These are your first set of preliminary results as chief executive,
so how would you sum them up?
I think they are a robust set of results in the face of some quite
challenging conditions, not only in terms of the economic situation, but also
taking account of the home general insurance market where we’ve seen the worst
UK floods for 60 years. But we’ve come out of that with an improved EEV
operating profit, we have a strong balance sheet and we’re confident about the
outlook for the future. I think that’s demonstrated by the fact that we’ve
increased our dividend by 10%.
Long-term savings are up by 25% despite the global economic
uncertainty. So what, for you, were the key drivers?
Well, we, the management have been driving that business pretty hard. You
mentioned that sales are up 25% but profits are up 35% and it’s growth in
profits that I’m particularly interested in. I think the demographic drivers
externally continue to be very positive for our life and savings business.
People do need to save more money and they are in most of the major markets in
which we’re operating. So, our customers are going to go on needing our products
and that really underpins a good measure of confidence about the future.
What about the credit crunch? Has Aviva been affected?
We’ve been affected a little bit. We have CDO holdings in Holland, and in the
US, we’ve taken some small writedowns on those. But overall, we manage our
balance sheet very conservatively so we have really minimal exposures.
And actually, in the course of the year, we’ve reduced our exposure to equity
market volatility; we sold down £3.4bn of equities. So, going forward, our
shareholders are actually materially less exposed to market volatility.
As your home market, the UK always attracts attention, so what’s been
In the UK life business, we’ve been working hard and I think we’ve been achie
ving some really outstanding results.
The profits of that business are up about 16% relative to 2007. We’re working
hard to maintain a market-leading position and I think in profit terms, that’s
unarguably the case.
If you look at all of our products across that UK life business, we’re
writing those products at a return which is well in excess of our cost of
capital and that is the benefit of scale. The other thing that we’re doing in
that business is to shake off some of the legacy issues that we’ve had. So of
the 550 systems that we had in our UK life business, we managed to flick the
switch and turn off 104 of those in 2007 and enter into a really ground-breaking
agreement with Swiss Re. This outsources about three million policies which will
greatly reduce the burden and the cost of administering those policies, many of
which come from many years ago. So I’m very pleased with the progress that we’re
making. Overall, there’s a lot of hard work going on and it’s paying off.
How do you see the outlook for 2008?
I actually think it’s pretty good. Yes, there are uncertainties around in
terms of the economic outlook but when I look at the businesses that we have,
fundamentally, I think our markets remain attractive.
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