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Aviva building up capital as it targets acquisitions

Aviva is building up its capital in preparation for acquisitions while Legal & General and Standard Life have effectively ruled themselves out of the consolidation drive.

Aviva group chief executive Andrew Moss said last week as the group posted its results: “We have a terrific track record of putting companies together. We will only do it if it generates value but we do see opportunities in the next 12 months.”

Aviva has boosted its capital surplus to £3.2bn compared with £2bn at year-end. Slashing its interim dividend by 31 per cent to 9p a share saved £100m.

It is also selling off a minority stake in its Dutch business Delta Lloyd, which analysts suggest could raise up to £850m.

The news came as Aviva posted a £747m profit after tax for the first half of 2009 compared with an £84m loss for the same period in 2008. Life and pensions new business sales were down by 4 per cent in the first half although the firm says margins have increased. UK life and pension sales dropped by 21 per cent to £4.7bn from £6bn.

Standard Life chief executive Sir Sandy Crombie suggested that the life office would not participate in consolidation. He says: “We have a lot of opportunities to grow organically. We are looking forwards rather than consolidating backwards.”

L&G chief executive Tim Breedon says: “Ramming two small businesses together gets you just that – two small businesses.”

Fitch Ratings senior director David Prowse says: “Some insurers are building up additional capital as some kind of war chest to exploit opportunities when they arrive but it is a question of timing.”

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