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Wilson says work still to be done at pensions giant

‘Wrong to assume the turnaround is complete’ warns Aviva boss

AvivaAviva boss Mark Wilson announced a rise in annual profit and a hike in the dividend, but said it would be wrong to assume that the turnaround of the life and pensions giant is nearing completion.

Mr Wilson, who was brought in to revive the ailing group, said it had “moved in the right direction” over the last year despite headwinds from currency, changing regulation and lower interest rates. But it had further to go on the recovery journey than the distance it had already travelled.

Operating profit is 6% higher at £2.17 billion (2013: £2.05bn) and the dividend is up sharply, indicating a willingness to maintain shareholder loyalty as the board continues to rebuild.

“These results demonstrate progress in our turnaround and the consequence of this is a 30% increase in the 2014 final dividend,” said Mr Wilson.

He said the acquisition of Friends Life in December is accelerating the turnaround plan.

“The financial rationale of the transaction is that we expect it to add c.£0.6 billion to cash flow, eliminate any need to de-lever, generate £225 million of expense synergies as well as material capital synergies.

“Strategically, this transaction secures our position in our home market, adds up to c.£70 billion of funds to Aviva Investors and gives us flexibility to invest in key existing growth segments and markets.

“The planning phase of the integration is under way and our work to date validates our underlying assumptions. The shareholder vote will be on 26 March, with completion anticipated on 13 April 2015. While these dates are important milestones, once the real work of integration is under way we expect the benefits for shareholders to accrue.”

But he said that much more work needs to be done.

“A successful integration of Friends Life is a significant focus and it is important to demonstrate our ability to execute on our plans and achieve our external objectives. This is a bare minimum. 

“While the proposed integration of Friends Life is a major exercise, there are large parts of the business that are not involved and we will continue to focus on better capital allocation and efficiency across the entire group, driving digital throughout the organisation and building out our true customer composite model.

“Aviva has travelled a long way in the past two years. But it would be wrong to assume that our turnaround is nearing completion. On the contrary, we have further to travel than the distance we have come.”

A proposed final dividend of 9.4p to 12.25p, representing a rise of 30.3%, will make a total for the year of 18.1p (2013: 15p), a 20.7% increase.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “The results are both broadly pleasing and in stark contrast to the travails of recent years, most notably the financial crisis and subsequent dividend cut in 2013,”

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