Insurance giant Aviva reported a “satisfactory” first half after cost-cutting boosted earnings by 5%, but delivered another blow to investors as it almost halved its interim dividend payout.
The group confirmed a cut in its divi from 10p to 5.6p, having already warned earlier this year it would be reduced in line with the mammoth cut to its full-year payout.
But recently-appointed boss Mark Wilson offered further signs that his turnaround efforts are gaining traction as he reported underlying operating profits up 5% to £1bn for the six months to June 30 and said new business rose 17% to £401m.
The increase in earnings was largely driven by cost-cutting, which includes plans revealed in April to axe around 2,000 jobs, equivalent to 6% of its global workforce.
Costs came down by 9% or £147m to £1.5bn as part of its aim to save £400 million and the group said there was scope for more savings as it looks to push through new initiatives in digital and automation.
It said there may be further reductions in roles, but these were likely to come through natural turnover rather than redundancies.
Mr Wilson said: “Although these results continue the positive trends of the first quarter, tackling our legacy issues will take time.”
He added that performance was still “far from satisfactory” across Spain, Italy, Ireland and its asset management arm Aviva Investors.
New business levels slumped by 57% in Italy and 38% in Spain.
The UK business delivered a 16% rise in new business, with its general insurance division seeing earnings rise 5% to £239m as it was helped by lower weather-related claims.
UK life and pensions earnings took a knock, down £31m to £438m, due largely to an exceptional gain of £74m a year earlier.
Share rose 5% as analysts hailed “steady progress” in its turnaround.
Insurance expert Eamonn Flanagan at Shore Capital, said while the results were slightly better than expected, the ``scale of the task facing the new chief executive is now starting to become apparent''.
“We believe that the market is taking too much for granted, too soon, as regards the turning around of this behemoth,” he added.
Mr Wilson is overhauling the business after joining the company in January after predecessor Andrew Moss quit following a shareholder rebellion over pay and performance.
He stunned the City in March when he cut the group’s divi by 44% following a long period of under-performance and a fall in underlying profits to £1.78bn in 2012, from £1.86bn a year earlier.
Aviva said cost cutting boosted UK earnings by £50m in the half year, while the increase in new business was helped by a strong performance for individual annuities and sales of group protection insurance policies.
But it was the latest group to note the impact of a price war in car insurance, with net written premiums in its UK general insurance arm down 6% to £2bn as a result.