Moss leads way with ‘One Aviva, Twice the Value’

Responsible for strategic development, growth and operational performance Andrew Moss, Group Chief Executive of Aviva, is focussed on bringing the company together and doubling its earnings with its new vision ‘One Aviva, Twice the Value’. Considered as an industry heavy weight by many, Andrew Moss spoke to The Nation Economist about the Global financial crisis and Government intervention, the importance of keeping his staff happy and the future direction of the insurance giant on his recent visit to Sri Lanka.

Q: You have been the Group Chief Executive of Aviva since July 2007. How has the past year been? What were its highlights?
Well, it has been a very exciting time for the company. We have re-articulated the vision of the company under’ One Aviva, Twice the Value’. We operate in 27 different countries therefore the aim is to bring these together into one group. The twice the value part of that is resetting ourselves new targets in terms of improving the earnings of the group; we aim to double our earnings per share at least by 2012. Actually as part of this process we have brought together our people more closely than they have ever been. I have been talking to the team in Sri Lanka about something we call the summits meetings in which the top 1,500 people of the company come together. About 22 people from Sri Lanka have taken part in this process.
Now at the same time the last year has been a challenging time in the world’s financial market , I think Aviva is very strong. We have made sure that we have reduced the risk profile of the company to a certain degree, to protect the capital position of the company. Some banks have found real problems in the past year, the insurance sector globally has done quite well and Aviva is among the strongest in the sector. As we come towards the end of 2008 I think we are still cautious, we are still managing the company to protect against downsized risks, but at the same time we are confident and we believe we have done a good job for our policyholders and shareholders.

Q.: How do you view the current global economic crisis impact on business in general, the financial services sector and insurance in particular?
What’s unusual about this crisis is that it started in the financial services sector. Normally when you get recession, banks in particular suffer more towards the end of the process. This time it started in banks with the liquidity crisis in August 2008. One of the big differences between the Insurance and Banking sector is that we don’t have the same liquidity pressures. Therefore we don’t run the same risks. Currently in the West, the sentiment is definitely very subdued. The US, UK and some western European countries are now in recession. I think the early part of 2009 will be challenging but I expect that we will work our way through that and come out of recession by the latter part of 2009. We have obviously seen things in the past three months that nobody ever expected to see like Lehman Brothers becoming bankrupt, banks in the UK and other places being owned by the government. However governments in most countries have taken decisive action. Now there is a bedrock, that’s underpinning to the financial system. I applaud the governments for the actions that were taken. I think those were necessary and give us the right framework to move forward and in time out of recession. I think the next challenge is the consumer within USA, UK and Europe as they will be cautious as we go into 2009. I think unemployment will rise in a number of those countries and the consequences of these will need to be managed.

But again what is encouraging to see is that governments have taken decisive action, they have reduced interest rates to very low levels and I think that this activity will ensure that things will improve over time. As far as the insurance sector is concerned with the exception of AIG, which has clearly had very significant problems, however those problems have not come from its core insurance business. The sector as a whole has done well. Solvency has been maintained at good levels in the UK. As I said we are cautious but confident as we move forward.

Q.: In addition to the financial turmoil, the world is facing other challenges such as terrorism, climatic changes and an ageing population, etc. In your view how do these impact the insurance industry?
Well I think the first thing to say is that you are absolutely right, demographics and the ageing population are a major challenge for the economies of nearly all the countries in the world. The Insurance Industry plays a vital role in that. In many of the countries that we operate, people need to save more money. The different ways in which this can be encouraged is a vital priority in the Insurance Industry as well as for governments. In some countries like Australia, there is high level of compulsion in the system and people have to save money. That decision was made 20 years ago, and now the Savings Industry in Australia more importantly the safety net, the provision of prosperity in retirement is at a very good place in that country. It takes time, life insurance and long term savings are the ultimate long term business, so the decisions that you make now, only works through over decades in reality, the Insurance Industry clearly plays a big part in that.

Coming to climate change, clearly there are impacts on the General Insurance Industry. Particularly in some of the risk profiles of certain events will change over time and that’s something a number of insurance companies put a lot of research into. Aviva has been very interested in that, and certainly as a company, for example, we have moved to a carbon neutral position and it is something we take very seriously.

Terrorism, well of course, the events in Mumbai recently have been very tragic, I’ve just been to India on the way to Sri Lanka and clearly the memory of those terrible events are quite fresh in the people’s minds and we sympathise with them. In the UK unfortunately we have some experience of terrorism as well and clearly in Sri Lanka as well, considering the current political situation. As far as the Insurance Industry is concerned it doesn’t have too much short-term impact. I think if it clearly becomes a more regular event then the industry in these particular countries have to evolve and provide particular protections. I think the Insurance Industry wherever it operates in the world tends to be versatile and flexible industry, which adapts to particular events and provides the right cover. The challenge sometimes is there of course and this was certainly the case in the UK in the 1970s. There has to be partnership between the Insurance Industry and the government to come up with the right answers to provide the adequate protection that society needs. However what all of this underlines is that Insurance is a vital safety net, in the actual social framework of all the countries which we operate. And that’s why it is an important industry, it’s there to help people when things go wrong.

Q.: Given this highly challenging environment how is Aviva positioned and what is your global strategy for Aviva?
Well we set out our global strategy in the middle of 2007, with ‘One Aviva, twice the value’ vision and that was concentrating primarily on making sure that we got the best out of the businesses that we have, and realising value from our existing businesses. So for example we set out with our cost saving strategy and we got a public target of saving 500 million pounds by the end of 2009 per annum. That’s been a great strategy to have when the external markets have been as volatile as they have been because we are able to pull levers and create value within the company than actually relying on external events to help us. This has been a great agenda to have in the last 18 months; we haven’t changed them at all as a result of what’s going on in the external environment. This is very important for all the 57, 000 staff members who work for us to know that we have a stable set of targets that we are very focused on achieving and that we are not changing our mind in anyway as a result of the global climate.

Q.: In the context of the global situation, does Aviva see any potential growth opportunities such as acquisitions and new markets?
Well we’ve been very cautious this year; we’ve been conserving capital. As always it’s part of my job to scan the horizon to see if there are any acquisition opportunities. However we go on investing a lot of capital in our existing business, every time we write new business we are investing new capital and it’s important to remember that. Historically Aviva has been a very acquisitive company. I think there may come a time again in 2009, I use the cricketing analogy now, in that we have been in the past 9 months on the back foot a little bit, and playing quite defensively, but as we go forward there will be opportunities for us to get on to the front foot perhaps be a little bit more aggressive. As always timing is very important when your making these decisions, up to now in 2008 our judgement has been that it is too early to make those decisions, I think we have been proved right so far, but at some point we will look again and see if there opportunities that will benefit our shareholders.

Q.: What has been the impact of the global crisis on Asia and its growth plans? Would Aviva’s commitment to Asia remain in the context of the changes in growth expectations in India and China?
No, Aviva is very committed to Asia. When I became Chief Executive we set up a regional office in Asia Pacific for the first time. We have four regional offices in the world; the Asia Pacific region is headquartered in Singapore. I feel that signalled a new commitment of Aviva to Asia. In the last 18 months we have gone into 3 new countries in Asia; Taiwan, Malaysia and South Korea, in each case partnering with the second largest banks in each of those countries. We would like to enter some other markets in Asia as well.

Now that we have a firm base from which to build, I expect organic growth in our businesses in Asia to continue to be strong, I mean Asia is not immune to what’s happening in the rest of the world but what’s different from 10 years ago is that domestic economies in countries like China and India now create more demand internally which acts as a buffer against problems that may arise more in the export markets in those countries. We have been very successful in some parts of Asia and are now the second largest insurance provider in China, AIG is the first and I hope we will overtake them at some point. We have been very focussed in India and China, but we have clearly made investments elsewhere, Sri Lanka is a good example of that. We are extremely committed to our business here and we believe that it can go from strength to strength.

Q: Eagle Sri Lanka is known for pioneering CSR in Sri Lanka long before it became a buzzword; likewise Aviva also has an extensive focus on CSR. How do you describe Aviva’s CSR strategy?
We do take CSR very very seriously. I don’t even like the phrase ‘Corporate Social Responsibility’ very much, I think genuinely as a company we have for hundreds of years as we are 300-years-old have always taken our activities in the community extremely seriously, and I think we do that because we genuinely believe that it is the right thing to do. We also think it is important for our staff to be involved in these projects as they are genuinely rewarding for our staff. Of course at the same time if we are genuinely helping people that makes a difference. Do we believe it has a benefit for our reputation? Absolutely we do, but the starting point for this is that it is the right thing to do.

Q: How important is Aviva Sri Lanka to you in your global plans and how do you see your Sri Lankan business evolving? What are the future plans for Eagle, Sri Lanka?
It’s of course very small compared to rest of Aviva, but our Asian business as a whole accounts for only 7% of our overall sales. This shows the sheer size of our businesses elsewhere but the growth prospects in Asia are very very strong. I expect Asia as a proportion of business to grow, but that will be difficult because there are plenty of people in other parts of Aviva who will be fighting jolly hard to make sure that their businesses grow as well. I think Sri Lanka specifically has a market. With a population of about 20 million, it’s a good deal smaller than some of the countries we operate in Asia, but nevertheless we have a solid business here and we think it is a business that will continue to grow. We will continue to invest capital in Sri Lanka.

In line with the ‘One Aviva, Twice the Value’ vision, my main priority for Eagle is to ensure that its performance is absolutely in line with that and contributes to the ‘One Aviva, Twice the Value’ strategy. I think it’s been terrific in terms of being part of One Aviva and the involvement of Eagle with the rest of the group has been very strong. Realising the ‘Twice the Value’ objective over the next 3 years is high on my agenda and also on the agenda of the management here. I have every confidence in their abilities to achieve this goal.