Aviva PLC has taken another step in its quest to restructure the company by eliminating approximately 2,000 positions worldwide over the next six months. The announcement came in the London-based company’s first-quarter interim management statement released yesterday.
Last year, the insurer embarked on a program to reduce costs. According to the statement, the company has lowered expenses in Q1 by £83 million, or 10 percent, compared to the first quarter of last year. The company stated it is on track to meet its savings target of £400 million.
Q1 restructuring costs totaled £54 million. In the statement, CEO Mark Wilson said those costs will likely increase during the remainder of the year as the expense-cutting program continues. “In future years, we will ensure we have more modest restructuring costs,” he stated.
“I am conscious of the challenges and do not want to set expectations at an unrealistic level. Progress so far has been satisfactory and there is a great deal more we need to do for our shareholders,” continued Wilson.
Since last year, Aviva PLC has undertaken a strategy to shed noncore business and slash expenses. In December, it sold off its U.S. unit, Aviva USA, and in February, it disposed of its Russian operations. Other dispositions included the sale of its shares in Delta Lloyd and its business in Malaysia.
Other highlights from the Q1 report include:
- Operating capital generation remained stable at £0.5 billion, equal to the Q1 2012 number.
- Internal leverage was cut by £300 million. Over the next three years, the company has targeted £600 million in debt reduction.
- The value of new life business (VNB) grew on a pro forma basis to £191 million, up 18 percent from £162 billion in the first quarter of last year. That growth was driven by increased profits in its U.K. life (up 33 percent to £108 million) and Asian businesses. However, the value of new business in Spain and Italy fell to £3 million and £4 million, respectively, from £9 million for each in Q1 2012. That company stated that was partly due to a reduction in the euro risk-free rate used to calculate VNB and partly due to mix and product issues.
- IFRS net asset value per share increased 9 percent to 302 pence. In fiscal year 2012, it was 278 pence.
- The general insurance combined operating ratio in the first quarter was stable at 96 percent.
- On a pro forma basis, estimated economic capital surplus stood at £7.3 billion, or 173 percent. Last year at the same time, it was £7.1 billion or 172 percent. That was within the target ratio range of 160 percent to 175 percent.