Aviva reports profit well ahead of expectations

Aviva reported operating profits of £2.7bn in a mammoth final results on Thursday, an increase of 20% on last year. It said the contribution from new acquisition Friends Life of £554m, and £103m of underlying growth more than offset foreign exchange headwinds. The firm's full-year profit after tax hit £1.08bn.

Analysts in a consensus forecast supplied by the company had expected the operating profit to come in at £2.49bn.

Operating earnings per share increased 2% to 49.2p, despite the company facing strong foreign exchange headwinds. In Aviva's life insurance business, value of new business was 24% higher, and the company had achieved 12 consecutive quarters of growth.

The insurer also revealed it was expecting £1.2bn in capital benefits from the integration of Friends Life, and had already made £168m out of the £225m integration savings previously promised.

Its combined operating ratio strengthened 1.1 basis points to 94.6%, against a forecast of 96%. A figure below 100% indicates an underwriting profit.

Aviva also revealed its solvency capital ratio for the first time under the new Solvency II rules. Its ratio at the end of December was 180%, at the top end of its internal working range.

"2015 was about stability and growth at Aviva, against a background of market volatility and uncertainty. Aviva is now a stronger and more focused business. We have completed the fix phase of our transformation," said group chief executive Mark Wilson.

"With a Solvency II ratio of 180% and a surplus of £9.7bn, our balance sheet is one of the strongest and most resilient in the UK market. Over the last four years, we have tripled our economic capital surplus."

"The integration of the £6bn Friends Life acquisition has gone faster and better than expected. We expect to achieve our target of £225m integration synergies in 2016, one year ahead of schedule. After nine months, we have achieved run-rate synergies of £168m and expect £1.2bn of capital benefits, £400m of which we have realised in 2015."

"Operating profits are up 20% to £2.7bn, and value of new business increased 24%, representing twelve consecutive quarters of growth. The combined ratio in our general insurance business improved to 94.6%, the best in nine years, despite the recent floods, and Aviva Investors grew fund management profits by 33% to £105m," he explained.

Looking ahead, Aviva said it was maintaining its focus on expenses and business mix improvement, reallocating capital towards businesses with superior returns and continuing to prioritise investment in digital to deepen and broaden customer relationships.

The company increased its dividend by 15% to 20.8p.