Aviva profits rise 12% to £3bn despite blow from personal injury claim changes
Aviva has pledged to hand more cash to shareholders after announcing a hefty jump in profits despite taking a hit from Government changes to personal injury claims.
The insurance giant cheered a 12% rise in operating profits to £3.01 billion 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 £345 billion, with fund management operating profits climbing 32% to £139 million.
Net written premiums in the general insurance business lifted by 15% to £8.21 billion, while the value of new business within life insurance rose 13% to £1.35 billion.
It came as the insurer said it would suffer a £380 million 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.
"Aviva's results are simple and clear-cut: more operating profit, more capital, more cash, more dividend. And there is more to come," he said.
"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, as it pushed up the full-year dividend by 12% to 23.3p.
IFRS profit after tax was down 22% to £859 million, including the £380 million 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 £5.6 billion merger with Friends Life in April 2015.
It has secured £270 million in run-rate synergies following the tie-up, compared with its initial goal of £225 million 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 £11.3 billion over the period.
The firm said it would now aim to increase the dividend payout ratio to 50% by the end of 2017.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said Aviva had managed to buck the industry trend by delivering simple and clear-cut results.
" There are no sweeping strategic changes and, short of the impact of the Ogden rate on the general insurance business, no unpleasant 'exceptionals'.
"All divisions delivered steady growth, Solvency improved more than expected and the dividend rose ahead of expectations.
"Overall, these results suggest Mark Wilson has built up a solid set of foundations at Aviva. Steady profit growth and plenty of capital generation mean the group can start funnelling cash back to investors or fund new expansion as management sees fit."