Aviva’s share buyback is a ‘real positive’ says UKGI boss

Aviva’s £750m share buyback programme, announced last week in conjunction with the insurer’s 2021 half year financial results, is “incredibly positive” and has contributed “to a good share price bump”, according to Adam Winslow, Aviva’s chief executive of UK general insurance.

On 12 August, Aviva confirmed its plans to return at least £4bn to shareholders by June 2022 - this includes a share buyback programme of up to £750m, which commenced immediately.

Speaking to Insurance Times following the publication of Aviva’s H1 results, Winslow said the share buyback had “been very well received”, despite the UK boss’ belief that many within the market were not expecting the insurer “to announce a number” within its financial results.

In part, Winslow thinks this is because the sale of Aviva’s non-core business operations, including Aviva Vita in Italy and AvivaSA in Turkey, has gone “quicker than the market expected”.

Not all of the firm’s agreed deals have completed yet, however – Aviva said its outstanding sales are due to be completed by the end of the year. So far, Aviva has confirmed sales for eight of its businesses, raising £7.5bn.

Strong competitive position

According to a bulletin published by financial organisation S&P Global on 12 August, Aviva’s “future capital adequacy and the overall financial health of the group won’t be dented by its intention to return £4bn of capital to investors by mid-2022”.

It continued: “The company also announced its intention to further reduce its debt stack by about £1bn. As a result, we anticipate that Aviva’s S&P Global Ratings-adjusted leverage for 2021-2022 will average about 30%.

“The financial reorganisation follows the sale of the group’s French, Italian, Polish and other smaller operational units as part of management’s strategic focus on the group’s core business units.

“Aviva’s disciplined approach to capital management underpins our assessment of its strong capital and earnings.

“At its third quarter 2020 results, Aviva stated its intention to return any excess capital above its target solvency coverage of 160%-180% to shareholders - the return of capital announced [on 12 August] brings it closer to its target.

“Although we calculate that the return of capital will see Aviva’s capital position fall below its current excess position at the ‘AAA’ benchmark in our capital model, once the sales and reorganisation is completed, we expect the group to retain an excess of capital above our ‘AA’ range benchmark for 2021-2023.

“This is consistent with the group credit profile of ‘aa-’, given its very strong competitive position in its remaining markets.”