LONDON--(Marketwire - Nov 8, 2012) -

 START News Release Aviva plc Interim management statement for the nine months to 30 September 2012 8 November 2012 Dear shareholders, Aviva plc today announced its Q3 Interim Management Statement where the operating profit trend is broadly in line with the half year. More importantly, I am pleased to report that we have taken, and are continuing to take, firm and decisive actions to transform Aviva. The key priorities remain: - To appoint a high quality CEO - To build the company's capital and financial strength, reducing also the risk and volatility of the balance sheetand income statement - To narrow focus on attractive core businesses and dispose intelligently of non-core segments - To improve earnings performance and return on equity with the aim of broadly replacing, by 2014, the earnings lost as a result of disposals with new earnings streams Reporting on each of these in turn, the CEO search process is now well advanced and in line with the original timetable set out by the Board. Shortlisted candidates are in the process of being interviewed by non-executive directors, and on completion,we will then seek FSA approval for the Board's preferred candidate. I am also pleased that we are getting good traction on building our financial strength. Economic capital surplus* as at the end of October 2012 was around GBP5.3 billion, up by GBP0.8 billion from the half year and by GBP1.7 billion from the beginning of the year - in ratio terms we are currently around 146% versus our target range of 160-175%. IGD capital surplus at the end of October was GBP3.7 billion, up GBP0.6 billion from the half year and with a ratio of 167%. In the quarter we also sold down part of our Italian sovereign bond holdings. In the quarter we reduced our Delta Lloyd holdings and announced the sale of our business in Sri Lanka. While we are not yet in a position to make firm announcements on further non-core disposals, the progress is in line with planned timelines. We can now confirm that we are in discussions with external parties with respect to our US life and annuities business and these are being actively pursued.While not agreed, any such sale would come at a substantial discount to IFRS book value, but would generate significant economic capital surplus. We believe any such sale would be in the best interests of the Group and we are hopeful of a satisfactory resolution reasonably soon. Beyond this, there are eight smaller disposals which are now more likely to be in 2013, and we expect all to be done without a significant impact on the Group's IFRS book value. The transformation and earnings enhancement process continues apace. A key initiative is the turnaround of our 27 "amber" business cells. In the quarter we assigned our most talented high-potential executives to each cell and they produced a plan for each. The analysis tended to show that within the cells we had a mix of performing as well as uneconomic or poorly performing sub-segments or products. The required actions ranged from revenue-enhancement, cost or loss reduction, capital withdrawal, or leveraging technology or the online space. We are now in the process of refining and implementing these plans and building the results into our 2013 and 2014 plans, and will be able to provide a more comprehensive update at the 2012 full-year results. Unsurprisingly, getting traction on the change initiatives at Aviva has taken time. On the one hand we are blessed with a terrific brand and really professional front-line staff who have the customer's interest fully at heart. For example, visiting the regional UK and international centres reveals an incredibly dynamic environment and a strong marketing ethic. The "systems thinking" initiatives are now well embedded in the culture of the UK business. * The economic capital surplus represents an estimated position. The capital requirement is based on Aviva's own internal assessment and capital management policies. The term 'economic capital' does not imply capital as required by regulators or other third parties. Pension scheme risk is allowed for through five years of stressed contributions. Chairman's review continued On the other hand, culturally the organisation has been more used to collective decision making and has moved more slowly as a result. This initially inhibited progress on some of the programmes possibly exacerbated by an unwieldy centre and support infrastructure, with more bureaucracy than desirable. Although it will take time to change this, the pace of change is accelerating and we are beginning to make real progress. There are nine specific transformation programmes and I'll cover each in turn: Backing Winners - This aims to develop new revenue opportunities in the developed markets, and involves a team of external professionals as well as the transformation team. In addition there is a separate initiative to invest new capital and expense resources in a few high growth and return opportunities. These are relatively new initiatives, and we will have further clarity on their potential by year end. Cost and Capital Efficiency - As previously announced, we are seeking at least GBP400 million of cost savings as well as the reallocation of capital from suboptimal segments. We have already removed four levels of middle management in the UK and the programme is being extended internationally. We have also removed the regional layer of our business. In addition the review of head office, support activities and non-staff costs is well advanced. By the end of the year we will have locked-in a run rate cost reduction of GBP250 million and have specific 2012 and 2013 plans in place on the balance. We are also in the process of producing a more efficient 2013 capital plan. Back Books - We are aiming strategically and tactically to reduce the drag on economic return and concentration risk from capital-hungry, sub-optimal, or non-current legacy portfolios. Favourable economic outcomes in this area are inherently difficult, but several modest tangible opportunities have been identified, and these are being worked through. Life Excellence - It is critical that we leverage best-in-group capability across all life segments. Specific initiatives include launching existing products into new markets, product re-pricing, improved underwriting standards, reallocation of capital, improved loss mitigation and cost reduction. The organisational team is now in place and key positions assigned. GI Excellence - Given our largest general insurance businesses are in the UK and Canada, it is important that we implement best-in-class techniques across both as well as across the smaller GI segments internationally. Specific initiatives include fully deploying existing risk-based pricing systems, improved claims efficiency and the deployment of sophisticated fraud reduction systems. This involves additional responsibility for existing professionals from the UK and Canada. Assets/Aviva Investors - We have initiated a programme to review the overall asset portfolio of the group and the appropriate mix for a low interest rate environment. As part of this review, we will be undertaking additional work with Aviva Investors to develop a more compelling external proposition.While Aviva Investors continues to serve the group well, it has fallen short of our aspirations to expand the business externally. Product Tails - As with most firms we have a natural 80/20 to our business with a significant tail of products and segments that make little contribution to our success and in many cases erode value. This programme aims to eliminate these tails. This is a relatively recent initiative and while an initial analysis has been conducted, it requires further analysis and solutions. IT and Operations - This essentially involves a complete reappraisal of our technology strategy and architecture, and also reviews our current IT spend level of over GBP800 million per annum. The review has now been completed, has been formally approved, and will be implemented in three phases. As a result we will eliminate over 800 applications from our current legacy estate, adopt a more modern digital architecture, improve service standards and reliability and reduce IT revenue and capital expense costs. In addition there is a separate programme to optimise spend on the various operational change initiatives across the Group which will result in more effective implementation, the elimination of waste and reduced costs. Chairman's review continued Performance Ethic - Aviva requires a more effective performance culture. As such we are seeking significant change in the areas of culture and values, performance targeting and measurement, communication, and remuneration practices across the Group. This work is well advanced. Additionally, the 2012 engagement and values surveys have been completed by staff. All senior management have been categorised in a nine-box performance and potential matrix, and force-ranked on a 20/70/10 basis, and systems have been designed to differentiate remuneration according to ranking, subject to further Remuneration Committee discussion and approval. Trading conditions though remain difficult and results have been mixed across the Group. We nevertheless have strong positions in the UK, Canada, France and Singapore and our performance has been good in these markets. In our life business in Spain and Italy markets are tough, driven by the external economic environment, with new business volumes considerably reduced. In Ireland, while a number of good actions are underway to improve performance, the results are not yet acceptable. Although conditions will remain challenging, the strategic and transformational programmes should enable us to improve our financial performance and value significantly, making Aviva a better business for our customers, our people, our partners and a better investment for our shareholders. John McFarlane Chairman Click on, or paste the following link into your web browser, to view the associated PDF document. [ http://www.rns-pdf.londonstockexchange.com/rns/6096Q_1-2012-11-8.pdf ] Contacts Investor contacts Media contacts Timings Pat Regan Nigel Prideaux Real time media +44 (0)20 7662 2228 +44 (0)20 7662 0215 conference call: 0730 hrs Analyst conference call: 0930 hrs Charles Barrows Andrew Reid Tel: +44 (0)20 7136 2051 +44 (0)20 7662 8115 +44 (0)20 7662 3131 Conference ID: 3528346 David Elliot Sue Winston +44 (0)207 662 8048 +44 (0)20 7662 8221 END This information is provided by RNS The company news service from the London Stock Exchange END