Aviva shares in demand as Europe gives boost to income

Shares in Aviva, the UK's largest insurer, hit a 32-month high yesterday as the group, which owns the Norwich Union brand, unveiled a better-than-expected 9 per cent increase in its long-term savings business for 2004, and predicted a strong 2005 followed by an even better 2006.

Shares in Aviva, the UK's largest insurer, hit a 32-month high yesterday as the group, which owns the Norwich Union brand, unveiled a better-than-expected 9 per cent increase in its long-term savings business for 2004, and predicted a strong 2005 followed by an even better 2006.

Publishing its fourth-quarter trading statement for the life, pensions and investment businesses, the group said its strong performance had been driven by a period of accelerated growth in continental Europe, which now accounts for more than half of the group's total life and pensions business.

Over the 12 months to the end of December, annual premium equivalent income - the most common measure of new business volumes among UK life insurers - rose 15 per cent in Aviva's continental European life and pensions business. Sales in its fund management business increased by 144 per cent, due to new distribution agreements in Italy and Spain.

In the UK, the life and pensions business increased 5 per cent, while investment business was up 26 per cent - most of which was accounted for by a substantial volume of new business into its commercial property funds.

Philip Scott, the group executive director of Aviva, said: "Continental Europe contributed over 50 per cent of group life and pensions business in 2004 for the first time, helped by particularly strong performance from France, Italy, the Netherlands and Spain. In the UK, we saw the market turn out very much as we had anticipated. We expect to see further growth in 2005, picking up more strongly in 2006 as we get into pensions simplification."

The blip in a strong set of results for Aviva, whose chief executive is Richard Harvey, was the group's joint venture with Royal Bank of Scotland, where sales fell more than 8 per cent over 2004. Mr Scott blamed a lack of advisers for the result.

"There has been a little bit of disappointment from both ourselves and the Royal Bank," he said. "We haven't had quite the level of advisory capacity in the bank, and one of our plans is to increase the number of branch-based advisers."