New Aviva CEO Amanda Blanc came out fighting yesterday as she announced that the group would shift its focus to those areas of the business where it is strongest.
Speaking as the group announced its half year results which saw it deliver a £1.08 billion profit, a fall of 28% year on year that included a £165 million cost for COVID related claims.
“COVID-19 has been a tragedy for public health and caused significant disruption to peoples’ lives and the global economy,” added Ms Blanc. “I am immensely proud of how our Aviva colleagues responded to the COVID-19 challenge. We moved quickly to expand our remote working capability enabling our colleagues on the front line to maintain strong levels of service for individual and commercial customers throughout the period of restricted movement.
“Aviva has also played a significant role in helping the community, contributing more than £40 million to support businesses and health services and providing significant additional relief and assistance to customers experiencing financial hardship. Against this backdrop, Aviva’s interim results demonstrate resilience, both in terms of financial strength and performance.
“This is no accident. Over recent years, Aviva has deliberately built up its financial strength and maintained a prudent and disciplined approach to trading across both underwriting and investing activities. Accordingly, while COVID-19 has weighed on our results, we maintained solid operating capital generation and operating profit, and our solvency ratio‡# and cash resources remain strong.”
She added: “Notwithstanding COVID-19, it is imperative that Aviva focuses on unlocking value for our shareholders. For too long, this has proven elusive and meaningful change is required.
“I am focused on three key areas. First, focusing the portfolio on those businesses that are best positioned and have a right to win in their respective markets. Second, transforming our performance to position Aviva as a best-in-class provider across all our product segments for customers, distributors and shareholders. Third, maintaining and building further on our financial strength to provide resilience, sustainability and flexibility.”
Ms Blanc said despite the clear strategy delivery would not be easy. “We have a long road ahead and much work to do. We will work at pace to deliver the change necessary for Aviva to fulfil its abundant potential.”
As such the group will look to its strongest areas of the business to drive profit and shareholder value.
“We will focus Aviva on our strongest businesses in the UK, Ireland and Canada and aim to be the UK’s leading insurer,” said Ms Blanc. “We are going to focus on those businesses where we have the necessary size, capability and brilliant customer service to generate superior shareholder returns. This is where we will invest and grow. Where we cannot meet our strategic objectives, we will take decisive action and we will withdraw capital.
“We must transform our performance and improve our efficiency. This requires great customer service, stronger innovation and better use of our brand. Our transformation will be underpinned by continuing to manage our balance sheet prudently, reducing debt and increasing our financial resilience.
“Aviva’s financial performance in the first half of 2020 was solid. Our financial position is strong and operating profit of £1.2 billion was robust, thanks to our diverse range of products, excellent partners and our swift operational response to the COVID-19 pandemic. I am proud of the way our people have gone above and beyond to help our customers during this crisis.”
“I have been CEO for one month and I am confident we have many of the ingredients to make Aviva a winner. From this moment on, we must deliver. Nothing else will do. My focus is making sure it happens and at pace.”
Her words were welcomed by the market as shares saw a 7% increase in value.
Joe Healey, Investment Research Analyst at The Share Centre.
“These are resilient half-year results, demonstrating the benefits of the restructuring that has been taking place,” said Joe Healey, Investment Research Analyst at The Share Centre.
“Probably the biggest news to come out of this release was Amanda Blanc’s statement surrounding a refocusing on the Group’s strongest markets being the UK, Ireland and Canada where they have the ‘necessary size, capability and brilliant customer service to generate superior shareholder returns. Furthermore, the Group announced an interim dividend of 6p a share something which will please investors considering it’s earlier than we would have expected.
“I think these results go to show the work Aviva has done over the year in terms of restructuring the business and it appears Amanda Blanc is not taking her foot of the gas accelerating the push. It’s a theme we’ve witnessed across the board during Covid-19 with companies trimming down operations to focus on the core profit drivers in their business models with the hope this will cut inefficient costs and help boost margins. Nevertheless, the business remains in the midst of a lot of uncertainty and therefore it’s pleasing to see a prudent process in place to keep the balance sheet healthy moving forward.
“We still see hope for the company benefitting from the demographic change of ageing societies which was supported in these results by the strong performance of UK annuities. Although a review of the dividend policy could lead to some changes, we still feel the Group offers an attractive proposition at their current valuation.”