Aviva – Price Hikes Expected To Continue Over 2023, Buyback Announced

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Aviva plc (LON:AV) reported full-year underlying operating profit of £2.2bn, up 35%. UK & Ireland Life drove performance, where the retirement division benefited from improved margins and earnings growth. Total life sales fell 7%, reflecting lower bulk annuity volumes. The value of new business rose 15% to £767m due to higher margins.

In general insurance, gross written premiums rose 8% to £9.7bn. An increase in claims and the cost to serve them pushed the combined operating ratio up from 92.9% to 94.6% (an increase means expenses rose faster than premiums).

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Cash remittances (cash flowing from operating businesses to the group) rose 11% to £1.8bn. Solvency II shareholder cover, a key measure of balance sheet health, sits at 212% and remains well ahead of target.

The board proposed a final dividend of 20.70p (2021: 14.70p). That takes the total for the year to 31.00p (2021: 22.05p), in line with guidance. A £300m buyback will start immediately.

The shares rose 3.3% in early trading.


Aviva's Earnings

Matt Britzman, equity analyst at Hargreaves Lansdown

“Aviva’s the latest insurer to push through hefty hikes for its general insurance premiums, a trend expected to continue over 2023 as the cost to service claims has risen in this inflationary environment.

The tricky backdrop pushed underwriting profitability down a touch, but the diversified model showed its strengths as performance on the whole was resilient. The life insurance business should be able to benefit from the growing number of pension schemes that now find themselves in the position of being able to de-risk - we’d expect to see an uptick in bulk purchase annuity business over the coming year as a result.

For investors, news of a £300m buyback was welcomed with open arms – the capital position remains strong, and the potential for further buybacks alongside a 7.8% forward yield looks attractive.”