Shares in UK insurer Aviva (AV.) moved 2% higher to 414p, despite the firm publishing results which were marginally below consensus.
Instead, investors focused on news the group would return £4.5 billion to shareholders. The market also liked news of the acquisition of Succession Wealth, the UK’s largest independent wealth management and financial planning business, for £385 million.
CASH RETURN OUTWEIGHS EARNINGS
Aviva announced operating profit for the year to December 2021 of £1,634 million, 2% below the consensus forecast of £1,660 million. The dividend of 22.05p was also 2% below the consensus estimate of 22.5p.
However, the board committed to returning £4.75 billion to shareholders including the already-announced £1 billion buyback.
The remaining £3.75 billion will be returned via a B Share scheme. Put simply, a shareholder with 100 shares will receive £100 in cash and be left with 75 Aviva shares.
The increased return of capital is due in part to lobbying by Swedish activist investor Cevian Capital, who disclosed a 4.9% holding in the UK insurer last June.
Cevian has been vocal in pushing for a greater return of capital from the proceeds generated by the sale of Aviva's non-core businesses.
The firm also announced a new cost savings target of £400 million, net of inflation between 2018-2024. This represents a step up from the previous target of £300 million between 2018-2022.
SUCCESSION WEALTH ACQUISITION
Aviva believes the Succession Wealth deal will enable it to offer high-quality advice to over four million workplace pension customers.
The UK wealth market is estimated to be worth £1.6 trillion and is forecast to grow by approximately 7% per annum to £2.1 trillion by 2024.
Aviva chief executive Amanda Blanc said: ‘The acquisition of Succession Wealth boosts Aviva’s presence in the fast-growing UK wealth market; supports our strategy to grow sustainably; and expands Aviva’s ability to offer high quality financial advice to millions of our customers.’
According to James Pearse, equity analyst at Jefferies, ‘A number of Aviva’s existing targets have been improved, as well as introducing new targets such as S2 own funds generation of £1.5 billion by 2024. We expect these announcements will be well received today’.
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