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Aviva slashes costs as IT consolidation is complete

Aviva slashes costs as IT consolidation is complete

UK life insurance business sets pace for global project

Aviva has completed a large cost cutting plan in its UK life insurance business, switching off hundreds of legacy IT systems and driving through large cuts in staff numbers.

The move signifies the first operations in which Aviva has completed original cost cut plans. Globally, it is attempting to remove half a billion pounds by 2010.

The insurance giant, which trades as Norwich Union in the UK until all operations are called Aviva from next month, said it had switched off over 300 of its 550 legacy systems in UK life insurance, and reduced the number of core systems from 20 to 4, driven through by chief information officer Ian Butterworth. It had migrated 2.7 million policies from old systems.

Operating profit for the division hit £880 million in 2008, up 50 percent compared to £589 million in 2005, it said. Staff were cut by 3,300 to 9,200 employees in the period. Annual cost overruns had been reduced from £140 million to £40 million from 2005 to 2008, and would be "eliminated" this year, Aviva said. Work began on UK cost cutting in September 2006, and the One Aviva global cost cutting plan was launched just over a year later in October 2007.

In a presentation to investors today, chief executive Mark Hodges said the UK life business was in "excellent shape" and that it had been transformed into a "modern, low cost and dynamic organisation" that was better at retaining customers.

Aviva highlighted how much it had offshored IT and processes. From 98 percent of UK life operations being run in-house in 2005, only 46 percent are now in-house, with 18 percent of business processes offshored to WNS and 36 percent of policy processing outsourced to insurers including Swiss Re and Scottish Friendly.

As part of investment in new technology, some seven million policies are now accessed by customers online, it said. It wants 70,000 pensions customers to use its online tracker by 2010. Yesterday, Aviva launched a new UK website for brokers.

In March, it signed a £700 million outsourcing deal with EDS for global operations, and last week it said it would use business process management software from Lombardi to simplify operations further.

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