Any happy returns?

One year ago, Aviva chief executive Igal Mayer dramatically left the UK to return to Canada. Mayer’s bold bid to lead the market on rate rises had failed miserably, and he was deeply unpopular with UK brokers.

He left scorched earth: the UK’s leading insurer wiped more than £1bn off its premium in 2009. Mayer’s replacement was Mark Hodges, who was promoted from the life side of the business. His remit was to build bridges with major brokers and to restore premium levels.

Hodges has largely succeeded, although his hard work will take some time to translate into figures. The most recent results show a further dip in net written premium, falling 5% to £1.94bn in the first half of 2010. Hodges and his general insurance lieutenant David McMillan have also ensured that Aviva regains popularity with brokers – but some say this has come at the expense of rates.

The wider business world, meanwhile, is transfixed by the future of Aviva as a company. Chairman Lord Sharman is set to leave next year, there has been speculation that group boss Andrew Moss could go too, and this week there were reports that Allianz, Zurich, Resolution and RSA were looking to take over and break up the business. RSA is still believed to be interested, although Aviva rejected its £5bn bid for its general insurance business in the summer.

Happy days

Mayer’s departure was greeted with jubilation from many of the consolidators, whose professional disagreements with the insurer boss had in some cases become personal. Hodges was welcomed back as an old friend – he had worked on the GI side of the business before going over to life, and was known and well liked in the market. His promotion of chief operating officer

David McMillan to GI chief executive was uncontroversial, and familiar face Janice Deakin stayed on to head up trading relationships.

Since then, it’s been hearts and flowers. Aviva has been wooing brokers and in most cases has been successful. McMillan tells Insurance Times: “The last year has seen Aviva make good on its long-term strategy. The business is strong, we’re doing well in the market, and both volumes and profitability are growing. This is reflected in what’s happening in the broker channel.”

One broker owner, who wishes to remain anonymous, says it is evident that the insurer is “less arrogant” than it had been. “They lost so much business in the last couple of years that they have had to eat humble pie to come back. They have been quite successful at it.”

RG Ford Insurance Brokers managing director Giles Ford says Aviva has become his company’s biggest supporter of business in the last year. “If I looked at the new business I did over a year ago, I did hardly any. We’ll be doing more than £200,000 this year. The message we are getting is that the doors are open and they’re ready for business.”

Brokerbility chairman Ashwin Mistry says Aviva has moved on. Calling it a “refreshing change”, he says the company has responded to market changes. “I think it has the right focus on commercial brokers. As far as we are concerned, Aviva is back in business, back as a broker friend and moving things on in a positive light.”

Mistry says that fears over Aviva’s approach in the commercial market were allayed by the installation of the new management. “[Aviva] is much more responsive to commercial brokers, which is something we were concerned about, as they were losing a little bit of direction. I think that has been reinstated with Mark and David at the helm.”

Aviva still courts small independent brokers, through its Broker Independence Group, for example. The consolidators have done even better out of Aviva. Towergate, to name one, is rebuilding its book with the insurer. Chief executive Andy Homer says: “Mark Hodges engaged with us immediately, and we began working with Janice Deakin and David McMillan with a view to implementing a balanced strategy.

“Since then, we have begun to see a move towards a much more joined-up trading relationship, and we are pleased. We did suffer a setback while Igal was in place, but now the relationship is back on track. Aviva is one of our most important markets.”

Bluefin chief executive Stuart Reid says it is still “early days” but notes that the new regime has done well to steady the ship, and that Aviva is “engaging with brokers a little bit more”, particularly the consolidators.

“When Igal was there, the consolidators were somewhat beaten around the head,” Reid says.

“I think they have taken a more pragmatic view. While they are still concentrating on the small brokers, I think they have realised that those larger brokers are important. They are therefore reengaging with those they may have alienated before. It’s a pragmatic approach and, one year in, I think they have done well.”

Relationships right, rates wrong?

But has this reconciliation come at the expense of rates? One major insurer tells a shocking tale of Aviva offering to beat a rival’s rates by 20% – and offering a commission bonus in order to win a book of business. This approach might win short-term support from brokers, but can only do damage in the long term by helping to perpetuate the soft market.

Smaller brokers, however, report that Aviva is taking upwards action on rates in commercial lines, notably property and liability, suggesting there might be a difference in the insurer’s approach across the market.

McMillan says: “Although the general consensus is that rates need to go up, Aviva appreciates that a lot of businesses are struggling. We continue to be mindful of this, taking a flexible approach and working with brokers to determine the best approach for each customer.”

Meanwhile, Aviva is looking at new areas of growth. Its return to corporate risks has been well documented, and this is one area where aggressive pricing is understood to be part of the strategy.

Of the new corporate risks business, McMillan says: “It signifies an increase in our interest and capability to underwrite larger risks.

“Another broker initiative is the launch of Personal Best, which allows brokers access to better pricing for personal lines and the same offers you see from Aviva in the direct channel.

"We’ve had good feedback from brokers, and we are continuing to invest in the franchise to build upon the work we’ve already begun.”

While the jury is out on whether Aviva is pricing too low, the market agrees that its bid to rebuild its premium base is sensible. As recent headlines demonstrate, this makes Aviva an attractive acquisition target – particularly as any price would be depressed by the lacklustre results.

Whatever happens next with top management changes and acquisition-hungry rivals, one thing is for sure: any takeover bid will meet resistance from the now well-established and increasingly effective UK GI team as it celebrates its first anniversary. IT