For the UK-based insurance giant, the half-year period has been a mixed bag with group CEO Mark Wilson describing the results as “consistent, dependable and growing.” Its operating profits were down from £1,465 million (around CA$2,495 million) in the same period in 2017 to £1,438 million (around CA$2,449 million) this time around, but the firm was eager to highlight that excluding disposals its operating profits would have actually been up from £1,365 million to £1,421 million. Operating EPS was up 4%.
“Aviva has grown operating earnings per share by 4% and increased the dividend by 10%,” said Wilson. “The 10% increase in the interim dividend is our fourth consecutive half-year of double digit dividend growth and further proof of Aviva’s progress. During these choppy market conditions, it is reassuring that Aviva’s results are consistent, dependable and growing.
“Aviva remains financially strong with a capital surplus of £11 billion. In the first half of 2018, we started a £600 million share buy-back and paid off €500 million of expensive debt. We remain on track to achieve our financial targets.”
Focusing in on the individual aspects of its business, Aviva fared particularly well with its life unit, which saw figures climb from £1,296 million to £1,392 million. Its general insurance and health business meanwhile, slipped back from £418 million to just £302 million this time around. In the UK, its combined operating ratio (COR) was 94.3%, compared to 93.2% last year; in Canada the COR stood at 104.6% compared to 98.9% in the same period in 2017; while across Europe the figure stood at 93.0% compared to 91.0%.
In Canada, the company pointed to a motor insurance market with “heightened levels of claims activity.” Overall, Aviva Canada reported an operating loss of £13 million (around CA$22 million) in HY18 but this actually compares favourably to its £25 million (around CA$42.5 million) loss during the second half of 2017. Personal lines premiums were up 6% because of higher premium rates while commercial lines premiums gained 1% due to an adjusted underwriting risk appetite. Though COR stood at 104.6%, the normalised COR improved by 2.5 percentage points compared to the second half of last year, but this was offset by the bad weather.
“In response to the challenging market environment, we have increased premium rates, tightened underwriting risk appetite and adjusted distribution and claims handling strategies,” said chief financial officer Thomas D Stoddard about Canadian performance. “As a result of these actions, underlying results are showing encouraging signs of progress and, weather notwithstanding, we expect this to be reflected in strong growth in profitability in the second half of 2018 and into 2019. Further actions on pricing should drive additional growth as we strive to return the COR to the targeted 94-96% range in 2020.”
The company said it remains confident in its target of achieving greater than 5% growth for the group as a whole.
