Aviva targeting the protection market

4th Aug 2011 08:24

The market gave the thumbs-up to interim figures from insurance giant Aviva, with the group boasting it is beating a number of its key targets.On an international financial reporting standards (IFRS) basis, operating profit before tax from continuing operations climbed by 10% to £1,146m in the first half of 2011 from £1,046m the year before. With discontinued operations added to the mix, operating profit rose 5% to £1,337m, up from £1,270m last year and ahead of the £1.28bn that the market was expecting.The group booked a loss after tax of £59,000 versus a profit the year before of £1.51m, primarily as a result of a £0.8bn adjustment relating to differing movements in asset and liability yield curves used by Delta Lloyd, the former subsidiary of Aviva which is now an associate company since Aviva reduced its stake below 50%. The adjustment is a reversal of the positive investment variances of £0.8bn seen in 2010.IFRS earnings per share (EPS) slumped 89% to 4.1p from 38.8p, but what the group termed operating earnings per share rose 6% to 29.1p from 27.4p the year before. The figure would have been 4.1p higher but for the Delta Lloyd investment variances mentioned above.Total long-term savings sales from continuing operations tumbled to £16,147m from £18,111m the year before. "We have grown sales of more profitable products such as unit linked and protection and intentionally slowed sales of more capital intensive products, especially in Europe," the company's chief executive, Andrew Moss, said.Pro-forma net asset value (NAV) on a Market Consistent Embedded Value (MCEV) basis, including the impact of the sale of motoring services group RAC, was up 33p from the figure at the end of 2010 to 575p per share at the end of June.The company said it was beating a whole host of its targets, including: 14% life insurance new business internal rate of return (IRR), against a target of 12%; 96% group combined operating ratio (a lower figure is better), against a target of 97%; and £0.8bn net operational capital generation in the first half, more than halfway towards the £1.5bn target for fiscal 2011 (FY11), which has been adjusted upwards to a range spanning from £1.5bn and £1.8bn.The group said it is on track to deliver £400m cost and efficiency savings by fiscal 2012."Corporate business will be key in our future growth as employees increasingly look to their employer for endorsement of pensions and savings products as auto-enrolment of workplace pensions begins," Moss said."We are increasing our position in the protection market and are the provider of choice to RBS and the Post Office. Our extended partnership with Santander, offering life, critical illness and income protection products to Santander customers through 1300 branches, direct and online will further strengthen our protection sales," Moss added."We will build on this from the summer of 2012 with an enhanced agreement with Barclays for the distribution of a range of life protection and personal accident products through the bank's non-advised sales channels, in addition to our general insurance home and travel products," Moss concluded.The interim dividend has been hiked by 5% to 10p. --jh