Aviva plc Q1 2022 Trading Update

May 18, 2022 (London, UK) - To read this update in full, click here. 

Continued progress and trading momentum across Life and General Insurance

Strong and resilient capital position, with capital return to be completed by end of May

On track to meet upgraded targets outlined at FY 2021

Amanda Blanc, Group Chief Executive Officer, said:

“First quarter trading was positive, and our performance shows the clear benefit of Aviva’s business mix across insurance, wealth and retirement. We delivered healthy sales numbers across all our major business lines, with UK customer numbers up by over 100,000 in the last year to 15.4m, increasing our confidence that we can transform Aviva’s performance and grow.

“UK & Ireland Life sales are up 2%, and net flows into our Wealth business remained strong at £2.7 billion, despite market volatility. Our Advisor platform is now the number one in the market for net flows, and in Annuities and Equity Release we saw increased bulk purchase annuities volumes, written with good returns.

“We have also continued our momentum in General Insurance where we had our best first quarter sales in a decade, as more people were attracted to the strength of the Aviva brand and the quality of our products. Total General Insurance sales were up 5% to over £2 billion, driven by strong sales in commercial lines in both the UK and Canada.

“We remain very well positioned to benefit from the long term growth trends in our markets, and to meet our upgraded financial targets. This is underpinned by our strong capital position which benefits from rising interest rates. Our financial strength and market leadership give us confidence that we can successfully navigate the current uncertain economic conditions.”

Continued growth in Life sales² and record Q1 General Insurance premiums

• UK&I Life sales of £8.4bn, up 2% (Q121: £8.3bn) with growth in Annuities & Equity Release and Protection & Health partly offset by Wealth.
• Total BPA sales in Q1 were £843m, up 29%, with a healthy pipeline weighted towards the second half of the year.
• UK&I Life value of new business (VNB) £144m, up 31%, and VNB margin of 1.7% (Q121: 1.3%), driven by Annuities & Equity Release VNB of £31m (Q121: £nil).
• General Insurance gross written premiums (GWP) up 5% in Q1 to £2.1bn, another record. UK&I GI GWP up 3% to £1,347m and Canadian GI GWP up 10% to £753mGI combined ratio (COR) of 96.4% (Q121: 90.6%) reflecting £70m cost for the February storms in UK GI and more normal motor claims frequency.

Continued focus on cost efficiency

• Controllable costs down 3% (excluding cost reduction implementation, strategic investment and IFRS 17 costs) to £683m at Q1 (Q121: £705m).
• On track to achieve savings target of £750m gross savings (£400m net of inflation) by 2024 relative to our 2018 baseline.

Capital return process nearing completion

• Shareholder approval received for £3.75bn return of capital via B Share Scheme. Total capital return to shareholders of £4.75bn will therefore be complete by end May 2022.
• 76 for 100 share consolidation now completed with new share count of 2,802m as at 16 May.

Solvency and liquidity remain strong and resilient

• Solvency II shareholder cover ratio of 205% (FY21: 244 %) was 39pp lower driven by £3.75bn capital return, £500m redemption of subordinated debt, 2021 final dividend, partly offset by operating capital generation in the period and the beneficial impact of higher interest rates.
• Solvency II cover ratio of 198% (FY21: 191%), pro forma for further debt reduction of £500m over time and £75m pension scheme payment. The acquisition of Succession Wealth will further reduce this pro forma ratio to 192% (FY21:186%).
• Solvency II Operating Capital Generation (OCG) for our UK Life Heritage business was £175m in 2021, representing c.9% of business unit OCG. We expect Heritage OCG to run-off by c.£10-£15m per annum.
• Centre liquidity (Apr 22) of £5.8bn (Feb 22: £6.6bn). Centre liquidity of £1.5bn pro forma for the £3.75bn capital return, further £500m debt reduction over time and £75m pension scheme payment.
• £500m Tier 2 Notes matured in April, completing half of our targeted further £1bn debt reduction.

Significant progress on ESG rating

• Sustainalytics ESG risk rating improves to 11.3, now ranking Aviva 6th⁴ out of 296 global insurers (up from 25th) and ahead of all UK Financial Services peers.

Outlook

• We remain confident and on track to meet the cash remittance, own funds generation, and cost reduction targets outlined at our FY 2021 results presentation.
• Our dividend guidance⁵ of c.£870m for 2022 and c.£915m for 2023 remains unchanged. Following the capital return and share consolidation this would be equivalent to per share amounts of c.31.0p and c.32.5p respectively.
• The acquisition of Succession Wealth, announced in March, remains on track to complete in the second half of 2022.
• Our strong leadership positions, together with the actions we have taken over the past two years to strengthen our financial position, leave us well placed to navigate the prevailing economic environment.

¹   Q1 net flows annualised as a percentage of opening assets under management

²   References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM). Further information can be found in the 'Other information' section of the Full Year 2021 Results announcement.

³   Pro forma for further debt reduction of £500m over time and pension scheme payment, and after the impact of the acquisition of Succession Wealth. Actual Q1 Solvency II cover ratio is 205% (FY21: 244%).

⁴    As at 17 May 2022

⁵   Estimated dividends are for guidance only. The Board has not approved or made any decision to pay any dividend in respect of any future period.

^*    The financial information for comparative periods in this trading update refer to continuing operations only.