Aviva slashes dividend

Underlying IFRS operating profits were down just 4 per cent at £1.78bn, but headline profits were wiped out after a £3.3bn impairment charge relating to the sale of its US business. On a market consistent embedded value (MCEV) basis, pre-tax profits fell from £3.97bn to £2.85bn, with most of the decline reflecting a sharp drop in operating earnings in France, from £1.1bn to £246m, as the previous year's £622m positive economic and other variances turned into a negative £225m.

On an IFRS basis, UK new business profitability rose 17 per cent, thanks to a shift away from lower-margin business, although one-off items reduced operating profits by 3 per cent to £887m. On the general insurance side, like-for-like operating profits rose 4 per cent to £893m, driving the combined operating ratio down from 97.5 per cent to 97 per cent.

Steps to improve the group’s financial strength have centred on simplifying the business portfolio, so that the group now operates in 18 countries compared with 30 three years ago. And, on a pro forma basis, the estimated economic capital surplus rose from £3.6bn to £7.1bn, while the solvency surplus, on an Insurance Group Directive basis, improved from £2.2bn to £3.8bn.

Broker Investec Securities has its forecasts under review, but was previously forecasting operating profits of £2.66bn and embedded value of 490p a share for 2013.