Contract with Aviva will create more roles at Scottish Friendly

 

© The Herald Originally published: 31/7/2008

by Simon Bain

The UK's biggest insurer, Aviva, has signed a strategic partnership with Scottish Friendly, one of the smallest, which will see jobs migrating across the Border.

Aviva said that by early next year its Norwich Union customers with Lifetime "wrap" accounts would see a "significantly improved service", provided by the tiny mutual organisation in Glasgow.

Scottish Friendly's leading edge IT platform has been the basis for its drive into new products, and earlier this year it won a prestigious international award.

Fiona McBain, chief executive, commented: "It is a very significant administrative contract, a huge testimony to our systems, and it adds greatly to our credibility as a financial services group."

On the employment implications, she said: "There is a lot of sensitivity in York, and I am not at liberty to speculate as to how many roles will be transferred, but there will be additional roles created at Scottish Friendly."

The insurer won its first client for wrap accounts last summer from the Edinburgh-based Nucleus advisory business.

The Lifetime product racked up a £33m loss in the first six months of this year, Aviva's interim results revealed yesterday, due mainly to £23m of costs.

Mark Hodges, chief executive of Norwich Union Life, said: "This is a key partnership which forms part of our overall strategy to simplify operations, reduce costs and focus on new opportunities for growth."

He added: "We will be making significant investments in our IT infrastructure over the course of the next three to five years to recognise the changing needs of the mass affluent customer who wants to do business with us online. This will focus on delivering more online solutions and product features."

Aviva was posting a 12 per cent rise in first-half profit as the strong euro helped offset the impact of market turmoil, and it also announced approval for the second and final stage of a £3.3bn pay-out to one million policyholders from its £4.6bn inherited estate.

The deal means shareholders will get around 30per cent of the value of the estate, three times their legal 10per cent stake in a traditional with-profits fund, in the form of a capital injection for investment or dividends.

Aviva said the reattribution would create a one-off embedded value profit of £225m and a one-off statutory profit of £390m, helping to underpin dividend growth.

Panmure analyst Barrie Cornes said: "The reattribution is probably the best the company could get, given where we are and what the FSA would let the company get away with."

Aviva confirmed it was committed to its growth targets, including increasing its cost saving from £350m to £500m.