Aviva targets medium sized SMEs
Aviva's Phil Bayles, MD of UK intermediaries, says insurer is in a good position compared to some of its competitors.
Aviva is targeting growth in SME business this year after it posted rising profits and a combined operating ratio (COR) of 93.9% for 2017.
According to Phil Bayles, managing director of UK intermediaries, Aviva has made a “deliberate effort” to focus more on businesses with a turnover of under £100m.
“We’re doing well in large and in small SME business, but in mid-market we have some room to grow,” he told Insurance Age.
Bayles added: “We’re very optimistic about SME and this year has started well for us.”
Aviva reported a 4% rise in UK general insurance underwriting profit to £408m in 2017, and Bayles argued that the provider’s results had been “consistent” over the last few years.
He added that looking at the rest of the market many insurers had revealed CORs in the high 90s or over 100%, commenting: “That’s not a great position to be in.”
Bayles continued: “There’s business in those insurers that needs sorting out and they’ll be doing some type of mediation around that.
“We’ve been there as well – you tend to go inwards a bit as a business whilst you sort yourself out.”
Commercial motor
Last week, following the publication of Aviva’s financial results, the insurer noted it had shrunk some unprofitable commercial and personal motor business lines in the broker distribution channel.
Bayles explained that the likes of haulage and self-drive hire had been generating “lots of large losses”, and flagged that other insurers had also been taking action in these areas.
“Certain classes of commercial motor have been losing money for the last ten years and at some point you have to stop doing it,” he said.
Adding: “We’re confident of growing this year because we took action last year.”
Acquisitions
The insurer has put aside £600m to make bolt-on acquisitions in 2018, but Bayles would not comment on any potential UK deals in the pipeline.
However, he noted that Aviva is already a “large scale business” in this country and that bolt-ons were more likely than making large buys.
The market has seen a number of big insurer deals lately including the merger of Allianz and LV and Axa’s purchase of XL Group.
“One of the problems with big acquisitions is that it’s very rare for one plus one to equal two,” Bayles observed.
Adding: “The two businesses merging usually end up smaller than the collective size of the two because there is so much overlap.
“The way we look at acquisitions is whether it adds profit growth, scale or new capability in an area where we want to grow.”
Bayles further stressed that the insurer had a “strong organic growth story” and that it did not need to make any acquisitions in order to grow.
“Buying stuff is expensive and disruptive - it’s a two-year job and during those two years you are inevitably somewhat distracted,” he continued.
“Some of our competitors are about to go through that distraction, which is good for us.”
Management
Aviva recently saw a change at the top with former UK CEO Colm Holmes moving to head up its Canadian business and Rob Townend taking over as managing director in the UK.
Holmes recently praised the honesty of the UK broker market and committed to maintaining “good friendships” made in the sector.
Bayles stated that the feedback from brokers following the move had been positive, because the insurer’s strategy had remained the same.
“The brokers know myself and Rob from before,” he continued.
“We all took a step up under the new structure and are leading the charge and that’s a big tick in the box from the stability point of view.”
He described his relationship with Townend as a “happy marriage”, stating they had been working together for the last 15 years.
Bayles has previously reassured brokers that they will see a “continuation” of the strategy that has made the business “successful over the years”.
For all the latest industry news direct to your inbox, sign up for our daily newsletter.
More on Insurer
POLL: UNRATED INSURERS
Most read
- Saffron buys again with Continuum
- Biba wants Senior Managers Regime date for brokers "as soon as possible"
- NMU Letchworth office axed in regional restructure
- The stats: March 2018 - The Acturis Premium Index
- Integro's Sutton and Humphreys head to Beach
- Broking success: Dale Collett, managing director, Gravity Risk Services
- David Cahoon steps up as MD at Rural Insurance