REG - Aviva PLC - Aviva plc Q1 2023 Trading Update

AvivaAnnouncement

24/05/2023 07:00

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RNS Number : 4186A  Aviva PLC  24 May 2023

Page 1

 

 News Release
 24 May 2023

Aviva plc Q1 2023 Trading Update

Another quarter of positive delivery. Continued growth momentum across the
Group

Strong and resilient capital position. Share buyback nearing completion

On track to meet or exceed Group targets

 

 General Insurance      Protection & Health          Workplace           Retirement         Solvency II
 £2.4bn                 £102m                        £1.8bn              £1.5bn             196%
 GWP +11%(1)            Sales(2) +11%                Net flows +25%      Sales(2) +17%      Shareholder cover ratio
 Q122: £2.1bn           Q122: £92m                   Q122: £1.4bn        Q122: £1.3bn       FY 22: 212 %

 

Amanda Blanc, Group Chief Executive Officer, said:

"We have delivered an encouraging start to 2023 and continue to build clear
trading momentum. New business volumes are good, despite persistent economic
uncertainty, and we delivered another quarter of strong growth across our
diversified business.

"Private healthcare sales grew by 25%, as more individuals and companies are
attracted to the benefits of private cover. The bulk purchase annuity market
is very active due to the higher rate environment, and we have now completed
over £2 billion of deals so far this year. Our workplace pensions business is
also very buoyant, with flows up 25% due to 134 new scheme wins and higher
wages feeding through to higher pension contributions.

"Our general insurance business goes from strength to strength. We have grown
premiums 11% and maintained attractive levels of profitability, thanks to our
disciplined management of inflationary pressures and our balanced mix across
personal and commercial lines, and across the UK, Ireland and Canada.

"Aviva is uniquely placed to successfully navigate the prevailing economic
environment, and we continue to support our customers through this challenging
time. We have market leading positions in high growth areas. We are
financially strong with an attractive and growing dividend, and we are
confident in the prospects for Aviva."

 

Continued growth

 

•    Insurance (Protection & Health) sales(2), were up 11% with
strong growth in Health and Individual Protection.

•    Wealth net flows of £2.3bn represented 6%(3) of opening assets
under management, but were 15% lower than Q1 2022 due to the impact of the
challenging market volatility on Platform. Workplace net flows were up 25% to
£1.8bn (Q122: £1.4bn).

•    Retirement (Annuities & Equity Release) sales(2), were up 17%
driven by strong BPA and Individual Annuity performance. YTD BPA volumes
including preferred provider schemes are £2.4bn.

•    General Insurance gross written premiums (GWP) up 11% at constant
currency to £2.4bn. UK&I GWP up 13% to £1.5bn and Canadian GWP up 9% at
constant currency to £0.8bn. Rate accounted for approximately half of the
growth across UK & Ireland and Canada.

•    Strong Group combined operating ratio (COR) of 95.4% (Q122: 95.7%),
presented on an undiscounted IFRS 17 basis(4). This performance reflects our
pricing strength, our continued disciplined response to inflation, our risk
selection and the diversification within our portfolio.

 

Footnotes for this page are shown on page 2

 

 

Page 2

 

Continued progress on reducing costs

 

•    Baseline controllable costs(5) down 1% to £675m reflecting our
ongoing focus on efficiency as we make further operational savings through
cost initiatives and simplification of the business.

•    On track to deliver savings target of £750m (gross of inflation) by
2024 relative to our 2018 baseline. We target top quartile efficiency
thereafter across all our businesses.

 

Strong solvency and liquidity positions

 

•    Estimated Solvency II shareholder cover ratio of 196% (FY22: 212%)
was 16pp lower as operating capital generated in the quarter was more than
offset by the impacts of the 2022 £576m final dividend, £300m share buyback,
£75m pension scheme payment, and market movements.

•    Solvency II cover ratio pro forma for redemption of the Tier 2 notes
announced on 16 May is 193% (FY22: 196%).

•    Solvency II debt leverage ratio of 33% (FY22: 31%).

•    £300m share buyback nearing completion.

•    The 2022 final dividend payment of £576m was paid to shareholders
on 18 May.

•    Centre liquidity (Apr 23) remains strong at £2.1bn (Feb 23:
£2.2bn), with the reduction since February mainly driven by the share
buyback.

 

Shareholder asset portfolio remains well positioned

 

•    Aviva's high quality shareholder asset portfolio of £79.6bn at 31st
March continues to perform well and is defensively positioned to withstand
periods of volatility.

•    The corporate bond portfolio (£20.8bn) continues to perform well
with <£20m of assets downgraded to a lower rating letter, which was more
than offset by c.£280m upgraded to a higher rating letter during the first
three months of 2023, and no corporate bonds downgraded below investment
grade.

•    Our commercial mortgage portfolio of £5.8bn comprises largely
long-duration fixed rate contracts with low average loan-to-value (LTV) ratios
of 50% using the fair value of the loan, or 54% using the nominal value.

•    Our securitised mortgage loans and equity release portfolio of
£10.0bn is mostly internally securitised with low average LTVs of 26%.

•    Further detail is provided on page 6, and also in the supplementary
slides available on the Group's website.

 

Outlook

 

•    Aviva is uniquely placed to successfully navigate the prevailing
economic environment, with its strong leadership positions and diversified
product set. This, together with our Q1 performance, reinforces our confidence
in the prospects, delivery of financial targets and outlook for the Group.

•    We are on track to meet our cost reduction target (£750m by 2024)
and to beat our own funds generation (£1.5bn p.a. by 2024) and cash
remittance (>£5.4bn 2022-24) targets.

•    We continue to see opportunities for further investment in the
growth of our business, but we will remain disciplined in our approach to
capital deployment.

•    Our dividend guidance of c.£915m for 2023 with low-to-mid
single-digit growth in the cash cost of the dividend thereafter, together with
our intention for further regular and sustainable capital returns to
shareholders, remain unchanged.

 

 

 

 

1. Constant Currency  ¦  2. Sales for Insurance (Protection & Health)
refers to Annual Premium Equivalent (APE). Sales for Retirement (Annuities
& Equity Release) refers to Present Value of New Business Premiums
(PVNBP). APE and PVNBP are alternative performance measures (APMs). Further
information on APMs can be found in the 'Other information' section of the
Results Announcement 2022.  ¦  3. Annualised  ¦  4. Comparatives have
been restated for changes in COR following adoption of IFRS 17. Refer to page
6 for further information about changes related to the adoption of IFRS 17.
¦  5. Baseline controllable costs exclude strategic investment, cost
reduction implementation, IFRS 17 and other costs not included in the 2018
baseline.

 

Click on, or paste the following link into your web browser, to view the
complete Aviva plc Q1 2023 Trading Update PDF document:

http://www.rns-pdf.londonstockexchange.com/rns/4186A_1-2023-5-23.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4186A_1-2023-5-23.pdf)

 

The document is available to view on the Company's website at
https://www.aviva.com/investors/results/ and a copy has been submitted to the
National Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

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