Aviva announces plans today for its European business (excluding the UK) to capitalise on the significant growth opportunities in the region. It is also announcing the integration of its businesses across Europe*. Andrew Moss, Aviva’s group chief executive, and Andrea Moneta, chief executive, Europe, will present plans to analysts and investors later today at a briefing hosted at Aviva’s corporate headquarters in London.
Aviva’s European business is a major contributor to the group’s financial performance. In the first half of 2009 Aviva’s European business, including Delta Lloyd, contributed 50% of Aviva’s long term savings sales and 44% of IFRS operating profits.
Aviva has a clear two part strategy to exploit the considerable opportunities in Europe. Firstly, Aviva and Delta Lloyd announced on 19 October 2009 that they have launched the Initial Public Offering of Delta Lloyd. This will enable Aviva to enhance the value and liquidity of its retained majority stake in Delta Lloyd.
Secondly, Aviva has established a new pan-European management team and has started to integrate the operations of its 12 separate businesses across Europe* through a “Quantum Leap” transformation plan. Aviva will centralise its operations allowing it to build a pan-European approach to distribution, simplify its product range and shorten the time to launch new products to customers. By moving to a pan-European operating model Aviva will make significant efficiency gains and build competitive advantage in the region.
As part of the transformation of its European business* Aviva has established a single holding company for its European operations in Ireland. It will convert a number of existing subsidiary businesses in the region to branch status, where it is appropriate to do so, and subject to regulatory approval. This will deliver economic, operational and regulatory benefits to Aviva, especially with the anticipated introduction of Solvency II.
Europe offers significant growth opportunities for Aviva in both under-penetrated Western markets and developing markets in Eastern Europe. The region is one of the biggest and most attractive insurance markets in the world combining:
- A significant pool of assets (Europe, excluding the UK, has personal financial assets of €40 trillion and life and pensions assets of €4 trillion);
- Substantial demand for insurance products (Aviva estimates life and pensions and general insurance premiums in the next five years will total €4 trillion);
- Attractive demographics among Europe’s 800 million strong population and;
- A highly fragmented market in which the top 10 insurers by market share represent only 37% of the total market.
At the presentation Andrea Moneta will set out how Aviva is uniquely positioned to take advantage of the considerable potential in the European insurance market. Aviva Europe* has a significant market share in most of the 12 markets it operates in and has a diverse product mix across long term savings and general insurance. Aviva also operates through a variety of distribution channels: it is Europe’s largest bancassurer with 46 banking relationships across the region and has a significant retail franchise with 9 million retail [1] customers and 18,000 financial advisors (of which 10,000 are in Aviva’s own network).
Aviva’s European business is a major contributor to the group’s financial performance and plans to transform the business are already delivering financial benefits. On an underlying constant currency basis, Aviva’s cost base across Europe* has reduced from €606 million (H1 2008) to €578 million (H1 2009) and its underlying margin has grown from 3.7% to 3.8% (H1 2008 to H1 2009) despite the challenging economic environment. As a result of the plans announced today and the progress already made, the Aviva Europe business* expects to contribute fully to Aviva’s target to double IFRS total return earnings per share by 2012.
Andrea Moneta, chief executive, Europe, commented: “Aviva is taking a quantum leap in Europe with one way of operating across the region. This will improve the quality of our products, drive efficiency and create significant value for Aviva’s customers and shareholders.”
Highlights :
Strong presence in a major market
- Aviva has significant market share in Europe, operating in 15 European countries, covering 80% of the region’s GDP and new business premiums
- Largest bancassurer and major retail1 franchise
- Contributed 50% of Aviva’s long term savings sales and 44% of IFRS operating profits (H1 2009)
European market offers significant growth potential
- Region’s personal financial assets stand at €40 trillion
- Favourable demographic trends among 800m population
- €4 trillion of insurance premiums in next five years
Clear strategy to exploit opportunities in Europe
- Integrating operations of 12 separate businesses across Europe through “quantum leap” transformation plan
- Creating pan-European distribution and simplifying products
- Plans to establish a single European holding company and simplified structure
Aviva Europe expects to contribute fully to group’s “One Aviva, twice the value” target
- Already delivering financial benefits: underlying margin has grown from 3.7% to 3.8% (H1 2008 to H1 2009) despite the challenging economic environment
- Aviva Europe expects to contribute fully to Aviva’s group target to double IFRS total return EPS by 2012
* excluding Delta Lloyd
[1] Retail refers to the sale of insurance products outside of the bancassurance channel through a direct sales force, IFAs, brokers or internet sales.
