UPDATE 1-Aviva turnaround advances as first-half sales rise

Thu Aug 8, 2013 4:46am EDT

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By Chris Vellacott

LONDON, Aug 8 (Reuters) - British insurance group Aviva unveiled a 5 percent rise in operating profit that beat market forecasts, with rising sales, lower costs and healing finances vindicating a group-wide shake-up.

In a half-year earnings statement on Thursday, Aviva said the value of new business - its key measure of growth - grew 17 percent to 401 million pounds ($622.24 million).

Operating expenses were 9 percent lower than a year earlier, while ongoing restructuring costs associated with the strategic overhaul declined.

Investors cheered the results. Bernstein Research analysts called them "incrementally positive" and Aviva shares were trading 5 percent higher.

But Chief Executive Mark Wilson labelled the performance merely "satisfactory", in a conference call with journalists, warning that some businesses units were still in need of attention.

"While operating profit is good at a group level, I think it is less than satisfactory in several of the business units and these are turnaround businesses," he said, highlighting Italy, Spain and Ireland as units in need of a boost.

Wilson also labelled Aviva Investors, the group's investment management arm, a turnaround business that would be shaken up under its new boss Euan Munro, recruited last month from rival Standard Life.

The earnings come seven months into Wilson's tenure. He joined in January from AIA Group Ltd with a remit to turn the business around.

Spiralling costs and poor share price performance triggered an investor revolt in 2012, forcing out his predecessor. Wilson has pushed ahead with the shake-up, exiting non-core businesses and trimming staff numbers.

Wilson said on Thursday the firm was now heading "in the right direction" but acknowledged he still had much to achieve.

"At the start of the year I said I wanted to make Aviva as predictable as a Swiss clock. At this stage we're not quite that precision instrument, but we are certainly making some progress," Wilson said.

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