AVIVA has suggested it was strengthening its position as the UK's biggest insurer as it unveiled better than expected profits.
It also said yesterday it would push the Government to reform annuity purchase to give retirees a better deal.
The insurer’s shares edged up on the half-year figures, which come ahead of Prudential’s today and Standard Life’s next week, but ended down almost 4% at an eight-month low of 360p. The plunging market took the shine off its healthy profit rises of 21% in Europe and 27% in the US, helping Aviva beat market forecasts, hike core earnings by 13%, and lift the dividend by 5%.
Aviva grew UK operating profits by 3% to £709 million, but by 17% excluding last year’s special £84m pay-out, and chief executive Andrew Moss said it was now “well positioned to be undisputed leader in the UK market”.
New exclusive product deals have been signed with three of the big five banks – Barclays, HSBC and Santander – adding to Aviva’s tie-up with RBS, giving it pole position in bank distribution.
UK life and pensions sales were up 5%, and core profits up 22%, with the now prominent IRR rate of return figure (on new business) edging up 1% to 16%.
General insurance operating profit rose 6% to £242m, and Aviva is about to launch a new internet brand for motor insurance, after attracting 50% more customers since early last year.
David McMillan, head of UK general insurance, said 50% of the customer base bought directly, showing Aviva’s brand strength, and 50% used aggregator websites.
Although Aviva would continue to underwrite the policies on the recently-sold RAC business, which was largely online, it would now launch a separate brand.
“We may expand it into other products, if we like the way customers are buying,” said Mr McMillan.
On last year’s 21% rise in motor rates, stoked by the soaring cost of personal injury claims, he said: “The average personal injury bill for whiplash is about £1200, it is £300 in Germany. We have a system that isn’t working for the insurers and isn’t working for customers.”
He said Aviva had long been lobbying for reforms, adding: “There is probably a better understanding and a better appetite at government level (for change) than there has been over the last 10 years.”
The insurer is also lobbying the Government to force the industry to make the open market option for annuities – the freedom to shop around with your pension on retirement – the default option rather than one requiring a proactive decision. Aviva revealed it was securing 30% of annuities bought in the open market, helped by its recent TV campaign featuring actor Paul Whitehouse.
David Barral, head of Aviva UK Life, said: “Customers are losing millions by not shopping around for an annuity. The numbers who shop around are increasing but we don’t think it’s anywhere near where it needs to be. I’m seeing (financial secretary) Mark Hoban in the next two or three weeks to discuss this issue specifically.”
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