Investing.com -- Shares of Aviva (LON:AV) rose on Thursday following its trading update that posted strong sales across key areas, despite challenges from increased insurance claims in Canada.
At 3:33 am (0833 GMT), Aviva was trading 2.8% higher at £467.40.
“This is a significantly better trading update from Aviva than weexpected, with the undiscounted and discounted P&C combined ratio better than we forecast (by 1ppt in 3Q24), better top-line growth in the P&C business and solid life new business profits,” said analysts at J.P. Morgan in a note.
The company reported growth in multiple segments, including a 15% increase in General Insurance premiums, a 21% rise in Wealth net flows, and a 22% increase in Protection & Health sales.
Retirement sales surged by 67%, reaching £7.3 billion, with £6.1 billion attributed to bulk annuity deals—a figure already at the high end of the group’s expectations for 2024.
The results reflect Aviva’s success in weathering sector-wide challenges, particularly in General Insurance, where the Canadian segment experienced high catastrophe losses that impacted the company’s 3Q standalone undiscounted combined ratio, which rose to 110%.
“Given the elevated industry-wide catastrophe losses in Canada during 3Q, we're reassured to find that Aviva expects to have incurred claims costs that are broadly in line with their market share,” said analysts at Jefferies in a note.
Meanwhile, Aviva’s operating capital generation across other segments remained strong, providing a buffer against the Canadian losses and the capital impact of high sales volumes.
This helped the company absorb these pressures without major impact to its Solvency II capital ratio, which dipped only slightly from 205% at the half-year mark to 195% in the third quarter—still within market expectations.
Despite the claims burden in Canada, Aviva’s overall performance metrics were largely positive. The group’s combined operating ratio, a key profitability measure, held steady at 92.8% on a discounted basis.
General Insurance gross written premiums rose by 15% to reach £9.1 billion year-to-date, driven by an 18% increase in the UK and a 7% gain in Canada.
In addition, Aviva’s Wealth net flows reached £7.7 billion, marking a 21% year-over-year growth as the company continued to capture interest in its retirement and investment offerings.
Jefferies analysts noted that Aviva’s performance benefited from strategic pricing adjustments and underlying improvements in the combined operating ratio, which are expected to continue bearing fruit over the coming quarters.
The company’s bulk annuity volumes have already reached £7.8 billion year-to-date, and while some moderation in Protection & Health growth is anticipated, the overall trajectory remains positive.
Aviva reiterated its guidance for the year, underscoring confidence in its outlook amidst a competitive insurance landscape.
“We believe there will be consensus upgrades to reflect better life new business sales (and therefore, potentially CSM) and better P&C top-line growth and margins than we expected,” said analysts at J.P. Morgan.