Aviva weathers the storm and suffers just a £10m hit

The insurer said the storm cost only £10m, a fraction of the hit suffered by some of its rivals.

New chief executive Mark Wilson described the financial impact of the storm as “relatively modest”.

“It was a significant event in terms of numbers of people affected. In terms of financial impact it wasn’t as significant an event as some were expecting,” he said.

Aviva said it had received several thousand claims, but they were of low value as the storm was not as significant in terms of the scale of damage as had been predicted.

In addition, people were more prepared due to media warnings and had taken precautions before the storm hit.

The firm drafted in extra staff to deal with calls and around half the claims were settled straight away over the phone.

“We’ve got the largest claims team in the UK so we can help our customers deal with claims quickly,” said Andrew Reid, Aviva’s director of financial communications.

Floods in Canada earlier in the year had a much bigger impact of around £120m.

Rival insurer RSA said earlier this week that the same Canadian and European severe weather events resulted in bigger than expected claims bills from customers and that full year returns to shareholders would suffer.

RSA said the October storm would cost it £65m after it wrought damage across the UK and northern Europe.

“RSA had exposure in Northern Europe, particularly Scandinavia whereas we had no hit from Scandinavia,” said Mr Reid.

The Association of British Insurers said that total payouts of around £130m are expected as a result of the storm.

Aviva said the Canadian floods had stifled progress in operating capital generation, which was unchanged from a year earlier at £1.3bn.

However, it said cost-cutting measures have more than offset the impact of the Canadian losses on cash flow. Aviva’s life division, which has its headquarters in York and employs around 2,500 staff in the city, increased the value of new business by five per cent.

Deliberate actions to improve margin led to an increase in the value of new business and lower volumes, in line with expectations.

Mr Reid said that the life division is focusing on making sure it grows profitably.

“The key measure of sales, the value of new business, went up by five per cent,” he said.

“We’re being very careful about what business we’re underwriting. We’re not chasing volumes. We’re at the top of the best buy tables for annuities.”

Annuities allow people who are retiring to exchange their pension pot for a guaranteed income for the rest of their lives, effectively passing on the risk of living longer than expected and using up your pension pot.

“People should be allowed to shop around for annuities just like you shop around for a car quote. There is now greater transparency and people are shopping around more,” said Mr Reid.

Mr Wilson, who joined Aviva at the end of 2012, has pushed through an aggressive restructuring programme with heavy cost-cutting which included the loss of 2,000 jobs earlier this year.

It has also sold off non-core businesses, cut other costs and improved profitability.

Mr Wilson said moves to turn the business around are bearing fruit.

The US business was sold in October for £1.6bn and there have been significant changes in top management.

In September, Aviva ditched the head of its UK and Ireland general insurance business after just a year in the job in the latest stage of an overhaul under Mr Wilson.

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