Aviva plc: Worldwide long-term savings new business– 12 months to 31 December 2008
Overview
In 2008 Aviva delivered a solid new business performance with life and pension sales up 11% to £36,283 million (2007 restated: £32,722 million) and total long-term savings up 1% to £40,278 million (2007 restated: £39,705 million). Because Aviva is a global group, with over 65% of sales coming from outside of the UK, our performance has benefited from currency movements, such as the appreciation of the euro. On a local currency basis, total long-term savings sales were down 7%.
On 15 January 2009 we announced that these results would be presented on a market consistent embedded value (MCEV) basis for the first time, because of Aviva’s early adoption of MCEV methodology. Further details of the effect of our move to the MCEV basis are given in the separate announcement that we’ve issued today. On a European Embedded Value (EEV) basis, our 2008 life and pensions sales grew by 9% to £34,581 million (2007: £31,600 million). On a local currency basis, EEV life and pension sales were in line with the prior year.
Our 2008 sales performance is a testament to the benefit of Aviva’s geographic spread and diverse distribution. Notable highlights included our highest ever life and pensions sales result in the UK. In the United States we have achieved our goal of doubling new business sales a year ahead of target1 and our sales performance in central and eastern Europe was excellent. The continued success of our joint venture in China and the contributions from new operations in South Korea and Taiwan were key to life and pensions growth in Asia Pacific.
Given the uncertain economic outlook we expect the UK and European markets to be more subdued in 2009. In North America, while demand for equity indexed annuity products is expected to continue, we do not anticipate the levels of growth seen in 2008. We expect steady growth in the Asia Pacific markets.
We continue to work closely with banking partners and, while we have seen a decrease in bancassurance sales, particularly in Ireland and Italy, our sales increased in other countries, particularly in central and eastern Europe and in Asia Pacific. We believe that bancassurance earnings will become even more important to banks in the future as they concentrate on their retail operations. We now have more than 90 bancassurance partnerships around the world and in 2008 they generated around 23% of Aviva’s long-term savings sales.
In the current economic climate, top-line sales growth targets are not our priority. In 2009 we aim to maintain a strong franchise in each of our markets, but with an increased emphasis on capital efficiency. We will aim to perform in line with the market, but will prioritise profitability and efficient use of capital.
Our IGD solvency position2 remains strong. At 31 December 2008 our estimated IGD surplus was £2.0 billion. Our equity hedges are still in place and even if the equity markets were to fall a further 40% from 31 December 2008 levels, our solvency surplus would still be approximately £1.3 billion.
In our general insurance business we expect to have achieved a COR of 98% for the group. We will provide a full update on our general insurance businesses in our 2008 full year results on 5 March 2009.
- The USA growth target was to double 2006 pro forma sales within three years of the acquisition of AmerUs. Pro forma sales are calculated as the combined sales of the former Aviva business based in Boston and the former AmerUs group, on a local currency basis.
- IGD solvency position is the group regulatory capital position based on the EU Insurance Groups Directive.
