IFRS profit before tax increased to GBP 3,374 million (FY2018: GBP 2,129 million) helped by positive investment variances, and this led to basic EPS of 63.8 pence (FY2018: 38.2 pence).
In 2019, Aviva generated equity own funds of GBP 2.3 billion (FY2018: GBP 2.0 billion) resulting in RoE of 14.3%, up 1.8 percentage points. Operating capital generation (OCG) was GBP 2.3 billion (FY2018: GBP 3.2 billion).
Aviva FY2019 preliminary figures, y-o-y changes
- Value of new business: GBP 1,224 million (+2%), of which:
- UK Life: GBP 592 million (+23%)
- Europe Life: GBP 414 million (-20%)
- Asia Life: GBP 206 million (+9%)
- Present value of new business: GBP 45,665 million (+12%), of which:
- UK Life: GBP 27,570 million (+15%)
- Europe Life: GBP 13,772 million (+9%)
- Asia Life: GBP 3,057 million (+15%)
- General insurance net written premiums: GBP 9,309 million (+2%), of which:
- UK: GBP 4,218 million (+1%)
- Canada: GBP 3,061 million (+5%)
- Europe: GBP 2,017 million (+2%)
- General insurance combined ratio: 97.5% (+0.3 pp.)
- Operating expenses: GBP 4,119 million (-0%)
- Operating profit: GBP 3,184 million (+6%)
On an underlying basis (excluding net management actions), return on equity was 8.1% (FY2018: 9.3%) and OCG was GBP 1.4 billion (FY2018: GBP 1.5 billion). The group's results benefited from improved returns in general insurance, particularly from Canada, and a reduction in debt interest and corporate centre expenditure. This was offset by lower returns from the group's life businesses which were affected by the loss of temporary transitionals on new business, experience variances in the UK, and lower new business profitability in Europe due to record low interest rates.
In UK Life and Investments, Savings & Retirement, own funds generation was GBP 1,314 million (FY2018: GBP 1,663 million), giving rise to return on capital of 9.5% (FY2018: 11.3%). The reduction in results was due to the loss of transitional benefits on new business, adverse experience variances related to persistency, expenses and challenges in the protection market, and lower operating profit from Aviva Investors where revenues were impacted by lower opening assets under management in higher margin propositions and divestment of the group's European indirect real estate business in 2018. While financial results were lower in 2019, Aviva achieved higher sales and customer net inflows across its life and savings businesses. This underpinned asset growth of 19% in long-term savings to GBP 138 billion (FY2018: GBP 116 billion), 9% in annuities & equity release to GBP 67 billion (FY2018: GBP 62 billion) and 5% in Aviva Investors to GBP 346 billion (FY2018: GBP 331 billion), supporting a positive outlook for future financial results in UK Life and Savings segments.
General Insurance results improved in 2019, with own funds generation increasing to GBP 628 million (FY2018: GBP 532 million) and return on capital of 14.0% (FY2018: 11.7%). The improvement in results was principally driven by a recovery in profitability in Canada where pricing and underwriting actions we took in response to industry-wide challenges in the auto insurance market helped drive a 5.3 percentage point improvement in the combined operating ratio (COR) to 97.8% (FY2018: 103.1%). In the UK, reported COR in 2019 has been affected by higher costs following its incorporation of UK Digital during the year, UK COR going up 0.6 percentage points to 97.9%, with solid results in commercial lines offset by weaker performance in personal lines. In Europe the COR was 95.7% (FY2018: 93.5%) despite adverse large loss experience. Weather had a favourable impact on Aviva's COR of 1.0 percentage point relative to long-term average (FY2018: 0.1% unfavourable) while prior year reserve development had a favourable 1.7% impact (FY2018: 2.3% favourable).
In Europe Life, Aviva actively managed the current environment of very low, and in some cases, negative government bond yields. Own funds generation increased to GBP 574 million (FY2018: GBP 384 million) and included assumption changes of GBP 181 million spread across France, Italy and Ireland businesses. This in turn gave rise to an improvement in return on capital to 10.3% (FY2018: 6.9%). New business volumes (PVNBP) rose 9% to GBP 13.8 billion (FY2018: GBP 12.6 billion). Strong volume growth was achieved in France (+32%) and Poland (+28%). However, the own funds contribution from new business declined to GBP 167 million (FY2018: GBP 253 million) due to low yields.
In Asia Life, own funds generation increased 30% to GBP 187 million (FY2018: GBP 144 million) and return on capital rose to 12.7% (FY2018: 9.7%). New business volumes from continuing operations in Asia increased 22% to GBP 2.7 billion (FY2018: GBP 2.2 billion) with double digit growth achieved in Singapore and China. This gave rise to VNB in Asia of GBP 210 million (FY2018: GBP 194 million), representing growth of 9%.
Total operating expenses were GBP 4,119 million (FY2018: GBP 4,138 million) with reductions in controllable costs partly offset by an increase in levies and premium taxes to GBP 180 million (FY2018: GBP 170 million). Controllable costs fell to GBP 3,939 million (FY2018: GBP 3,968 million).
Savings of GBP 72 million were mainly derived from Aviva's lean group centre initiative and reduced project spend, although the group reinvested some of these savings in other areas including IT modernisation and proposition development. Implementation costs associated with the cost reduction programme and the group's spend on IFRS 17 was GBP 59 million.
At the end of 2019, Aviva's Solvency II capital surplus rose to GBP 12.6 billion (FY2018: GBP 12.0 billion), with an increase in the cover ratio to 206% (2018: 204%). The group reduced debt by GBP 0.2 billion in 2019, leading to a reduction in the leverage ratio to 31% (FY2018: 33%). Solvency II net asset value (NAV) per share rose 31 pence to 423 pence (FY2018: 392 pence).
Maurice Tulloch, Chief Executive Officer of Aviva, commented on the results:
"In 2019, we set out our priorities and financial targets, strengthened our leadership team and remained focused on helping our customers prepare for a better future. We've made good progress, but there is much more to do. (...) We will improve business performance and enhance returns through disciplined action on expenses and underwriting. We will focus capital and resources where we can achieve competitive advantage and strong returns and we will take robust action across the portfolio where our performance falls short or where we can see a better way of delivering value to our shareholders."
More financial information about Aviva can be found at aviva.com/investors/results.