North America
Improving our position and profitability in a key region
The North America region is home to two of the world’s largest and richest economies. Aviva North America consists of two businesses: our life insurance and annuity business in the United States and our general insurance business in Canada – both serve their respective home markets with support from our regional headquarters in Chicago.
Strategy
Our strategic priorities for the region are focused on driving profitable growth through improving our position and competitiveness in North America:
- focusing on our customers with compelling value propositions, enhanced service and personalised customer experience
- improving the profitability and capital generation of the North American region, which is a net capital contributor to the Group
- selectively expanding and growing our core life insurance and annuity distribution and product capabilities
- operating as a great underwriting company in our general insurance business
- building on our strong high-quality relationships with our distribution partners.
Market environment
There are increasing signs of economic recovery and, despite the recession, North America’s economies remain among the world’s largest and its population among the world’s wealthiest. The US life insurance and annuity market and the Canadian property and casualty insurance market are very competitive and highly fragmented with a large number of insurers.
Strong profits and progress against strategic priorities across the region
In 2010, the North American businesses saw strong financial performance as a result of our focus and discipline. We increased our total regional IFRS operating profit by 77% to £376 million, benefiting from strong pricing and underwriting management, cost discipline and an improved economic environment.
Healthy profit growth in US life and annuity business
In the US, our disciplined pricing management led IFRS operating profits from our life and annuity business to more than double, with life new business profitability also improving significantly to a 14% IRR (2009: 7%). Our US protection sales as measured on a PVNBP basis rose 15% to £999 million and are the largest across Aviva. Annuity sales grew moderately as we focused on profitable growth and capital efficiency. We continue to focus on diversifying our business mix, specifically targeting the growth of life sales in existing and new channels.
Strong general insurance performance in Canada
In Canada, operating profit rose 54% to £222 million reflecting improved underwriting performance combined with benign weather in the early part of 2010. Following our decision last year to exit unprofitable business we saw a moderate decline in premiums on a local currency basis and we concentrated efforts on growing profits from our book.
We made further progress enhancing our sophisticated underwriting capabilities and dealt successfully with new regulation in the Ontario auto market, further strengthening our position in that sector. We have taken difficult but necessary actions to improve our cost base and operational performance, including targeted cost reductions announced in November 2010 that form part of the overall £60 million of cost savings and efficiencies to be achieved across the North American Region by the end of 2012.
Outlook
Regional economic growth is recovering and the outlook is for moderate growth overall. In this context, our disciplined underwriting and operational effectiveness in our general insurance business – combined with a continued focus on profitable growth underpinned by compelling value propositions to our customers in our life business – positions the North America region well to further grow our contribution to Aviva’s overall profits.
‘Building Insurance Around YOU’
Aviva USA approaches the life insurance and annuities marketplace in a very innovative way: by building insurance around the concept that every individual matters. Recent market shifts have made many customers wary of financial services in general which is why we wanted to make it clear that we put our customers at the centre of everything we do. Today’s consumers want to be understood and have recognition of the specific and unique reasons for considering and making decisions about financial products. We approach the market with products that are tailor-made for an individual’s stage in life. Launched in 2010, ‘Building insurance around YOU’ is the outcome of our commitment to customers, articulating our focus on getting to know them, fully understanding their priorities, and delivering life and annuity products to meet their changing needs.
