Aviva turnaround progresses as profits and dividend beat forecasts

6th Mar 2014 07:11

- Gross written premium down three per cent- Operating profit up six per cent- Cash remittances up 40 per cent- 'Progress made but still issues to address'Insurer Aviva's turnaround under Chief Executive Mark Wilson saw encouraging progress with 2013 results exceeding most analysts expectations. Wilson's focus on 'cash flow plus growth' drove the remittance ratio much higher to lift cash remittances 40% to £1.27bn, cut operating expenses 7%, enabling operating profit to rise 6% to £2.05bn, well ahead of consensus forecasts, with the value of new business also up 13% at £835m.This cash flow allowed a full year dividend of 15p per share, that was ahead of the 14.6p consensus forecast.New Zealander Wilson, who joined in January 2013, said that although the restructuring has seen progress made in 2013, he wants to "guard against complacency". "Aviva still has issues to address. Have we made progress? Yes, some. Is it a little faster than anticipated? Probably. Have we unlocked the full potential at Aviva? Not yet."He said the turnaround at the company was intensifying and that his the business's focus on was starting to be reflected in performance. Cash flows to the group are up 40%. After a £2.9bn loss after tax last year, Aviva has delivered a £2.2bn profit. "Following our exit from a number of low margin, underperforming or non-strategic businesses, Aviva is simpler, more focused and better managed," he added. "We have significantly improved our capital surplus, increased our liquidity and have a stronger leadership team."Aviva completed significant disposals in the US, Aseval in Spain, Malaysia, Netherlands and announced a disposal in Italy. Concerns about the balance sheet were further adressed, with the FTSE 100 group's intercompany loan reduced by £1.7bn to £4.1bn at end of February 2014 and a plan agreed to reduce this loan to £2.2bn by end of 2015, using £450m of existing cash resources and £1.45bn of other actions including the funding and de-risking of the pension scheme, along with more effective use of internal reinsurance and other actions to reduce stressed liabilities.Wilson said: "We have reached agreement with the Prudential Regulation Authority and I believe the execution of this plan will take the issue of our inter-company loan off the table."OH