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| “We are determined to continue improving our efficiency and service” |
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Pehr G Gyllenhammar
Chairman |
Equity markets were flat for the first six months of the year. Against this somewhat disappointing, if neutral, background, Aviva’s profits show the benefit of improved operational efficiency. Our share price has outperformed both the FTSE 100 index and the European life assurance sector since the beginning of the year, although we are far from achieving the market highs that we saw four years ago.
Our operating results are improving steadily and our return on capital is beating our target level. We are cutting costs and improving margins in long-term savings. Our general insurance business is world class in its performance for shareholders and customers and its cash flow makes a healthy contribution to the growth of our overall operations.
Recovery in consumer confidence has been slow in most markets, but our life and pensions business is well positioned for the upturn. There are good new business margins in Spain and Italy and, in the Netherlands we are gaining the benefits from our bancassurance agreement with ABN AMRO. In Poland, economic conditions have been less favourable, but we see a gradual recovery in progress.
Our UK life operations have had to contend with a difficult environment, marked by more regulation and criticism of the industry. We are playing a leading role in the debate over savings and pensions reform, and have the scale and financial strength to develop new products, diversify distribution and give reassurance to customers.
Service levels are good in general insurance across the group, but are still not satisfactory in parts of the long-term savings business. We apologise to customers who have experienced problems, and restate our commitment to steady improvements. We continuously compare ourselves with the best in class, which stimulates us to raise our standards of performance.
We continue to build on our strong and diversified mix of established operations in more mature markets. In new markets we are growing fast, but naturally from a low level as we have only recently started businesses in China and India. Our call centre and claims processing activities in India form part of our commitment to improve service levels. We also expect to see a very positive effect on our costs in the future.
We are proposing an interim dividend of 9.36 pence net per share (2003 interim dividend: 9.0 pence) payable on 17 November 2004 to shareholders on the register on 13 August 2004. This is consistent with our policy of growing the dividend by about 5% a year.
In the areas of corporate governance and corporate social responsibility we strive to be second to none, and I am personally taking a very active part in these developments.
The board has said farewell to Philip Twyman, who retired in March after many years of excellent work, most recently with responsibility for our finance and fund management operations. We have welcomed Andrew Moss, who joined us in May as group finance director.
The board also has two new non-executive directors. Richard Goeltz, an American citizen, and Russell Walls of the UK, attended their first board meeting in June. They both bring extensive experience in the field of finance and in general management. I am convinced that they will make a good board even stronger.
We are served by loyal and dedicated employees who have gone through a difficult period of adverse economic conditions. But we have all been encouraged by the group’s improved performance in a more encouraging business climate.
We are determined to continue improving our efficiency and service. Moreover, we wish to demonstrate creativity, innovation and dynamism as we develop our business further.
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