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Aviva’s chief executive has said a surge in UK home insurance prices has not yet reached its peak, as the industry continues to grapple with a combination of higher labour costs and wild weather driving up payouts.
The FTSE 100 insurance group, a big general and life insurer in the UK which also operates in Ireland and Canada, on Wednesday reported a 14 per cent rise in first-half adjusted operating profit to £875mn, beating expectations.
A significant contributor was its general insurance business, where premiums were up 15 per cent on the first half of last year to £6bn, helped by a better underwriting performance in the UK and Ireland.
The group said it was maintaining “strong pricing discipline in the inflationary environment”. Prices for home and motor insurance have risen sharply in recent years, as claims costs for insurers have gone up.
“I don’t think that we’ve reached the peak on home [insurance prices] yet,” said chief executive Amanda Blanc. “The premiums in home are going up, whereas . . . in motor they are flattening or coming down a little bit for new business.”
The industry, she said, was responding to a series of severe storms last year and rising labour costs because of shortages of skilled workers such as plumbers.
The average cost of an annual home insurance policy, covering buildings and contents, rose 20 per cent to almost £400 in the second quarter of the year, an all-time high, according to data published this week. Insurers also made record property insurance payouts to homes and businesses in the same period.
Assets under management in Aviva’s wealth management business grew to £186bn thanks to higher net inflows compared with the first half of last year.
Sales in its retirement division were lower, with sales of bulk annuities — insurance policies that cover corporate pension liabilities — in the period slowing slightly from £2.4bn to £2.3bn. But the company said it anticipated it would meet its three-year target of doing £15bn to £20bn of these deals.
In the results statement, Blanc said “greater economic stability and political certainty” was making the UK market more attractive for investment and growth.
It left its longer-term targets for group performance unchanged. Aviva’s shares were slightly higher by late-morning trading.
The group’s Solvency II capital coverage ratio — the amount of capital it has compared with regulatory requirements — was 2 percentage points lower than at the year-end, at 205 per cent. But this was also ahead of consensus estimates collated by the company.
Analysts at Citigroup said earnings upgrades were “likely to follow” after a “solid set of numbers”, and solvency levels that were ahead of expectations.
The results come as Aviva’s investment management business agreed to sell a portfolio of 32 UK wind farms to a consortium led by Hong Kong’s CK Infrastructure.
