Planning a new policy for insurer

INTERVIEW:Andrea Moneta,  chief executive of Aviva Europe

THE GLOBE in London, the famous theatre where Shakespeare first staged many of his plays, was a fitting venue for Andrea Moneta to plan a dramatic transformation of the European business of UK insurer Aviva.

On July 14th, 2008 – just two weeks after starting his job as chief executive of Aviva’s European operations – Moneta summoned the heads of the company’s 12 country businesses who report to him to a think-in in London.

“Let’s assume you could buy Aviva Europe from Andrew Moss [the insurer’s overall chief executive], how would you manage it?” he says he asked his executives.

The question got the creative juices flowing and the chief executives of Aviva’s various European units started devising a grand plan to grow the business. “There were 400 years there as a collective experience,” he says in a thick Italian accent.

“I asked them to look at the business as if we were entrepreneurs looking at their own business: ‘Let us think as if it was our own money in this.’ There followed a long silence and this is the result.” The “this” that Moneta refers to is the transformation of a group of companies owned by Aviva across 12 countries into a single, pan-European business under the umbrella of an Irish company.

Moneta, a former Italian banker and European central banker, has claimed that Aviva is the largest bancassurance group in Europe as it sells insurance products through 20,000 bank branches, giving it access to 30 million customers. The new structure will help drive earnings, he says.

“Instead of reinventing the wheel 12 different times, we hope to get it right the first time, one time, and leverage on the skills that we have in the different places,” he says during a visit to Dublin just before Christmas.

Luckily for corporate Ireland, Moneta has chosen to base the headquarters for the overall European business in Dublin, with the creation of 12 branches reporting to the Irish company. The plan is subject to regulatory approval but, if sanctioned, the pan-European company will give Ireland a pivotal role in the future growth of the business.

Stuart Purdy, the chief executive of Ireland’s Hibernian Aviva (to be known in Ireland as Aviva from this month), has been appointed products director for Aviva Europe and will be responsible for establishing and managing two pan-European insurance divisions.

The reasons for picking Ireland over Aviva’s other European locations are manifold. Ireland’s low corporation tax regime was, of course, one of them but it was “neither the primary nor most important” reason, says Moneta.

“[Hibernian Aviva] is one of the oldest businesses for Aviva – it goes back 1908. It is well established and a fully-fledged business. Here we have general insurance, health and life and pension business,” he says. “It was a very good platform where we could build our investment management activities.

“There is a long-lasting culture in terms of financial services. It is many years that international companies have set up their companies here so they have a qualified, skilled labour force – that was a good solution for us. It was pivotal to what we wanted to do.”

In simple terms, the aim of creating a single holding company covering 12 country branches is to avoid duplication, Moneta says, and to draw on economies of scale. The objective is to “decouple” the manufacturing of insurance products from the distribution of the products. In other words, the holding company will create a range of products that can be sold to customers locally.

In making his point, Moneta asks how many insurance products, including health, motor, household and travel insurance, are sold on average by one insurance company to a single person? The answer is surprisingly few: 1.1 to 1.3 products per person.

“It is extremely low because the insurance industry has been built in silos,” he says, adding that Aviva aims to use its new structure to sell more products to customers.

Creating a network of branches under a single holding company will also enable Aviva Europe to use its capital more effectively, he says, particularly with the imminent arrival of Solvency II, the EU rules which will determine how much insurance companies must set aside in their reserves. “The capital will remain in the holding company so you don’t need it across the branches,” he says. “This will give us the flexibility and opportunity to place it where it earns the most money.”

Moneta is aiming to double the company’s earnings by 2012 “at the latest” under the new strategy. The Italian businessman has not wasted much time introducing the changes. A day short of his four-month anniversary in the job, he pitched his “vision” for the European business to the Aviva board. They were “shocked”, he says. “It was different but it made a lot of sense.”

Moneta was hired by Moss in 2008 from the Dubai Financial Group, where he was managing director. He declined to comment on the debt-laden emirate’s current financial nightmare. Before Dubai, Moneta worked at the European Central Bank (ECB) as head of strategic planning from 1999, after a decade at Andersen Consulting (now Accenture). After a two-year stint at the ECB, he joined Italian bank UniCredit, where he held a variety of jobs, including group chief financial officer and head of private banking and asset management. As chief integration officer for UniCredit’s 2005 merger with German bank HVB, he oversaw the integration following a $20 billion (€14 billion) merger and the creation of one of Europe’s largest banks.

Moneta believes mergers of this scale have to be “extremely clear and as fast as possible”. “To change always brings a certain level of uncertainty – the sooner you remove it the better,” he says.

Counting himself lucky to have gained experience in so many industries and jobs in different locations, Moneta says he has continuously faced “very challenging tasks”.

With just 18 months’ experience in the insurance business, Moneta has only recently caught what he calls the “professional disease” of an insurer: he finds himself watching weather more closely. “If it rains in Ireland, I cross my fingers,” he says.

The recent floods have focused the company on how it can respond to its customers. “Regardless of the economics of this, it is very important that we are close to our customers when something like this happens,” he says.

Moneta concedes that the prices charged for general insurance in Ireland will have to rise.

“Ask any investor, also any insurer, to square its own numbers, then the claim ratio has an impact on the pricing of the general insurance business,” he says.

“I think that maybe in the past the Irish market was extremely rich and a lot of reserves were built up. Maybe these play a role in terms of pricing in recent years and these need to be adjusted. This is a fact.”

Moneta says Aviva is making a substantial investment by sponsoring Lansdowne Road’s new stadium, which is estimated to have cost the firm about €44 million. The stadium features prominently in Aviva’s financial literature. The Italian says he has been impressed with Ireland’s ability to deal with its problems.

“We are strong believers in this business in Ireland,” he says. “Yes, Ireland is suffering now, but when you talk with the Irish people there is an awareness that the times of the Tiger are gone and there is a need to rethink the business profoundly.

“I am optimistic about the ability of Ireland and the Irish people to get through this crisis and come back to a very sustainable dynamic economic environment.”

On The Record

Name:Andrea Moneta

Position:chief executive of Aviva Europe

Age:44

Nationality:Italian.

Family:married with two children

Why is he in the news?Aviva has just announced that it is to create a single pan-European holding company based in Dublin. The company's Irish division has dropped Hibernian from its name and is now known as Aviva. The insurer has bought the naming rights to the new Lansdowne Road stadium, which opens later this year.

Hobbies:sport, travelling and reading

Something you might expect:He is a supporter of Inter Milan and a big fan of Ireland manager Giovanni Trapattoni, who managed the club from 1986 to 1991.

Something that might surprise:He was managing director of Dubai Financial Group, part of the emirate's heavily indebted sovereign wealth fund, before he joined Aviva in 2008.