# Aviva achieve strong first half with profitable growth momentum

- Link: https://www.directorstalkinterviews.com/aviva-achieve-strong-first-half-with-profitable-growth-momentum/4121125516
- Published: 2023-08-16T07:39:50+01:00
- Author: Amilia Stone

**[Aviva plc](https://www.directorstalkinterviews.com/ftse-company/aviva-plc/av.l)**(
LON:AV) has announced its 2023 interim results announcement.

| Operating profit^(‡,1) |  | Solvency II OFG^(‡) |  | General Insurance undiscounted COR^(‡) |   | Solvency II shareholder cover ratio^(‡) |   | 2023 interim dividend | 
| £715m |   | £648m |   | 94.8% |   | 202% |   | 11.1p | 
| +8% |   | +26% |   | +1pp |   | -10pp |   | +8% | 
| HY22^(2): £661m |   | HY22^(3): £514m |   | HY22^(2): 93.8% |   | FY22: 212% |   | HY22: 10.3p |

> **Amanda Blanc, Group Chief Executive Officer, said:**
> _“Aviva is delivering consistently strong and profitable growth. In the first 
> half of 2023 we grew sales, operating profit and dividends for our shareholders.
> Our excellent trading momentum is a direct result of the decisions we have taken
> over the last three years to re-focus Aviva. Today, Aviva has leading positions
> in growing markets, providing strong resilience in the current economic climate._
> _“In the UK & Ireland, general insurance premiums were up 13%, with healthy sales
> in both our commercial and personal lines businesses, where our Aviva Zero product
> has now attracted 250,000 new policies since launch. In Wealth, our market-leading
> Workplace business grew net flows by 25%. We continue to see very strong demand
> for private health insurance, with sales increasing by_ 58% _as we expanded our
> services to corporate and individual customers. Our excellent Canadian general
> insurance business is also growing well, with sales 12% higher as a result of 
> a strong performance in commercial lines, and the continued success of our local
> banking partnership._
> _“Aviva’s cash and capital position is robust and, in line with our guidance, 
> we have increased the interim dividend by 8% to 11.1p, and estimate full year 
> 2023 operating profit growth of 5% to 7%. We expect to make further strong progress
> with our clear strategy, growth opportunities in all of our markets, and the £
> 1 billion investment well underway to accelerate our future performance._
> _“Aviva’s performance and prospects have been transformed from just a few years
> ago. Today’s Aviva is about delivery and momentum, and these results show that
> Aviva is consistently meeting its promises. We expect to exceed our financial 
> targets and we are making progress each quarter, as we said we would. I remain
> confident and excited that there is so much more Aviva can and will achieve.”_

Strong first half results with continued profitable growth momentum

• Group operating profit^(‡,1) up 8% to £715m (HY22^(2): £661m). Operating EPS^(‡,
4) up 10% to 19.9p (HY22^(2,4): 18.1p).

• Solvency II operating own funds generation (OFG)^(‡) up 26% to £648m (HY22^(3):
£514m). On track to exceed our target of £1.5bn OFG^(‡) per annum by 2024. Solvency
II operating capital generation (OCG)^(‡) up 9% to £580m (HY22^(3): £532m).

• Solvency II return on equity 10.8% (HY22: 6.7%).

• General Insurance gross written premiums (GWP)^(‡) up 12% to £5,274m (HY22: £4,694m).
Undiscounted COR^(‡) of 94.8% (HY22^(2): 93.8%) and discounted COR of 91.3% (HY22:
92.8%). Operating profit^(‡,1) up 29% to £470m (HY22^(2): £364m).

• Insurance, Wealth & Retirement (IWR) VNB^(‡) up 7% to £319m (HY22^(3): £297m),
and operating value added^(‡) up 32% to £640m (HY22: £486m).

• Baseline controllable costs^(‡,5) flat at £1,340m (HY22: £1,342m), absorbing c.
7% of inflation. With our continued focus on cost efficiency we now expect to deliver
our 2024 target of £750m gross cost reduction a year early.

• Cash remittances^(‡) of £825m were up 3% (HY22: £798m). On track to exceed our
target of >£5.4bn cumulative cash remittances^(‡) 2022-24.

• IFRS profit for the period^(6) of £377m (HY22^(2,10): £198m loss).

• Interim dividend per share up 8% to 11.1p (HY22: 10.3p); £300m buyback executed
in first half.

Capital position is strong and asset portfolio well positioned

• Estimated Solvency II shareholder cover ratio^(‡) of 202% (FY22 :212%) and centre
liquidity^(‡) (July 23) of £1.6bn (Feb 23: £2.2bn).

• Solvency II debt leverage ratio^(‡) of 30% pro forma for planned debt reduction(
FY22: 30%).

• Aviva’s high quality shareholder asset portfolio of £78.5bn (FY22: £78.4bn) continues
to perform well and is defensively positioned.

Continued positive trading performance

**•** UK&I General Insurance GWP^(‡) up 13% to £3,219m (HY22: £2,840m) and undiscounted
COR^(‡) of 96.3% (HY22^(2): 95.3%). UK personal lines GWP^(‡) grew 16% driven by
strong rate increases as we continue to manage the inflationary environment, as 
well as new product propositions. UK commercial lines GWP^(‡) grew 11% due to rate
increases and new business growth.

**•** Canada General Insurance GWP^(‡) up 12% in constant currency to £2,055m (HY22:
£1,854m) and undiscounted COR^(‡) of 92.8%
(HY22^(2): 91.8%). We saw excellent growth
in constant currency of 17% in commercial lines and 8% in personal lines driven 
by rate increases and strong new business growth.

**•** Protection and Health sales^(7) were up 23% with strong growth in Health and
Individual Protection. VNB^(‡) was up 18% to £118m
(HY22^(3): £100m) driven by higher
volumes in Health together with beneficial assumption changes made in H2 2022.

**•** Wealth continued to show resilience in challenging market conditions with 
net flows^(‡) of £4.3bn (HY22: £5.0bn). Strong growth in Workplace net flows^(‡)
was more than offset by lower net flows^(‡) in Platform.

**•** Retirement sales^(7) were up 17% to £3,223m (HY22: £2,762m) with strong growth
in Bulk Purchase Annuities (BPAs) and Individual Annuities. VNB^(‡) was up 2% to
£74m (HY22^(3): £72m). The outlook for BPA volumes remains positive with a strong
pipeline for the second half.

**•** Aviva Investors external net flows^(‡) remained positive at £0.2bn (HY22: 
£0.2bn) and reflect the tough market backdrop.

| Group financial performance |   | Cash and liquidity | 
|   |   |   |   |   |   |   |   |   | 
| General Insurance GWP^(‡) |  | Insurance, Wealth & Retirement VNB^(‡) |   | IFRS profit for the period^(6) |   | Cash remittances^(‡) |   | Centre liquidity^(‡) | 
| £5,274m |   | £319m |   | £377m |   | £825m |   | £1.6bn | 
| +12% |   | +7% |   | +290% |   | +3% |   | (28)% | 
| HY22: £4,694m |   | HY22^(3): £297m |   | HY22^(2,10): £198m loss |   | HY22: £798m |   | Feb 23: £2.2bn |

Confident outlook

Our positive momentum continued in the first half of 2023 with a strong set of results,
and our diversified business model positions us well to navigate the current macroeconomic
environment. This reinforces our confidence in the prospects, financial targets 
and outlook for the Group.

In General Insurance we remain focused on pricing appropriately for the ongoing 
inflationary environment. Overall, we expect the rating environment to remain favourable
across both commercial and personal lines. We expect the underlying COR^(‡) to benefit
from the earn through of rating actions already taken and still to come in the second
half. However, we wouldn’t expect the favourable weather and PYD experience of the
first half to necessarily repeat.

In Insurance, Wealth & Retirement we expect to see continued growth. We anticipate
continued momentum in BPAs in the second half as a growing number of pension schemes
look to de-risk. In Wealth, our Workplace business will continue to offer strong
growth opportunities while market conditions present a near-term challenge in Adviser
Platform. We continue to expect strong demand for Protection and Health products.

We expect full year 2023 Group operating profit^(‡,1) to grow between 5% to 7% from
£1,350m in 2022.

We are on track to exceed our Solvency II operating own funds generation^(‡) target
of £1.5bn per annum by 2024 and our cash remittance^(‡) target of >£5.4bn cumulative(
2022-24). We expect to deliver our target of £750m gross cost reduction by 2024 
one year early.

We remain committed to delivering for our shareholders. Consistent with previous
guidance, we expect to pay a dividend of c.£915m or c.33.4p for 2023, with low-to-
mid single digit growth in the cash cost of the dividend thereafter.

Under our capital framework, which remains unchanged, surplus capital is available
for reinvestment in the business, bolt-on M&A and/or additional returns to shareholders.
We anticipate further regular and sustainable capital returns in the future.

Footnotes included within the news release

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

R    Symbol denotes key performance indicators used as a base to determine or modify
remuneration.

1.   Reference to operating profit represents Group adjusted operating profit which
is a non-GAAP APM and is not bound by the requirements of IFRS. Further details 
of this measure are included in the ‘Other information’ section.

2.   The 2022 comparative results, which were previously prepared under IFRS 4, 
have been restated following the adoption of IFRS 17 from 1 January 2023, as described
in note B2(a).

3.   The 2022 comparatives have been restated from those previously published for
methodology changes described in the ‘Other information’ section.

4.   Operating earnings per share is derived from the Group adjusted operating profit
APM. Further details of this measure are included in the ‘Other information’ section.
The 2022 comparatives have been calculated using the weighted average number of 
shares in issue as if the share consolidation at taken place on 1 January 2022.

5.   Baseline controllable costs exclude strategic investment, cost reduction implementation,
IFRS 17 and other costs not included in the 2018 cost savings target baseline.

6.   IFRS profit/(loss) for the period represents IFRS profit/(loss) after tax.

7.   Sales for Insurance (Protection & Health) refers to Annual Premium Equivalent(
APE). Sales for Retirement (Annuities and Equity Release) refers to Present Value
of New Business Premiums (PVNBP). Sales or premiums for General insurance refer 
to gross written premiums (GWP). APE, PVNBP and GWP are APMs and further information
can be found in the ‘Other information’ section.

8.   IFRS Shareholders’ equity is equity attributable to shareholders of Aviva plc,
less preference capital.

9.   Adjusted IFRS Shareholders’ equity is IFRS shareholders’ equity plus CSM, net
of tax.

10. Since the publication of initial 2022 results under IFRS 17 and IFRS 9 on 19
July 2023, IFRS loss for the period, IFRS Shareholders’ equity and Adjusted Shareholders’
equity for half year 2022 has been adjusted for a favourable impact of £200 million(
net of tax), in preparation of the Half Year Report 2023. See note 2.i Profit and
earnings per share.

11. Rounding differences apply.

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