Aviva Regulatory News (AV.)

Aviva plc 2023 Interim Results Announcement

Strong first half with profitable growth momentum across the Group

Group operating profit‡,1 up 8% and Solvency II own funds generation‡ up 26%

Confident outlook for 2023, expect to exceed Group medium-term targets

Interim dividend per share up 8% to 11.1p

Amanda Blanc, Group Chief Executive Officer, said:

"Aviva is delivering consistently strong and profitable growth. In the first half of 2023 we grew sales, operating profit and dividends for our shareholders. Our excellent trading momentum is a direct result of the decisions we have taken over the last three years to re-focus Aviva. Today, Aviva has leading positions in growing markets, providing strong resilience in the current economic climate.

"In the UK & Ireland, general insurance premiums were up 13%, with healthy sales in both our commercial and personal lines businesses, where our Aviva Zero product has now attracted 250,000 new policies since launch. In Wealth, our market-leading Workplace business grew net flows by 25%. We continue to see very strong demand for private health insurance, with sales increasing by 58% as we expanded our services to corporate and individual customers. Our excellent Canadian general insurance business is also growing well, with sales 12% higher as a result of a strong performance in commercial lines, and the continued success of our local banking partnership.

"Aviva's cash and capital position is robust and, in line with our guidance, we have increased the interim dividend by 8% to 11.1p, and estimate full year 2023 operating profit growth of 5% to 7%. We expect to make further strong progress with our clear strategy, growth opportunities in all of our markets, and the £1 billion investment well underway to accelerate our future performance.

"Aviva's performance and prospects have been transformed from just a few years ago. Today's Aviva is about delivery and momentum, and these results show that Aviva is consistently meeting its promises. We expect to exceed our financial targets and we are making progress each quarter, as we said we would. I remain confident and excited that there is so much more Aviva can and will achieve."

Strong first half results with continued profitable growth momentum

• Group operating profit‡,1 up 8% to £715m (HY222: £661m). Operating EPS‡,4 up 10% to 19.9p (HY222,4: 18.1p).

• Solvency II operating own funds generation (OFG)‡ up 26% to £648m (HY223: £514m). On track to exceed our target of £1.5bn OFG‡ per annum by 2024. Solvency II operating capital generation (OCG)‡ up 9% to £580m (HY223: £532m).

• Solvency II return on equity 10.8% (HY22: 6.7%).

• General Insurance gross written premiums (GWP)‡ up 12% to £5,274m (HY22: £4,694m). Undiscounted COR‡ of 94.8% (HY222: 93.8%) and discounted COR of 91.3% (HY22: 92.8%). Operating profit‡,1 up 29% to £470m (HY222: £364m).

• Insurance, Wealth & Retirement (IWR) VNB‡ up 7% to £319m (HY223: £297m), and operating value added‡ up 32% to £640m (HY22: £486m).

• Baseline controllable costs‡,5 flat at £1,340m (HY22: £1,342m), absorbing c.7% of inflation. With our continued focus on cost efficiency we now expect to deliver our 2024 target of £750m gross cost reduction a year early.

• Cash remittances‡ of £825m were up 3% (HY22: £798m). On track to exceed our target of >£5.4bn cumulative cash remittances‡ 2022-24.

• IFRS profit for the period6 of £377m (HY222,10: £198m loss).

• Interim dividend per share up 8% to 11.1p (HY22: 10.3p); £300m buyback executed in first half.

Capital position is strong and asset portfolio well positioned

• Estimated Solvency II shareholder cover ratio‡ of 202% (FY22 :212%) and centre liquidity‡ (July 23) of £1.6bn (Feb 23: £2.2bn).

• Solvency II debt leverage ratio‡ of 30% pro forma for planned debt reduction (FY22: 30%).

• Aviva's high quality shareholder asset portfolio of £78.5bn (FY22: £78.4bn) continues to perform well and is defensively positioned.

Continued positive trading performance

• UK&I General Insurance GWP‡ up 13% to £3,219m (HY22: £2,840m) and undiscounted COR‡ of 96.3% (HY222: 95.3%). UK personal lines GWP‡ grew 16% driven by strong rate increases as we continue to manage the inflationary environment, as well as new product propositions. UK commercial lines GWP‡ grew 11% due to rate increases and new business growth.

• Canada General Insurance GWP‡ up 12% in constant currency to £2,055m (HY22: £1,854m) and undiscounted COR‡ of 92.8%(HY222: 91.8%). We saw excellent growth in constant currency of 17% in commercial lines and 8% in personal lines driven by rate increases and strong new business growth.

• Protection and Health sales7 were up 23% with strong growth in Health and Individual Protection. VNB‡ was up 18% to £118m(HY223: £100m) driven by higher volumes in Health together with beneficial assumption changes made in H2 2022.

• Wealth continued to show resilience in challenging market conditions with net flows‡ of £4.3bn (HY22: £5.0bn). Strong growth in Workplace net flows‡ was more than offset by lower net flows‡ in Platform.

• Retirement sales7 were up 17% to £3,223m (HY22: £2,762m) with strong growth in Bulk Purchase Annuities (BPAs) and Individual Annuities. VNB‡ was up 2% to £74m (HY223: £72m). The outlook for BPA volumes remains positive with a strong pipeline for the second half.

• Aviva Investors external net flows‡ remained positive at £0.2bn (HY22: £0.2bn) and reflect the tough market backdrop.

Confident outlook

Our positive momentum continued in the first half of 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 across both commercial and personal lines. We expect the underlying COR‡ to benefit from the earn through of rating actions already taken and still to come in the second half. However, we wouldn't expect the favourable weather and PYD experience of the first half to necessarily repeat.

In Insurance, Wealth & Retirement we expect to see continued growth. We anticipate continued momentum in BPAs in the second half as a growing number of pension schemes look to de-risk. In Wealth, our Workplace business will continue to offer strong growth opportunities while market conditions present a near-term challenge in Adviser Platform. We continue to expect strong demand for Protection and Health products.

We expect full year 2023 Group operating profit‡,1 to grow between 5% to 7% from £1,350m in 2022.

We are on track to exceed our Solvency II operating own funds generation‡ target of £1.5bn per annum by 2024 and our cash remittance‡ target of >£5.4bn cumulative (2022-24). We expect to deliver our target of £750m gross cost reduction by 2024 one year early.

We remain committed to delivering for our shareholders. Consistent with previous guidance, we expect to pay a dividend of c.£915m or c.33.4p for 2023, with low-to-mid single digit growth in the cash cost of the dividend thereafter.

Under our capital framework, which remains unchanged, surplus capital is available for reinvestment in the business, bolt-on M&A and/or additional returns to shareholders. We anticipate further regular and sustainable capital returns in the future.

Footnotes included within the news release

‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section.

R Symbol denotes key performance indicators used as a base to determine or modify remuneration.

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.

2. The 2022 comparative results, which were previously prepared under IFRS 4, have been restated following the adoption of IFRS 17 from 1 January 2023, as described in note B2(a).

3. The 2022 comparatives have been restated from those previously published for methodology changes described in the 'Other information' section.

4. Operating earnings per share is derived from the Group adjusted operating profit APM. Further details of this measure are included in the 'Other information' section. The 2022 comparatives have been calculated using the weighted average number of shares in issue as if the share consolidation at taken place on 1 January 2022.

5. Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 cost savings target baseline.

6. IFRS profit/(loss) for the period represents IFRS profit/(loss) after tax.

7. Sales for Insurance (Protection & Health) 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.

8. IFRS Shareholders' equity is equity attributable to shareholders of Aviva plc, less preference capital.

9. Adjusted IFRS Shareholders' equity is IFRS shareholders' equity plus CSM, net of tax.

10. Since the publication of initial 2022 results under IFRS 17 and IFRS 9 on 19 July 2023, IFRS loss for the period, IFRS Shareholders' equity and Adjusted Shareholders' equity for half year 2022 has been adjusted for a favourable impact of £200 million (net of tax), in preparation of the Half Year Report 2023. See note 2.i Profit and earnings per share.

11. Rounding differences apply.

Click on, or paste the following link into your web browser, to view the full Aviva plc Half Year Report 2023 (document):

http://www.rns-pdf.londonstockexchange.com/rns/4286J_1-2023-8-15.pdf

The document is available to view on the Company's website at https://www.aviva.com/investors/reports/ and copies have been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.