Aviva up as it reinstates dividend but profits suffer from coronavirus claims

Aviva said it is reviewing its dividend policy going forward

Aviva plc -

Aviva PLC (LON:AV.) rose on Thursday after the insurer reinstated dividends after what it was said was a solid first half financial performance.

The FTSE 100-listed firm halted payments in April alongside several of its peers after a request from the Bank of England to be cautious due to the coronavirus pandemic.

A second interim dividend in respect of the 2019 financial year of 6p per share was declared today.

Aviva cautioned, however, that it was reviewing its dividend policy going forward with the objective of a sustainable pay-out and lower levels of debt. 

Net profits in the six months to end-June, 2020, fell by 29% to £1.08bn, with the insurer taking a £165mln charge for coronavirus-related claims that meant its underwriting business barely made a profit.

The life side saw strong inflows, with new business up 12% to £601mln, though Aviva said it took a £25mln charge for higher mortality as a result of coronavirus.

Aviva added that is solvency ratio also reduced to an equivalent of 416p per share (2019:423p) as good operating capital generation was offset by lower government bond yields, wider spreads on bonds and provisions for likely lower values in its property portfolio.

In morning trade, Aviva shares were up 4.2% at 296.10p.

"Similar challenges usually call for similar solutions"

Commenting on the numbers, Nicholas Hyett, equity analyst at Hargreaves Lansdown noted: “Aviva’s never been a terribly coherent whole. It’s not that the various businesses are incompatible, just that they’re not terrible complementary and have always been run pretty much independently. That’s left Amanda Blanc facing similar challenges to every other Aviva CEO of recent times.

"Similar challenges usually call for similar solutions, and as staff at Aviva’s sizeable but often forgotten French business might say ‘plus ça change, plus c'est la même chose’. The group will be slimming down to focus on its core UK, Irish and Canadian business, pulling out of markets where it can’t generate returns while simultaneously “transforming performance” in the rest of the business."

He added: "The words may be different, but it’s pretty much the same playbook Aviva’s been working from for years. Blanc will have some work to do at the full years to show why her plan will succeed where others have struggled."

"The good news for shareholders is that dividends are back, something analysts hadn’t expected, but with a policy review coming up at the end of the year, and an ambition to cut debt, future payments are likely to be lower.”

 -- Adds share price, analyst comment --

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