Aviva shares slump 25%

Mar 6 2009 by Iain Laing, The Journal

SHARES in Aviva slumped by a quarter yesterday as the UK’s biggest insurer struggled to convince investors about its prospects amid the current turmoil.

The blue-chip stock fell even though the Norwich Union firm maintained its dividend and insisted it was in a strong financial position.

Aviva posted operating profits for 2008 of £2.3bn, up 4% on a year earlier, but reported a net loss of £885m because of the performance of investment markets following falls in equity, property and bond values.

The company said it had reviewed the value of its assets and liabilities and made “cautious provision” in the results for future losses.

As well as the sharp drop for Aviva, shares in rivals Prudential and Legal General fell by more than 7%.

Panmure Gordon analyst Barrie Cornes said he remained cautious on Aviva due to the falling property market. He said: “Solid, largely in line and no nasty surprises makes these a solid set of figures, but the shares are likely to continue to be driven by market uncertainty in the short term.”

Aviva insisted its capital position was strong and said its solvency surplus was £2bn at the end of 2008, a figure which would fall to £1.2bn if equity markets were to decline by a further 40%.

Aviva said it was better placed to withstand the tough market conditions because it was less dependant on earnings from long-term savings new business.

It added: “This is an important factor in setting our dividend. Our geographic spread across four continents and diverse distribution also brings resilience.”

Aviva said its total dividend would remain at 33p a share. Chief executive Andrew Moss said: “In a tumultuous year, our underlying business has shown great resilience. Operating profits are up and we have maintained our dividend.”