Aviva hikes dividend after robust first half

Global insurance giant Aviva reported robust first-half growth on Wednesday, with operating profit rising 8% year-on-year to £715m.

The FTSE 100 company’s Solvency II own funds generation jumped 26% to £648m, while the Solvency II shareholder cover ratio dipped 10 percentage points to stand at 202%.

Gross written premiums in general insurance rose 12%, reaching £5.27bn, as the firm’s undiscounted combined operating ratio slightly increased by one percentage point to 94.8%.

In insurance, wealth and retirement, Aviva said the value of new business in the sector grew 7% to £319m, while the operating value added saw a substantial jump of 32% to £640m.

The company’s IFRS profit for the period swung to £377m, from a loss of £198m in the first six months of 2022.

Cash remittances increased 3% to £825m, while Aviva’s centre liquidity saw a reduction of 28%, settling at £1.6bn.

The board hiked the interim dividend per share by 8% to 11.1p, after Aviva executed a £300m buyback in the first half.

Looking ahead, Aviva said it remained confident over its future performance, underpinned by the strong first half.

In general insurance, it said its focus remained on apt pricing strategies amid an inflationary environment.

Aviva said it expected the rating environment to stay favourable, and anticipated benefits from rating actions to be implemented in the second half.

In insurance, wealth and retirement, the company also forecast continued growth.

The firm said it was optimistic about momentum in bulk purchase annuities (BPAs), as more pension schemes looked to mitigate risks.

Despite near-term challenges in the Adviser Platform, the company said it saw significant growth prospects in the Workplace business segment and strong demand for Protection and Health products.

Aviva projected full-year 2023 group operating profit to increase by between 5% and 7% from the £1.35bn it recorded in 2022.

Additionally, it said it was on course to surpass its target of £1.5bn per annum for Solvency II operating own funds generation by 2024, and was also aiming to achieve its £750m gross cost reduction target a year ahead of schedule.

Aviva said it anticipated a dividend payment of around £915m, or 33.4p, for 2023.

“Aviva is delivering consistently strong and profitable growth - in the first half of 2023 we grew sales, operating profit and dividends for our shareholders,” said group chief executive officer Amanda Blanc.

“Our excellent trading momentum is a direct result of the decisions we have taken over the last three years to re-focus Aviva.

“Today, Aviva has leading positions in growing markets, providing strong resilience in the current economic climate.”

Blanc said that in the UK and Ireland, general insurance premiums were up 13%, with healthy sales in both our commercial and personal lines businesses, where its Aviva Zero product had now attracted 250,000 new policies since launch.

“In wealth, our market-leading Workplace business grew net flows by 25%.

“We continue to see very strong demand for private health insurance, with sales increasing by 58% as we expanded our services to corporate and individual customers.

“Our excellent Canadian general insurance business is also growing well, with sales 12% higher as a result of a strong performance in commercial lines, and the continued success of our local banking partnership.”

Amanda Blanc described Aviva's cash and capital position as “robust”, adding that in line with guidance, it had increased its interim dividend by 8% to 11.1p, and estimated full-year 2023 operating profit growth of between 5% and 7%.

“We expect to make further strong progress with our clear strategy, growth opportunities in all of our markets, and the £1bn investment well underway to accelerate our future performance.

“Aviva's performance and prospects have been transformed from just a few years ago - today's Aviva is about delivery and momentum, and these results show that Aviva is consistently meeting its promises.

“We expect to exceed our financial targets and we are making progress each quarter, as we said we would.”

Reporting by Josh White for Sharecast.com.