our scale, brand, and strong relationships with distributors/partners, to deliver a broad range of high quality products and services that customers want to buy.
• Technical excellence: We are building on our existing strengths in pricing, product development, underwriting capabilities and our ability to understand and take measured risks.
• Operational effectiveness: We are focusing on customer value management (eg improving retention, advocacy and cross-selling), and driving improved quality and efficiency by creating a simplified, more modern way of doing business across the Group and further building on our claims management expertise.
• Financial discipline: We apply rigorous and clear frameworks for capital allocation and asset liability matching to ensure we are reinvesting in products and markets offering the optimal potential return. In addition, we are focused on managing our investment risk and gearing, and on making selective portfolio changes.

Financial deliverables

Our strategy gives us a clear way forward, but we are also focused on delivering strong performance in the near-term, so we have set out a number of clear financial deliverables:

• At least £1.5 billion operational capital in 2011;
• Life IRR of at least 12% with payback of 10 years or less;
• General insurance COR of 97% or better in 2011;
• £200 million of cost savings and £200 million of efficiency savings by the end of 2012.

02 Nov 2010: Delivering value in the new business environment PDF (3.58MB)