Aviva boosts profits but City is left underwhelmed by frozen dividend

INSURANCE major Aviva yesterday posted a bigger-than-expected 6 per cent rise in its 2011 profits, but disappointed the market with a lower than expected rise in the dividend.

Andrew Moss, group chief executive, revealed that operating profits rose to £2.1 billion from £2.02bn in the previous year, partly helped by improved profit margins in the life insurance business.

Moss said that UK life and pensions profits were up 8 per cent at £920 million. Profits at the UK general insurance and health arm, which employs 1,500 in Perth and 1,000 in Bishop-

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briggs, lifted 7 per cent to £520m.

Aviva, which has overtaken Royal Bank of Scotland to become Britain’s biggest general insurer, said particularly robust results were achieved in its motor insurance business, with net premiums up 32 per cent at over £1.1bn.

Trevor Matthews, chief executive of the UK business, having previously worked with Standard Life and Friends Life, said he had found an operation “in very good shape. This is not a turnaround situation”.

Aviva’s final dividend was held at 16p and the total dividend rises 2 per cent from 25.5p to 26p, against an expectation of a 5 per cent rise. Moss said this was due to gathering uncertainty in the eurozone, where Aviva has a strong presence, in the final quarter of last year.

The Aviva boss also said the company was “extremely committed to the UK”, where it has 40 per cent of its business, amid reports rival Prudential is considering switching its domicile to Asia.