Friends Life asset boost masks Aviva life profit fall

The statement followed one from British insurer Aviva in which it said it planned to move some of the funds now run by AXA in-house, following a review of its operations after buying Friends Life earlier this year.

Chief executive Mark Wilson said Aviva was moving to a new phase under its turnaround programme as the group posted slightly better-than-expected half-year earnings of £1.17billion – up 9 per cent from the £1.07billion recorded a year earlier.

However, strip Friends out and UK Life profit actually fell by 7% to £449 million.

The investment management arm of Aviva saw its profits drop to £32m from £41m in the same period last year, which the group attributed to the disposal of US equity manager River Road and higher expenses.

However, with a £158m contribution from Friends Life, life business operating profit before tax was up 5 per cent to £1.02bn, from £973m during the first six months of 2014. Life insurance operating profit increased by 5% to GBP1.02 billion, mainly due to Friends Life, while operating profit from general insurance and health was up 5% to GBP422 million thanks to its underwriting performance.

Mr Wilson said: “After three years of turnaround we are now moving to a different phase of delivery”.

“This is encouraging but nowhere near complete”.

“Our strong investment performance(5) and focus on delivering the highest level of service means that we continue to grow as a business with more and more clients around the world entrusting us with their assets”.

“The 15% increase in the dividend is a further step towards achieving our target payout ratio and underlines our confidence in our cash flow and the business”, said Wilson. The tie-up has transferred £22.3 billion of assets under management to Aviva Investors, with an additional £24 billion to come.

In terms of the group’s balance sheet, IFRS net asset value was up 12% to 380p per share from 340p at full year, 2014. “The progress is evident in these results”, he added.

Barrie Cornes, analyst at Panmure Gordon said: “Aviva has reported a good set of interim 2015 results that were ahead of expectations on most key metrics”.

UK Life value of new business increased to GBP253 million in the six months to the end of June, against GBP177 million in the corresponding half of 2014, including the acquisition of Friends Life.

“Our asset management business will take time to contribute material growth in Group operating profit, although positive signs, particularly related to the flagship AIMS range of funds, are emerging”.