Profit at Aviva's Irish arm plunges 89pc
PROFITS at the Irish arm of Aviva plunged last year as the company suffered from the end of a cross-selling agreement with Allied Irish Banks.
The insurer, which is moving its Irish business into its UK division, said operating profit from the Life business in the Republic plunged 89pc to £5m (€5.75m) on sales that collapsed 31pc to £632m, after it lost the contract with AIB.
The life division, which is by far the biggest part of Aviva's business, was part of an Irish sector that "remains a difficult market", Aviva said.
"Profitability is not yet at acceptable levels."
In general insurance and health, operating profit in Ireland slid by a third to £29m.
The weak Irish numbers were part of a larger trend for Aviva. The UK's second-biggest insurer by market value plunged as much as 15pc after it said it slashed its dividend, cut directors' bonuses to zero and froze pay for some 400 top managers.
The firm will pay a final dividend of 9 pence a share for 2012, down from 16 pence in the previous year. That cut the total for the year to 19 pence a share, far less than the 25.4 pence expected.
"These results look ghastly," Marcus Barnard, a London- based analyst at Oriel Securities. Chief executive Mark Wilson has cut the dividend "as much as possible to a lower level, from which it can grow".
The insurer had a net loss of £3.05bn in 2012, following a £3.3bn write-down on the US business it agreed to sell in December. Operating pre-tax profit dropped 15pc to £2.13bn.
Mr Wilson, who took over at Aviva at the start of this year, is selling assets to rebuild capital buffers depleted by the European sovereign debt crisis.
The company's "overall situation" means executive directors won't be awarded bonuses for 2012, Mr Wilson said.
"Whilst we have enough liquidity to pay the current dividend level, the cash flows from the businesses are too tight to sustain that historical level.
"It's like walking up an escalator that's going down – it's possible to climb up but eventually the escalator wins." (Additional reporting by Bloomberg)