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Aviva still on the acquisition trail – UK sales down by a quarter

Aviva has reiterated it is on the acquisition trail as it announces that life and pensions sales in the UK dropped by a quarter in the nine months to September 30.

In a conference call this morning, group chief executive Andrew Moss (pictured) said the firm would likely use the proceeds from yesterday’s IPO of Delta Lloyd for inorganic growth, potentially in the distribution space.

He said: “Historically, if you look at what Aviva has done it has often chosen to grow its business by making smaller bolt-on type acquisitions often in the distribution space which simply improves the flow of new business and adds to profits over time.

“So in the inorganic space that would probably be the priority.”

Moss added that Aviva would also be looking at ING’s assets but insisted the firm did not want to purchase another big brand.

He said: “We have made it very clear that buying another large brand here in the UK just does not make sense for us given we have got the Aviva brand trading very successfully and the RAC brand also trading successfully. Buying another brand just does not stack up for us.”

Meanwhile, collective investments sales plunged by almost half to £631m over the period, from £1.24bn in 2008 and total pensions sales were lower at £2.89bn compared with £3.49bn in the first nine months of last year.

Despite this, the margin for the year to date improved to 2.5 per cent from 2.1 per cent at the half year.

Bond sales have reduced to £1.6bn from £2.39bn in 2008 but Aviva is launching a new with-profits guaranteed product this month in a bid to capitalise on increasing demand for guarantees.

Overall sales fell 11 per cent to £27bn from £30bn last year on a PVNBP basis. The firm says this reflects its focus on profitability rather than volume of sales in the current economic climate.

In Asia Pacific, sales were 22 per cent lower as customers remained cautious about investing in unit-linked savings products, according to Aviva.

Bancassurance life and pension sales increased 5 per cent on last year to reach £7bn. The firm says this demonstrates the value of this revenue stream and Moss insisted if further opportunities for distribution in the banking sector present themselves Aviva would be extremely interested.

He said: “We already have a number of agreements with banks and building societies in the UK, notably with RBS and that has been growing both in volume and margin terms over the last couple of years.

“We operate on a multi-distribution basis and bank distribution is an important element of it. If there are other opportunities in that regard you can be sure Aviva will be competiting hard to take advantage of that.

“We believe we have a real competitive advantage in terms of our expertise in working with banks. We will be pretty active.”

The firm’s capital surplus stood at £3.7bn as at September 30, up from £3.2bn at half year.

This does not yet include the £400m uplift from the sale of the Australian business, the additional £500m from the Delta Lloyd IPO or the deduction of £500m for policyholder payments as part of the reattribution of the inherited estates.


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