Shares in insurer Aviva (AV.) climbed as much as 4% to a post-pandemic high of 399p, even as the FTSE 100 fell 1.3% on fears of higher interest rates, after the firm posted positive results for last year and announced it had completed the sale of its Italian business.

For the year to December the company generated operating profits of £3.16 billion, comparable with the previous year, thanks to record sales of group protection products, record sales of bulk purchase annuities and record net flows into its savings and retirement products, cementing its position as the largest provider of workplace pensions.

RESHAPING CONTINUES

On top of its resilient financial performance, the firm announced it had completed its exit from the Italian market with the disposal of its life insurance business to France’s CNP for €543 million and its general insurance business to Germany’s Allianz for €330 million.

Together with the proceeds from the sale of its stake in Aviva Vita last month, the firm will have realised over €1.3 billion in cash from the sale of its Italian operations this quarter.

Since announcing the divestment strategy last August, chief executive Amanda Blanc has now engineered the sale of seven overseas businesses for over £5 billion or roughly a third of the firm’s market value.

‘The sale of our Italian operations to high quality buyers is a positive outcome for our customers, employees, distributors and shareholders. We promised that we would deliver quickly and we are. Our work to improve Aviva for the benefit of our shareholders continues’, said Blanc.

LOWER DEBT, HIGHER DIVIDENDS

The firm will use its cash pile to reduce its gearing quickly, with £1.7 billion of debt set to be repaid in the first half of this year, to invest in cash-generative growth opportunities in its core markets of the UK, Ireland and Canada, and to return capital to shareholders.

The 2020 final dividend of 14p per share takes the full-year pay-out to 21p against 15.5p in 2019, and with the Solvency II capital ratio covered by more than 200% against a regulatory minimum of 180%, and the early paydown of some of its debt, there is scope for bigger shareholder returns sooner than many had expected.

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Issue Date: 04 Mar 2021