Aviva, the international insurance giant, made a pre-tax loss of £1.3 billion in 2008.
The British branch of its fund management arm, Aviva Investors, lost £18m compared with £10m the previous year. Operating profit for the British arm fell to £64m from £70m.
The company said in a statement that the British decline was “driven by the decline in investment income, partially offset by strong performance fees and higher returns on stock lending activities”.
The £18m operating loss comprised a £6m loss from the Norwich Union retail investment business and a £12m loss from its joint venture with Royal Bank of Scotland Group.
The group added it had incurred a £23m loss on its Lifetime wrap platform, which it announced in July 2008 it would pass to Scottish Friendly to administrate and eventually merge with Scottish Friendly’s wrap.
Using the newly introduced Market Consistent Embedded Value (MCEV) accounting, which makes companies’ profit and loss appear more volatile, Aviva as a whole recorded a loss of £7.7 billion.
It wrote off 8% of the value of its corporate bond portfolio and shares fell by 28% by mid-morning. However, it will still pay a full-year dividend of 33p per share, the same as last year.
Aviva Investors, which operates in 15 countries, had £236 billion of funds under management at the end of 2008, a figure the company described as “stable”. It fared better in other countries than in Britain, recording net profits in the Netherlands and the rest of Europe.
“In common with the asset management industry in general, market factors had an adverse impact on the value of our funds under management,” said the group.
“However the fall in equity and property capital values and outflows from some open-ended property funds was more than offset by exchange gains as sterling declined against other major currencies towards the end of the year, increasing the value of our non-sterling investments.”
Aviva’s chief executive, Andrew Moss, said in a statement, “In a tumultuous year, our underlying business has shown great resilience. Operating profits are up and we have maintained our dividend. Bottom line earnings have been affected by investment markets which have predictably created significant unrealised losses during the year.”