Aviva upbeat despite UK sales drop

Aviva has given reassurances over the outlook for its full-year profits

Life and pensions firm Aviva has given reassurances over the outlook for its full-year profits, despite revealing a 25% plunge in UK life and pension sales.

The weak domestic performance for the firm - which recently rebranded its Norwich Union insurance arm under the Aviva banner - dragged overall worldwide sales down by a worse-than-expected 11% to £24.06 billion in the first nine months of the year.

A drop in consumer demand for pensions and savings products amid the recession hit new business during the year so far, according to Aviva.

But it said the impact on profits was being offset by cost cutting and a focus on value and not volume, while the recent stock market revival was also expected to provide support.

Andrew Moss, chief executive of Aviva, said: "The outlook for the group's total profitability in 2009 is good despite a reduction in sales driven by continuing customer caution and active management of sales volumes to optimise profitability."

Shares in Aviva rose more than 6% on the upbeat guidance, while the insurer also confirmed its capital buffer had strengthened further, by another £500 million since the half-year stage to £3.7 billion.

The firm is the latest major UK insurer to report an improved picture thanks to the equity market rebound, in spite of falling sales across the sector.

Legal & General had reported a 7% fall in nine-month sales, with the major players consistently revealing a tough UK market.

Soaring unemployment has impacted payments into individual and company pensions, while a general trend among consumers to focus on repaying debt rather than saving has also taken its toll.

Aviva saw UK pension sales fall to £2.9 billion in the first nine months from £3.5 billion a year earlier, while it reported a 19% slide in protection insurance product sales.