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Aviva share price: 3 things we learnt from its half-year results

Last week, the UK-based insurer recorded a relatively strong set of half-year results with its management announcing that it is reviewing ‘strategic options’ for its Asian businesses.

Aviva recorded a strong set of half-year results last week, driven by a strong performance in general insurance lines, though the insurer was weaker across its fund management and life businesses.

IG looks at the main takeaways from Aviva’s latest trading update.

Mixed results at Aviva

Aviva did not disappoint investors in its half-year results, building on its strong foundations, but it didn’t manage to excite them either, with the insurer left with lots to improve upon.

In its first six months of trading, Aviva’s operating profit rose by 1% to £1.4 billion and saw its interim dividend increase by 3% to 9.5p a share. Its flat, though stable, set of figures were reflected in its share price which has fallen by 4% in the days since its latest trading update.

The slight uptick in profit was driven by the company delivering a decent performance in general insurance with a combined ratio of 95.9%. But this was offset by operating profits declining across its life insurance and asset management units, with the insurer blaming challenging market conditions for its weaker performance.

Aviva boasts strong balance sheet

Overall, the company’s financial position remains strong with a capital surplus of £11.8 billion and £2.3 billion of cash.

‘Maintaining such a healthy capital surplus is important as we continue to reduce our debt levels and safely navigate uncertain market conditions,’ Aviva CEO Maurice Tulloch said. ‘Aviva is ready and resilient.’

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Asian business under review

Aviva’s management used its half-year results to inform investors that it has decided to review strategic options for its Asian businesses.

Tulloch’s predecessor, Mark Wilson, began the process of transforming Aviva into a leaner operation with a focus on generating cash and financial stability, with the new CEO clearly looking to pick up where he left off.

Aviva has disposed of many of its satellite businesses, with the insurer using the proceeds to invest in larger more profitable units and acquiring the likes of Friends Life and RBC’s general insurance unit.

Aviva is now turning its attention to trimming the fat across its Asian businesses in a move that will leave the group with plenty of cash to help it hit its Solvency II target of 150% - 180%, as well as reducing debt and returning value to shareholders.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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