View more on these topics

Aviva UK Life profits boosted by Friends Life deal

Aviva has reported a surge in operating profit within its UK Life business in the first half of the year, driven by the recent acquisition of Friends Life.

However, excluding the impact of the deal both Aviva UK Life and Aviva Investors have seen year-on-year profits tumble.

The insurer’s first half results, published this morning, reveal UK Life profits rose 17 per cent, from £476m in H1 last year to £555m this year. This includes a £120m contribution from Friends Life following its acquisition in April.

When the impact of the Friends Life deal is stripped out, profits within Aviva UK Life slumped 7 per cent, from £483m to £449m, although H1 2014 included a £100m benefit from “expense reserve releases following actions taken to reduce the current and future cost base”.

The first six months of 2015 saw similar expense releases – labelled as “non-recurring” – of around £50m, including £22m linked to property restructuring and “various smaller releases” from an ongoing review of back-book business.

The insurer has so far made £63m of cost savings following the merger with Friends Life. The group is targeting total savings of £225m.

Total UK operating expenses increased from £263m to £354m, including £115m of expenses from Friends Life. Excluding the impact of Friends Life, UK expenses dropped 9 per cent, from £263m to £239m.

Total UK integration and restructuring costs were £82m in the first six months this year, up from £8m in H1 2014. Some £71m of these costs relate to integration activity, with the remainder largely linked to Solvency II.

The value of new business written in the UK was up 43 per cent year-on-year, from £177m to £253m.

In UK Life, excluding the Friends Life deal, this figure improved by a third, from £177m to £232m, reflecting higher margins on pensions and health business, increased bulk annuity deals and equity release sales.

This was partly offset by a year-on-year drop in annuity sales, the insurer says.

Aviva Investors, the providers fund management arm, generated profits of £32m, down from £41m in the first six months of 2014. This was mainly due to higher expenses and the “adverse impact” of the disposal of the River Road business in June 2014, the firm says.

The profit figure was described as “inadequate” by Aviva chief executive Mark Wilso, although he adds “positive signs…are emerging”.

Funds under management at Aviva Investors increased 7 per cent, from £245.9bn to £262.6bn, driven by a transfer of funds from Friends Life Investments. Excluding this, funds under management dropped £5.6bn, with the company suffering net fund outflows of £300m, an improvement on the £1.7bn figure reported in the same period last year.

AIMS, the firm’s flagship fund, has seen net external inflows of £300m since the start of the year.

Funds under management on Aviva’s UK platform have risen from £5.3bn at the end of 2014 to £6.8bn at the halfway point this year, with the firm reporting increased demand following introduction of pension freedoms in April.

Aviva group chief executive Mark Wilson says: “After three years of turnaround we are now moving to a different phase of delivery. We have improved the balance sheet, simplified the group and we are now transforming our business. The progress is evident in these results.”



Calls for FSCS reform as brokers pick up bill for IFA ‘miscreants’

Brokers are calling for urgent reform of the FSCS levy as they feel they are unfairly paying to “pick up the bill of miscreants” in the life and pensions sector. Presently, the FCA and the Financial Ombudsman Service categorise term assurance and critical illness as “non-investment protection policies”. However, the FSCS classifies them as life […]


Lone MPC member voted for rate increase

Just one member of the Monetary Policy Committee voted to increase the base rate at this week’s meeting. The minutes from this week’s meeting, published today, show Ian McCafferty voted to increase the base rate by 25 basis points to 0.75 per cent. McCafferty believed the risks of overshooting the Bank’s medium-term inflation target of […]


Principality increases mortgage lending

Principality Building Society increased mortgage lending by 1.6 per cent in the first half of 2015. Its interim results, which account for the first six months of the year, show lending increased from £545.5m in H1 2014 to £554.7m in H1 2015. The Wales-based society’s book surpassed £5bn for the first time at the end […]


Zurich UK Life profits down despite sales surge

Zurich’s UK Life division saw operating profits slump 17 per cent in the first half of the year, despite sales volumes rising by over a third. The insurer’s half year results, published this morning, reveal profits dropped from £66m last year to £55m this year. “This is a healthy result given a large one off […]


News and expert analysis straight to your inbox

Sign up