Aviva talks up outlook as sales slide in third quarter
AVIVA became the second insurer in as many days to talk up the profit outlook despite revealing a sharp slide in sales in the third quarter, led by a 25 per cent dive in UK life and pensions.
The slump in the UK, where sales fell to £6.66bn from £8.84bn in the third quarter, weighed on Aviva’s overall performance in 2009. The UK’s second-biggest insurer said total sales fell 11 per cent to £24.8bn over the nine months to 30 September. On Monday, rival Legal & General (L&G) said new sales slipped seven per cent over the same period.
Aviva chief executive Andrew Moss gave an optimistic prediction of profitability in the months ahead despite question marks over the economy and little hope for a bounce in sales over the next six to nine months.
He said: “The outlook for the group’s total profitability in 2009 is good despite a reduction in sales driven by continuing customer caution and active management of sales volumes to optimise profitability”. Moss said Aviva had focused on profitable business over driving volume in the third quarter but results showed margins only inched higher to 2.1 per cent against two per cent a year ago.
But some analysts questioned the logic of giving up volume. “The problem is they are focusing on value over volume, but the margins are not improving,” said MF Global’s Peter Eliot.