Aviva grows operating profit for the fourth year in a row and increases dividend, announcing a ten-year insurance agreement with HSBC

 
Lucy White
Wasps v Exeter Chiefs - Aviva Premiership Final
Aviva has raised its interim dividend by 13 per cent (Source: Getty)

Insurance multinational Aviva has announced a growth in operating profit for the first half of 2017 for the fourth year in a row, as it hikes its interim dividend by 13 per cent to 8.4p.

The figures

Operating profit grew by 11 per cent from the same period last year to £1.47bn, while an 11 per cent increase in the value of general insurance net written premiums to £4.69bn indicates the company was competing well.

"The benefits of our geographic and product diversity are clear and Aviva has numerous sources of growth," said chief executive Mark Wilson.

"In the first half of 2017 we increased sales right across the group and delivered strong growth in operating profit in the UK, Europe and Aviva Investors."

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Aviva's growth is in line with predictions, as company-supplied consensus expectations indicated the insurance giant would post a low double-digit increase in operating profits.

Why it's interesting

Aviva also announced today that it had entered into a ten-year general insurance agreement with HSBC, in a distribution partnership which will be one of the UK’s largest general insurance bancassurance deals.

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In February, Aviva revealed it had added £1.1bn of cash to its balance sheet. Since then it has sold Friends Provident, netting the firm £340m, and shares in its Spanish division for £400m.

Aviva added today that its Solvency II coverage ratio, or the amount of capital it is required to hold under EU rules to cover risk, has grown to 193 per cent while its capital surplus is £11.4bn.

Competitor Direct Line beat expectations on Tuesday, causing shares to jump, while investors in RSA were disappointed yesterday as dividends missed the mark.

Read more: RSA picks Luxembourg for EU headquarters as part of continental branch re-jig

What the analysts say

“Aviva has put its house in order and is now generating healthy organic growth pretty much across the piece. The simplified structure and lack of grand plans has allowed it to focus on getting the simple stuff right, while developing new initiatives – particularly in digital," said Hargreaves Lansdown's Nicholas Hyett.

However, we’re increasingly wondering what chief executive Mark Wilson has in mind for the group next.

The group’s Solvency II position is increasingly robust, and with £1.1bn of capital generated this year the group has plenty of firepower should it feel the need to take a big leap forward or snap up smaller bolt on opportunities.

If, on the other hand, management choose to stick with the steadier organic growth model, you would expect that cash to start coming back to shareholders in one form or another.

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