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Aviva: we like the UK

Ben Brettell | 4 August 2016 | A A A

You’re about to read press releases, which we’ve written for media use only. They’re not intended for individual investors. They’re not personal advice and don’t include any recommendations.

No recommendation

You’re about to read press releases, which we’ve written for media use only. They’re not intended for individual investors. They’re not personal advice and don’t include any recommendations.

Media contact:

Ben Brettell

Senior Economist

Direct line: 0117 980 9993

Email: ben.brettell@hl.co.uk

Aviva has announced a 13% increase in operating profits for the first half, to £1,325m, with the interim dividend up 10% to 7.42p per share. Operating EPS rose 1% to 22.4p. The shares were up almost 5% in early morning trading.

Operating profits in the Life business increased 20% to £1,226m, boosted by a 3 month contribution from Friends Life. General insurance and health saw profits fall 21% to £334m following increased costs attributed to the Flood Re levy and weather and natural catastrophe claims, following fires in Canada and floods in France.

The group remains well capitalised with a Solvency II ratio of 174% (FY15: 180%) and surplus Solvency II capital of £9.5bn. Despite entering the period of macro, political and market uncertainty the group remains confident in its capital position.

Registrations on the MyAviva app have passed 3m (FY15: 2.3m). The group expects to have all UK customer data on a single database by the end of 2016 allowing customers to view all policies in one place.

Nicholas Hyett, Equity Analyst, Hargreaves Lansdown

Mark Wilson may be a New Zealander who has spent his career in Asia, but he seems to have become a little enamoured with the UK. Having played down the impact of Brexit immediately after the referendum, today’s results open with a declaration of confidence in the UK economy - “We are growing in the UK, we are investing in the UK. We like the UK.”

Mark Wilson's background might have suggested an imminent Asian expansion drive, but the evidence so far is that he is first determined to fix the businesses closer to home. That makes sense; a strongly performing European composite insurer with good cash generation can one day fund a lot of growth further afield, if that is where the Board decide to go in years to come.

The stock took a tumble following the referendum result and now trades on 8x prospective earnings and the prospective yield is 6%, rising to 7.2% by FY18, on current analyst forecasts. However, the group moved quickly to play down capital concerns, something it has repeated today.

If we had a complaint about Aviva, it is that the brand still, we suspect, means nothing to anybody. Advertising strategies seem to have changed faster than the fortunes of the English rugby team over the last few years. But a lot is changing under Mark Wilson, digital initiatives, such as the Aviva Drive app, are moving front and centre and an improved balance sheet offers opportunities. We will watch Mark Wilson’s next move with interest.

NOTES TO EDITORS

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Hargreaves Lansdown is equipped with a live in-house broadcast camera via the Globelynx network and has an ISDN line available for radio interviews - 0117 934 9006. To arrange an interview with a Hargreaves Lansdown spokesperson please contact the person you wish to speak to directly using the contact details above, or call Globelynx on 0207 963 7060 or email globelynx@globelynx.com.


You’re about to read press releases, which we’ve written for media use only. They’re not intended for individual investors. They’re not personal advice and don’t include any recommendations.