New business
| Present value of new business premiums | Value of new business | New business margin | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Life and pensions (gross of tax and minority interest) |
6 months 2009 £m |
Restated 6 months 2008 £m |
Restated Full year 2008 £m |
6 months 2009 £m |
Restated 6 months 2008 £m |
Restated Full year 2008 £m |
6 months 2009 % |
Restated 6 months 2008 % |
Restated Full year 2008 % |
| United Kingdom | 4,735 | 6,010 | 11,858 | 101 | 73 | 204 | 2.1% | 1.2% | 1.7% |
| France | 2,440 | 2,062 | 3,880 | 72 | 69 | 135 | 3.0% | 3.4% | 3.5% |
| Ireland | 426 | 699 | 1,299 | 4 | 8 | 15 | 0.9% | 1.2% | 1.2% |
| Italy | 2,198 | 1,305 | 2,331 | 81 | 35 | 71 | 3.7% | 2.7% | 3.0% |
| Netherlands (including Belgium and Germany) | 1,780 | 2,085 | 4,097 | (34) | (29) | (47) | (1.9)% | (1.4)% | (1.1)% | Poland | 554 | 951 | 1,842 | 27 | 31 | 65 | 4.9% | 3.3% | 3.5% |
| Spain | 1,245 | 1,295 | 2,489 | 78 | 116 | 202 | 6.3% | 9.0% | 8.1% |
| Other Europe | 208 | 667 | 1,014 | 6 | 19 | 29 | 2.9% | 2.8% | 2.9% |
| Europe | 8,851 | 9,064 | 16,952 | 234 | 249 | 470 | 2.6% | 2.7% | 2.8% |
| North America | 3,189 | 2,227 | 5,715 | 16 | (8) | 55 | 0.5% | (0.4)% | 1.0% |
| Asia | 532 | 684 | 1,351 | 6 | 26 | 30 | 1.1% | 3.8% | 2.2% |
| Australia | 166 | 212 | 369 | 10 | 6 | 13 | 6.0% | 3.0% | 3.5% |
| Asia Pacific | 698 | 896 | 1,720 | 16 | 32 | 43 | 2.3% | 3.6% | 2.5% |
| Total life and pensions | 17,473 | 18,197 | 36,245 | 367 | 346 | 772 | 2.1% | 1.9% | 2.1% |
| Present value of new business premiums | Value of new business | New business margin | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Life and pensions (net of tax and minority interest) |
6 months 2009 £m |
Restated 6 months 2008 £m |
Restated Full year 2008 £m |
6 months 2009 £m |
Restated 6 months 2008 £m |
Restated Full year 2008 £m |
6 months 2009 % |
Restated 6 months 2008 % |
Restated Full year 2008 % |
| United Kingdom | 4,735 | 6,010 | 11,858 | 72 | 53 | 147 | 1.5% | 0.9% | 1.2% |
| France | 2,019 | 1,692 | 3,281 | 40 | 38 | 79 | 2.0% | 2.2% | 2.4% |
| Ireland | 320 | 524 | 974 | 3 | 6 | 10 | 0.9% | 1.1% | 1.0% |
| Italy | 994 | 649 | 980 | 25 | 12 | 21 | 2.5% | 1.8% | 2.1% |
| Netherlands (including Belgium and Germany) | 1,661 | 1,965 | 3,868 | (28) | (25) | (48) | (1.7)% | (1.3)% | (1.2)% |
| Poland | 480 | 827 | 1,604 | 19 | 22 | 46 | 4.0% | 2.7% | 2.9% |
| Spain | 676 | 705 | 1,357 | 26 | 38 | 68 | 3.8% | 5.4% | 5.0% |
| Other Europe | 208 | 667 | 1,014 | 5 | 16 | 24 | 2.4% | 2.4% | 2.4% |
| Europe | 6,358 | 7,029 | 13,078 | 90 | 107 | 200 | 1.4% | 1.5% | 1.5% |
| North America | 3,189 | 2,227 | 5,715 | 16 | (5) | 36 | 0.5% | (0.2)% | 0.6% |
| Asia | 528 | 680 | 1,344 | 5 | 21 | 24 | 0.9% | 3.1% | 1.8% |
| Australia | 166 | 212 | 369 | 7 | 4 | 9 | 4.2% | 1.9% | 2.4% |
| Asia Pacific | 694 | 892 | 1,713 | 12 | 25 | 33 | 1.7% | 2.8% | 1.9% |
| Total life and pensions | 14,976 | 16,158 | 32,364 | 190 | 180 | 416 | 1.3% | 1.1% | 1.3% |
United Kingdom
Against the backdrop of sustained challenging market conditions, the UK life business has continued to manage for value with a focus on capital discipline and reducing the operating cost base.
The successful rebrand of Norwich Union to Aviva took place on 1 June 2009. Alongside this, and as part of our simplification agenda and commitment to deliver service excellence, we launched two new online services, Aviva for Advisers and the Customer Portal. Both portals make it easier to interact with us, giving customers and advisers more information and control over their products.
Life and pension sales were 21% lower at £4,735 million compared to the first half of 2008 (six months to 30 June 2008: £6,010 million), with collective investments sales of £418 million (six months to 30 June 2008: £840 million). Despite lower sales our first quarter life and pension market share increased to 11.9%1 (Q1 2008: 11.0%) demonstrating that in a market that has contracted by 32%1 since the second quarter of 2008, a flight to quality is taking place reflecting our customer focus and understanding, financial strength, diversified product offering and wide distribution reach.
Our joint venture with the Royal Bank of Scotland continued to deliver a strong performance, with life and pension sales increasing by 9% to £692 million (six months to 30 June 2008: £635 million) driven by an almost 50% growth in pension sales.
Commission reductions across individual pensions, group pensions and bonds, and a change in business mix have all contributed to a strengthening of margin over the 2008 year-end position by 0.4% to 2.1%. Following the trend seen in the first quarter, the amount of capital2 we consumed during the first half of the year was £136 million (six months to 30 June 2008: £210 million) equating to 2.9% of PVNBP (six months to 30 June 2008: 3.5%). Through our business simplification initiatives we remain on track to eliminate the expense overrun by the end of 2009 despite the reduction in volumes.
Total pension sales were £2,089 million (six months to 30 June 2008: £2,410 million), with the slowdown in salary increases as a result of the recession having a particular impact on incremental business. However, we are seeing real momentum following the launch of our market-leading Pension Tracker. We have increased the number of Employee Benefit Consultants, from 17 to 22, who have included us on their panel of providers with whom they will place new business and we have secured 170 new group pension plan schemes during the first half of 2009 including the largest scheme yet written at £90 million PVNBP.
Overall protection sales were £461 million (six months to 30 June 2008: £606 million), down 24% mainly due to regulatory changes significantly impacting creditor sales. Protection sales excluding creditor were £441 million (six months to 30 June 2008: £467 million). Our on-line Simplified Life proposition continues to differentiate us in this market, generating on average over 1,600 applications per week, an increase of 80% over 2008. The recently launched free life cover for new parents, raising awareness of the need to plan financial protection, clearly demonstrates how our new brand is delivering on its promise of building financial services around the needs of our customers.
Total annuity sales were £833 million (six months to 30 June 2008: £1,286 million). Our focus on driving greater value led to a reduction in individual annuity sales to £750 million, 14% lower than the equivalent period in 2008. In addition, our continued discipline of not pursuing business falling below our minimum level of return has resulted in reduced bulk purchase annuities sales of £83 million (six months to 30 June 2008: £418 million).
In line with our stance on profitability, bond sales reduced to £1,219 million (six months to 30 June 2008: £1,628 million). We remain committed to writing business at acceptable levels of return in this market which has experienced a contraction of 55%1 since the second quarter of 2008.
Sales of equity release have grown to £133 million (six months to 30 June 2008: £80 million) as a result of a higher sales through penetration of the IFA market and proposition enhancements.
The economic environment has remained volatile in the first half of 2009 and we expect this to persist throughout the remainder of the year. We will continue to build on the momentum established through our well-defined strategy, and focus further on generating greater value through enhanced interactions with our existing customers, reshaping our distribution relationships, and driving significant profitable growth in the corporate sector and our risk business.
Europe
In Europe, life and pensions sales were £8,851 million (six months to 30 June 2008: £9,064 million) across our broad geographical portfolio. Excluding the one-off sales in the prior year, this is a strong performance set against the continuing economic uncertainty. The result has been achieved through the strength and diversity of our businesses, with the bancassurance channel selling particularly well in Italy and France. Margin decreased to 2.6% (six months to 30 June 2008: 2.7%) principally reflecting the impact of a one-off portfolio transfer in the prior period. Excluding Delta Lloyd, the margin was 3.8% (six months to 30 June 2008: 4.0%)
In France sales were up 18% as a result of the strengthened euro. On a local currency basis, sales increased by 2% despite lower unitlinked sales which continue to be affected by uncertainties in the financial markets. We have seen higher sales of guaranteed products with many of our customers selecting these products as an attractive and safe investment. The value of new business rose to at £72 million (six months to 30 June 2008: £69 million) with a margin of 3.0% (six months to 30 June 2008: 3.4%) driven by the current change in the market away from unit-linked volumes.
In Ireland, sales were down 47% on a local currency basis reflecting the sharp decline in the life and pensions market attributable to the current recession. There is lower demand across both retail and bancassurance channels with consumers being influenced by volatile equity markets, the slowdown in economic growth and property market uncertainty. Value of new business was £4 million (six months to 30 June 2008: £8 million) and margin was reduced to 0.9% (six months to 30 June 2008: 1.2%).
In Italy, sales increased by 68% to £2,198 million (six months to 30 June 2008: £1,305 million). This was a 48% increase on a local curreny basis. This significant increase reflects strong sales of protection products and also the high demand for our profit sharing products offering attractive guarantees sold through UniCredit. Aviva Assicurazioni Vita (formally UBI Vita), acquired in June 2008, contributed sales of £359 million. The increase in protection sales and overall increase in volumes led to an improved value of new business of £81 million (six months to 30 June 2008: £35 million) with the margin rising to 3.7% (six months to 30 June 2008: 2.7%).
In Spain, sales decreased by 4%, down 17% on a local currency basis, to £1,245 million (six months to 30 June 2008: £1,295 million) reflecting lower protection and pension sales and the inclusion in the prior period of a one-off transfer of £151 million as a result of the distribution agreement entered into with Caja Murcia. Adjusting for this, savings sales were slightly ahead of the prior year reflecting the attractive returns on offer, which offset lower pension and protection sales driven by adverse economic conditions. Value of new business was down to £78 million (six months to 30 June 2008: £116 million) with a reduction in margin to 6.3% (six months to 30 June 2008: 8.8%) as 2008 included the one-off transfers from Caja Murcia.
In Poland, life and pension sales were 42% lower than half year 2008, down 37% on a local currency basis. The prior year included a special promotion through Deutsche Bank for short-term endowment policies which attracted significant volumes but on a comparatively lower margin. This change in business mix, coupled with the move towards regular premiums resulted in an improvement in the margin to 4.9% (six months to 30 June 2008: 3.3%) despite the value of new business falling slightly to £27 million (six months to 30 June 2008: £31 million).
Other Europe includes a number of markets which, although currently experiencing challenging conditions, have high potential for future growth. Sales in these markets were down 69% on a local currency basis with the largest reduction in Romania, where the prior period included £410 million of initial contributions from the launch of compulsory pensions. Sales in Turkey were slightly higher reflecting both an increase in policies sold and a focus on higher premium business. Across the rest of the markets volumes declined reflecting difficult market conditions. The value of new business was £6 million (six months to 30 June 2008: £18 million), however, the margin increased slightly to 2.9% (six months to 30 June 2008: 2.8%).
Sales through Delta Lloyd were 15% down on the prior year reflecting the challenging market conditions whilst the prior period included £758 million of corporate pension scheme sales. In addition, there has been continued strong competition from the banking sector particularly on annuity products. Swiss Life Belgium, acquired in June 2008, contributed sales of £241 million, whilst the prior period included £758 million of one-off corporate pension scheme sales. The value of new business was a loss of £34 million (six months to 30 June 2008: £29 million loss) resulting in a margin of (1.9)% (six months to 30 June 2008: (1.3%)).
North America
Aviva USA reported an increase of 43% in new business sales to £3,189 million (six months to 30 June 2008: £2,227 million) on a sterling basis and on a local currency basis growth was 8%. While sales for the first half of the year remained strong, as customers seek products with guarantees during the current economic turbulence and recognise Aviva as one of the stronger market participants, compared to the second half of 2008 sales were down 8% on a sterling basis. We expect this trend to continue in the second half of the year consistent with our strategic goals to manage our production levels by changing our overall business mix to moderate annuity sales and grow our life insurance business.
Sales of annuities increased by 78% to £2,815 million (six months to 30 June 2008: £1,579 million). Demand has exceeded our desired production and, as a result, we have taken a number of actions to ensure we manage the business mix for the year. Re-pricing, commission reductions and production limits, as well as the elimination of non-core distribution relationships should have a positive effect on our new business margins for the full year 2009.
Life product sales, which mainly include indexed universal life and term assurance products, were £374 million for the first half of 2009 (six months to 30 June 2008: £273 million). Life product sales were up 3% on a local currency basis compared to the second half of 2008, although there is a trend of reduced life sales in the overall market due to the economic decline. Despite the current trends, we are optimistic that the steps we are taking now will position us for future growth. These steps include expanding into the brokerage general agency market and our CPA Wealthstar Initiative. We continue to evaluate funding agreement sale opportunities against our overall strategy on a case-by-case basis, and as a result there were no funding agreement sales in the first half of 2009 (six months to 30 June 2008: £375 million).
New business contribution has improved to £16 million (six months to 30 June 2008: £8 million loss) and overall margin was 0.5% (six months to 30 June 2008: (0.4)%) in part driven by the annuity actions taken by management set out above.
Asia Pacific
Life and pension sales across the Asia Pacific region were 22% below the prior year at £698 million (six months to 30 June 2008: £896 million). This mainly reflects the uncertainty associated with the current economic conditions across the region. Customers remain cautious about investing in unit-linked savings products and in the low interest rate environment bank deposits are comparatively more
attractive, especially where guaranteed by governments, than insurance savings products. The reduction has been offset by sales from the South Korea joint venture which first reported in the second half of 2008 and now represents 18% of life and pension sales in the region. The value of new business fell 50% to £16 million (six months to 30 June 2008: £32 million), resulting in a new business marginof 2.3% (six months to 30 June 2008: 3.6%).
Within the overall regional total, sales of life and pension products in Asia fell by 22% to £532 million (six months to 30 June 2008: £684 million) with new business margin down to 1.1% (six months to 30 June 2008: 3.8%). This has mainly been driven by change in the projection term assumptions for Hong Kong, China, India and Singapore. Reduced sales volumes also reflect the scaling back of capital intensive products in Hong Kong, Taiwan and Malaysia, offset by new sales from the South Korea joint venture.
In Australia, life and pension sales in the first six months of the year were down by 22% to £166 million (six months to 30 June 2008: £212 million) due to the closure of a capital protection product at the end of 2008 and lower superannuation and group risk sales resulting from less fluidity in the employment market. This was partly offset by an increase in higher margin protection sales which improved the overall margin to 6.0% (six months to 30 June 2008: 3.0%).
