Aviva’s strategy pays off as profits rise 5pc and cash generation hits £800m

AVIVA’s decision to focus its business on just 12 core markets was vindicated yesterday as it reported better-than-expected first half profits.

The general and life insurer said it made £1.33bn IFRS operating profit over the past six months, four per cent higher than the consensus estimate for £1.28bn, while its net asset value per share also beat forecasts.

Profit growth was driven by a strong performance in its life and pensions arm, which generated £15.4bn of new business sales, ahead of forecasts for £15bn.

Its general insurance operating profits grew 2.5 per cent to £455m.

Profits were also boosted by 21 per cent growth in Europe, to £525m, where it said saving rates were up 12 per cent since 2008.

Aviva also emphasised its strong capital position, saying it had a £4bn IGD surplus at the end of June and generated £800m of cash in the period.

“Markets may well continue to be volatile, but our strong balance sheet and capital position underpins our confidence in our continued momentum,” chief exec Andrew Moss (pictured) said.

Aviva said it held a total £1.4bn exposure to sovereign debt from Greece, Ireland, Italy, Poland and Spain.

It said it had no exposure to Portugal, just £1m to Greece and £200m to Ireland – but held £300m of Spanish debt and £900m of Italy’s.

Panmure Gordon analyst Barrie Cornes said Aviva was likely to sell more assets. “We anticipate more disposals following on from the part sale of its stake in Delta Lloyd and the RAC business, including the Asian operations which are deemed non-core,” he said.