I’m talking to you today from Aviva’s
Digital Garage here in Shoreditch in London. It’s an innovative
place that is building a new business and it really is exciting. With Aviva’s
results today we are seeing a trend of stability and growth amongst a backdrop
of market volatility, foreign exchange headwinds, some of the worst floods we’ve
seen here in the UK in the last hundred years. What we’ve seen is actually
growth, growth in all our key metrics all moving in the right direction. So for
example we’ve seen operating profit up 20 percent to £2.7 billion pounds. We’ve seen value of new business our core measure of life sales, that’s up 24 percent. You
know on that measure that’s now twelve consecutive quarters of growth. I think that’s a lot of consistency of growth in results. Our combined ratio which is our key measure
for our general insurance business, that’s 94.6% and that figure is in fact our best
combined ratio now for nine years. That’s a pretty good result from our GI
colleagues. And of course we can’t forget Aviva Investors. They’ve just passed £105 million pounds of operating profit that’s an important milestone and that’s
a 33% increase on the year before. And the flagship range of funds, that’s the AIMS range of funds, it’s performed outstandingly in the last 12 months, in fact since inception it has outperformed its peers now that range of funds now has about three
billion pounds in it and that’s a very good start. Our dividend follows our
half-year trend and we’ve put that up 15%. Now when you consider the last
couple of years our dividends actually increased 38% over the last two years so
we are starting to repay I think our investors for their patience with us. So one of the
things that’s been on investors’ minds a lot over the past 12 months is Solvency II. How will insurance companies transition to it, will they have enough capital, how
will it work? We’re pretty happy with our outcome. We’ve ended up at 180%. I think that makes us one of the most
strongest and most resilient in the UK market We’re at the top end of our working range so
we’ve got a fair bit of headroom there and the interesting thing about it is our
solvency position is very resilient. A good example to illustrate that point is over
this latest market volatility we’ve seen even at the worst part of that volatility which was in February our solvency basis would have only dropped about 6 percentage points. 3 years ago all I heard about was the internal loan, this big problematic
monster, £5.8 billion pounds, what were we going to do about it. Was it going to be a drag
on cash flow. We put in the target for that of £2.2 billion by the end of 2015. In fact we got to £1.5 billion far exceeding our target and now that’s an
issue thankfully I never have to hear about again. Three years ago we had pretty modest levels of capital, we’ve now tripled it as at the end of 2015. And I
guess it’s a long way from just three years ago when we probably had one of
the worst balance sheets in the market to today when we’ve probably got one of the best balance sheets in the market and I think that’s a testament to a whole lot of work
from a whole lot of people. Another key focus of the group in the last 12 months of course has been the integration of Friends Life. Remember we are only nine months in. We should remind people why we did it we did it for compelling financial and strategic
reasons. On the financial side it was about expense synergies, it was about liquidity, it was about capital. On the strategy side that was also as compelling as we got a whole
lot of customers that we can show the much greater range of Aviva products. So it really was a good transaction and it’s been delivering everything we expected and
more. A key focus of that of course is the expense synergies. And on that we’ve so
far delivered £168 million pounds out of a total
target of £225 million about three quarters of the target. But because
of that we’ve announced today we’re going to bring forward our target and
deliver it twelve months early at the end of 2016, the end of this year. And I think so far
Aviva has delivered everything it said it would do and more. If you look at the UK
remember that’s amongst the backdrop of integrating Friends Life. You’ve seen the
value of new business actually increase 29%. Now of that 29% you’ve also seen
protection business up strongly. And so those two trends we’re pretty happy with
and this is after a year a bit earlier where of course we had all the pension changes and
pension reforms. I think that shows the resilience of the group and the strength
of the franchise’s when you can overcome all of those headwinds like regulatory
change and still grow your new business that
much. And there’s other great performers in the year. It was only a
couple years ago I referred to a couple of our businesses that’s Ireland and
Italy in rather unflattering terms. The reality is they are now behaving, in the last 12
months or so, a bit more like stars. You’ve had Italy up in terms of VNB, and you’ve had
Ireland that’s done a great job both in terms of VNB and combined ratios and
profit so you’ve had all the key metrics moving the right way because those teams
have made some hard decisions and some tough calls and now are starting to deliver
results. And moving to Asia we’ve had some good progress there as well with for
example we’ve opened a Digital Garage our second sister Garage other than
Shoreditch here, is in Singapore and they’ve started doing some fine work there. Singapore as a business has had a good year. VNB is up strongly. Remember
this was on the back of the choice we made not to continue with the DBS
relationship. So they’ve broadened their distribution, improved their margin on their products and I
think Nish and the team out there are making some good progress. And moving to our
general insurance it was a pretty good year in some pretty trying conditions for
general insurance. Our COR, our combined ratio which is a pretty important headline
number everyone focuses on 94.6%. Now that figure is in fact our best combined
ratio for the group in nine years. So that’s a pretty satisfactory outcome. Our underwriting profits also up 10%. Remember
that’s after we had the floods, some of the worst floods in a hundred years in the
UK. I’ve gotta say how our people responded to those floods was just outstanding. We had a
hundred people on the ground over Christmas doing what our customers want
us to do and looking after them. I’ve seen what the teams have done, I’ve spoken to some
of these customers. It really was first class. Canada had a very strong year. We
didn’t have too much whether to contend with there. They made progress in terms
of their pricing and analytics again and they’ve really been the leader in that. And
of course I think one of the highlights for Canada is the deal that we
announced recently for Royal Bank of Canada. The RBC is a wonderful franchise, they are the
biggest bank in that market andthey are a bank that I think culturally is a very nice
fit for us and they’ll be great partners it adds growth to our business there, it adds scale and we bring with
that the expertise. And I have very high hopes for an important business line in
a very important market to us. It’s a core business. A lot of people are asking us where we’re
at in digital. It wasn’t until we started up this Digital Garage here that we
got a different type of people in there and it’s a much more fast-paced dynamic
environment. Now it already has revenues of about £1.3 billion pounds or so and
that’s making some good progress but the reality is that what’s important here is
going to be the traffic to the My Aviva website where we can put life insurance, asset
management, health insurance, general insurance all in one place. People only
have to put in their details once. It’s simple, it’s easy and it’s going to be a
great deal for the customer. Now we are still in pilot phase we’re developing we’re piloting, we’re testing. It’s all very dynamic. But so far the pilots have been
extraordinary, the customer gets a better deal and our margin also will increase
significantly. This is the future of Aviva. This is the future of insurance and
there’s very few companies very few composites that could even try what we’re doing. So
we’ve got higher capital, higher liquidity, a much simpler business. We have nearly halved
the number of countries we are in to be much more focused. Our profit as you’ve
seen today is up. All in all we’ve made very satisfactory progress. But I want Aviva to get a name for continuing to deliver year after year, to be just like
that Swiss clock I’ve spoken about so many times before. And I think after 12
consecutive quarters of value of new business growth, I think after beating
our cost targets now for quite some time for a few years now, I think after the ability to prove we can
integrate Friends Life, I think the dividend going up 38% in the last
couple of years. It’s been a long journey, we’re nowhere near my vision yet, we
still have a long way to go, but I’d call this a very good start. I think
we’re entering 2016 from a position of strength. That’s a nice position to be
in when you have volatile markets and a lot of uncertainty. We have many levers to pull
whether its product or geographical, where we put our capital, or what we do with
expenses, we’ve got a lot of levers to pull and
we’re focused on doing that. But 2016 is about Aviva realising more of its future
potential.