Weather helps Aviva profit to dive

The weather has not just left tourists feeling glum — it has been a key factor in a massive fall in profits at one of the country’s biggest insurers.

Aviva Ireland’s general insurance business saw its operating profits fall dramatically, from over €30m in the first half of 2011 to under €4m for the first six months of this year.

Aviva said in a statement: “In Ireland operating profit fell from £24m (€30.5m) to £3m (€3.8m), reflecting adverse weather claims, increased costs, and difficult economic conditions.”

The general insurance area was not the only part of Aviva’s Irish operation to be hit by tough market conditions so far this year.

The ending of a joint venture with AIB in March resulted in further losses for the insurer.

“In Ireland life operating profit fell from £32m (€40.6m) to £8m (€10m), impacted by the closure to new business of our joint venture with AIB on 31 Mar, 2012 and adverse market and economic conditions,” Aviva said in its half-year report.

Aviva has already announced its plans to restructure its Irish business. It will make between 500 and 540 people redundant, down from initial plans to cut 770 from its workforce. It began recruiting last month for 220 additional posts in claims insurance and direct sales in Galway.

The global company incurred restructuring costs of £186m in the first half of the year, with the increase driven by costs associated with Solvency II implementation, the costs of merging the UK and Ireland businesses, as well as additional restructuring costs around the group.

Globally, the insurer wrote down the value of its US business by more than $1bn (€810m), fuelling spec-ulation the unit is to be sold as part of a broader overhaul aimed at boosting the group’s financial performance.

Aviva has written off $1.37bn of goodwill at the US unit, which it bought for £2bn in 2006.

Finance chief Pat Regan said the move was not intended to prepare the division for disposal.

However, analysts, who believe the US business is probably among some 16 units earmarked for sale or closure, say the writedown would make it easier for Aviva to avoid booking a loss on a disposal, which now looks more likely.

Aviva has not identified which businesses it wants to shed, but said yesterday after reporting the lower than expected half-year profits that it had appointed investment banks to advise on the sale or closure of 10 of the 16 units.

The firm has greater exposure than its British rivals to the troubled eurozone, contributing to a persistently weak share price which in May prompted irate investors to force out former chief executive Andrew Moss.