Aviva Increasess New Business as CEO Overhauls InsurerSarah Jones
Aviva Plc said new business in the first nine months of the year rose 14 percent, paced by gains in Poland and Turkey, as Chief Executive Officer Mark Wilson overhauled the U.K.’s second-biggest insurer by market value.
The value of new business reached 571 million pounds ($918 million pounds) in the period, up from 503 million pounds a year earlier, the London-based company said in a statement today. New business rose more than 40 percent in Turkey, Poland and Asia, and gained 33 percent in France.
Wilson, who succeeded Andrew Moss this year, is in the midst of replacing half of his senior managers, including the heads of the company’s Europe and Asia businesses. He’s also seeking to appease investors by selling assets and cutting costs to rebuild capital depleted by the financial crisis and shrink a 5.1 billion-pound internal loan.
“We still see decent progress being made by Aviva and remain constructive on the reform program,” Christopher Esson, a London-based analyst at Credit Suisse Group AG with an outperform rating on the stock, wrote in a note to investors. “In the absence of positive surprises, we would not be surprised to see some short-term consolidation in the shares.”
The stock dropped 2.1 percent to 435.90 pence at the close in London, paring its gain this year to 17 percent and lagging the FTSE 350 Insurance Index’s 27 percent advance. Larger competitor Prudential Plc has climbed 45 percent, while Legal & General Group Plc, which this week reported a 20 percent increase in nine-month net cash, has risen 44 percent.
Wilson promoted David McMillan to be CEO of Aviva Europe in February and hired AIA Group Ltd.’s Khor Hock Seng to run the insurer’s Asian business. He hired Euan Munro to run Aviva Investors as of next year, adding an executive known for building an absolute-return fund at rival Standard Life Plc.
The insurer reduced total expenses 8 percent in the nine-month period to 2.5 billion pounds, and said progress on cost cuts has been “satisfactory.” Operating expenses were 10 percent below their level in 2011. Operating capital generation, a measure of cash, was unchanged at 1.3 billion pounds.
“Expenses are a key part of our transformation,” Wilson said on a conference call with reporters today. “We are on track to deliver 400 million pounds of expense savings. The benefit of this will flow through to shareholders.”
Net asset value per share fell 2.8 percent to 237 pence in the quarter as foreign-exchange movements and higher pension liabilities offset proceeds from last month’s sale of its U.S. unit to Apollo Global Management LLC, which generated a higher-than-expected $2.6 billion.
The company, which made an extra $800 million on the disposal, declined to comment on what it will do with the cash. It said that a “substantial” reduction in its inter-company loan, which was unchanged from the previous quarter, remained a priority.
The combined ratio, or claims and expenses as a percentage of premiums, for Aviva’s general insurance business was little changed at 96.9 percent. That figure doesn’t yet account for damage from last week’s European windstorms.
Wilson estimates that the impact from the storm, which battered homes and felled trees from England to the Baltic Sea, would be about 10 million pounds, and said the losses remained within Aviva’s monthly budget for such events.
U.K. competitor RSA Insurance Group Plc this week said it will miss its profitability target in the wake of the storms, estimating losses of as much as 65 million pounds, mostly in Scandinavia.