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Aviva on track with cost savings and capital return to shareholders

Published: 10:17 11 Nov 2021 GMT

Aviva PLC -

Aviva PLC (LSE:AV.) expects to meet its target of cutting costs by £300mln in 2022, including over £225mln of cumulative savings by the end of the current year.

It is also delivering on its commitment to return at least £4bn of capital to shareholders, with £450mln of the £750mln share buyback already completed, the insurer said in a trading statement.

The remainder of the capital return - at least £3.25bn - is likely to take place in the second quarter of next year, chief financial officer Jason Windsor told Reuters.

The company has faced calls to return £5bn to shareholders from activist investor Cevian, which took a 5% stake in Aviva earlier this year.

Aviva said life insurance net inflows rose to £25.3bn in the first nine months of the year from £21.8bn in the same period last year, with Savings & Retirement inflows soaring by a record 21% to £7.3bn.

“We continue to expect the full-year benefit from UK Life management actions and other to be in the £0-£200mln range,” the company said.

General insurance inflows rose by 5% to £6.5bn and Aviva said it expects to write £5bn-£6bn of bulk purchase annuity (BPA) volumes in total this year.

The company said softer rates in motor insurance and adverse weather conditions in the second half of the year will impact full-year profitability. However, it still expects the overall combined operating ratio (COR) for continuing operations in the general insurance business to be below 94% for the full year.

Net inflows in Annuities & Equities fell by 14% to £5.3bn in the first nine months. Margins are expected to improve in the fourth quarter but to remain below 2020 levels due to the low credit spread environment, Aviva said.

The insurer also said it is on track to meet its target of over £5bn in cumulative cash remittances from continuing operations in the period from 2021 to 2023.

Cash remittances for the first nine months were £1.1bn and the full-year figure is expected to be up strongly on the £1.4bn achieved last year. Cash remittances are set to continue to increase in 2022 and reach £1.8bn in 2023.

 The insurer has sold off businesses in Italy and France in recent months to focus on its core markets of UK, Ireland and Canada.

"We continue to make excellent and rapid strategic progress, right across Aviva,” said group executive Amanda Blanc. “The completion of disposals in France and Italy GI since the half year are significant milestones as we deliver a radically simplified and refocused Aviva.

“We expect the good trading momentum to continue in the fourth quarter, and we remain on track to meet or exceed our cash and cost saving targets."

Shares were 1.28% higher at 158.50p in midmorning trade.

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