Aviva still 'on track' despite Beast from the East eating into profits
PUBLISHED: 12:31 02 August 2018 | UPDATED: 12:31 02 August 2018
The Beast from the East took a bite out of insurer Aviva's profits as bad weather, divestments and poor performance from its Canadian motor insurance division weighed on results.
The company said operating profits declined slightly to £1.44bn over the first six months of the year, from £1.47bn a year earlier.
It was knocked in part by a significant increase in weather-related claims, including from its UK division, which suffered the effects of the Beast from the East in early spring.
Aviva was also impacted by “challenging market conditions” in the Canadian motor insurance market, where it continues to see heightened claims activity, as well as business divestments in the first half of the year.
But Aviva insisted it was still delivering “attractive growth from its major businesses” and subsequently increased its dividend by 10% - news which will be well received by its 560,000 retail shareholders. Aviva employs around 5,000 people at its Norwich offices.
Chief executive Mark Wilson said: “The 10% increase in the interim dividend is our fourth consecutive half-year of double-digit dividend growth and further proof of Aviva’s progress.
“During these choppy market conditions, it is reassuring that Aviva’s results are consistent, dependable and growing.
“Aviva remains financially strong with a capital surplus of £11bn. In the first half of 2018, we started a £600m share buy-back and paid off 500m euros of expensive debt.
“We remain on track to achieve our financial targets.”
Aviva shares were down 1.6% in midday trading.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said the results signalled “steady growth”.
“Tough conditions in the Canadian motor insurance business, the big freeze earlier in the year and exits from Spain and Taiwan mean the headline numbers don’t look great at Aviva.
“But underneath that noise it’s another half of steady growth from a business which has become pleasantly dependable. Capital generation is steady, new business in life insurance is ticking along nicely and costs have generally been kept under control.”
He said Aviva was also making progress with digital customers.
“Aviva seems to have been able to increase cross-selling to digital customers and given its huge legacy customer base, that could support relatively cheap growth for years to come.”