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Aviva Plc FY18 results a mixed bag

13 March 2019

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by Anchor

UK insurance provider, Aviva Plc reported FY18 results on Thursday (7 March), which showed that profit before tax rose to GBP2.13bn from GBP2bn in FY17, while Group operating profit increased by 2% YoY to GBP3.12bn from FY17’s GBP3.07bn. This was due in part to an increase in its life business (+5% YoY at c. GBP3bn). Aviva’s gross written premiums advanced to GBP28.66bn from GBP27.61bn posted in FY17. Meanwhile, diluted EPS stood at GBp37.80 (+9.3% YoY) vs GBp34.60 recorded in FY17.

Aviva’s Solvency II ratio increased to 204%, compared to 2017’s 198%. In terms of segments, the aforementioned life insurance business grew operating profit 5% YoY, more than making up for an 11% YoY decline in Aviva’s much-smaller fund management segment. Here, operating profit fell from GBP164mn in FY17 to GBP146mn last year “as it invested in longer-term equities and assets and absorbed Mifid II costs.”

In general, UK insurance recorded an operating profit rise from GBP447mn to GBP453mn in FY18, while in Canada they were even at GBP46mn. In Europe, operating profit fell slightly from GBP223mn to GBP220mn and in Asia and other markets, Aviva slipped from FY17’s GBP8mn loss to a GBP16mn loss in FY18. Aviva’s general insurance combined operating ratio was basically flat at 93.8% in the UK vs 93.9% in FY17. The same was true in Canada at 102.4% vs 102.2% in FY17, while Europe stood at 93.4% (FY17: 93.3%) and in Asia and other markets it stood at 122.1% (FY17: 123.2%).

The insurer proposed a full-year dividend of GBp30/share (+9% YoY) compared with GBp27.4/ share posted in FY17 – the fifth year in a row it has increased.

New Group CEO, Maurice Tulloch, who was appointed only recently, said the results showed the insurer’s “strong foundations” but spoke about “re-energising” the business. “We have strong foundations but we are only scratching the surface of our full potential,” he said. “There’s a huge opportunity here. At the heart of it, it’s all about insurance fundamentals, delivering excellent customer experience, tackling complexity and injecting a different pace of change into Aviva. And that will be just the start. I am determined to re-energise Aviva and deliver long-term growth for our shareholders.”

Looking ahead, the company warned that “our near-term outlook entering 2019 is more muted than our outlook a year ago”. In particular, the insurer said it sees “potential headwinds from weak investment markets”, although it did also highlight its “robust and resilient” balance sheet.

WoW the share price is down c.3%

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