Aviva Trims First-Quarter Expenses 9%, Plans to Cut 2,000 Positions
May 17, 2013 by Best's News Service
LONDON – Aviva plc cut its overall expenses in the first quarter, while reporting flat results for operating capital generation and general insurance combined ratio.
Expenses were down 9% from the prior-year period to 887 million pounds (US$1.4 billion). The only segment to report an expense increase was Canada, which increased 2% to 97 million pounds. The largest reductions were a 45% drop in central costs to 35 million pounds and a 19% drop in Asia costs to 21 million pounds.
Along with cutting its “non-people” expenses, Aviva plans to eliminate 2,000 positions over the next six months, which is 6% of the company’s overall work force. Group Chief Executive Officer Mark Wilson said in a statement he realizes cuts are painful, but necessary to boost the company’s competitive position .
“This is essential for Aviva to become more efficient and agile,” he said in the statement. “I expect Aviva to move through this phase of its transformation as quickly as possible.”
Restructuring costs in the quarter were 54 million pounds with that figure expected to increase over the year because of redundancy and restructuring programs.
While Aviva’s overall combined ratio was flat from the previous first quarter, the company’s Ireland operations posted a four point jump in the ratio to 108 for the quarter, which is an “unsatisfactory” result, Wilson said in the statement. He said the company is substantially cutting costs in Ireland, while leveraging the scale and underwriting expertise of its United Kingdom operations.
The Canadian combined ratio dropped 2 points to 93 for the quarter. Wilson noted the company is able to deploy more sophisticated pricing in Canada with predictive analytics.
Aviva in January sold its remaining share in Delta Lloyd for 353 million pounds. The company began cutting its stake in the Netherlands-based company last year as part of an effort to divest non-core assets (Best’s News Service, July 12, 2012).
The company’s value of new business metric, which it says is its key measure of growth, increased 18% overall in the quarter to 191 million pounds. Wilson said the company made limited progress in the quarter with refocusing its businesses to grow new business value. The company’s businesses in the United Kingdom, France and Asia posted the largest new business value gains.
Aviva Insurance Ltd. companies currently have a Best’s Financial Strength Rating of A (Excellent).
(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com) BN-NJ-05-16-2013 1501 ET #