Continuing momentum with strong first half results demonstrating benefits of diversified business model
Confident outlook for 2022 despite challenging market backdrop
Further capital returns – anticipate launching share buyback with our full year 2022 results
|Solvency II OFG‡||Solvency II pro forma cover ratio1||General insurance COR‡|| |
|2022 interim dividend|
Amanda Blanc, Group Chief Executive Officer, said:
"Sales are up, operating profit is higher, our financial position is stronger. This has been an excellent six months for Aviva.
Our scale and diversification give us resilience and opportunity, enabling Aviva to withstand the challenging economic climate. Our market leading positions and our unique ability to look after a wide range of customers' needs are clear advantages and have driven robust operating performance. Trading has been encouraging across all our major businesses in insurance, wealth and retirement.
Even so, we are very conscious of the pressures currently facing many of our customers, especially the more vulnerable. In response we have launched new, low cost, insurance products, and we are increasing the range and amount of support we provide to communities, businesses and our own people during this challenging time.
Delivering for our shareholders is at the core of our strategy. Our liquidity and capital position is extremely healthy and we are declaring an interim dividend of 10.3p, in line with our full year 2022 dividend guidance of c.31.0p. We are increasingly confident in Aviva's prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full year results.”
Strong first half results demonstrating benefits of diversified business model
- Solvency II operating own funds generation‡ up 46% to £538m (HY213: £369m)
- Operating profit‡,2 up 14% to £829m (HY213: £725m)
- General insurance gross written premiums (GWP) up 6%4 to £4,694m (HY213: £4,366m) with a strong 94.0% COR‡ (HY213: 91.6%)
- UK & Ireland Life sales5 up 4% to £16.8bn (HY21: £16.2bn) with VNB‡ up 13% to £300m (HY21: £265m)
- Solvency II return on equity‡ 10.9% (HY213,6: 7.4%), 12.3% (HY213,6: 8.8%) excluding Heritage
- Baseline controllable costs‡,7 down 2% to £1,342m (HY213: £1,372m) reflecting continued focus on efficiency
- Cash remittances‡ of £798m (HY213: £1,063m) in line with our expectation and medium term target
- IFRS loss after tax of £633m (HY21: £198m loss), largely reflects adverse market movements, with no impact on capital or cash remittances‡
- Interim dividend per share of 10.3p (HY21: 7.35p), up 40%, in line with our dividend guidance for 2022
Capital position is strong - new share buyback anticipated with full year 2022 results
- Solvency II shareholder cover ratio‡ of 234% (2021: 244%) and centre liquidity‡ (July 22) of £2.7bn (Feb 22: £6.6bn)
- Estimated Solvency II shareholder cover ratio pro forma1 for planned £1bn further debt reduction, pension scheme payment, and the acquisition of Succession Wealth of 213%
- Solvency II debt leverage ratio‡ of 30% (2021: 27%). We expect this to return below 30% as we complete additional deleveraging over time
- Given our strong capital position and prospects, we anticipate commencing a new share buyback programme with our 2022 full year results, subject to market conditions and regulatory approval
- Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to return surplus capital regularly and sustainably.
Watch our Group CEO, Amanda Blanc's half year results 2022 film
Read Amanda Blanc's 2022 half year results video transcript
Hi, Amanda. Thank you so much for having me here to talk about the results with you today.
How are you?
I'm good, thanks. Jenny, how are you?
I'm really well, thank you. So, are we making the progress that you'd hoped for at this stage of the year?
Well, yeah, I actually think that we are, Jenny. And that is largely due to the fantastic work that's done by you and all of your colleagues at Aviva. And I can't thank them enough for the hard work that they've put in in the first six months of this year.
So, I think if I reflect back over the period, we've made some really strong progress and there’s really good momentum in the business and I think you can see that in the growth, in insurance, the growth in the wealth business and the growth in the retirement business, which I think puts us in a really, really strong position.
We made some difficult decisions two years ago when we refocused the portfolio, but I think you're really starting to see the benefit of those decisions now coming through in the performance of the business.
And we're much better at managing the performance of the business as well. I think the performance culture in the business is really strong.
And so whilst I know we look out at a very difficult macro environment, Aviva is in a very, very good position to be able to work through that and I think we'll come out of that very strongly and I'm very confident about the outlook.
It'd be great to know what the half-year highlights are for you.
So, as I reflect on the first half, I think if we look at the sales performance of the business, that's strong. The operating profit of the business is also up and so that's a strong performance for us. And I put that down to the diversified nature of the business.
We are in a strong competitive position holding as we do number one positions in many of our product lines in the UK, Ireland and Canada.
And of course, the capital position of the business is strong. There are two things to talk about there.
Firstly, today we announced that the interim dividend is in line with the guidance that we gave back in March, and secondly, that we anticipate launching a share buyback with the full year results in March 2023.
And I think, Jenny, this shows the confidence that we have in the business.
So, you've talked about our four strategic priorities. Can you tell me a bit about how we're progressing in each of those?
Yes. So, let's talk about customer first.
So obviously, the customer's at the heart of what we do here at Aviva. We have over 18 and a half million customers across the UK, Ireland and Canada. That's a lot of customers to look after and we take that responsibility very seriously.
You will remember in February of this year there were three storms which happened very quickly in the UK, and we had 19,000 claims from those storms and obviously our customers really needed us at that point and we were there for them, and we were able to actually settle 10% of claims on the first day, which I think is real testament to our colleagues, but also a testament to One Aviva, because our Aviva Canada team were able to step in and help the UK team to make sure that we were able to do that. I was incredibly proud of that.
We've also made over 100 experience improvements to the MyAviva app and to Aviva Connect, which is the broker app. And we have over half a million new registrations on MyAviva in the last 12 months. So, people are engaging more with Aviva, which is obviously good. The reason that's important is if somebody is on and using the MyAviva app, then they're twice as likely to buy another Aviva product.
And the second priority area is growth and we've made great progress there also.
We've grown in insurance, we've grown in wealth and we've grown in retirement, as you can see from the results that we've published today.
So maybe just to sort of delve into a couple of those areas, because we can't just rely on our existing revenue streams, we have to look for new opportunities.
So, in commercial lines, we are expanding our regional underwriting footprint. We've made enhancements to our digital proposition. In Canada we've launched a multinational proposition for national businesses there. And in the wealth business, we've launched some new enhancements to the master trust proposition.
And last week I was really excited when we announced the Azur acquisition because that puts us as number one in the high-net-worth market in the UK.
That and the launch of Aviva Zero where we've now underwritten over 12,000 policies, I think these are all really good proof points which show that Aviva is growing in our traditional areas but also in new revenue areas.
So, our third priority area is efficiency and as you've seen today, our costs are down 2%. So that's really good news.
I think particularly when you look at this very high inflationary environment in which we're operating in, so any cost reduction is clearly going to be tough.
But the good news is that we are on target to meet the 750 million target that we set out in March this year.
We're reducing our IT platforms, simplifying them so that they're not as expensive. And we are also looking at our product set to simplify the number of products that we have. And of course, for us, top quartile efficiency remains our absolute priority across each of the business lines.
And the final area is, of course, around sustainability. And here we're making good progress. But in the last six months where we've really been focusing our attention is on the cost of living crisis. And I think there are three things that we should draw out here. Firstly, we've committed £15 million to support vulnerable businesses and vulnerable people in local communities as they struggle through what is, of course, an incredibly difficult time for them.
The second area is thinking about our customers and ensuring that we can provide them with affordable product propositions as they are making choices during this cost of living crisis.
And finally, our own colleagues, we made an announcement last week of a one-off payment to support 7,000 of our colleagues in this difficult time.
Thank you, Amanda. That's been some great insight.
What are the key messages that you'd like us to take away from today?
So, Jenny, I think to sum up, we would say we've had an excellent start to the year, but we are very conscious of how difficult it is out there. It's really tough.
But we are in a good position because we've got some leading franchises.
If you look at our position across the UK, Ireland and Canada we're in a strong position. And we have a formidable brand.
And the work that we did two years ago in setting the new strategy has put us in a great place to be able to capitalize on that.
So, we have a real confidence that we can deliver Aviva's promise.
So, I guess I just want to finish by saying thank you to all of our colleagues for all the hard work that they've put in for the last six months. I really, really appreciate that.
Thank you so much, Amanda. It's been brilliant talking through with you today.
And thank you. I've really enjoyed it.
‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section | 1 Solvency II pro forma cover ratio is the estimated Solvency II shareholder cover ratio at 30 June 2022 adjusted for £1bn further debt reduction, pension scheme payment and acquisition of Succession Wealth | 2 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 are included in the 'Other information' section | 3 Comparatives presented are from continuing operations | 4 Constant currency | 5 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section | 6 Following a review of the basis of preparation of Group Solvency II Return on Equity comparative for the six months ended 30 June 2021 has been restated. See section '4.ii – Solvency II return on capital/equity' for details | 7 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline
Rupert Taylor Rea
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Joel von Sternberg
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Presentation slides: 0700 hrs BST
Real time media conference call: 0800 hrs BST
Analyst conference call/audiocast: 0845 hrs BST
Notes to editors
- All figures have been retranslated at average exchange rates applying for the period, with the exception of the capital position which is translated at the closing rates on 30 June 2022. The average rates employed in this announcement are 1 euro = £0.84
(6 months to 30 June 2021: 1 euro = £0.87) and CAD$1 = £0.61 (6 months to 30 June 2021: CAD$1 = £0.58).
- Growth rates in the press release have been provided in sterling terms unless stated otherwise. The following supplement presents this information on both a sterling and constant currency basis. All percentages, including currency movements, are calculated on unrounded numbers so minor rounding differences may exist.
- Throughout this report we use a range of financial metrics to measure our performance and financial strength. These metrics include Alternative Performance Measures (APMs), which are non-GAAP measures that are not bound by the requirements of IFRS and Solvency II. A complete list and further guidance in respect of the APMs used by the Group can be found in the 'Other information' section.
- We are the UK's leading Insurance, Wealth & Retirement business and we operate in the UK, Ireland and Canada. We also have international investments in Singapore, China and India.
- We help our 18.5 million customers make the most out of life, plan for the future, and have the confidence that if things go wrong we’ll be there to put it right.
- We have been taking care of people for 325 years, in line with our purpose of being ‘with you today, for a better tomorrow’. In 2021, we paid £30.2 billion in claims and benefits to our customers.
- Aviva is a market leader in sustainability. In 2021, we announced our plan to become a Net Zero carbon emissions company by 2040, the first major insurance company in the world to do so. This plan means Net Zero carbon emissions from our investments by 2040; setting out a clear pathway to get there with a cut of 25% in the carbon intensity of our investments by 2025 and of 60% by 2030; and Net Zero carbon emissions from our own operations and supply chain by 2030. Find out more about our climate goals at www.aviva.com/climate-goals and our sustainability ambition and action at www.aviva.com/sustainability
- Aviva is a Living Wage and Living Hours employer and provides market-leading benefits for our people, including flexible working, paid carers leave and equal parental leave. Find out more at www.aviva.com/about-us/our-people
- As at 30 June 2022, total Group assets under management at Aviva Group are £353 billion and our Solvency II shareholder capital surplus is £10.3 billion. Our shares are listed on the London Stock Exchange and we are a member of the FTSE 100 index.
- For more details on what we do, our business and how we help our customers, visit www.aviva.com/about-us