6th Aug 2015 10:28
LONDON (Alliance News) - Aviva PLC on Thursday said it's integrating Friends Life, the rival insurer it bought for about GBP5.6 billion, ahead of schedule, as it reported higher operating profit in the first half of 2015 and increased its interim dividend.
The FTSE 100 insurer said that GBP63 million of run-rate synergies have been generated so far through the acquisition and integration of Friends Life, and said it's confident of meeting the overall GBP225 million synergy target.
"This is encouraging but nowhere near complete. Amidst the integration, our UK Life business continued to grow, with value of new business up 31% excluding Friends Life," Chief Executive Mark Wilson said in a statement.
UK Life value of new business increased to GBP253 million in the six months to the end of June, against GBP177 million in the corresponding half of 2014, including the acquisition of Friends Life. That was about half of the total value of new business for the group as a whole, which increased to GBP534 million from GBP444 million.
Protection products made up 40% of group value of new business, compared with 38% in the prior year period, while annuities products fell to 17% of the total from 19%.
Aviva said it made an operating profit, excluding amortisation and impairment of acquired value of in-force business, of GBP1.17 billion in the half, compared with GBP1.07 billion in the prior year period, and increased its interim dividend to 6.75 pence from 5.85p.
The insurer said that underlying growth and the contribution from Friends Life more than offset currency losses and business disposals. Life insurance operating profit increased by 5% to GBP1.02 billion, mainly due to Friends Life, while operating profit from general insurance and health was up 5% to GBP422 million thanks to its underwriting performance.
Wilson said there was an "inadequate" contribution by the group's fund management business, Aviva Investors, where operating profit fell to GBP32 million from GBP41 million.
"Expenses have increased as we have invested in our distribution capabilities and strengthened the management team. Our asset management business will take time to contribute material growth in group operating profit, although positive signs, particularly related to the flagship AIMS range of funds, are emerging," Wilson said.
Aviva's profit after tax fell to GBP545 million from GBP863 million, including GBP271 million of acquisition-related integration and amortisation costs, Aviva said.
"After three years of turnaround we are now moving to a different phase of delivery. We have improved the balance sheet, simplified the group and we are now transforming our business," Wilson said.
"Our focus is turning to reallocating capital to higher returning or faster growing business cells. Our true customer composite and digital strategies need to be delivered quickly and we still have opportunities to improve efficiency," Wilson added.
By Samuel Agini; [email protected]; @samuelagini
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