Insurer Aviva reported a forecast-beating 26 per cent increase in profits last year, helped by cost cuts and stronger sales of high-margin life policies.

Aviva, Britain's second-biggest insurer by market value, said it made a 2010 operating profit of £2.55 billion, up from £2.02 billion the previous year.

Analysts had expected a profit of £2.44 billion pounds, according to the company's own calculation of consensus expectations.

"By focussing on what we do best in the markets where we have strength and scale, we will continue to prosper in 2011," chief executive Andrew Moss said in a statement on Thursday.

Aviva has been cutting costs, paying off debt and focussing on cash generation in an effort to improve shareholder returns, amid criticism from some investors that it has underperformed its main British rivals.

The company, which generates about 70 per cent of its sales in Britain and mainland Europe, has also pledged to focus on the markets where it is strongest.

The profits improvement last year was driven by Aviva's life insurance business, where operating profits rose 23 percent to 2.32 billion pounds.

The company also benefited from 149 million pounds of cost cuts.

Aviva shares were down 0.2 per cent at 448.8 pence at 8:34 am, valuing the company at about £12.7 billion. The stock has risen 11 per cent in the year to date, outperforming an 8 per cent rise in the FTSE 100 life insurance index.

The company is paying a total dividend of 25.5 pence per share, an increase of 6 per cent.

Reuters