Aviva hit by weather and job losses

Aviva announced its IFRS after tax profit was £1,315m compared with a loss of £885m last year. But operating profit fell from £2,297m to £2,022m and general insurance declined by 20%.

General insurance made just £960m compared with £1,198m last year. UK net written premiums fell from £5,413m to £4,298m in the year. The GI combined ratio worsened one point to 99% and UK profit fell to £535m from £656m.

Financial Highlights £m (2008 in brackets)

• Total sales 45,068 (51,377)
• General insurance and health 960 (1,198)
• Operating profit before tax 2,022 (2,297)
• Profit/(loss) after tax 1,315 (-885)

GI net written premiums by region £m (2008 in brackets)

• United Kingdom 4,298 (5,413)
• Europe 3,046 (4,090)
• North America 1,800 (1,601)
• Asia Pacific 49 (33)
• Total general insurance and health 9,193 (11,137)
• Combined operating ratio 99% 98%
• UK general insurance and health operating result at £535m (£656m)

Andrew Moss, group chief executive, commented: “Aviva’s general insurance businesses are a vital component of our composite model, bringing diversification of earnings and giving Aviva further resilience.

“General insurance and health premiums were lower at £9,193m (2008: £11,137m), although they were only reduced by 7% when allowing for the sale of the Delta Lloyd health business at the start of the year.

“Our group expense ratio improved to 12.6% from 13.4% in 2008, reflecting increased productivity.

Unemployment and weather

“The combined operating ratio for 2009 was 99%, having been impacted by increased unemployment claims from UK creditor customers and the adverse weather in Europe.

“This claims experience, together with the reduced investment return on a lower asset base, resulted in a 20% decrease in the general insurance operating profit, to £960m.

“We continued to deliver excellent service to our customers when they needed us most. For example, in Ireland, we took the unprecedented step of launching an advance payment mechanism to help householders and businesses facing hardship in the aftermath of the severe floods.

UK market

Aviva said: “2009 was a year of significant developments for us in our home market. We successfully adopted the Aviva brand and initiated the bringing together of our life and general insurance businesses under a single CEO. “Our extensive transformation programmes enabled us to deliver cost savings of £450m from our life and general insurance businesses a year ahead of plan, together with a simplified approach aimed at improving customer service and profitability.

“As a result of the disposal of non-core businesses and efficiency improvements in our life and general insurance business we have 9,600 fewer staff than two years ago, a reduction of 30%.

“We recognise that significant changes have an impact on our people and we have made full use of natural turnover and redeployment to reduce the effects.

Reshaped insurance

“We have reshaped our general insurance portfolio over the past 12 months. We made the decision to withdraw from less profitable business, and took action to improve claims management and enhance our risk selection.

“Our strategic initiatives, coupled with efficiency improvements, have resulted in lower expenses and commission. Higher levels of unemployment claims from creditor customers combined with lower prior year savings led to a COR of 99%.

RAC success

“RAC now has over two million individual members and around five million corporate customers. We are proud that in a period of severe winter weather in December RAC patrolmen provided assistance at more than 80,000 breakdowns in the UK.

“During the year we launched the RAC car insurance panel, which is growing rapidly and had already achieved a 3.5% share of new business in the UK personal motor market by the end of 2009.

“Delivering profitable growth is a key focus for both our UK businesses in 2010. A return to top-line growth in general insurance is a key priority. Our marketing investment, recent re-entry into corporate risk business and development of the RAC franchise will contribute to this.

“We will also maximise the competitive advantage of our risk index, which will give insurance brokers fast and easy access to Aviva’s best prices.