Rain

Rain

max temp: 14°C

min temp: 11°C

ESTD 1874 Search

Insurers Aviva and RSA in spotlight as half-year results revealed

15:44 01 August 2014

The insurance sector will be in the spotlight next week when Aviva, RSA and motor specialist esure step forward with half-year results.

shares

Aviva chief executive Mark Wilson will want to show the City his turnaround plan has not lost momentum when he unveils the insurer’s half-year results on Thursday.

The country’s second largest insurer, which has 31million customers worldwide, is expected to post an operating profit up a modest 4% to £1.05billion, compared to a year ago, according to brokers at Panmure Gordon.

Analysts at JPMorgan Cazenove expect cost savings the firm has made to be partly offset by winter storms claims in Canada and the UK, a strong pound and the lower sale of annuities for pensions as a result of changes made in the March Budget.

Aviva’s share price lost 5% or £550m on March 19 when the Chancellor made his surprise announcement that pensioners did not have to buy an annuity to draw their pensions.

The annuity market is worth around £12bn per year and the move is expected to impact 18m people.

Even though most of Aviva’s sales in this area are bulk annuities’ to employers’ final-salary pension schemes and are unaffected by the Chancellor’s proposals, the firm’s share price has not risen back above its pre-announcement peak.

Mr Wilson took charge in January last year after the departure of predecessor Andrew Moss in the wake of a humiliating shareholder revolt over his pay and the faltering pace of the business.

Since then he has cut hundreds of jobs and has disposed of parts of business as part of his turnaround strategy.

Mr Wilson told the market on July 9 he now planned to double the amount of excess cash the firm generated to £800m and to reduce its ratio of expenses to income from 54% to less than 50%, by the end of 2016.

Mr Wilson said: “We have made some progress at Aviva and it is time to move to the next phase of the turnaround. With a clear strategy and targets in place, the size of the opportunity for Aviva is compelling.”

But the firm’s share price was largely unmoved on the day the chief executive announced his plans. Next week’s results will allow Mr Wilson a second chance to make his case.

RSA chief executive Stephen Hester will update the market on the rescue plans for the More Than insurer when it posts half year results on Thursday.

The former Royal Bank of Scotland boss joined the firm in February following the resignation of Simon Lee in the wake of three profits warnings and the group’s Irish crisis when a £200m black hole was discovered in the division’s finances.

Mr Hester said he is ahead of where he thought he would be in his three-year plan to turn around a firm that had expanded into 30 countries over the last decade and overextended itself.

Since he took over he has successfully launched a £775m emergency rights issue, and raised around £600m by selling non-core businesses in regions that include Poland, the Baltics and China.

Mr Hester is reportedly poised to launch a plan to cut £150m over the next three years from RSA’s £2bn a year running costs.

He has also understood to have earmarked businesses in Germany and Italy as next for sale.

Analysts at Morgan Stanley expect the group to deliver a pre-tax profit of £177m, compared with £250m a year ago, due to bad winter weather in Canada and an earthquake in Chile.

But Morgan Stanley said the second half of the year will be better for the group as the majority of the cash from its disposals will flow into the group’s coffers.

The broker adds that RSA’s balance sheet is strong enough to support “a small interim dividend.”

But Mr Hester warned earlier this month that for the next two to three years acquisitions and giving money back to shareholders are off the table until the group has properly stabilised.

Sheilas’ Wheels owner esure is expected to reflect the pressure the industry faces over falling motor premiums when it reports half-year results on Monday.

The Surrey-based car and home insurer, which employs 1,400 people and has over 1.5m customers, is expected by the market to post flat profits before tax of £56.2m.

According to data from breakdown group the AA, average car premiums fell 19.3% in the year ending June 30 - the largest 12 month decrease since the group started compiling these figures two decades ago.

Over the last two years the car insurance industry has seen rates plunge as regulators have clamped down on fake whiplash claims as well as inflated hire car and garage repair bills that have padded out premiums.

This has meant that many insurance firms have had to dip into their reserves to write competitive policies and retain market share.

Analysts at Oriel Securities expect operating profits at esure to fall 6% to £60.9m as it faces claims from UK winter flooding as well as a car market where rates are falling.

However, management at the group, led by chairman and founder Peter Wood who also founded rival Direct Line, is widely admired with JP Morgan saying cash generation at the firm “remains healthy.”

There is a sign that as the economy improves insurers may begin to edge up prices.

Brokers at HSBC said that if this happens the well-capitalised esure, with around 5% of the car market and 2% of the home market is well-placed to grow.

AA insurance director Simon Douglas said: “This could be the ‘last hurrah’ for cheaper car premiums. These falls are now becoming unsustainable as insurers are digging into reserves to maintain their competitive edge. Some insurers are starting to resist pressure to cut premiums.”

shares

0 comments

Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files
Comments

Please log in to leave a comment and share your views with other East Anglian Daily Times visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by East Anglian Daily Times staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique East Anglian Daily Times account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

The water unit from the Prince's Street fire station with Ipswich with officials from the Port of Ipswich and students from Suffolk New College at the water safety demostration hosted by the port.

The Port of Ipswich teamed up with Suffolk Fire and Rescue Service to stage a rescue simulation off Orwell Quay.

From left, Chris Chamberlain from HTK, Vicki Cole from Crafted and Helen Dodman from Ipswich Central, the three organisations behind the Destination Digital conference.

The company behind the delivery of the Ipswich town centre Business Improvement District project has teamed up with two local digital specialist to stage a conference on online marketing for the tourism and hospitality sectors.

French Connection has warned that it faces a substantial loss when it posts its annual results.

Fashion chain French Connection today warned that it now expects to make a big annual loss after seeing its recovery hopes dashed by a difficult spring trading period.

Andrew Harrison, managing director of Stansted Airport.

Manchester Airports Group, parent company of Stansted Airport, scored a four-star rating in Business in the Community’s 2015 CR Index.

Dominic Casserley, group chief executive of Willis.

Global risk advice and insurance broking firm Willis has launched a 550million euro (£393m) offer to take full control of the French broker Gras Savoye.

Sainsbury's is to cut 800 jobs as part of a restructuring of its store operations.

Sainsbury’s is to cut 800 jobs as it becomes the latest supermarket to restructure its operations in the face of tough trading conditions.

The CWind Sword offshore support vessel.

Colchester-based offshore service vessel manufacturer CTruk has won an order to supply two more of its MPC22 boats to sister company CWind.

Kay Allen, founder of Trading for Good, and Paul Winter, chief executive of Ipswich Building Society.

Ipswich Building Society has been presented with a Responsible Business Award at a Trading for Good East of England event held in its home town.

Savills has agreed a deal to acquire Smiths Gore.

Property services group Savills has agreed the acquisition of residential and rural agency chain Smiths Gore for an undisclosed sum.

Signage outside the Birds Eye factory in Lowestoft.

The company behind the Birds Eye frozen foods factory in Lowestoft has been sold by private equity firm Permira to a acquisition specialist based in the United States.

Most read

Most commented

Topic pages