Aviva reported a bigger-than-expected 6 percent rise in its 2011 earnings, helped by better profit margins in its life insurance business, and said capital reserves had recovered from a hit they took last year as a result of the euro zone debt crisis.

The company, Britain's second-biggest insurer, had an operating profit for the year of 2.5 billion pounds ($3.93 billion), it said on Thursday, ahead of the 2.41 billion pounds pencilled in by analysts in a company poll.

Aviva also said its Insurance Groups Directive capital surplus, a key measure of capital strength for European insurers, had risen to 3.3 billion pounds as of February 29, up from 2.2 billion pounds at the end of last year.

In November, Aviva said falling euro zone government bond prices had cut its surplus by 30 percent to 2.7 billion pounds between July and September last year, prompting a steep fall in its share price.

Aviva shares closed at 355 pence on Wednesday, valuing the company at about 10.2 billion pounds. The stock has risen 14 percent since the start of the year, outperforming an 11 percent rise in the Stoxx 600 European insurance index <.SXIP>

(Reporting by Myles Neligan; Editing by Paul Hoskins)