Aviva warns on UK savings market

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The Independent Online

Aviva, the largest insurance company in the UK through its Norwich Union brand, yesterday warned that consumers were still holding back from saving.

Aviva, the largest insurance company in the UK through its Norwich Union brand, yesterday warned that consumers were still holding back from saving.

Despite difficulties in the UK, Aviva reported a 37 per cent rise in first-half profits to £1.13bn, beating most forecasts. But in contrast to other rivals, Aviva struck a more cautious note on the prospects for the UK savings market, saying uncertainty over world economic conditions was preventing a full-scale recovery. Philip Scott, executive director at Aviva, said: "We are not seeing a huge surge in the UK. There is some return of confidence in the consumer, but it is still in the context of a very uncertain geopolitical environment and we don't expect things to change this year." Customers have also been put off by mis-selling scandals and poor stock markets, which have ravaged their returns. Sales in the UK of life and pension products were up 3 per cent in the first half to £547m.

Sales across the group in life and pensions were up only 2 per cent to £1.2bn, but Mr Scott said Aviva was focusing on higher quality business. Margins rose to 26.5 per cent from 24.5 per cent, as the benefits of sharp cost cutting also came through. Operating profits in the UK were up 5 per cent to £356m.

This contrasts with stronger growth in Europe. The group has tied up with a number of banks, which sell its products through their branches. Operating profits in its life business on the Continent were up 23 per cent.

Aviva also disappointed investors with a £499m drop in investment returns, which sent shares down 3 per cent to 547p. As a substantial European business, Aviva was hit by currency movements and the decline in the euro. This had a knock-on effect on Aviva's net asset value per share - its core value to shareholders - which fell to 496p from 502p. Roman Cizdyn, at Commerzbank, said: "Aviva believes it has a very strong position in the UK and is pursuing more profitable business rather than chasing volume."

Aviva also turned in a very strong general insurance result, increasing profits by nearly 60 per cent to £613m.

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