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Strategic Report 2013

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Strategic Report 2013 Aviva plc Strategic report 2013 | Retirement | Investments | Insurance | Health | Our purpose People face uncertainty, challenges and choices every day. Life is complex and unpredictable. It’s all too easy to be a bit afraid, a little uncertain. At Aviva, our purpose is to free people from fear of uncertainty, allowing them to get on and lead their lives; so that they can look forward to the future with confidence, knowing they have protected what matters most to them. We are here to make a difference to our customers at their times of need and to make it easier for them to plan for the future. And we have been doing this for the last 318 years. Our purpose is all about what we do for our customers and ensuring we build a strong business on which they can depend. In this report, you can read more about how we are changing Aviva to deliver a better future for our customers, our shareholders, our communities and our people. 1 Aviva plc Strategic report 2013 What’s inside Chairman’s Group Chief Executive Chief Financial statement Officer’s statement Officer’s statement With the changes we have 2013 was a year in made, and continue to The turnaround is which cash flow, make, I am confident intensifying but there is earnings and the that Aviva has the still much to do. financial position of the necessary foundation Group improved. to grow. Page 04 Page 06 Page 10 View our Strategic report online reports Chairman’s statement 04 Chairman’s governance Group Chief Executive letter 62 Officer’s statement 06 Extract of directors’ Chief Financial Officer’s remuneration report 64 statement 10 Independent auditors’ Our business model 16 report to members of Aviva plc 67 Market context 18 Annual report and Summary of consolidated accounts 2013 Strategic framework 19 financial statements 68 We provide our annual Measuring our Notes to the summary report online which allows performance in 2013 26 us to reduce the amount of consolidated financial of paper we print and Market focus 30 statements 71 distribute. Risks to our business 44 Shareholder services 74 Our wider impact 46 Cautionary statement 76 Visit Aviva plc Board of directors 54 aviva.com/2013ar Group executive 58 Corporate responsibility report 2013 Find out more about our commitment to acting as a responsible member of the international business community. Visit Aviva plc aviva.com/2013cr Anne Lawlor Dublin, Republic of Ireland When young mother Anne Lawlor found a lump in her breast, she was glad she had an Aviva health insurance policy. The tumour was diagnosed in September 2013 and Anne had surgery within two weeks. “When I was diagnosed” she says, “there were loads of things to worry about, like, you’re going to lose your hair and you’re going to have to deal with things that you don’t really expect when you’re 34. But the one thing I wasn’t worried about was what type of treatment I was going to be able to afford and how quickly I was going to be able to access that treatment.” Charles and François Magnien Burgundy, France The Magnien family has been producing wine in Gevrey-Chambertin since 1556. When Charles took over the business from his father François in 2009, the business had several insurance providers. Now they use only Aviva. Charles has placed his personal insurance with Aviva too. “It’s a relationship based on trust,’’ he says. “To me, trust is paramount in insurance. It means I can focus on making a quality product, knowing my business is well protected, so I don’t have to worry.” 4 Aviva plc Strategic report 2013 Chairman’s statement A year of transformation Key statistics in 2013 2013 has been a very important year for Aviva and for shareholders. proceeds than originally expected, and our John McFarlane businesses in Russia and Malaysia. We sold Chairman our remaining holding in Delta Lloyd N.V. and reached a satisfactory settlement with Bankia £2.8bn in Spain. Total IFRS profit Aviva’s major interests are now largely before tax concentrated in the UK, France and Canada, but the Group does have attractive businesses elsewhere in Europe and in the faster growth Asia region. Operating performance The Group’s adjusted operating profit grew by 6% during the year to £2,049 million. 17% Contributing to this was a continuation of a increase 2013 has been a very important year for Aviva Group-wide cost reduction programme that has Share price growth and for shareholders. The positive changes made now delivered savings of £360 million out of the during 2013 by your Board and management, have begun to £400 million target by the end of 2013, with the rebuild our reputation amongst investors that we full reduction now embedded in the 2014 plan. traditionally held. Of course, much is yet to be The economic capital base and Group liquidity done, but I’m sure shareholders will endorse the have also been strengthened significantly. This progress that has been made, over a relatively has built our financial strength and lowered the short time. I would particularly like to thank my risk of the Group. We plan further strengthening Board colleagues and our management team, over the coming years, accompanied by a 15.0p for their contribution to this. reduction in internal and external leverage. We have strengthened significantly our Total dividend A new management team risk management and audit processes, and At the beginning of the year, Mark Wilson was have invested heavily in preparing for the appointed as your Group Chief Executive Officer. implementation of Solvency II in January 2016, Mark has strong credentials for this role, and this and for our being designated a Global has since been demonstrated in the changes Systemically Important Insurer. Mark has made to upgrade significantly the calibre of our management team, as well as the overall performance and financial security of the Company. New leadership was appointed to UK & Ireland General Insurance, Europe, Aviva Investors and Asia, and to transformation and human Management has resources. A new Chief Information Officer overseen significant will also join the Group in April 2014. change in the Group’s business portfolio to Business portfolio narrowed focus on the most Management has overseen significant change attractive segments. in the Group’s business portfolio, to focus on the most attractive segments and where we have the greatest chance of success. During the year we completed the sales of John McFarlane the US business, for which we received higher Chairman 5 Aviva plc Chairman’s statement continued Strategic report 2013 The Group has also worked effectively with our I am pleased to announce that Tom Stoddard regulators around the world, and particularly with will be joining as the new Chief Financial Officer Committee the new Prudential Regulation Authority and the on 5 May 2014. Tom joins from Blackstone, the Financial Conduct Authority in the UK. global investment and advisory firm, and has chairmen experience in advising insurance companies. As at the date of this Dividend report, the Board Last year, we made the difficult decision to Our people committees are chaired reduce dividend levels with reference to our It has nevertheless been a challenging year by the following earning capacity and cash flows, and eliminate for our workforce in the face of significant cost Non-Executive the dilutive scrip dividend programme. reduction. However, despite this, our people have Directors: Notwithstanding this, shareholders have retained their focus on the business and delivered § Audit Committee: benefitted from significant share price growth very strong results. Glyn Barker that more than offset the lower dividend. The increased certainty and confidence in the § Governance The Board is able to declare a final dividend of business as we move forward will make Aviva Committee: 9.40 pence per share (2012: 9.00 pence). We are a better place to work. We have also aligned Scott Wheway also introducing a dividend reinvestment plan employees’ interests with shareholders through § Nomination (DRIP), which allows shareholders to reinvest their share plan schemes and employees will be able Committee: dividend in the Company’s shares through a to benefit in the Group’s improvement. John McFarlane market purchase rather than a new issue of The Board is very grateful for the continued § Remuneration shares. This avoids the dilutive effect that the effort and support of our staff in what has been Committee: previous Scrip dividend scheme had over time. a challenging period. Patricia Cross § Risk Committee: Board and governance Investing in communities Michael Hawker, AM. It is an honour for me to serve as your Chairman. We focus our investment in communities on During 2013 and more recently, there have been the issues that matter most to our customers a number of changes to your Board. Sir Adrian and those that are most closely aligned to Montague was appointed as Senior Independent our business, to maximise the value of our Director. Sir Adrian has significant experience of investment. We also provide access to insurance the financial services industry and government for all areas of society such as affordable contents and regulatory issues. insurance to low income households, a flexible We also appointed a number of new insurance solution for learner drivers, and the non-executive directors, with relevant experience provision of low-cost insurance policies for in financial services, with the appointment of individuals in the Indian sub-continent on low Bob Stein, Michael Mire and Patricia Cross. incomes, for a policy premium of less than Aviva is making good progress in complying £2 a year. with Lord Davies’ proposals which we aim to fulfil Aviva Investors also works with fund managers with the search, currently in progress, and analysts globally to integrate environmental, for an additional director.
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