Growth and strategic execution drive strong year-to-date performance at Aviva
Remain on track to meet or exceed cash remittance and cost saving targets
Strong solvency and liquidity positions. Capital return of at least £4bn underway with c.£450m of the £750m share buyback completed
| Savings & Retirement | Annuities & Equity Release | General Insurance1 | Aviva Investors | Solvency II |
|---|---|---|---|---|
| £7.3bn | £5.3bn | £6.5bn | £1.6bn | 215% |
| Net flows +21% | PVNBP (14)% | GWP +5% | Ext. net flows +37% | Cover ratio +12pp |
| 9M20: £6.0bn | 9M20: £6.2bn | 9M20: £6.2bn | 9M20: £1.2bn | HY21: 203% |
Amanda Blanc, Group Chief Executive Officer, said:
“Aviva has delivered strong performance in the first nine months. Record inflows in Savings & Retirement and excellent growth in General Insurance support our confidence in Aviva’s growth potential. Savings & Retirement net flows were up 21% year-to-date, continuing the strong first half performance. Bulk annuity volumes accelerated sharply in the third quarter. General Insurance premiums1 grew 5% year-to-date reflecting solid customer retention and new business wins, particularly in commercial lines.
“We continue to make excellent and rapid strategic progress, right across Aviva. The completion of disposals in France and Italy GI since the half year are significant milestones as we deliver a radically simplified and refocused Aviva. We are delivering our commitment to return at least £4bn of capital to shareholders, with c.£450m of the £750m share buyback already successfully completed.
“Aviva is targeting Net Zero by 2040 and we welcome the Government's plan, mandating financial institutions to publish transition plans. This will help to ensure that every firm making a Net Zero commitment - whether an insurer, a bank or an asset manager - is doing so in a robust and consistent way.
“We look forward with confidence. We expect the good trading momentum to continue in the fourth quarter, and we remain on track to meet or exceed our cash and cost saving targets.”
Strong growth in Life sales2 and GI premiums
- UK&I life sales of £25.3bn (9M20: £21.8bn) with strong growth in Savings & Retirement. Improved annuity volumes versus the first half with £2.4bn BPAs written in Q321, bringing 9M21 volumes to £4.0bn (9M20: £5.0bn).
- General Insurance gross written premiums (GWP)1 up 5% to £6.5bn at 9M21 (9M20: £6.2bn) and COR1 92.4% (9M20: 98.1%).
Continued focus on cost efficiency
- Controllable costs1,3 down 2% (excluding cost reduction implementation and IFRS 17 costs) to £2,045m at 9M21 (9M20: £2,080m) despite the headwinds of inflation and targeted investments in growth.
- On track to achieve savings target of £300m in 2022 relative to our 2018 baseline and net of inflation. Focus over the longer term remains to deliver top-quartile cost efficiency.
Positive outlook for cash remittances
- Expecting strong growth in cash remittances for the year from the £1.4bn achieved last year (9M21 continuing cash remittances: £1.1bn) and we remain on track to achieve our target of over £5bn in cumulative business unit cash remittances1 in 2021 to 2023.
Solvency and liquidity remain strong
- Solvency II shareholder cover ratio of 215% at Q321 (HY21: 203%).
- Pro forma prospective cover ratio at Q321 of c.197%, adjusted for remaining disposals, illustrative capital return, further debt reduction, and also for the estimated impact of interest rate reduction between 30 September and 5 November 2021 (HY21: 195%) - please refer to page 5 for further details.
- Centre liquidity (Oct 21) of £4.5bn (Jul 21: £2.8bn), with the increase since July mainly reflecting divestment proceeds received.
- Solvency II debt leverage ratio of 28% at Q321 (HY21: 26%).
Focus the portfolio nears completion. Capital return underway
- Recently completed disposals of France for £2.8bn and Italy GI for £284m. The remaining completions in Poland, Italy (Life) and Vietnam are expected by the end of the year, bringing to a conclusion the £7.5bn divestment programme.
- £750m share buyback commenced with c.£450m completed. We expect at least £4bn to be returned by HY22 with further details to be provided at FY21 results in March 2022 (subject to regulatory and shareholder approvals, remaining completions and market conditions).
Download our trading update – third quarter 2021 announcement PDF (550 KB)
Play a recording of our trading update – third quarter 2021 for analysts and investors
Watch our Group CEO, Amanda Blanc’s third quarter 2021 trading update film
Transcript for video Watch our Group CEO, Amanda Blanc’s third quarter 2021 trading update film
So, Amanda, you've been really clear on our strategic ambition and our colleagues have been
working hard to deliver on this. As a result, have we seen growth in our core lines of
business?
Sarah, we have. We've had a great quarter as far as that is concerned.
We've actually seen record written premiums in the general insurance business, which has been
driven by the commercial business, but really very strong growth there, which is a continuing
trend so extremely pleasing to see.
And then if we think about the priority area of Savings and Retirement, we've actually seen record
inflows into the Savings and Retirement business over the quarter.
Of course, it's driven a little bit by the external environment, but also, I think by our fantastic
products and propositions.
And then finally, in Aviva Investors, I think we've seen some strong progress there.
You know, the focus that Aviva Investors now has on real assets, on infrastructure, is starting to
really bear fruit and of course, underpinned by exceptionally strong credentials in ESG, which is
something we have such a strong heritage in, which is obviously at this point in time, incredibly
compelling to our customers.
So I think our transformation journey, on the route to growth, that we are well underway.
And overall, are you satisfied with the strategic progress that we've made year to date?
I am satisfied. I mean, if we think about it, was only 15 months ago where we actually launched
this new strategy, which was around focusing the portfolio, financial strength and transformation
of performance.
So taking each one of those in turn, I guess if we look at focusing the portfolio, in the last quarter,
we've completed the sale of France and Italy GI. So I think that that's great, and the other
disposals are on track to complete by the end of the year.
That, of course, has meant that we've been able to improve our financial strength, and we've been
able to delever the business. So, we're in a really strong position going forward.
But the real work of the business is now in the third area, which is around the transformation of
performance.
And we talked a little bit earlier about the growth within the business. And I think that's our first
priority showing that we can grow this business into those key product lines, which we spoke
about. And I think we've really shown that we can deliver that.
The digitisation and simplification of the business is always a challenge with a complex business
such as Aviva. But we're making really good progress there, looking at our customer journeys,
looking at the back-office processes to make sure that we make it easy for our customers, but also
easy for our colleagues. And of course, that results in a good cost discipline within the business.
So, you know, overall, I think we're in good shape on each of the three strategic priorities, and I'm
pleased that we've set ourselves up well for the future.
So I've been hearing lots of news about COP26 and I know Aviva’s been really heavily
involved with this. Is there a bit more you can tell us about how Aviva's tackling climate
change?
So of course, Aviva is 325 years old this year, so we're very excited about that. But actually, if we
think about, you know, ESG as it is currently known, Aviva has been working on this for the last 30
years.
This is deep into our DNA, and so we were very happy to play an active role in COP26.
We announced our net zero ambition target in March of this year. One of the most aggressive
targets out there, particularly for an organisation, a financial services organisation like Aviva.
But I think we felt that we were in a strong enough position to be able to do that and to lead on
this in the UK, which is, of course, our home market. So we've played a very active role with the
companies that we invest in. The top 30 carbon emitters within our own portfolio, we have a
climate escalation plan with them that they need to have a route to net zero and to align with the
science-based targets or we will have to disinvest.
We have committed to investing £10 billion of our policyholder funds into low carbon strategies.
And we've also said that we will not underwrite or invest in businesses that have more than 5% of
their revenue generated from coal unless they’ve signed up to science-based targets.
Thank you for answering all of my questions. And I just wondered whether you had any
further thoughts that you'd like to leave us with.
I'm restless for the organisation to do even better.
As I look forward to 2022, I think we're going to see more from Aviva, more in the growth space, in
those key priority areas that we spoke about earlier, more in the simplification of the business to
make us as efficient as we possibly can be, so we deliver better customer experience and, as a
consequence, of course, a lower cost base for the organisation.
But I think getting all of the colleagues really excited about the future for Aviva is really what we're
all about.
And if we think about this, it's every policy that we sell, every pension that we administer, you
know, every investment that we make that gets us on the road to net zero. That means that we're
doing a great job for our shareholders, for our customers, but also for our colleagues.
1 From continuing operations.
2 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section of the 2021 interim results announcement.
3 Controllable costs represent other expenses from continuing operations of £1.7bn for 9M21, reported in the IFRS consolidated income statement, and adjusted to show the controllable operational overheads associated with maintaining our businesses (for example adjusted to include indirect acquisition costs, and exclude certain amortisation and impairment charges and premium based taxes, fees and levies that vary directly with premiums). Controllable costs is an APM and further information can be found in the 'Other information' section of the 2021 interim results announcement.
Enquiries
Media:
Andrew Reid
+44 (0)7800 694 276
Sarah Swailes
+44 (0)7800 694 859
Analysts:
Rupert Taylor Rea
+44 (0)7385 494 440
Tegan Gill
+44 (0)7800 691 138
Michael O'Hara
+44 (0)7837 234 388
Notes to editors:
- Throughout this trading update we use a range of financial metrics to measure our performance and financial strength. These metrics include Alternative Performance Measures (APMs), which are non-GAAP measures that are not bound by the requirements of IFRS and Solvency II. A complete list and further guidance in respect of the APMs used by the Group can be found in the 'Other information' section of the 2021 interim results announcement.
- All figures have been translated at average exchange rates applying for the period, with the exception of the capital position which is translated at the closing rates on 30 September 2021. The average rates employed in this announcement are 1 euro = £0.86 (Q3 2020: 1 euro = £0.88) and CAD$1 = £0.58 (Q3 2020: CAD$1 = £0.58). Growth rates in this announcement have been provided in sterling terms unless stated otherwise.
- We exist to be with people when it really matters, throughout their lives. We have been taking care of people for more than 320 years, in line with our purpose of being ‘with you today, for a better tomorrow’. In 2020, we paid £30.6 billion in claims and benefits to our customers.
- Aviva is invested in our people, our customers, our communities and our planet. In 2021, we announced our plan to become a Net Zero carbon emissions company by 2040, the first major insurance company in the world to do so. This plan means Net Zero carbon emissions from our investments by 2040; setting out a clear pathway to get there with a cut of 25% in the carbon intensity of our investments by 2025 and of 60% by 2030; and Net Zero carbon emissions from our own operations and supply chain by 2030. Aviva has been leading this agenda for decades: Aviva was the first international insurer to go operationally carbon neutral in 2006 and we are champions of renewable energy and energy storage at our offices, allowing us to achieve our 2030 carbon reduction target (70% reduction on 2010 levels) 10 years early. Find out more about our climate goals at www.aviva.com/climate-goals and our sustainability ambition at www.aviva.com/sustainability
- Aviva is a Living Wage and Living Hours employer and provides market-leading benefits for our people, including flexible working, paid carers leave and equal parental leave. Find out more at www.aviva.com/social-purpose
- We are focused on the UK, Ireland and Canada where we have leading market positions and significant potential. We will invest for growth in these markets. We will also transform our performance and improve our efficiency. Our transformation will be underpinned by managing our balance sheet prudently, reducing debt and increasing our financial resilience. We also have strategic investments in Singapore, China and India.
- For more details on what we do, our business and how we help our customers, visit www.aviva.com/about-us
