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Insurance Excellence in UK P&CIgal Mayer, Chief Executive, Norwich Union Insurance Goldman Sachs European Financials Conference Berlin 2008
Disclaimer
This presentation may include oral and written “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. These forward-looking statements sometimes use words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which may be beyond Aviva’s control, including, among other things, UK domestic and global economic and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory g , p g yauthorities, the impact of competition, the possible effects of inflation or deflation, the timing impact and other uncertainties relating to acquisitions by the Aviva Group and relating to other future acquisitions or combinations within relevant industries, the impact of tax and other legislation and regulations in the jurisdictions in which Aviva and its affiliates operate, as well as the other risks and uncertainties set forth in our 2007 Annual Report to Shareholders. As a result, Aviva’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Aviva’s forward-looking statements, and persons receiving this presentation should not place undue reliance on forward-looking statements.
Aviva undertakes no obligation to update the forward-looking statements made in this presentation or any other forward-looking statements we may make. Forward-looking statements made in this presentation are current only as of the date on which such statements are made.
European Financials Conference:Climbing a wall of uncertainty
An increasingly global company
£60billion
SalesAsia Pacific
UK GI
North America 10%9% 25%
General Insurance
FY 2007 sales£49bn(1)
12%
(1) 2007 total long-term savings new business sales and G.I. and health net written premiums
£30billion UK life
UK GI
FY 2007FY 2000
75%Long Term
SavingsEurope 40%
29%
24%5%
34%
34%
3%
One Aviva, twice the value
Purpose
Vision
Purpose
Prosperity &peace of mind
Vision
One Aviva,twice the value
Regional / BU strategies
Group strategy and targets
Strategic priorities
• Manage composite portfolio
• Build global Asset Management
• Allocate capital rigorously
• Increase customer reach
• Boost productivity
Targets
• 98% meet or beat COR• Long Term Savings
growth targets• £350m cost savings by
end 2009• Double IFRS EPS by
2012 at the latest• 1.5 – 2 x dividend cover• 12.5% ROCE
UKMarket leadership● Address legacy● Transform business
model ● Exploit UK synergies● Generate capital
N. AmericaDouble scale● Focus: top 5 in
chosen segments● Integrate '07● Expand products,
distribution ’08+
EuropeScale, growth, capital● Seize unique growth
opportunities● Leverage scale● Generate capital
Asia PacificScale, growth● Prioritised portfolio● Regional operating
model● Investment required
Asset ManagementAsset ManagementAviva Investors
• Globally integrated business • Transform the investment model • Increase third party business
Our priorities: realising the potential of ‘One Aviva’
Our purpose• The leading UK P&C insurer• Capital generator for the group
O i iti
Purpose
Vision
Purpose
Vision
Our priorities• Delivering across the cycle:
- Expense management- Building core insurance capability- Flattening the impact of claims
inflation- Winning customers & brokers
A Focus on Insurance Excellence
Strategic
prioritiesTargets
UK Europe N.America AsiaPacific
Strategic
prioritiesTargets
UK Europe N.America AsiaPacific
Market leadership
● Address legacy
● Transform business model
● Exploit UK synergies
● Generate capital
UK
The UK market leader
• Consolidated market – top 6 insurers have over 50% market share
• Aviva is the largest P&C insurer in UK
• Top 1 or 2 position in all our major classes
Aviva14.4%Rest of Market
37.6%
RBSI (including
Direct Line)
12.3% classes
• Unique business model- Balanced mix of personal and commercial- Multi-distribution
- Powerful brands
• Consistently delivering performance- 98% or better COR since 2004 1
- £3.9bn operating profit over last 5 years
RSA8.5%
AXA6.5%
Zurich5.6%
AIG5.2%
Allianz4.0%
BUPA3.4%
HBOS2.5%
Source: Datamonitor 2007
Our composite model and scale delivers market advantage
(1) Excludes impact of 2007 summer floods
Unparalleled distribution reach
DIRECT BROKERS PARTNERSBanking AffinityRetail
3,000
Leading shares in each channel
#1 in the SME market
Insurer of the year 2003 to 2007
… over 100 othersPowerful brands
brokers
Forward Focus: Insurance Excellence
Retailer
Insurer
Historical retail focus to build distribution
Insurance excellence
Building core insurance capability
Forward Focus: Insurance Excellence
Expense management & scale benefits
Operational excellence & customer service
Pride and passion for insurance
RetailerInsurer
Focus on the fundamentals
Insurance Excellence: A New Operating Model
Salesd O ti
Simplified structure
and Marketing
Operations
Underwriting,Pricing and
Product
Support Functions
UK best of breed expense ratio1
applied to NUI channel / product mix
NUI Expenses
UK Best of Breed
Personal Lines
Motor 16.1% 12.3%Property 11 0% 9 7%
Breed Co. 2
Best of
Direct Line, FortisDirect Line NU
Insurance ExcellenceExpense management - the promise of scale
Ambition to deliver industry leading expense ratio
(1) Expense ratios exclude CHE and commission(2) Based on leading cost performance in channel, weighted to reflect NUI mix
Source: FSA Returns (2006)
Property 11.0% 9.7%Creditor 1.3% 1.3%RAC Rescue 27.5% 27.5%
Commercial Lines
Motor 13.8% 8.2%Property 16.3% 15.2%Liability 11.6% 11.6%
NUI Total 13.9% 12.0%
Direct Line, NUNUNU
BritAxaNU
Insurance ExcellenceExpense management - the promise of scale
• Programme 1: Prioritisation and focus e.g.
• £76m reduction in marketing spend
• £33m reduction in IT costs
1
Inflation and one-off Costs 1
(38)
(125+)
(200)
• £52m less change activity
• Total £200m savings already in train for 2008
• Expense ratio reduced from 13.9% to 12.4%
(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs(2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)(3) Additional benefits exist outside overhead cost base
3Starting RAC 2006 C&E Prog. 1 2008point integration2 savings
Expense ratio
13.9%
Expense ratio
12.4%
Ambition to deliver industry leading expense ratio
Insurance ExcellenceExpense management - the promise of scale
1
Inflation and one-off Costs 1
(38)
(125+)
(200)
Progress has been good:
• 114 less senior managers than last year simplifying our business
Programme 1: Confident in our delivery
(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs(2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)(3) Additional benefits exist outside overhead cost base
3Starting RAC 2006 C&E Prog. 1 2008point integration2 savings
Expense ratio
13.9%
Expense ratio
12.4%
year – simplifying our business
• IT project spend halved
• Marketing campaigns consolidated
Insurance ExcellenceExpense management - the promise of scale
• Further activity planned to realise ambition • Programme 2: Re-engineering service and
processing centres • Dealing with inherited legacy • Fewer products from over 70 to under 20• Increasing self service
1
Inflation and one-off Costs 1
(38)
(125+)
(200)
• Increasing self service• Right first time – reduce “follow up
enquiry” by 50%
Programme 2 focus on re-engineering our service offering
(1) e.g. Investment in brand and technology, VAT on offshoring and pre-contracted property and IT costs(2) Over and above c£60m in 2006 (NB: £54m additional benefits outside overhead cost base)(3) Additional benefits exist outside overhead cost base
3Starting RAC 2006 C&E Prog. 1 2008point integration2 savings
Expense ratio
13.9%
Expense ratio
12.4%
Programme 2: Re-engineering service & processing centres
Operations Today
PerthDundee
GlasgowBishopbriggs
PerthDundee
GlasgowBishopbriggs
Noida
Personal
Commercial
Mixed
2010 End State Vision
PerthBishopbriggs
PerthBishopbriggs
Personal
Commercial
Mixed
PerthBishopbriggs
PerthBishopbriggs
Personal
Commercial
Mixed
NoidaNoida
Operational & service excellence
Stretford
Bradford
WorthingExeter
Belfast
Manchester
Birmingham Norwich
Southend
LiverpoolCheadle
Bishopbriggs
Sheffield
BasildonIpswich
Leeds
Leicester
Bristol
Stretford
Bradford
WorthingExeter
Belfast
Manchester
Birmingham Norwich
Southend
LiverpoolCheadle
Bishopbriggs
Sheffield
BasildonIpswich
Leeds
Leicester
Bristol
Pune
Bangalore Chennai
Southampton
Offshore locations to be confirmed following ongoing commercial negotiations with offshore
partners
StretfordManchester
NorwichCheadle Stretford
Norwich
Pune
BangaloreSouthend
Manchester
LeicesterStretford
Manchester
NorwichCheadle Stretford
Norwich
Pune
BangaloreSouthendSouthend
ManchesterManchester
LeicesterLeicester
Programme 2: Re-engineering service & processing centres
2010 End State Vision
P thP th
Personal
Commercial
Mixed
P thP th
Personal
Commercial
Mixed
N idN id
Centres of Excellence
Create 7 Centres of Excellence\
5) Personal Motor Claims2) Commercial Lines Sales and Servicing
3) Collections
1) PL Sales and Servicing (incl. HNW and IB)
6) Commercial Motor Claims
7) Household Claims (incl. Commercial Property)
Levers
Primary Customer Access Channels (As Is / To Be) - IllustrativeClaims Tracking
0% / 30%
100%/ 70%
0% / 30%
Direct
Claims Reporting
0% / 5%
100% / 95%
0% / 5%
ServicingSales
0% / 39%
100% / 61%
50% / 60%
50% / 40%
80% / 85%
Contact Channel
Web Self service
Telephony
SS EDI
4) Liability and Bodily Injury Claims
Operational & service excellence
Offshore locations to be confirmed following ongoing commercial negotiations with offshore
partners
Perth
StretfordManchester
NorwichCheadle
BishopbriggsPerth
Stretford
Norwich
Bishopbriggs
Pune
BangaloreSouthend
Manchester
Leicester
Perth
StretfordManchester
NorwichCheadle
BishopbriggsPerth
Stretford
Norwich
Bishopbriggs
Pune
BangaloreSouthendSouthend
ManchesterManchester
LeicesterLeicester
NoidaNoida
We will create seven Centres of Excellence to consolidate like functions, simplify processes and drive
overall performance to best-in-class standards
0% / 30%
100% / 70%
100% / 70%
0% / 30%
CP
Broker
0% / 5%
100% / 95%
100% / 95%
0% / 5%
0% / 18%
100% / 82%
5% / 24%
20% / 15%
95% / 76%
80% / 85%
Web Self service
Telephony
100% / 70%
0% / 30%
100% / 95%
0% / 5%
96% / 60%
4% / 40%
Telephony
SS EDI
Telephony
SS eBroking
UK best of breed expense ratio1
applied to NUI channel / product mix
NUI Expenses
UK Best of Breed
Personal Lines
Motor 16.1% 12.3%Property 11.0% 9.7%
Breed Co. 2
Best of
Direct Line, FortisDirect Line, NU
Insurance ExcellenceExpense management - the promise of scale
Delivering the promise of scale
ope ty 0% 9 %Creditor 1.3% 1.3%RAC Rescue 27.5% 27.5%
Commercial Lines
Motor 13.8% 8.2%Property 16.3% 15.2%Liability 11.6% 11.6%
NUI Total 13.9% 12.0%
,NUNU
BritAxaNU
Aim to be UK low cost producer
Insurance ExcellenceBuilding core insurance capability
Premium rating leadership
• Motor rates: 16% Q4 2006• Household rates: 10% Q3 2007• Commercial rates: 5% November 2008
Demonstrating leadership in the market
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Liability Property Motor ZERO
Commercial Lines Trends
Progress being made but market Progress being made but market conditions are still toughconditions are still tough
3.1%1.6%1.1%
Insurance ExcellenceFlattening impact of claims inflation
• Track record of delivering significant cost reduction
• 2007: Delivered >£75m benefit
• 2008 plans in train to deliver £100m+ 0
Impact of claims initiatives on inflation (Major Classes)
Flattening the impact of inflation through to 2010
pof sustainable benefits across:
– bodily injury costs
– recoveries
– credit hire bill
– claims settlement
• Efficiency makes it easier for our customers
Commercial Motor - Average Settlement Cost
2000 2001 2002 2003 2004 2005 2006 2007
0%
Personal Motor Household Commercial Motor Commercial Property Commercial Liability
Underlying Inflation Inflation after Benefits
Customers
• Summer floods 2007 – 50% by Xmas, 80% by Easter
• World class 80% net promoter score in RAC
• Re-launch our flagship, Norwich Union Direct
Insurance ExcellenceWinning customers & brokers
Winning in a highly competitive market
Brokers
• Insurer of the Year – five years running
• Grew file count in a shrinking 2007 market
• Clear commitment to independent brokers
• Will sign up to deals based on sustainable, long
term models
One Aviva, twice the value
RetailerInsurer
Salesand
MarketingOperations
Underwriting,Pricing and
Product
Support Functions
2010 End State Vision
Offshore locations to be confirmed following ongoing commercial negotiations with offshore partners
Perth
StretfordManchester
NorwichCheadle
BishopbriggsPerth
Stretford
Norwich
Bishopbriggs
Pune
Bangalore
Personal
Commercial
Mixed
Southend
Manchester
Leicester
Perth
StretfordManchester
NorwichCheadle
BishopbriggsPerth
Stretford
Norwich
Bishopbriggs
Pune
Bangalore
Personal
Commercial
Mixed
SouthendSouthend
ManchesterManchester
LeicesterLeicester
NoidaNoida
Create 7 Centres of Excellence\
5) Personal Motor Claims2) Commercial Lines Sales and Servicing
3) Collections
1) PL Sales and Servicing (incl. HNW and IB)
6) Commercial Motor Claims
7) Household Claims (incl. Commercial Property)
Primary Customer Access Channels (As Is / To Be) - Illustrative Claims Tracking
0% / 30%
100%/ 70%
0% / 30%
100% / 70%
100% / 70%
0% / 30%
Direct
CP
Broker
Claims Reporting
0% / 5%
100% / 95%
0% / 5%
100% / 95%
100% / 95%
0% / 5%
Servicing
0% / 18%
100% / 82%
Sales
0% / 39%
100% / 61%
50% / 60%
50% / 40%
5% / 24%
20% / 15%
95% / 76%
80% / 85%
Contact Channel
Web Self service
Telephony
Web Self service
Telephony
100% / 70%
0% / 30%
100% / 95%
0% / 5%
96% / 60%
4% / 40%
Telephony
SS EDI
Telephony
SS eBroking
4) Liability and Bodily Injury Claims
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Liability Property Motor ZERO
RetailerInsurer
Salesand
MarketingOperations
Underwriting,Pricing and
Product
One Aviva, twice the value
Building Aviva from the inside
Support Functions
2010 End State Vision
Offshore locations to be confirmed following ongoing commercial negotiations with offshore partners
Perth
StretfordManchester
NorwichCheadle
BishopbriggsPerth
Stretford
Norwich
Bishopbriggs
Pune
Bangalore
Personal
Commercial
Mixed
Southend
Manchester
Leicester
Perth
StretfordManchester
NorwichCheadle
BishopbriggsPerth
Stretford
Norwich
Bishopbriggs
Pune
Bangalore
Personal
Commercial
Mixed
SouthendSouthend
ManchesterManchester
LeicesterLeicester
NoidaNoida
Create 7 Centres of Excellence\
5) Personal Motor Claims2) Commercial Lines Sales and Servicing
3) Collections
1) PL Sales and Servicing (incl. HNW and IB)
6) Commercial Motor Claims
7) Household Claims (incl. Commercial Property)
Primary Customer Access Channels (As Is / To Be) - Illustrative Claims Tracking
0% / 30%
100%/ 70%
0% / 30%
100% / 70%
100% / 70%
0% / 30%
Direct
CP
Broker
Claims Reporting
0% / 5%
100% / 95%
0% / 5%
100% / 95%
100% / 95%
0% / 5%
Servicing
0% / 18%
100% / 82%
Sales
0% / 39%
100% / 61%
50% / 60%
50% / 40%
5% / 24%
20% / 15%
95% / 76%
80% / 85%
Contact Channel
Web Self service
Telephony
Web Self service
Telephony
100% / 70%
0% / 30%
100% / 95%
0% / 5%
96% / 60%
4% / 40%
Telephony
SS EDI
Telephony
SS eBroking
4) Liability and Bodily Injury Claims
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Liability Property Motor ZERO
One Aviva, twice the valueOutlook
• UK GI cash generator to fuel global growth
• Progress to date
• £200m cost savings in train
Insurance Excellence
• £200m cost savings in train• More to come
• RatesMotor / home = >inflationCommercial = positive territory
• Commitment remains to 98% of better globally
Insurance Excellence in UK P&CIgal Mayer, Chief Executive, Norwich Union Insurance Goldman Sachs Insurance Conference Berlin 2008