Aviva has raised profit forecasts as its recently acquired motor services company, RAC, has helped it amass higher savings in costs along with high gains in revenues, pushing the insurer’s shares at a two-month high, up 2.1% at 635 pence.
With its stock scaling 2%, leading insurer Aviva operating as Norwich Union in Britain, declared that it was looking at a global ‘combined ratio’ of around 98 % or below. The combined ratio demonstrates the profitability levels from general risk insurance following payment of claims and administration costs, thereby implying that a figure below 100% was a profit.
Aviva managed to get a combined ratio of 95% over the initial six months of the year, with most experts believing that its earlier below-100% aim was extremely conservative.
Purchase of RAC was going to hike Aviva’s combined ratio by 1 percent. As head of Aviva general insurance, Patrick Snowball stated, “The combination of a disciplined approach to our insurance business and our growing non-cyclical income from RAC will enable us to grow our profits and continue to deliver high quality earnings to Aviva's shareholders.”
Snowball clearly said that all concerns or doubts regarding Aviva’s insurance business would be ‘put to bed’ as its profit targets had been raised due to the efficiency of its systems ‘for pricing risk’ together with the huge cost savings it accrued because of placing certain portions of its operations in more economical locations.
Aviva was now hoping to save a whopping £100 million a year in costs, against its previous declaration of saving £80 million as annual cost savings, at the time of purchasing RAC in March. Besides, it expected to increase this amount further to £130 million a year after 2008, as the insurer claimed that it could produce a grand £250 million a year as its total pre-tax profits through the RAC deal, by 2008.
Posted
on : Tue, 18 Oct 2005 19:20 GMT | Insurance News
By : Anne Philips
|
