Aviva posts 1H loss, but operating profits up
LONDON—Aviva PLC, Britain's largest insurer, on Wednesday reported a net loss of 1.28 billion pounds ($2.54 billion) for the first half of the year after the worst stock market falls since 2002 slashed the value of the company's investment holdings.
Last year, in the midst of a strong stock market, Aviva made a profit of 1.5 billion pounds between January and June. Wednesday's results were the the first recorded loss for the company since 2002.
It's not all doom and gloom for Aviva though. The company said that the group's insurance operations have been profitable throughout the first half of the year, thanks largely to increasing sales in Asia and North America. Operating profit climbed 12 percent to 1.72 billion pounds ($3.4 billion).
Insurance companies' overall profits can rise and fall on the back of the stock market, where they invest insurance premiums. With the Dow Jones 600 Index of European stocks down 24 percent this year, analysts were anticipating Aviva's poor first-half earnings results, and news that its core business was doing well sent the company's stock up alomst 9 percent in London to 507.50 pence ($10.06).
In terms of operations, Aviva -- who employ 57,000 people worldwide -- struggled to increase profits over the last six months in the saturated home market of western Europe. However, plans are already in motion to lean out operating costs in the region. In June, the company announced that it would be cutting between 1,500 and 1,800 jobs at Norwich Union, its British general insurance arm, by the end of 2010 as part of a structural overhaul, which will see more of its business services moved online.
At the same time, sales in North America and Asia have soared. In the last six months, American baby boomers, the oldest of whom have just hit their 60s and are concerned about old age, helped increase Aviva's regional life and pensions sales by 28 percent to a whopping 2.2 billion pounds ($4.4 billion). Aviva's geographical growth is also strong. In the last year alone, the insurer expanded into Taiwan, Malaysia and South Korea.
"The agenda that we set outselves a year ago, which was to realise the full potential of our existing businesses, has suited us very well in the face of a more challenging economic environment," said Aviva's chief executive Andrew Moss. "We can't help what's going on in the external markets."
Prudential, Britain's second biggest insurer, is likely to echo Aviva's first-half results when their earnings report is published on Thursday as they've been hit by the same stock market falls.
