Aviva first-half profit falls but earnings target intact

Aviva’s first-half profit fell but the insurer said conditions would improve and stuck to its target for higher annual earnings per share.

Operating profit for the six months to the end of June fell 2% to £1.44bn, caused partly by bad weather and divestments. Aviva said the fall was caused by bad weather, business disposals and high motor claims in Canada and that it expected operating earnings per share to rise by more than 5% in 2018.

Excluding businesses sold, including in Spain and Taiwan, operating profit rose 4% to £1.42bn. The FTSE 100 company increased its interim dividend 10% to 9.25p a share.

Aviva had higher weather-related claims in the UK, Ireland and Canada. Profit rose in the UK and Ireland but Canada swung to an operating loss of £13m from a £71m profit a year earlier. The Canadian business was also affected by natural catastrophes and high motor claims. Aviva said it had increased premium rates and reduced its risk appetite and that underlying results were improving.

Chief executive Mark Wilson said: "Aviva has maintained respectable, broad based growth from its major markets in the first half of 2018. During these choppy market conditions, it is reassuring that Aviva's results are consistent, dependable and growing.

“Our confidence in the full year outlook and our financial strength is reflected in the dividend … This marks the fourth consecutive interim period of double digit growth in dividend per share. Providing shareholders with a sustainable and growing dividend remains paramount for Aviva.”

Aviva has been buying back shares as part of a £600m repurchase programme to boost earnings per share. The company said it was financially strong with £11bn of surplus capital.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Tough conditions in the Canadian motor insurance business, the big freeze earlier in the year and exits from Spain and Taiwan mean the headline numbers don’t look great at Aviva. But underneath that noise it’s another half of steady growth from a business which has become pleasantly dependable. Capital generation is steady, new business in life insurance is ticking along nicely and costs have generally been kept under control."