Aviva hikes dividend by 10 per cent as operating profit rises 13 per cent - but combined operating ratio deteriorates

 
Caitlin Morrison
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(FILES) Aviva, Britain's largest insuran
The insurer grew profits but its combined ratio was hit by natural catastrophes and Flood Re paymenrs (Source: Getty)

Insurance giant Aviva has hiked its dividend after posting "encouraging" results for the first half of 2016.

The figures

Operating profit was up 13 per cent to £1.33bn, from £1.17bn last year, with operating earnings per share up one per cent to 22.4p, from 22.1p in the first half of 2015.

General insurance net written premiums increased seven per cent to £3.99bn from £3.68bn, and life insurance value of new business was up seven per cent to £583m from £534m.

Aviva increased its interim dividend by 10 per cent from 6.75p to 7.42p.

Operating expenses increased by 13 per cent to £1.7bn from £1.5bn, which the company said was mainly due to an additional quarter from Friends Life, which it acquired for £5.6bn last year, as well as new government levies and foreign exchange.

Shares in the company were up 4.5 per cent in early trading.

Aviva Aviva | mobile image

Why it's interesting

Although the group grew business and profits during the six month period, the combined operating ratio deteriorated to 96.2 per cent from 93.1 per cent in the first half of last year.

Aviva said this was due to an increase in natural catastrophe and weather claims, "commission strain" from a new distribution partnership, and payments into newly-established Flood Re.

What Aviva said

Chief exec Mark Wilson delivered a strong message of positivity towards the UK. "Our UK businesses delivered encouraging results. We are growing in the UK, we are investing in the UK. We like the UK," he said.

However, he added: "We are also benefiting from Aviva's diversity, with 42 per cent of our earnings coming from outside of the UK."

Wilson did not explicitly refer to the recent Brexit vote, but did say: "Aviva's strong financial position and diversity mean we are well insulated from external events. We have deliberately designed Aviva to be resilient to a low interest rate environment."

"We remain confident in our ability to deliver on our key commitments to grow earnings, cash and dividends."

In short

Aviva is feeling pretty good about its performance over the past six months - and it wants to spread the love to the rest of the UK.

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