Aviva lifts dividend 15% as Friends Life integration 'ahead of schedule'

6th Aug 2015 08:01

(ShareCast News) - Aviva posted solid half-year operating profits growth and lifted its dividend 15% to indicate its confidence in the future as it raced to reap the benefits of its 10 April acquisition of rival Friends Life.Refinement rather than turnaround was the watchword in interim results that showed gentle improvements in some key numbers but declines in others.Operating profits of £1.17bn were 9% ahead of the same period last year as underlying growth and the first contribution from Friends Life more than offset adverse forex movements and disposals.But operating earnings per share fell 9% to 22.1p as the benefits of the Friends deal have yet to be earned on the higher number of shares now in issue.IFRS profit after tax was down by more than a third to £545m, mainly due to £271m of acquisition related integration and amortisation costs."After three years of turnaround we are now moving to a different phase of delivery," said chief executive Mark Wilson.The balance sheet was sparkling, with net asset value up 12% to 380p per share, an economic capital surplus lifted to £10.8bn from £8bn and everything within the company's expected target range for the looming Solvency II regulations.Wilson added: "The Friends Life integration is ahead of schedule and we have delivered £63m of run-rate synergies after three months. This is encouraging but nowhere near complete."Excluding Friends Life, Aviva's core UK life division stuck to its knitting and grew the value of new business 31% and operating profits 5% to £1.02bn.The insurance arm grew operating profits 5% to £422m and enjoyed the best combined ratio in eight years of 93.1%.Fund management, which has so far transferred £22.3bn of funds managed directly by Friends Life Investments to Aviva and have served notice to transfer £24bn more from AXA, saw profits decline 31% to £33m due to the impact of the disposal of River Road and higher expenses.Wilson concluded: "We have improved the balance sheet, simplified the Group and we are now transforming our business. The progress is evident in these results."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."