The contribution to profits from Aviva's fund management business, Aviva Investors, remains inadequate at £32m ($50m) (HY14: £41m), said group CEO Mark Wilson, presenting the first-half results.
"Expenses have increased as we have invested in our distribution capabilities and strengthened the management team," he said. "Our asset management business will take time to contribute material growth in group operating profit, although positive signs, particularly related to the flagship AIMS [Aviva Investors multi-strategy] range of funds, are emerging."
Wilson said the AIMS target return fund, launched in July last year returned 8% in its first year – "which is above target and ahead of peers." Last December, an AIMS target income fund was launched and by the end of June, the AIMS series of funds had £1.7bn ($2.7bn) under management.
Aviva Investors' funds under management increased by £16.7bn to £262.6bn ($410bn) (HY14: £245.9bn) during the first half of the year.
But Aviva said this was driven by the transfer of funds directly managed by Friends Life Investments, following the acquisition of Friends Life in April.
Excluding this transfer, funds under management decreased by £5.6bn ($8.7bn) as positive market movements were more than offset by the adverse impact of the euro exchange rate, primarily on Aviva's French business, and net fund outflows.
The 31% decrease in operating profit for Aviva Investors to £32m ($50m) referred to by Wilson mainly resulted from higher expenses, together with the adverse impact of the disposal of the River Road US equity business in June 2014.
This was partly offset by a £10m ($15.6m) increased contribution from the UK retail fund management business, which was transferred from UK Life to Aviva Investors in May 2014, and a £2m contribution from Friends Life Investments.
Operating expenses rose to £169m ($264m) (HY14: £143m), including £4m expenses from Friends Life Investments.
Overall, Aviva's results beat expectations. The company's first-half operating profits rose to £1.17bn ($1.83bn) from £1.07bn last year, ahead of the consensus forecast of £1.09bn given in the company's own survey of analysts.
Aviva's combined ratio in the first half was 93.1%, the best it has reported for eight years, and the value of new business soared 25% to £534m ($833m) (HY14: £444m).
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