Aviva extends cost savings as IT delivers on promise

Aviva has massively increased its cost savings targets by £150 million to half a billion pounds by the end of next year, as improved IT contributes to a more efficient business.

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Aviva has massively increased its cost savings targets by £150 million to half a billion pounds by the end of next year, as improved IT contributes to a more efficient business.

Andrew Moss, chief executive at the insurance company, said the One Aviva cost savings programme has made significant progress against the clear targets the company has set. Some £211 million, nearly half of the new target, has been delivered so far.

In a wide-ranging address to the London Stock Exchange, Moss said IT will continue to play a central part of One Aviva. “We are accelerating our transformational change programme to deliver a unified and more profitable company in line with our ‘One Aviva, twice the value’ vision,” he said.

“We are investing in our brand and will launch a single global intranet later this year to bring our people even closer together as part of a new global IT strategy,” Moss said. Adding some detail to what IT changes to expect he said, “We see opportunities for shared services in each of our regions and we estimate our new global purchasing process could bring savings of more than £50 million.”

Aviva said the scope of One Aviva will increase by £150m with a cost saving target of £500m. Shared service centres will deliver the extra cost savings.

Norwich Union, its UK insurance business, has made “great progress” in simplifying systems, and decommissioned 118 unnecessary product systems as part of One Aviva. This will contribute £100 million savings by the end of 2009, one fifth of the total reductions.

Cost savings of £30 million had already been achieved by the end of June, it said, as 500,000 insurance policies were switched to a more efficient IT platform.

The complexity of Aviva’s systems were “the result of a series of mergers and acquisitions” that formed the group, Aviva said.

It will now set up a global intranet as part of its IT strategy, to “bring our people even closer together”. This will help its operations around the world to “work as one”, it said.

The company is consolidating 26 UK general insurance customer service centres to nine, which by 2010 will start delivering an extra £150 million savings a year alongside simplified processes, Aviva promised. It will then set up shared service centres in other regions, it said. A new procurement process aims to deliver £50 million cost savings.

Aviva recently sold its offshore operations to business process outsourcer WNS for £115 million. It said it could now “maximise economies of scale” as a result of provision for the UK, Ireland and Canada being outsourced to the firm.

In June, it announced it was cutting 1,800 back office and contact centre jobs in the UK, prompting Union Unite to react angrily to the “brutal job cuts”.

Aviva made an after-tax loss of £1.3 billion in the six months to 30 June, despite a £1.5 billion profit the year before, a change it attributed to a large reduction in the value of its assets. Operating profits instead rose 12 percent to £1.72 billion on the back of strong sales, and Aviva promised a £1 billion cash payment across a million of its Norwich Union life policy holders.

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