Aviva Plc. SWOT and PESTLE Analysis

Strength

1. Strong financial performance: Aviva delivered a strong set of numbers in FY16. Its operating profit was up by 12% at £3,010 m (IFRS basis) and new business registered a growth of 13% y-o-y to £1,352m (including the acquisition of Friends Life) which was driven by growth in UK and Europe. Aviva also achieved a reduction in internal loan by February 2016 to £1.5 billion. The complete integration of Friends Life into Aviva is further expected to reduce costs and improve synergies. The total dividend payout in FY16 was 23.3p, an increase of 12% y-o-y.

2. Consistent performance across business segments: Aviva has a well-diversified, customer-focused portfolio across the insurance business segments. Aviva’s fund management segment - Aviva Investors Multi-Strategy (AIMS), gained traction from the acquisition of Friends Life in 2015 and integration of its assets. The assets under management in AIMS more than doubled in HY16 to £6.2bn. The Commercial real estate segment for Aviva is substantially risk-free with Loan-To-Value Ratio (LTV) at 60% at Half Year (HY) 2016 from 102% in FY11. The loan interest cover for Aviva was at 2.14x at HY2016, significantly improving from 1.47x in FY14. Also the portfolio has zero loans in arrears as of HY2016. The Life insurance segment in UK has also been boosted by Friends Life run-rate synergies getting reflected from 2016. Aviva’s had a leading market share of 12% in General insurance and 14% in Life Insurance in UK as of 2015.

3. Focused Three-Pronged Strategy: Aviva has successfully focusing on a three pronged strategy which has allowed it to generate growth and market share. First is offering solutions and services to customers across life, general, accident & health insurance and asset management. Second is focusing on customer experience driven by digitization – leveraging the various facets of digitization such as mobility, cloud and analytics. Thirdly it is only focusing on the select geographies where it has business presence and aims to further diversify its offerings in those markets. The company will continue with this strategy for further development of its business and markets.

4. High Brand Awareness and Cross-Selling: Aviva has a high brand awareness and also is the preferred brand for consolidation from the customer’s perspective according to UBS Evidence Lab. This indicates a clear link between cross-selling of products and the Aviva brand. Also increase in available data and usage of analytics enables Aviva to understand customer profiles better and offer them the right solutions. Aviva has managed to tap customers who have taken at least one product from Aviva to take up other offerings provided by the insurer. This has been true especially in the UK market for Aviva, and the brand recognition is a key competitive advantage for the company.

Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

1. Investments data analytics for customer insights: Insights from data analytics helps in a long way to understand customers and ultimately improve customer experience. Many customers hold multiple insurance products and analytics insights help insurers to assess their individual risk and provide personalized solutions. Aviva has made investments in areas of predictive analytics, weather analytics solutions such as flood mapping and integrated the same into their operations.

2. Digital first strategy - online, mobile and tablet to enhance customer experience: Aviva’s digital first strategy emphasizes on being a digital disruptor and improving customer experience driven through digital technologies. In line with the strategy, Aviva is recruiting and collaborating with data scientists, innovators, entrepreneurs and start-ups. Aviva has 7.5m users registered on its digital platforms as of 2016 and number of customers on MyAviva in the UK has reached 4.7 million as of FY16. Aviva also has entered into a digital insurance joint venture in Hong Kong with Hillhouse and Tencent which will sell insurance products and solutions online in the country.

Legal

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Environmental

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