Aviva looks to corporate pensions for growth area

Britain’s second biggest insurer, which employs around 48,000 staff in Yorkshire, is looking to increase its presence in corporate savings and life protection in the UK during 2011.

The announcement came as the company published its results for the six months to the end of June, which show that UK operating profit rose by three per cent to £709m.

The improvement came as sales fell nine per cent to £16.15bn, driven in part by a 21 per cent decline in Europe as the company walked away from less profitable business.

The group’s life and pension division, which is based in York, saw sales increase by five per cent to £5.4bn, while total pension sales were up 33 per cent, with group personal pensions up 82 per cent.

David Barral, chief executive of the life operation, said: “Many companies are closing their final salary schemes and moving to group personal pension schemes, which don’t carry the same degree of risk for employers.

“It’s a market that will continue for the foreseeable future because most final salary schemes will close and that means big growth in the number of group personal pension schemes.”

The company is also growing its “at-retirement” business as baby boomers retire.

Meanwhile, Aviva said it is building on its position in the life protection market and has extended its agreement with Barclays from next year for the distribution of life protection and personal accident products, in addition to its general insurance home and travel products.

The firm said regulatory changes such as the FSA’s Retail Distribution Review, which will bring about reform of retail investment advice, would benefit firms such as Aviva with a strong brand and wide range of products.

Underlying operating profits in the life division, excluding an £84m special distribution benefit in 2010, made to policyholders from the inherited estate of the CGNU Life and CULAC with-profits funds, were up 22 per cent to £462m.

In addition, Aviva has added 670,000 new motor customers since the start of last year.

Net motor premiums have risen 24 per cent to £705m after its own rates for personal motor cover lifted by 21 per cent over the half year.

A highly competitive industry in recent years saw many players slash rates to maintain market share, which the market claims led to low rates that are now rising to more sustainable levels.

Rising costs have also been blamed on a “compensation culture” encouraged by ambulance chasers and as fraud has risen.

The group, which uses actor Paul Whitehouse in its latest advertising campaign, said general insurance sales lifted 14 per cent to £2.22bn, the sixth quarter in a row of growth.

The improvement follows upward pressure on car premium rates across the industry and a surge in the firm’s own customer numbers, helped by the roll-out of direct pricing to brokers.

Aviva said its combined operating ratio – measuring operating costs as a percentage of revenues – improved by two percentage points in general insurance to 96 per cent. It comes after a period of major job losses at the firm.

Across the group, which has operations in Europe and North America, Aviva said operating profits rose five per cent to £1.38bn in the half year.

Group chief executive Andrew Moss said Aviva continued to weather the challenging economic environment. He added: “This has been a successful six months. We are beating all our operational targets.”

Aviva has been selling assets as it retrenches from countries where it is too small to compete, refocusing on the 12 territories where it makes the most money.

Aviva recently announced the sale of RAC in a £1bn deal with private equity group Carlyle.

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