Aviva leaps from the red to £747m but still takes axe to its dividend

Simon English
06.08.09

Insurance giant Aviva jumped back into the black today, but still slashed the dividend as part of moves to bolster its finances.

It followed rival Legal & General in cutting the payment to shareholders, a move likely to provoke suggestions that the company has done the right thing a little late.

Aviva shares halved in two days when the insurer unveiled full-year results for 2008 six months ago as it held the dividend amid rising panic about the industry's financial health.

Today it recorded a profit for the first half of this year of £747 million against an £84 million loss for the same period last time. The interim divi is cut by a third to 9p.

Chief executive Andrew Moss denied this indicated that he should have taken advice to lower the divi earlier.

“We made the right decision then and we have made the right decision now,” he said. “Our 2008 earnings supported paying the dividend and we have made a prudent decision today.”

Aviva has improved its solvency surplus to £3.2 billion, up from £2 billion six months ago.

Dropping the dividend will help it further boost cash reserves, freeing up capital for what Moss called “market opportunities”. This could include takeovers in a sector that is ripe for consolidation.

The insurer is also plotting a “partial” float of its Dutch arm Delta Lloyds, which has sales of around £3 billion a year and accounts for around 15% of Aviva's business. Delta will be listed on Euronext Amsterdam “when market factors and other conditions allow”.

Sales of life and pensions tumbled in the first six months as customers diverted money to paying bills and other forms of saving. New business in the UK fell from £6 billion to £4.7 billion. Aviva has spent tens of millions on a rebrand that sees it ditch the Norwich Union name. Recent surveys suggest the public thinks Aviva is a computer maker or perhaps a bus company.