Aviva 9 Months Sales Up 12 Percent Print E-mail

Reuters – 28 October 2008

British life insurer Aviva Plc beat analysts' expectations with a 12 percent rise in nine-month sales, and provided reassurance over its capital strength, sending its shares sharply higher.

Aviva, owner of the Norwich Union brand, said it had life and pensions sales of 25.673 billion pounds ($40 billion) in the nine months to Sept. 30, up from 22.935 billion pounds in the same period last year.

Analysts had expected sales of 24.859 billion pounds, according to the average of 13 forecasts collected by the company. Individual forecasts ranged from a low of 23.959 billion pounds to a high of 25.488 billion.

Aviva also said its capital position was "strong," with a surplus of 1.3 billion pounds at Oct. 24, down from 1.9 billion on Sept. 30, a decline partly due to the 22 percent fall in British stock markets.

The company estimated its capital cushion would drop by another 400 million pounds in the event of stock markets falling another 20 percent.

By 0910 GMT, Aviva shares were up 13 percent at 276.5 pence, making them the biggest riser in the FTSE 100 share index.

"It's a pretty confident statement from the company," said Fox-Pitt, Kelton analyst Raghu Hariharan.

"They've taken a lot of knocks, and there's still a handy surplus left."

Insurers are legally obliged to hold enough spare capital to meet all their obligations to customers, plus a further buffer to absorb unexpected shocks. Major life insurers hold an extra layer of capital on top of this.

Life insurers' shares have fallen steeply this month on mounting concerns that falling equity and bond prices as the global economy slows could dent their capital reserves.

In a conference call with reporters, Aviva Chief Executive Andrew Moss said the company had not held talks with the government on any form of taxpayer-funded bailout plan similar to the one extended to the banking sector earlier this month

"I can confirm we have had no discussion with the government on any capital support from the government," Moss said.

"We're pretty confident we don't need to raise any extra capital."

Moss also said the company was unlikely to compete with arch rival Prudential to buy the Asian operations of the world's largest insurer, American International Group which was rescued by the U.S. government last month.

"We have no particular desire to get involved in an auction for those assets. Already in some Asian markets we're seeing new business come to us naturally which might otherwise have gone to AIG," he said.

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