LONDON (Reuters) -British insurer Aviva raised its interim dividend on Thursday after reporting a 22% jump in half-year operating profit, driven by strong growth in general insurance premiums and inflows into its wealth business.
The earnings topped analyst forecasts, helping to drive the company’s shares 4% higher in early trading to a new 17-year high. The stock is up about 46% this year, versus a 12% gain for the wider FTSE 100 index.
Aviva, which closed a 3.7 billion pound ($5 billion) takeover of smaller rival Direct Line in July, gave the first insight into its performance, including that premiums were flat and the number of policies fell in the half-year period.
“This is exactly as we expected,” Amanda Blanc, CEO of Aviva told reporters. She said the FTSE 100 company would provide more details on the acquisition in November.
Direct Line cost-cutting had helped it to increase its margin, CFO Charlotte Jones said.
“Aviva’s recent run of success appears to have continued,” analysts at Jefferies said in a note, adding that they were encouraged by the margin improvement at Direct Line.
Aviva said it expected some areas of rate softening in the second half of the year for its general insurance business, but it expected more growth at its wealth and health divisions.
The insurer also sees a potential slowing in the pension buy-out market, after companies offloaded 45 billion pounds worth of pension pots to insurers last year, a key revenue driver for the industry.
“Given the exceptional market conditions in 2024, those volumes may not be repeated,” the company said.
Aviva struck 2 billion pounds worth of pension buy-out deals in the first half, down on 2.3 billion pounds the prior year, although this rose to 3.1 billion pounds after the period-end.
“Whilst the bulk (pension buy-out) market is important to Aviva… it’s not everything,” Blanc said, adding it would benefit from being a diversified business.
Aviva posted an operating profit of 1.07 billion pounds for the six-month period ended June 30, compared with the 875 million pounds reported for the year-earlier period.
The insurer raised its dividend by 10% to 13.1 pence per share.
($1 = 0.7365 pounds)
(Reporting by Yamini Kalia and Yadarisa Shabong in Bengaluru and Iain Withers in London; Editing by Subhranshu Sahu and Jane Merriman)
