UPDATE 2-UK recovery helps insurer Aviva top Q1 forecasts

* Life & pensions sales 9.13 bln stg vs 8.5 bln stg forecast

* Sales dip 5 percent on year ago, up 15 percent on Q4

* Confirms 98 pct combined operating ratio target for 2010

* Shares down 0.6 percent

(Adds CEO, analyst quotes, shares, background)

By Clara Ferreira-Marques

LONDON, May 11 (BestGrowthStock) – Insurer Aviva (AV.L: ) topped sales
forecasts with a smaller-than-expected five percent drop in the
first quarter, as a recovery in British and European investor
appetite offset the impact of a decision to slow U.S. growth.

In Britain alone, investment sales jumped 143 percent and
annuities virtually doubled, with record levels of applications
reported for some products, as Aviva benefitted from what it
said was a savings revival as the economy begins to recover.

Aviva’s British-focused rivals, including Legal & General
(LGEN.L: ) and Standard Life (SL.L: ), have reported a similar
return to more positive investor sentiment. [ID:nLDE63Q1MY]

“There is huge confidence coming back into the market.
Whether that will be sustained in the second quarter is
anybody’s guess,” analyst Kevin Ryan at ING said.

“But Aviva is the largest player in the UK market and it is
joining in this growth. UK life sales are up 2 percent and for
the sector leader, that is a good effort.”

The insurer’s shares, which rose strongly on Monday along
with the rest of the sector on the back of a European debt plan,
were down 0.6 percent on Tuesday at 337 pence at 0846 GMT.

Aviva, Britain’s second-largest insurer after Prudential
(PRU.L: ), said group life and pensions sales in the quarter
totalled 9.13 billion pounds ($14.12 billion), from 9.57 billion
a year ago and well above expectations of 8.49 billion.

Compared to the fourth quarter, sales were up 15 percent.

British life sales came in flat on the year-ago quarter but
up 14 percent on the fourth quarter.

Britain and Europe, despite drops in Poland and Spain,
accounted for 85 percent of the group’s long-term savings new
business.

In the United States, sales virtually halved with a 48
percent year-on-year drop, hit by Aviva’s focus on profit over
sales which forced it to slow the pace of annuity sales.

“We are content to grow that business, albeit at a moderate
pace,” Aviva Chief Executive Andrew Moss told reporters, adding
new business was being written at improved profit margins. “Our
priority remains managing that business for profit.”

BAD WEATHER COSTS WEIGH

Aviva said its combined operating ratio — a key measure of
profitability for general insurance — was hit by bad weather in
the first quarter, but confirmed its 98 percent target for the
full year. A level below 100 percent indicates a profit.

Rival RSA Insurance (RSA.L: ) said last week that bad weather
in Europe would cost it 80 million pounds. Aviva said it had
benefitted from a milder winter in Canada, but put the total
cost of bad weather at 50 million for the quarter.

In Britain, where rising claims have been a concern, Aviva
said it was seeing good levels of retention in its general
insurance business and “clear evidence that the personal motor
market is starting to harden”.

Aviva said separately it had shareholder exposure to the
sovereign debt of Greece, Spain and Portugal totalling 900
million pounds at the end of March, with Greece alone accounting
for 150 million of that.

Moss said the risk of a Greek debt default was “relatively
low”, with the risk for other countries “very, very low”.

The insurer also announced it had agreed a long-term funding
plan for its British pension scheme.

Growth Stocks

(Reporting by Clara Ferreira-Marques; Editing by Mike Nesbit)
($1=.6465 pounds)

UPDATE 2-UK recovery helps insurer Aviva top Q1 forecasts