Aviva profits up 12% as fund management arm enjoys a 'breakout year'
Aviva has pledged to hand more money to shareholders after announcing a hefty jump in profits, despite taking a hit from the Government changes to personal injury claims.
The insurance giant cheered a 12% rise in operating profits to £3.01bn for the year ending in December as it saluted a "breakout year" for its fund management arm.
Aviva Investors' assets under management grew by close to a fifth at £345bn, with fund management operating profits climbing 32% to £139m.
Net written premiums in the general insurance business lifted by 15% to £8.21bn, while the value of new business within life insurance rose 13% to £1.35bn.
It came as the insurer said it would suffer a £380m blow from the Government's proposed changes to the discount rate calculation, which is expected to increase payments given to victims of life-changing injuries through medical negligence, car crashes and other incidents.
Chief executive Mark Wilson said the firm was now tightening its focus on driving down debt and investing in growth creation. "Aviva's results are simple and clear-cut: more operating profit, more capital, more cash, more dividend - and there is more to come," he added.
"Aviva's financial position has been transformed and a distinctly stronger balance sheet and excess capital give Aviva more options. We are now actively planning a capital return to our shareholders and debt reduction in 2017 and will invest further to grow our businesses."
Shares in Aviva soared close to 7% in morning trading. IFRS profit after tax was down 22% to £859m, including the £380m after-tax charge from the drop in the Odgen discount rate.
However, the insurer said it had beaten its cost-savings target one year ahead of schedule followings its £5.6bn merger with Friends Life in April 2015.
It has secured £270m in run-rate synergies following the tie-up, compared with its initial goal of £225m of annual savings by the end of this year.
Under Solvency II, which requires insurance companies to prove they can withstand a major financial shock, its capital surplus grew by 16% to £11.3bn over the period.