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(Alliance News) -Â Aviva on Thursday reported a fall in 2020 profit, though raised its payout and dangled the prospect of a "substantial" return of capital to shareholders as it is exits Italy.
Shares in the FTSE 100-listed insurer were up 3.8% at 397.80 pence in London on Thursday, the top performer in the blue-chip index.
Aviva is selling remaining Italian life and general insurance businesses for EUR873 million in cash, valuing the businesses at EUR1.2 billion including Unicredit Group's 49% shareholding in Aviva SpA.
It will sell its general insurance business in Italy to Germany's Allianz SE for EUR330 million and life insurance business to French insurance firm CNP Assurances for EUR543 million. Aviva said it expects to use the increased capital and cash to support debt reduction, investment for long-term growth, and the return of excess capital to shareholders.
"Since I announced our new strategy in August last year, we have announced seven divestments that will generate over GBP5bn of cash proceeds. This rapid progress allows us to focus on transforming and growing our already strong businesses in the UK, Ireland and Canada," said Chief Executive Amanda Blanc.
Gross written premiums fell 2.3% to GBP29.02 billion from GBP29.71 billion in 2019, with net earned premiums down 4.1% to GBP25.25 billion from GBP26.33 billion. Net investment income dropped 52% to GBP19.33 billion from GBP39.61 billion the year before.
All this meant that - even as expenses fell 31% to GBP43.96 billion - pretax profit decreased 32% to GBP2.61 billion from GBP3.82 billion.
Operating profit edged down 0.6% to GBP3.16 billion from GBP3.18 billion.
Aviva said it is accelerating debt reduction plans, which will allow the company to lower debt by GBP1.7 billion in the first half of this year. Alongside this, Aviva on Thursday announced an GBP800 million debt tender offer.
"We are also announcing a new target that demonstrates our confidence in Aviva's ability to deliver profitable growth and growing sustainable dividends. We aim to deliver over GBP5 billion of cash remittances from our core businesses over the next three years, which combined with reduced centre debt interest and other costs will drive strong growth in excess cash flows to fund sustainable investment in our business and growing returns to shareholders," the company said.
Aviva proposed a final dividend of 14 pence for 2020, giving a total of 21 pence for the year, adding it expects to grow the payout by "low to mid-single digits over time". Aviva paid out 15.5p for 2019.
CEO Blanc said: "Our performance in 2020 demonstrates the resilience of our Core businesses and our growth potential. We delivered record sales in group protection; record sales of bulk purchase annuities; and record net flows in savings and retirement, where we are the largest provider of workplace pensions in the UK."
"Aviva is financially strong and following the completion of the major disposals, we will be in a position to make a substantial return of capital to our shareholders."
By Lucy Heming;Â lucyheming@alliancenews.com
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