One
Aviva, Twice the value
Responsible for strategic development, growth and operational
performance, Andrew Moss Group Chief Executive of Aviva,
is focused 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 speaks 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 and what are the highlights?
A: Well, it has been a very exciting time for
the company. We have rearticulated 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 1500 people
of the company come together. About 22 people from Sri
Lanka have taken part in this process.
Now at the same time of course 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: As a person who
values getting to know his staff stationed in various
parts of the world, is this visit to Sri Lanka also
part of this strategy?
A: I think it’s always great to meet my
people around the world. As in all businesses the talent
that you have within the company is the key determinant
whether your company is going to be successful or not.
So it is great to visit different parts of the business,
meet people and have them tell you what their successes
are as well as their challenges. You always get a better
feel if you actually visit and see your staff, where
they work and understand their challenges and then decide
where you can help to promote success in the company.
Q: How do you view
the current global economic crisis impact on business
in general, the financial services sector and insurance
in particular?
A: What’s unusual about this crisis is that
it started in the financial services sector. Normally
you get recession and 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 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 Government’s 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: We understand
that you co-chair an Industry Working Group with the
UK chancellor of Exchequer. Could you share with us
some insights into how these initiatives have evolved
and what impact they will have on the insurance industry
in UK and globally?
A: I think its very early days, we have had 2
meetings so far. This group is looking at the medium
to long-term challenges that the insurance sector faces.
Actually the insurance industry in the UK is a very
strong industry. It’s a major provider of invisible
earnings to the UK and the government is interested
in making sure that we maintain the very strong competitive
position that the UK has in global insurance. I’m
very happy that the government wants to talk to the
industry about that issue. A number of Chief Executives
in the UK including myself are happy in giving our time
for this initiative. However it’s too early to
say what’s going to come out of it, but I think
its very important that the dialogue is taking place.
Q: In addition
to the financial turmoil, the world is facing other
challenges such as terrorism, climatic changes and an
aging 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 aging
population is a major challenge for the economies of
actually 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. 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
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 the particular countries have to evolve
and provide particular protections. I think the insurance
industry wherever it operates in the world tends to
be a versatile and flexible industry, which adapts to
particular events and provides the right cover. The
challenge sometimes 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 realizing 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. It 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 its 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
its important to remember that. Historically Aviva has
been a very acquisitive company and 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 you’re making these decisions, up to now in
2008 our judgment 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 are 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 focused 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: Talent is a
global issue all organizations focus on. What is Aviva’s
talent management philosophy and how does it get translated
into businesses across the globe.
A: Well we invest heavily in our people across
the world. We absolutely know and believe that our success
depends on the people who work for us. I think more
than ever in the last 18 months we have brought people
together across the company and invested more money
than we have historically in developing the leadership
within our organization. However I’m always very
conscious that it’s not only the 1500 people that
are leading the organization that matter but the other
55 and a half thousand people who are working on a day
to day basis, who are interacting with our customers
that make a huge difference to our success. It is very
important that when our customers approach us, they
are getting the right reaction from our people. That
in itself is hugely important and if we want our customers
to trust us and stay with us, interact with us and buy
more business from us, then we have to treat them very
well, give them good service, good value for money and
be very focused on what we are doing.
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, 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?
A: It’s of course very small compared to
the 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.
Q: Finally, to
end on a positive note, what are the future plans for
Eagle, Sri Lanka?
A: 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.
(Courtesy: Business Today, January 2009 issue)
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