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Aviva - full-year guidance intact

Aviva's General Insurance gross written premiums(GWP) rose 13% in the first nine months of the year, to £8.0bn.

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Aviva's General Insurance gross written premiums (GWP) rose 13% in the first nine months of the year, ignoring the effect of exchange rates, to £8.0bn. Growth was driven by both the UK & Ireland and Canada, with "strong" rates, new business and customer retention.

Protection and Health sales rose 23%, reflecting higher individual protection and corporate health demand. Retirement sales rose 2% to £4.4bn, due to higher defined benefit pension and individual annuity volumes.

The solvency II ratio, which measures capital levels compared to requirements, dipped to 200% from 202%.

The group's full-year guidance for 5-7% growth in operating profit remains unchanged, subject to normal weather conditions for the rest of the year.

The shares rose 1.4% following the announcement.

View the latest Aviva share price and how to deal

Our view

We continue to think the medium-term horizon looks promising at Aviva.

Investors have been well rewarded from the ongoing transformation, including some hefty buybacks in recent memory. It was good news as well, to hear management reiterate the full-year dividend plans, backed by a strong capital position. Although no returns are guaranteed.

Aviva brings insurance, wealth, and retirement under one roof. The insurance arm centres around the UK and Canada. The latter has been a standout and now claims the number two spot in its market. General insurance in the UK & Ireland is seeing more challenging conditions. New premiums are coming in, which is positive, but higher claims and costs continue to put pressure on underwriting profit. We're supportive of the £460mn acquisition of AIG's protection business, due to close in the coming months. This market has its attractions and Aviva has the finances to pounce on desirable assets when they appear.

Aviva's bulk annuity business, where Aviva takes on final salary commitments from pension funds, has grown rapidly. The market's hot and £5.5bn has been brought in over the year to date, as it snapped up £900m from Thomas Cook recently - the focus continues to be on finding the right new business rather than pushing for market share. These contracts feed significant quantities of new assets into the business, which Aviva Investors can manage - increasing scale and profitability.

Being a huge workplace pension provider is behind the logic to increase its presence in the wealth management market. There are also plans to expand the advisory offering to help achieve the goal of at least 10% growth in net flows to wealth. With a longer-term eye, things are moving in a good direction. But it's a challenging and crowded market, not helped by continued market volatility.

However, Aviva's ace in the hole strategically is that it's ahead of the game in digitisation. Controllable costs are in check despite cost inflation, and long-term digitisation could help improve cross-selling. We like the direction of travel and see the 8.3% yield as worthy of a look while the sector remains a little out of favour. Of course, there are no guarantees.

Aviva key facts

All ratios are sourced from Refinitiv. 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.

One of HL's Independent Non-Executive Directors is also a Non-Executive Director at Aviva plc.

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 Refinitiv. 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. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Sophie Lund-Yates
Sophie Lund-Yates
Lead Equity Analyst

Sophie is a lead on our Equity Research team, providing research and regular articles on a selection of individual companies and wider sectors. Sophie's specialities are Retail, Fast Moving Consumer Goods (FMCG), Aerospace & Defence as well as a few of the big tech names including Facebook and Apple.

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Article history
Published: 16th November 2023