Flourishing Aviva raises divi by 15pc

INSURANCE giant Aviva treated investors – including 600,000 small shareholders – to a 15pc hike in its dividend after announcing another impressive set of results.

The firm offered more evidence that it is returning to health, as profits rose 9pc to £1.17bn in the first half of the year, beating forecasts in the City.

Analysts focused on these figures rather than profit after tax, which fell from £545m to £863m.

This included £271m of costs incurred to integrate insurer Friends Life, which it bought for £5.6bn earlier this year.

Boss Mark Wilson said the process of merging the firms was ‘nowhere near complete’ but is on track, with £63m in savings achieved so far. It has outlined plans to shed 1,500 jobs across the newly merged business.

Its claims and costs as a percentage of income from premiums – known as the combined operating ratio – stood at 93.1pc.

This key measure of success, which means it is raking in more from premiums than it is paying out in claims to its policyholders, was better than expected and the best result in eight years. It was helped by good weather in the first half of the year, which meant that Aviva paid less in claims.

The life insurance arm also turned in an 18pc increase in profit despite a slump in annuity sales since the Government’s pensions reforms were introduced in April. One of the storm clouds was its fund management arm Aviva Investors, which is struggling to recover.

Profits at the division fell £31m due to a combination of the costs of getting it back on its feet and the disposal of its River Road subsidiary in the US.

Aviva rewarded shareholders by increasing the interim dividend by 15pc to 6.75p from 5.85p.

But Wilson said Aviva is still a long way from complete recovery.

He said: ‘I’m not really known for my patience. My message to the group is yes we have made some progress but it is not nearly enough.’

Barrie Cornes, an analyst at broker Panmure Gordon, said the results were better than expected on most measures and maintained his ‘buy’ recommendation on the stock.

Shares edged up 4.5p to 532p.