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Having sold off assets over the past couple of years, Aviva declared an end to its disposal programme and upgraded its outlook for 2018, accelerating its growth ambitions. The dividend was raised, and cash was returned to shareholders, with the trend expected to continue going forward.
Prudential finally settled rumours by declaring that it is to split its UK business from its US and Asian arms, having merged its UK life insurance business with its UK fund manager in 2017. Shareholders will take a stake in the new UK life insurance and asset management company M&G Prudential, and retain a holding in the existing Prudential, which will take on all other operations.
Legal & General reported growth across all metrics, with results receiving a boost after booking a significant mortality release, due to life expectancy not lengthening as much as anticipated. The outlook is bright, targeting double-digit earnings growth over the coming year.
Aviva shares react to higher returns and rosier outlook
‘Our largest market, the UK, has gone from strength to strength, growing sales, market share and profit. For Aviva, the UK is a dependable and growing business. Aviva has broad-based growth, with six of our eight major markets delivering double-digit profit improvement. We now have a collection of strong and growing businesses,’ – chief executive Mark Wilson.
Aviva delivered its fourth consecutive year of double-digit dividend growth, lifting its payout 18% to 27.4p – meeting its promise to pay out 50% of operating profits, with a pledge to lift that to 55%, then to 60% of earnings by 2020.
A further £500 million will be returned to shareholders as Aviva looks to deploy a £2 billion surplus this year, with £500 million earmarked for bolt-on acquisitions. Another £900 million will be used to reduce its debt pile.
Operating earnings per share (EPS) rose 2% in 2017 to £3.1 billion, and Aviva has brought forward its growth ambitions. It now expects an annual EPS growth of over 5% from 2018 onwards, having previously guided for mid-single digit growth.
While the Aviva investors in the UK, France, Poland, Ireland, and Singapore all experienced double-digit growth in operating profit in 2017, Canada put in a disappointing performance which Aviva is now tackling by implementing a recovery plan.
Cash remittances climbed by one-third last year, and Aviva has a target to deliver £8 billion over 2016 to 2018, raising the target from £7 billion at the end of 2016.
With the business streamlined and its targets met or exceeded, the company is confident of delivering stronger earnings growth out to 2020, with the dividend to follow suit.
Aviva shares have bounced off the lows at 484p, but the rally appears to be faltering well short of the £5.37 high from January. Above this, the July 2017 high at £5.50 comes into view. A turn lower from £5.20 would create a lower high, and raise the risk of a return to the lows around 484p.