LONDON (Alliance News) - Aviva PLC Thursday said its turnaround is ongoing as it reported a fall in net profit for 2014 due to the 2013 sale of its US life and related internal asset management businesses, but operating profit excluding this rose as increases in its life business, general insurance and health helped to offset a fall in fund management operating profit.
In what could be its last annual earnings statement in its current form with the proposed GBP5.6 billion acquisition of life insurance rival Friends Life Group Ltd expected to complete in the second quarter of 2015, Aviva said its net profit fell to GBP1.74 billion in 2014, compared with GBP2.15 billion in 2013. Friends Life, meanwhile, swung to a net loss of GBP138 million in 2014, compared with a net profit of GBP235 million in 2013.
Aviva's pretax profit from continuing operations rose to GBP2.66 billion from GBP1.47 billion, as revenue from continuing operations rose to GBP43.50 billion from GBP34.65 billion and expenses from continuing operations rose to GBP40.83 billion from GBP33.17 billion.
Aviva is increasing its dividend for the year to 18.1 pence from 15 pence, as previously reported.
Profit from discontinued operations, which represents the results of the US life and related internal asset management businesses until their disposal in October 2013, fell to GBP58 million from GBP1.27 billion, explaining the fall in net earnings.
Aviva's closely-watched operating profit on a continuing basis rose by 6% to GBP2.17 billion, slightly ahead of the GBP2.15 billion expected by financial analysts, according to consensus estimates provided by the company, as increases in its life business, as well as in general insurance and health, helped to offset a fall in fund management operating profit.
Value of new business, a measure of the present value of future profits from business written in the year and Aviva's measure of growth for life insurance, increased to GBP1.01 billion in 2014, compared with GBP904 million in 2013.
Elsewhere, Aviva said its asset management business is "progressing with the first tangible signs of higher margin fund inflows emerging".
Aviva Chief Executive Mark Wilson said the integration of Friends Life, which also reported results for 2014 on Thursday, is a "significant focus".
"A successful integration of Friends Life is a significant focus and it is important to demonstrate our ability to execute on our plans and achieve our external objectives. This is a bare minimum," Wilson said.
However, Wilson said it is important that Aviva doesn't allow the integration of Friends Life, should the acquisition complete, to come at a cost to other parts of the business.
"While the proposed integration of Friends Life is a major exercise, there are large parts of the business that are not involved and we will continue to focus on better capital allocation and efficiency across the entire group, driving digital throughout the organisation and building out our true customer composite model," Wilson said.
Wilson, who has been orchestrating a turnaround since becoming chief executive at the beginning of 2013, said that it would be "wrong to assume that our turnaround is nearing completion".
"On the contrary, we have further to travel than the distance we have come," Wilson said.
Friends Life swung to a net loss of GBP138 million in 2014, compared with a net profit of GBP235 million in 2013. Pretax profit from continuing operations fell to GBP64 million from GBP415 million. Although revenue increased to GBP11.05 billion from GBP10.05 billion, as higher net earned premiums more than offset a slight fall in investment return, total claims benefits and expenses rose to GBP10.98 billion from GBP9.66 billion.
The group's closely watched operating profit before tax rose to GBP556 million from GBP402 million, beating company-provided analyst expectations of GBP352 million. Value of new business was down by GBP47 million to GBP132 million. Sustainable free surplus rose by 15% to GBP373 million.
Friends Life intends to increase its dividend to 31.15 pence per share from 21.14 pence per share, subject to completion of the Aviva takeover deal.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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