Overview

I am pleased to report a second consecutive quarter of growth for Aviva. Long-term savings sales for the first three months of this year have recovered to over £10 billion and are 16% higher than the previous quarter, and in line with the first quarter of 2009. Within this, life and pension sales continued to gain momentum from the low point in the third quarter of last year to reach just over £9 billion and the group margin has been maintained in line with the full year 2009. Investment sales also increased, to over £1 billion and general insurance and health premiums rose to £2.5 billion, a strong improvement over the previous quarter. Our capital position remains strong and this second quarter of growth bodes well for the rest of the year, even though there is still a degree of economic uncertainty in some markets.

Strong performance across the group

Europe and the UK accounted for 85% of our long-term savings new business, with sales increasing by 16% on a sterling basis compared to the previous quarter. North America and Asia Pacific also reported strong first quarter sales.

One of the benefits of our global diversity is that we are well-positioned to benefit from economic recovery as it happens at differing rates across a range of geographies. We’ve responded by introducing products which meet customers’ new approach to saving, because they have told us that having the option to minimise risk is now the most important factor in their buying decision.

Sales through bancassurance account for around one third of Aviva’s life and pensions sales. In the first quarter our bancassurance sales continued to grow across all regions, increasing by 44% compared to the previous three months and underlining Aviva’s competitive advantage in this channel.

General insurance returning to growth

General insurance and health sales returned to growth in the first quarter. Net written premiums were up 16% at £2.5 billion, compared to the previous quarter as we began to reap the benefits of the initiatives that we put in place such as the reshaping of our UK portfolio and our strategy of increasing our general insurance sales through Aviva’s European existing bancassurance relationships.

Claims were higher than expected in the first quarter, because of adverse weather in the UK and Europe, but these were partly offset by better than expected claims levels in Canada. We continue to focus on a group combined operating ratio of 98% for the full year.

Good strategic progress

Aviva’s programme to create a single operating model across Europe is delivering benefits. We have successfully piloted our pan-European product development centre in Ireland and cross-selling initiatives in a number of continental markets. We’re also optimistic about our plans to increase general insurance sales through our European bancassurance partners, following some early success with sales in Italy in the first quarter.

In the UK, where financial advisers have voted us Money Marketing Company of the Year, we are also making good progress in bringing our life and general insurance businesses closer together. Already this is helping us to eliminate duplication on major programmes, such as Solvency II and will give us the opportunity to harmonise terms and conditions for our employees in these businesses. 

Aviva Investors’s strategy of increasing the proportion of third party business has successfully delivered significant mandates from several pension schemes and financial institutions in the UK, Europe and the United States.

Strong capital position maintained

Aviva’s capital position remains strong. Our estimated IGD solvency surplus was £4.4 billion as at 31 March 2010 (31 December 2009: £4.5 billion), after allowing for the 2009 final dividend. We remain focused on cost management, with our total cost base down 7% (excluding discontinued operations) and like-for-like costs down 2% on the same period last year.

Our estimated net asset value per share on an MCEV basis was 505 pence at 31 March 2010 (31 December 2009: 471 pence). On an IFRS basis the estimated net asset value per share was 395 pence at 31 March 2010 (31 December 2009: 374 pence). The provisions we put in place last year for potential defaults on debt securities have not been used and we have not experienced any material deterioration in commercial mortgage defaults.

Aviva continues to have a firm focus on capital. In 2010 we expect to generate approximately £1.3 billion of net operating capital¹, an increase of 30% on 2009. We expect to achieve the increase through a combination of higher in-force profits, an increase in general insurance profitability, disciplined cost management and a continued focus on capital efficiency.

Outlook

Aviva has made an encouraging start to 2010, delivering a second consecutive quarter of long-term savings growth. We will continue to focus on profitability and capital, managing Aviva’s new business flows in a disciplined way, throughout the coming year.

¹ Operational capital generated, net of investment in new business