Aviva – Identity Crisis Over?
Aviva plc (LON:AV) reported underlying operating profits of £725m in the first quarter, up 17% year-on-year. That reflects very good results in the general insurance business, both in the UK and Canada, as the group experienced favourable weather and some reduction in claims in motor as customers drove less. That was supported by good cost control in the corporate centre.
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Alongside results the group announced plans to return £4bn to shareholders by the end of first half of 2022 – starting immediately with a £750m share buyback and an interim dividend of 7.35p per share, up 5% year-on-year.
Aviva shares rose 2.8% in early trading.
Aviva Seems To Have Settled Down
Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:
“Having spent the last few years suffering a bit of an identity crisis, Aviva seems to have finally settled itself down to life as a fairly boring, but highly cash generative insurance business. Investors are enjoying the fruits of the transition, with bumper shareholder returns.
The group does have some growth options – most notably sizeable workplace pension and advisor businesses which are scooping up assets, some of which are making their way through to the long unloved Aviva Investors – but the vast majority of the business is more ‘steady-eddie’ than ‘eddie the eagle’. General insurance is a difficult market to differentiate yourself in, and bulk annuities aside, the market for guaranteed retirement income is not what it once was.
A good illustration of the group’s new found conservatism is the work done to patch up the balance sheet – cutting debt and leaving management with a sizeable capital surplus. Some of that is earmarked for shareholder returns, but aggressive overseas expansion seems to be off the cards.
Still Aviva in its current format seems to have a complementary business model, products that resonate with clients and a sense of focus it’s lacked in some previous guises. That should serve it well.”
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