Aviva First Half 2023 Results

On Wednesday, Aviva, the British insurer and asset manager, is set to report its financial results for the first half of 2023. Here are the key details to keep in mind:

IFRS Operating Profit Forecast

Industry experts expect Aviva to announce an IFRS operating profit of £701 million ($889.4 million) for the six months ending on June 30. This aligns with the company’s recent guidance of approximately £700 million. In comparison, the restated operating profit for the same period the previous year was £661 million.

Gross Written Premiums Forecast

Consensus estimates suggest that Aviva’s general insurance gross written premiums will reach £5.15 billion, reflecting an increase from the previous year’s £4.69 billion. Investors will be particularly interested in any indications of when the company anticipates higher pricing to positively impact its profit margins.

Solvency II Ratio Forecast

Aviva’s solvency II cover ratio, an essential metric for assessing capital strength, is expected to stand at 199% according to market consensus, as compared to 196% at the end of March. Analysts at Berenberg note that this improvement is likely due to favorable interest rate trends and moderate capital generation.

What to Keep an Eye On

CSM GROWTH: Focusing on a New Accounting Standard

Deutsche Bank emphasized that the market will be closely watching the contractual service margin (CSM) growth, which is a liability on the balance sheet indicating anticipated future profits. As the group unveils its first half-year results under the new IFRS17 accounting standard, analysts believe that despite not being a direct measure of overall group growth, investors will want to compare different companies in this regard, particularly in relation to their life insurance counterparts.

CANADIAN FIRES: Potential Impact on Aviva

It will also be essential for investors to monitor the potential consequences of wildfires occurring in Canada. UBS analysts noted that although an insignificant impact was anticipated during the 1H23 reporting period, these fires have continued to cause damage. This includes provinces like Ontario, where Aviva holds a prominent position in both commercial and personal lines general insurance.

CAPITAL RETURNS: Interim Dividend and Share Buybacks

Industry experts predict that the group will propose an interim dividend of 11.0 pence per share, based on consensus figures. This would represent an increase from the 10.3 pence payout declared in the same period of the previous year. As for share buybacks, management has indicated that they will provide an update on this matter during the full-year results announcement, rather than at this stage. Deutsche Bank highlighted that investors may seek confirmation of a level of around GBP300 million for share buybacks, as well as insights into management’s perspective on the leverage ratio under the new IFRS 17 accounting standard.