Aviva sets aggressive growth plans

Aviva's group chief executive, Andrew Moss, and his executive team will set out their vision for ‘One Aviva, twice the value’, focusing on new growth and efficiency targets designed to unlock value, drive growth and accelerate the pace of the group's development in an increasingly global market. There will also be a presentation on the strategy for the further development of Aviva’s fast-growing US operation, including the announcement of US third quarter new business sales.

Aviva’s new growth and efficiency targets are as follows:

• UK: to grow long-term savings new business sales at least as fast as the market, while at least maintaining margins, thereby retaining a leadership position in its home market

• Europe: to grow long-term savings new business sales by an average of at least 10% a year to 2010, while growing new business profit at least as fast

• North America: to double the volume of US life new business sales within three years of the acquisition of AmerUs, while maintaining margins

• Asia Pacific: to grow long-term savings new business sales by an average of at least 20% a year to 2010

• Deliver additional annualised cost savings of £350m by the end of 2009

Aviva will also measure progress against its growth and efficiency targets by reference to earnings per share (EPS), which is impacted by operating earnings, investment returns, taxation and capital changes, hence heightening the focus on operating efficiency, profitable growth, investment returns and capital management.

Andrew Moss, Aviva group chief executive, said: "Our vision of 'One Aviva, twice the value' puts a clear internal focus on growth and efficiency and signals a period of transformation at Aviva. Today, we've announced ambitious targets designed to unlock further value and drive growth from our existing businesses. Our scale and international reach means that we can now move from organising the company as a series of independent operations to managing Aviva as one group; drawing upon not only our size but also our collective knowledge base and resources to accelerate the pace of growth in changing global markets. This programme, together with the more effective deployment of capital and resources and further investment in future growth through new markets and new distribution, will provide real added value to our shareholders over the coming years."

OTHER TARGETS REAFFIRMED

Aviva confirmed its existing targets as follows:

General insurance: Target to meet or beat a combined operating ratio of 98%. As previously announced, the company retains some degree of uncertainty in achieving this for the 2007 full year following the £400m exceptional UK weather losses reported to date.

Dividend: Target to grow the dividend using dividend cover in the range of 1.5 to 2.0 times operating earnings after tax on an IFRS basis, while retaining sufficient capital to support future business growth.

Return on Capital Employed (ROCE): The current target for return on capital employed is 12.5% calculated on a basis of smoothed investment returns. Aviva expects to replace this with a new return on economic capital measure and targets by the end of 2008.

NEW EFFICIENCY SAVINGS

Aviva plans to deliver £350m of new annualised cost savings over the next two years, measured at forecast 2007 expense levels. Of these, £300m is targeted to come from the UK and £50m from Europe. Aviva is developing detailed plans for the delivery of these savings and further financial information will be available with the full year results in February 2008. The total initial costs of delivering these savings will not exceed £350m.

UK

In the UK, Aviva has a market leading position and has already announced plans to transform its business model to retain its competitive position in both life and general insurance. By simplifying processes and maximising scale, Aviva will deliver further profitable growth and customer service benefits.

• UK General Insurance: Aviva aims to deliver £200m of cost savings by the end of 2008 from the completion of a number of change programmes (eg moving to a single insurance IT platform for personal lines), focused IT spend and a single approach to marketing activity. The savings announced today are projected to decrease the expense ratio to 12.4% in 2008 from 13.9% in 2006. Looking ahead, the business also plans to simplify structures further and re-engineer its processes.