Aviva Posts Earnings Gain in Spite of Euro Crisis

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Aviva (LSEAV.), Britain’s largest provider of general and life insurance, posted a 6% gain in earnings today as the company released its financial results for 2011.  The company reported an operating profit of £2.5bn for 2011, outperforming analysts’ predictions of £2.41bn.  Furthermore, capital surpluses within the Insurance Groups Directive, an important measure of capital stability for European insurance companies, rose from £2.2bn at the end of 2011, to £3.3bn as of February 29th.

This news comes just months after the company came under scrutiny for losing roughly 30% of its’ capital surpluses due to ongoing uncertainty in the Eurozone.

“Despite challenging market conditions we have beaten all our operating targets. We have made good strategic progress, focusing on markets where we will grow and earn higher returns.  Aviva continues to perform well, even in tough times,”said Chief Executive Andrew Moss.

In spite of a strong earnings performance, analysts were underwhelmed with Aviva’s dividend. While it rose 2% to 26p in 2011 compared to 25.5p the year before, analysts had expected a 5% rise. Moss called the modest increase a “measured reaction” to continuing uncertainty.

Cautious Optimism

While 2011’s results indicate a strong performance in uncertain times, Aviva still has reason for concern in the coming year as the Eurozone crisis continues to unfold, with the potential to adversely affect sales in the market. 40% of Aviva’s revenues are generated from mainland Europe, and the company has made far more inroads to the European market than its’ British competitors in the insurance industry.

In spite of uncertainty, Moss is cautiously optimistic of 2012’s prospects: both Europe’s, and Aviva’s. “There are going to be a few bumps in the road, I’m sure, but the overall trend is towards agreement and resolution,” stated Moss. “Looking to 2012, we have increased our operating targets underlining our confidence in Aviva’s continued success,” he added.

Highlights

  • New business internal rate of return increased to 14.4%.
  • Life insurance operating profit rose 7% to £2.1bn.
  • UK life and pensions profits rose 8% to £920m.
  • Dividend rose 2% to 26p

Company Spotlight

Aviva plc is the U.K.’s largest insurer, and among Europe’s market leaders in general and life insurance, and pension services.  The company has 36,000 employees serving 43 million customers worldwide.  Aviva’s shares on the London Stock Exchange were up 2.59% to 360.3p as of 12:58 GMT.

References
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