Aviva jumps 9% as balance-sheet jitters ease

Aviva's chief executive, Richard Harvey, insisted yesterday his company had a robust and healthy balance sheet, with £1.5bn of surplus capital to support the business.

Shares in the UK's largest insurer, formerly CGNU, rallied 9 per cent to 465p despite Aviva reporting flat earnings as Mr Harvey quelled market jitters by showing the group had £3.2bn to grow the business worldwide.

It has seen more than 40 per cent wiped off its share price this year amid fears its capital position had taken a hammering on the stock market.

"This is a reassurance of our strong capital position. Half our business is outside the UK – we are a lot stronger than people have thought. Using the EU's extremely strict solvency tests we have £1.5bn excess," Mr Harvey said.

Gordon Aitken, an analyst at Credit Suisse First Boston, said Aviva had been punished by market sentiment after cutting its dividend last quarter.

The ratio of its surplus assets to its liabilities in its UK with-profits fund is 10.1 per cent, rating it as one of the UK's strongest companies. Oper-ating profits were broadly flat at £979m, boosted by buoyant profits of £480m from general insurance, which represents a third of the business.