Aviva moves into profit after half-year loss in 2008

angelique ruzicka Aviva has moved back into the black after announcing an IFRS profit after tax of £747m for the first six months of 2009. It lost £84m in the same period last year.

Pre-tax operating profits were down, however, to £1.05bn from the £1.22bn of last year.

The group’s UK business, meanwhile, suffered a reduction in net written premiums in all personal and commercial lines. Personal lines dropped to £1.26bn in the six months of 2009 from the £1.58bn in the same period of 2008. Commercial premiums were down to £792m for 2009 from the £1.01bn of last year.

Igal Mayer, chief executive of Aviva UK Insurance, said the falls were the result of the group leaving poorly-performing partnerships last year. “In terms of the UK GI operation, the premiums are down but largely that was all planned. It’s last year’s story around exiting poor-performing businesses.”

He said Aviva’s partnership business had to be overhauled, as did some broker business, especially around MGAs. “When you terminate those relationships, which we did last year, there is an impact on premium. It’s what we expected it to be. There’s also a modest effect from the economy.

“Everyone is down a couple of percentage points in commercial lines, as companies aren’t insuring as much as they did. There is less economic activity, fewer trucks on the road, less inventory and fewer sales – all drivers for premiums.”

Mayer said he was now focusing on rebuilding the UK GI division. “We are now doing business with the right people and we are doing the right business. It’s really just working with our distributors to gain more. I would classify that as just pure execution. We are out there fighting for business on a day-to-day basis.”

Mayer added that the underwriting loss made in “other” personal lines was mainly attributable to the losses made in its creditor business. “Credit lines, which includes income protection, is as you’d expect with less lending activity.”

The company also announced plans for a partial initial public offering (IPO) of Delta Lloyd on Euronext Amsterdam and that it would slash its dividend by 31%. Despite this, the group’s share price increased 6.34% to settle at 374.2p.

Group chief executive Andrew Moss said the company’s actions, focus on costs and dividend reduction, would increase its flexibility and allow it to consider growth opportunities over the coming year. “This will create long-term value for all our shareholders,” he said.