UK’s Aviva Posts $1.258 Billion Loss

By Robert Barr | March 6, 2009

The UK’s Aviva PLC, Europe’s biggest provider of life insurance and pension products, booked a net loss for 2008, due to a drop in the value of assets amid the financial crisis, which caused the company’s shares to plunge on Thursday.

Aviva fell to a net loss of £885 million ($1.258 billion), compared to a profit of £1.5 billion ($2.133 billion) in 2007.

It logged a writedown of £1.6 billion ($2.275 billion) on investments and £819 million ($1.165 billion) on short-term fluctuations in business returns. Excluding those, its operating profit increased by four percent.

The company left its full-year dividend unchanged at 33 pence ($0.47).

Investors reacted to Aviva’s report by sending its shares down 16.6 percent to 274.5 pence ($3.90) in midmorning trading on the London Stock Exchange.

“All in all, with investment markets globally still very much on the back foot, concerns with regards to both Aviva’s and the wider industry’s financial strength are unlikely to relent,” said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers. “Nonetheless, this is a relatively resilient performance from Aviva today.”

Life and pension sales rose 11 percent to £36.3 billion ($51.62 billion), and the company said it had achieved £340 million ($484 million) in savings toward its target of £500 million ($711 million).

Last month, Aviva announced that it was canceling a £1 billion ($1.422 billion) special payout – about £1,000 ($1,422) each to a million policyholders – because of the sharp fall in stock markets.

On a market consistent embedded value basis (MCEV) basis, which Aviva was using for the first time in its financial reporting, operating profit was up 10 percent to £3.36 billion ($4.78 billion) and the net loss for the year was £7.7 billion ($10.946 billion).

“Our total result has naturally been impacted by the performance of investment markets, including the fall in equity, property and bond values,” said Andrew Moss, Aviva’s chief executive.

“In these markets only the fittest will emerge as winners. Our increased share of the U.K. life and pensions market in 2008 is a good example of a market where we have growing competitive advantage,” he added.

Topics Profit Loss

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