Insurance giant Aviva has released final results for 2005 revealing operating profits are up 25% on the previous year and suggested it may be looking to drive an imminent takeover, but financial adviser group Millfield has admitted it failed to hit promised profits.
Preliminary results for the year ended 31st December revealed under international financial reporting standards suggest Aviva's operating profit stands at £2.1bn million - an increase of 25% - while the worldwide operating profit is up 29% to £2.9bn from £2.2bn in 2004, and global long-term new business sales saw a 10% rise to £24.6bn from £22.3bn.
Life and pensions generated a 7% growth in global sales to £22.2bn, however, group chief executive Richard Harvey admits the international portfolio now accounts for 60% of life new business, and international long-term savings rose 16% to £14.4bn.
Analysts at stockbroker Killik and Co point out pre-tax profits in the life insurance division are actually down £1.12bn to £1.07bn.
Of this, the UK Norwich Union business saw £2.2bn of new business in 2005 – up 7% on the previous year – and the firm says it is continuing to write “all business comfortably above the cost of capital” as well as developing its interest in the Sipp and bulk purchase annuity markets.
At the same time, Harvey has revealed the firm is topping up its Group UK pensions schemes to the tune of £700m over the next two years.
Similarly, Aviva has increased its final dividend payment per share for 2005 to 17.44p but has now scrapped its commitment to increase the dividend by 5% each year.
Both of the final announcements are hints Aviva might be considering acquisition engagement, as a further statement from Harvey says:
“We are confident of delivering further growth from our businesses in 2006. We will continue to evaluate new distribution and acquisition opportunities to provide additional momentum where we can create shareholder value,” says Harvey.
Industry rumours suggest Aviva is in discussions with Prudential about a takeover.
In contrast, Millfield Partnership has today published a trading statement admitting the firm has not made its quarterly operating profits target, which it promised would be published during the first calendar quarter of 2006.
A statement issued this morning says “as a result of a number of factors” including late reported costs and trading in December lower than anticipated, the intermediary group actually incurred a operating loss for its third business quarter.
This is despite reducing base costs from £49m to £29m per annum by December 2005, so the firm is now reviewing “aspects of its operating results” with auditors ahead of its full annual report expected by June.
It is understood while Millfield has not met its profitabily target this time round, it should do so by the end of the second calendar quarter this year.
News of Millfield’s inability to reach profitability follows weeks of speculation around the trading of its shares, after the share price dropped 200% in a three-week period between 26th January and 20th February.
Although FSA and Millfield officials have been unwilling to confirm details, it is thought the FSA is investigating trading because the share price may have fallen - from 18.25p to 7.75p during that period - through short selling and as a result of comments made about Millfield within investor chat rooms.
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