PROFITS FELL by a quarter in Aviva’s Irish business last year, as a weaker economy combined with claims related to “unprecedented weather events” eat into results.

The insurance firm, formerly known as Hibernian, said operating profits had dropped from €181 million in 2008 to €136 million last year. Business declined in all aspects of the group’s business apart from health, where profits more than doubled from €5 million to €11 million.

Aviva now has 250,000 health insurance customers in the Republic, having gained more than 50,000 last year. A spokesman said the firm was the fastest-growing health insurer in Europe, with an Irish market share of almost 12 per cent.

The picture was less positive in Aviva’s general insurance arm, where floods in the south and freezing weather at the end of last year contributed to a 27 per cent fall in profits to €72 million.

The company indicated last month that it had accounted for €88.6 million in claims for weather-related damage in the Republic in the final three months of the year.

The Irish Brokers Association projected earlier this week that homeowners could face an increase of up to 20 per cent in their insurance premiums as a result of last year’s bad weather.

Aviva’s life and pensions business also declined in 2009, with profits dropping by 31 per cent to €53 million on the back of weaker demand.

The company described the overall results as “solid”, pointing to “a challenging business environment”. It highlighted its investment in the Aviva Stadium during the year, a move thought to have cost about €44 million.

The Irish results were issued as its parent, Aviva plc, beat 2009 profit expectations. Helped by cost cuts, the firm’s operating profit rose 3 per cent last year to £3.48 billion, outstripping the £3.01 billion pencilled in by analysts.

The increase in Aviva’s profit partly reflected cost reductions, with the company achieving a targeted £500 million in savings one year early. That helped offset a 20 per cent drop in profits at the company’s general insurance arm after heavy floods, including those in Ireland, prompted a rise in customer claims.

The division narrowly missed its profit target as a result.

The company said it felt no pressure to respond to rival Prudential’s mammoth Asian takeover bid with deals of its own.

Aviva’s key European market is set to grow more in absolute terms than Asia, it said, adding that Asian insurers faced a future threat from increasingly consumer-focused regulation.

(Additional reporting, Reuters)