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Insurer Aviva pumps out cash to keep payouts on track
[LONDON] Aviva boosted profits and cash generation in the first half of the year despite a challenging market backdrop, enabling the British insurer to raise its interim dividend, sending its shares higher.
The company said on Thursday operating profit rose 13 per cent to £1.33 billion (S$2.36 billion), helped by a strong performance in its UK life insurance business but weighed by a year-on-year rise in claims from natural catastrophes.
That was broadly in line with a company supplied consensus forecast of £1.31 billion and compared with £1.17 billion in the year-earlier period.
The rise was underpinned by a 7 per cent increase in written premiums at its general insurance division to £3.991 billion, a 7 per cent rise in the value of new business at its life insurance operations and a 23 per cent increase in assets under management on its UK life platform to £10.3 billion.
The solid performance meant it had a capital surplus under the industry's new Solvency II capital rules of £9.5 billion. This was down slightly from the year-end, but helped to supply better than expected operating capital of £1.2 billion.
That in turn enabled the company to pay an interim dividend of 7.42 pence a share, up 10 per cent from the same period a year earlier and just above consensus expectations for 7.41 pence.
Shares in Aviva were 4 per cent by 0728 GMT and were biggest gainers in FTSE 100.
Insurers across Europe, operating under tougher new capital rules, need to make sure they have enough cash to weather a severe market shock. This had increased the focus on their cash levels by income-seeking investors keen to see dividend payouts maintained.
Mark Wilson, group chief executive officer, said the market outlook was challenging.
"Aviva's strong financial position and diversity mean we are well insulated from external events. We have deliberately designed Aviva to be resilient to a low interest rate environment," he said.
"We remain confident in our ability to deliver on our key commitments to grow earnings, cash and dividends."
The company said its combined operating ratio in its general insurance business - a key measure of underwriting profitability - had weakened slightly to 96.2 per cent from 93.1 per cent. A figure of less than 100 per cent indicates an underwriting profit.
As well as facing rising payouts following fires and floods in Canada and Europe, the company also had to pay into flood levy schemes in Britain and Poland.