Eurozone bonds slump erases profits at Aviva
Aviva took a £1.1billion hit on
investments in troubled eurozone
countries as it came perilously
close to falling into the
red last year.
The UK’s biggest insurer
posted a pre-tax profit of £87million
for 2011, down from £2.4billion.
This was mainly down to a
huge slide in the value of government
bonds issued by Italy
and France.
These investments
are used to underpin pensions
and insurance policies in those
countries.
Accounting rules mean the
insurer has to book them as a
loss, even though it tends to
hold investments for between
ten and 30 years.
Aviva said the bond value
had bounced bank since the
start of the year as confidence
returned to the eurozone.
It also suffered a £726million loss
from its Dutch subsidiary
Delta Lloyd.
An accounting ‘anomaly’ in
Holland meant Delta posted
an ‘unrealised’ investment
profit last year, which inflated
its results.
The insurer said the underlying
business is healthy – given
the grim economic backdrop.
Operating profits – which don’t include these investment losses – were flat at £2.5billion. It was bolstered by a 10 per cent rise in its life and pension sales to £11.3billion. Sales of company pensions in the UK rocketed by 66 per cent to £2.96billion.
Aviva admitted this was
largely because it is one of only
three insurers still paying commission
to advisers.
Trevor Matthews, Aviva’s UK
chief executive, also conceded
advisers may be cashing in on
commission payments before
they are banned next year by
the City watchdog.
But he insisted Aviva, whose
adverts star Paul Whitehouse would not be adversely
affected by the ban.
Sales of annuities to individual
savers rose by just over a
fifth to £2.76billion. Aviva (up 5.6p
at 356.8p) said it was totally
committed to the UK, unlike
its rival Prudential which has
been threatening to move its
domicile over EU rules requiring
insurers to hold more capital
reserves.
Premiums for motor insurance
customers rose 13 per cent last
year. Aviva conceded a new
dictat from Brussels banning
insurers from discriminating
between men and women will
also cause premiums to rise for
female drivers.
Women have traditionally paid less for their insurance as they are less likely to get involved in serious crash.
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