Aviva Produces Sound Results In 2010
By Thomas | Published March 04, 2011
Britain’s second largest insurer Aviva has reported sound results for 2010, with a 33 percent jump in net profit to reach £1.46 billion (US$2.33 billion). This compares with results in 2009 when a profit level of £1.1 billion (US$1.76 billion) was achieved. Aviva also highlights plans for an overhaul of global operations during 2011.
Aviva’s pre-tax profits came in at £2.44 billion (US$3.90 billion) for 2010 – a significant year-on-year improvement of 35 percent – when a corresponding pre-tax profit of £1.8 billion (US$2.88 billion) was reported. Operating profit strengthened in 2010 to £2.55 billion (US$4.08 billion) an uplift from £2.02 billion (US$3.23 billion) in 2009 reflecting a 26 percent rise.
New written business in the UK, Europe, North America and Asia contributed to the Aviva’s groups profits, with double-digit growth recorded across the network.
There were strong sales in Aviva’s life and pension sectors, along with growth in the general and health insurance businesses. Aviva’s life and pension sales increased by 4.2 percent to reach £33.36 billion (US$53.37 billion), while sales activity in the general insurance and healthcare business were up by 6 percent to total 9.7 billion (US$15.52 billion) in 2010.
Last year, Aviva announced that steps had been taken to save £400 million (US$640 million) in group costs in order to make the global insurer even more efficient to help long term growth.
Andrew Moss, Aviva’s Chief Executive said: “Over the last few years, we’ve grown the business, significantly reduced costs and strengthened the balance sheet. As a result, we’ve created a good platform for the next phase of growth.”
In reporting, Aviva highlighted future plans for growth which will see the insurer focusing on 12 core markets earmarked for investment in a bid to strengthen the group’s market position. Aviva said it will concentrate more closely on its most profitable markets while potentially departing from some non-essential market sectors which have been delivering lower levels of financial return.
The revamping of Aviva’s operations will take place over the next 12 months, but no specific details were given on the extent of the restructuring programme.
Part of Aviva’s future plan is to focus on the UK and European savings and pensions market, where the insurer expects significant growth in demand over the next few years. The UK and European savings market is one of the largest in the world with potential growth expected to generate a total market demand reaching £1.05 trillion (US$1.7 trillion) by 2014; this position has been established by research conducted by Aviva last year. Aviva’s study found that European citizens need to save an additional £2 trillion (US$3.3 trillion) annually to fully close the pension gap for people retiring between 2011 and 2051.
While some rival insurers have shied away from western European life and non-life insurance markets – preferring to concentrate on the higher growth markets in Asia and Latin America – Aviva sees great potential from the need to recover the shortfall in the savings and pension market in the European region. The pressure on corporate funding for pensions over a number of years, and the increasing awareness that private pensions will be required to supplement the value of state pensions, has created a huge pensions and savings gap creating a demand for long term investment and saving products.
Aviva has built a strong reputation in the insurance market within Europe and has significant brand awareness. Optimizing its position in the life and pension market in Europe is, therefore, key for the insurer to bolster future growth. Although the European region has seen a slow recovery from the global financial crisis which arose in 2007-2008, there is evidence that key industries have strengthened, with high demand for insurance products in emerging markets such as Turkey.
In the relatively static market prevailing in North America, Aviva was able to grow its business in 2010, with the operating profit totaling £376 million (US$601.6 million) reflecting a 77 percent increase year-on-year. The growth in Aviva’s North American operation was down to stronger pricing and underwriting management, within a slowly improving economic environment.
Meanwhile in the thriving Asia-Pacific region, Aviva is continuing with its strategic goal of increasing its presence and improving its market position. The British insurer is growing through organic processes and extending franchising, while investing in key sectors to capitalize on the rapidly expanding economies and demand for saving and protection products in the region.
In China and India, Aviva saw their market position strengthen, with the insurer experiencing a significant increase in new business. Meanwhile, in the mature Asian market of Singapore, Aviva’s local operation on the island also demonstrated growth in business during 2010.
Aviva intensified operations in China and India during 2010 and has made the two economic powerhouse countries priority targets for market growth due to the rapidly expanding number of people in the middle class sector, with increasing wealth driving demand for insurance products. Overall Aviva’s sales in China increased by 28 percent and in India sales jumped by 22 percent.
Aviva has been able to deliver improved profit figures for 2010 due to the implementation of cost management actions, coupled with positive sales growth across key markets in the UK, Europe, North America and Asia. The overall profit increase was generated in a tough market climate, but Aviva intends to focus on core markets in 2011 with plans to inject capital in order to enable the company to augment its already strong market position.
Insurance Company Mentioned:
Europe’s fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions.