Aviva Asia's FY16 VNB falls 11%, dragged down by loss of DBS tie-up (Amended)

INSURER Aviva Asia on Thursday reported an 11 per cent year-on-year drop in the value of new business (VNB), a measure of the expected profits from new premiums written, to £148 million (S$256 million) for the 12 months as at end-December 2016, on a constant currency basis.

The British insurer's full-year financial statement said despite positive foreign-exchange movements, Asia's VNB was dragged down by lower VNB in Singapore and other Asia markets.

Singapore's VNB fell 10 per cent to £104 million in FY16, due to the loss of the distribution tie-up with DBS Bank, which ended in December 2015. Excluding the bank distribution, VNB in Singapore grew 23 per cent in 2016 - something Aviva Asia said far exceeded the market average of 6 per cent.

VNB in other Asia markets was down 15 per cent to £39 million, "due to the adverse impact of lower sales and higher expense overrun".

Operating profit from its life and general insurance and health businesses for the full year was £228 million, down 8 per cent from a year ago, weighed down by an operating loss in the life insurance segment from other Asia markets. In particular, higher claims from the Singapore health business led the insurer to more than double its operating loss for the Asian general and health insurance operations to £13 million.

That said, the strengthening of Asia's existing distribution platforms, particularly Aviva Financial Advisers in Singapore which was launched in August 2016, as well as stronger agency and broker channels in China, helped soften the declines in Asia's overall results.

"In China, Aviva-COFCO continued to grow its agency force. During the period, the agency business recruited over 7,500 new agents and the agency business alone saw an increase of 28 per cent in VNB over prior year," the insurer said.

In Indonesia, Astra Aviva Life's annual premium equivalent doubled over the prior year. It is now ranked No 9 in the domestic bancassurance market, the insurer said.

Said Chris Wei, executive chairman of Aviva Asia & FPI, as well as global chairman of Aviva Digital: "The Asian markets are strategically important to Aviva, owing to large populations in fast-growing economies including China and Indonesia, coupled with relatively low insurance penetration rates and social insurance coverage."

Looking ahead, he said as part of the insurer's digital first strategy, Aviva, Hillhouse Capital Group and Tencent Holdings recently announced an agreement to develop an insurance company in Hong Kong. It will focus on digital insurance.

Amendment note: This article has been changed to reflect that Astra Aviva Life is now ranked No 9 in the domestic bancassurance market and not No 91.