Flooding Fails to Wash Out Norwich Parent

THE summer floods will cost Norwich Union insurer Aviva around Pounds 75m, bringing the group’s total 2007 bad weather bill to a massive Pounds 475m.

Britain’s largest insurer has come to the rescue of 45,000 households and 6,000 businesses following the summer floods that devastated parts of Yorkshire and the January storms that caused serious wind damage.

Mark Hodges, head of Norwich Union Life, said the group had the balance sheet to absorb the costs.

“The weather events of 2007 were a one in every 200 years event,” he said.

“We have been there for our customers and have now made either a full or part payment to 99 per cent of the people who contacted us.”

The increase in bad weather claims took the group’s combined operating ratio – costs and claims as a percentage of premiums – to 100 per cent, beneath the group’s target of 98 per cent.

Without the flood claims, the combined operating ratio would have been 95 per cent.

“It is a one-off,” said analyst Youssef Ziai at ABN Amro. “They are paying the bills and these things have a habit of increasing. I don’t think this affects their ability to increase the dividend payment.”

The update came as Aviva reported record levels of business in the UK, with life and pension new business sales up five per cent to Pounds 11.6bn in 2007.

Aviva chief executive Andrew Moss said the company’s broad portfolio of products mean it was confident about future trading.

“While our markets will be affected by the current economic uncertainty, I believe we will continue to grow both new business sales and profit in line with our stated targets.”

Aviva has a diversified portfolio across the UK, Europe, United States and Asia helping it to counter downturns in areas like protection, which has been hit by the decrease in mortgage approvals, with an upturn in pensions, equity release and annuities.

“We are protected because we have a broad portfolio of products,” said Mr Hodges.

The group’s Norwich Union life business is run out of York, where it employs 3,500 people. A further 1,500 Norwich Union staff work at offices in Leeds and Sheffield.

Norwich Union maintained its share of the life and pensions market at 11 per cent in the first nine months of 2007, in line with its stated aim of growing at least in line with the rest of the sector.

Across the group as a whole Aviva reported a 22 per cent rise in 2007 life and pensions sales, beating forecasts.

Aviva, the last UK insurer to publish sales after a turbulent fourth quarter, said its life and pensions new business climbed to Pounds 31.6bn over the 12 months, beating an average forecast of Pounds 30.82bn.

Total full-year sales for the group, which include investment sales, rose 25 per cent to Pounds 38.58bn.

Aviva hopes to grow at least in line with the market in 2008 after meeting market estimates of 5-10 per cent growth in 2007. But it warned that overall growth could slow, echoing comments from its rivals.

(c) 2008 Yorkshire Post. Provided by ProQuest Information and Learning. All rights Reserved.