Aviva shares fall despite private health boom boosting insurance giant
Shares in Aviva fell even after it recorded a strong start to the year, with sales rising eleven per cent thanks to a boom in private healthcare.
Private healthcare sales grew by a quarter to £33m as more customers were attracted to “the benefits of private cover,” perhaps boosted by Brits looking for alternatives to the widely publicised struggles of the NHS.
Speaking to the Financial Times, chief executive Amanda Blanc said “whilst the NHS does a great job for millions of people there are people who would like to accelerate their treatment, or give themselves that confidence that should something happen to them, they want to have that accelerated treatment.”
Blanc said Aviva’s general insurance business is going “from strength to strength”. Gross written premiums rose 11 per cent to £2.4bn with Aviva’s UK division, which recorded 13 per cent growth, outperforming its Canadian business.
However, flows into Aviva’s wealth business were £2.3bn, which was 15 per cent lower than the first quarter of last year. Aviva said this was due to “the impact of challenging market volatility”.
Its shares were trading 5.9 per cent lower.
The insurance giant said its costs were down one per cent to £675m reflecting its ongoing focus on efficiency. It said it was on track to deliver its savings target of £750m by 2024.
Blanc, City PM’s personality of the year in 2022, commented: “We have delivered an encouraging start to 2023 and continue to build clear trading momentum. New business volumes are good, despite persistent economic uncertainty, and we delivered another quarter of strong growth across our diversified business.”
Its Solvency II shareholder cover ratio stood at 196 per cent, 16 percentage points lower than at the end of 2022, mainly due to the impact of shareholder returns. This came in below analyst expectations, further disappointing investors.
Aviva said it continues to see opportunities for further investment, but will “remain disciplined in our approach to capital deployment”.
It maintained its financial targets and aims to return around £915m in dividends to shareholders in 2023. Aviva reiterated its aim to provide “regulator and sustainable capital returns to shareholders”.
Over the past few years Aviva has faced pressure from its shareholders, activist fund Cevian Capital in particular, to return more money to shareholders.
Last year it announced a £300m share buyback programme, which it said was “nearing completion,” while it recently paid its final dividend to shareholders worth £576m.
Cevian, which took a stake in 2020, announced today that it sold its entire stake in Aviva, arguing it had been “transformed from a poorly performing conglomerate to a focused and well-performing insurance company.”
It had been one of Aviva’s largest shareholders.