Aviva hits seven-month high on new buyback, raised dividend outlook

By Geoffrey Smith

Investing.com — Aviva (LON:) announced a new £300 million share buyback and said it will pay out higher dividends in future as the broad rise in interest rates last year bolstered its pension business.

The U.K. asset manager and insurer said it is confident of its ability to continue generating surplus cash and expects to pay out around £915M (£1 = $1.1848) this year and will aim for “low to mid-single-digit growth” in the dividend thereafter.

“We are making excellent progress at Aviva,” chief executive Amanda Blanc said in a statement. “Operating profits and dividends are growing and we have strong trading momentum despite significant market volatility.”

Aviva’s operating profit rose 35% last year to £2.21 billion, while its underlying net profit rose to £1.87B, well ahead of expectations for £1.41B.

The final dividend for 2022 was raised by nearly 50%, giving a total payout of 31 pence a share, a yield of 7.2% measured against Wednesday’s closing share price.

Aviva joins rival Legal & General (LON:) in enjoying a banner year in 2022, when the sharp rise in interest rates sharply changed the outlook for pension managers. The rise in bond yields has reduced the future liabilities of company pension schemes, making it easier for them to offload those liabilities to the likes of Aviva and L&G. The group said the outlook for its pension business remains positive.

At the same time, its general and health insurance businesses grew solidly, with only the retail insurance business suffering from pricing pressures. It said it expects to “remain focused on pricing appropriately for the inflationary environment” in the current year, and sees continued strong demand for its protection and health insurance lines.

The group’s asset management arm, Aviva Investors, was the only fly in the ointment, due to broad market volatility in both bond and equity markets last year. While it eked out £1.3B in net inflows last year, the group said “conditions are likely to remain challenging in 2023 given ongoing uncertainty in the macro environment and investment markets.”

Aviva stock rose 3.1% to a seven-month high in response at the open in London on Thursday.