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Aviva Turns In Good Results and Identifies Plans For Growth

Posted on Nov 04, 2010 by Sergio Ulloa ()

Aviva, the second biggest United Kingdom-based insurance company, reports strong sales growth in the first nine months of 2010. The company which provides life and general insurance worldwide announced a sales increase of 5 percent to generate total sales of £35.9 billion (US$ 57.4 billion: € 43 billion). Sales in the UK during the third quarter leaped by 26 percent to £2.4 billion (US$ 3.8 billion: € 2.7 billion). Aviva is also taking measures to focus business activity on markets generating optimum returns, while reviewing scope for divesting in those countries where profit levels have failed to reach acceptable returns. The action on market positioning is being coupled with cost cutting measures; the cost cutting identified covers reducing staff numbers particularly in Canada, escapement from the final salary pension scheme for its 7,600 employees and other general productivity improvements. These actions are designed to achieve savings of £400 million (US$ 640 million: € 456 million) per year, with implementation commencing in 2011. Additionally, Aviva has set itself a target to reach £1.5 billion (US$2.4 billion: €1.8 billion) in operational capital by year end 2010. Aviva is following the trend adopted by other international insurers by withdrawing from the lacklustre Taiwanese insurance market. This will mean Aviva is discontinuing its joint venture with Taiwanese based First Commercial Bank and is in keeping with Aviva's corporate strategy, which was unveiled in the summer of 2010. The strategy outlined Aviva's intention to only operate in markets and countries which provide a high rate of return on investments. A breakdown of revenue generated by Aviva over the first nine months of 2010 shows that general and health insurance premiums increased by 4 percent year on year to hit £7.3 billion (US$11.6 billion: € 8.3 billion). Within Aviva's home base in the UK, sales increased by 16 percent to £12.28 billion (US$19.6 billion: €14.7 billion). Aviva Europe recorded sales of £13.1 billion (US$20.9 billion: € 14.7 billion); although sales in the French market declined by 3 percent to £570 million (US$915 million: € 650 million). Sales were up 1 percent to £5.15 billion (US$8.3 billion: € 6.18 billion) in North America, while the emerging Asian insurance market experienced a sales increase of 24 percent to total £1.57 billion (US$2.5 billion: € 1.8 billion). Aviva's Group Chief Executive, Andrew Moss said: "The third quarter of 2010 saw continued strong profitability and good sales growth from both our life and general insurance businesses. New business profitability has improved and we're on track to generate a very significant £1.5 billion (US$ 2.4 billion: € 1.7 billion) of capital in 2010." Regarding future plans for Aviva Andrew Moss states: "As we look to the next phase of our growth, Aviva will sharpen its geographic focus and deepen its position in its key markets through its strengths in both life and general insurance...." The UK insurer is setting its sights in global markets as it looks for further growth opportunities, with a focus on the UK, France, Spain, Italy, Turkey, Poland, Ireland, and Russia within Europe - where it is endeavoring to become a market leader through its expertise in this region. However, in North America, the Aviva group will focus on organic growth, and will not look for any acquisitions to bolster its presence, but aims to be within the top 10 life insurers in the region. The European life and pensions market is set to deliver strong growth over the next five years, which is estimated to reach £1.05 trillion (US$1.7 trillion: €1.22 trillion) in pensionable assets - surpassing the combined Asian / Japan / North American markets. This position was projected after Aviva published a report which confirmed that the EU countries will need to find an additional €1.9 trillion (US$2.6 trillion: £1.6 trillion) in savings every year to close gaps in pension shortfalls. The developing insurance markets in Turkey and Poland offer Aviva the potential for significant growth as both countries expand their insurance requirements. Part of Aviva's strategy for Asia includes expansion in the region through franchising in order to gain access to markets which meet their new corporate strategy. Although Aviva has announced that it will exit the waning Taiwanese insurance market, it will concentrate on key markets in the region such as India and China. Aviva has already agreed to a 60 percentage stake in Asuransi Winterthur Life of Indonesia, meaning Aviva has access to one of Asian fastest growing life insurance industries. Penetrating the Asian insurance market will be a major focus for Aviva in order to keep their competitive edge and maintain their market share in the region. Asia has become a pivotal ground for international insurers and Aviva will look for ventures in countries in the Asian region which fit their business criteria. Currently, Aviva has a presence in China, Malaysia, India, Sri Lanka, Singapore and Hong Kong. Aviva provide protection products to meet the demands of the local communities such as takaful products through its Malaysian arm, CIMB Aviva, to meet the needs of the large Islamic population. Part of the Aviva Group's network is Singapore, which has proven to be a core market for the British insurer in the Asian region. Aviva's sales in the South East Asian market was driven by the success of its Singaporean operations, which grew by 80 percent to £481 million (US$ 769 million: €548 million) over the £267 million (US$427 million: € 304 million) in sales made during the first nine months of 2009. This is expected to rise further as recovery in the Asian region's economy strengthens. The Singaporean health business has increased 39% to £50 million (US$ 80 million: €57 million) in 2010, up from £36 million (US$ 57 million: €41 million) in the same period in 2009; this is mainly due to a successful marketing campaign by Aviva, implemented on the island to take full advantage of the improved economic conditions in Singapore and the demand for Singaporean health insurance plans. Across the Asian region, Aviva enjoyed profitable returns through their joint ventures in China, India and South Korea. In the China insurance market, Aviva's Chinese operation Aviva Cofco's multi-channel distribution network gained a 28 percent increase in sales from £251 million (US$ 404 million: € 286 million) in 2009 to £321 million (US$ 516 million: € 366 million). Aviva's partnership with Korean Woori Bank has lead to record sales in the Korean insurance market amounting to £270 million (US$ 434 million: €307 million). Within the emerging powerhouse - India - Aviva's joint venture with Dabur generated sales of £81 million (US$ 130 million: € 92 million); although Aviva expects regulatory reform in India to adversely affect sales in the future. Asia has emerged from the 2007-2008 financial crises as an avenue for growth for international insurers in both the Asian life and non-life markets. Several of the Asian insurance markets fit in with Aviva's newly announced business criteria. Aviva has enjoyed successful sales growth over the last 12 months, most notably in South East Asia through its Singapore venture where it is established as a car, home, travel, life and health insurer. The first nine months of 2010 has seen Aviva deliver outstanding results with continued strengthening of its operations and levels of profitability. Results are set to remain buoyant with demand for insurance products strengthening globally, and, with efficiency measures being implemented, the future for the company looks extremely positive. Insurance Company Mentioned: Aviva Aviva InsuranceEurope'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.
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