The insurer’s UK commercial lines business grew by 15% last year

Aviva has reported a 6% increase in its general insurance gross written premium (GWP) over the course of 2021, reaching its “highest sales in over a decade” of £8.8bn, according to its full-year financial results, published on 2 March 2022.

This compares to a 2020 general insurance GWP of £8.3bn.

This GWP boost contributed to a combined operating ratio (COR) of 92.9% for the insurer’s general insurance business in 2021 - an improvement on 2020’s 96.8%.

However, Aviva’s adjusted operating profit fell to £1,634m during 2021 – a 10% decrease compared to £1,806m in 2020.

This drop was due to a lower operating profit within the insurer’s UK and Ireland life operations, despite sales in this division growing by 23% last year.

Aviva UK and Ireland general insurance chief executive Adam Winslow said: “Our COR improvement was driven by the success of our commercial lines business with profitable new business growth, strong retention across all segments - especially in global specialty and mid-market - and further rate momentum.

“In personal lines, we’ve continued to make solid progress against our strategy in a competitive market. We’ve made some bold decisions to help us grow the business profitably, including developing our offering on price comparison websites and enhancing our capability in the high net worth market.”

Within Aviva’s UK commercial lines business, GWP grew by 15% in 2021 to £2,609m - compared to £2,262m in 2020. The insurer’s UK retail arm saw customer numbers boosted by 9% over the course of last year too, reaching 3.5 million. GWP for this part of the business was up 3% between 2020 and 2021.

Cash for shareholders

In addition, shareholders are beginning to see significant cash distributions after Aviva group chief executive Amanda Blanc revealed a total capital return of £4.75bn during a press conference call this morning (2 March 2022) – this includes the firm’s existing £1bn share buyback scheme, a B share scheme and share consolidation.

This return is 5% better than market expectations.

However, activist investor Cevian Capital, which purchased a 5% holding in Aviva back in June 2021, believes a minimum shareholder return of £5bn is needed to properly address overcapitalisation at the firm.

Blanc also today announced the acquisition of national financial advice firm Succession Wealth for £385m, in a move designed to “enhance our capabilities and accelerate growth” through further investment.

Commenting on this, Edison Investment Research managing director and sector head of financials Robert Murphy said: “With this sector worth a not an insignificant £1.6tr in 2020 and expected to grow at 7% per year through 2024, chief executive Blanc was understandably optimistic about the move.

“In light of the fact by 2039 it is expected that one in four people in the UK will be over 65, driving a demand for financial advice, this acquisition shows Aviva is moving onto the front foot in its strategic positioning.”

Blanc added: “The ‘focus’ and ‘strengthen’ parts of our strategy are complete and we are now wholly focused on accelerating performance.

“Our trading in 2021 was strong, reinforcing our confidence that Aviva can grow sustainably.

“We are on track to reduce controllable costs by £300m by the end of 2022.”

The group’s total 2021 dividend increased by 5% to 22.05p – up from 21p in 2020.

Cash remittances also increased by 22% to reach £1.66bn – up from £1.37bn in 2020.

Winslow noted that tackling climate change is also a big part of Aviva’s strategy - so far, the insurer has grown its renewable energy business and set out its environmental, social and governance (ESG) underwriting principles. The business has also announced plans to change offices in a move to reduce its carbon footprint - it has decided a new location in Fenchurch Street.

He said: “Our commitment to the environment will remain a priority for our business as we use our skills and expertise on behalf of our customers and the communities in which we work and live.”