Aviva posts 10 percent profit fall on higher costs
The insurer is restructuring its business to improve financial performance
By CFOWorld staff | CFO UK | Published 11:46, 09 August 12
Aviva posted a 10 percent fall in profits in its first six months due to higher restructuring costs aimed at boosting financial performance, the insurer said on Thursday.
The UK’s second largest insurer made a half-year operating profit of £935 million, down from £1.03 billion a year earlier, as a result of the sale of RAC, “adverse foreign exchange movements, the adverse impact of recent UK weather” as well as higher costs in reorganising the business, the company said.
Analysts had expected a profit of £1 billion, according to a company poll.
The company posted a pre-tax net loss £681 million, and had to write down £876 million in goodwill and intangibles in the US business.
Aviva plans to sell or close more than a quarter of its businesses in a shake-up aimed at regaining the support of investors who in May forced out chief executive Andrew Moss in protest over the group's poor stock market performance.
The insurer, now led by executive chairman John McFarlane, also had to absorb £40 million in flood-related claims during the first half after the country was hit by torrential summer rain.
“We are focusing on those business segments where we can deliver attractive returns.
“Although trading conditions in a number of our major markets will continue to be challenging throughout 2012 we have a clear strategy which we are delivering against. We are confident we will succeed,” chief financial officer Patrick Regan said in a statement on Thursday.
The company is paying an unchanged interim dividend of 10 pence per share.
Aviva shares closed at 318 pence on Wednesday, valuing the company at about £9 billion.
The stock has risen 6 percent since the start of the year, lagging a 16 percent increase in the Stoxx 600 European insurance share index.
photo credit: Reuters
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