Aviva shares perked up on Thursday after the insurance and wealth firm said operating profit surged 35% to £2.2bn smashing analyst expectations.
Unlike some of their competitors, Aviva has managed to keep a lid on costs are carve out an increase in operating profit. However, Aviva was hit the same market swings as their peers and recorded an overall loss for the year due to adverse changes in investments.
Nonetheless, an increase in insurance premiums net of reinsurance helped operating profits higher and investors cheered the news sending Aviva shares over 3% to the good.
Aviva is regarded by many as a pillar of their income portfolio and today’s announcement reinforced this assertion with a final dividend hike to 20.7p to total 31p for the 2022 full year. This is sharp increase on 2021’s 22.05p pay out.
The firm will also commit an additional £300m to share buybacks meaning Aviva has returned £5bn to investors since 2021.
“Aviva’s the latest insurer to push through hefty hikes for its general insurance premiums, a trend expected to continue over 2023 as the cost to service claims has risen in this inflationary environment,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“The tricky backdrop pushed underwriting profitability down a touch, but the diversified model showed its strengths as performance on the whole was resilient. The life insurance business should be able to benefit from the growing number of pension schemes that now find themselves in the position of being able to de-risk – we’d expect to see an uptick in bulk purchase annuity business over the coming year as a result.”
“For investors, news of a £300m buyback was welcomed with open arms – the capital position remains strong, and the potential for further buybacks alongside a 7.8% forward yield looks attractive.”