Aviva shows Prudential who is really being prudent

His point is that the 6% or more drop in output during the recession has a far greater effect on our general economic wellbeing than whether the economy is now growing at 0.1% or 0.3%.

The same thought occurred to me this morning as I looked at the figures from insurance giant Aviva.

The news which has overshadowed everything else in the sector this week is the announcement from the Prudential that it intends to pay £23 billion to buy the Asian interests of the American Insurance Group, its argument being that the growth rates in Asia are very much faster than anything one could expect in Europe.

No one argues with that, just as no one argues with the fact that Aviva is one of the biggest forces in the European market — in France, Poland, Turkey, Italy and, of course, here.

But once again we need to focus on size as well as growth rates.

The European market is much bigger than the Asian market, it is much richer, the saving habit is well established and there is a stable regulatory and political environment.

For all these reasons Aviva expects the European market to increase in size over the next five years by a massive $1.7 trillion (£1.1 trillion), significantly more business than anyone expects to do in Asia in the same period.

Aviva already has 43 million customers in Europe, which is 7% of the adult population.

So it follows that for the next five years at least Aviva has the opportunity to make much more money out of Europe than the Prudential, with or without AIG in Asia, and to do so without having bet the farm.

It is not as exciting of course, but then insurance companies are not really meant to be exciting. They are meant to be secure. And with some $4.5 billion of surplus capital Aviva is certainly that.

Aviva chief executive Andrew Moss can also report with evident satisfaction that after last year's horrors the group has returned comfortably into profit.

More to the point, Moss's "one Aviva, twice the value" strategy, whereby he brought various relatively autonomous businesses together into one group, appears to be back on course having been somewhat derailed by the financial crisis.

The drive to take £500 million out of costs has come in a year ahead of schedule and Aviva now has 19% fewer employees than it did a couple of years ago.

Intriguingly, its measures of customer satisfaction have improved, possibly because with fewer staff they have been forced to make things simpler.

Even Aviva Investors turned in a healthy profit, which is something that has eluded a lot of fund management groups.

All in all it could scarcely be more different from Prudential.

It will be interesting to see which company investors find more appealing as the year unfolds.

A vested interest in defaulting...

There is a growing debate in Europe, added to by Lord Turner, chairman of the UK Financial Services Authority about whether it is right for hedge funds and others to buy credit default swaps to insure against a country such as Greece when they do not hold any of that country's debt in the first place so have no need for protection.

Hedge funds by and large maintain that nothing should be done to interfere with the free flow of market forces and that it is important they be allowed to carry on taking such positions.

The politicians probably do not understand what they see, but they know they don't like it.

One senses they are reminded of a law which used to exist in some places against taking out an insurance policy on the life of someone else, without the other party knowing.

The reason was simple enough: if one party stood to gain from another party's death, it created an incentive to bump the other party off and it seems to me that those taking a bear position in sovereign debt similarly have a vested interest in — if not killing off the country — at least undermining its credibility and prompting a loss of confidence in its government.

And Robert Jenkins, past chairman of the Investment Management Association and Foreign & Colonial, emails from New York to warn that any attempted IMF rescue of Greece could run into trouble in Congress.

The US is the biggest contributor to US funds so a rescue by the IMF might be seen in the current polarised Congress as a partial bailout by Washington.

Jenkins says that Congress has still not got over its belated discovery that by bailing out AIG, the US taxpayer had indirectly refinanced a major chunk of the French banking system since the bailout enabled AIG to pay out massive sums to Société Générale, which had not been what Congress intended at all.

Even if Treasury Secretary Tim Geithner is willing to table an IMF rescue for Greece, there is no telling how Congress will react.

Still as Jenkins says, "should Greece actually default, America still stands ready to help."

How? Guess who is the biggest seller of credit default swaps on Greek debt — AIG. And guess who owns AIG — the US government.