Aviva PLC (LON:AV. raised its dividend after delivering an 11% increase in first half operating profit, lifted by double-digit growth in its UK life insurance arm.
Operating profit in the six months to 30 June was £1.5bn, compared to £1.4bn in the same period a year ago.
In its life insurance division, operating profit rose 3% to £1.4bn, driven by a strong performance in the UK and improvements in Europe.
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The general insurance and health business achieved a 25% rise in operating profit to £417mln, as net written premiums increased 17% to £4.7bn with a boost from its acquisition of RBC Insurance in Canada last July and foreign exchange benefits.
Combined operating ratio for general insurance strengthened to 94.5% from 95.7%. A level below 100% indicates an underwriting profit.
Its asset management arm, Aviva Investors, saw operating profit jump 45% to £71mln with revenue up 13% to £273mln, buoyed by higher average assets under management, income from asset origination and continued expansion of the AIMS range of funds to £12bn.
Aviva bolsters capital position
The company improved its capital position with the Solvency II ratio rising to 193% at the end of June from 189% the previous year. The capital surplus grew to £11.4bn from £11.3bn last year.
Aviva has completed one third of its £300mln share buy-back announced in May and the remainder will be finished by the end of the year.
Chief executive Mark Wilson said the firm has decided to hike the dividend by 13% to 8.4p, reflecting “positive performances across Aviva’s businesses worldwide”.
“The benefits of our geographic and product diversity are clear and Aviva has numerous sources of growth,” he said.
“In the first half of 2017 we increased sales right across the group and delivered strong growth in operating profit in the UK, Europe and Aviva Investors.”
Aviva confident on outlook
Wilson added that Aviva is confident it will be able to sustain growth in the coming years after streamlining the business and developing its digital channel.
He also announced a 10-year extension of Aviva’s UK general insurance distribution agreement with HSBC Holdings PLC (LON:HSBA), saying it will “deliver significant further growth”.
Shares in Aviva rose 1.72% to 547.25p in morning trading.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Aviva has put its house in order and is now generating healthy organic growth pretty much across the piece.The simplified structure and lack of grand plans has allowed it to focus on getting the simple stuff right, while developing new initiatives – particularly in digital."
The analyst added that the group’s Solvency II position is increasingly robust, and with £1.1bn of capital generated this year it has "plenty of firepower should it feel the need to take a big leap forward or snap up smaller bolt on opportunities".
"If, on the other hand, management choose to stick with the steadier organic growth model, you would expect that cash to start coming back to shareholders in one form or another.”