Regional overviews: Asia Pacific
One Aviva triangle
Dear Shareholder,
There are huge opportunities in the Asia Pacific region to grow Aviva’s business over the coming years.
By continuing to expand our portfolio of long-term savings, protection and takaful insurance products across more countries in the region, by continuing to offer better service to customers and by continuing to invest in our people, we plan to achieve our targets and increase our share of the group result.
While we are exploring new markets in the region, we are also focusing on achieving our full potential in our existing businesses, particularly those where we have just begun operations.
One of our main strengths lies in the “one Aviva” operating model which enables us to share skills and services across the region and group. For example, we are investigating opportunities to implement our very successful Navigator product in more countries. When entering new markets we can use expertise from elsewhere in the region, adapting tried and tested distribution approaches to the local market and establish ourselves quickly.
We have already achieved rapid growth in Asia Pacific. The Aviva brand is becoming well known, our business model is successful, and we are confident that we can continue to build on this strong base.
Simon Machell
Chief executive, Asia Pacific
Asia Pacific overview
Total sales
Operating profit
Total life and pensions sales (PVNBP)
| % | |
|---|---|
| 1 Australia | 31 |
| 2 Hong Kong | 25 |
| 3 Singapore | 20 |
| 4 Other | 24 |
Total EEV operating profit
| % | |
|---|---|
| 1 Australia | 64 |
| 2 Hong Kong | 17 |
| 3 Singapore | 17 |
| 4 Other | 2 |
Regional goals and objectives
We have continued to make great progress towards our ambition of establishing Aviva as a leading international player in the Asia Pacific region. We plan to grow the business by at least 20% per year to 2010, aiming to make Aviva Asia Pacific a more significant part of the Aviva group.
During 2007 we added two new businesses to our Asia Pacific footprint, Taiwan and Malaysia. In January 2008, we formed a partnership with Woori Finance Holdings Company Ltd to enter the South Korean life insurance market by acquiring a stake in LIG Insurance Co Ltd which is expected to take place in the first half of 2008 subject to regulatory approval.
We now have operations in nine markets. Our businesses are all at different stages of development and in tandem with the economic outlook for Asia, which predicts growth rates of between 4.1% in Taiwan to 8.6% in China for the next five years, our outlook is very positive. We currently have the opportunity to actively grow our existing businesses in the region, in particular in the high growth markets of India and China and at the same time, we are assessing the potential of other markets in the region. In order to grow efficiently, we are also focusing on maximising the use of shared services and knowledge across the region.
Strategic developments
Aviva has a strong agenda for growth in the region, aiming to build scale and expand into new markets. A strong regional office, based in Singapore, has been established to act as a hub of expertise and to provide support to the region. The regional operating model will provide cost savings and synergies as well as facilitate the sharing of product expertise and transfer of ideas between markets.
We operate a multi-distribution strategy, with particular strength in bancassurance, and aim to continue to harness the benefits of multi-distribution in all of our markets. Initiatives to achieve this will see the growth of channels beyond the dominant agency sales force, which we expect to decline in the region over coming years due to increased deregulation.
Our brand in Asia Pacific
Building our brand has become more important than ever with commoditised products and increased competition. In 2007, our customer advocacy scores across most of our markets improved, meeting key performance targets. Our focus to build brand awareness made further progress as the operations in Singapore, Australia, Hong Kong and India launched a shared brand campaign utilising a common consumer theme, raising prompted brand awareness scores across each of these markets.
Business results
Aviva Asia Pacific continues to achieve a strong rate of growth with total new business sales 60% higher at £4,089 million (2006: £2,546 million) driven primarily by strong Navigator sales across the region.
In Australia, total sales grew by 46% to £2,400 million (2006: £1,600 million) following strategic investment in key independent financial adviser groups and favourable changes to superannuation legislation. Within this total, life and pension sales increased 44% to £439 million (2006: £297 million) reflecting growth in protection business and a strongly performing retail investment sector.
Sales for the rest of Asia Pacific of £1,689 million (2006: £946 million) continued to grow as a result of our expanding distribution and broadening geographical presence.
Life and pension sales were up 51% to £990 million (2006: £685 million). In Singapore, sales grew through our strong relationships with key brokers and those in Hong Kong through the continued good performance of our partnership with the banking group DBS. In China we have increased our presence in the country to eight provinces and are now ranked second among foreign insurers and in India, sales have increased through bancassurance partnerships, ongoing expansion of the direct sales force and the addition of new branches in the year.
Our performance to date demonstrates the effectiveness of multi-channel distribution. Leveraging this core capability in 2007, we have established a further two new joint ventures in Malaysia and Taiwan, giving Aviva access to nine million potential new customers across these markets.
Life EEV operating profit for the region increased by 6% to £91 million (2006: £86 million), with an improvement in new business contribution to £62 million (2006: £43 million) reflecting the strong sales performance in the year. New business margin remained strong at 4.3% (2006: 4.4%). Operating profit in fund management was £15 million (2006: £9 million) mainly due to higher funds under administration following the Navigator sales performance.
