Long-term savings Aviva Europe

Aviva Europe

Life and pensions sales increased by 14% on the previous quarter to £4,285 million (4Q09: £3,753 million), and 13% compared to the first quarter of last year. On a local currency basis this was 13% and 15% respectively.

We have responded to customer preference for savings products that have a guaranteed element by developing products which are both attractive to customers and meet our profitability criteria.

We have continued to make good progress with our European transformation programme and are successfully embedding our pan-European operating model, which includes the creation of a single bancassurance platform, a central procurement capability, development of a common product suite and the piloting of our cross selling and product initiatives in Poland, Ireland and a number of our emerging markets. Compliance and legal projects are underway to finalise regulatory approval for our European headquarters in Ireland and the groundwork for our branch structure is well advanced.

Bancassurance

We continue to leverage our bancassurance franchise, which now includes 51 arrangements and makes Aviva the market leader in this distribution channel. Sales increased by 48% from the previous quarter to £2,611 million (4Q09: £1,762 million).

Sales performance in Italy, one of our major bancassurance markets, was very strong, up 150% to £1,542 million (4Q09: £618 million). Existing with-profit and unit-linked products have been redesigned, making them more attractive to customers while also adjusting surrender conditions to improve long term retention. Sales have benefitted from some seasonal effects and we do not expect volumes to continue at this level throughout the year. We have actions in place to rebalance our sales mix to include a greater proportion of unit linked products.

In France, sales have increased by 54% to £393 million (4Q09: £255 million). In partnership with Credit du Nord, we introduced a new product, “Antarius Duo”, which has enabled us to capture sales from customers who are choosing to transfer their savings from lower return, short-term deposits, into more attractive insurance products

In Spain the challenging market environment and resulting low levels of consumer propensity to invest, combined with the beneficial effect of seasonality in the prior quarter’s sales, led to lower sales of £530 million, down 28% (4Q09: £734 million). We are focused on increasing sales of our protection products, which have grown by 56% since the previous quarter and in this sector we now have the second largest market share in Spain.

In Ireland, sales were 13% lower at £117 million (4Q09: £134 million), reflecting seasonal patterns in an economic environment that remains tough. However, sales have increased by 43% on the same period last year, reflecting the benefits of our partnership with Allied Irish Bank, who following their reorganisation have increased their focus on life and pensions sales.

Retail

We continue to build on our significant retail franchise as we develop a single pan-European retail operating model supported by centralised sales support. Retail sales were 16% lower than the previous quarter at £1,674 million (4Q09: £1,991 million), a 17% decrease on a local currency basis, but up 8% on the same period last year.

France has delivered an excellent sales performance increasing sales by 6% to £1,157 million (4Q09: £1,096 million). Sales through our partnership with AFER increased by 56% on the previous year, as customers continued to be attracted by our range of simple, easy to understand products. We have made good progress on our strategic aim to grow unit linked product sales, with sales up by 25% compared to the same period last year.

In Poland retail sales were 39% lower at £203 million (4Q09: £334 million, equivalent to a 44% decrease on a local currency basis), largely as a result of a one-off beneficial impact of assumption changes in the 2009 figure and some seasonal sales effects. Pension sales in Poland have declined by 52% compared to the previous year, as a result of Polish pension legislation changes. We are developing a number of savings and protection initiatives and are focusing on promoting unit linked products to existing customers, which has already increased sales.

In Ireland retail sales were 48% lower at £130 million (4Q09: £248 million), reflecting seasonal trends. However, we are encouraged by the fact that sales were 24% higher than the same period last year and we have recently launched several new protection and savings products.

Delta Lloyd

Life and pensions sales were up 6% at £883 million on the previous quarter (4Q09: £830 million), supported by seasonal trends in pension and annuity sales. Compared to the same period last year, sales were 6% lower, representing a 4% decrease on a local currency basis.

Sales in Germany were predictably lower, following the announcement that Delta Lloyd intends to close its loss-making German operation to new business. Pensions and annuity sales were at a similar level to the same period last year with no large contracts sold. However, we believe that the future prospects for large group pension sales remain positive.

Investment sales were £173 million, 7% higher than the first quarter of last year and equivalent to a 10% increase on a local currency basis. This reflects an increased appetite for single premium investments in the Dutch market.