- Operating profit above forecasts
- Insurance and wealth business strong
- Direct Line to add 10% to EPS growth
Despite a muted response, shareholders in insurance and savings group Aviva (AV.) will be pleased with full-year 2024 results which beat market expectations both in terms of earnings and cash generation.
The shares, which have gained 12% so far this year, added another 4p or 0.7% to 529p on a down day for the market, with the FTSE 100 off by 0.5% after a poor end to trading in New York overnight.
STRONG GROWTH ACROSS THE BOARD
For the year to December, total sales of insurance, wealth and retirement products rose 22% to a record £43.5 billion.
General insurance premiums were up 14% to £12.2 billion, with UK and Ireland premiums up 16% to £7.7 billion, while wealth net flows rose 23% to £10.3 billion as platform flows saw ‘a significant improvement’ and total AUM (assets under management) grew 17% to £198 billion.
Retirement sales grew even faster, up 33% to £9.4 billion, and the asset management business Aviva Investors saw external net inflows as well as originating £3.2 billion of real assets for the annuities business.
Thanks to the volume of new business from higher-margin retail customers and favourable pricing, operating profit for the year rose 20% to £1.77 billion, 6% ahead of the consensus.
Cash remittances of just under £2 billion were also ahead of expectations, and the Solvency II shareholder cover ratio, a key measure of liquidity in the insurance industry, was slightly ahead of expectations at 203% at year-end.
A ‘CAPITAL-LIGHT’ MODEL
Under chief executive Amanda Blanc the group has been steadily shifting towards a more capital-light business, and 56% of last year’s profit came from capital-light operations.
The proposed acquisition of Direct Line, which is expected to complete mid-2025, will add to the capital-light structure and is expected to add around 10% to the EPS (earnings per share) run-rate.
‘2024 was an excellent year, right across Aviva,’ commented Blanc. ‘We made clear strategic progress and delivered another set of very good numbers, with higher sales, higher operating profit and a higher dividend. Over the last four and a half years we have completely transformed Aviva, built a track record of consistently strong results and returned £10 billion to shareholders.’
Although buybacks are on hold while the Direct Line deal goes through, Jefferies’ financials specialist Philip Kett noted that, despite there being no mention of potential capital synergies, the company did hint they would be ‘material’ and therefore investors could assume buybacks would restart in 2026.
