Aviva returns to profit

Insurer Aviva reported a better than expected 3 per cent increase in 2009 profit, with cost cuts and stronger financial markets outweighing a weather-induced rise in customer claims.

Aviva, Britain's second-biggest insurer by market value, had a 2009 operating profit of £3.48 billion, up from £3.37 billion the previous year, the company said today.

Analysts had expected profits to fall to £3.01 billion, according to the average of 10 forecasts collected by the company.

The insurer said that last year its Irish business focused on profitability and took positive rating and risk selection actions in a soft market. These actions led to an adverse impact on volumes, however this was offset by growth in France and Italy.

Aviva said its Irish health division "continued to perform strongly" with net written premiums in of £52 million compared to (£19 million the previous year following the acquisition of Vivas Health in May 2008.

Overall, Aviva Ireland reported operating profit on a market consistent embedded value (MCEV) basis of €136 million for 2009 as against €181 million a year earlier.

Aviva, whose main rival Prudential is staking its future on Asia through the £23.6 billion takeover of AIG's Asian business, said it planned a renewed focus on the UK and Europe.

"In terms of life and pensions assets over the next 5 years, Europe is actually projected to grow by more than Asia is," chief executive Andrew Moss told BBC radio.

"We are very comfortable with our position."

The increase in Aviva's 2009 profits partly reflected cost reductions, with the company achieving a targeted £500 million in savings on year a early.

That helped offset a 20 per cent drop in profits at Aviva's general insurance arm after heavy floods in the UK and Ireland at the end of last year prompted a rise in customer claims. The division narrowly missed its profit target as a result.

Aviva, which cut its half-year dividend by a third as falling sales and weak markets put its profits under pressure, is paying a total dividend for the year of 24 pence per share, down from 33 pence in 2008.

Additional reporting: Reuters