insurance excellence in uk p&c - aviva plc excellence in uk p&c ... ‘target’,...

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


• 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


1


(38)

(125+)

(200)

Progress has been good:

• 114 less senior managers than last year simplifying our business

Programme 1: Confident in our delivery



Expense ratio

13.9%

Expense ratio

12.4%

year – simplifying our business

• IT project spend halved

• Marketing campaigns consolidated


• 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


(38)

(125+)

(200)

• Increasing self service• Right first time – reduce “follow up

enquiry” by 50%

Programme 2 focus on re-engineering our service offering



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


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


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


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


RetailerInsurer

Salesand

MarketingOperations


Product

Support Functions


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


LeicesterLeicester

NoidaNoida



3) Collections




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


-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%


RetailerInsurer

Salesand

MarketingOperations


Product


Building Aviva from the inside

Support Functions


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


LeicesterLeicester

NoidaNoida



3) Collections




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


-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%


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

insurance excellence in uk p&c - aviva plc excellence in uk p&c ... ‘target’,...

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