US operations are focus of sell-off talk after Aviva posts £681m loss

AVIVA, Britain’s second-biggest insurer, plunged to a £681 million half-year after-tax loss after writing down the value of its US business, fuelling speculation that the operation will be sold.

The firm sliced £876m of goodwill off Aviva USA, erasing all of its value above that of its assets.

Kevin Ryan of Investec said the decision was “at least in part” a preparation for offloading the business. “We would view a sale as good news,” he added in a note to investors.

Pat Regan, Aviva’s chief financial

officer, yesterday attempted to dismiss such talk, insisting that the goodwill write-off simply reflected expectations of lower profits from the division.

“It’s not a statement of the market value of the US business or anything you might want to read into it like that,” Regan said.

Aviva USA is one of 16 units marked for sale or closure under a wide-ranging overhaul that will see significant change abroad but have less impact in the UK. The restructuring is being led by chairman John McFarlane, who is running the company on an interim basis following the ousting of chief

executive Andrew Moss in May.

Scots-born McFarlane – a former non-executive director of Royal Bank of Scotland – said yesterday that investment banks had been appointed to advise on disposing of ten of those businesses, none of which has been named publicly. Meanwhile, the search for a chief executive is “bang on timetable”, with a new leader planned to be in place early next year.

Excluding write-offs, operating profits during the six months to the end of June fell by 10 per cent to £935m, less than the figure of around £1bn most analysts expected. The weaker performance was linked to higher restructuring costs, the weakening of the euro against the pound, and last year’s RAC disposal.

The group was also hampered by £40m of flood-related claims in Britain, though its UK general insurance business still managed a 17 per cent rise in operating profit. Operating profit from UK life insurance edged 2 per cent

higher, the only region in all of Europe to post an increase.

Robin Spencer, chief executive of general insurance in the UK and Ireland, said both of those businesses had demonstrated “why they are at the heart of the strategy of the group”.

Spencer was appointed in July after former general insurance chief David McMillan was promoted to director of group transformation as part of McFarlane’s reorganisation of the board.

Aviva is still looking for savings in the UK as part of a group-wide drive to cut costs by £400m. Spencer said this would be done by fine-tuning strategy, rather than dramatic change.

“If you look at our operations in Scotland, all of those centres are broker-facing, customer-facing roles,” he said. “I would expect there to be very few changes there.”

Aviva employs about 3,000 people in Scotland, including 1,500 and 900 respectively at general insurance centres in Perth and Bishopbriggs. The group closed two similar centres in Glasgow and Dundee in 2010.

Aviva maintained its interim dividend at 10p. The shares closed 1.5p lower at 316.7p.