Company Reports

Aviva reported a strong set of results for 2023, with operating profit up by 9% to GBP 1.467 billion. This sound financial performance was driven by good growth of general insurance premiums combined with adequate underwriting performance, decent protection and health sales, and net flows within the wealth management business. Looking forward, the company has upgraded its objectives and guidance to an operating profit target by 2026 of GBP 2.0 billion. Further, there is a GBP 1.8 billion 2026 target for own funds generation. This stacks up well against the GBP 1.729 billion achieved over 2023, a double-digit rise, and the GBP 1.5 billion target for 2024. The total dividend for 2023 is GBX 33.4 per share, a GBX 22.3 per share final, with guidance upgraded to mid-single-digit cash cost growth. A new share buyback was announced of GBP 300 million, with guidance for further regular capital returns in the future. The Group’s solvency ratio stood at 207% at the end of the year, after the two acquisitions. The recent announcement of the acquisition of Probitas builds on Aviva’s interest in continuing to develop its general insurance proposition, particularly in commercial and specialty lines of business. We maintain our fair value estimate and our no-moat rating.

With the divestment of peripheral operations and geographies, Aviva has tilted its portfolio to a regional focus and more balance across product lines. International growth took the company increasingly away from general insurance. This is back to levels of contribution seen historically. Aviva is still a life and savings business predominantly, generating close to three quarters of its earnings from protection and health, equity release, annuities, and long-term savings. Health insurance is increasingly important, serving 4.5 million retail customers and around 3.3 million customers who get health insurance through their employment. With elevated national health service waitlists, there is increasing demand for health insurance. In protection, the company’s products are split equally between individual and group insurance. Using individual protection as a benchmark, 10% of sales are direct, 10% are sold without advice but intermediated, and protection sales are heavily intermediated. Aviva is looking to make individual protection increasingly automated. Health and protection make up around 10% of operating profit from U.K. and Ireland life and savings.

Aviva has delivered mixed results for the third quarter of 2023 with good earnings in insurance, but weaker in wealth. The company has grown general insurance premiums by 11% year to date with slightly stronger growth in personal lines, particularly in the U.K., where Aviva has prioritized pricing over volume and benefited from higher sales in new products such as Aviva Zero and Aviva High Net Worth. The discounted combined ratio improved marginally over the first 9 months by 60 basis points, but that improvement is unfortunately due to discount rates as the impact of wildfires and adverse weather has hit claims. This has particularly been the case in Alberta, Nova Scotia, British Columbia, and Northwest Territories.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many previously poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage, and his appointment at BlackRock. Maurice Tulloch was going to tilt the business toward general insurance, but he left soon after taking on the leadership position. Current CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.

Aviva has reported a net profit of GBP 377 million for the first six months of 2023, or GBX 12.1 per share. This means that as of the first six months of the year, Aviva is behind our full-year net income forecasts. The company is worth GBP 9.4 billion in shareholder value, so its earnings have delivered an 8% return to shareholders. If Aviva stays on this track, it is likely to deliver a return for the full year that is above the cost of capital that we apply of 11%. While a good part of the increase in operating profit over last year under the new accounting standard relates to the company’s investment result, there is still good underwriting profit growth, albeit at lower margins than the prior six months. We maintain our rating of no economic moat, and we are likely to adjust our GBP 4.8 per share fair value estimate, but not by much.

Aviva has reported a strong trading update for the start of 2023 with good growth. Unfortunately, there has been a drag on solvency and we believe that this is what the market is focusing on. Growth has been particularly strong in general insurance and the mix between rate and volume is broadly good. The same can be said for protection and health, but the wealth business still has work going on. Net flows in the platform business have dropped substantially and net outflows in the asset management business continue to be driven by strategic actions that will continue in the second quarter. The company remains on track to meet its cost-reduction plan of GBP 750 million by 2024. However, based on May 24 numbers the GBP 1.5 billion per-year capital-generation target by 2024 still looks a little way off. We maintain our GBP 4.80 per-share fair value estimate and our no moat rating.

When looking at the exposure of insurers to the unfolding banking crisis, we believe this is limited. The main impact of the crisis currently seems to be contagion, so investors are selling shares cheaply. However, exposure to United States bonds is either in government bond securities, or exposure to Credit Suisse, Silicon Valley Bank, and other U.S. regional banks is immaterial, which is 50 basis points or less of their investment portfolio. Some do hold larger bank debt holdings of up to 5.5% of shareholder investments, but nearly all that debt ranks as senior. AT1 debt tends to be very minimal or there is no exposure as a policy with board-level approval. The vast majority of corporate debt held is investment-grade. We maintain our fair value estimates and moat ratings across our European insurance coverage. Allianz remains our Best Idea. Admiral is one of our top picks.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many previously poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage, and his appointment at BlackRock. Maurice Tulloch was going to tilt the business toward general insurance, but he left soon after taking on the leadership position. Current CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.

The market has taken Aviva’s full-year 2022 results reported on March 9 well as Aviva furthers its shareholder distributions. In raising cash remittances out of subsidiaries by 11% to GBP 1.8 billion, the business has announced another buyback of GBP 300 million and increased its dividend. The final dividend of GBX 20.7 per share takes the total to GBX 31.0 per share for the year. Total dividend cash cost guidance has been raised to GBP 915 million for 2023, or GBX 39.0 per share. Dividend growth has been rebased to low- to mid-single-digit growth in cash thereafter, implying buybacks will remain a significant part.

Aviva has reported poor results for the third quarter of this year. On a nine-month basis the numbers that stand out to us are a 4% decline in wealth net flows, driven by a 20% drop in platform net flows. That has been offset by some better performance in workplace and individual pensions; however, while the platform business is low margin, it is still a bit concerning. Furthermore, Aviva's investors business had a GBP 3.7 billion outflow after divesting the French business. Compared with the end of the second quarter, wealth net flows are up 2% yet there is a 6% decline in net flows in Aviva investors. In the personal lines general insurance business gross written premium was flat in the U.K. and up in Canada, driven by Ontario auto and home insurance. Commercial lines insurance was up across the board and underwriting was decent. We think life performance was solid and the rise in protection and health insurance present value for new business, though the new business margin has slipped a little.

Many European insurance companies have fallen into 5-star territory year to date. However, we still like and support our preferred picks of two primary firms. In our personal lines subindustry, we still like Admiral. That is because we believe the business is adept at growing its customer numbers ahead of peers and the market. Though we do anticipate slower motor insurance growth over the immediate time frame, coupled with a fall in home insurance volumes due to lower U.K. completed home sales, we still believe in the prospects for Admiral’s long-term growth. Yet, while the business clearly outstrips the competition in terms of expansion, its development is not aggressive. Admiral has grown its U.K. motor market share by 5 percentage points over the last 10 years.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many previously poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage and his appointment at BlackRock. It felt like Maurice Tulloch would tilt the business more toward general insurance but we think it is likely that the business' problems became too much for him. Present CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.

Aviva has delivered a strong set of results for first-half 2022 with operating profit of GBP 829 million, a rise of 14%. The business has announced a 40% increase in its interim dividend to GBX 10.3 per share, guidance of more capital returns to shareholders, and a 27 percentage point solvency improvement to 213% including GBP 1 billion debt reduction. Operationally, workplace added 150,000 new customers, general insurance grew gross written premiums by 11%, and Aviva Investors recovered net flows to end at a positive GBP 0.2 billion. With the combined ratio coming in at 94%, underwriting also looks good. While the market has reacted positively to these results, we maintain our GBP 4.40 per-share fair value estimate until, or unless, we get a better reading on the earnings profile of this business. We also retain our no moat rating.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many previously poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage and his appointment at BlackRock. It felt like Maurice Tulloch would tilt the business more toward general insurance but we think it is likely that the business' problems became too much for him. Present CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.

Aviva reported steady results for first-quarter 2022 with some highs and lows but on balance a good result. In Aviva’s dominant life and savings unit, the value of new business increased 7%. This rise is almost wholly attributable to a higher allocation to illiquid assets backing Aviva’s annuities. Relatedly, the business also delivered an increase in the present value of new business premiums in this annuities and equity release line. That looks like a result of higher bulk-purchase annuity sales as market volumes started to rise. Aviva reiterated there is a healthy pipeline of BPA sales more heavily weighted toward the second half of 2022. Equity release also experienced higher sales during the first quarter, partially offset by lower individual annuity sales as retirement customers switched to this new form of income.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many previously poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage and his appointment at BlackRock. It felt like Maurice Tulloch would tilt the business more toward general insurance but we think it is likely that the business' problems became too much for him. Present CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.

Aviva has reported a rather complicated set of results for full-year 2021. That is because the business has been disposing of peripheral entities, reducing debt, and distributing cash to shareholders. This leaves a company with a very different earnings profile on a forward looking basis. However, we still think there is upside within Aviva and that many of its remaining woes orientate around operating and economic assumption adjustments within its liabilities. These have been long-standing issues much as have seen at Aegon. We expect significant managerial attention on correcting these to realistic long-term assumptions that do not require continued annual adjustments. We expect this particularly within a rising rate world but also in an environment where management takes steps to mitigate the effects of these. We lower our fair value estimate to GBP 4.4 per share and maintain our no economic moat rating.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many previously poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage and his appointment at BlackRock. It felt like Maurice Tulloch would tilt the business more toward general insurance but we think it is likely that the business' problems became too much for him. Present CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.

In Aviva’s trading update for the third quarter, the business continues to focus on costs, capital, and return of cash. Of the GBP 750 million buyback announced at the first half of 2021, GBP 450 million has been completed. Management says it is on track to deliver on its GBP 300 million 2022 cost-saving target relative to the 2018 baseline. Growth of the GBP 1.4 billion in cash remittances is also on track.

As a good middle-of-the-road insurer Aviva has had its fair share of problems over the years. As with many poorly run companies, these issues have stretched across leverage, controls, turnover and likely relatedly, its sprawling business portfolio. While prior leadership teams tried to get a handle on this business, up until now none have really done so. We mainly attribute this to a focus on growth and innovation, without a focus on strong capital management and discipline. Mark Wilson’s tenure was characterized by the Friends Life acquisition, the digital garage and his appointment at BlackRock. It felt like Maurice Tulloch would tilt the business more toward general insurance but we think it is likely that the business' problems became too much for him. Present CEO Amanda Blanc is now set on making things right and has divested noncore assets, promising now to focus on the U.K., Ireland, and Canada.