Aviva chair warns of worse to come as firm posts £680m loss
Restructuring costs leading to £681m loss will only increase in late 2012, says McFarlance.
Aviva has reported a net loss after tax of £681m for the first half of 2012, a substantial drop from the profit after tax of £465m recorded in the same period of 2011 due in large part to costs relating to the insurer’s ongoing restructuring.
Moreover, Aviva chairman John McFarlane has predicted restructuring costs will grow in the second half, compounding company losses.
He said: “While this has been a challenging first half, we are taking the necessary actions to improve our position going forward.
“This environment is likely to continue and therefore we expect second half performance trends to be broadly similar to the first six months, but with higher restructuring costs as we implement our strategic plan.”
Illustrating the extent of the company’s restructuring plan, interim operating profit before restructuring costs was £1.1bn, representing a 2 per cent drop year-on-year.
At the half-year point the company decided to write down £876m of goodwill and intangibles in its US business.
According to Mr McFarlane, bad UK weather compounded losses as it led to increased claims.
Mr McFarlane added: “We have also committed to reduce the cost base by £400m. We have already removed the regional layer of our structure, reduced the number of management layers and have made substantive changes to promote a sharper performance ethic across the group.”
In the second quarter Aviva reduced its Italian sovereign bond holdings by just under €2bn (£1.6bn). In July the company sold 21 per cent of Delta Lloyd, bringing its holding below 20 per cent.