Aviva said its turnaround was progressing but still faced challenges, as the value of new business in its annuity business fell 43% over the year.

Across the Aviva business, the value of new business rose 13% to £338 million, compared to £208 million the previous year. However, the UK business suffered a 22% decline in the value of new business over the first quarter to £89 million, as its annuity business fell 43% on the same measure to £40 million over the year.

Its fund management business Aviva Investors, which itself is undergoing significant change under new chief Euan Munro (pictured) who joined from Standard Life Investments, saw a 4% decline in sales over the first quarter, after bringing in £730 million. The decline was largely due to currency movements. The quarterly figure represented a £147 million increase on the previous quarter.

The group said the decline in annuity sales was mostly down to a re-pricing exercise and a relatively strong first quarter in 2013. However it acknowledged the negative impact of Budget reforms and said it hoped an increased focus on bulk annuity sales would offset this.

Savings business in the UK and Ireland increased 5% from £1.1 billion to £1.2 billion. Protection sales increased 11% from £70 million to £78 million.

Mark Wilson, group chief executive, commented: 'Aviva still faces challenges both in the external environment and in the business as we progress our turnaround. The regulatory environment is constantly changing and soft conditions persist in certain general insurance lines. As a business we remain focused on cash flow, expense efficiency and the clinical allocation of capital to areas where we can maximise returns. There is still much to do.'

Aviva said it will continue to restructure, with expenses relating to the exercise at £18 million, compared to £54 million over the same period in 2013.

Last year the business saved £360 million costs savings of a target total of £400 million in 2014.