Yorkshire helps insurance giant offset European falls

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Insurer Aviva said a strong performance at its life arm, which has its headquarters in York, helped to offset weak trading in Spain and Italy.

The division, which employs around 2,500 staff in York, reported a 33 per cent increase in new business in the first three months of 2013, making it the group’s best performer.

Overall Aviva reported an 18 per cent jump in new business to £191m between January and March.

In his first trading update since taking over at the start of this year, chief executive Mark Wilson said that Aviva is on track to deliver its £400m cost savings target.

“Today’s results demonstrate the first steps towards delivery,” he said. “I am conscious of the challenges and do not want to set expectations at an unrealistic level. Progress so far has been satisfactory and there is a great deal more we need to do for our shareholders,” he said.

The best performing division after the UK life arm was Asia, which reported a 29 per cent increase in new business in the first three months of 2013.

The group’s performance in southern European was described as “disappointing” and Aviva said there is clearly scope for improvement in Spain and Italy, where the value of new business fell to £3m and £4m respectively.

Operating expenses were cut by 10 per cent to £769m and the group reported £54m in restructuring costs.

The trading statement comes days after shareholders backed the new management team, one year after a rebellion over executive pay plans.

But Mr Wilson failed to quell shareholders’ anger when he faced them for the first time since they staged the revolt that forced out his predecessor.

He sought to reassure investors at the company’s annual general meeting by admitting it had under-performed, telling them he agreed with their objections over executive pay, and insisting the new board is taking steps to turn the business around.

Chairman John McFarlane acknowledged past failings, but said of current arrangements over pay: “I don’t think we do have our hands in the trough.”

Many shareholders were angry about “payment for failure on a grand scale” as well as questioning a decision to slash dividends.

Around one in eight votes failed to back the board’s remuneration report for this year.

Mr Wilson was appointed chief executive after the departure of Andrew Moss following last year’s humiliation when the bulk of investors voted down a controversial pay deal.

Aviva is now undergoing a major restructuring amid a boardroom clear-out and disposals which saw it record a headline loss of £3bn this year.

The group currently employs around 4,300 people in Yorkshire at sites in York, Leeds and Sheffield.

Mr Wilson, former boss of Asian rival AIA Group, joined the group amid spiralling costs and a poor share price performance.

Mr McFarlane subsequently drew up a review promising savings from the sale or closure of more than a dozen underperforming units across its insurance and asset management operations.

In May the group announced plans to cut 2,000 jobs, or around six per cent of the global workforce over the next six months.

The executive team has agreed to freeze salaries at last year’s levels and no bonuses will be paid to directors for 2012.

In a blow to many of Britain’s pension funds, Aviva announced a 44 per cent cut in its full-year dividend in March after a long period of under-performance and a fall in underlying profits.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “Respectable though these numbers are, investors are likely to continue to look elsewhere in the sector for racier prospects.”