Long-term savings United Kingdom

Long-term savings United Kingdom

Throughout 2009 Aviva’s UK Life business has continued to follow a consistent strategy of proposition development, improving operational efficiency, enhancing customer and distributor service levels and disciplined financial management.

Exceptional economic conditions have impacted consumer confidence and reduced activity across the UK market. Against this backdrop, life and pension new business sales were £8,914 million (2008: £11,858 million) with collective investment sales of £1,049 million (2008: £1,485 million) and, while remaining focussed on profitability, we have marginally improved our life and pension market share to 10.6%¹ (Q3 2008: 10.5%). An encouraging performance has been seen in the fourth quarter of 2009, with life and pension sales growing 17% and collective investment sales growing 96% over third quarter levels.

Life and pension sales through our joint venture with the Royal Bank of Scotland grew by 3% to £1,246 million (2008: £1,211 million) underpinned by over 10% growth in both pension and core protection sales compared with previous year.

Total pension sales were £3,752 million (2008: £4,753 million) with the fall due, in part, to the reduced number of large schemes written compared with the same period last year. The pension market has continued to be impacted by lower consumer confidence, limited salary increases and higher unemployment, resulting in falls in both increments and group scheme membership. Significant progress has been made in improving our pension proposition, with our innovative market-leading Pension Tracker being one of the reasons we were recognised as Pension Provider of the Year at the 2009 Personal Finance Awards.

At the end of 2009 we reopened our Wrap and Sipp platforms to new business and we see this as a key platform for growth going forward.

Sales of protection products (excluding creditor) were £940 million (2008: £890 million). Growth has been driven primarily by our on-line Simplified Life proposition which has played a major part in delivering, in the fourth quarter of 2009, our highest level of quarterly sales in the last two years. Overall protection sales (including creditor) were lower at £965 million (2008: £1,126 million), driven by the impact of the regulatory changes affecting creditor business.

Total annuity sales were lower at £1,897 million (2008: £2,433 million) due to lower bulk purchase annuity volumes of £175 million (2008: £826 million) as we remain resolute in achieving a minimum level of return. Sales of individual annuities were 7% higher at £1,722 million (2008: £1,607 million) reflecting our ability in a contracting market to provide an annuity income, using our market-leading pricing capability, which takes account of customers’ individual circumstances. New applications almost trebled during 2009 and the fourth quarter saw record new business volumes. Further refinement of our postcode pricing approach will allow us to build on this momentum in 2010.

Equity release sales have increased to £276 million (2008: £250 million). While a number of other providers have exited this market we recognise that it plays an important part in the retirement plans of customers and we remain fully committed to retaining this proposition as part of our product offering.

Bond sales were £2,024 million (2008: £3,296 million). The reduction compared with 2008 is in line with our focus on value driven by our commission reductions and the withdrawal of the Inflation Protected Guarantee option. We have delivered new propositions, including the recent launch of a With-Profit Guaranteed bond, and increased the fund choice on our Investment Portfolio bond.

The reattribution of our inherited estate began on 1 October and is now almost complete. We received an overwhelmingly positive response with more than 87% eligible policyholders voting, and 96% voting in favour of the offer. Over 90% of the 740,000 cheques issued so far have been deposited.

We expect the market to remain tough in the short-term as the impact of the recession continues to influence demand for investment and savings products, but the strength of our brand, broad product range and distribution reach have left us well placed to continue driving growth.

¹ Source: Quarter 3 2009 ABI data