2021 priorities with Amanda Blanc, CEO of Aviva

Rowena Morris:

Hi everyone, and welcome to this episode of our business in focus podcast. I am Rowena Morris, a director at PwC, and I am your host for this episode. In a year like no other, understanding what CEOs see as their biggest challenges and opportunities can provide us all with essential insight. To help us do just that, we’ve just launched our 24th annual CEO survey. It’s a big moment in the calendar here at PwC, and I look forward to reading it every year to find out what matters to CEOs and how they are planning for the future. In this episode, we are going to be discussing some of the challenges that CEOs are facing at the moment, and what their priorities are for the coming months. I am delighted to be joined in our virtual studio with Amanda Blanc, the CEO of Aviva; and Kevin Ellis, PwC’s UK chairman.

Hi there Kevin, hi Amanda.

Kevin Ellis:

Hi, nice to see you.

Amanda Blanc:

Great to see you.

Rowena:

Kevin, I am going to kick off with you, our CEO survey shows that there is confidence that the crisis has bottomed out and a majority of CEOs expect the economy to improve this year. Alongside looking for operational efficiencies, it is clear that CEOs are also prioritizing investment in digital transformation. It will be interesting to get your thoughts around, why do you think that is?

Kevin:

Certainly, the CEO survey was really quite positive, and the UK CEOs are more positive than the international CEOs, possibly led by the Brexit deal at Christmas and vaccine roll out. That positivity really comes through, and it is quite contagious that kind of confidence. The digital transformation story links to the fact that like all CEOs, everybody wants more for less digitized and that is driving a lot of behavior. Also, everyone wants more insights. Business like ours, going through the pandemic, when trading was tough at the start of the pandemic, and we were all getting to grips with the situation, we took a lot of confidence from our CRM system, because that was giving us data about an uptick in our orderbook, and therefore an uptick in sales, that gave us the confidence to see ourselves through.

Everyone wants insights and everyone wants more for less; and therefore, having a digitalized system, having the right transformation that gives you the system, so you can drive your business through the windscreen of the vehicle rather than the rearview mirror, is really what people have both learned through the COVID times, but what was coming at us anyway even before COVID hit.

Rowena:

Really helpful, and the heart of competitive advantage. Moving on to, the number of CEOs looking to drive revenue through mergers and acquisitions is up marginally on last year, interestingly to see, so 39% compared to 32% in 2020. What role do you think deals will have in the UK’s recovery?

Kevin:

Again, what’s happened here is that, this is obviously a health crisis and not a financial crisis, that makes it very unique. We went into this crisis with 2.6 trillion dollars’ worth of capital available, looking for a home. That dry powder has meant people have been out there looking for deals. The UK was one of the earliest deal markets to take off. It was first in Europe really, as we saw it from our deals practice, behind Asia. People were looking to reshape their businesses, they were looking to grow, and they also feared the fear of missing out, was driving a lot of activity. Also, at the same time, the UK exchange rate was favorable as well for people wanting to invest in the UK.

From the UK point of view, it is really important, because at the same time as we were coming out of Brexit, and looking for new trading partners, at the same time we also needed to kickstart the economy coming through COVID. One of the ways you kickstart an economy is through foreign direct investment. The deals market was driving that foreign direct investment. Again, the stability of seeing a Brexit deal done, however, skinny it was, was critical in that. But also the vaccine roll out again gave people a feeling that confidence is on its way, the tide is turning, there is a light at the end of the tunnel coming towards us, let's get our money spent, let's get into position to grab the upside. When you look around the market, we are seeing that all the time.

Amanda, you’ve been in position now for 9 months, and you certainly haven’t sat on your hands as far as deals are concerned, have you? So let’s talk about what you have been up to?

Amanda:

What we did was, four weeks into my role, we set out a strategy last year, around focusing the portfolio of Aviva. Everybody was a little bit skeptical that was this the right time to be doing it, in the middle of COVID, and with everything else that was going on, but actually we have found that, exactly as you say, the deals market is buoyant and we were able to find really good homes for the businesses that didn’t fit our strategy any more. We were looking at, and Kevin you will remember this in the 1990s, early 2000s, insurance companies were putting flags all over the world. What you see now is more of a focus on the markets where you can really believe that you can win. I was reading a stat this morning, which said 70% of the deals that have been done in the last 12 months, over a billion pounds, have been divestments. That’s interesting, because it is, we are not alone looking at, really focusing our effort and attention on where we actually can win.

Kevin:

That focus is probably the big message around all the deals we are seeing. I know a lot of people that I am talking to are now thinking, actually I can get real value for this part of the business, not because it's a bad part of the business, but it doesn’t really fit my next five-year strategy, it has obviously what’s driven your activity.

Amanda:

We also were looking at things like volatility, so if we were looking at Europe, where we were in guaranteed interest rate projects, where the volatility was high, when you got a low interest rate environment, for us it was the case of, actually they would be better owners of these businesses. They were great businesses, but just didn't fit within our risk appetite. It did make a lot of sense for us, and we were able to execute fairly quickly. Interestingly, that perhaps because of COVID, and you are not spending so much time on planes, maybe there is more time for the meetings to get the deals done, it’s interesting.

Kevin:

Makes sense.

Rowena:

I am going to move on now to another big issue coming out of the CEO survey around cybersecurity. So, 91% of CEOs are citing it as a major concern, making it second only to pandemics and health crises. How do you plan to stay ahead, Amanda, of the latest cyber threats this year?

Amanda:

Cyber is a big issue for everybody. It is a big issue for our customers, it is a big issue for us, it’s also obviously a big issue for the regulators when they are thinking about what risks we are susceptible to. The report in January 2021, the FCA reported 78 million pounds that have been stolen in cloned firm investment scams over the last year. We also know that these types of scam are on the rise. That’s really worrying. It is worrying for insurers, where people give their money to us, and they believe that they are going to be protected, and they trust the brand. If somebody is pretending to be you or anything like that, that’s really a concern. Our own fraud report last year said, one in five people have been targeted by a coronavirus scam. What we see is, even in these difficult environments, people are opportunistically thinking that they can take advantage of vulnerable customers. We take it really seriously. I would say, it was right up there, so I would agree with your survey, and you’ve got to make sure that you really look at your customer’s data, it is really serious. Of course, with our specialist teams working around the clock to detect and respond to cyber incidents, and this is not of course just a UK thing, the threat can come from any country, anywhere, at any time. The more that we go digital, to go back to your very first theme, the more susceptible you become to those attacks, and therefore the more aware you have to be.

Rowena:

I feel we could do a whole podcast, just talking about this, but I am going to move us on now. Kevin, moving over back to you, there has been a lot of discussion recently about the UK’s future role in the world, especially after leaving the EU. What do you think makes the UK an attractive place to do business?

Kevin:

It has always been attractive partly because of the history, both time zone and language and the culture here, and the trained workforce. It has always put us in a strong position. There is another factor here as well, which we are very focused on. I touched on it earlier with the foreign direct investment, and we got to have the right level of regulation, the right level of trust and control, but not too much red-tape, to make it unattractive, and that came through very strongly in the CEO survey. The big thing is, having that trained workforce, and an environment, where you trust the regulation, you trust the rule of law, and therefore if you are putting your money to work in an investment or a deals based way, you know that your investment is going to be well looked after looked after by the rules, regulations and culture of that country.

Rowena:

What can we do in the future to ensure the UK continues to be an attractive destination for foreign investment and an effective trading partner with major economies around the world?

Kevin:

There are massive megatrends going on at the moment in the world, and it's really a question of making sure as a government, that you oil the wheels, and the changes that happen naturally. It really goes down to we are in this fourth industrial revolution, and we know that 30% of the jobs that exist today will be replaced by machines and robots. But at the same time, those very machines and robots will create another 30% of jobs. You can’t walk from one job to the other, you have to be retrained.

Although, the market will retrain, the more the government can oil the wheels to improve that reskilling so that people can move into the jobs of the future, the sunrise jobs and out of the sunset jobs, that will be a big factor. Because one of the attractive things about the UK is the ability to have the skills and the trained workforce where you want to invest. That goes to the green agenda. We know that if the UK are going to hit their pledges in terms of net zero, then we’ve got to effectively retrofit all the houses in the UK in terms of their energy use. That will require about 500,000 new jobs to be created in that space for that retrofitting to happen.

Now, I am sure that will happen, but you want it happening on time, and you want to lead the world in it and attract investment. The more that we can oil the wheels of that reskilling for those sunrise jobs, you can move those jobs out, the fossil fuel industries, then that will help. It is about making sure that we have the right trained and skilled workforce to attract the money that will come into this country alongside the historic advantages we have got through language, time zone, and rule of law.

Rowena:

Great, so Amanda, moving on to you now, so we talked a bit about the UK’s changing role in the world, now thinking about the future of financial services, how do you expect that the UK’s FS sector to evolve over the next few years, and what do you think the key opportunities are, building over what Kevin was talking about.

Amanda:

The really key point that Kevin raised there was around ESG. This and the recognition of the importance of sustainability, to the government, to business, to customers, we cannot underplay that. You’ve seen so many announcements in the last few weeks, Aviva’s own announcements, but many others. This real important move to a more sustainable world. We know, as an insurance company, if the world keeps warming at the rate it is now, then there is no such thing as an insurance company, as we go forward. This is a trend, which is also a business opportunity. Kevin talked about retrofitting houses, of course, you have to retrofit businesses and properties as well. Everything is going to need to be thought about. This transition from one economy, as Kevin was talking about, to another, is important for everybody. It is important in the leveling up agenda in the UK, it is important in the building back better environment. The role that insurers have specifically in that is huge. If we think about our balance sheet, we have a massive opportunity to invest in UK infrastructure. We can invest in UK green infrastructure, and we can really aid this transition. I am super optimistic about the role that we as insurers can play in this transition of the economy from where it is today, to where it needs to get to.

Taking the businesses out of London, really transitioning, I am from the Rhondda Valley in South Wales, a coal mining area, that whole area needs to be redeveloped, and you need to be thinking about new skills, new things for people to do, in some of the new industries, that Kevin just talked about. That’s a big opportunity.

ESG is really important, of course, the digital opportunity is also the other massive opportunity for us, and what we’ve seen with COVID is an acceleration of that trend towards digital. We’ve all learned to work in a new way, we’ve all learned to do business in the new way, we’ve all learned to buy things in the new way. I don’t think that’s going back, so as organisations, we’ve really got to push that forward.

Rowena:

I would like to pick up around that ESG agenda, so you talked about the announcement Aviva made at the beginning of March around, becoming the first major insurer to set a target to shrink its carbon footprint to net zero by 2040. Clearly, as you are saying, you are not alone in identifying climate change is an important risk, we’ve watched it rapidly climb the agenda within our CEO survey, with 70% of the CEOs citing it as a concern this year, compared to 44%, two years ago. It just would be really interesting to hear your perspectives on what made you decide to set those demanding climate targets.

Amanda:

Look Aviva has always had this at its heart. It was one of the first organisations to start becoming active in terms of shareholder voting, looking at its own operations. We have solar carports in our Perth office, which have been long in the planning. We’ve always had this as part of our DNA, but when I looked at the plan that the business had to take us to the next level, it was about last September, I said, ‘look it is just not good enough, we need to be way more demanding of ourselves than this, and not set ourselves a target that’s going to be easy to achieve, and being net zero by 2040, and we’ve said we will do that will all of our investments, with all of our operations, and from are underwriting perspective.’ This is a big target for us, but we thought we had to do it. We saw it as a huge responsibility that we had as the UK's largest insurer. It is something that, we’ve set ourselves goals, there are steps along the way. It is clearly a big strategic issue for us. We are going to be judged in our LTIP by the performance that we make on these goals so we put our money where our mouth is really. We believe acting now is the right thing to do. Of course, that combines nicely with this year being COP26, and G7 and G20 all being in the UK, the UK have a really key role to play here. I am very excited about seeing how it all develops.

Rowena:

It really leads me quite nicely on to my next question that I want to talk about, the value of purpose really, and how it has come to the fore over the course of the pandemic, with many businesses taking more and more action to support their environment and their communities more so than ever before. Do you think this trend is set to continue and will last in 2021 and longer, maybe Amanda, if I come to first?

Amanda:

For sure, 2020 really underlined to us the importance of purpose. Aviva’s purpose is, with you today for a better tomorrow. That's a really strong purpose, and it's why we exist. If you think about an insurance company, that’s what we are here to do. We contributed over 40 million to support community partners last year, whether it was health services, businesses, to our markets around the world, to the NHS charities in the UK. The whole sustainability goal is around purpose. Everything is connected actually. What we do in our community is what we do in terms of protecting people when bad things happen to them, what we do around sustainability, all of these things are connected, and that means that people want to work for organisations like Aviva, because, our colleagues now are really selective about thinking about the type of business that they want to work for. We can’t just walk past that.

Kevin:

Yeah, I totally agree with Amanda. It's all connected. It is really interesting, we do a digital annual report. In our digital annual report, we include our diversity and inclusion statistics. They go way beyond any legal requirement. They include our black employees pay gap; they include ethnic minorities as well as gender. What’s interesting is, with the digital annual report, you can see what is red. You won’t be surprised to know that people read more about our diversity and inclusion than they read about anything else in that digital annual report, is what really matters to people.

Going to Amanda’s point, to be a successful organisation, the only long-term competitive advantage is your culture. To have a strong culture, you have to have a purpose today and it all links together, right from how you treat people in good times and bad times, or how you treat people in terms of who you recruit and who you reward in a fair just society. It isn’t just about societal good, it's an economic good, because you won't be able to attract and retain a top talent if you aren’t living your purpose, because the people that see it most transparently, are the people that work for you. COVID in a way brought it to the fore, and it came out in the CEO survey, that actually UK CEOs were more concerned about their employees wellbeing as both the societal and economic good, than our international colleagues. That has come up across to me in all the conversations that I have with CEOs through the COVID crisis. The first thing that talked about is how they have been looking after employees, and it comes from productivity, performance and retention, which are all critical for a successful business as Amanda said just now.

Rowena:

That’s really interesting, Kevin. It will be helpful to focus on maybe two or three practical steps that you would see in that, CEOs can think about taking or that you know they are taking to look after the wellbeing of their people, especially as we continue to navigate through these uncertain times.

Kevin:

One of things that really worked well for us was personal resilience. We didn’t know whether the Wi-Fi would work when we sent 22,000 people to work from home, let alone whether they could be productive and effective. But we knew that only way they could do that if they felt safe, so being confident about telling that their jobs were safe, being confident about telling them what we thought the future would be, and that the uncertainty they didn’t have to worry about was their job, and their paycheck, and their mortgage. The second part of that, was we then did regular live streams, bringing a psychiatrist together with me, answering questions on people’s concerns and wellbeing, on how you stay healthy, how you cope with loneliness during the lockdown and things like that.

If you like, in terms of whether it was the right thing to do, the first time we showed the live stream, we had 14,000 people watching it live. That immediately opened my eyes to the importance of wellbeing and the importance as an employer of taking that responsibility for your employees, particularly in challenging times. Coming back to the office will be nearly as scary as leaving the office, because it is another big change for people, particularly we’ve got a young workforce, and therefore, we need to carry on with the resilient support, psychological support of our people as we bring them back into the offices and they deal with another major change in their lives.

Rowena:

Amanda, how has Aviva been thinking about this and planning for that.

Amanda:

Obviously, it is very similar to what Kevin was talking about there. You will understand that, because really our people are our business, without that, we don’t actually have anything. People, they pay their insurance premiums, and then there is a promise that we will pay a claim, it’s a very personal thing, service that we deliver. We already do things like 35 hours for care and responsibilities, equal parental leaves, these are all things that we do as a standard, generally making sure that people can thrive and be themselves at work, it is at the heart of Aviva.

Rowena:

The last question for both of you, and maybe if I kickoff with Amanda first, how have the disruptive events of last year impacted your future plans for transformation and growth, particularly in relation to meeting the changing needs of customers?

Amanda:

I started my role in the middle of a pandemic. It is the most strange experience really if you think about it. It has really allowed me to think about different ways of working, but what it does do without doubt is, it really makes you think about how do you deliver transformation and growth when you don’t have people collaborating in a workspace. For me it's really thinking about, how has that slowed us down potentially in those areas and how can we accelerate that now as we go forward.

The basics of customers haven’t changed. They want fair prices, they want a trusted brand that delivers on what it said it is going to do, excellent service, ease of access, but actually doing it has been a bit harder over the last 12 months. Our focus now is really on simplifying the group in the middle of all of this. We’ve done seven disposals in seven months, we now need to focus on the businesses that we have left in the core market and make sure that we enhance our digital experiences, but pick up also on all of the other things that a good business needs to do, that have been just a little bit difficult over the last 12 months.

Rowena:

Kevin, do you want to touch on the same question, but from a PwC perspective?

Kevin:

A lot of our organisation is about training. We recruit 4000 people every year and lose 4000 people every year, so a very fast turnover business. A lot of the learning of training comes through, learning how to network, more importantly observation skills. Although, we’ve been very productive during the pandemic, and we’ve been very effective as an organisation, I do feel that a lot of our people have probably lost out in terms of observation skills and that will have a long-term impact on the business, but also they have lost out in terms of culture. We’ve recruited 3,500 people during the pandemic, and a bit like Amanda starting in a pandemic, it’s not quite the same, where you are not together in an office, innovating, having a chat by the watercooler, having chat by the coffee machine, and therefore, that culture is critical with the organisation.

We do need to get probably the learnings from COVID, but at the same time probably get our people back into the office, at least three days a week, in a blended working way, so we can reinstall the observations and learning, and rebuild the culture. It is particularly relevant, because those 3,500 people that joined, they won’t know what they are missing out on, unless we explain it to them, because they won’t understand that the last year was very abnormal and normality requires a different kind of skill in terms of networking, observation, and culture. It is incumbent on us as leaders and those that have been in the organisation for a long while, to explain to them that actually they do need to come into office and navigate the world, and socialize, and mix, and network in a different way, and learn and benefit from that. Otherwise, in a couple of years’ time, they might say, my career has not gone where I wanted it to, why is that, and if we haven’t told them, then that’s our fault.

Rowena:

Great, thanks Kevin.

That draws us to the close of another episode of business in focus, thanks so much Amanda and Kevin for a fascinating discussion, and of course thanks to everyone for listening too.

If you would like to explore our CEO survey findings, or to read our one to one interview with some of the UK’s top CEOs, visit our website at pwc.co.uk/ceosurvey

Finally, don’t forget to subscribe to keep up to date for future episodes. Thanks everyone and stay safe.

Participants

• Rowena Morris, Director, PwC
• Amanda Blanc, the CEO of Aviva
• Kevin Ellis, PwC’s UK chairman