Pensions  

Aviva’s Friends Life takeover on track as profits leap

Aviva’s Friends Life takeover on track as profits leap

Ahead of a takeover that will create the largest life and pensions firm in the UK, both Aviva and Friends Life have reported improved profits for 2013 in results published this morning (5 March).

Aviva’s operating profits last year increased by 6 per cent to £2.2bn and the value of its news business rose by 15 per cent on 2013 figures, results published today (5 March) revealed.

According to bosses expense reductions and an improved results in the UK life business offset the negative impact of lower individual annuity sales and other issues such as currency fluctuations and disposals of non-core businesses which, together, depressed operating profit by about £200m.

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In general insurance and health, the operating profit of £808m was broadly flat compared with the £797m achieved in 2013.

Aviva Investors’ fund management operating profit increased 16 per cent year-on-year to £79m, although bosses ruled this remained “inadequate” relative to assets under management of £246bn.

Management’s comments about Aviva Investors come just days after the Financial Conduct Authority fined the fund managers £17.6m for weaknesses that led to compensation of £132m being paid out to investors.

Also today, Friends Life continued to push forward with the latter reporting an increase in profits of 38 per cent to £556m.

Annuity sales were down at Friends Life by 15 per cent, which bosses claimed outperformed the market which saw sales down 38 per cent in 2014. The protection business saw sales up by 6 per cent compared with 2013.

Mark Wilson, group chief executive of Aviva, said: “These results show tangible progress. We have increased our final dividend by 30 per cent to reflect the progress made during the year and our improved financial position. We have entered 2015 in a position of strength.

“Nevertheless, it would be wrong to assume that our turnaround is nearing completion as we have further to travel than the distance we have come.”

On the sale to Aviva, Andy Briggs, group chief executive of Friends Life, said: “My belief is that the stand-alone future of Friends Life is attractive, but the opportunity to accelerate the Friends Life strategy through the combination with Aviva is even more attractive.

“The combination is expected to create the leading player in the UK life and pensions market, with even greater scale in the key markets that Friends Life already participates in.”

Aviva’s shareholder vote about the takeover will be on 26 March, with completion anticipated on 13 April 2015.

emma.hughes@ft.com