Aviva Profit Beats Estimates as U.K. Growth Outweighs Europe

Aviva Plc (AV/), Britain’s second-biggest insurer by market value, reported full-year profit that beat analysts’ estimates as earnings in the U.K. outweighed slower growth in Europe.

Operating profit fell 2 percent to 2.5 billion pounds ($4 billion) from 2.55 billion pounds a year earlier, the London- based company said in a statement today. That beat the 2.45 billion-pound median estimate of 11 analysts surveyed by Bloomberg. Profit from U.K. life and pension products rose 8 percent, while sales in the rest of Europe dropped 20 percent.

Chief Executive Officer Andrew Moss’s three-year-old plan to focus on boosting sales in Europe has been hampered by the sovereign debt crisis, which has also hurt the insurer’s investment performance. Investors with about 60 percent of the Greek government bonds eligible for the nation’s debt swap have now indicated they will participate, putting the country on the verge of the biggest sovereign restructuring in history and easing the threat of contagion in Europe.

“Aviva’s fortunes are inexplicably tied to Europe because that’s where all its business is,” said Kevin Ryan, a London- based analyst at Investec Plc (INVP) with a “buy” rating on the stock. “Any good news on Europe is good news for Aviva.”

Photographer: Simon Dawson/Bloomberg

The company logo for Aviva Plc inside the company headquarters in London. Close

The company logo for Aviva Plc inside the company headquarters in London.

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Photographer: Simon Dawson/Bloomberg

The company logo for Aviva Plc inside the company headquarters in London.

The stock climbed 1.6 percent to 356.8 pence in London trading, outpacing the benchmark FTSE 100 index’s 1.2 percent rise. The firm raised its full-year dividend 2 percent to 26 pence, less than the 28.1 pence estimate of 21 analysts polled by Bloomberg.

Realistic Outlook

“We’ve got to be realistic about the outlook for the first part of this year,” Moss said on a call with reporters. “People are still nervous in some of those markets and that will affect sales.”

Aviva U.K.’s profit rose to 1.45 billion pounds as it gained market share, while the European unit, which excludes the U.K., had long-term savings sales of 10.9 billion pounds in 2011.

The company’s solvency surplus, measured by the insurance groups directive, was 3.3 billion pounds at Feb. 29, up from 2.2 billion pounds at the end of last year.

Moss, who took over as CEO in 2007, has exited or sold off business in countries such as the Netherlands, Australia and Hungary to focus on 12 key markets, down from 30 three years ago. The insurer, which makes about half its profit in continental Europe, said in 2009 the region would be the fastest-growing for life insurance and pension sales over the following five years.

As the sovereign debt crisis gathered pace last year, European CEO Andrea Moneta stepped down and the insurer reversed a decision to place its regional hub in Dublin, moving it to London instead. Aviva announced the sale of its operations in Czech Republic, Hungary and Romania to MetLife Inc. (MET) in January this year.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net;

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