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British insurer Aviva leaves door open to return more capital
Global Banking & Finance Review®
Company
By Carolyn Cohn
LONDON (Reuters) -Aviva may be able to give more cash back to shareholders, its chief executive said on Wednesday, as the British insurer reported a 5% increase in general insurance sales in the first quarter and said its capital position was strong.
Aviva’s Solvency II ratio, a key measure of capital strength, came in at 198%. A level of 100% is considered by regulators the absolute minimum which insurers should hold.
“We’ve said that we will keep a clear commitment that any excess capital above the 180% solvency ratio that we don’t reinvest in the business to generate more value will be returned to shareholders over time,” CEO Amanda Blanc told Reuters.
“We won’t retain excess capital where we can’t put it to good use in the business.”
Aviva’s shares were up 0.64% at 0734 GMT, outperforming the FTSE 100.
Aviva is under pressure from activist investor Cevian Capital, which holds 6% of the insurer’s shares, to return more money to shareholders.
The home, motor and life insurer has already given 4.75 billion pounds ($5.9 billion) back to investors after raising 7.5 billion pounds following a string of disposals around the globe since Blanc was appointed chief executive in July 2020.
Aviva, which has major businesses in Britain, Canada and Ireland, also said in March it would boost its dividend this year and next, although Cevian said the insurer could do more.
Aviva said on Wednesday it was on track to meet financial targets which it raised in March, including cost savings of 750 million pounds gross of inflation across 2018-24.
General insurance gross written premiums rose to a record 2.1 billion pounds in the first quarter, while sales in the insurer’s life business rose 1% to 8.7 billion pounds.
Fund management unit Aviva Investors saw external net outflows of 200 million pounds, however, which it said reflected volatile market conditions. Assets under management totalled 253 billion pounds at the end of March, a 5% drop on the quarter.
Jefferies analysts said the results showed there was “promising growth in pockets of the business”, reiterating their “hold” rating on the stock.
($1 = 0.8063 pounds)
(Reporting by Carolyn Cohn, editing by Sinead Cruise)
A solvency ratio is a key measure of an insurance company's ability to meet its long-term debt obligations. It compares an insurer's total assets to its total liabilities, indicating financial stability.
A dividend is a portion of a company's earnings distributed to its shareholders. It can be paid in cash or additional shares and is often used as a way to reward investors.
Capital strength refers to a financial institution's ability to withstand economic downturns and meet its obligations. It is often measured by ratios like the solvency ratio.
General insurance sales refer to the revenue generated from policies that cover various risks, such as home, motor, and liability insurance, excluding life insurance.
External net outflows occur when more funds are withdrawn from an investment fund or financial institution than are deposited. This can indicate a lack of investor confidence.
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