Aviva plc today announced its interim results for the first half. Highlights are:
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Interim operating profit before restructuring costs down 2%
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Interim operating profit after restructuring costs down 10%
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Impact of restructuring costs, foreign exchange, UK weather
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£876m writedown of US goodwill
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Dividend held at 10p per share
The chairman John McFarlane's note to shareholders is below:
"Operating profit (including restructuring costs) was down 10% to £935m(HY11: £1,035m) as a result of the sale of RAC, adverse foreign exchange movements, the adverse impact of recent UK weather and higher restructuring costs as we implement the strategic plan. Interim operating profit before restructuring costs was down 2% to £1,121m.
There was a net loss after tax of £681m (HY11 profit after tax: £465m). At the half year, we concluded that it was necessary to write down £876m of goodwill and intangibles in our US business.
The interim dividend is held at 10p per share.
General insurance operating profit has marginally improved with a combined operating ratio of 95.5. Life insurance operating profit was lower overall, with stable operating profits in the UK, our largest market, offset by lower profits from overseas, mainly from the eurozone.
Aviva’s capital position is ahead of full year 2011. At 30th June, the group economic capital surplus was £4.5bn(ratio: c.140%) and the IGD solvency surplus was £3.1bn(ratio: c.150%).
In July, we announced our revised strategic plan and execution is on track. The first priority remains to build Aviva’s financial strength. In the second quarter we reduced our Italian sovereign bond holdings by just under E2bn. In July we sold 21% of Delta Lloyd, bringing our holding below 20%. We expect to announce further progress in the delivery of our plan in the second half of the year.
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.
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."
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