Aviva Plc – Interim Results Announcement

 

Aviva plc 2021 Interim Results Announcement*

SIGNIFICANT STRATEGIC DELIVERY AND STRONG GROWTH IN KEY AREAS

Intended capital return of at least £4bn ¹ including up to £750m share buyback starting immediately ²

Best half year sales³ in General Insurance in a decade and record flows into Savings & Retirement

Cash remittances4,‡		Interim dividend		Adjusted operating profit4,‡		General Insurance GWP4		Life new business PVNBP4,‡
£1.1bn		7.35p		£725m		£4.4bn		£16.9bn
+884%		+5%		+17%		+6%		+13%
HY20: £108m		2020: 7.00p		HY20: £621m		HY20: £4.1bn		HY20: £14.9bn

 

Amanda Blanc, Group Chief Executive Officer, said:

“We have made good progress on all fronts in the 12 months since we launched our strategy.

We are delivering on our commitment to make a substantial capital return to our shareholders. We intend to return at least £4 billion to investors by the end of the first half of 2022¹, starting with a share buyback of up to £750 million.

We delivered strong cash remittances^4,‡ of £1.1 billion in the first half and we are on track to achieve our objective of over £5 billion in cash remittances^‡ between 2021 and 2023. In light of our confidence in the strength of the business and underlying cash flows, the Board has declared a 5% increase in the interim dividend to 7.35 pence per share.

The breadth of Aviva, across life insurance and general insurance, is a key strategic advantage and has driven a 17% increase in operating profit^4,5,‡ to £725 million. We also delivered some of our best ever sales figures in the first six months. In UK general insurance we delivered our highest sales³ in a decade. In Savings & Retirement, net flows^‡ increased by 24% to a record £5.2 billion, and we've added 100,000 new workplace customers, reinforcing our number one position.

Alongside delivering growth, we continue to focus on reducing controllable costs^4,6,‡ which are down 2%. We are on track to deliver our £300 million savings target in 2022 and are focused on achieving top quartile efficiency in all our businesses.

While we've got more to do, our half year results show we have what it takes to drive growth in our businesses. We remain completely focused on transforming performance, capitalising on the breadth of Aviva, making insurance simple and easy for our customers, and creating value for our shareholders.”

Return of capital to shareholders of at least £4bn by HY 2022 with full details with FY results in March 2022¹

• Intended shareholder return of at least £4bn (subject to regulatory and shareholder approvals, remaining completions and market conditions) including up to £750m via share buyback to commence immediately²

• Expect additional reduction in debt of c.£1bn and repayment of £0.7bn of internal loan

• Combined with £2bn repayment of debt in H1 2021, expected to utilise all of the cash proceeds from divestments of £7.5bn

• Divestment programme expected to complete by end of 2021

 

Strong growth in cash remittances and operating profit

• Cash remittances ^‡ of £1,296m (HY20: £150m) of which £1,063m from continuing operations (HY20: £108m)

• Group operating profit^5, ‡ of £1,132m (HY20: £1,225m) and Group IFRS loss for the period of £198m (HY20: profit of £874m) reflecting non-operating items including anticipated loss on disposal of France and investment variances driven by higher interest rates

• Operating profit^5, ‡ from continuing operations up 17% to £725m (HY20: £621m) and Solvency II operating own funds generation ^‡ up 12% to £710m (HY20: £632m)

 

‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section.

1  Subject to regulatory and shareholder approvals, completion of disposals and market conditions

2  Commencing on 13 August 2021

3  References to sales represent present value of new business premiums (PVNBP) for our life business and gross written premiums (GWP) for our general insurance business, PVNBP is an APM and further information can be found in the 'Other information' section.

4  From continuing operations 

5  Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section. 

6  Represents controllable costs excluding cost reduction implementation and IFRS 17 costs

 

*This announcement contains inside information. The person responsible for making this announcement on behalf of the Group is Kirstine Cooper (Group Company Secretary)

 

Significant financial strength

• Solvency II shareholder cover ratio ^‡ of 203% (FY20: 202%) and centre liquidity ^‡ (Jul 21) of £2.8bn (Feb 21: £4.1bn)

• Solvency II debt leverage ratio ^‡ of 26% (FY20: 31%) following £1.9bn debt reduction in H1 

• Interim dividend up 5% to 7.35p (2020: 7.0p per share)

Continued focus on improving the performance of the business

• Life present value of new business premiums (PVNBP) ^‡ up 13% to £16.9bn¹ (HY20: £14.9bn) with strong growth in Savings & Retirement and lower volumes of annuities in a subdued bulk purchase annuity market – good start to H2 with £2.1bn of BPAs secured in July (£3.7bn July YTD)

• Best start to the year in a decade for General Insurance gross written premiums (GWP) up 6% to £4.4bn¹ (HY20: £4.1bn) and combined operating ratio (COR) ^‡ of 91.6%¹ (HY20: 101.4%) 

• Controllable costs^1, ‡ down 2% (excluding cost reduction implementation and IFRS 17 costs) to £1,378m (HY20: £1,408m) and on target to deliver £300m cost savings relative to our 2018 baseline in 2022

 

 

Group financial performance highlights				Group financial strength
Group adjusted operating profit‡		IFRS loss for the period		Solvency II shareholder cover ratio‡		Solvency II debt leverage ratio‡		Centre liquidity‡
£1,132m		£198m		203%		26%		£2.8bn
(8)%		–		+1pp		(5)pp		£(1.3)bn
HY20: £1,225m		HY20: Profit of £874m		FY20: 202%		FY20: 31%		Feb 21: £4.1bn

 

Outlook

We are confident that the steps we are taking to transform our business set us up well to capitalise on the growth opportunities in our core markets of UK, Ireland and Canada despite the continued economic and COVID-19 uncertainties.

In the UK we expect to see continued growth in Savings & Retirement, and the bulk purchase annuity business has seen a strong start to the second half and has a good pipeline of transactions. In general insurance, we continue to see excellent opportunities for growth in commercial lines as we capitalise on our leading positions with brokers and the favourable rate environment. In personal lines, lower pricing and claims have somewhat offset each other but the softer rate environment in motor in the UK, Ireland and Canada will increasingly impact earnings. Weather conditions have been benign in the first half of the year, and whilst we have experienced adverse weather conditions in July, including floods in the UK and hail storms in Canada, we expect the Group COR to be below 94% for the full year.

Our focus on transforming performance means that we are on track to deliver on our £300 million controllable cost reduction target in 2022 including over £225 million of cumulative savings by the end of 2021. We are also on track to achieve our target of over £5 billion in cash remittances from the business units (continuing operations) between 2021 and 2023; with cash remittances for the year expected to be up strongly on £1.4 billion achieved last year, and continue to increase in 2022, as we grow toward £1.8 billion of cash remittances in 2023.

We are continuing to deliver for shareholders with today's announcement of a proposed capital return to shareholders of at least £4 billion by HY 2022². This includes a share buyback of up to £750 million which will commence immediately³. We intend to provide further details, including the mechanism of the remaining capital return (with preference for methods that would result in a reduction in share count) at Aviva's full year results in March 2022.

 

‡ Denotes APMs and further information can be found in the 'Other information' section.

1  From continuing operations

2  Subject to regulatory and shareholder approvals, completion of disposals and market conditions

3  Commencing on 13 August 2021