Aviva, the UK's largest insurance company, warned yesterday that the outlook for increased levels of saving in 2003 was grim as it reported flat sales for the year, up only 2 per cent to £2.3bn.
Sales for the group in the fourth quarter of 2002 were down 14 per cent on the same period last year. While international sales in Singapore and the US have grown 38 per cent over the year, sales in the UK, which accounts for half of the group's business, have slowed. Sales were down 3 per cent in 2002 to £1.2bn.
Philip Scott, the executive director of Aviva's life business, said falling equity markets "affects investor sentiment and consumer appetite is inevitably influenced".
"We expect the choppy conditions to continue throughout the first half of the year, and in some markets we will see further contraction in new business levels," Mr Scott said.
Aviva has been aggressively competing for market share in the UK of with-profits business and pensions, two areas of financial strain for the whole insurance sector. The Government price cap of 1 per cent on stakeholder pensions restricts margins and with-profits products require substantial capital support. Aviva said last week it had to dip in to its capital reserves to pay out £1.5bn in with-profit bonuses for last year.
"Aviva is being pretty gloomy," Roger Doig, at JP Morgan, said. "To receive a message from the leading player in the market that we should expect contraction is not good news."
Shares in Aviva closed down 3.7 per cent at 397p. Legal & General and Prudential will reveal their 2002 sales figures tomorrow, and are expected to have suffered from the fall-off in investor confidence.
Meanwhile, there was further gloom for with-profits policyholders after Pearl Assurance declared a nil annual bonus for 2 million of its 2.4 million with-profits policyholders.
All bonuses for policyholders in the AMP stable, which includes NPI, London Life and Pearl, have been reduced by an average of 20 per cent.
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