Aviva plans share buyback programme for end of financial year

Aviva is hiking its dividend by 40 per cent and planning another share buyback programme by the end of the year.

The life insurer and pension provider has seen its share price stall in recent months, shortly after the £385million acquisition of Succession Wealth, which is set to be completed later this year. 

But investors reacted positively a strong first-half performance on Wednesday, with Aviva shares 5.9 per cent higher at 438.75p in early trading morning.

Chief executive Amanda Blanc said: ‘Sales are up, operating profit is higher, our financial position is stronger. This has been an excellent six months for Aviva.’

Aviva boosted its operating profit in the first half of the year by 14 per cent to £829million, buoyed by a strong performance for annuities and equity release, and a 2 per cent reduction in core costs.

New business sales in the life insurance segment rose 3 per cent to £17.4billion, while turnover from gross written premiums from its general insurance business jumped 6 per cent to £4.7billion.

The Solvency II Coverage Ratio, a measure of capital strength for the company, increased from 186 per cent to 213 per cent and helped boost its interim dividend to 10.3p.

But Aviva’s loss after tax widened from £198million to £633million, reflecting ‘adverse market movements’.

The company said it expects ‘continued growth’ in its life insurance segment and will ‘price appropriately to manage inflation’ on its insurance products. 

Keith Bowman, investment analyst at interactive investor said: ‘In terms of the share price, a 23 per cent loss year-to-date coming into these latest results compares to a 15 per cent retreat for the FTSE All World index.

‘In all, geographical diversity has been reduced over recent years following previous business sales, with profits from its insurance operations hindered by factors including rising claims inflation and less favourable weather.

‘General insurance operating profit retreated 11 per cent to £375million. On the upside, a more focused business has been achieved.’

Aviva also said it anticipates launching another share buyback by the end of the financial year subject to market conditions and regulatory approval.  

In May, Aviva released £4.75billion to shareholders via a B-share programme.

‘Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to return surplus capital regularly and sustainably,’ the company said.