ii view: dividend stock Aviva promotes growth potential

First-half results to 30 June

• Operating profit up 8% to £715 million
• Interim dividend up 8% to 11.1p per share
• Capital cushion or solvency II ratio down 10% from late December to 202%

Guidance:

• Expects full year 2023 operating profit to grow between 5% to 7%

Chief executive Amanda Blanc 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.”

ii round-up:

Aviva (LSE:AV.) provides savings, retirement pension products and general insurance including car and home cover to over 18 million customers across the UK, Ireland, and Canada. 

It operates in the five areas of UK and Irish life, UK and Irish general insurance, Canadian general insurance, Aviva investors encompassing its asset management operations, and international investments which includes business partnerships in both China and India. 

For a round-up of these latest results announced on 16 August, please click here. 

ii view:

With a history dating back more than 300 years, Aviva paid out more than £23 billion in customer claims and benefits in 2022. Under chief executive Amanda Blanc, its goals include becoming a simpler, more competitive and more commercial company. Overseas businesses lacking the relevant scale have been sold, with its focus now on the UK, Ireland, and Canada. Its shareholding in Singapore Life Holdings or Singlife was recently sold, with partnerships via local savings companies in China and India ongoing. 

For investors, the tough economic backdrop for global markets, including rising interest rates, is hindering flows into its Savings/Wealth related business, with deposit savings accounts now a more realistic alternative. Aviva's geographical diversity has reduced following various business sales, while exposure to general insurance leaves it calculating risks in relation to unknown events such as increased flooding under global climate change. 

More favourably, Aviva is now a more geographically focused business but one which retains business type diversity, including exposure to pension and health insurance provision. Cost reduction remains a management focus - around £1 billion of investment to accelerate performance is underway, while its robust financial position has again been underlined by management.    

For now, and given a pleasing mix of increasing efficiency, robust sales and forecast dividend yield of over 8%, income investors at least will likely remain fans. 

Positives: 

• Focus on reducing costs
• Attractive dividend yield (not guaranteed)

Negatives:

• Reduced geographical diversity
• General insurance is subject to events outside of management’s control

The average rating of stock market analysts:

Strong hold