Aviva announces new targets for worldwide general insurance

Aviva plc (“Aviva”) today announces a new improved target for its worldwide general insurance business to meet or beat a Combined Operating Ratio (COR¹) of 98%.

At a presentation to analysts and investors today, Aviva will also give details of the following new targets for RAC:

• Total pre-tax profits arising from the RAC acquisition to reach £250 million per annum by end of 2008 
  • Cost savings of £100 million per annum from RAC integration in 2006 increasing further to £130 million per annum from 2008
  • Increased pre-tax profits of £40 million from revenue growth from 2008
• An additional 1.4 million RAC customers by end of 2008
  • Growth of RAC Rescue by 800,000 members to 3 million members by end of 2008, including 400,000 Hibernian customers in Ireland 
  • RAC Insurance to increase customer numbers by 600,000 to 900,000 by end of 2008.

Patrick Snowball, executive director, Aviva general insurance, commented: “Our commitment to meet or beat a new combined operating ratio of 98% demonstrates the confidence we have in sustaining our excellent general insurance results.

“The combination of a disciplined approach to our insurance business and our growing non-cyclical income from RAC will enable us to grow our profits and continue to deliver high quality earnings to Aviva’s shareholders.

“The acquisition of RAC is transforming our UK business, making us the leading provider of motoring services. We’re moving fast on the integration and will beat our original cost saving target. We have announced ambitious growth plans for the RAC and will more than double profits from the acquisition by the end of 2006, with more to come in later years.”

Cost savings and revenue benefits from RAC acquisition
The RAC acquisition will improve the worldwide COR by 1%. The profit stream from the RAC acquisition will be generated by a combination of cost savings and significantly increasing the revenues from the RAC brand. The cost savings forecast was recently increased from £80 million to £100 million in 2006. This will lead to annualised cost savings of £130 million from 2008. Of this £85 million will be generated by removing duplication and achieving operational efficiencies. £45 million will be saved through cost benefits arising from the purchasing power of the enlarged group. There will be a one-off charge of £130 million in the generation of these savings.

Aviva expects significant revenue benefits to be created from its acquisition of RAC and is expecting to grow customer numbers by over 1.4 million by the end of 2008. This includes increasing RAC’s roadside assistance direct customer numbers from 2.2 million to 3 million by the end of 2008, taking its overall roadside customer base to 7.5 million. As part of this Aviva plans to extend the RAC’s reach into Ireland to service its 400,000 Hibernian rescue customers from renewal. In addition Aviva plans to increase the number of RAC insurance customers by 600,000 up to 900,000 customers by the end of 2008.

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Enquiries:

Media
Hayley Stimpson, director of external affairs +44 (0)20 7662 7544
Sue Winston, head of group media relations +44 (0)20 7662 8221
Rob Bailhache, Financial Dynamics +44 (0)20 7269 7200

Analysts
Charles Barrows, investor relations director +44 (0)20 7662 8115
Nicole Marques, investor relations manager +44 (0)20 7662 8302

ANALYSTS: The Aviva general insurance seminar for investors and analysts takes place at 0900 GMT today at Solus House, Park Royal, London. Investors and analysts wishing to attend should contact Jane Sibley on +44 (0)20 7662 1189. The presentation slides will be available on the Group’s website, www.aviva.com, from 0915 GMT. The presentation is also being filmed for webcast and can be viewed on the Group’s website from 1500 GMT.

NEWSWIRES: There will be a conference call today for wire services at 1130 GMT on 020 7162 0125. Quote: Aviva, Patrick Snowball

Notes to editors:

• Aviva is the world’s sixth-largest insurance group based on gross world-wide premiums and market capitalisation (at 31 December 2004); it is one of the leading providers of life and pensions in Europe and has substantial businesses in other markets around the world.
• Aviva’s main activities are long-term savings, fund management and general insurance, with world-wide total income of £40 billion and assets under management of £280 billion at 31 December 2004.
• The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.

¹ The Combined Operating Ratio (COR) is an industry term which demonstrates the efficiency of a general insurance business by expressing the total of claims costs, commission and expenses as a percentage of premiums received.