Norwich Union insurer Aviva yesterday said a round of price cutting in the life and pensions market this summer had eaten into the profitability of its UK business.
Aviva was forced to offer customers better deals in response to moves by competitors, squeezing margins which stood at three per cent at the end of September compared with 3.2 per cent at the half-year stage.
Prices of protection products were lowered in July to breathe fresh life into a market that has been under pressure since the housing market began to stagnate, while the cost of individual pensions was also reduced.
Updating the market on its performance during the first nine months of this year, Aviva said new business sales of its life and pensions products in the UK were three per cent lower at £6.59 billion.
Aviva needed strong growth outside its biggest market to ensure that overall new business sales were ten per cent ahead of last year at £16.26 billion, although this was at the bottom of the range of expectations in the City.
Accepting that the UK market was competitive, chief executive Richard Harvey insisted: " Momentum is building into 2006."
New rules on pensions are to be introduced in April and Norwich Union has lowered its prices on products for individuals to drive up volumes ahead of this date.
This strategy led to thirdquarter sales of individual pensions rising 22 per cent on the previous three months, although the nine-month figure was behind last year at £1.87 billion. Annuity sales in the UK rose by a third to £1.24 billion. In its other markets Aviva saw the strongest growth in Italy.