Aviva (formerly CGNU/Norwich Union) announced a net operating profit for 2004 of £2.344 billion ($4.5 billion), a 25 percent increase from 2003’s £1.72 billion ($3.3 billion). The U.K.’ largest insurer also announced plans to buy RAC (formerly the Royal Automobile Club) for £1.1 billion ($2.11 billion), which it plans to integrate with Norwich Union Insurance (NUI), the U.K.’s largest P/C insurer.
A.M. Best Co. said the results fell within its expectations, while most analysts had forecast slightly lower figures. Best also indicated that the acquisition of RAC, which provides roadside services to members similar to the AAA in the U.S., “is consistent with AVIVA’s strategy to strengthen the importance of its non-life business.” Standard & Poor’s said its ratings on Aviva would not be affected by the acquisition.
Other earnings highlights detailed by the company included the following:
— Life operating profit up 9 percent to £1.611 billion ($3.1 billion), “reflecting steady return of customer confidence.”
— Accelerating long-term savings sales growth up 12 percent to £20.687 billion ($39.8 billion) “with outperformance in many markets in Europe and investment sales up 44 percent to £1.629 billion [$3.13 billion].”
— Continued excellent general insurance performance with profits up 47 percent to £1.326 billion ($2.55 billion)
— Worldwide combined operating ratio ahead of target at 96.7 percent.
— Total dividend increased by 5 percent, “strongly covered by post tax statutory profits.”
— Improved transparency and disclosure from early adoption of European Embedded Value.
Group CEO Richard Harvey commented: “Aviva is thriving. This is a strong set of results, delivered by managing our business for value for customers and shareholders. Our diversified business model brings the complementary qualities of long-term savings and general insurance. Our aim is profitable growth in all of our businesses.
“We have one of the strongest platforms for long-term savings growth across continental Europe and this now accounts for over 50 percent of our life and pensions new business. We’ve also gained good ground in the long-term growth markets of Asia. The outlook is brighter for long-term savings across our main markets as savers’ confidence continues to return.
“Our general insurance business continues to deliver very strong and resilient earnings through scale benefits and innovation. Today we’ve also announced the acquisition of RAC plc, which builds on our success in the UK general insurance market and creates a powerful new combination in insurance and motoring services while delivering substantial shareholder value potential to Aviva’s shareholders. Our shareholders are seeing healthy dividend growth underpinned by strong statutory profits.”
In a joint announcement with the RAC, Aviva said that its board “believes that the Acquisition will accelerate the growth and profitability of NUI, Aviva’s UK general insurance business, strengthening its position as the UK’s number one general insurer (with 15 million policyholders) and creating a powerful new combination in insurance and motoring services. The Acquisition will bring together RAC’s powerful brand and customer base (including 6.7 million roadside assistance customers) with NUI’s complementary expertise, where it already insures one in seven of all
UK motor vehicles and has a leading position in private motor insurance.”
Due to securities regulations the offer is limited to shareholders outside the U.S., Canada, Japan and Australia. For persons not residing in those countries, further information is detailed on the company Website at: www.aviva.com. The full earnings report may also be obtained on the site.
Was this article valuable?
Here are more articles you may enjoy.