Aviva and Friends Life topped the FTSE leaderboard after unveiling better than expected figures ahead of their £5.6billion merger next month.
Aviva, which employs over 2000 across general insurance centres at Perth and Bishopbriggs near Glasgow, has now seen its shares double since Scot John Macfarlane took over as chairman and ordered a radical shake-up of the business in 2012. Mr Macfarlane is stepping down at Aviva (also as chairman at FirstGroup) to take up the chair at Barclays next month.
Under chief executive Mark Wilson, Aviva has accelerated its turnround with the Friends deal which it says will help put its UK life business "in a good position to meet customers' needs" when pensions freedoms arrive next month.
Mr Wilson said execution of the merger will be a significant focus for the group this year and warned: "Aviva has travelled a long way in the past two years, but it would be wrong to assume that our turnaround is nearing completion."
Aviva said its results showed tangible progress, with all key metrics moving in the right direction. Cash is up 65per cent, operating earnings per share are up 10per cent, and value of new business is up 15per cent, despite a 16per cent fall in the value of new annuity business in the UK following the scrapping of mandatory annuities.
Bulk annuity purchase more than offset the fall, leaving life new business value up £4m at £473m.
The company reported a 26per cent rise in book value, a £571m cut in operating expenses since 2011, lower debt ratios, and a full year combined insurance ratio of 95.7per cent (where below 100per cent means a profit) which was the best in eight years.
Aviva said: "We have increased our final dividend by 30per cent to reflect the progress made during the year and our improved financial position. We have entered 2015 in a position of strength."
Aviva reiterated that the merger would slash £225m off annual costs, and bring material capital savings, without giving further detail.
It was reporting a 6 percent rise in operating profit to £2.17bn, a touch higher than analysts' forecasts. Friends Life's operating profit jumped 38 percent to £556m, also above forecasts. Friends also reported a 15 percent drop in annuity sales.
Aviva shares rose 6 per cent to hit their highest point since September 2008 while Friends rose to six-year highs.
Barrie Cornes, analyst at Panmure Gordon, said Aviva had beaten expectations on "pretty much every key metric" and confirmed his 'buy' recommendation on the stock.
Holders of Friends stock will receive 0.74 new Aviva shares for each Friends share. Institutional investors, who vote on the merger on March 26, have said the deal makes sense as a way to cope with UK pension changes.
The turnround at Aviva Investors, which poached Standard Life's Euan Munro to run the business in 2013, is said to be progressing, "with the first tangible signs of higher margin fund inflows emerging" and "a clear strategy for our third party proposition". The new AIMS fund range has £1bn of assets under management eight months after launch. Aviva Investors' total assets increased 2per cent to £245.9bn billion, of which £45.5 billion is external.
Standard Life Investments now has identical assets under management - also at £245.9bn - but almost half or £117bn at SLI is managed for third parties.
Aviva however will now get a boost of up to £70bn from the Friends assets.
The company said a 16 percent rise in Aviva Investors' operating profit "remains inadequate". It signed a deal in January with Virtus Investment Partners in the US, which Mr Wilson said would help distribution.
In emerging markets, Mr Wilson said Aviva was considering options for its Indian joint venture with Dabur Group following a rule change increasing foreign investment limits. Options could include selling the business.
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