Aviva UK life bucks trend reporting profit growth
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UK life profits rose 2 per cent to £469m, compared to the same period last year, while underlying profits were broadly in line with the first half of 2011 at £395m. In contrast, the company as a whole saw profits topple by 10 per cent to £935m.
David Barral, chief executive of Aviva UK Life, said operating capital generation more than doubled to £381m, reflecting better capital efficiency, such scrapping large bulk purchase annuities.
He said less capital is also being consumed in terms of commission, as advisers move towards fee-based advice.
Aviva’s partnership with Tesco Bank, signed in the first half of the year and due to go live in September, will give it an exclusive five-year distribution agreement to sell life insurance and has further strengthened the company’s customer franchise in the UK, Mr Barral added.
He said: “Protection sales are strong and up 24 per cent year-on-year. We have strong support from the IFA market, as advisers are going back to basics on protection, making sure clients get appropriate life and critical illness cover.
“We are also beginning to see the benefits from strategic partnerships with the likes of Barclays, Santander and Tesco.”
The company doesn’t have any further partnerships in the pipeline, but Mr Barral said it always considers opportunities and is actively reducing exposure to building societies, in favour of “larger more profitable relationships”.
Although the company is undergoing a major £400m cost reduction programme, which senior executives say is on track to be completed by October, Mr Barral said little of that would affect Aviva’s UK life business.
He said: “We are still working within the group to simplify business by removing unnecessary layers of middle management. However, the only precipitous action we took was to stop doing large scheme bulk purchase, while still doing smaller ones. UK business is the bedrock of Aviva.”
In fact, the only other country in the group to report a positive half-year operating profit was the US, which increased profits by 4 per cent to £113m.