Topic

BSC MANAGEMENT 2010/ 2012

BATCH -14

GROUP MEMBERS

NAME NIBM INDEX UCD STUDENT ID EMAIL

Ms. L K Jayawardhana BSCI14-075 10295445 lakshij1@gmail.com

Ms. K S P Perera BSCI14-119 10296972 spriyadarshinip@gmail.com
Ms. S J K De S Gunasekara BSCI14-062 10295437 janitha_gunesekara@hotmail.com
Mr. T D Weerawardana BSCI14-174 10295666 thrakaweerawardana@yahoo.com
Mr. M R Razlan Aaqib BSCI14-001 10295607 razlanaaqib@hotmail.com
Mr. M A M Abdullah BSCI14-002 10296301 aaboobucker@gmail.com

GROUP ASSIGNMENT

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Select an organization that has gone for a re- orientation change in the
recent past. Study the change management process and describe it in
detail. Identity the most critical aspects of the change done and
evaluate the effectiveness of the management’s efforts of dealing with
each aspect. Come up with proposal to avoid the difficulties faced by
the management in the said effort, in future similar situations. Length
of your answer should be a minimum of 20 pages. Please note that the
lecturer comment from and the plagiarism test result test sheet should
be attached to the assignment.

Module : Managing Change - BMGT2001L

Lecturer : Mr. Kolitha Ranawaka.

Submission Date : 27th December, 2010

Group Members

STATEMENT OF AUTHORSHIP

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“We declare that all materials included in this report are the end result of our own
work and that due acknowledgement has been given in the bibliography and
references to ALL sources be they printed, electronic or personal.”

Name of the Group Member Signature

Ms. L K Jayawardhana ……………………………..

Ms. K S P Perera ……………………………..

Ms. S J K De S Gunasekara ……………………………..

Mr. T D Weerawardana ……………………………..

Mr. M R Razlan Aaqib ……………………………..

Mr. M A M Abdullah ……………………………..

ACKNOWLEDGEMENT

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We wish to express our sincere appreciation to the employees of AVIVA NDB
Insurance PLC for their great contribution in assisting and guiding us to collect data
for this assignment.

Our special thanks are extended to our course Director/ Lecturer Mr. Kolitha
Ranawaka who has always given support, direction and advices to prepare this
assignment.

Also, finally much credit should go to our group members who contributed with their
individual efforts for the success of this assignment.

We indebt to all of you for their enthusiasm and reference input to the assignment.
Without them, this assignment would not have been possible.

EXECUTIVE SUMMARY

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Eagle Insurance now known as AVIVA NDB Insurance PLC took wing as a leading
player within Sri Lanka's insurance landscape in the late 1980s. Over the years, the
Company's good governance practices, ethics and innovation have helped it to soar to
new heights.

This assignment was mainly focused on analyzing the re-orientation change in the
recent past at AVIVA NDB Insurance PLC, Sri Lanka who is selling Life and
General Insurance policies.

TABLE OF CONTENT

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 Executive Summary

Table of Contents

Introduction

1. INTRODUCTION

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Re Orientation involve the combination of separate units such as mergers and
acquitions.

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INTRODUCTION TO THE ORGANIZATION:

AVIVA NDB INSURANCE PLC

1.2.1. Origin

In 1988, Eagle Insurance Company Limited took wing as the fledging CTC Eagle
Insurance Company, with Ceylon Tobacco Company (a member of BAT industries,
UK) as the company's main shareholder.

BAT Industries divested its financial services business to the Zurich Financial
Services Group based in Switzerland, as part of a global strategy in 1999. Thus, the
company became part of an international conglomerate with the National
Development Bank (NDB), Sri Lanka's development banking giant being the major
local shareholder.

As the major shareholder with a 75.6% holding in its subsidiary, Capital

Development and Investment Company Limited (CDIC), NDB acquired 100% of
NDB Finance Lanka Limited, the holding company (87.27%) of Eagle Insurance in
2003. The Bank of Ceylon was also a key shareholder of Eagle Insurance with its
23.92% stake in CDIC.

In February 2006, once again Eagle became a member of a multinational group of

Aviva International Holdings Limited Kingdom. Aviva is World’s oldest insurance
company and number one in the UK and 6th largest in the world, became the ultimate
holding company of Eagle with an indirect shareholding of 51%. The NDB holds
36.1% of shares indirectly and 5% directly in Eagle Insurance.

In February 2010, Eagle Insurance transformed in to AVIVA NDB Insurance creating

a historical landmark in the insurance industry. This transformation combined the
strengths of Eagle’s major shareholders, globle giant Aviva and NDB group, one of
the largest financial conglomerates in Sri Lanka with 51% and 41.15% holding

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respectively. Aviva became the major shareholder of Eagle in 2006. NDB has been a
key shareholder of Eagle since 1997.

1.2.2. Purpose
Prosperity & peace of mind

1.2.3. Vision

“ONE AVIVA, TWICE THE VALUE”

1.2.4. Core Values

Progressiveness
Performance
Integrity
Teamwork

1.2.5. Corporate Information

Name of the Company:-

Aviva NDB Insurance PLC
Company Registration No- PQ 18

Legal Form
• Public Company with limited liability
• Incorporated in Sri Lanka on 12th December 1986 under the Companies Act
No.17 of 1982
• Re-registered under the Companies Act No. 7 of 2007
• A composite Insurance Company licensed by the Insurance Board of Sri
Lanka
• The shares of the company are listed on the Colombo Stock Exchange

Tax Payer Identification Number (TIN)

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134001356
Vat Registration Number
1340013467000

Directors
Bill Lisle- Chairman Shah Rouf- Managing Director
Deepal Sooriyaarachchi Harvey Chamberlain
David Hope Eran Wickramaratne
Sarath Wickramanayake Lal de Mel
Indrajit Wickramasinghe Nihal Welikala

Accounting year
31 December

Registered Office/ Head Office

No. 75, Kumaran Ratnam Road, Colombo 02

Company Secretary
Ms Chathuri Munaweera – LLB, Attorney-at-Law

Company Registrars
SSP Corporate Services (Private) Limited
No.101, Inner Flower Road, Colombo 03

Lawyers
Julius & Creasy
Attorneys-at-Law & Solicitors
No.41, Janadhipathi Mawatha, Colombo 01

Auditors:- Ernest & Young

Chartered Accountants

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 No. 201, De Saram Place, Colombo 10

2.0. Theoretical Background

Organizational diagnosis is concerned with identifying what is that needs to be
changed.

2.1. PEST analysis

PEST analysis can be used to examine the organization’s environment and search for
evidence of change that might signal a problem or opportunity. Pest refers to political,
economic, socio-cultural and technical factors.

Political Factors:-
Include new legislation in area such as environment management, consumer
protection and employment; regulation of markets in area such as telecommunications
and broadcasting, fiscal policies and so on.

Economics Factors:-
Economics Factors include issues such as exchange rates, cost of borrowings, change
in levels of disposable income, cost of raw materials, security of suppliers, new
competitors and the trade cycle.

Socio-cultural Factors:-
Socio-cultural Factors include demographic trends such as a fall in the birth rate or an
ageing population. They also include shifting attitudes towards education, training,
work and leisure, which can have knock- on effects on the availability of trained
labour, consumption patterns and so on. Cultural factors can also affect business
ethics and the way business is done in different parts of the world.

Technical Factors:-
Technical Factors include issues such as the levels of investment that competitors are
making in research and development and the outcome of this investment; the

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availability of new materials, products, production processes, means of distribution
and so on; the rate of obsolescence and the need to reinvest in plant and people.
2.2. SWOT analysis

SWOT analysis offers a more comprehensive approach to diagnosing organization-

environment fit. In addition to assessing the opportunities and treats that a PEST
analysis might reveal, it also includes an assessment of the organization’s strengths
and weaknesses and its capability of responding to the threats and opportunities that
confront it.

Strengths Weaknesses

Opportunities Threats

This remarkable piece of history as to the origins of SWOT analysis was provided by
Albert S Humphrey, one of the founding fathers of what we know today as SWOT
analysis

SWOT analysis came from the research conducted at Stanford Research Institute
from 1960-1970. The background to SWOT stemmed from the need to find out why
corporate planning failed. The research was funded by the fortune 500 companies to
find out what could be done about this failure. The Research Team were Marion
Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie.

A scan of the internal and external environment is an important par of the strategic
planning process. Environmental factors internal to the firm usually can be classified
as Strength (S), or Weakness (W) and those external to the firm can be classified as
Opportunities (O) or Threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis

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The SWOT analysis provides information that is helpful in matching the firm’s
resources and capabilities to the competitive environment in which it operates. As
such, it is instrumental in strategy formulation and selection. The following diagram
shows how a SWOT analysis fits in to an environmental scan.

SWOT Analysis Framework

Environmental Scan

Internal Analysis
External Analysis

Strengths Weaknesses Opportunities

Threats

SWOT Matrix

Strengths
Firm’s strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage.
Weaknesses
The absence of certain strengths may be viewed as a weakness. In some cases a
weakness may be the flip side of strength.
Opportunities
The external environment analysis may reveal certain new opportunities for profit
and growth.
Threats
Changes in the external environment also may present threats to the firm.

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 S

SWOT Analysis
Weaknesses
Strengths
Lack of patent Protection
Patents
Absence of important W
Technological Skills Skills
Intern
al
Leading brand Weak brand factor
s

Good reputation among Poor reputation among

customers customers

Production Quality O Unreliable Product T

Exclusive access to high Lack of access to the
grade resources. best resources.

Distribution networks. Lack of access to key

distribution networks.
Management
Management
Threats
Opportunities
Changing Customer base
Changing customer taste
Closing of Geographic Exter
Technological advances nal
markets factor
s
Changes in government
Technological
polices
advances
Lower Personnel taxes.
Tax increase
Change in population
Change in population
age
age
New distribution
New distribution
channels
channels

Positi Negati
ve ve
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The SWOT Matrix
A firm should not necessarily pursue the more lucrative opportunities. Rather it may
have a better chance at developing a competitive advantage by identifying a fit
between the firm’s strengths and upcoming opportunities. in some cases the firm can
overcome a weakness in order to prepare itself to pursue a compelling opportunity.
To develop strategic that take in to account the SWOT profile, a matrix of these
factors can be constructed. The SWOT matrix (TOWS matrix) is shown below

SWOT /TOWS Matrix

Strengths Weaknesses
Opportunities S-O strategies W-O Strategies
Threats S-T Strategies W-T strategies

• S-O strategies pursue opportunities that are a good fit to the company’s
strengths.

• W-O Strategies overcome weakness to pursue opportunities.

• S-T Strategies identify ways that the firm can use its strengths to reduce its
vulnerability to external threats.

• W-T strategies establish a defensive plan to prevent the firm’s weaknesses

from making it highly susceptible to external threats.

2.3. The McKinsey 7S Model

The McKinsey 7S model highlights seven interrelated elements of organizations,
which, when aligned, make an important contribution to organizational effectiveness.
It can be used to identify relationships that are misaligned and point to elements of

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the organization that need to be changed. While it considers strategy, the model does
not make explicit reference to outcomes or the external environment.
The seven elements are:

• Strategy:- Purpose of the business and the way the organization seeks to
enhance its competitive advantage.
• Structure:- Division of activities; integration and coordination mechanisms;
nature of informal organization.
• Systems:- Formal procedures for measurement, reward and resource
allocation; informal routines for communicating, resolving conflicts and so
on.
• Staff:- The organization’s human resources, its demographics, educational and
attitudinal characteristics.
• Style:- Typical behavior patterns of key groups, such as managers and other
professionals, and the organization as a whole.
• Shared values:- Core beliefs and values and how these influence the
organization’s orientation to customers, employees, shareholders and society
at large
• Skills:- The organization’s core competencies and distinctive capabilities.

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3.0. PRESENTATION OF INFORMATION

(LKR Mn) 2009 2008 2007 2006 2005

Total revenue 9655 7265 5875 4813 4277

Total Revenue

12000

10000
Value LKR Mn

8000

6000 Total revenue

4000

2000

0
5 4 3 2 1
Year

(LKR Mn) 2009 2008 2007 2006 2005

Profit before taxation 958 605 546 539 528

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 Profit before taxation

1200

1000
Value LKR Mn

800

600 Profit before taxation

400

200

0
1 2 3 4 5
Year

(LKR Mn) 2009 2008 2007 2006 2005

Gross written premium GI 2504 2045 1867 1468 1211

Gross Written Premium GI

3000
Value LKR Mn

2500

2000

1500 Gross written premium

1000

500

0
1 2 3 4 5
year

(LKR Mn) 2009 2008 2007 2006 2005

Gross written premium -
Life 4632 4342 3788 3150 2832

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 Gross Written Premium - Life

3000

2500
Value LKR Mn

2000

1500 Gross written premium

1000

500

0
1 2 3 4 5
Year

(LKR Mn) 2009 2008 2007 2006 2005

Net assets 2579 2224 2025 1743 1467

Gross Written Premium GI

3000
Value LKR Mn

2500

2000

1500 Gross written premium

1000

500

0
1 2 3 4 5
year

(LKR Mn) 2009 2008 2007 2006 2005

Life Fund 18048 14484 12306 10508 9238

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 Life Fund

20000
18000
16000
14000
12000
LKR Mn

10000 Life Fund

8000
6000
4000
2000
0
1 2 3 4 5
Year

(LKR Mn) 2009 2008 2007 2006 2005

Return on net assets (%) 37.12 27.2 26.97 30.92 35.98

Return on net assets

40
35
30
25
LKR Mn

20 Return on net assets (%)

15
10
5
0
1 2 3 4 5
Year

20
(LKR Mn) 2009 2008 2007 2006 2005
Basic earnings per share 24.35 15.46 17.57 17.45 17.18

Basic earnings per share

30

25

20
LKR Mn

15 Basic earnings per share

10

0
1 2 3 4 5
Year

(LKR Mn) 2009 2008 2007 2006 2005

Market capitalisation 5340 3450 4523 4065 2550

Market Capitalization

6000

5000

4000
LKR Mn

3000 Market capitalisation

2000

1000

0
1 2 3 4 5
Year

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4.0. ANALYSIS AND DISCUSSION

PEST analysis

Political Factors:-
In choosing assets for investment, AVIVA NDB has ensured that the determinations
issued by the regulator relating to the admissibility of assets and the Solvency Margin
Rules are complied with in full. As AVIVA NDB has invested a high proportion of its
assets in government securities and other admissible assets, the Company was able to
maintain solvency levels which are much higher than the minimum levels required by
the regulator. The Company’s statements of solvency are certified annually by the
Company’s appointed Actuary and independent external auditors.

Economics Factors:-
During the year, the Company recorded a growth of 11.7 % for GWP with the
General insurance and Life insurance segments reporting a growth of 22.4 % and 6.7
% respectively.

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In June 2009, the Company divested its asset management subsidiary Eagle NDB
Fund Management Company Limited (now known as NDB AVIVA Wealth
Management). NDB AVIVA Wealth Management is owned by NDB bank (51%
effective control) and Aviva (49% effective control) who are the parent companies of
AVIVA NDB and therefore still remains within the Group. NDB AVIVA Wealth
Management is the outsourced service provider of investment management services
to the Company. The outsourced investment management operation is governed and
overseen by the Investment Committee of the Board through an investment mandate
drawn up based on the risk appetite of the Company, in order to mitigate likely risks
and ensure regulatory compliance.

In line with the objectives of creating new market space, the Company, expanded its
reach to the North and East during 2009, opening branches in Jaffna, Batticaloa and
Vavuniya and increasing its footprint to 54 distribution points operating through 35
locations. 2,945 member strong direct sales force contributed towards selling our
policies in addition to the bancassurance distribution channel. Bancassurance
relationships were strengthened in 2009 with an operating presence of 129 locations.

In a unique Private Public Partnership, AVIVA NDB entered into an MOU during the
year with Wayamba University to provide a certificate level qualification in Personal
Financial Management exclusively to the Insurance Advisors of AVIVA NDB to
enhance their financial knowledge. The sales force will storm the market in 2010 as
WealthPlanners providing financial solutions not limited to insurance alone. Through
this technical skill enhancement, the policyholders of AVIVA NDB will receive
superior financial advice, which is one of the Company’s key corporate
responsibilities. This is another first in the industry pioneered by the Company.

Socio-cultural Factors:-
The Company focused on voluntarism throughout 2009 where employees were given
paid leave to engage in Company approved corporate social responsibility activities.

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AVIVA NDB continued to conduct a mass media campaign reminding the public to
light crackers with care and contributed significantly to a reduction of accidents
during Avurudu festivities. The Company’s consistent aim is to educate and create
awareness on the dangers of firecrackerswhen used carelessly and conducts extensive
multimedia and below-the-line communication campaigns during festive seasons.

AVIVA NDB Samana, focusing on the disabled community under the theme of
“Creating an equally-abled society”, was extended with the involvement of AVIVA
NDB volunteers. To strengthen this initiative volunteer staff underwent a one-day
intensive training programme at the Kotte, Sevana School for children with special
needs and the School for the Deaf and Blind, Ratmalana. These volunteers were
allocated to Special Schools on Staff Volunteer Hours on a continuous basis. This
was to ensure mutual benefit to the children with special needs, as well as the
volunteers themselves.

AVIVA NDB launched the Employee Volunteer Leave programme – “Eagle Lend a
Hand” in which employees were granted paid leave to engage in volunteer social
work. This was an initiative to empower and encourage employees to give back to the
community and engage in activities identified from the company ‘charities list’. This
was an extension of the Company’s consistent focus on corporate responsibility.

AVIVA NDB Insurance presented Higher Education Scholarship benefit certificates

to 25 students from all districts in the country. These ‘Highfliers’ have proved their
academic excellence by topping the batch in each district at the Government Year 5
Scholarship Examination held in 2002. They entered Advanced Level class and were
entitled to receive the scholarship benefits.

Technical Factors:-
Unit-linked or investment-linked Life insurance products are in their nascent stage in
Sri Lanka. The buoyant equity market in 2009 stimulated a greater interest in unit
linked products due to potential equity returns associated with these products. There

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is a customer need for similar investment based products as evidenced by the growth
in these products.
As consumer needs in first time, AVIVA NDB Insurance launched Unit-linked or
investment products for retirement and cater to education. As a result, the industry
will need to explore new markets and products in order to sustain continuous growth.

SWOT analysis

Strengths:-
The transformation will combine the strength that is NDB bank - a world class
Sri Lankan - with Aviva’s global experience, tried and tested processes and
practices to transform into an entity that is supported by a “family culture” and rich
heritage of the past, to deliver Prosperity and peace of mind to all its stakeholders
at this new dawn.

Weaknesses:-

Opportunities:-
With the changes taking place in the industry the Company is pioneering once again
to leverage on the growth potential and the opportunities garnered from the resolution
of the 33 year old internal conflict. The transformation addresses a strategic shift in
2010 which focuses on gaining a sustainable competitive advantage by leveraging on
the new windows of opportunity, resources, skill and competency of its people to
deliver value to all stakeholders.

Threats:-
Competition with other insurance companies- The insurance sector in total consists of
17 insurance companies, of which 10 are composite insurers, with 5 offering only
General insurance and 2 offering only Life insurance products.

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The McKinsey 7S Model
The seven elements are:

• Strategy:-

• Structure:-

• Systems:-

• Staff:-
The full time employees of the Company increased to 786 during the year to
support the expansion and growth initiatives. A programme of “Talking Talent” was
unveiled in 2009 as part of Aviva’s brand promise to its employees. Talking talent
identifies and builds on the existing potential and strengths of the individual while
recognising employees for who they are.

At AVIVA NDB, talent is diverse and we value it in all its forms. Whilst certain
companies use the term “talent” to a selected, miniscule portion of the total employee
population, at AVIVA NDB all employees are considered as “talent”. During the
year, the Company commenced rolling out Aviva’s Talking Talent process to the
second level of leaders. These leaders were taken through the Talking Talent process
in detail, with the ultimate outcome of them having development paths tailored to
their particular needs. Talking Talent has a long term view in terms of where the
Company envisions being in the future and the type of talent we need in the
organisation. The process is to be rolled out to all employees of the Company in
future.

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“Real Deal” is a tool that is used to identify what really and individually matters to
employees in their work and life. In identifying this, the Company is able to learn
what would cause an employee to make or break the psychological contract with the
Company as well. The ‘real deal’ for all employees is being identified and is in the
process of being centrally stored in the Human Resource Information System. This is
referred to in interactions with employees and in tailor-making employee solutions.
The Real Deal cards are also used as a recruitment and development tool.

Every individual is unique. Therefore, organization believes that the way recognise
employees should not be a ‘one size fits all’ model. In tailor-making recognitions,
AVIVA NDB launched a new recognition scheme during the year, branded ‘Rainbow
Cards’. Every departmental head is now equipped with a pack of cards, representing
the colours of the rainbow, to recognise their employees on-the-spot. On the back of
each card a reward is indicated which best suits the individual.

• Style:-

• Shared values:-

• Skills:-
AVIVA NDB is known for its abundant learning and development opportunities. The
launch of Aviva Academy, powered by the learning tools of the Aviva group, was a
significant event this year. The Accelerated Leadership Development Programme is a
3 module residential programme focusing on enhancing technical and general
management skills and personal development for 30 selected junior management
staff.

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In addition, the Company launched the Aviva Academy Leadership Development
Programme for managers of Life distribution. 48 Regional Managers participated in
this inaugural programme. This is a continuation of the Leading People workshop
launched in 2008.

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