Operating profit up 9%, with continued growth momentum across the Group
Announcing share buyback of £300m and upgraded dividend guidance
Confident outlook for 2024, and new Group targets
| Operating profit‡,1 | Solvency II own funds generation‡ | Undiscounted COR‡ | Solvency II cover ratio‡,4 | 2023 total dividend per share |
|---|---|---|---|---|
| £1,467m | £1,729m | 96.2% | 207% | 33.4p |
| +9% | +12% | 1pp | (5)pp | +8% |
| 20222: £1,350m | 20223: £1,540m | 20222: 95.2% | 2022: 212% | 2022: 31.0p |
Amanda Blanc, Group Chief Executive Officer, said:
“We have made significant progress in 2023. Sales are up, costs are down, and operating profit is 9% higher. Our position as the UK’s leading diversified insurer, with major businesses in Canada and Ireland, is clearly delivering. Today we have raised our total dividend by 8% to 33.4 pence and have now returned more than £9bn in capital and dividends to shareholders over the last three years.
“We have generated strong organic growth, especially in our capital-light businesses, which make up over half our portfolio. General insurance premiums increased by 13% on the back of strong performances in Canada and the UK. We are the number one provider of workplace pensions, and this business continues to thrive, with a record £6.9bn of net flows, boosted by winning 477 new schemes during the year. Our private health business is experiencing strong demand from businesses and individual customers and sales grew 41% in 2023. The higher interest rate environment boosted the bulk annuity market, where we secured excellent volumes of £5.5bn at strong margins.
“We are building a clear track record of strong and consistent performance. In each of the last three years we have grown sales, operating profit and our dividend. This momentum gives us increased confidence for Aviva’s future, and so today we are announcing a new £300m share buyback programme, upgrading our dividend guidance to mid-single digit cash cost growth, and upgrading our Group financial targets.
“Aviva is financially strong. We are trading consistently well. Our prospects have never been better. We have leading businesses in growing markets, a fantastic brand, and we are investing substantially to make service better for our 19m customers. All the ingredients are in place to ensure Aviva continues to deliver an outstanding performance for our customers and our shareholders. I’m certain we will.”
Strong 2023 results with continued profitable growth momentum
- Group operating profit‡,1 up 9% to £1,467m (20222: £1,350m).
- Solvency II operating own funds generation‡ (Solvency II OFG) up 12% to £1,729m (20223: £1,540m), which included a £208m initial benefit from two partnership extensions in IWR. Solvency II OFG excluding management actions and other up 28%.
- Solvency II operating capital generation‡ (Solvency II OCG) up 8% to £1,455m (20223: £1,352m).
- Solvency II return on equity‡ 14.7% (20223: 9.9%).
- Cash remittances‡ of £1,892m up 3% (2022: £1,845m).
- General Insurance premiums‡,5 up 13%6 to £10,888m (2022: £9,749m). Undiscounted COR‡ of 96.2% (20222: 95.2%) and discounted COR of 92.7% (2022: 94.3%).
- Insurance, Wealth & Retirement (IWR) operating value added‡ up 13% to £1,849m (2022: £1,635m).
- Baseline controllable costs‡,7 down 1% at £2,734m, more than offsetting inflation. Our continued focus on cost efficiency has enabled us to deliver our £750m cost reduction target a year early.
- IFRS profit for the year8 of £1,106m (20222: loss of £1,030m).
New share buyback and upgraded dividend guidance
- Solvency II shareholder cover ratio‡ of 207% (2022: 212%) and centre liquidity‡ (Feb 24) of £1.9bn (Feb 23: £2.2bn).
- As part of our programme of regular and sustainable capital returns we are commencing a new share buyback programme of £300m immediately, taking the total amount of capital returns and dividends paid to shareholders to more than £9bn over the last three years. Our preference remains to return surplus capital regularly and sustainably to shareholders.
- Final dividend per share of 22.3 pence (2022: 20.7 pence) giving a total dividend per share of 33.4 pence (2022: 31.0 pence), up 8%.
- In light of the significant progress we have made and our confidence in Aviva’s future, we are upgrading our dividend guidance and we now expect to grow the cash cost of the dividend by mid-single digits9.
Continued trading performance
- UK&I General Insurance premiums‡,5 up 16% to £6,640m (2022: £5,740m) and undiscounted COR‡ of 96.8% (20222: 96.4%). UK personal lines premiums grew 24% driven by strong rate discipline in the inflationary environment and new propositions. UK commercial lines premiums grew 10% due to rate actions and new business growth.
- Canada General Insurance premiums‡,5 up 10%6 to £4,248m (2022: £4,009m) and undiscounted COR‡ of 95.3% (20222: 93.7%). We saw excellent growth of 13%6 in commercial lines and 9%6 in personal lines driven by rate increases and strong new business growth.
- Protection and Health sales5 were up 16% driven by strong growth in Health, up 41%, and Individual Protection. Value of new business on an adjusted Solvency II basis (VNB)‡ was 3% lower as the impact of interest rate increases more than offset the growth in sales.
- Wealth continued to show resilience in challenging market conditions with net flows‡ of £8.3bn (2022: £9.1bn) representing 6% of opening Assets under Management (AUM)‡. AUM grew 15% to £170bn (31 December 2022: £147bn).
- Retirement sales5 were up 14% to £7,088m (2022: £6,238m) driven by £5.5bn of Bulk Purchase Annuity (BPA) transactions and increased demand for Individual Annuities in a higher interest rate environment. VNB‡ was up 9% to £286m (2022: £264m).
- Aviva Investors is a core enabler of growth for the Group. In 2023, it originated £2.6bn of real assets for our annuities business, and over 60% of Workplace net flows‡ were into Aviva Investors.
Group financial performance
| General Insurance premiums‡,5 | Operating value added‡,10 | IFRS profit for the year8 |
|---|---|---|
| £10,888m | £1,849m | £1,106m |
| +13%6 | +13% | +207% |
| 2022: £9,749m | 2022: £1,635m | 20222: £(1,030)m |
Cash and liquidity
| Cash remittances‡ | Centre liquidity‡ |
|---|---|
| £1,892m | £1,891m |
| +3% | (15)% |
| 2022: £1,845m | Feb 23: £2,220m |
Confident outlook and upgraded Group targets
Our positive momentum continued in 2023 with a strong set of results, and our diversified business model positions us well to navigate the current macroeconomic environment. This reinforces our confidence in the prospects, financial targets and outlook for the Group.
In General Insurance we remain focused on pricing appropriately for the ongoing inflationary environment. Overall, we expect the rating environment to remain favourable in personal lines with some moderation of rate increases in commercial lines. We expect the underlying COR11 to benefit from the earn through of rating actions taken in 2023.
In Insurance, Wealth & Retirement we expect to see continued growth. We expect further strong demand in Protection & Health products given supportive market dynamics. Wealth is central to our strategy, and as we set out at our ‘In Focus’ briefing in October 2023, the market presents a significant opportunity for Aviva to continue to generate sustainable, capital-light growth. We expect to continue our disciplined approach to BPAs, where the market should continue to benefit from more pension schemes looking to de-risk.
We have now exceeded our existing Solvency II operating own funds generation‡ target of £1.5bn by 2024, and we have delivered our £750m cost reduction target one year early. We remain on track to exceed our cash remittance‡ target of >£5.4bn cumulative (2022-2024).
Therefore, we are establishing new, upgraded targets for the Group:
- Operating profit‡,1: £2bn by 2026. A new target following the implementation of IFRS 17.
- Solvency II own funds generation‡: £1.8bn by 2026. A key driver of value and cash remittances‡. Upgraded from £1.5bn by 2024.
- Cash remittances‡: >£5.8bn cumulative 2024-2026. Underpinning our sustainable dividend policy. Upgraded from >£5.4bn 2022-2024.
We are committed to delivering for our shareholders. The upgraded targets set out today support our sustainable dividend policy. We now expect the cash cost of the dividend to grow by mid-single digits, demonstrating our confidence and ambition for Aviva as we look to deliver for all of our stakeholders.
Under our capital framework, surplus capital is available for reinvestment in the business, bolt-on M&A and returns to shareholders. We have announced a £300m share buyback today, and anticipate further regular and sustainable capital returns in the future.
Download our 2023 full year results announcement (PDF 4.5MB)
Download our 2023 full year results presentation (PDF 1.7MB)
Watch our 2023 full year results update for investors and analysts
Watch our Group CEO, Amanda Blanc’s 2023 full year results video
Transcript for video Watch our Group CEO, Amanda Blanc’s 2023 full year results video
Barry:
Hi, Amanda. Thanks for having me here today to talk about the results with you. So, it's the end of the financial year, how have we performed?
Amanda:
So, Barry, thank you very much for travelling over from Ireland today to do this. I think what today's results demonstrate is our momentum. Aviva is moving even faster than before, and I think the real credit for that performance goes to our Aviva colleagues for everything that they do to support our customers, whether that is helping a family recover from a devastating flood claim, consolidating somebody's pension pot to help them plan for retirement, or delivering a new service such as the Canadian Auto Care Centers. They work tirelessly to solve our customers financial puzzles, so they deserve a huge thank you.
Amanda:
So if we turn now to the performance of the business, I think what you've seen is a consistent quarter-on-quarter growth, strong reliable earnings and cash generation. And of course, we are exceeding our targets. So if we unpack that just a little bit, we continue to grow right across the business. In General Insurance premiums are up by 13% and we've had over £8.3 billion of net flows into the Wealth business.
Amanda:
We're also more efficient. Our costs are down by 1% and we've achieved our cost savings target one year early. We're more profitable. Operating profit is up 9%. And I think that shows the real underlying strong performance of the business. And that has translated into excellent cash remittances of £1.9 billion. And today we announced the £300 million share buyback, which starts immediately.
Amanda:
And with our confidence in Aviva's performance and the positive outlook for cash generation, we've upgraded our dividend guidance today. So another strong year.
Barry:
Well, that's great to hear. What are the top highlights across the business?
Amanda:
It's actually difficult to pick one or two. So maybe I could just run through a couple of the really standout points for me. So in the Wealth business, Doug and the team have delivered really, really strong growth in the Workplace savings business with 477 new schemes won in 2023. We've also delivered double digit AUM growth on the Adviser Platform and expanded our lead generation capability into Succession Wealth. Across Protection and Health those businesses are both growing.
And Retirement, of course, remains a really core part of the Aviva proposition. And we've seen good growth in Individual Annuities and the Bulk Purchase Annuity business in 2023. In Aviva Investors, Mark and the team have delivered sustainable asset origination for the annuity business and they've captured over £4 billion worth of workplace net flows in 2023. In UK General Insurance Jason and the team are cementing our number one position with over 40% growth in Personal Lines Retail and continued growth in Commercial Lines. And, finally, in Canada, Tracy and the team have grown the Commercial Line business whilst delivering a very strong 88% combined operating ratio and building out the RBC partnership in Personal Lines. So what this really shows is the benefit of the diversified model and when all of the businesses are performing at the level that they are today, I think it shows the real strength of the Aviva proposition.
Barry:
So it's clear that Aviva is a great investment and I've heard you talk about that before, can you share in your own words why that is?
Amanda:
Firstly, we’re the UK's leading diversified insurer, there's no other business that can replicate that in the UK. That combination of strong growth potential with capital light businesses I think is a very compelling investment proposition. Secondly, we have a consistent strategy. It hasn't changed. We're focused on the four key areas of customer, growth, efficiency and sustainability. Thirdly, we have strong organic growth in all of our markets.
Amanda:
That has been accelerated through bolt-on M&A, as you've seen this week with the acquisition of Probitas. And I think that's evidenced in the numbers that we're producing and we're really confident that we can sustain that performance. Fourth, I think we now have a track record of delivery, built up with strong and consistent performance momentum over the past three and a half years.
Amanda:
And finally, and of course, very importantly, we deliver superior returns for shareholders, growing dividends and providing regular capital returns. So all of that, I think, creates a very compelling investment proposition.
Barry:
So, can we expect any changes to our strategy?
Amanda:
So I think we know that our strategy, the go-to customer brand of choice across insurance, wealth and retirement is actually the right one for Aviva. And so it's no surprise that our strategy remains unchanged and we are laser-focused on execution. And I think we're really well positioned to secure that future growth with a new set of upgraded Group targets.
Amanda:
We're making excellent progress on executing the strategy so far, and it's unlocking the competitive advantage of Aviva's model, but also creating real momentum for the future.
Barry:
To continue with this momentum, what growth opportunities are we seeing?
Amanda:
I think we're really fortunate there are plenty of growth opportunities. Let's just take a few of those. So in the Wealth market, we expect that market to grow to £4.3 trillion over the next decade. Our acquisition of the AIG UK Protection portfolio provides 2.5 million customers across the UK. In Canada the acquisition of Optiom, that strengthens our Specialty Lines business, and it gives us a growing stream of distribution income.
Amanda:
And in the UK General Insurance business, the acquisition of Probitas is another step in our strategy to invest in Aviva's future profitable growth. Aviva's presence in the Lloyd’s market opens up new opportunities to accelerate growth in capital-light insurance businesses. So we're already number one for trust, consideration and awareness for customers, but we're definitely not complacent Barry. We continue to prioritise delivering the right outcomes for our customers.
Amanda:
For example, we pass on all of the benefit of interest paid on cash balances on the investment platform, and we don't have early exit charges. And we're going to continue with this customer focused momentum in 2024 and beyond.
Barry:
What do you want everyone to take away from today?
Amanda:
Okay, so I think if we reflect on today's results, we have transformed the performance of Aviva over the last three years. We've grown quarter-on-quarter, year-on-year. And by operating more efficiently, we're turning that into improvements in profitability. And through dividend growth and regular share buybacks we are sustainably delivering superior returns to our investors. With our strong momentum and continued investment in the business we've got real confidence in the ability to extend this track record and it's been another excellent year. So ultimately, I want everyone looking at the results to feel as proud and as confident as I feel in the future of Aviva.
Barry:
Thanks for talking to me, Amanda.
Amanda:
Thank you very much for coming over and doing the interview Barry, it's been great to see you.
Footnotes
‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section of the Aviva plc Annual Report and Accounts 2023.
1. Reference to operating profit represents Group adjusted operating profit which is a non-GAAP APM and is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section of the Aviva plc Annual Report and Accounts 2023.
2. The 2022 comparative amounts, which were previously prepared under IFRS 4, have been restated following the adoption of IFRS 17 from 1 January 2023, as described in note 1 of the Aviva plc Annual Report and Accounts 2023.
3. The 2022 comparative amounts have been restated for methodology changes described in the 'Other Information - overview' section of the Aviva plc Annual Report and Accounts 2023.
4. Solvency II cover ratio is the estimated Solvency II shareholder cover ratio at 31 December 2023.
5. Sales for Protection & Health (Insurance) refers to Annual Premium Equivalent (APE). Sales for Retirement (Annuities and Equity Release) refers to Present Value of New Business Premiums (PVNBP). Sales or premiums for General insurance refer to gross written premiums (GWP). APE, PVNBP and GWP are APMs and further information can be found in the 'Other information' section of the Aviva plc Annual Report and Accounts 2023.
6. In constant currency.
7. Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 cost savings target baseline.
8. IFRS profit/(loss) for the year represents IFRS profit/(loss) after tax.
9. Estimated dividends are for guidance and are subject to change. The Board has not approved or made any decision to pay any dividend in respect of any future period.
10. Refers to IWR operating value added.
11. Undiscounted COR excluding the impacts of prior-year development and weather versus LTA.
Enquiries
Investor contacts:
Rupert Taylor Rea
+44(0) 7385 494 440
Joel von Sternberg
+44(0) 7384 231 238
Michael O'Hara
+44(0) 7387 234 388
Media contacts:
Andrew Reid
+44 (0)7800 694 276
Sarah Swailes
+44 (0)7800 694 859
Marion Fischer
+44 (0)7800 693 219
Timings
Presentation slides: 0700 hrs GMT
Real time media conference call: 0730 hrs GMT
Analyst presentation: 0830 hrs GMT
Notes to editors
- All figures have been translated at average exchange rates applying for the year, with the exception of the capital position which is translated at the closing rates on 31 December 2023. The average rates employed in this announcement are 1 euro = £0.87 (2022: 1 euro =£0.85) and CAD$1 = £0.60 (2022: CAD$1 = £0.62). Where percentage movements are quoted on a constant currency basis, this is calculated by applying year to date average exchange rates to prior year.
- Growth rates in this announcement have been provided in sterling terms unless stated otherwise.
- All percentages, including currency movements, are calculated on unrounded numbers so minor rounding differences may exist.
- Throughout this report 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 Aviva plc Annual Report and Accounts 2023.
- We are the UK's leading diversified insurer and we operate in the UK, Ireland and Canada. We also have international investments in India, China and Singapore.
- We help our 19.2 million customers make the most out of life, plan for the future, and have the confidence that if things go wrong we’ll be there to put it right.
- We have been taking care of people for more than 325 years, in line with our purpose of being ‘with you today, for a better tomorrow’. In 2023, we paid £25.6 billion in claims and benefits to our customers.
- In 2021, we announced our ambition to become Net Zero by 2040, the first major insurance company in the world to do so. We are aiming to have Net Zero carbon emissions from Aviva’s operations and supply chain by 2030. While we are working towards our sustainability ambitions, we recognise that while we have control over Aviva’s operations and influence on our supply chain, when it comes to decarbonising the economy in which we operate and invest, Aviva is one part of a far larger global ecosystem. There are also limits to our ability to influence other organisations and governments. Nevertheless, we remain focused on the task and are committed to playing our part in the collective effort to enable the global transition. Find out more about our climate goals at www.aviva.com/climate-goals and our sustainability ambition and action at www.aviva.com/sustainability
- Aviva is a Living Wage, Living Pension 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/about-us/our-people
- As at 31 December 2023, total Group assets under management at Aviva Group were £376 billion and our estimated Solvency II shareholder capital surplus was £8.8 billion. Our shares are listed on the London Stock Exchange and we are a member of the FTSE 100 index.
- For more details on what we do, our business and how we help our customers, visit www.aviva.com/about-us
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