It is inevitable that the falls in the stock market will depress our customers' appetite for savings Richard Harvey, chief executive, Aviva

Operating profits at Aviva, formed three years ago through the merger of Norwich Union and CGU, fell 9% to �1.8bn ($2.83bn).

On Tuesday, shares in insurers were hammered after Prudential said it was scrapping its policy of raising share dividends each year.

And Royal & Sun Alliance saw its shares tumble again on Wednesday on fears that it would have to cut its dividend.

'Robust' results

The insurance sector as a whole has suffered from stock market falls which have sapped companies' financial reserves and raised concerns over whether claims can be met.

Aviva chopped its dividend to 23p, from 38p last year, but the move was in line with a policy announced last year.

"We have delivered a robust set of results in a difficult year where the ongoing turmoil in investment markets has affected consumer demand and investor sentiment," said chief executive Richard Harvey.

But speaking to reporters he said tough times still lay ahead.

"Last year was difficult and this year will be difficult.

"It is inevitable that the falls in the stock market will depress our customers' appetite for savings."

Relief

The firm's core life assurance business saw operating profits slide by 8.5% to �1.52bn.

This was mainly due to a �123m charge being taken to allow for the fact that policyholders are living longer.

However, analysts were relieved the figure was not worse.

"There were no real surprises in the Aviva results, which was a nice change after Prudential yesterday," said Dave Bradbury, a fund manager at Canada Life.

"More analysis needs to be done but the mortality charge is much better than expected and providing there's nothing lurking below it, it seems to have been managed well."

Shares under pressure

Aviva's shares closed down 5.5p at 378p, after a volatile day's trade which saw the stock touch a high of 402p, and low of 356p.

Meanwhile rival insurer Royal & Sun Alliance saw its shares hammered on fears that it may cut its dividend when it reports results on 6 March.

RSA's shares ended down 8.25p at 62.75p, a fall of 11.6%.

There was also speculation that RSA may launch a rights issue to strengthen its finances.