Professional Documents
Culture Documents
“Focus on Profit”
1
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 authorities, 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.
UK General Insurance – delivering transformational
change
3
Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
Purpose
Prosperity &
peace of mind
Purpose
Vision
One Aviva,
twice the value
Vision
Strategic Targets
priorities
Aviva Investors
Asset Management • Increase third party business
• Globally integrated business • Transform the investment model
UK Purpose
Prosperity &
peace of mind
One Aviva,
● Address legacy twice the value
Aviva Investors
• Globally integrated business Asset
• Transform Management
the investment model • Increase third party business
6
1. Insurance Excellence Igal Mayer
Aviva
Rest of Market 14.4% • Consolidated market – top 6 insurers
37.6% have over 50% market share
RBSI
(including
Direct Line)
12.3%
• Aviva is the largest GI insurer in UK
3,000
brokers
8
1. Insurance Excellence Igal Mayer
3,000
brokers
14
2. Personal Lines John Kitson
Broker
Broker
Partners Direct
Direct RAC
Partners
Marketing
Personal
RAC
Broker
• The personal market is 64% of NUI’s turnover and c 51% of operating profit
• Partners dominate turnover and in particular household, but for 2008 Direct is
the majority of the personal profits
Personal GWP by channel Personal operating profit* by channel
RAC,
RAC,12%
12%
Direct,
NUD, 16%16% RAC,
RAC,14%
14%
Partnerships,
Partners, 51%51%
Partners, 23%
Partnerships, 23%
16
2. Personal Lines John Kitson
• “Which” criticisms
Confused.com
17
2. Personal Lines John Kitson
Large
aggressive
panels
Leverage
Small brokers Membership Panels 18
/ Aggregators
2. Personal Lines John Kitson
50%
45%
MOTOR
40%
35% Percentage of
30%
shoppers
25%
getting a quote
from each
20%
company
15%
10%
5%
0% C
Direct has not been on the shopping list…
l
d
e
gs
F
t
ce
ll
e
on
e
ira
an
ge
n
A
ur
on
hi
ic
P
n
ha
tin
R
n
ni
Li
Th
dm
ff
rc
Es
ud
m
ra
O
ep
sc
U
as
hu
ia
su
B
e
A
st
h
Te
El
ire
or
D
C
ic
In
Po
M
D
w
A
or
A
70.0%
• aggregator growth continues
Competitiveness - cheapest or within 10%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
M ar 05
M ar 06
M ar 07
April 05
M ay 05
Jun 05
Jul 05
Aug 05
Sep 05
Oct 05
D ec 05
Jan 06
F eb 06
Apr 06
M ay 06
Jun 06
Jul 06
Aug 06
Sep 06
Oct 06
D ec 06
Jan 07
F eb 07
Apr 07
M ay 07
Jun 07
Jul 07
Aug 07
Sep 07
Oct 07
D ec 07
N ov 05
N ov 06
N ov 07
19
2. Personal Lines John Kitson
20
2. Personal Lines John Kitson
22
2. Personal Lines John Kitson
50000 14000
Shopping List 12000
40000
10000
Quotes
30000 8000 Quotes
Sales
Pre Happy: 7th or 8th 20000 6000 Sales
4000
10000
Aim: Top 3 2000
0 0
Jul Aug Sepe cas t)
Se p (For
Competitive Position
OnlineOnline
MotorMotor
NonNon
AggAgg
Quotes & Sales
Quotes & Sales
160000 12000
Aim: Within 10% of 140000 10000
the cheapest 120000
8000
Quotes
100000
Quotes
Sales
22% of the time 80000 6000
Sales
60000 4000
40000
20000 2000
0 0
Jul Aug Sep
50000 14000
Shopping List 12000
40000
10000
Quotes
30000 8000 Quotes
Sales
Pre Happy: 7th or 8th 20000 6000 Sales
4000
10000
Aim: Top 3 2000
0 0
Jul Aug Sepe cas t)
Se p (For
Competitive Position
OnlineOnline
MotorMotor
NonNon
AggAgg
Quotes & Sales
Quotes & Sales
160000 12000
Aim: Within 10% of 140000 10000
the cheapest 120000
8000
Quotes
100000
Quotes
Sales
22% of the time 80000 6000
Sales
60000 4000
40000
20000 2000
0 0
Jul Aug Sep
Banks / BS’s
Barclays
HSBC Yes No No Yes No No
Abbey
Retailers
Post Office Yes? Yes No No Yes No
ASDA No No No No No No
27
2. Personal Lines John Kitson
• Take core NUD & offer to brokers through different technology routes
• Now in execution
29
2. Personal Lines John Kitson
• Take core NUD & offer to brokers through different technology routes
• Now in execution
30
2. Personal Lines John Kitson
• 3 years on
• 260,000 insurance customers
• Honed distribution strategy
… RAC relaunched as membership &
retail panel player
• Signed 5 year deal with Budget
• Sales & service all RAC staff
• Signing up insurers... Launch Q1
• Scale via cross sell / aggregators
• NU take 30% / 40% of panel premium
• All parties not to claim farm
32
2. Personal Lines John Kitson
• 3 years on
• 260,000 insurance customers
• Honed distribution strategy
… RAC relaunched as membership &
retail panel player
• Signed 5 year deal with Budget
• Sales & service all RAC staff
• Signing up insurers... Launch Q1
• Scale via cross sell / aggregators
• NU take 30% / 40% of panel premium
• All parties not to claim farm
33
2. Personal Lines John Kitson
• Direct grows
• Brokers grow
• Partnerships fall
• RAC steady in Rescue but doubles in size for insurance
• Motor grows
• Home grows
• Creditor falls
34
2. Personal Lines John Kitson
35
Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
37
2. PL – Transforming Pricing Dan Pickens
38
2. PL – Transforming Pricing Dan Pickens
Sums Insured
Single Product
3
Blanket
Platform3 3
Blanket Blanket
Sport Equipment 3
£1,000 2 2
39
2. PL – Transforming Pricing Dan Pickens
• Rate dispersion
Approaches
• Statistical techniques
∫∫ f(x,y,z) dxyz
Approaches
• Statistical techniques
• Multi-peril pricing model
Yi1 = B(1+xi1)(1+yi1)(1+zi1)…
∑ Yik
Approaches
• Statistical techniques
• Multi-peril pricing model
• Use of third-party data
- CUE
CREDIT!
Old Rating
Make
Segment (i.e. SUV)
Number of Doors
Engine (Size and Fuel)
Transmission
Age
ABI Group
47
2. PL – Transforming Pricing Dan Pickens
Worse
110% Implemented in June for Motor
and September for Household
100%
Claim Ratio
90%
80%
70%
Better
60%
1
1-575 2
576-605 606-626 627-642 643-656 657-669 670-681 682-693 9
694-707 10
708+
Worse Better
Credit Score
2. PL – Transforming Pricing Dan Pickens
0.12
0.1
0.08
Percentage of Policies
0.06
Overall Price Neutral Change
Individual policy changes range
0.04 from -50% to +55%
0.02
0
-50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60%
Applied Rate Change
49
2. PL – Transforming Pricing Dan Pickens
WORST 1 1-575 13.3% 14.6% 19.9% £851 75.7% 12.3% 11.8% 17.5% £880 83.2%
2 576-605 15.9% 15.6% 17.9% £885 63.5% 13.9% 11.4% 15.0% £942 65.2%
3 606-626 14.5% 14.0% 17.6% £727 54.7% 12.1% 10.5% 16.0% £721 57.4%
4 627-642 12.4% 12.2% 17.9% £619 46.0% 10.3% 9.9% 17.6% £640 52.6%
5 643-656 9.4% 9.1% 17.7% £554 38.8% 8.5% 8.7% 18.7% £582 47.6%
6 657-669 8.1% 8.0% 18.0% £566 39.0% 9.1% 9.3% 18.7% £494 40.2%
7 670-681 7.1% 7.5% 19.2% £583 34.5% 8.2% 9.2% 20.6% £420 35.3%
8 682-693 6.6% 6.2% 17.4% £566 34.3% 8.6% 9.4% 20.0% £389 28.3%
9 694-707 6.5% 6.5% 18.2% £453 25.4% 8.6% 10.0% 21.1% £330 27.3%
BEST 10 708+ 6.1% 6.2% 18.8% £359 17.8% 8.4% 9.8% 21.2% £284 21.7%
Summary 1-5 65.6% 65.5% 18.2% £745 57.6% 57.0% 52.3% 16.7% £774 62.4%
Summary 6-10 34.4% 34.5% 18.3% £512 30.8% 43.0% 47.7% 20.3% £385 30.4%
2. PL – Transforming Pricing Dan Pickens
Quoted Quoted
CR Avg CR Avg
Prem Prem
Summary 1-5
65.6% 65.5% 18.2% £745 57.6% 57.0% 52.3% 16.7% £774 62.4%
‘Worse’
Summary 6-10
34.4% 34.5% 18.3% £512 30.8% 43.0% 47.7% 20.3% £385 30.4%
‘Better’
2. PL – Transforming Pricing Dan Pickens
Individual
Customer
Price Individual Profitability
Optimisation
Customer
Individual Profitability
Customer
Profitability
52
2. PL – Transforming Pricing Dan Pickens
Credit - Motor 9
ABI, Make/Model, NCD
Validation, and Post Code 9
Mass Customised
Product Architecture 9
Credit - Home 9
DVLA / CUE
Mass Customised Pricing
Price Optimisation
53
Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
• The market
• Distribution strategy
• Consolidation
• Commission
• Winning the crowd
55
3. Commercial Lines Janice Deakin
Aviva
13.4%
105
• No1 through successful
focus on SME via brokers
95
• Commercial lines are
profitable
75
Aviva Market Aviva Market Aviva Market
2005 2006 2007
*2007 includes the impact of the summer floods
Data taken from FSA returns may differ from result announcements
Data is for commercial Motor, Property and Liability
57
3. Commercial Lines Janice Deakin
58
3. Commercial Lines Janice Deakin
We recently announced…
2010 Operations End State Vision
2010 End State Vision
Personal
Mixed
Commercial
Perth Noida
Bishopbriggs
Southend Bangalore
59
3. Commercial Lines Janice Deakin
35.0%
independents 25.0%
20.0%
10.0%
62
3. Commercial Lines Janice Deakin
35.0%
independents 25.0%
20.0%
10.0%
35.0%
independents 25.0%
20.0%
10.0%
65
3. Commercial Lines Janice Deakin
"It was the first time in many years that I have left a conference
believing that the directors of an insurer were actually going to do
what they said and that they would also be acting in our best
interests.“
66
3. Commercial Lines Janice Deakin
"It was the first time in many years that I have left a conference
believing that the directors of an insurer were actually going to do
what they said and that they would also be acting in our best
interests.“
3. Commercial Lines Janice Deakin
2007 Now
• Unprecedented pace of broker • 85% of brokers say they are
consolidations staying independent
• Ever increasing trend on commission • Actions in place to reduce
commission significantly
• Rate increases of 3% across the
• Rates going backwards for 4 years book, plans in place for Q4 and
2009
• NU-consolidator business growing • Consolidators business has
rapidly fuelling increased commission shrunk by 4% in 2008
• NU premium through independent • NU premium through independent
broker shrinking brokers up 5% year on year
2007 Now
• Unprecedented pace of broker • 85% of brokers say they are
consolidations staying independent
• Ever increasing trend on commission • Actions in place to reduce
commission significantly
• Rate increases of 3% across the
• Rates going backwards for 4 years book, plans in place for Q4 and
2009
• NU-consolidator business growing • Consolidators business has
rapidly fuelling increased commission shrunk by 4% in 2008
• NU premium through independent • NU premium through independent
broker shrinking brokers up 5% year on year
• Historical context
• Rating – phase 1
• Rating – phase 2
• Underwriting for profit
• Sustainable profit through the cycle
71
3. CL – Transforming underwriting Larry Harrington
4% 84%
3%
82%
2%
80%
1%
-1%
78%
76%
-3%
74%
-4% 72%
Jan-07
Feb-07
Mar-07
May-07
Jun-0 7
Jul-07
Jan-08
Feb-08
Mar-08
May-08
Jun-08
Jul-08
Sep-07
Oct-07
Nov-07
Dec-07
Apr-07
Aug-07
Apr-08
Aug-08
monitored to assess elasticity & push Rate Grow th Volume Retention Rate
6% 78%
74%
70%
improvement 1%
0%
68%
66%
-1%
-2% 64%
-3% 62%
-4% 60%
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Jan-08
Feb-08
Mar-08
May-08
Jun-08
Jul-08
Sep-07
Oct-07
Nov-07
Dec-07
Apr-07
Aug-07
Apr-08
Aug-08
Rate Growth Volume Retention Rate
72
3. CL – Transforming underwriting Larry Harrington
General Commercial
Large Property Construction Commercial Property
TOTAL IB Complex Schemes General Combined Motor Trade Agriculture Combined (legacy Package Products
Owners Combined Owners
Bonus)
2009 Plan Core NECR 32.0% 37.8% 38.0% 42.5% 32.2% 46.0% 47.3% 37.9% 38.7%
Key :
NECR worse than Target by 5% points
NECR within +/- 5% points of Target
NECR better than Target by 5% points
Red Rate Target £69.6 10.1% £70.1 6.6% £48.7 10.3% £128.1 10.2% £42.0 12.6% £230.4 7.7% £37.1 6.1% £4.3 6.3% £175.3 4.8%
Amber Rate Target £200.1 6.9% £173.3 6.4% £372.5 6.2% £34.8 9.2% £135.8 6.9% £51.4 7.7% £16.7 6.0% £19.8 6.3% £49.4 4.8%
Green Rate Target £115.7 5.0% £9.5 5.0% £156.6 5.0% £29.3 5.0% £122.7 5.0% £0.0 7.7% £3.7 5.0% £73.7 6.3% £15.6 4.8%
Overall Rate Target £385.4 6.9% £252.9 6.4% £577.8 6.2% £192.2 9.2% £300.5 6.9% £281.8 7.7% £57.5 6.0% £97.8 6.3% £240.2 4.8%
• Massive database
• Use it to segment activity to lose accounts or get needed rate
– New vs renewal
– Office level and product class
• 12 months ago we got the market moving… now getting more
sophisticated in segmenting the book 73
3. CL – Transforming underwriting Larry Harrington
£0 £100
-£20 £90
GWP Loss
-£80 £60
• Cases where 2 out of last 3 years -£100 £50
underlying loss ratios >80% -£120 £40
-£180 £10
• Branches working through case by case -£200 £0
<<<Jun
Jan Feb Mar Apr May TIME
Jul>>>
Aug Sept Oct Nov Dec
75
3. CL – Transforming underwriting Larry Harrington
Rating 9
Cleanse the book 9
Sustainable profit through the cycle 9
Differentiating ourselves in the SME market 9
77
Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
80
4. Operations David McMillan
£150m
Expense £150m
Ratio
81
4. Operations David McMillan
• Footprint
consolidation
Product
Complexity
• Lean
manufacturing
Systems Process • Right-shoring
Complexity Complexity
• Self service
• Mass
Organisation customisation
Complexity
• IT architecture
82
4. Operations David McMillan
Personal Personal
Mixed Mixed
Commercial Commercial
Dundee
Noida
Glasgow
Perth Perth
Bishopbriggs Bishopbriggs
Leeds
Bradford
Belfast
Sheffield Pune Pune
Liverpool Manchester Manchester
Stretford Stretford
Cheadle Cheadle
Leicester Leicester
Birmingham
Birmingham Norwich Norwich
Ipswich
Bristol Southend
Basildon
Basildon Bangalore Chennai Bangalore
Southend
Southampton
Colombo
Worthing
Exeter
Centres of Excellence:
UK – 7
India – 2 83
4. Operations David McMillan
Aims
Policy Sales & Direct, Broker - Personal &
Service Commercial
84
4. Operations David McMillan
“Right-shoring” key
customer moments of truth
Policy Sales
First Claim Call
Back office
Collections / Recoveries /
Analytics
85
4. Operations David McMillan
2007 2010
2007 Target
Operations Headcount c10,000 c7,000
Sites 27 9
90
4. Operations David McMillan
Panel Proposition
Direct Relaunch Leverage Membership
Reshaping
the book.. Consolidators
Reduce premium
Sustainable commission
Strong relationships
Differentiated offer to 3000 small brokers Protect Differentiate through 110 broker club
and
Grow
Grow share of business Succession planning
3 3 3
0.08 Segment (i.e. SUV)
Sums Insured
Percentage of Policies
Blanket
3
Blanket
3
Blanket
Number of Doors
Specified Inner Limits 3
Higher
Inner
Higher
Inner
Low Inner
0.06
Overall Price Neutral Change Engine (Size and
Limit Limit Limit
3 3 3
Individual policy changes
range from -50% to +55%
Fuel)
Frozen Food 0.04
Unlimited £400 Limit £200 Limit
Transmission
3 3
Loss of rent and
£12,000 Limit £6,000 Limit 2 Age
alternative 0.02
accommodation 3 3
Visitors Personal Effect
Unlimited £1,000 2 ABI Group
3
Sport Equipment
£1,000 2 2 0
-50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60%
Applied Rate Change
0% 78% Leicester NB £4.5 37.9% £0.0 0.0% £23.8 47.1% £7.0 106.6% £10.8 48.0% £13.5 67.1% £0.6 96.4% £12.0 30.2% £10.2 30.5%
GWP Loss
Birmingham NB
ManchesterNB
£5.6
£1.0
37.4%
32.7%
£5.8
£0.1
24.3%
1.2%
£24.7
£19.6
42.9%
39.0%
£1.8
£1.8
52.9%
26.3%
£4.4
£1.1
32.4%
23.7%
£5.2
£2.7
72.0%
64.2%
£0.1
£0.0
12.5%
0.0%
£4.2
£3.3
32.5%
17.2%
£2.0
£2.5
27.1%
20.7% -£80 £60
Glasgow NB £0.0 5.3% £0.0 0.0% £14.9 47.2% £1.2 26.6% £10.3 31.4% £2.8 52.0% £1.3 18.6% £5.2 22.7% £0.9 16.0%
-1% Unallocated £3.4 £0.0 £3.7 £1.5 £1.5 £2.7 £0.8 £0.0 £0.1
76%
8.3% 0.0% 22.3% 20.9% 4.3% 59.3% 65.7% 0.0% 408.3%
Belfast NB
Total
£0.2
£386.4
40.8%
31.9%
£0.0
£252.9
0.0%
39.8%
£5.1
£577.8
31.0%
36.4%
£2.9
£192.2
110.9%
53.4%
£3.1
£300.5
15.4%
30.0%
£1.4
£281.8
48.3%
59.2%
£0.1
£57.5
98.8%
59.7%
£1.5
£97.9
24.0%
32.7%
£2.1
£240.2
33.9%
44.8% -£100 £50
-2%
74%
2009 Plan Core NECR 32.0% 37.8% 38.0% 42.5% 32.2% 46.0% 47.3% 37.9% 38.7%
M ay -07
J u n -0 7
J u l- 0 7
J a n -0 8
F eb-08
M ar-08
M ay -08
J u n -0 8
J u l- 0 8
S e p -0 7
O ct- 0 7
N o v -0 7
D e c -0 7
Apr-07
A u g -0 7
Apr-08
A u g -0 8
Red Rate Target £69.6 10.1% £70.1 6.6% £48.7 10.3% £128.1 10.2% £42.0 12.6% £230.4 7.7% £37.1 6.1% £4.3 6.3% £175.3 4.8%
Amber Rate Target
Green Rate Target
£200.1
£115.7
6.9%
5.0%
£173.3
£9.5
6.4%
5.0%
£372.5
£156.6
6.2%
5.0%
£34.8
£29.3
9.2%
5.0%
£135.8
£122.7
6.9%
5.0%
£51.4
£0.0
7.7%
7.7%
£16.7
£3.7
6.0%
5.0%
£19.8
£73.7
6.3%
6.3%
£49.4
£15.6
4.8%
4.8% -£160 £20
Overall Rate Target £385.4 6.9% £252.9 6.4% £577.8 6.2% £192.2 9.2% £300.5 6.9% £281.8 7.7% £57.5 6.0% £97.8 6.3% £240.2 4.8%
-£200 £0
<<<Jun
Jan Feb Mar Apr May TIME
Jul>>>
Aug Sept Oct Nov Dec
96
Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today