General Insurance premiums rose 29% to £8.1bn in the first half, including 42% growth in the UK & Ireland, supported by the inclusion of Direct Line. Wealth net flows increased 32% to £7.6bn, Health in-force premiums rose 5% to £1.1bn, and Retirement sales fell 24% to £2.2bn.
First-half operating profit rose 24% to £1.3bn (£1.3bn expected), with improved claims performance helping insurance profitability come in better than expected.
Cash remittances, dividends paid by Aviva’s businesses to the Group, were up 47% to £1.5bn (£1.1bn expected). The Solvency II ratio, a measure of balance sheet strength, came in at 176% (178% expected).
Guidance was unchanged, with full year earnings per share growth expected to be broadly in line with the 11% target rate.
The interim dividend rose 7% to 14.0p per share.
The shares were broadly flat in early trading.
Our view
Aviva delivered an impressive first half, with profit, cash generation and General Insurance profitability all ahead of expectations. UK General Insurance was the standout, helped by better performance in motor, while Wealth continued to attract strong customer flows. We thought this was a good set of numbers, with Aviva making clear progress towards its medium-term targets.
Aviva brings insurance, wealth and retirement under one roof, and the acquisition of Direct Line has strengthened its market-leading positions in areas such as UK motor and home insurance. The integration is moving quickly, with profitability improving and savings building towards the £225mn target. Direct Line is also returning to growth through price comparison websites, although there is still work to do before the full benefits of the deal are realised.
General Insurance is in good shape. Pricing remains ahead of claims inflation in UK motor, helping protect margins despite a competitive market. Commercial insurance conditions are softer, and Aviva has allowed some business to fall away rather than cut prices to chase growth. Canada also performed well in the first half, with improved claims performance and pricing actions supporting margins.
Aviva's bulk annuity business, where it takes responsibility for company pension commitments, remains highly competitive. Volumes were lower, but new business was written at attractive returns. These contracts bring significant quantities of assets into the Group, which Aviva Investors can manage. We continue to support management's focus on returns rather than market share.
Being a major workplace pension provider supports the logic behind expanding the wealth management business. First-half flows were strong across workplace pensions and the adviser investment platform. The growing scale of these businesses should support profit growth, although the fees earned on assets dipped slightly, a trend we’ll be monitoring.
The retirement products sit alongside protection and health insurance. Demand for private healthcare remains a long-term opportunity, but weaker demand from consumers and small businesses has led management to lower its 2026 Health profit outlook. It’s not a dial mover, but a focus area for investors, so one to watch.
All in, Aviva is a high-quality business. Strong cash generation, disciplined insurance pricing and progress at Direct Line provide a solid foundation for growth, while Wealth is increasing exposure to more predictable, less capital-intensive earnings. The balance sheet remains strong, and the dividend looks attractive, though not guaranteed.
But the earnings multiple already reflects many of Aviva’s strengths, and we see limited scope for a further uplift from that angle. That leaves earnings growth to do the heavy lifting, which, in our view, limits potential upside.
Environmental, social and governance (ESG) risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security are also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.
According to Sustainalytics, Aviva’s overall management of material ESG issues is strong.
Aviva values ESG management and focuses on transparency around key issues. The company actively addresses physical climate risks, data privacy, security, and sustainable finance. Aviva aims to boost sustainable investments by 2025 and integrates ESG factors into its investment strategies. The absence of customer satisfaction targets in FY2022 is a potential area for improvement.
A director of Hargreaves Lansdown Group Limited is a non-executive director of two Aviva plc subsidiaries.
Aviva key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.