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Aviva operating profit falls due to floods

Aviva released its interim results today which showed a 25 per cent growth in worldwide sales of £19.2bn in the first six months of 2007 compared to £15.6bn in the same period last year.

But worldwide operating profit dropped 8 per cent from £1.6bn in the first half of 2006 to £1.5bn in the first half of 2007 which the Group said was a result of losses of £400m due to the flooding.

Aviva said “exceptional UK weather losses of £235m” coupled with a further £165m of flood losses in July led to a 34 per cent drop in its general insurance and health operating profit to £560m.

Life operating profit on a European Embedded Value basis was up 24 per cent from £1bn to £1.2bn while sales in the UK rose 7 per cent to £7.4bn.

The Group said it has recorded record half year sales in the UK and that this was due to higher margins, improved service and lower costs.

Aviva also announced a new partnership with HSBC to sell general insurance to its 10 million customers.

Group chief executive Andrew Moss says: “The UK general insurance market has been tough. A competitive market and some of the worst floods in living memory reduced our UK result, with a £235 million loss for adverse weather. We have sustained a further £165 million of flood losses in July, which will be reported in our full year results. We continue to do everything we can to help customers who have been affected by these events.

“Our UK life performance builds on the strong sales growth delivered last year. We have grown market share, while increasing margins and improving service. We have driven costs down in line with our target and improved persistency. We continue to investigate ways to rationalise our cost base and simplify our legacy systems. Our outsourcing partnership with Swiss Re announced earlier this year will enable us to enhance customer service and cost effectiveness further.”

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