Aviva PLC (LON:AV.) said it is mulling options for its Asian businesses, including a possible sale, as the life insurer posted a mixed set of first-half results.
Not quite six months into the job, chief executive Maurice Tulloch said the results showed the FTSE 100 group’s “strong foundations” but still “much to do” on the track he set out in June’s initial strategic draft.
Strategic steps
Tulloch, who was promoted from boss of the international insurance business and quickly moved to unpick his predecessor’s tactics with plans to divide the group back into its life and general insurance parts.
So far, management of the life and general insurance businesses in the UK have been separated, while the UK digital and UK general insurance have been brought back together, while £25mln of the £300mln cost cutting targeted by 2022 has so far been delivered.
Confirmed recent speculation in the media, Tulloch said the board had also “considering a range of options” for Aviva's Asian businesses, saying the unit has “excellent growth and earnings potential”.
With Tulloch not due to outline his full strategic plan until November, Russ Mould at AJ Bell said some heavy hints were dropped about the strategic direction: “Aviva looks set to continue to reduce its borrowings to underpin Tulloch’s ‘ready and resilient’ message on the business.
“And it looks increasingly like market rumours over a sale of Aviva’s Asian business are on the money. While Asia has significant potential as far fewer people already have insurance and savings products, Aviva likely lacks the scale to thrive in what is also a highly competitive market.”
Mixed results
The six months to end-June saw group operating profit inch up 1% to £1.45bn, as the profits from general insurance swelled 29% to £391mln but the core life insurance arm was down 8% to £1.3bn and fund management shrank 18% to £61mln.
Operating earnings per share of 27.3p were up 2% and slightly better than the average analyst forecast, as non-life was better than expected and cost discipline largely offset the weaker results from life and asset management.
Tulloch said the life insurance and asset management profits declined due to challenging market conditions and the absence of a longevity reserve release.
With cash remittances up 6% to £1.6bn, the board declared a 3% increase to the interim dividend to 9.5p per share,
Aviva shares were up 1% to 385.4p on Thursday morning.
