Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

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Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

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Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

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RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Categorized | Insurance

Aviva confronts sceptics on Friends deal

Posted on October 29, 2015


Aviva’s chief executive has confronted sceptics over the insurer’s purchase of Friends Life, saying its latest financial results showed the £5.6bn transaction was “everything we expected it to be”.

Mark Wilson on Thursday acknowledged that much of the City was still not convinced about Aviva’s all-share acquisition of its FTSE 100 rival, the biggest UK insurance deal since 2000.

    But the New Zealander said the group was already reaping rewards from the tie-up
    with Friends as he unveiled a 23 per cent jump in quarterly new business profits at its life and pensions operation.

    “I understood the scepticism at the time — historically not too many deals have worked in the UK,” he said. “A lot of analysts and investors said we would be distracted.

    “But this one has shown, for two successive quarters, we are getting the benefits of the deal. It’s everything we hoped for and expected it would be.”

    He said Aviva had already generated £90m in savings from the integration, putting the group ahead of schedule in its plan to reduce annual costs by £225m by the end of 2017. About 1,500 jobs are expected to go.

    The acquisition has divided opinion in the City.

    Mr Wilson has pitched the deal, forged in the wake of chancellor George Osborne’s historic pensions reforms, as a way to improve Aviva’s cash generation and increase its financial firepower.

    Yet Aviva shares, which had rallied strongly after he took the helm, have struggled for momentum this year on concerns the insurer has paid a full price for an acquisition in a mature market.

    Aviva shares rose 0.8 per cent to 483p on Thursday. Yet they remain at a discount to peers, trading at less than 130 per cent of the company’s book value. Rival Prudential changes hands at about 320 per cent.

    “Clearly the market doesn’t yet believe,” said Mr Wilson, who was hired almost three years ago after a shareholder revolt ousted his predecessor Andrew Moss.

    But he added: “As people analyse this, they will see that all we’ve been doing is what we said we would — and maybe a little bit more.

    “The market will eventually see that.”

    Aviva’s life arm generated £289m worth of “value of new business” — a measure of profits — in the third quarter, up 23 per cent from the same period a year ago assuming currencies were constant.

    Aviva disclosed it held 72 per cent more capital than required by regulators and signalled the looming Solvency II shake-up of insurance financial safety standards would be manageable.

    The insurer said it had taken further steps to strengthen its balance sheet in recent months, disposing of a £2.2bn of commercial mortgage holdings and reinsuring a chunk of its UK general insurance business.

    Mr Wilson added the group was making progress turning round Aviva Investors, although the asset management arm endured net outflows in the period as £4.5bn worth of redemptions offset gross sales of £4bn.

    In general insurance, the group lost 94p in claims and expenses for every £1 worth of premium income in the first nine months of the year — an improvement from 95.9p in 2014, helped by fewer weather-related payouts.