The life insurance business recorded an operating profit of £244m ($373m, €318.5m), with FPI contributing £151m of the total. When FPI’s contribution is excluded, the life operating profit in Asia grew to £93m from £87m in 2014.
The value of new business (VNB) across the life operation in Asia increased 22% to £151m ($213.8m) in 2015, up from £122m in 2014 with strong growth achieved in both Singapore and China as the company shifted towards more protection products.
“2015 was another year of strong growth for Aviva Asia. China and Singapore were the main drivers of VNB growth, thanks to strong contributions from our protection business in both markets,” Chris Wei, executive chairman of Aviva Asia & FPI and global chairman of Aviva Digital.
“We saw our young Indonesian and Vietnam businesses make encouraging and solid progress,” he added.
New business growth
Singapore’s VNB increased by 19% following higher sales of protection products as the company expanded its relationships with key independent financial advisers.
VNB in China improved by 31%, driven by a continued shift towards higher margin products distributed through its face to face, affinity and digital channels.
Aviva said the inclusion of Friends Provident International (“FPI”) increased the VNB by £5m (US$8m).
Aviva said it planned to expand its customer reach in the region through its multi-distribution strategy across financial advisory, bancassurance, agency, affinity and digital, tailored to the needs of each individual market,
Meanwhile Aviva’s VNB from Europe increased 14% in constant currency but this growth was eroded by foreign exchange headwinds, resulting in a relatively flat headline result.
Italy was the standout performer in Europe with 40% growth in VNB driven by the success of the introduction of a less capital intensive product suite.
Acquisition benefits
On the acquisition of Friends Life, which was completed on 10 April 2015. Aviva said it had made “highly satisfactory progress on integration”.
“At the end of 2015, we had secured £168m of run-rate synergies. We expect to achieve the remainderof our £225m run-rate synergy target by the end of 2016, one year ahead of schedule,” the company said
It said the integration is expected to give rise to £1.2bn worth of capital benefits, £400 million of which were achieved in 2015.
Fund flows
On the asset management side Aviva Investors recorded £5bn in outflows for 2015 but its assets under management leapt £44bn to £289.9bn, largely due to the integration of Friends Life.
In reporting its annual results, Aviva said gross inflows were £23bn against redemptions of £28bn. It also said profits for the fund management arm of the insurer were up by 33% to £105m.
The recently launched ‘flagship’ AIMS range, considered by many an attempt to rival Standard Life’s successful GARS funds, had a strong year, adding £1bn in assets to reach £3bn.
Parent company Aviva saw its shares rise over 4% to 479p as the market welcomed the fact it reported profit up 20% to £2.66bn, earnings per share up 2% to 49.2p, and a total dividend up 15% to 20.8p.
Chief executive Mark Wilson said: “2015 was about stability and growth at Aviva, against a background of market volatility and uncertainty. Aviva is now a stronger and more focused business. We have completed the fix phase of our transformation.” He added that the results were “highly satisfactory” in his view.
“A 20% jump in operating profit and 18% increase in the annual dividend both cement Aviva’s recovery under the leadership of Mark Wilson since taking the helm in January 2013 following a difficult spell under his predecessor Andrew Moss,” said Russ Mould, investment director at AJ Bell.
“Aviva has squeezed all of the anticipated cost benefits out of the £6 billion purchase Friends Life a year ahead of schedule and seems to be coping with an era of low interest rates very well, despite all of the negative long-term implications depressed bond yields could have for the insurance industry,” he added.
“The 20.8p dividend equates to a historic dividend yield of 4.2% on a 485p share price and the analyst consensus expects further increases in the payment for 2016 and 2017.”
