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City hails Mark Wilson’s Aviva turnaround

Aviva: Flood costs were offset by better weather earlier in the year. Picture: SWNS

Aviva: Flood costs were offset by better weather earlier in the year. Picture: SWNS

  • by MARTIN FLANAGAN
 

MARK Wilson’s turnaround strategy at Aviva, Britain’s biggest insurer, today won plaudits from investors who pushed the shares up by 8 per cent.

The chief executive, brought in last year to revive the flagging group, unveiled a better annual profit than expected.

Wilson unveiled a rebound from a loss of £2.9 billion to profits of £2.2bn last year and said he did not foresee further significant redundancies in the coming year “but we are always looking for efficiency improvements”.

Aviva, which employs 2,500 across two Scottish sites at Perth and Bishopbriggs, said operating expenses fell 7 per cent last year, even though it took a £60 million hit from flood losses in Britain.

Wilson said there had been progress since he was brought in at the start of 2013 with a remit to revive Aviva’s fortunes after a shareholder rebellion triggered the departure of his predecessor.

But, having got rid of a number of under-performing businesses in the US, Spain, Malaysia, Holland and Italy, he said there was much still to do. “I want to guard against complacency. Aviva still has issues to address,” Wilson said.

“Have we made progress? Yes, some. Is it a little faster than anticipated? Probably. Have we unlocked the full potential at Avia? Not yet.”

However, he said the turnaround at the company was “intensifying and we are starting to get a track record”. The shares closed up 37.4p at 503.5p.

Despite the widespread disruption caused by the British floods, Wilson said the figure for claims was in line with the amount it normally sets aside for bad weather claims in January and February. “[The floods] have been offset by better weather earlier in the year. We have also had less freezing or snow this winter. That balances itself out,” he added.

The better operating performance, including new business up 65 per cent in Asia and 39 per cent in the “mature” market of France, meant bonuses would be reinstated for 2013 for top-performing staff, Wilson said.They were cut in 2012 and senior employees saw their pay frozen to appease shareholders after half of them had voted against remuneration proposals.

Wilson said: “We’ll pay for performance. We will be paying bonuses for this year and I think the shareholders will be quite ok with that scenario.”

Aviva Investors, the fund management arm of the company, saw £5bn of net outflows in the year. The division’s new boss, Euan Munro, who joined from Edinburgh-based rival Standard Life recently, said he would be making presentations to investors about how performance could be improved.

The amount of cash remitted to the group by subsidiaries – a key focus of Wilson since his appointment – jumped 40 per cent in the year to £1.27bn.

A 4 per cent in increase in the final dividend to 9.4p gives a total payout for the year of 15p compared with 19p in the previous 12 months.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, commented “Aviva has not yet returned to firing on all cylinders, although these numbers highlight the progress which has been made.”

 

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