Flood claims fail to sink insurer Aviva as profits rise 1 per cent to £3.3bn

Aviva beat full-year profit forecasts yesterday as strong growth in life insurance sales offset the impact of the summer floods on its general insurance business.

Britain's biggest insurer set itself a target of doubling earnings per share by 2012 and said it could accelerate the pace of its dividend increase. Andrew Moss, the chief executive, unveiled a plan to combine Aviva's 15 asset management businesses around the world to increase cross-border sales as part of the drive to boost earnings

Aviva also provided comfort for investors worried about potential losses from investments in US sub-prime assets and other racy products hit by the credit crisis.

Aviva's operating profit for 2007, on a European embedded value basis, rose 1 per cent to £3.29bn, ahead of analysts' expectations. The insurer, which owns Norwich Union in the UK, increased the full-year dividend by 10 per cent to 33p as expected.

Mr Moss said: "We will double it [earnings per share] by 2012 at the latest. If we are successful in delivering our goals, it potentially creates room for accelerating the dividend increase."

He added that he could not make a promise on the dividend.

Mr Moss took over as chief executive of Aviva in July, replacing the company's long-time boss Andrew Harvey. He launched a "one Aviva, twice the value" strategy but with little detail. Analysts said Mr Moss, formerly the finance director, was now putting some meat on the bones that could help drive the insurer's ailing share price. Having risen more than 6 per cent during trading, Aviva's shares closed up almost 1 per cent at 616p.

Aviva last month announced a higher-than-expected £475m cost from the summer floods. The hit from the floods pushed operating profit at the general insurance unit down 39 per cent to £1.03bn.

Mr Moss gave an upbeat outlook for the prospects of Aviva's core life business, where the US, UK and European divisions increased profit by 35 per cent to £2.75bn. "People need to save money, and in many parts of the world they are. That is why life insurance is a very attractive business to be in," he said.

The company said less than 1 per cent of its assets were at risk of writedowns from the collapse in the credit markets. Debt has been dispersed around the world in complex structured products and investors have been worried billions of pounds in toxic assets could be sitting on insurance companies' books. "We have put out very extensive disclosure today which outlines asset exposures," Mr Moss said. "It will give assurance to shareholders that we do not have issues."

Aviva is locked in a tussle with Clare Spottiswoode, the policyholder advocate, over reallocating surplus capital in two of its with-profits funds. Mr Moss said he expected her to respond to its latest proposal early in March.