Insurer Aviva achieves 'steady' performance against turbulent backdrop

The company said operating profit for the six months to the end of June was up 1 per cent to £1.45 billion, while operating earnings per share ticked up 2 per cent to 27.3p.This came during a period which chief executive Maurice Tulloch said was “characterised by a challenging economic and political backdrop and significant levels of organisational and leadership change”.He also announced that the company would review options for its Asian business.“Our Asian operations are strategically and financially attractive, however, we are evaluating a range of options to enhance the value of the businesses to shareholders,” he said.It comes a week after Reuters reported that the insurer was mulling a sale of the Asian unit, with a possible value of up to two billion US dollars (£1.64 billion). First half performance was “mixed”, but the board approved a 2 per cent increase in the dividend to 9.5p per share.Operating profits in life insurance and asset management were both down, falling 8 per cent and 18 per cent respectively.Life insurance performance was impacted in the UK by the competitive market, leading to lower new business volumes.But general insurance saw a 29 per cent rise in operating profit.Looking ahead, Aviva said the challenging macro backdrop was expected to persist in the second half, including a softer outlook for economic growth in Europe and the UK.In June, the company announced that it would axe 1,800 jobs to cut costs, just a few months into Mr Tulloch’s tenure following his appointment in March.Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “The decision to review the future of Aviva’s, arguably sub-scale, Asian businesses has been a long time coming. “Maurice Tulloch’s predecessor, Mark Wilson, had long been expected to lead an Asian expansion, but with that having failed to materialise it looks like the board have now decided Aviva could do without an Asian business altogether.Mr Hyett added: “The strong result from General & Health Insurance is a pleasant surprise, particularly the turnaround in Canada. “Given that product differentiation in the sector is almost impossible, and prices inevitably get squeezed, Aviva’s combined operating ratio is pretty healthy. “Cost control has a lot to do with that, which may not be a long term source of growth but potential for further digitisation means we suspect the low hanging fruit hasn’t been totally exhausted. “The next batch of savings looks to be from interest costs, which would have the added bonus of boosting Aviva’s overall financial resilience at a time when the economic outlook is less than rosy.”Richard Hunter, the head of markets at interactive investor, said: “Having previously gone through a streamlining operation which left Aviva fitter, the focus is now turning to a strategy review to ensure the company maintains its relevance.He added: “Perhaps not surprisingly, this has resulted in mixed fortunes as the business transforms. There has been a reduction in net earned premiums, operating profit is flat, and challenging market conditions have made for difficult reading with the life insurance and asset management businesses. “The Asian business, which should be an exciting source of opportunity, remains insufficiently tapped and exploited. More positively, the financial stability and cash generative ability of the company is ever-present.”