LONDON (Reuters) - British insurer Aviva (AV.L) on Thursday posted a 2 percent dip in first-half operating profit, hit by disposal costs, weaker profits in Canada and a significant increase in weather related claims.
Cold winter weather in Europe, higher claims in Canadian auto insurance and the costs of exiting Spain and Taiwan all weighed, although a beat on underlying profits helped the company to maintain its plan to return more capital to shareholders.
Operating profit in the six months to the end of June was 1.44 billion pounds ($1.89 billion), it said in a statement, compared with 1.47 billion pounds a year earlier. Excluding disposals, operating profit rose 4 percent, Aviva said.
Operating earnings per share rose by 4 percent to 26.8 pence, beating some analyst estimates, and the company said it remained confident of reaching its goal of greater than 5 percent growth in operating earnings per share in 2018.
KBW analyst Greig Paterson told clients in a note that he forecast growth of 8 percent in operating EPS, helped by the use of disposal proceeds to finance bolt-on acquisitions, share buybacks and paying down debt.
“Stripping these out, it is not clear that there is underlying economic growth,” he added, flagging a ‘market perform’ rating and target price of 495 pence a share.
While operating EPS and underlying operating profits beat consensus, life insurance sales of 603 million pounds and the company’s Solvency II ratio of 187 percent both lagged, he said.
At 0840 GMT, shares in Aviva were down 0.4 percent at 493.4 pence.
Aviva also said it would pay an interim dividend of 9.25 pence a share, up 10 percent from the prior year and beating a company supplied consensus estimate for 9.18 pence a share.
“During these choppy market conditions, it is reassuring that Aviva’s results are consistent, dependable and growing,” Chief Executive Mark Wilson said.
“Aviva remains financially strong with a capital surplus of 11 billion pounds,” he added, although this was down from 12.2 billion pounds a year earlier.
Reporting by Simon Jessop; Editing by Sinead Cruise/Keith Weir