Aviva has reported a stronger-than-expected first-half performance, with operating profits rising almost a quarter as the insurer said its £3.7bn acquisition of Direct Line was already delivering improvements.
Operating profit increased 24 per cent to £1.33bn in the six months to June 30, beating market expectations. Aviva said it had moved quickly to improve Direct Line’s profitability while increasing sales through price comparison websites and maintaining customer service levels.
Dame Amanda Blanc, Aviva chief executive, said the group was making “very good progress” integrating Direct Line and remained confident of delivering the financial benefits of the acquisition.
The insurer expects to extract £225mn of cost savings from the deal by 2028, more than double its original £100mn target, after reaching the initial savings goal ahead of schedule. Aviva has previously indicated that up to 2,300 jobs could be lost as part of its wider cost-cutting programme, although it said the additional savings target would not require further job reductions.
The strong operating result was offset at the statutory level. Interim profit almost halved to £418mn from £819mn a year earlier, reflecting losses linked to hedging interest-rate and equity exposures as well as Direct Line integration and restructuring costs.
The figures underline the distinction between Aviva’s underlying trading performance and the accounting volatility generated by financial-market movements and acquisition costs.
Aviva also lowered its outlook for its health business, forecasting full-year operating profit of about £90mn, down from its previous guidance of roughly £100mn. The group attributed the reduction to slower growth in consumer and small-business markets.
The Direct Line acquisition remains central to Aviva’s strategy, with management betting that cost reductions and improved distribution can generate a substantial increase in returns from the combined business.
For investors, the latest results provide early evidence that the integration is beginning to deliver. But the decline in statutory profits and weaker health outlook demonstrate that the insurer still faces financial and operational pressures beyond the headline operating-profit growth.
Aviva said it remained on track to meet its three-year financial targets in 2028, putting the focus firmly on whether the early gains at Direct Line can be converted into sustained earnings growth.
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