Aviva 4Q23 Results Look Credit Neutral

Aviva (AV/ LN) 4Q23 results are broadly inline with some new targets published for 2026 but consistent with consensus anyway. We see these as broadly credit neutral with the new buyback (GBP300m) at the lower end of the range (some had looked for GBP350m).

• Key credit metrics: solvency II ratio is 207% (from 200% at Sep-23, consensus was 204%) and a new GBP300m equity buyback is starting (lower end of expectations of 300-350m) alongside a dividend marginally above consensus (33.4p vs. 33.2p est.). S2 leverage is 30.7% (from 30.6% at Sep-23) with a “preference” to be <30% over time.
• Gross written premium growth looks solid in 4Q23. Weather claims appear higher in the UK & Ireland (higher CoR vs. 9M23 stage) but Canada looks better in 4Q23. Net flows in wealth held at c.6% and Investors’ net flows were another GBP3bn outflow in 4Q23 leaving AuMs at GBP227bn (cons: 230bn, Sep-23: 218bn).
• Outlook: new target of operating profit of GBP2bn by 2026 (consensus already there), S2 own funds generation up to GBP1.8bn by 2026 (from 1.5bn by 2024) and higher cash remittances. These looks achievable and highlight the improving capital generation of the business.