Aviva on course to return more than £5bn to shareholders and make £300m in cost savings
- Swedish hedge fund Cevian Capital wants Aviva to return £5bn to investors
- Aviva has streamlined its operations by selling off eight international arms
- The firm has already completed £450m of a £750m share buyback scheme
Aviva has said it is on track to achieve its cost reduction and cash remittance objectives following a solid performance this year.
The company expects to return over £5billion to investors between 2021 and 2023, having already handed out £1.1billion from January to September this year, including £450million of a £750million share buyback scheme.
Swedish hedge fund Cevian Capital has pressured the insurance giant to return billions of pounds to investors after acquiring a 5 per cent stake in the FTSE 100 group over the summer.
Shout about: Aviva announced in August that it would return £4billion to shareholders by the first half of next year and spend another £1billion reducing its debt pile,
Under Amanda Blanc’s leadership, Aviva has sold off eight international subsidiaries, including those in Vietnam, Italy, France, for a total of £7.5billion in order to focus on its British Isles and Canadian businesses.
It announced in August that it would return £4billion to shareholders by the first half of next year and spend another £1billion reducing its debt pile, though Cevian demanded it gives investors an extra £1billion.
The group also declared that it was on schedule to achieve its target of £300million in cost cuts in 2022, with three-quarters of that figure happening by the end of this year.
Aviva’s comments come as it attracted record inflows into its savings and retirement division in the first nine months of 2021, a £1.3billion increase on the previous year.
At the same time, gross written premiums from continued operations in its general insurance arm rose by £300million to £6.5billion, thanks to both retaining and adding new commercial customers and more advantageous rates.
There was also a recovery in trade from motor insurance claims following the loosening of lockdown and travel restrictions, though it noted they remain below pre-Covid levels.
Strategy: Under the leadership of Amanda Blanc (above), Aviva has sold off eight international subsidiaries in order to focus on its British Isles and Canadian businesses
However, bulk annuity volumes were 20 per cent down on last year despite skyrocketing in the third quarter as Aviva agreed to a £900million deal with the pension schemes of B&Q and Screwfix owner Kingfisher.
Blanc said: ‘We continue to make excellent and rapid strategic progress, right across Aviva. The completion of disposals in France and Italy GI since the half-year are significant milestones as we deliver a radically simplified and refocused Aviva.
‘We are delivering our commitment to return at least £4billion of capital to shareholders, with c.£450million of the £750million share buyback already successfully completed.’
She added: ‘We look forward with confidence. We expect the good trading momentum to continue in the fourth quarter, and we remain on track to meet or exceed our cash and cost-saving targets.’
Green transition: Aviva intends to stop underwriting for firms which make over 5 per cent of their revenue from coal or unconventional fossil fuels [e.g. shale gas) by the end of the year
As well as shareholder returns, Aviva aims to become a net-zero company by 2040, with a target to cut the carbon intensity of its investments by 60 per cent and be net zero from its operations and supply chain by the end of the decade.
It intends to stop underwriting for firms which make over 5 per cent of their revenue from coal or unconventional fossil fuels [e.g. shale gas) by the end of the year unless they have signed the Science Based Targets Initiative.
When the pledge was announced, Blanc said Aviva had ‘a huge responsibility’ as Britain’s largest insurer ‘to change the way we invest, insure and serve our customers.
‘For the world to reach Net Zero, it’s going to take leadership and radical ambition. And it is going to take Aviva to play our part.’
Aviva’s shares were up 0.3 per cent to 406.8p during the late afternoon on Thursday.