Aviva shares drop 33% after loss

Aviva is continuing with cost-cutting efforts

Insurance giant Aviva's shares have fallen more than 33% on concerns over the company's financial strength after it posted a net loss.

Its losses for 2008 were �885m, after a profit of �1.5bn in the previous year, as it was hit by the downturn in the financial markets.

The shares had their largest drop in over 20 years, to 190p, after what the firm described as a "tumultuous year".

Aviva said it would be maintaining its dividend to shareholders.

The insurer said that its loss was "predictable" and that its underlying business remained strong.

Increased write-downs

"Maintaining our capital strength has been a priority for us and remains so this year," chief executive Andrew Moss said. "We've undertaken a thorough review of the value of our assets and liabilities, and have made cautious provision for future losses."

The company wrote off 8% of its total corporate bond holdings because of requirements to to report the debt at its market value. "In current conditions, market values are very low," Aviva said.

Aviva increased its provisions for corporate bonds by �300m and and commercial mortgages by �250m, taking its total default provisions on both to �1.13bn.

It maintained its dividend at 33p a share, which added to concerns about its reserves if financial markets deteriorate further. The stock was the biggest mover in the FTSE 100 Index.

The company's UK Norwich Union brand will become Aviva from June.