Aviva hailed further progress in its turnaround today despite the dual impact of flooding and the surprise reform of annuity rules on its UK operations.
The group, which has 31 million customers, reported a four per cent rise in half-year operating profits to £1.05bn as it benefits from a continued drive to improve efficiency.
The cost savings have been offset by winter storms in Canada and the UK, where it faced more than £60m of claims from flooding and storm damage at the start of the year.
It has also been hit by the strong pound and the lower sale of annuities for pensions following the Chancellor’s surprise Budget announcement that pensioners no longer have to buy an annuity to draw their pensions.
In Aviva’s UK life and pensions division, the value of new business was down 21 per cent in the half year to £177m, reflecting a 41 per cent reduction in annuity sales following the reforms. Aviva also reported a general market decline as customers choose to defer taking their pension.
Chief executive Mark Wilson admitted the overhaul by the Chancellor was a surprise, but that the group is working to take advantage of the changes.
He said: “I think giving consumers flexibility is a good thing, not a bad thing and we need to adapt. It provides opportunity for new products and we’ve developed those, new ways of distribution and we are developing those as well.”
Aviva has 2,000 staff at its life headquarters in York, and it also employs 1,500 people in Sheffield.
In the UK general insurance business, weather claims were worse than the previous year but “marginally favourable” against the long term average.
It meant the company’s combined operating ratio - a measure of underwriting profitability, with anything below 100 per cent representing a profit and anything above representing a loss - fell to a seven year low of 94.3 per cent in the UK.
Mr Wilson took charge in January last year after the departure of predecessor Andrew Moss in the wake of a humiliating shareholder revolt over his pay and the faltering pace of the business.
Since then he has cut hundreds of jobs and has disposed of several businesses as part of his turnaround strategy.
Across the group, he expects to have cut £568m a year from expenses by the end of this year, ahead of the £400m target set in 2012.
Mr Wilson added: “It’s true that all the key metrics are going in the right direction. It’s true that the businesses are gaining traction, that the turnaround momentum continues. But it’s also true that we still have quite a few issues, so we remain a turnaround.”