Aviva plc 2023 results: Profit up 9%, Dividend Growth, and Confident Outlook

Aviva plc (LON:AV) has provided its 2023 Results Announcement.

Amanda Blanc, Group Chief Executive Officer, said:

“We have made significant progress in 2023. Sales are up, costs are down, and operating profit is 9% higher. Our position as the UK’s leading diversified insurer, with major businesses in Canada and Ireland, is clearly delivering. Today we have raised our total dividend by 8% to 33.4 pence and have now returned more than £9bn in capital and dividends to shareholders over the last three years.

“We have generated strong organic growth, especially in our capital-light businesses, which make up over half our portfolio. General insurance premiums increased by 13% on the back of strong performances in Canada and the UK. We are the number one provider of workplace pensions, and this business continues to thrive, with a record £6.9bn of net flows, boosted by winning 477 new schemes during the year. Our private health business is experiencing strong demand from businesses and individual customers and sales grew 41% in 2023. The higher interest rate environment boosted the bulk annuity market, where we secured excellent volumes of £5.5bn at strong margins.

“We are building a clear track record of strong and consistent performance. In each of the last three years we have grown sales, operating profit and our dividend. This momentum gives us increased confidence for Aviva’s future, and so today we are announcing a new £300m share buyback programme, upgrading our dividend guidance to mid-single digit cash cost growth, and upgrading our Group financial targets.

“Aviva is financially strong. We are trading consistently well. Our prospects have never been better. We have leading businesses in growing markets, a fantastic brand, and we are investing substantially to make service better for our 19m customers. All the ingredients are in place to ensure Aviva continues to deliver an outstanding performance for our customers and our shareholders. I’m certain we will.”

Strong 2023 results with continued profitable growth momentum

•    Group operating profit^‡,1 up 9% to £1,467m (2022²: £1,350m).

•    Solvency II operating own funds generation^‡ (Solvency II OFG) up 12% to £1,729m (2022³: £1,540m), which included a £208m initial benefit from two partnership extensions in IWR. Solvency II OFG excluding management actions and other up 28%.

•    Solvency II operating capital generation^‡ (Solvency II OCG) up 8% to £1,455m (2022³: £1,352m).

•    Solvency II return on equity^‡ 14.7% (2022³: 9.9%).

•    Cash remittances^‡ of £1,892m up 3% (2022: £1,845m).

•    General Insurance premiums^‡,5 up 13%⁶ to £10,888m (2022: £9,749m). Undiscounted COR^‡ of 96.2% (2022²: 95.2%) and discounted COR of 92.7% (2022: 94.3%).

•    Insurance, Wealth & Retirement (IWR) operating value added^‡ up 13% to £1,849m (2022: £1,635m).

•    Baseline controllable costs^‡,7 down 1% at £2,734m, more than offsetting inflation. Our continued focus on cost efficiency has enabled us to deliver our £750m cost reduction target a year early.

•    IFRS profit for the year⁸ of £1,106m (2022²: loss of £1,030m).

New share buyback and upgraded dividend guidance

•    Solvency II shareholder cover ratio^‡ of 207% (2022: 212%) and centre liquidity^‡ (Feb 24) of £1.9bn (Feb 23: £2.2bn).

•    As part of our programme of regular and sustainable capital returns we are commencing a new share buyback programme of £300m immediately, taking the total amount of capital returns and dividends paid to shareholders to more than £9bn over the last three years. Our preference remains to return surplus capital regularly and sustainably to shareholders.

•    Final dividend per share of 22.3 pence (2022: 20.7 pence) giving a total dividend per share of 33.4 pence (2022: 31.0 pence), up 8%.

•    In light of the significant progress we have made and our confidence in Aviva’s future, we are upgrading our dividend guidance and we now expect to grow the cash cost of the dividend by mid-single digits⁹.

Continued trading performance

•    UK&I General Insurance premiums^‡,5 up 16% to £6,640m (2022: £5,740m) and undiscounted COR^‡ of 96.8% (2022²: 96.4%). UK personal lines premiums grew 24% driven by strong rate discipline in the inflationary environment and new propositions. UK commercial lines premiums grew 10% due to rate actions and new business growth.

•    Canada General Insurance premiums^‡,5 up 10%⁶ to £4,248m (2022: £4,009m) and undiscounted COR^‡ of 95.3% (2022²: 93.7%). We saw excellent growth of 13%⁶ in commercial lines and 9%⁶ in personal lines driven by rate increases and strong new business growth.

•    Protection and Health sales⁵ were up 16% driven by strong growth in Health, up 41%, and Individual Protection. Value of new business on an adjusted Solvency II basis (VNB)^‡ was 3% lower as the impact of interest rate increases more than offset the growth in sales.

•    Wealth continued to show resilience in challenging market conditions with net flows^‡ of £8.3bn (2022: £9.1bn) representing 6% of opening Assets under Management (AUM)^‡. AUM grew 15% to £170bn (31 December 2022: £147bn).

•    Retirement sales⁵ were up 14% to £7,088m (2022: £6,238m) driven by £5.5bn of Bulk Purchase Annuity (BPA) transactions and increased demand for Individual Annuities in a higher interest rate environment. VNB^‡ was up 9% to £286m (2022: £264m).

•    Aviva Investors is a core enabler of growth for the Group. In 2023, it originated £2.6bn of real assets for our annuities business, and over 60% of Workplace net flows^‡ were into Aviva Investors.

Confident outlook and upgraded Group targets

Our positive momentum continued in 2023 with a strong set of results, and our diversified business model positions us well to navigate the current macroeconomic environment. This reinforces our confidence in the prospects, financial targets and outlook for the Group.

In General Insurance we remain focused on pricing appropriately for the ongoing inflationary environment. Overall, we expect the rating environment to remain favourable in personal lines with some moderation of rate increases in commercial lines. We expect the underlying COR¹¹ to benefit from the earn through of rating actions taken in 2023.

In Insurance, Wealth & Retirement we expect to see continued growth. We expect further strong demand in Protection & Health products given supportive market dynamics. Wealth is central to our strategy, and as we set out at our ‘In Focus’ briefing in October 2023, the market presents a significant opportunity for Aviva to continue to generate sustainable, capital-light growth. We expect to continue our disciplined approach to BPAs, where the market should continue to benefit from more pension schemes looking to de-risk.

We have now exceeded our existing Solvency II operating own funds generation^‡ target of £1.5bn by 2024, and we have delivered our £750m cost reduction target one year early. We remain on track to exceed our cash remittance^‡ target of >£5.4bn cumulative (2022-2024).

Therefore, we are establishing new, upgraded targets for the Group:

•    Operating profit^‡,1: £2bn by 2026. A new target following the implementation of IFRS 17.

•    Solvency II own funds generation^‡: £1.8bn by 2026. A key driver of value and cash remittances^‡. Upgraded from
£1.5bn by 2024.

•    Cash remittances^‡: >£5.8bn cumulative 2024-2026. Underpinning our sustainable dividend policy. Upgraded from >£5.4bn 2022-2024.

We are committed to delivering for our shareholders. The upgraded targets set out today support our sustainable dividend policy. We now expect the cash cost of the dividend to grow by mid-single digits, demonstrating our confidence and ambition for Aviva as we look to deliver for all of our stakeholders.

Under our capital framework, surplus capital is available for reinvestment in the business, bolt-on M&A and returns to shareholders. We have announced a £300m share buyback today, and anticipate further regular and sustainable capital returns in the future.