Aviva makes £700m profit but slashes dividend

Aviva has made a profit of over £700m in the first half of the year but has slashed its dividend to just 9p.

General insurance and existing life business were the main drivers of the turnaround, accounting for around 80% of operating profits.

Aviva's interim statement revealed it made an after-tax profit of £747m in the first six months of 2009. Operating profit fell 14% to just over £1bn.

However, the firm has cut its interim dividend by 31% to 9p per share.

The board says ongoing economic instability and a falling operating profit are key factors behind its decision to cut dividends. However, it also wants additional financial flexibility in order to take advantage of market opportunities.

Despite the cut, the firm's shares jumped 5.5% to 376p.

New life and pensions business fell, down 21% to £4.7bn, while life operating profits dropped 14% to £368m. General insurance and health new business also fell, down 14.7% to £4.9bn.

Aviva has also given an update on the reattribution of its inherited estate, saying 70% of policyholders have voted so far, with 96% accepting the offer.

Andrew Moss, group chief executive of Aviva, says: "In a challenging economic environment Aviva has returned to profit: life and pensions margins have improved, the general insurance business has beaten our targets and our regulatory capital position has strengthened significantly.

"Our overriding priority now is to continue to build a position of strength from which Aviva can exploit market opportunities. In this context we have decided to reduce our interim dividend to 9p per share in line with lower investment earnings in 2009."

John Bakie, Senior Correspondent - IFAonline | Professional Adviser
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