Aviva enjoys 'savings revival' as recovery takes hold

INSURANCE giant Aviva reported a "savings revival" as the economy begins to recover and confidence returns to the market.

Aviva's UK chief executive Mark Hodges said people are starting to

think about their long-term savings needs and the group is optimistic about future growth.

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Aviva topped forecasts with a smaller-than-expected five per cent drop in first quarter sales to 9.1bn thanks to a recovery in the UK and Europe.

In the UK, investment sales jumped 143 per cent to 426m with record levels of applications reported for some products.

Analyst Kevin Ryan at ING said: "There is huge confidence coming back into the market. Whether that will be sustained in the second quarter is anybody's guess.

"But Aviva is the largest player in the UK market and it is joining in this growth. UK life sales are up two per cent and for the sector leader, that is a good effort."

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When asked whether confidence could be sustained in the second quarter Mr Hodges said: "We're optimistic. We have strength in our model. Savings are strong, annuities are strong. This is a pretty good set of results."

Aviva, the UK's second-largest insurer after Prudential, said sales were up 15 per cent compared with the fourth quarter.

British life sales came in flat on the year-ago quarter, but rose 14 per cent on the fourth quarter.

Britain and Europe, despite drops in Poland and Spain, accounted for 85 per cent of the group's long-term savings new business.

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In the US, sales virtually halved with a 48 per cent year-on-year drop, hit by Aviva's focus on profit over sales which forced it to slow the pace of annuity sales.

Aviva put the total cost of bad weather at 50m, with the UK accounting for 25m.

The cost of the travel chaos caused by the Iceland volcanic ash cloud was below 1m.

While Aviva did not strictly have to pay out on many of these claims, it stepped in when travellers were unable to meet the cost of accommodation or extra travel through their tour operators or airlines.

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Aviva said shareholder exposure to the sovereign debt of Greece, Spain and Portugal amounted to 900m at the end of March, with Greece accounting for 150m.

In general insurance, Aviva said there were signs of a return to volume growth, helped by the impact of marketing initiatives such as its 'Get the Aviva Deal' campaign.