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By most accounts, Aviva’s 2017 performance hit all the marks: operating profit is up 2%, total dividend per share is up 18%, and cash remittances are up 33%.
However, that makes the blemish in its Canadian outpost that much more noticeable. Here, operating profit fell by $400 million from 2016, with underwriting flipping from a profit to a loss.
"We’re not happy with the results," said Jason Storah, executive vice president, broker distribution, at Aviva Canada. "But, we’re very confident that we’ve got a team here that’s delivered outstanding results in the past and we’re really confident about what the future looks like for us."
Auto insurance was a weak spot for the company, and that was attributed in the results announcement to "adverse prior year reserve development across auto and property insurance portfolios together with weaker accident year profitability in the auto insurance market, where bodily injury claims inflation rose sharply."
Increasing rates to cover those losses is one step Aviva Canada plans to take to improve results going forward.
"We all see changes in behaviour in the auto industry,” said Storah, pointing to more technology installed in cars as a reason for higher repair costs. “It’s getting back to the fundamentals of insurance, which is to ensure we’re collecting enough premiums to cover the loss costs and the loss trends in auto."
Storm clouds brewing over the company aren’t just figurative – claims from weather-related losses were "elevated," according to Aviva, and likewise hurt results in the Canadian market.
"In 2017, we had 15 catastrophes across the country, and, certainly in Aviva, we believe that weather’s becoming more and more unpredictable, and more significant in the impact it has on our results," said Storah. "It’s about us making sure that we’re collecting premiums over a period of time to cover those events when they do happen. "
The priority in Canada, Aviva stated, is to get operating profits back up, partly by increasing premium rates across several products, though the insurer acknowledged it’ll take a few cycles for remedial actions to translate into good news for its Canadian performance.
Aviva Canada is already increasing rates by 5% because they’re simply not keeping up with losses, while working with broker partners so they understand how it’s going to impact their businesses.
Getting back to insurance basics is the theme going forward.
"Ultimately insurance is about focusing on the fundamentals,” said Storah, “so being really, really disciplined in our underwriting and really disciplined on indemnity management" is the lesson learned from these results.
A bright spot in Aviva Canada’s performance was the acquisition of RBC General Insurance (RBCGI), which led to an increase of 15% in net written premiums. The partnership has taken up a lot of resources – namely, time and money – but it’s been worth it, said Storah.
"We’re really proud of the relationship that we have going forward with RBC and the kind of opportunities that we’re talking about with them," he explained.
