Aviva nearly doubles target for cost savings from Direct Line takeover

Insurer Aviva has revealed it expects to meet 2026 performance targets a year early and almost doubled aims for cost savings following its £3.7 billion takeover of Direct Line.

The FTSE 100 firm said £100 million of original cost savings at Direct Line have been delivered three months ahead of plan and it now expects to strip out £225 million in costs by 2028 following the deal.

This is is not set to involve further job cuts, with Aviva having already signalled last December that up to 2,300 jobs could go under the cost-cutting plans, with around 5% to 7% of the combined roles set to be axed over three years.

Many of the role reductions are expected to go through natural staff turnover, while affected employees will be redeployed where possible, with around 1,000 UK-based vacancies across the group.

It is looking to make the extra savings through its IT and insurance operations.

Aviva’s chief executive Amanda Blanc said the group expects to hit its target of £2 billion in operating profit a year early.

It comes as the group guided for 2025 group operating profits of around £2.2 billion, including £150 million from six months’ ownership of Direct Line.

She laid out new three-year targets, including an 11% compound annual growth rate in operating earnings per share through to 2028.

Ms Blanc said: “The integration of Direct Line is well under way and we are increasingly confident of reaping the full benefits of this acquisition.”

“The outlook for Aviva has never been better,” she added.

In the first nine months of its year so far, Aviva saw general insurance premiums increase 12% to £10 billion.

UK and Ireland general insurance premiums lifted 17% to £6.7 billion in the nine months.

The group said it had seen general insurance prices coming down after surging higher in recent years.

“We have observed areas of rate softening in the first nine months but remain focused on pricing appropriately … We continue to monitor the market conditions and flex our trading approach to maintain profitability,” the group said.

But shares fell 5% in morning trading on Thursday, though this comes after the stock has in recent weeks hit the highest level since before the 2008 financial crisis.