Aviva reports best results in years, operating profit up 32%

Aviva Ireland has reported its best performance in five years by posting a 32 per cent rise in its operating profit, excluding non insurance activities, to €91.2 million.

Its operating expenses were unchanged at €165 million while its cash remittance to its UK parent was 23 per cent lower at €73.6 million.

In it general insurance business, gross written premium grew by €48 million year on year while its customer numbers rose by 6 per cent.

The company said 2015 was a “benign year” with weather-related damage below its earlier expectations. It remains committed to fighting “all suspected cases” of fraudulent claims.

Its combined operating ratio, a key measure of profitability in general insurance, improved by 2 percentage points to 94.6 per cent despite the increase in claims costs in the market.

Aviva’s life business achieved a 27 per cent rise in operating profit to €34 million. Aviva said the value of new business, the future profit expected on business written last year, grew significantly in 2015, up 97 per cent to €22 million.

Its market share in pensions, savings products and protection grew to

7.6 per cent from 6.5 per cent previously.

Aviva announced the sale yesterday of its health insurance business to Irish Life for an undisclosed sum.

In its full year results this morning, the company said that following a challenging first half, the performance of the health business picked up significantly in the third quarter delivering a profit of €17.5 million, up 43 per cent.

"This performance was bolstered by prior year releases as well as lower than expected volumes of public hospital claims and a reduction in the number of customers trading cover for lower premiums," Aviva Ireland chief executive Hugh Hessing said.

Concentrating capital

Mr Hessing said the sale of the business would allow Aviva Ireland to concentrate its capital on the core businesses of life and general insurance.

“Today’s results show that our strategy of disciplined underwriting and risk management is working,” he said. “Our business is underpinned by the solid foundation laid over the last two years and strengthened by appointments that have enhanced our capability in key areas.

“We are now in a position to move ahead with the digital phase of our strategy which will simplify our business for our customers.”

Speaking to The Irish Times, Mr Hessing said the industry should appeal to the Supreme Court the decisions of both the High Court and the Court of Appeal to the effect that the Motor Insurers Bureau of Ireland should pay the estimated €90 million in claims cost associated with the collapse of Malta-registered Setanta Insurance.

This would result in insurers here having to pick up the bill and result in the cost being passed on to consumers. Mr Hessing said it was important that the industry fought to secure changes to ensure that they are not asked to foot the bill for the collapse of a rival in the future.

“We need to push for that and secure a judgement that is robust enough to ensure that this doesn’t happen again. I don’t believe we are there yet,” he said.

Mr Hessing expects another year of increase in motor premiums for Aviva customers in 2016. However, he said the rises should be lower on average than in 2015.

Aviva Ireland provides products to more than 1 million customers and employs just shy of 1,000 staff here, excluding its health business.