Asia Pacific
Committed to building franchise value through organic growth
Aviva Asia Pacific operates in nine countries across the region through both joint ventures and wholly owned operations. China and India, both with large populations and relatively high economic growth, are ‘must-win’ markets and are expected to generate a significant proportion of our future new business. We will continue to pursue franchise value growth through organic investment and improved margins, focusing on these key markets.
Strategy
Our strategy is to grow our franchise value through:
- Securing strong organic growth in our chosen markets, in particular China and India.
- Evolving our product portfolio to improve margin and profit.
- Strengthening our multi-channel distribution capability.
- Strengthening our talent pool.
Market environment
The economic forecast from Asia Development Bank4 predicts GDP growth for emerging markets in Asia (excluding Japan) of 8.2% in 2010 and 7.3% in 2011. While competition is increasing both as a result of international competitors focusing on Asia and domestic leaders leveraging strong brands, we believe that the opportunity for Aviva to create franchise value through organic growth in Asia is unprecedented.
Franchise value growth through organic investment
We continue to progress against our strategic priorities, pursuing franchise growth though organic investment and improved margins. While we operate in nine countries, we have further sharpened our focus on markets where we have strength and scale such as China, India and Singapore where we expect to generate a significant proportion of our new business growth.
Sales increase significantly as Asian franchise grows5
Total sales were £1,911 million in 2010. This represents an increase of 25% on 2009, with margin on a Present Value of New Business Premium (PVNBP) basis increasing from 0.9% to 3.2%. Life and pensions sales increased by 48%, reflecting the growth and development of Aviva’s franchise in Asia. We delivered a strong performance in our priority markets of China and India where sales increased by 28% and 22% respectively. Outside China & India, life and pension sales increased from £665 million to £1,085 million. This reflects the region’s strong economic recovery as well as our renewed strategic focus on delivering strong new business margins. Markets such as Singapore recorded a rise in life and pensions sales to £345 million from £155 million and Korea is now our second largest market after China in terms of sales volumes, growing by 41%. IFRS operating profit of £31 million was lower than prior year, which included favourable reserve releases in Singapore and the Aviva’s Australian life business (sold 1 October 2009). Excluding these one-off factors and the one-off impact from the change in China’s GAAP accounting basis this year, underlying adjusted operating profit increased by £40 million reflecting our increased scale and focused cost management. We have also focused on capital efficiency. Our internal rate of return (IRR) has improved significantly from 6% to 11% through increasing benefits of scale coupled with careful portfolio management and capital discipline.
Strengthening our multi-channel distribution capability
Our improved performance in 2010 can be largely attributed to strengthened relationships with our bank partners. This has encouraged an evolving product portfolio focused on higher-margin products in areas such as protection and saving.
We have continued to build our multi-distribution platform and now have over 50 bank partnerships, with sales from our bancassurance operations increasing by 76% since 2009.
Outlook
The fundamentals of the Asian markets remain attractive with the region’s economies reverting to pre-crisis levels. The longer-term outlook for our business in Asia remains positive and high growth rates are expected in the medium term, owing to the current low penetration rates of insurance products in many markets, high GDP growth, a growing middle class and ageing populations. By strengthening our multi-channel distribution capability as well as managing our product portfolio for margin and profit, we will be well positioned to continue delivering strong growth in both volumes and margins.
Aviva Advisors
The financial needs of our customers are evolving rapidly in Asia. To address this, in Singapore and Hong Kong, we are transforming the traditional agency model with the launch of a truly innovative channel – Aviva Advisors. This ‘owned’ channel, unique in the market, is led by professional advisors who are equipped with innovative and differentiated life insurance products, services and state of the-art tools to meet their clients’ needs. It bridges the gap between the traditional agency and independent financial advisors. 
4. Asian Development Bank outlook 2010 update, 28 September 2010
5. Excludes the Australian life business sold on 1 October 2009