It looks like Aviva – which last year announced the sale of Friends Provident International, as well as divestments of joint ventures in France, Spain, Taiwan, and Italy – is doing something right. Ticking all the boxes, the British insurer delivered growth in profits, dividends, capital, and cash in 2017. However, its performance here in Canada has proven more challenging.
“Aviva is now a simpler, stronger group and we are growing,” said group chief executive officer Mark Wilson about overall performance. “Our strategy is paying dividends.”
Here are the numbers for the group as a whole:
“The streamlining of our geographic perimeter is complete and the strength of our franchises is beginning to shine through,” explained Wilson. “As a result, we have upgraded and brought forward our growth ambitions, and are now targeting greater than 5% growth in operating EPS from 2018.
“Together with our targets of £8 billion of cumulative remittances in 2016-2018 inclusive and increase in dividend payout ratio to 55-60% by 2020, we remain confident that we can continue to deliver cash flow plus growth for our shareholders.”
Focusing in on Canada, however, paints a different story. Operating profit fell to £46 million (CA$82.52 million) from £269 million (CA$482.5 million) one year earlier although its net written premiums actually increased by 15% to £3,028 million compared to £2,453 million in the prior year thanks to a full 12-month contribution from RBCGI which was acquired in July 2016. However, the underwriting result deteriorated from a profit of £168 million in 2016 to a loss of £64 million in 2017 with the combined operating ratio increasing to 102.2% (2016: 93.0%). The company said this was “attributable to adverse prior year reserve development across auto and property insurance portfolios together with weaker accident year profitability in the auto insurance market, where bodily injury claims inflation rose sharply.”
As for ‘geography’, with its exit from certain markets came Aviva’s investment elsewhere. In Vietnam, for instance, the insurer acquired 100% ownership of its joint venture with VietinBank. Still in Asia, Aviva recently received regulatory approval for its joint venture with Tencent and Hillhouse in Hong Kong.
In terms of performance, major market Singapore delivered operating profit of £110 million, an increase of 5% in local currency terms. Back on its home turf, UK insurance operating profit rose 13% to £2.2 billion; operating profit from annuities and equity release grew 11% to £725 million; and in long-term savings, operating profit climbed 30% to £185 million. In nearby Ireland, where it is acquiring Friends First, Aviva saw an 18% increase in operating profit to £86 million.
Other major markets include France, Poland, and Italy.
“Aviva has broad-based growth, with six of our eight major markets delivering double-digit profit improvement,” said Wilson. “We now have a collection of strong and growing businesses.”
