leads way with ‘One Aviva, Twice the Value’
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
Q: You have been the Group Chief Executive of Aviva since July 2007. How
has the past year been? What were its highlights?
A: 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
A: 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?
A: 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
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?
A: 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?
A: 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?
A: 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?
A: 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?
A: 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.