Aviva Asigurari de Viata, the Romanian life insurance arm of British financial group Aviva, has cut its number of employees by 10% since the beginning of the year, and has renegotiated rent for spaces occupied by agencies and branches, in an attempt to cut costs.
These measures come amid a 20-25% decline in Aviva sales in the first half of the year (after it had recorded two-digit rises in previous years), along with the entire insurance market, which saw a 3% decline; the company has remained in the red since its entry on the Romanian market, in 2000.
"We had an efficiency target we had to meet, and we found that we had more staff in the company than was necessary. That is why we stopped hiring in January and have not replaced employees leaving the company. This has had a positive effect on costs," Shah Rouf, general manager of Aviva Asigurari, told ZF.
The company cut its staff by 10 by not replacing those who left, whilst another 7 people were laid off last month. In all, the number of employees fell by 17, i.e. almost 10%, with Aviva currently employing around 160.
Several insurers made personnel cuts this year. Omniasig, the second-largest player on the general insurance market, cut its employee numbers by 200, i.e. 11%, currently operating with 1,600 staff. In addition, the insurer closed down 47 territorial branches of the over 270 it had across Romania. Another example is Ardaf, a company that cumulated 100 million euros in losses over the last three years, and which has recently decided to reduce the number of employees by 164, accounting for 12% of the total, as well as switching 500 agents to commission-based contracts.
In addition to rendering personnel costs more effective, another step taken by UK’s Aviva, No. 6 on the life insurance market, was to renegotiate rent for its agencies and branches.
"We either renegotiated rent, or we relocated the agencies, this secured us a rent cut by at least 10% (…)," added Rouf.
According to Rouf, gross premiums underwritten by Aviva in the first six months of the year fell by 20-25%, but the decline is less significant than originally forecast.
"We expected this decline, but we managed to exceed our targets. As for profit, we don’t expect one in the next few years. We have recently made a major 3 million-euro investment - in a new IT system, which will help us significantly boost our volume of activity, with the same number of staff."
In 2008, Aviva underwrote almost 108 million RON (29.3 million euros) in gross premiums, 29% more than in the previous year. The company’s life insurance market segment saw a steady rise over the last few years, from 4.5% in 2004 to 5.8% in 2008, but its losses climbed as well, exceeding 21 million RON (5.8 million euros) last year.
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