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Aviva UK Life profits up 9% despite Budget pensions turmoil

Aviva’s UK Life business has delivered a 9 per cent increase in pre-tax profits for 2014 despite a tumultuous year that saw annuity sales battered in the wake of the Budget.

The provider’s annual results, published this morning, reveal year-on-year profits in the UK Life arm rose from £930m to just over £1bn. This was primarily due to a £282m release of “longevity reserves” following a review of the life expectancy of its annuitants.

The firm says this was partially offset by a “substantial write down” resulting from the Government’s decision to introduce a 0.75 per cent charge cap for auto-enrolment and ban active member discounts from April this year.

Sales in the UK Life division, measured on a present value of new business premiums basis, increased 1 per cent, from £11.9bn to £12bn. Annuity sales predictably suffered in the fourth quarter, plummeting 56 per cent year-on-year from £663m to just £292m. Over the 12 months annuity sales were down 16 per cent, from £2.3bn to £1.9bn.

This was partly offset by a 74 per cent increase in equity release sales compared with 2013, from £401m to £696m, and an 11 per cent rise in protection sales, from £992m to £1.1bn.

Pensions new business also rose 6 per cent, from £5.5bn to £5.8bn.

UK operating expenses were slashed 7 per cent year-on-year, from £569m to £529m, reflecting staff cuts and reduced spend on property. UK integration and restructuring costs more than halved, from £44m to £21m.

The provider has boosted its final dividend 30 per cent to 12.25p on the back of the results.

Aviva group chief executive Mark Wilson says: “We have increased our final dividend by 30 per cent to reflect the progress made during the year and our improved financial position. We have entered 2015 in a position of strength.

“Nevertheless, it would be wrong to assume that our turnaround is nearing completion as we have further to travel than the distance we have come.”

Aviva is currently in the process of acquiring Friends Life, with a deal expected to be completed on 13 April.

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