LONDON (BLOOMBERG, REUTERS) - British insurer Aviva on Thursday (March 9) raised its dividend and said it will return more cash to shareholders this year after higher earnings at the life insurance unit helped boost full-year operating profit. Aviva shares rose the most in seven months.
The company posted a 12-per-cent increase in full-year operating profit to £3 billion (S$5.15 billion), boosted by growth in its fund arm, Aviva Investors, as well as its British, Canadian and Irish units.
Profit after tax fell 22 per cent to £859 million, however, after adding in a £380 million exceptional charge to cover the British government's decision to lower the discount rate used to assess personal injury claim lump sum payouts.
The company said its performance was helped by a strong rise in cash remittances from its various business units, up 20 per cent to £1.8 billion, helped by a 15 per cent rise in general insurance net written premiums to £8.2 billion.
"We have the high-quality problem of too much capital so we're going to invest in our business," chief executive officer Mark Wilson said in an interview on Bloomberg Television. "We're saying today we're going to give some of that back to our shareholders in 2017 and we're going to pay down some pretty expensive hybrid debt as well."
Aviva shares climbed as much as 6.4 per cent in London trading, the most since Aug 4, and were up 5.6 per cent at 539.5 pence as of 8.18am on Thursday (March 9).
The stock is up 11 per cent this year, giving the company a market value of about £22 billion.
Life insurance operating profit increased 8 per cent to £2.6 billion pounds, helped by growth in protection, pensions and individual annuities in Britain, and protection sales and currency effects in Europe.
Fund management operating profit, meanwhile, rose 30 per cent to £138 million, boosted by a rise in group assets under management to £450 billion, an increase in revenue margin and improved cost to income ratio.
The company said it would pay a total dividend for the year of 23.3 pence a share, up 12 per cent.
Strong cash generation of £3.5 billion helped the firm's Solvency II capital ratio, the rainy day cash buffer to any market shock, rise to 189 per cent from 180 per cent in 2015.
That gave a surplus of £11.3 billion, up from £9.7 billion last year, and as it is above the firm's flagged range of 150 per cent to 180 per cent, Aviva said it was "actively planning to return additional capital to shareholders and reduce hybrid debt in 2017".
"Aviva's results are simple and clear cut: more operating profit, more capital, more cash, more dividend. And there is more to come," Mr Wilson said in a statement.