Aviva's turnaround gathers pace

The scale of that debt - reflecting years of using capital generated in some operations to finance activity elsewhere - had become both a drag on sentiment and a regulatory issue. But in the 14 months to the end of February, Aviva cut that by £1.7bn to £4.1bn, and has agreed with regulators to cut it to £2.2bn by the end of 2015. That’s “considerably more stringent than we would have imagined,” says analyst Oliver Steel of Deutsche Bank.

Meanwhile, expenses are now 11 per cent below the 2011 level and total cost savings since then are set to reach £400m by the year-end. Moreover, Aviva has continued to exit non-core operations in the US, Spain, Malaysia and Italy. More disposals in South Korea, Turkey, Taiwan and Indonesia are on the cards, too. Overall, self-help bolstered Aviva’s capital cover ratio (the difference between available capital and what’s needed) to 182 per cent last year, from 147 per cent.

Better conditions in the life-insurance market are also helping, and the value of Aviva’s new-business sales grew 13 per cent. There were especially robust performances in France, Poland and Asia, although UK life profit grew just 5 per cent - significantly supported by cost-cutting - reflecting tough comparatives on annuity sales following the implementation of the directive against gender discrimination.

Pending upgrades, JP Cazenove expects EPS of 46.5p for 2014 (2013: 49p) and embedded value of 470p.