Insurers RSA and Aviva survive Canadian wild fires to notch up bumper profits

UK insurance giants Aviva and RSA put paid to the notion low interest rates are scarring insurers by posting a thumping set of half-year profits by combating setbacks like the disastrous wildfires in Canada.

The FTSE 100 duo and their rivals have been forced to think outside the box to fuel growth in a world where rock-bottom interest rates have pulled the rug from beneath insurers’ investment returns, hurting profits.

Aviva, the larger of the two, said operating profits rose 13% for the six months ending June to £1.3 billion, helped largely by its jumbo deal for Friends Life in 2014.

The takeover drove a 20% rise in operating profits at the life insurance business in the period, cancelling out weakness at its general insurance business, where wild fires that were the worst natural disaster in Canada’s history helped cut operating profits by 21%.

Aviva boss Mark Wilson said: “We have deliberately positioned ourselves to be a blue-chip haven in these times. We are different. We have so many levers we can pull — 42% of our business comes from outside the UK.”

RSA, under former RBS chief Stephen Hester, has also been nimble and produced record results, smashing analyst expectations with operating profits up 20% at £312 million.

In the low-rate environment, Hester has embarked on a strategy he has dubbed “self-help”, which includes cutting costs and selling businesses. “The external environment is not going to provide any help,” he said.

Underwriting profits rose 72% while the combined ratio, a measure of profitability, improved to a record 94.7%.

“You will not find an insurance company anywhere producing these kinds of increases. The self-improvement is now showing through,” Hester said.

Despite talk that RSA could be a takeover target, he said it was not for sale. “We have a bright, independent future,” he added.