Aviva share price falls as it warns of 'muted' 2019

 
Harry Robertson
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British insurance giant Aviva's headqua
Source: Aviva

Aviva's shares were down five per cent this morning after it warned of a "muted" outlook for 2019 despite reporting rising profits for 2018 today.


New boss Maurice Tulloch, appointed earlier this week, said the results showed the insurer’s “strong foundations”.

The figures

Profit before tax rose to £2.13bn in 2018 from £2bn in 2017 while group operating profit rose two per cent to £3.12bn from £3.07bn in 2017.

Aviva's Solvency II ratio increased to 204 per cent, compared to 2017's 198 per cent.

Aviva’s life insurance business grew operating profits five per cent, more than making up for an 11 per cent decrease in its much smaller fund management department.


Fund management operating profits fell 11 per cent from £164m in 2017 to £146m last year as it invested in longer term equities and assets and absorbed Mifid II costs.

However, the insurer increased its total dividend per share nine per cent to 30p, up from 27.4p in 2017 - the fifth year in a row it has risen.

Why it’s interesting

Aviva’s shares are down three per cent today as the markets respond to the company’s statement that “our near-term outlook entering 2019 is more muted than our outlook a year ago”.

In particular, the insurer said it sees “potential headwinds from weak investment markets”, although highlights its “robust and resilient” balance sheet.

Aviva appointed Tulloch, former head of its international business, as its new chief executive on Monday after sacking former boss Mark Wilson five months earlier, citing a desire to increase shareholder value.

This aim drove the company to spend £600m on share buybacks in 2018, its results show, helping push operating earnings per share up seven per cent to 58.4p.

Hargreaves Lansdown analyst Nicholas Hyett said: "Ongoing restructuring and the disposal of fringe businesses mean the group’s been very inward looking in recent years, although it’s also in much better shape."

"Tulloch is a potentially odd choice if the board are looking to shake things up though. He’s been with Aviva for 27 years and his pledge to cut debt and focus on insurance fundamentals is hardly going to set the world on fire. It’s early days, but at first glance it looks like the plan is to ‘re-energise' Aviva with more of the same.”

What Aviva said

Tulloch said: “I am excited to be taking over as CEO of Aviva. We have strong foundations but we are only scratching the surface of our full potential.”

“At the heart of it, it’s all about insurance fundamentals, delivering excellent customer experience, tackling complexity and injecting a different pace of change into Aviva”, he said. “And that will be just the start. I am determined to re-energise Aviva and deliver long term growth for our shareholders.”

Chairman Sir Adrian Montague said: “Looking forward, our capital management plan will prioritise debt reduction for the foreseeable future. We plan to reduce debt by at least £1.5 billion by the end of 2022.”