Aviva targets £400m in cuts but says jobs are safe

Insurance giant Aviva yesterday outlined plans for a further £400 million in cost cuts and efficiencies over the next two years.

The group's previously announced decision to axe its 7,600-member final salary scheme in the UK next April will help deliver some of the savings, while Aviva said it was also cutting several hundred jobs in its Canadian operations.

But the firm, which employs 2,500 in Scotland, is not planning large-scale redundancies to achieve its latest cost cutting measures, having already slashed its workforce by almost a fifth since 2007.

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Aviva updated the market on third-quarter performance, reporting a 26 per cent leap in UK sales to 2.4 billion.

This took UK sales in the year so far to 12.3bn, up 16 per cent year on year, while worldwide new business rose 5 per cent in the first nine months of 2010.

Aviva has earmarked 200m in efficiencies and a similar sum in cost savings by the end of 2012, of which about half will come from the UK.

This comes after the life and pensions arm cut 500m between 2007 and 2009 - a move that saw it reduce its headcount by 19 per cent.

Aviva announced plans in April to shut the UK final salary pension scheme to future accruals, which will save it 50m a year in funding costs.

Andrew Moss, chief executive of Aviva, said the group was on track for "strong profitable growth" for the full year.

Worldwide long-term saving sales hit 8.4bn in the third quarter, up 9 per cent on a year earlier.

In the UK, insurance sales rose 15 per cent year-on-year to 1.2bn in the three months to 30 September, which was 2 per cent higher than in the previous three months.

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But on a global basis, insurance sales dropped 11 per cent since the second quarter after a tougher market for its international operations, in particular Aviva's majority-owned Dutch insurer Delta Lloyd.

Aviva shares rose 4.7p to 402.3p yesterday as investors cheered the update and news of further cost savings.

A year ago the financial crisis left nine-month worldwide life and pension sales down by a worse-than-expected 11 per cent. UK life and pension sales fell 25 per cent this time last year.

Aviva has been concentrating on profitable business and pulling out of less lucrative areas, as well as cutting costs to help offset more difficult markets.

However, the group has faced shareholder pressure after it spurned a 5bn offer from MoreThan owner RSA for its general insurance arm.

Aviva has ruled out a break-up, saying in August there were compelling strategic and financial benefits in continuing to run the general insurance business alongside its pensions and investments division. It said this view was supported by a recent strategic review carried out in conjunction with external advisers and confirmed yesterday it wanted to expand general insurance business worldwide.