Aviva plans cost cuts, eyes strong FY

Aviva plans cost cuts, eyes strong FY
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First Published: Tue, Nov 02 2010. 03 24 PM IST
Updated: Tue, Nov 02 2010. 03 24 PM IST
London: Insurer Aviva unveiled £200 million ($318.8 million) in planned cost cuts and said it was set for “strong profitable growth” this year after sales for the first 9-month rose in line with expectations.
Aviva also said it would sell its Taiwanese business and exit other unnamed countries as part of a plan to focus on markets where it can generate at least 100 million in annual operating profits.
“We are on track to deliver strong profitable growth and outstanding capital generation for the full year 2010,” the company said in a statement on Tuesday.
Britain’s second-biggest insurer will take out £200 million in costs and deliver another £200 million in efficiency gains by the end of 2012, it said.
Shares in the company were up 1.6% at 403.88 pence by 03:30 pm, making it one of the top risers in the FTSE 100 share index, which was 0.7% higher.
“There is still significant low hanging fruit in the group which they are now highlighting,” said Execution Noble analyst Joy Ferneyhough.
Aviva, which in August rebuffed a £5 billion bid approach for parts of its general insurance unit from rival RSA , has responded to falling sales and worries over its capital strength during the financial crisis by cutting costs and focusing on sales of its most profitable products.
The company is on course to eliminate £750 million in expenses by the end of 2011 compared with 2007, chief executive Andrew Moss told reporters on a conference call.
Total life and pensions sales for the nine months to 30 September were £25.5 billion, up 6% compared with the same period last year, Aviva said.
That was just ahead of the £25.2 billion pencilled in by analysts, according to the company’s calculation of consensus expectations.
Life insurance sales have recovered this year after falling off in 2009 as the financial crisis deterred consumers from making savings and investment decisions.
General insurance premiums have also risen, helped in the UK by a steady rise in car insurance prices.
“The reality is that in our major markets we’ve seen recession, yet we see ongoing growth in our business,” Moss said.
“Customers still need to save money and they still need to buy home and motor insurance.”
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First Published: Tue, Nov 02 2010. 03 24 PM IST