Long-term savings United Kingdom

Business Review

Long-term savings

United Kingdom

In the UK, our life and pensions business continued the momentum built-up at the end of 2009. Life and pension sales were £2,557 million, an increase of 14% compared to the previous quarter and in line with the first quarter of 2009 (4Q09 £2,250 million:  1Q09: £2,505 million). These sales were achieved while maintaining our focus on profitability. Collective investment sales increased to £426 million in the first three months of the year (4Q09: £418 million:  1Q09: £175 million), reflecting increased confidence among UK investors.

Significant developments in the first quarter included record levels of protection and annuity applications, strong individual pension sales and particular success in the bulk purchase annuity market. We were also delighted to be awarded the title of Money Marketing ‘Company of the Year’ for 2009. This is a prestigious award for life insurance companies, voted for by financial advisers, and demonstrates the value of our brand, product innovation and service excellence.

The first quarter of 2010 saw record weekly core protection² applications driven by the continued success of Aviva’s Simplified Life offering through IFAs and our partnerships with Barclays and the Post Office. Sales were £165 million, 1% above the previous quarter (4Q09: £164 million), achieved without compromising our focus on profitability. Overall protection sales were £231 million (4Q09: £258 million) having been impacted by lower group life sales, as competition in this market increased and we strengthened our focus on value creation.

Total annuity sales of £877 million, are 35% higher than the fourth quarter of 2009 (4Q09: £648 million). Our well-developed bulk purchase annuity offering delivered sales of £344 million (4Q09: £28 million) and it is pleasing that we have been able to maintain our pricing discipline while winning new business. Sales of individual annuities were £533 million (4Q09: £620 million) reflecting the seasonal market fall in application levels during December and January. However average weekly applications are now 19% higher than during 2009, as we continue to see the benefit of our pricing expertise and risk selection.

Aviva’s pension sales have remained resilient. Sales were 10% higher than the fourth quarter of 2009 at £941 million (4Q09: £859 million) as customers’ propensity to save began to return and group schemes that we secured during 2009 converted into new business volumes.

Capitalising on Aviva’s market leading position our equity release sales increased by 52% to £96 million (4Q09: £63 million). In-line with our strategy of focusing on creating value, bond sales were marginally lower at £412 million (4Q09 £422 million).

First quarter life and pension sales through our joint venture with the Royal Bank of Scotland were £250 million (4Q09: £274 million) primarily driven by subdued bond sales as investors preferred the bank’s strong ISA offering and the reduction in guaranteed bond sales when compared with the first quarter of 2009 (1Q09: £382 million). Aviva’s share of the joint venture’s total sales was £327 million, representing 1% growth over the fourth quarter of 2009 (4Q09: £323 million).

Over the next three years the Retail Distribution Review (RDR) will have a major impact on the market we operate in and we have put in place a number of initiatives to ensure that we adapt successfully to these changes. We continue to support advisers in their transition through to the post-RDR market, with initiatives such as our Business Transformation Programme and our market-leading Financial Adviser Academy. We are continuing to prepare for the changes with an RDR-compliant Sipp and Wrap proposition, one of the few that conforms to the current Platform discussion paper proposals. Furthermore we have delivered adviser-charging for our individual pension products and will be introducing this capability on other products in the coming months.

On 20 April we advised UK staff, and the Trustees of the Aviva Staff Pension Scheme (ASPS) and the RAC staff pension scheme that we intend to begin consultation with them regarding our proposal to close the final salary sections of these pension schemes. The review is in light of future funding requirements, and our desire to provide an equitable, sustainable and competitive pension for all our UK employees.

While market conditions remain challenging, the momentum we’ve seen building over the past three quarters is encouraging, and we are well-positioned to benefit from increased market activity and the gradual return of consumer confidence.

² Core protection - Mortgage Life Insurance and Term Assurance with or without Critical Illness options, Simplified Life, Whole of Life cover and 50+ cover