Aviva PLC (LSE:AV.)’s boss Amanda Blanc attracted more plaudits today as she continues to revive the fortunes of the FTSE 100-listed insurer.
Since her appointment as chief executive Blanc has been voted business person of the year in 2022 by The Sunday Times, embarked on a selling spree, dealt with an activist investor and tackled head on sexism from her own shareholders at its AGM.
Blanc who grew up in the Welsh valleys is credited for having greatly simplified Aviva, the current focus of which is the group’s core markets in the UK, Ireland, and Canada.
The narrower remit saw big chunks of the business sold off enabling billions to be returned to shareholders which helped pacify activist investor, Cevian, the Swedish investment firm, which had campaigned for greater returns to shareholders.
Last month Cevian, led by Christer Gardell, known by some as 'The Butcher' cut its holding in Aviva to be below 5%, a move seen as a vote of confidence in Blanc’s strategy.
At the time Niko Pakalen, partner at Cevian, said: 'The reduction of our holding is a portfolio reallocation following Aviva's strong absolute and relative returns. We continue to see significant return potential.'
Shareholders have certainly been rewarded under Blanc's tenure with shares up over 60% with a further 3% rise today. Russ Mould at AJ Bell believes Blanc has “done an enviable job.”
“Streamlining operations and selling off underperforming businesses is a well-worn strategy, but one Blanc has executed well and that’s evident in the 2022 numbers which show a big increase in profit and dividends accompanied by a big share buyback.”
Mould was referring to annual results which saw a 35% increase in operating profit to £2.21bn in the 12 months to 31 December 2022 from £1.63bn a year before, while general insurance gross written premiums rose 8% to £9.75bn from £8.81bn with a combined operating ratio of 94.6% (2021: 92.9%).
UBS noted operating profit in the second half of the year of £1.38bn was above consensus by 50% which appears to be partly driven by one-offs relating to longevity releases in UK&I Life of around £537mln.
The broker said cash remittances of £1.05bn in the second half were 13% above consensus and the cumulative remittance target of more than £5.4bn for 2022-24 remains unchanged, with expectations of exceeding this target. Cost savings of £750mln remain on track, the broker noted.
The life and general insurer’s core capital coverage level, adjusted for promised debt reduction and pension scheme repayments, was 207% compared with the 202% consensus.
Aviva also improved its future dividend guidance, now expecting a low-to-mid single-digit growth in the cash cost of the dividend after the £915mln that should be returned this year. It also launched a £300mln share buyback which analysts don’t think will be the last.
Matt Britzman, equity analyst at Hargreaves Lansdown said: “For investors, news of a £300mln buyback was welcomed with open arms – the capital position remains strong, and the potential for further buybacks alongside a 7.8% forward yield looks attractive.”
Britzman expects the life insurance business to benefit from the growing number of pension schemes that now find themselves in the position of being able to de-risk. He expects “to see an uptick in bulk purchase annuity business over the coming year as a result.”
In general insurance further price hikes are expected in line with other insurers as the cost to service claims has risen in this inflationary environment.
With the low hanging fruit now sold off investors will wait and see whether Blanc has any more rabbits up her sleeve. But the upgraded dividend guidance and likelihood of further returns to shareholders are likely to keep investors on side for now.