Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aviva PLC (AVVIY, Financial) reported a 20% increase in operating profit, reaching nearly 1.8 billion pounds.
- The company announced a final dividend of 23.8p per share, with a total dividend per share up 7% year on year.
- Aviva PLC (AVVIY) achieved double-digit growth in several areas, including UK and Ireland general insurance, and Canadian operations.
- The proposed acquisition of Direct Line is expected to deliver 125 million pounds in cost synergies and unlock material capital benefits.
- Aviva PLC (AVVIY) has a strong capital position with a solvency ratio of 203% and a leverage ratio reduced to 29%.
Negative Points
- Operating funds generation (OFG) was 4% lower in 2024 compared to the previous year.
- The Canadian operations faced challenges due to severe weather events, impacting the combined ratio.
- There was a noted decrease in assumption changes and experience variances within the IWR segment.
- The equity release market has contracted further, affecting individual annuities.
- The company anticipates a headwind of around 100 million pounds from Solvency UK reform, impacting future targets.
Q & A Highlights
Q: Can you provide an update on the current pricing environment in the UK P&C market, considering persistent inflation?
A: Unidentified_1: The UK P&C market has seen strong growth, particularly in personal lines. While the market softened in Q4, with new business market pricing down about 16% for 2024, Aviva lowered new business rates by about 10%. We maintain good rate adequacy and discipline in market participation. Home insurance pricing remains ahead of claims inflation, despite a slight market softening in Q4.
Q: Could you elaborate on the 2025 group earnings target mentioned in the Direct Line scheme document?
A: Unidentified_2: The 2025 profit forecast was a technical requirement due to the takeover code, aligning with the 2026 target of £2 billion. The forecast underwent stringent review, similar to synergy numbers. We are confident in achieving the 2026 target, with 2024 profits up 20% to £1.767 billion, driven by strong UK GI profit growth and strategic opportunities.
Q: How do you plan to increase the number of policies per customer across the UK?
A: Unidentified_1: We are focused on increasing multi-product holdings, with 40% of new sales to existing customers. The integration of Direct Line Group (DLG) will bring more customers, and growth in workplace offerings will further enhance this. Our sophisticated marketing and data strategies will help identify customer needs and drive growth.
Q: What are the potential sources and timeline for capital synergies from the Direct Line acquisition?
A: Unidentified_2: Capital synergies will come from diversification benefits as DLG integrates with Aviva's UK GI business and the group. This will require regulatory approvals, internal reinsurance, and a part 7 transfer, expected to complete within 18 months post-acquisition. DLG is cash and capital generative from day one.
Q: Can you provide an update on the progress of the Direct Line acquisition?
A: Unidentified_1: We are making good progress on regulatory approvals and have set up an integration office to ensure readiness for day one. We expect the transaction to complete by mid-year and will provide further updates as more information becomes available.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
