Aviva sees signs of recovery as profits soar

Aviva, the UK's largest insurer, yesterday outshone rivals with an 11 per cent rise in profits and a rosy outlook for 2004, as it cut costs and boosted sales through European banks.

The insurer, which operates in the UK as Norwich Union, also said it had no problems with the new solvency requirements being implemented by the regulator. These new rules caused Standard Life to dump £7.5bn of equities, but Richard Harvey, the chief executive of Aviva, said the company had £4.3bn over and above its minimum capital requirements.

Aviva's fortunes contrast sharply with those of Prudential, which this week reported a 30 per cent drop in profits. Pru was gloomy on the prospects for the UK savings market and Aviva's UK profits did fall 6 per cent as investors shied away from turbulent stock markets. But Mr Harvey said confidence was improving: "We are encouraged by signs of returning confidence, although it is a bit slower to come back than we would like. Our operations are now very efficient and we are well placed for the uptick."

The company said it had achieved £250m of cost savings in the year. This has come from a number of job cuts, most recently from its insurance broking subsidiary, where 1,600 were axed. About 3,700 jobs across the group have been outsourced to India and unions fear more will disappear from the UK.

Operating profits for the year hit £1.9bn and the dividend was increased by 5 per cent. Sales through banks, such as ABN Amro and Royal Bank of Scotland, were up 27 per cent over the year and now account for a quarter of the group's sales.