What happened?
Aviva''s FY24 conference call provided some details on the drivers of the strong result, with an emphasis on General Insurance.
BNPP Exane View:
Our hesitation on the Aviva investment case has centred on a) the underlying growth rate in the surplus capital generation, and b) the capital generation cover of cash returns. What have we learned on these items today? On the growth, the underlying OCG was pretty decent, and the Life expected emergence outlook has grown Y/Y for the first time in some time, albeit we expect much/most of this is the AIG acquisition. On the cash return cover, the group delivered 15ppts of OCG and spent 15ppts on cash returns. The OCG was held back by cat losses, but flattered by low NB strain - so it still looks tight to us. Details from the call:
. UK GI: Aviva new business motor pricing -10%, but they don''t see any unreasonable behaviour in the market. Home is lagging motor - pricing turned negative in Q4, but they are still happy with rate adequacy. We infer that there may be some attritional deterioration into 2025+ from the exceptional underwriting conditions in 2024. Ogden benefit was c.GBP40m. Reiterated view that they have been well-behaved on premium finance (APR of 15%, below market average). Probitas is printing a mid-80s COR, and will recapture the c.20% of third party capital participation through 2026.
. CANADA GI: seeing 5-6% claims inflation; rate increases of 9/11/4% in motor/home/commercial in 2024, and filing high-single digit price for 2025. While we expect reinsurance costs will offset some of the implied positive development, it sounds like they expect improvement in the underlying COR from c.97% in 2024.
. IWR (LIFE): strain below the 3-4% guidance due to the asset mix orientation towards government bonds; this is largely a reflection of the market conditions (tight spreads), so we infer this isn''t the new normal. Possible they will trade into credit at a later date. 65% of workplace...
