6th Mar 2014 08:43
LONDON (Alliance News) - Aviva PLC Thursday reported a rise in annual operating profit, prompting Chief Executive Mark Wilson to declare its turnaround is intensifying.
The life insurer reported a GBP2.05 billion operating profit for 2013, compared with GBP1.93 billion in 2012, while swinging to a GBP2.15 billion profit after tax from 2012's GBP2.93 billion loss, which including a writedown of the value of Aviva USA.
Analysts had been forecasting a GBP1.99 billion operating profit for 2013, according to consensus estimates provided by the company.
Aviva said cash remittances to the group increased to GBP1.27 billion from GBP904 million in 2012, while Aviva paid a 9.4 pence final dividend, up from 9.0 pence in 2012. However, the full-year dividend is down to 15.0 pence from 19.0 pence.
Operating expenses were down 7% to GBP3.01 billion from GBP3.23 billion, as Aviva's cost cutting measures continued to gather momentum, but Chief Executive Mark Wilson said there remains "significant opportunity" to reduce expenses further. Some of those savings would be redeployed to manage its existing books of business more efficiently by investing in digital and automation technology.
Wilson said the company's 'cash flow plus growth' approach had begun to come through in its overall performance, with value of new business up to GBP835 million from GBP738 million.
"Following our exit from a number of low margin, underperforming or non-strategic businesses, Aviva is simpler, more focused and better managed. We have significantly improved our capital surplus, increased our liquidity and have a stronger leadership team," Wilson added.
Wilson warned against complacency, however, adding that there was room for improvement.
He said: "Have we made progress? Yes, some. Is it a little faster than anticipated? Probably. Have we unlocked the full potential at Aviva? Not yet."
On progress, Aviva said it reduced the value of its inter-company loan by GBP1.7 billion to GBP5.8 billion over the course of the year.
After the restructuring of Aviva Insurance Ltd, a GBP5.8 billion loan was established between it and Aviva Group Holdings, the parent of many of Aviva's international subsidiaries.
Between then and its 2013 interim results, the loan amount was reduced to GBP5.1 billion, but it was unchanged at the end of the first nine months of 2013.
Aviva's plan is to reduce the inter-company loan to GBP2.2 billion by end of 2015, by utilising GBP450 million of existing cash resources and GBP1.45 billion of "other actions". Aviva said Thursday the plan has been approved by the UK's Prudential Regulation Authority.
The insurer said flood losses in the UK in January and February came to GBP60 million, in line with long term average.
Aviva shares were Thursday quoted up 7.7% at 502.00 pence, the second biggest gainer about FTSE 100 stocks.
By Samuel Agini; [email protected]; @samuelagini
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