Aviva plc’s 2014 Q1 financial results ‘reassuringly calm and stable’

Aviva plc posted results in the first quarter of 2014 that were “reassuringly calm and stable, in marked contrast to the weather and regulatory developments,” the company reported Thursday.

Overall, operating capital generation (OCG) in 2014 Q1 was £0.4 billion compared to £0.4 billion in 2013 Q1, with improved OCG in Europe offset by higher weather losses in Canada and the United Kingdom, notes a statement from Aviva. With regard to U.K. Life, OCG was stable, despite 21% lower annuity sales, which have generated positive new business strain in the recent past.

“The value of new business increased by 13% – the sixth consecutive quarter of year-on-year growth – and our book value grew by 6%,” Mark Wilson, group chief executive officer, says in the statement. With regard to new business, that totalled £228 million in the first quarter of 2014 compared to £208 million in the same quarter of 2013.

Specifically, the value of new business increased by 45% in Europe and 96% in Asia, more than offsetting a 22% declined in the United Kingdom, reports Aviva, which saw the combined operating ratio (COR) deteriorate to 97.7% in 2014 Q1 compared to 95.5% in 2013 Q1, reflecting the worse weather in 2014 Q1.

COR was impacted by increased weather claims in both Canada and the U.K., Aviva reports.

In Canada, net written premiums (NWP) grew by 5% in constant currency, reflecting growth in Western Canada, improved retention in personal lines and rate increases in commercial lines. “The weakening of the Canadian dollar resulted in Canadian NWP declining 9% to £426 million (compared to £470 million in the first quarter of 2013),” the statement adds.

“Aviva still faces challenges in both the external environment and in the business as we progress our turnaround. The regulatory environment is constantly evolving and soft conditions in certain general insures lines persist,” Wilson says.

Looking at Aviva’s General Insurance combined operating ratio, the results show the following changes for 2014 Q1 compared to 2013 Q1:

• U.K. – 98.6% compared to 98.1%
• Ireland – 100.3% compared to 107.6%;
• France – 91.0% compared to 90.5%;
• Italy – 94.9% compared to 96.4%;
• Other Europe – 96.8% compared to 109.5%; and
• Canada – 102.7% compared to 92.7%.

With regard to Canada, Aviva reports the increase in COR was a result of the harsh winter impacting North America, which resulted in £40 million of additional weather-related claims.

“The start of 2014 has demonstrated the benefits of Aviva’s diversification, but we are not content to rely on diversification to ensure results. We focus on individual business cells and improving each is a priority,” notes the statement.

“The impact of regulatory reform in the U.K., poor weather and difficult trading condition in the U.K. motor market have been offset by our recovering European businesses and strong performance from our growth market,” Aviva adds.

Says Wilson, “As a business we remain focused on cash flow, expense efficiency and the clinical allocation of capital to areas where we can maximize returns. There is still much to do.”