Aviva (AV.) chief executive Mark Wilson says having a strong balance sheet is "unchartered territory" for the life assurer. The group has reported a Solvency II coverage ratio, of capital over the required regulatory minimum, equivalent to 180 per cent. It also managed to reduce its combined ratio of claims to income by 1.1 percentage points to 94.6 per cent - its best reading in nine years.
The integration of April acquisition Friends Life is running a year ahead of schedule, with management already achieving £168m of the £225m run-rate synergies it targeted for the end of 2016. Management expects the addition of Friends will push up the cash contribution of its UK life business to group coffers by £1bn over the next three years. Indeed, cash remitted by the business grew by more than half to £667m during 2015. Excluding Friends Life, operating profit for this segment increased by 2 per cent to £1.05bn, largely due to £259m in expense reserve releases following cost-cutting exercises.
Friends generated £91m in new business, largely as a result of increased demand for its protection products, while sales from annuities continued to decline. Excluding this contribution, new UK business was up 10 per cent to £518m, reflecting higher margins on pension and health business. Improved margins on its bulk annuity deals also helped.
However, trading in Europe was mixed. Adverse currency movements wiped £101m off operating profits across life, general insurance and health, with operating profits down from £995m to £880m. The disposal of its Eurovita and CxG businesses, and a one-off benefit during the prior year in Poland, took their toll. Meanwhile in Asia the acquisition of FPI pushed up operating profits for its life business from £87m to £244m.
Analysts at Shore Capital expect adjusted EPS of 52p in 2016, falling to 57.5p in 2017.
AVIVA (AV.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 480.2p | MARKET VALUE: | £19.4bn | |
| TOUCH: | 480-480.2p | 12-MONTH HIGH: | 575p | LOW: 400p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 394p* | EMBEDDED VALUE: | 515p | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 26.3 | 0.55 | 11.1 | 26 |
| 2012 | 22.7 | 0.40 | -11.2 | 19 |
| 2013 | 22.0 | 1.47 | 22.0 | 15 |
| 2014 | 21.7 | 2.66 | 50.4 | 18.1 |
| 2015 | 21.9 | 1.17 | 22.6 | 20.8 |
| % change | +1 | -56 | -55 | +15 |
Ex-div: 7 Apr Payment: 17 May *Includes intangible assets of £7.7bn, or 190p a share | ||||
