25th Jan 2023 13:54
(Alliance News) - Jefferies on Wednesday said Aviva PLC has been "resilient", after the insurer left returns guidance unchanged despite a GBP50 million hit from a UK cold snap last year.
Aviva shares were 2.6% higher at 452.58 pence each in London on Wednesday afternoon, making it the best FTSE 100 performer.
Jefferies rates Aviva at "hold", with a price target of 445.00p
The London-based company also updated on its general insurance business, expecting a group combined operating ratio, in line with guidance for 2022.
"Aviva's GI businesses in the UK, Ireland and Canada continued to trade positively over the closing months of 2022, demonstrating the clear benefits of our diversification across GI products and geographies," the company said.
Aviva expects a combined operating ratio of 94.6%, in line with guidance given back in November, but worsened slightly from 94.1% in 2021. A reading above 100% indicates a loss on underwriting, so the lower the better.
"We continue to price appropriately for the high inflation environment, in particular in UK Personal Lines, responding at pace to emerging data and trends," Aviva said.
Jeffries said Aviva's operating margin "is resilient given the deteriorating margins reported by some peers".
Claims stemming from a UK freeze event in December amounted to GBP50 million, Aviva said, though it added that its "weather experience" for 2022 was largely in line with its long-term average. It was only "marginally" above the long-term average in the fourth quarter.
"Weather losses have been broadly in-line with Aviva's long-term average, which is a positive surprise given the recent updates from Direct Line Group in the UK and Intact in Canada," Jefferies said.
Earlier this month, Direct Line Insurance Group PLC blamed severe cold weather for a significant increase in claims over December, pushing the company to an underwriting loss for the year.
The Bromley, England-based insurance company told investors that it expects related claims of around GBP90 million across the home and commercial divisions.
So far, Direct line said it has helped 3,000 customers deal with burst pipes, water tanks and other related damage due to a prolonged period of sub-zero temperatures across the UK.
Aviva also maintained returns guidance. It said in November that it expects a 31.0 pence per share payout for 2022 and 32.5p for 2023. In addition, it said at the time that it intends to "return further capital to shareholders" next year.
Aviva declared a 10.3p interim dividend this year and paid 22.05p for all of 2021.
By Sophie Rose, Alliance News reporter
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