Aviva plc Q3 2024 Trading Update

Another quarter of strong delivery and profitable growth

Capital position remains robust and resilient

Confident in achieving Group targets

Amanda Blanc, Group Chief Executive Officer, said:

“Our third quarter performance has been very strong. Trading continues to be extremely positive right across the business, underlining the strength of our consistent strategy and the significant benefits of Aviva's scale and diversification.

“Quarter after quarter, we are delivering consistently superior results and growing Aviva, particularly in the capital-light businesses. General insurance premiums are up 15%, and wealth net flows of £7.7bn are 21% higher reflecting continued growth in workplace pensions and strong demand from our financial adviser platform business. The bulk purchase annuity market remains very active and we have increased volumes, at good margins and disciplined capital usage, to £6.1bn.

“Aviva’s large and growing customer base is a major advantage, contributing to our excellent performance. Over the last four years we have increased customer numbers by 1.2m to 19.6m. We now have five million UK customers with more than one policy and, as the UK’s leading diversified insurer, the potential to grow this further is huge.

“Aviva is financially strong, trading well each quarter and has significant opportunities for further growth. We are confident about the outlook for the rest of 2024 and beyond, growing the dividend and achieving the Group’s financial targets.”

Another quarter of high-quality growth momentum

• General Insurance premiums up 15% to £9.1bn (9M23: £8.0bn).
• UK&I GI premiums up 18% to £5.7bn (9M23: £4.9bn) with 25% growth in personal lines and 11% growth in commercial lines, both balanced between continued strong new business and pricing actions to offset the inflationary environment.
• Canada GI premiums up 11% to £3.4bn (9M23: £3.2bn) with personal lines up 13% driven by pricing actions and strong new business growth. Commercial lines grew 8%.
• Group undiscounted combined operating ratio (COR) of 96.8% (9M23: 96.3%). The underlying COR improvement as pricing actions taken continue to earn through was offset by elevated natural catastrophe events (‘CATs’) in Canada. Discounted COR of 92.8% (9M23: 92.5%).
• Protection sales were up 44% following the completion of the AIG UK protection (‘AIG’) acquisition in April and double-digit growth in Health in-force premiums⁴.
• Wealth net flows of £7.7bn (9M23: £6.4bn) were up 21%, or 6%⁵ of opening Assets Under Management (‘AUM’) reflecting strong growth in Adviser Platform and inflows in Succession Wealth and Direct Wealth.
• Retirement sales of £7.3bn (9M23: £4.4bn) were up 67% driven by higher BPA volumes of £6.1bn (9M23: £3.2bn). Retirement margin improved to 3.2% (9M23: 2.5%) as we maintain our disciplined focus on margins and capital allocation.

Unlocking competitive advantage of our customer franchise

• The unrivalled scale of our 19.6m customer franchise is central to our strategy and growth story, as we continue to unlock both the scale and depth of our customer relationships. As we set out at our ‘In Focus’ briefing in October, our ambition is to reach more than 21m customers, including 5.7m UK customers with 2 or more Aviva policies by 2026. These ambitions underpin our confidence in the 2026 Group targets.
• Aviva’s brand, the strong market position of our businesses, our strength in leadership and technical capabilities and the investments we continue to make are critical differentiators. They allow us to serve more of our customers’ needs, transforming their experience and improving engagement. This means we are growing customer numbers and improving the depth of relationships, which is unlocking a unique competitive advantage of our diversified Group.
• We are delivering against this ambition with strong growth, particularly from our capital-light businesses. In Workplace we added 130k customers and in UK motor increased policies in-force by 13%.
• Our customers are always a key priority and our focus is on supporting them when they need us, as we have shown in our response to a quarter of elevated CAT activity in Canada.

Robust solvency and liquidity positions

• Estimated Solvency II shareholder cover ratio remains robust at 195% (HY24: 205%).
• Our businesses continued to deliver strong operating capital generation, which in Q3 was sufficient to absorb the impact of exceptionally high Canada CATs and the solvency strain from strong Q3 BPA sales. In addition, economic impacts, mainly from falling interest rates, reduced the SII cover ratio by 3pp. After the interim dividend (-4pp) and completion of the Probitas acquisition (-3pp) the overall SII cover ratio reduced from 205% to 195% over the quarter.
• Solvency II debt leverage ratio of 29.5% (HY24: 31.1%) following the redemption of the €700m Tier 2 notes in July. In September we successfully completed a £500m Tier 2 debt tender and new issuance which was neutral to the debt leverage ratio.
• Centre liquidity (Oct 24) of £1.7bn (Jul 24: £1.5bn), primarily reflecting payment of the interim dividend, remittances received and centre costs.

Confident outlook

• Strategic delivery and positive growth momentum continues. We are confident in achieving the Group targets outlined at our full year results presentation:
  • Operating profit⁶: £2bn by 2026.
  • Solvency II OFG: £1.8bn by 2026.
  • Cash remittances: >£5.8bn cumulative 2024-2026.
• In General Insurance we continue to benefit from market-leading pricing sophistication and expect the underlying COR to improve as rating actions taken earn through. While the inflationary environment has improved, we remain focused on continuing to price appropriately for claims inflation.
• In our Health business we anticipate further growth in line with our ambition for double-digit growth in in-force premiums, with some moderation in Protection growth expected.
• In Wealth we expect our strong growth momentum to continue and we remain on track to meet our Wealth ambition of £280m of operating profit in 2027.
• We have written £7.8bn of BPA volumes in 2024 as of today’s date and we do not expect this to increase materially over the remainder of the year. We have therefore met our three-year ambition of £15-20bn across 2022-24.
• Our capital framework is unchanged. Our guidance for mid-single digit⁷ growth in the cash cost of the dividend remains, alongside the intent to make regular and sustainable returns of capital.

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_Footnotes

_{1  Sales for Insurance, Wealth & Retirement (IWR) and for Retirement (Annuities and Equity Release) refers to Present Value of New Business Premiums (PVNBP). Sales for Insurance (Protection and Health) refers to Annual Premium Equivalent (APE). Premiums for General Insurance refer to gross written premiums (GWP). The first instance of each reference has been footnoted. However, this footnote applies to all such references in this announcement. PVNBP, APE and GWP are Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section of the Aviva plc Half Year Report 2024.
2  All Group, UK&I and Canada General Insurance GWP movements are quoted in constant currency unless otherwise stated.
3  Solvency II shareholder cover ratio is the estimated Solvency II shareholder cover ratio at 30 September 2024.
4  Health in-force premiums represents the total premiums attributable to Health policies in-force as at the reporting date, and is used to measure the growth of the Health business.
5  Net flows annualised as a percentage of opening assets under management.
6  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 Half Year Report 2024.
7  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.}

Enquiries

Investor contacts:

Greg Neilson
+44(0) 7800 694 564

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

Analyst conference call: 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 30 September 2024. The average rates employed in this announcement are 1 euro = £0.85 (9M23: 1 euro = £0.87) and CAD$1 = £0.58 (9M23: CAD$1 = £0.60). Where percentage movements are quoted on a constant currency basis, this is calculated by applying current 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 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 Half Year Report 2024.
• We are the UK's leading diversified insurer and we operate in the UK, Ireland and Canada. We also have international investments in India and China.
• We help our 19.6 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/sustainability/climate 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 30 June 2024, total Group assets under management at Aviva Group were £398 billion and our estimated Solvency II shareholder capital surplus as at 30 September 2024 was £7.6 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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