Core capabilities

Building on four core capabilities

To be the best in both life and general insurance, we will focus on the four core capabilities of marketing and distribution, technical excellence, operational effectiveness and financial discipline. We already perform well in these areas, but by focusing our efforts and resources, we aim to excel at each of them.

Marketing and distribution expertise

We will capitalise on our “best-in-class” multi-channel distribution capabilities including bancassurance leadership, by building on our scale, brand, and strong relationships with distributors/partners to deliver a broad range of high quality products and services that customers want to buy. Read more about our distribution network.

Technical excellence

We are building on our existing strengths in pricing, product development, underwriting capabilities and our ability to understand and take measured risks. We have already taken significant steps to enhance our pricing and underwriting capabilities. For example, in the UK we have used postcode information to price annuities and in our largest general insurance markets (ie UK and Canada) we have some of the most sophisticated general insurance pricing models.

Operational effectiveness

We are focusing on customer value management (eg improving retention, advocacy and cross-selling), and driving improved quality and efficiency by creating a simplified, more modern way of doing business across the Group, which will both improve our efficiency and reflect customers’ changing preferences.

We will continue to look for opportunities to eliminate legacy systems, streamline our processes and capitalise on opportunities to optimise our performance, as we have already done with an internet-based human resources database in Europe, our global intranet and the introduction of common IT platforms.

We will remain focused on costs, having achieved a strong track record in delivering significant cost savings to date. We are also further building on our claims management expertise, for example in Ireland we have pilot schemes in place which have helped us to improve fraudulent-loss recovery by 7%.

Financial discipline

We apply rigorous and clear frameworks for capital allocation and asset liability matching to ensure we are reinvesting in products and markets offering the optimal potential return. We will ensure that we balance sales growth with maintaining our profitability on new business. In addition, we are focused on managing our investment risk and gearing, and on making selective portfolio changes.

Demonstrating financial discipline through a range of short term targets:

• Deliver at least £1.5 billion operational capital in 2011;
• Deliver a life IRR of at least 12% with payback of 10 years or less;
• 2011 general insurance combined operating ratio (COR) to be 97% or better;
• Additional cost savings of £200 million and a further £200 million efficiency gains by end 2012.