Earlier this year, Aviva's CEO Mark Wilson set out his "investment thesis" for the company -- "delivering cash flow and growth, in that order" -- so this management statement represents the first report of work-in-progress toward that goal.
Operating capital generation -- which Wilson describes as "a precursor to cash" -- was "stable" at 0.5 billion pounds. Operating expenses were reduced by 10%, to 769 million pounds, although costs of 54 million pounds were incurred in restructuring the business, in large part due to redundancies. These costs are set to continue, as Aviva aims to reduce its workforce by around 2,000 roles (6% of its global headcount).
The company reported an 18% increase in its key measure of growth, the value of new business. Growth was especially strong in Aviva's developed markets in the U.K. and France and also in Turkey and Asia, which saw increases of 67% and 29% respectively, but was described as "disappointing" in Spain and Italy, where the value of new business fell substantially.
Commenting on the statement, Wilson said:
In the first quarter we have taken steps to deliver our investment thesis of cash flow and growth. Our operating expenses are now 10% lower and we are on track to deliver our cost savings target of £400 million.
Our key measure of growth-value of new business-has increased by 18% driven by actions to improve profitability in UK Life and growth in our Asian business. In general insurance, our profitability was stable with a COR of 96% with a strong result in Canada. Net asset value has increased by 9% to 302 pence and our internal debt level has reduced by £300 million.
Today's results demonstrate the first steps toward delivery. I am conscious of the challenges and do not want to set expectations at an unrealistic level. Progress so far has been satisfactory and there is a great deal more we need to do for our shareholders.
At 343 pence, Aviva's share price is now some way to recovering from its recent lows, which followed the company's announcement of a swingeing 44% cut in its final dividend by at the beginning of March, but it still remains over 15% down so far this year.
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