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Aviva reassures over profits as UK sales plunge
THE incoming chief executive of Aviva's UK operations yesterday declared the general insurance and life businesses "ripe and ready" for growth.
Mark Hodges was speaking as the insurance company reassured over the outlook for its full-year profits, despite revealing a 25 per cent plunge in UK life and pension sales.
The weak domestic performance for the firm – which recently rebranded its Norwich Union insurance arm under the Aviva banner – dragged overall worldwide sales down by a worse-than-expected 11 per cent to 24.06bn in the first nine months of the year.
A drop in consumer demand for pensions and savings products amid the recession hit new business during the year so far, according to Aviva.
But it said the impact on profits was being offset by cost cutting and a focus on value and not volume, while the recent stock market revival was also expected to provide support.
Shares in Aviva rose more than 6 per cent on the upbeat guidance, while the insurer confirmed its capital buffer had strengthened further, by another 500m since the half-year stage to 3.7bn.
Aviva's Dutch unit, Delta Lloyd, was also sold this week in western Europe's largest initial public offering this year, raising 995 million euros for the UK parent.
Mr Hodges, currently CEO of the group's York-based life business, said: "There's a strong message in here about the capital strength. I would hope that we have laid to rest any concerns and attention can rightly move to what happens next."
In an interview with the Yorkshire Post, he said broad economic factors such as people saving less and falling wage rises were playing through and impacting on sales this year.
Mr Hodges said he was not predicting a swift return to previous sales levels and added: "There's no doubt there's a dreadful trading environment and the consumer is nervous about the future."
He said: "When you are comparing first nine months of 2009 to first nine months of 2008 you are comparing pre and post financial crisis world. Lehman Brothers had happened and the impact started to be felt in quarter four.
"You are comparing two very different worlds."
Aviva in April axed 1,700 jobs. Asked if there were likely to be more losses, Mr Hodges said it was too early to say. He said he is focusing on building a new management team for the UK businesses, which will be brought together under him from January 1. He added: "I am delighted to be taking on these two great organisations. Both are ripe and ready to grow."
Asked about his outlook for the new year, he said: "Once we know what the new government looks like, once we know the financial crisis is behind us, there is no reason for people not to return to saving.
"We are well positioned in various channels and products. We don't have to start doing a whole lot of new things. We need to continue what we are doing extremely well."
He ruled out a bid for Royal Bank of Scotland's insurance businesses which are being sold off to meet competition regulations at the European Union.
Mr Hodges said: "If you look at RBS' insurance assets they are very heavily branded. When they were up for sale last time we declared a lack of interest. We have a very successful brand in the UK. Part of what you pay for would be the brand. It would have no economic sense to do that."
Andrew Moss, the group chief executive, said yesterday that options for Aviva included restructuring the balance sheet, writing more new business and bolt-on deals.
He gave no details on potential acquisitions, though he said the group would, as a matter of course, look at assets put on the block by rival ING.
Mr Hodges urged against "reading too much into that".
Speculation has arisen around large insurance companies acquiring banking assets following the break-up of Lloyds, RBS and Northern Rock with industry observers pointing out that they possess both the capital bases and the systems to compete in the sector.
Mr Hodges said new risk-based regulations in banking and insurance meant any advantages of owning both have fallen away.
He added: "Our focus is on doing what we do very well rather than moving into new areas like banking."
Shares closed last night up 21p at 400.3p, or 5.5 per cent.
INSURER LIFTS RESTRICTIONS
Aviva has announced it is no longer imposing withdrawal restrictions on investors with money in its property fund.
Since January, people who wanted to cash in life and pensions policies held in the group's unit-linked property fund early have had to wait for up to six months after their request before they could get their money.
The group introduced the restriction following steep falls in the value of commercial property, saying the move gave it longer to sell properties at an acceptable price.
But the insurer said it was lifting the restrictions following improvements in the commercial property market and a recovery in the cash balance held by the fund.
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Wednesday 23 May 2012
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