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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Aviva Plc Subordinated Capital Securities Due 2041 | NYSE:AVV.CL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 25.49 | 0 | 01:00:00 |
|
|
|
6 months
2016
£bn
|
United Kingdom & Ireland Life
|
0.7
|
United Kingdom & Ireland General Insurance & Health
|
0.1
|
Europe
|
0.6
|
Canada
|
0.1
|
Asia and Other
|
(0.3)
|
Total
|
1.2
|
|
6 months
2016
£m
|
6 months
2015
£m
|
Sterlin
g
% change
|
Life business
|
1,226
|
1,021
|
20%
|
General insurance and health
|
334
|
422
|
(21)%
|
Fund management
|
49
|
33
|
48%
|
Other*
|
(284)
|
(306)
|
7%
|
Total
1
|
1,325
|
1,170
|
13%
|
|
|
|
|
Operating earnings per share
1
**
|
22.4p
|
22.1p
|
1%
|
|
6 months
2016
£m
|
6 months
2015
£m
|
Sterling
% change
|
Operating expenses
|
1,696
|
1,498
|
13%
|
Integration & restructuring costs
|
105
|
172
|
(39)%
|
Expense base
|
1,801
|
1,670
|
8%
|
|
|
|
|
Operating expense ratio
|
53.4%
|
52.8%
|
0.6pp
|
|
6 months
2016
|
6 months
2015
£m
|
Sterling
% change
|
Constant Currency
% change
2
|
United Kingdom & Ireland
|
280
|
260
|
8%
|
8%
|
France
|
103
|
98
|
6%
|
(1)%
|
Poland
3
|
27
|
30
|
(9)%
|
(11)%
|
Italy
|
71
|
39
|
82%
|
71%
|
Spain
|
16
|
13
|
29%
|
22%
|
Turkey
|
12
|
12
|
(6)%
|
-
|
Asia
|
61
|
76
|
(20)%
|
(23)%
|
Aviva Investors
|
13
|
6
|
106%
|
106%
|
Value of new business
|
583
|
534
|
9%
|
7%
|
|
6 months
2016
|
6 months
2015
|
Change
|
United Kingdom & Ireland
|
95.4%
|
93.2%
|
2.2pp
|
Europe
|
96.7%
|
94.3%
|
2.4pp
|
Canada
|
95.8%
|
91.9%
|
3.9pp
|
General insurance combined operating ratio
|
96.2%
|
93.1%
|
3.1pp
|
|
6 months
2016
£m
|
6 months
2015
£m
|
Sterling
% change |
IFRS profit after tax
1
|
201
|
545
|
(63)%
|
Basic earnings per share
1
|
2.5p
|
12.8p
|
(80)%
|
|
6 months
2016
|
6 months
2015
|
Sterling
%
change
|
Interim dividend per share
|
7.42p
|
6.75p
|
10%
|
|
30 June
2016
|
31 December
2015
|
Sterling
% change
|
Estimated Solvency II cover ratio
4,5
|
174%
|
180%
|
(6.0)pp
|
Estimated Solvency II surplus
5
|
£9.5bn
|
£9.7bn
|
(2)%
|
IFRS net asset value per share (restated)
6
|
412p
|
390p
|
6%
|
|
0B
Overview
|
Aviva is delivering consistency, stability and growth despite the challenging market backdrop.
Operating
profit increased 13% to £1,325 million
(HY15: £1,170 million)
despite higher weather claims in general insurance, lower bulk purchase annuity sales in UK Life and new government levies.
Our Solvency II coverage ratio of 174%
1,2
(FY15: 180%)
remains toward the upper end of our working range. We have proven our resilience during a HY16 period of investment market volatility and record low interest rates.
Solvency II operating capital generation was £1.2 billion, and business unit cash remittances were £752 million
(HY15: £495 million)
.
Interim dividend per share has increased 10% to 7.42p. We remain on track to deliver on the plan outlined at our recent investor day to increase the dividend payout ratio to 50% of operating EPS by the end of 2017, up from 42%
3
in 2015.
The steps we have taken to improve strength, resilience and operational consistency are reflected in our results. We remain confident in our ability to deliver on our key commitments to grow earnings, cash and dividends.
|
1B
Operating profit
|
Operating profit increased 13% to £1,325 million
(HY15: £1,170 million)
, driven by growth in UK Life, fund management and digital together with an additional 3 months contribution from Friends Life. This was partially offset by higher natural catastrophe and weather
claims in Canada and Europe, new Government levies and investment for future growth across a number of our businesses.
Life insurance operating profit increased 20% to £1,226 million
(HY15: £1,021 million)
. In the UK, growth was driven by Friends Life integration synergies together with positive momentum in protection, savings and individual annuities, partially offset by lower bulk
purchase annuity sales. In Europe, our life business delivered stable operating profits on a constant currency basis, as growing protection and with-profits income were offset by a new government levy in Poland and higher project expenses in France. Operating profits from our Asia life business increased 49% to £118 million
(HY15: £79 million)
primarily due to an additional three months contribution from Friends Provident International.
General insurance & health operating profit declined 17% to £334 million
(HY15: £400 million
4
)
. Underwriting profit of £165 million
(HY15: £222 million)
deteriorated
due to the £23 million Flood Re levy in the UK and a c.£55 million increase in weather and natural catastrophe claims following fires in Canada and floods in France. The investment return fell by £12 million to £171 million
(HY15: £183 million
4
)
due to lower bond yields. During the second half of 2016 we expect our general insurance operations to benefit from the RBCI acquisition in Canada
and distribution partnerships in the UK.
Fund management operating profit increased 48% to £49 million
(HY15: £33 million)
. The result benefitted from higher average AUM following the transfer of £45.1 billion of Friends Life assets to Aviva Investors in 2015, an additional transfer of £1.5 billion
of Friends Life assets in HY16 and positive external fund flows. Operating expenses increased reflecting our continued investment to secure long-term growth.
|
2B
Capital
|
At 30 June 2016, our Solvency II coverage ratio was 174%
1,2
(FY15: 180%)
. The resilience of our solvency position was proven during a period of heightened volatility in HY16. Despite bond yields at historic lows, a more
challenging outlook for corporate credit and asset price weakness following the Brexit vote, our Solvency II coverage ratio remains toward the top end of our working range.
We enter the current period of macro, political and market uncertainty with confidence in our capital position. We have limited sensitivity to interest rate risk, exposure to equity markets is modest and protected by hedging, we have a diverse and prudent bond portfolio and the commercial mortgage assets backing UK
annuities have an average LTV of 60%
(FY15: 61%)
.
Solvency II operating capital generation was £1.2 billion during HY16, incorporating £1.5 billion from our operating business units, net of £0.3 billion of debt, corporate centre and other costs.
|
|
3B
Friends Life
integration |
The integration of Friends Life remains on track. At HY16, we had secured run-rate synergies of £201 million, up from £168 million at the end of 2015. We reiterate our expectation that the £225 million integration synergy target will be delivered by the end of 2016, one year ahead of our original plan.
UK Life is now effectively operating as a single entity. Over the course of the integration, we have reduced our property footprint by 258,000 square feet and transferred £46.6 billion of assets to Aviva Investors.
|
4B
Life insurance:
Value of new business: MCEV basis (VNB) |
VNB increased 7%
5
to £583 million
(HY15: £534 million)
. In the UK, VNB growth was 6% with gains in protection, savings and individual annuities offset by weaker sales volumes in bulk purchase annuities and equity
release. VNB from our European life businesses increased 14%
5
driven by a strong result in Italy where we have followed through on our turnaround initiatives. In Asia, VNB declined 23%
5
primarily as a result of the discontinuation of the DBS bancassurance relationship in Singapore. We recently launched our Aviva Financial Advisors network in Singapore.
|
5B
General insurance
|
General insurance net written premiums increased 7%
5
to £3,991 million
(HY15: £3,678 million)
reflecting our new partnership agreement with Homeserve in the UK and improved competitiveness across the Group as
we benefit from operating expense reductions, our investment in digital and Solvency II diversification benefits. The Group combined operating ratio (COR) deteriorated by 3.1 percentage points to 96.2%
(HY15: 93.1%)
. This reflected the impact of the Flood Re levy in the UK (0.6%), an increase in natural catastrophe claims mainly from fires in Canada and floods in France (1.5%), a reduction in prior year reserve releases (0.5%) and commission strain from our new distribution
partnership in the UK (1.0%).
|
6B
Fund management
|
Growth drivers from our fund management business are pointing in the right direction. External fund net flows have turned positive (£0.6 billion) and, together with an additional transfer of £1.5 billion of Friends Life assets and favourable market movements, assets under management (AUM) have grown 10% to
£319 billion
(FY15: £290 billion)
. The AIMS range of funds continues to make excellent progress, with AUM more than doubling during HY16 to £6.2 billion
(FY15: £3 billion)
. Our UK Life platform also continues to increase in scale, with AUM increasing 23% during HY16 to £10.3 billion
(FY15: £8.4 billion)
.
|
7B
Digital
|
We continue to make strong progress with our digital transformation. Registrations on MyAviva, a key leading indicator, have surpassed 3 million
(FY15: 2.3 million)
. We are investing significantly in our digital and direct capabilities to make dealing with Aviva simple and convenient.
In the UK, we will have all of our customer information on a single database by the end of 2016. This will enable customers to see all their policies in one place, and deal with us whenever and however they choose.
|
8B
Expenses
|
Operating expenses increased 13% to £1,696 million
(HY15: £1,498 million)
. Growth was primarily due to an additional quarter from Friends Life, new government levies and foreign exchange. Excluding these factors, operating expenses were broadly flat, with realisation
of Friends Life synergies in UK Life and savings in UK General Insurance offset by investment for growth in our acorn businesses (Aviva Investors, Asia and Digital) and higher project related expenses in France. There remains more to do in this area.
|
9B
Outlook
|
We are committed to maintaining a strong and resilient balance sheet, a sustainable dividend and growing operating earnings. While uncertainty in the economic outlook may persist in the short term, we have not observed major disruption to our operating activities and we continue to target mid-single digit growth in
operating profit over the medium term. We will maintain our self-help agenda, focusing on improving expense efficiency and reallocating capital to businesses with the highest returns and growth potential.
|
|
|
13B
Business unit performance
|
In UK and Ireland life, operating profit increased 25% to £711 million
(HY15: £569 million)
. In addition to the incremental impact of an extra quarter from Friends Life, operating profit grew due to the realisation of integration synergies, improved asset mix on annuities
and positive momentum in protection and long-term savings. This was partially offset by the 27% reduction in annuity sales, with higher individual annuity volumes overshadowed by a decline in bulk purchase annuity sales. Long-term savings assets under management increased to £95 billion
(FY15: £88 billion)
on the back of £2.0 billion of net flows. Within this, platform assets under administration continue to grow strongly, up 23% during HY16 to £10.3
billion
(FY15: £8.4 billion)
.
Operating profit from our UK and Ireland general insurance and health business declined 3% to £231 million
(HY15: £239 million)
. The underwriting result was stable in UKGI at £115 million
(HY15: £115 million)
with increased
costs associated with the Flood Re levy (£23 million) and higher weather claims offset by improved prior year development and our continued focus on portfolio rebalancing and expense management.
The longer term investment return for UK & Ireland general insurance fell to £93 million
(HY15: £121 million)
. Excluding the impact of the reduction in the internal loan, investment income in the UK & Ireland general insurance fell
£6 million to £93 million
(HY15: £99 million)
.
Our European insurance businesses delivered operating profit of £430 million
(HY15: £431 million)
. Life operating profit of £395 million
(HY15: £372 million)
was stable in constant currency terms with growth in protection
and with-profits products offset by lower unit-linked asset management charges, a new regulatory asset levy in Poland and higher expenses as we invested in a number of projects in France. General insurance operating profit fell to £35 million
(HY15: £59 million)
mainly reflecting adverse weather experience in France which experienced severe flooding in 2Q16.
In Canada, general insurance operating profit fell to £88 million
(HY15: £131 million)
. Underwriting profit declined to £42 million
(HY15: £82 million)
with forest fires in Alberta and lower levels of prior year development
partially offset by improvement in claims frequency. The longer term investment return fell to £47 million
(HY15: £51 million)
due to lower investment yields.
Fund management operating profit increased 48% to £49 million
(HY15: £33 million)
. This was driven by the increase in average AUM following the onboarding of £45.1 billion of Friends Life assets in 2015 and additional £1.5 billion in HY16. The result also
benefitted from improved net fund flows and assets under management. The AIMS range of funds continues to make strong progress, more than doubling assets under management during HY16 to £6.2 billion
(FY15: £3 billion)
.
Operating profit from our Asian insurance businesses increased to £112 million
(HY15: £75 million)
reflecting a full six month contribution from Friends Provident International (FPI). Excluding FPI, results were stable despite the discontinuation of the DBS relationship
in Singapore.
|
|
Investor contacts
|
Media contacts
|
Timings
|
Chris Esson
+44 (0)20 7662 8115
David Elliot
+44 (0)20 7662 8048 |
Nigel Prideaux
+44 (0)20 7662 0215
Andrew Reid
+44 (0)20 7662 3131
Sarah Swailes
+44 (0)20 7662 6700 |
Presentation slides: 07:00 hrs BST
www.aviva.com
Real time media conference call: 07:30 hrs BST
Analyst presentation: 08:30 hrs BST
Live webcast: 08:30 hrs BST
http://www.avivawebcast.com/interim2016/ |
|
|
|
AVIVA PLC
|
|
|
|
By: /s/ K.A. Cooper
|
|
|
|
K.A. Cooper
|
|
Group Company Secretary
|
1 Year Aviva Plc Chart |
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