Cost cuts help Aviva profits rise 21 per cent

Aviva had an operating profit for the first six months of 1.27bn, up from 1.05bn a year ago, and ahead of the 1.15bn pencilled in by analysts, according to the company's estimate of consensus expectations.

Aviva, which employs around 5,000 people at operations in York, Leeds and Sheffield, said the improvement reflected a four per cent reduction in costs, a renewed focus on selling more profitable products, and strong results from Aviva Investors, the company's fund management arm.

"While we remain alert to the macroeconomic environment and risks in financial markets,...we are confident about the future," said Aviva chief executive Andrew Moss.

Aviva and Royal Bank of Scotland also announced plans to start a new distribution partnership, and RBS said it would book a one-off loss as a result of the changes in their agreement. The two parties will end their current existing joint venture, in which Aviva's insurance products are sold through RBS' bank network.

In the new arrangement, Aviva will manufacture protection and selective pension products, while RBS will receive all the profits from the distribution of these products and will also manufacture and distribute its own investment products.

However, RBS said it would book a one-off loss of 235m as a result of terminating the current joint venture with Aviva, including the re-purchase of Aviva's original right to share in the distribution profits.