Aviva rejects Asian push as it focuses on Europe

AVIVA, Britain's second-biggest insurer, said yesterday it felt no pressure to respond to rival Prudential's mammoth Asian takeover with deals of its own.

• Picture: PA

After announcing a return to profit, the company said its key European market is set to grow more in absolute terms than Asia, adding that Asian insurers face a future threat from increasingly consumer-focused regulation.

"We don't need to make any sizeable acquisitions. We have very attractive prospects for new business," chief executive Andrew Moss said.

On Monday, Prudential said it planned to buy AIG's Asian business for $35.5 billion (24bn), effectively staking its future on the region's booming financial services markets.

"Nobody argues that economic growth in parts of Asia is not going to be strong, but the actual characteristics of our business are not driven just by economic growth," Moss said, adding that more onerous regulation will "probably be the trend" across the region, mirroring developments in Europe.

Prudential generates about one-third of its sales in Asia, while Europe accounts for more than half of Aviva's revenues.

Mark Hodges, Aviva's UK chief executive, said there were now two clear strategies being pursued by Prudential and Aviva. "It is easier to differentiate between us. We are focused on the UK and Europe." he said.

A study by consultancy firm Oliver Wyman predicts the region's life market will expand by $1.7 trillion over the next five years, against $1.5tn for Asia excluding Japan.

Aviva's operating profit rose 3 per cent last year to 3.48bn, outstripping the 3.01bn pencilled in by analysts, according to the company's calculation of consensus expectations.

Shares in the company fell 2.6 per cent to 380p. Analysts said the decline reflected worries over Aviva's pension deficit, which reduced the company's net asset per share figures by a bigger than expected 62p.

"We think that's what the market's looking at the moment," Shore Capital analyst Eamonn Flanagan said.

The increase in Aviva's profit partly reflected cost reductions, with the company achieving a targeted 500 million in savings one year early. That helped to offset a 20 per cent drop in profits at the company's general insurance arm after heavy floods in the UK and Ireland prompted a rise in customer claims.

The division narrowly missed its profit target as a result.

Aviva said the overall reduction in staff numbers over the past two years also reflected its decision to outsource a number of operations, as well as the sale of non-core businesses, such as its Australian life arm.

The company, which cut its half-year payout to shareholders by a third as falling sales and weak financial markets put profits under pressure, set a total dividend for the year of 24p, down from 33p in 2008.