As M&A trends shift and insurers seek new capabilities and customer-facing technologies, Aviva plc has been rapidly evolving its M&A strategy to take advantage of the new opportunities emerging in the marketplace. Chris Wei of Aviva discusses their strategy and objectives with Gary Reader of KPMG.
Gary Reader, KPMG’s global head of insurance sat down with Chris Wei, Global Chairman of Aviva Digital and Executive Chairman of Aviva Asia to find out more about how Aviva is evolving its approach to deals.
Gary Reader: Aviva has been very clear about its intentions to transform into a digital and customer-focused organisation. How is that emphasis influencing your M&A activities?
Chris Wei: Our stance is changing dramatically. For one, the traditional bank/insurance relationship has been fundamentally de-emphasised. What we are looking for today are relationships that go beyond simply leveraging bank networks to also help drive our vision around digital execution for financial services. I don’t think the traditional big M&A distribution deals are going to drive our success in the future, but rather smart investments and partnerships that deliver brilliant customer experiences.
Gary Reader: Will partnerships be a bigger focus for Aviva moving forward?
Chris Wei: I think when partners share aligned interests, it can be hugely successful. Our partnership with Amazon in the UK, for example, allowed us to be the first UK insurer on the Alexa platform and helped us improve service delivery to our customers. At the same time, Amazon’s cloud and infrastructure services have been very important to our growth in the UK, so there is a clear alignment of interests.
Gary Reader: Nobody has an unlimited investment budget. How do you prioritise and select your areas of focus for M&A and partnership activity?
Chris Wei: We have a few macro topics that we focus on – data and analytics and artificial intelligence, for example. More broadly, we are focused on creating a brilliant and frictionless customer experience. If the target is aligned to one of our priority areas of focus, can help us improve the customer experience and has a business model that is relevant for our business, it may be worth exploring. But we also recognise that we need to bring something to the table as well. The really good companies are not struggling to find financing; what they want is access to data, to customers and to deep industry experience.
Gary Reader: How has this shift towards partnerships and non-financial benefits influenced the traditional due diligence process for Aviva?
Chris Wei: It’s certainly tough. If you value some of these opportunities, particularly the startups, from a pro forma perspective, you are likely going to be very, very wrong. It’s almost a waste of time. You can’t get too hung up on financials. We often look at other key metrics that influence the way they engage customers or users. What is their customer proposition and are customers buying into it? Ultimately, it often comes down to experience and instinct. If you think it’s too expensive, you need to walk away.
Gary Reader: Aviva Ventures has also been very active in the investment space, particularly for technology startups. Is the value proposition different with the venture arm?
Chris Wei: The ventures unit is really set up to focus on startups and the like, but it reports into our group M&A director so it is very much aligned to our overall strategy. But it’s a different mindset versus traditional M&A.
Ventures often invests into really early stage companies, sometimes as a way to access a technology or piece of intellectual property than anything else. And, we recognise that some of the investments simply aren’t going to succeed. But where we do, the value is tremendous.
Gary Reader: In your opinion, how important has the creation of alignment between Aviva’s M&A objectives and the corporations’ overall strategy been?
Chris Wei: I think it’s extremely important. Our very public strategy is ‘digital first’ and that translates throughout – into how we drive change and transformation; into how we align our investments and ventures; and into how we structure our new partnerships. The good news is that our board and group executive team are 100 percent behind the strategy and recognise the urgency. I think we’re very aligned as an organisation and the value of that alignment is being demonstrated.