Aviva plc Half Year Report 2022

RNS Number : 4764V

Aviva PLC

10 August 2022

 

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News Release
10 August 2022

Aviva plc 2022 Interim Results Announcement

Continuing momentum with strong first half results demonstrating benefits of diversified business model

Confident outlook for 2022 despite challenging market backdrop

Further capital returns - anticipate launching share buyback with our full year 2022 results

Solvency II OFG‡		Solvency II pro forma cover ratio1		General insurance COR‡		Operating profit‡,2		2022 interim dividend
£538m		213%		94.0%		£829m		10.3p
+46%		+27pp		+2.4pp		+14%		+40%
HY213: £369m		2021: 186%		HY213: 91.6%		HY213: £725m		HY21: 7.35p

Amanda Blanc, Group Chief Executive Officer, said:

"Sales are up, operating profit is higher, our financial position is stronger. This has been an excellent six months for Aviva.

Our scale and diversification give us resilience and opportunity, enabling Aviva to withstand the challenging economic climate. Our market leading positions and our unique ability to look after a wide range of customers' needs are clear advantages and have driven robust operating performance. Trading has been encouraging across all our major businesses in insurance, wealth and retirement.

Even so, we are very conscious of the pressures currently facing many of our customers, especially the more vulnerable. In response we have launched new, low cost, insurance products, and we are increasing the range and amount of support we provide to communities, businesses and our own people during this challenging time.

Delivering for our shareholders is at the core of our strategy. Our liquidity and capital position is extremely healthy and we are declaring an interim dividend of 10.3p, in line with our full year 2022 dividend guidance of c.31.0p. We are increasingly confident in Aviva's prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full year results."

Strong first half results demonstrating benefits of diversified business model

• Solvency II operating own funds generation^‡ up 46% to £538m (HY21³: £369m)

• Operating profit^‡,2 up 14% to £829m (HY21³: £725m)

• General insurance gross written premiums (GWP) up 6%⁴ to £4,694m (HY21³: £4,366m) with a strong 94.0% COR^‡ (HY21³: 91.6%)

• UK & Ireland Life sales⁵ up 4% to £16.8bn (HY21: £16.2bn) with VNB^‡ up 13% to £300m (HY21: £265m)

• Solvency II return on equity^‡ 10.9% (HY21^3,6: 7.4%), 12.3% (HY21^3,6: 8.8% ) excluding Heritage

• Baseline controllable costs^‡,7 down 2% to £1,342m (HY21³: £1,372m) reflecting continued focus on efficiency

• Cash remittances^‡ of £798m (HY21³: £1,063m) in line with our expectation and medium term target

• IFRS loss after tax of £633m (HY21: £198m loss), largely reflects adverse market movements, with no impact on capital or cash remittances^‡

• Interim dividend per share of 10.3p (HY21: 7.35p), up 40%, in line with our dividend guidance for 2022

Capital position is strong - new share buyback anticipated with full year 2022 results

• Solvency II shareholder cover ratio^‡ of 234% (2021: 244%) and centre liquidity^‡ (July 22) of £2.7bn (Feb 22: £6.6bn)

• Estimated Solvency II shareholder cover ratio pro forma¹ for planned £1bn further debt reduction, pension scheme payment, and the acquisition of Succession Wealth of 213%

• Solvency II debt leverage ratio^‡ of 30% (2021: 27%). We expect this to return below 30% as we complete additional deleveraging over time

• Given our strong capital position and prospects, we anticipate commencing a new share buyback programme with our 2022 full year results, subject to market conditions and regulatory approval

• Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to return surplus capital regularly and sustainably

Footnotes are shown on page 2

Page 2

Continuing strong operating momentum into first half of 2022

• Wealth showed resilience in challenging conditions with net flows^‡ of £5.0bn (HY21: £5.2bn). Workplace added 150,000 new customers in the period, while our Advisor platform attracted the 2nd⁸ highest net flows^‡ in the market

• Annuities & Equity release sales⁵ up 12% to £2,762m (HY21: £2,466m) and Solvency II operating OFG^‡ up 18% to £169m (HY21: £143m) driven by growth in BPAs and Equity Release. Outlook remains positive with higher BPA volumes and margins expected in H2

• Protection & Health VNB^‡ up 5% to £100m (HY21: £95m) reflecting strong performance in Group Protection and Health partly offset by higher interest rates which impacted Individual Protection

• UK & Ireland General Insurance GWP, up 5% to £2.8bn (HY21: £2.7bn), and COR^‡ of 95.6% (HY21: 93.6%). UK commercial lines performed strongly with GWP up 12% while personal lines was 1% lower as we maintained pricing discipline to mitigate the impact of claims inflation. We will continue to take the necessary actions to price appropriately for the inflationary environment in the second half

• Canada GWP up 12% (6% at constant currency) to £1,854m (HY21: £1,661m) and a COR^‡ of 91.7% (HY21: 88.8%). We saw excellent growth in both Commercial and Personal lines with GWP up 11% and 4% respectively at constant currency

• Aviva Investors external net flows^‡ recovered well in Q2 to £0.2bn in the first half (Q1 2022: £0.2bn net outflows), however remain lower than the prior year (HY21: £1.1 billion) given the volatile market conditions in the first half of 2022

• International investments operating profit^‡,2 flat at £55m with sales⁵ 8% lower due to lockdowns in China

Group financial performance						Group financial strength
General Insurance GWP		Life new business sales5		IFRS loss for the period		Solvency II shareholder cover ratio‡		Centre liquidity‡
£4.7bn		£17.4bn		£(633)m		234%		£2.7bn
+6%4		+3%		(219)%		(10)pp		£(3.9)bn
HY213: £4.4bn		HY213: £16.9bn		HY21: £(198)m		FY21: 244%		Feb 22: £6.6bn

Outlook

Our strong first half results reinforce our confidence in the prospects and outlook for our business, as our strategy to transform performance continues to build momentum. While recognising the challenging economic backdrop, we remain well positioned to drive growth and meet our Group targets.

In UK & Ireland Life we expect to see continued growth. We anticipate higher BPA volumes in the second half as well as improving margins. In Wealth and Protection & Health we expect a continuation of first half trends for the remainder of the year. We also expect the completion of our acquisition of Succession Wealth during the second half.

In General Insurance, we expect the rating environment to remain favourable in commercial lines, while in personal lines we will continue to price appropriately to manage inflation.

We remain firmly focused on improving efficiency and are on track to meet the first stage of our cost target to reduce baseline controllable costs^‡,7 by £300m (net of inflation) over 2018-22. We are continuing to execute the actions necessary to deliver the upgraded target we set out in March to reduce costs by £750m (gross of inflation) by 2024.

Cash remittances^‡ remain on track to meet our target of >£5.4bn cumulative (2022-24). Solvency II operating own funds generation^‡ also on track to meet our target of £1.5bn per annum by 2024.

‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section | 1 Solvency II pro forma cover ratio is the estimated Solvency II shareholder cover ratio at 30 June 2022 adjusted for £1bn further debt reduction, pension scheme payment and acquisition of Succession Wealth | 2 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section | 3 Comparatives presented are from continuing operations | 4 Constant currency | 5 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section | 6 Following a review of the basis of preparation of Group Solvency II Return on Equity comparative for the six months ended 30 June 2021 has been restated. See section '4.ii - Solvency II return on capital/equity' for details | 7 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline | 8 Latest data available as at Q1 2022 (Fundscape)

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Chief Executive's Overview

Overview

I'm pleased to report Aviva has had an excellent first half of 2022 despite the challenging environment.

Our strong first half performance is a timely reminder of the benefits of Aviva's diversified, high quality and focused business model and mix. This provides in-built resilience and opportunity for the Group, allowing us to withstand difficult market conditions. The Group is now focused on growing in those areas where it has market leading positions and expertise, and where it can generate attractive returns. Aviva is well balanced across its insurance, wealth and retirement propositions in the UK, Ireland and Canada.

Strong first half results

Profitability improved across the Group during the first half. We are building clear momentum in our operating performance and we have made progress against the financial targets we set out in March.

Solvency II operating own funds generation (OFG), an important measure of value creation at Aviva and one of our key targets, was up 46% to £538 million (HY21: £369 million). We saw improved volumes and margins in Bulk Purchase Annuities (BPAs), further performance improvement in UK GI Commercial lines together with increased GI investment returns, as well as lower Group interest costs following our debt reduction actions.

Group adjusted operating profit¹ was also up, by 14%, to £829 million.

Cash remittances to the Group centre of £798 million in the first half were in line with our target for over £5.4 billion of gross cash remittances over 2022-24, and this supported a strong centre liquidity position of £2.7 billion as at end July.

In UK & Ireland Life we delivered robust sales² growth of 4% to £16.8 billion, with volumes in Annuities & Equity Release up 12% and in Health & Protection up 6%. In our Wealth business net flows of £5.0 billion represented 7%³ of opening assets under management, although were lower than last year due to the challenging market conditions. UK&I Life value of new business (VNB), a key measure of the profitability of new business, was up 13% to £300 million, driven by a 50% increase in Annuities & Equity Release as BPA margins improved versus the first half of last year.

Trading momentum in General Insurance continued in the first half, and we saw gross written premiums of £4.7 billion, an increase of 6% at constant currency . Commercial Lines delivered double digit premium growth with strong new business, rate increases and high retention levels. Personal Lines premiums were up 1% at constant currency, with UK Personal Lines down 1% reflecting our resolute focus on returns in a difficult market. The Group combined operating ratio (COR) was an excellent 94.0% demonstrating our underwriting discipline and tight management of claims inflation, with the 2.4pp increase versus the first half of 2021 reflecting a return to more normal claims frequency and weather patterns.

External net flows in Aviva Investors recovered well in Q2 to £0.2 billion in the first half (Q122: £0.2 billion net outflows), however remain lower than the prior year (HY21: £1.1 billion) given the volatile market conditions in the first half of 2022. Overall, Aviva Investors saw total net outflows of £4.3 billion in the period reflecting expected outflows from internal assets, mainly Heritage, and withdrawals by clients previously part of the Group, mainly in France.

Our focus on cost efficiency continues. First half baseline controllable costs⁴ fell 2% to £1.3 billion as we maintained our cost discipline despite the inflationary environment. We remain on track to meet our £300 million (net of inflation) cost reduction ambition by the end of this year. We are also very focused on delivering our £750 million (gross of inflation) ambition by 2024, although offsetting inflationary pressures will determine how much falls through to the bottom line.

Finally, our balance sheet is strong. On a pro forma basis⁵, our Solvency II shareholder cover ratio was 213% at 30 June 2022 (with a headline Solvency II shareholder cover ratio of 234%), benefitting from operating capital generation in the period as well as positive market movements. Our asset portfolio is well positioned with diversification across asset classes, strong credit ratings, and low loan-to-value ratios in our commercial mortgage portfolio.

Interim dividend and commitment to further capital returns

The Board of Directors has declared an interim dividend of 10.3 pence per share, up 40% (HY21: 7.35 pence), with a cost of c.£289 million (HY21: £286 million). This is consistent with our full year 2022 dividend guidance of c.31.0 pence⁶ (approximately £870 million).

Given our strong capital position and prospects, we anticipate commencing a new share buyback programme with the 2022 full year results, subject to market conditions and regulatory approval.

Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to return surplus capital regularly and sustainably.

Delivering Aviva's Promise

We aim to be a leading player in every major segment where we operate. Where we are already number one, we plan to build further on that position. Where we are not, we are pushing hard to get there. We're focusing on four areas to make that a reality:

Customer: delivering leading customer experience and engagement. Aviva already has the benefit of being the no.1 insurance customer franchise in the UK. But we're aiming to go further, by enhancing our digital capability to provide customers with a simpler, more personalised offering, with the products they need, when and how they need them. Our aim is to look after more customers and more of their needs so that they stay with us for longer.

1 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section | 2 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section | 3 Net flows annualised as a percentage of opening assets under management | 4 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline | 5 Solvency II pro forma shareholder cover ratio is the estimated Solvency II shareholder cover ratio at 30 June 2022 adjusted for £1 billion further debt reduction, pension scheme payment and acquisition of Succession Wealth | 6 The Board has not approved or made any decision to pay any dividend in respect of any future period

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We've been there for our customers during the first half. In February the UK suffered three storms in a single week. We received over 19,000 claims, so colleagues from across the business, including in Canada, helped to process them in good time, settling 10% of claims on the day of notification. That's One Aviva in action, making a real difference for our customers.

Growth : continued targeted growth in our priority areas across the Group. We have great capabilities, partnerships, and market positions, and we're ideally equipped to capitalise on big customer trends.

In the first half we saw continued excellent growth across the Group, including in our General Insurance businesses, in Protection & Health and in Annuities & Equity Release. In Wealth, where market conditions have been challenging, net flows have remained strong. We're expanding revenue streams too, where there are the right opportunities. For example Aviva Zero, our digital motor insurer in the UK with in-built carbon offset feature, which launched earlier this year, has now sold over 10,000 policies. Also in the UK, we have just announced the acquisition of a high net worth business from Azur, which will move us to number one in that segment.

Efficiency: we are targeting top quartile efficiency and cost reduction. That means reducing the number of old systems and products, making it easier for customers and brokers to deal with us, automating processes, and reducing our property footprint. Our baseline controllable costs fell 2% in the first half despite the inflationary pressures, demonstrating our firm grip on Aviva's cost base.

Sustainability: continuing to lead the UK financial services sector on sustainability and living up to our responsibilities to people and the planet, changing the way we do business and using our influence to help others do the same.

In May, our Sustainalytics ESG risk rating improved to 11.3, now ranking Aviva 5th¹ out of 288 global insurers (up from 25th) and ahead of all UK Financial Services peers. Importantly, we've been supporting our colleagues, customers, and communities in the face of economic pressures and the cost-of-living crisis. We have made financial commitments to communities to provide advice and support to vulnerable people and businesses, continued to provide affordable but robust products and premium deferral options, and we are making a one-off payment to help 7,000 of our colleagues.

Summary

Overall, Aviva is in excellent health and our strategy is delivering results. We enter the second half of 2022 with confidence and while we remain mindful of market and macro-economic challenges, we are on track to meet all of our financial targets. There is still much to do, but we expect to make continued good progress to deliver Aviva's promise for our customers and shareholders.

Amanda Blanc

Group Chief Executive Officer

9 August 2022

Other operating highlights
UK & Ireland Life	• Wealth - strong net flows of £5 billion (HY21: £5.2 billion), pleasing performance in challenging markets • Workplace pensions - 150,000 net new customers. AUM 8% lower at £88.5 billion reflecting impact of lower equities • Adviser platform - #22 by net flows in the adviser platform market with net flows £2.4 billion. Total platform AUM 7% lower at £40.3 billion (2021: £43.1 billion) • Annuities - BPA sales3 of £1.9 billion (HY21: £1.6 billion), including £0.8 billion of Aviva staff pension scheme • Equity release - sales3 up 27% amid heightened market activity and introduction of a new proposition • Group protection - sales3 up 31% reflecting excellent retention and new scheme wins • Ireland Life - margin improvement with VNB up to £16 million (HY21: £10 million) driven by rationalised product offering
General Insurance	• UK commercial lines GWP up 12% to £1,430 million (HY21: £1,280 million) • UK personal lines GWP 1% lower to £1,198 million (HY21: £1,213 million) as we took actions to maintain pricing discipline • Canada commercial lines GWP up 17% to £716 million (HY21: £614 million), up 11% in constant currency • Canada personal lines GWP up 9% to £1,138 million (HY21: £1,047 million), up 4% in constant currency
Aviva Investors	• First phase of the transition to a new scalable real assets operating model with loan servicing successfully outsourced to Mount Street

1 As at 9 August 2022 | 2 Latest data available as at Q1 2022 (Fundscape) | 3 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section

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Cash remittances‡,R and Centre liquidity‡	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m
UK, Ireland, Canada and Aviva Investors	779	1,052	(26)%	1,651
International investments1	19	11	73%	11
Cash remittances‡ from continuing operations	798	1,063	(25)%	1,662
Centre liquidity‡ as at end of July/February	2,735	2,817	(3)%	6,644

Profit	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m
UK, Ireland, Canada and Aviva Investors	1,040	984	6%	2,231
International investments1	55	55	-%	97
Corporate centre costs and Other operations	(138)	(134)	(3)%	(379)
Group debt costs and other interest	(128)	(180)	29%	(315)
Adjusted operating profit‡,R from continuing operations2	829	725	14%	1,634
IFRS (loss)/profit for the period3	(633)	(198)	(219)%	2,036
Operating earnings per share (as reported)4,‡,R	19.0p	21.0p	(10)%	43.8p
Operating earnings per share (normalised)4,5,‡	23.5p	N/A	N/A	N/A
Basic earnings per share	(18.8)p	(6.2)p	(203)%	50.1p

Controllable costs‡	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m
UK, Ireland, Canada and Aviva Investors	1,227	1,259	(3)%	2,559
Corporate centre costs and Other operations	115	113	2%	295
Baseline controllable costs6	1,342	1,372	(2)%	2,854
Cost reduction implementation, IFRS 17 costs and other	103	75	37%	242
Strategic investment	34	-	-%	-
Controllable costs‡ from continuing operations	1,479	1,447	2%	3,096

Solvency II operating own funds generation (OFG)‡,R and Solvency II operating capital generation (OCG)‡	Solvency II operating own funds generation				Solvency II operating capital generation
	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m
UK, Ireland, Canada and Aviva Investors	709	550	29%	1,660	722	841	(14)%	1,906
International investments1	75	84	(11)%	124	33	37	(11)%	55
Corporate centre costs, Group external debt costs and Other	(246)	(265)	7%	(597)	(199)	(484)	59%	(597)
Group Solvency II operating own funds generation‡ and Solvency II operating capital generation‡ from continuing operations	538	369	46%	1,187	556	394	41%	1,364

Solvency II return on capital/equity‡,R	6 months 2022 %	Restated 6 months 20217 %	Change	Full year 2021 %
Solvency II return on capital
UK, Ireland, Canada and Aviva Investors	8.0%	6.1%	1.9pp	8.8%
International investments1	15.3%	18.5%	(3.2)pp	13.6%
Group Solvency II return on equity‡ from continuing operations	10.9%	7.4%	3.5pp	10.7%

Capital position	30 June 2022	31 December 2021	Change	30 June 2021
Estimated Solvency II shareholder cover ratio‡,R	234%	244%	(10)pp	203%
Estimated Solvency II surplus	£10.3bn	£13.1bn	(21)%	£12.0bn
Solvency II net asset value per share‡	420p	417p	3p	433p
Solvency II debt leverage ratio‡	30%	27%	3pp	26%

Dividend	6 months 2022	6 months 2021	Sterling % change	Full year 2021 £m
Interim dividend per share	10.3p	7.35p	40%	7.35p

R Symbol denotes key performance indicators used as a base to determine or modify remuneration | ‡ Denotes Alternative Performance Measures (APMs) and further information can be found in the 'Other information' section |1 International investments include Aviva's interest in joint ventures/associates in Singapore, India and China | 2 Group adjusted operating profit is a non-GAAP APM and is not bound by the requirements of IFRS. Further details of this measure are included in the 'Other information' section. | 3 IFRS (loss)/profit for the period represents IFRS (loss)/profit after tax | 4 Operating earnings per share is derived from the Group adjusted operating profit APM. Further details of this measure are included in the 'Other information' section. | 5 Normalised EPS is calculated as if the share consolidation completed on 16 May 2022 as part of the £3.75 billion capital return, had taken place on 1 January 2022 | 6 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline
| 7 Following a review of the basis of preparation of Group Solvency II Return on Equity and Market Solvency II Return on Capital, comparative amounts for the six months ended 30 June 2021 have been restated. In the numerator, Transitional Measure on Technical Provisions (TMTP) run-off has been replaced with the economic cost of holding equivalent capital to the opening value of TMTP on a shareholder basis and, for Group Solvency II Return on Equity only, the denominator has been adjusted to exclude excess capital above our target Solvency II shareholder cover ratio. Further details can be found in the 'Other information' section.

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Group financial headlines

Operating results

Cash remittances

Cash remittances during the first half of 2022 were £0.8 billion (HY21¹: £1.1 billion), in line with our existing target to grow remittances towards £1.8 billion in 2023. Strong remittances in the prior period arose from the decision to retain cash in our subsidiaries in 2020 to maintain balance sheet strength following volatility arising from COVID-19.

Profit

Operating profit² increased by 14% to £829 million (HY21¹: £725 million). Excluding UK Life management actions and other of £(71) million (HY21: £(38) million), operating profit² was up 18% to £900 million (HY21: £763 million).

UK & Ireland Life operating profit² benefitted from strong results in Annuities & Equity Release which more than offset marginally lower operating profit² in Wealth, as well as lower operating profit² from Protection & Health and management actions and other compared with the first half of 2021. Heritage operating profit² increased by 33% due to the impact of market movements on policyholder tax. Excluding management actions and other, UK Life operating profit² was up 19% to £696 million (HY21: £583 million).

General Insurance performed robustly against a challenging market backdrop, with operating profit² down 11% predominantly driven by claims returning to a more normal level following a strong prior period which included COVID-19 frequency benefit.

Operating earnings per share of 19.0 pence (HY21: 21.0 pence) with the impact of disposals partly offset by higher operating profit² from continuing operations and a lower share count. Operating earnings per share on a normalised basis was 23.5 pence.

IFRS loss for the period was £(633) million (HY21: £(198) million) while basic earnings per share decreased to (18.8) pence (HY21: (6.2) pence). Higher operating profit² was more than offset by non-operating items including economic variances of £(1,470) million (HY21: £(437) million), with higher interest rates and widening spreads resulting in an adverse economic variance impact.

Cost reduction

Baseline controllable costs³ from continuing operations, fell by 2% to £1,342 million (HY21¹: £1,372 million), despite headwinds from inflation. We are on track to meet our ambition of a £300 million reduction (net of inflation) in 2022 and to meet our target of £750 million (gross of inflation) cost reduction from the 2018 baseline by the end of 2024.

Solvency II operating own funds generation (Solvency II OFG)

Solvency II OFG from continuing operations increased by 46% to £538 million (HY21¹: £369 million) with higher Solvency II OFG from Annuities & Equity Release, Management Actions & Other and UK GI partially offset by lower Solvency II OFG from Protection & Health and Canada.

Solvency II operating capital generation (Solvency II OCG)

Solvency II OCG from continuing operations increased by 41% to £556 million (HY21¹: £394 million) as the prior year was adversely impacted by capital actions and other non-recurring items which have not repeated in the first half of 2022. This has been partially offset by lower Solvency II OCG from core business units.

Solvency II return on equity (Solvency II RoE)

Solvency II RoE was 10.9%, improving by 3.5pp (HY21 restated: 7.4%). Our ambition remains for Solvency II RoE on a continuing basis to improve to >12% by 2024. The Solvency II RoE was 12.3% excluding Heritage, which acts as a drag to the headline Solvency II RoE given it is in run-off.

1 Comparatives presented are from continuing operations | 2 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section. | 3 Baseline controllable costs exclude strategic investment, cost reduction implementation, IFRS 17 and other costs not included in the 2018 costs savings target baseline

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Capital and cash

Solvency II capital

At 30 June 2022, Aviva's Solvency II shareholder surplus was £10.3 billion and Solvency II shareholder cover ratio was 234%
(FY21: £13.1 billion and 244% respectively). Our pro forma Solvency II cover ratio allowing for the planned £1 billion further debt reduction, £0.1 billion pension scheme payment, and the acquisition of Succession Wealth, is estimated at 213%.

The solvency capital requirement of £7.7 billion includes a c.£1.9 billion benefit from Group diversification.

Solvency II net asset value per share was 420 pence (FY21: 417 pence).

Pro forma £bn unless otherwise stated	31 December 2021	30 June 2022	Pro forma1 adjustments	Pro forma 30 June 2022
Own funds	22.2	18.0	(1.6)	16.4
SCR	(9.1)	(7.7)		(7.7)
Surplus	13.1	10.3	(1.6)	8.7
Solvency II shareholder cover ratio (%)	244%	234%	(21)%	213%
Centre liquidity (as at end February/July)	6.6	2.7		1.3
Solvency II debt leverage ratio	27%	30%		28%

Centre liquidity

At end July 2022, centre liquidity was £2.7 billion (February 2022: £6.6 billion) with the reduction primarily driven by the £3.75 billion capital return, £0.5 billion subordinated debt redemption and £0.5 billion payment of the 2021 final dividend, partly offset by cash remittances to Group of £0.8 billion and the £0.5 billion RT1 debt issuance. Our pro forma centre liquidity is £1.3 billion after allowing for the planned further £1 billion debt reduction, £0.1 billion pension payment, and the acquisition of Succession Wealth.

Solvency II debt leverage

Solvency II debt leverage ratio increased to 30% (FY21: 27%) as a result of the reduction in own funds following the capital return. Our
pro forma Solvency II debt leverage ratio is 28% after allowing for the planned £1 billion debt reduction, £0.1 billion pension payment and the acquisition of Succession Wealth.

Dividend

Today we have announced an interim dividend per share for the first half of 2022 of 10.3 pence (HY21: 7.35 pence) with a cash cost of approximately £289 million.

Our guidance for dividend payments of approximately £870 million and £915 million for 2022 and 2023 respectively, with low-to-mid single growth in dividends per share thereafter, remains unchanged. On a per share basis this is equivalent to approximately 31.0 pence² in 2022 and 32.5 pence² in 2023.

Capital return

Under our capital framework, we consider capital above 180% Solvency II shareholder cover ratio as excess, allowing for reinvestment in the business, focused M&A and returns to shareholders. We target Solvency II debt leverage ratio of below 30%.

Given our strong capital position and prospects, we anticipate commencing a new share buyback program with our 2022 full year results, subject to market conditions and regulatory approval.

Assuming a new buyback is agreed, its size will be determined by the Board at year end and will take account of the financial position at that time, as well as both the drivers of the capital surplus (including the impact of market movements) and our preference to return surplus capital regularly and sustainably.

1 Solvency II pro forma shareholder cover ratio is the estimated Solvency II shareholder cover ratio at 30 June 2022 adjusted for £1 billion further debt reduction, pension scheme payment and acquisition of Succession Wealth | 2 The Board has not approved or made any decision to pay any dividend in respect of any future period

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Business highlights

UK & Ireland Life

Operating profit	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m
Wealth	71	73	(3)%	147
Annuities & Equity Release	346	265	31%	645
Protection & Health	95	107	(11)%	229
Heritage	184	138	33%	319
Other1	(71)	(38)	(87)%	77
Ireland Life	26	-	-%	11
Total	651	545	19%	1,428

UK and Ireland Life operating profit² was 19% higher at £651 million (HY21: £545 million) with a strong performance in Annuities & Equity Release and increased Heritage operating profit² more than offsetting a reduction in management actions and other non-operating items compared to the first half of 2021. Annuities & Equity Release operating profit² increased 31% to £346 million (HY21: £265 million), driven by sales³ of bulk purchase annuities, which increased by 15% to £1.9 billion (HY21: £1.6 billion), and improved margins. Heritage operating profit² increased by 33% to £184 million (HY21: £138 million) due to the impact of market movements on policyholder tax. The operating loss² within Other of £(71) million (HY21: £(38) million) reflects a reduction in the carrying value of deferred acquisition costs as a result of market movements.

Wealth operating profit² was 3% lower at £71 million (HY21: £73 million). In Protection & Health, operating profit² decreased by
11% to £95 million (HY21: £107 million), primarily driven by the absence of favourable claims experience in the first half of 2022.

Ireland Life operating profit² improved significantly to £26 million (HY21: £nil) driven by reduced expenses, improved underlying performance and modelling improvements.

UK & Ireland Life Solvency II OFG of £328 million (HY21: £217 million) was up 51% and up 14% excluding Other. Annuities & Equity Release Solvency II OFG of £169 million (2020: £143 million) was up 18% driven by higher volumes and improved margins reflecting the higher availability and allocation of corporate bonds and illiquid assets. Wealth Solvency II OFG was up 10% reflecting higher average AUM. Protection & Health was down 27% to £56 million (HY21: £77 million) driven by lower volumes of individual protection and the non-recurrence of favourable claims experience.

	PVNBP			VNB
New business	6 months 2022 £m	6 months 2021 £m	Sterling % change	6 months 2022 £m	6 months 2021 £m	Sterling % change
Wealth4	11,896	11,699	2%	109	110	(1)%
Annuities and Equity Release	2,762	2,466	12%	75	50	50%
Protection & Health	1,327	1,255	6%	100	95	5%
Ireland Life	858	820	5%	16	10	53%
UK & Ireland Life total	16,843	16,240	4%	300	265	13%

Wealth sales^3,4 grew 2% driven by growth in Workplace, predominantly reflecting incremental growth from the in-force book, which more than offset new business volumes which were lower as the prior year comparator benefitted from significant scheme wins that were delayed from 2020. The growth in Workplace was partly offset by reduced sales³ from our adviser platform due to a combination of lower new business flows, reflecting current market volatility which has dampened investment activity, and a strong first half in 2021 which saw the benefit from pent up demand from savings accumulated in 2020. VNB reduced by 1% from the resultant change in business mix with a higher proportion of Workplace sales³ .

Our Wealth new business is capital efficient, with profits being derived from asset management fees less costs. We have a competitive position in both workplace and retail markets, which have delivered diversified and resilient earnings and highly efficient customer acquisition into the Group.

Annuities & Equity Release sales³ were 12% higher, driven by BPA sales³ of £1.9 billion (HY21: £1.6 billion), despite a relatively subdued first half where we have maintained pricing discipline, and a strong start to the year in equity release with sales³ up 27% on prior period, reflecting high levels of market activity. This more than offset lower sales³ from individual annuities where volumes were down on internal individual annuities, despite strong growth in external volumes. VNB for Annuities & Equity Release was up 50% to £75 million
(HY21: £50 million) predominantly driven by increased BPA sales³ at improved margins from a reduced lag in sourcing higher yielding illiquid assets to back the liabilities.

Protection & Health VNB was up 5% driven by increased sales³, up by 6%. Growth in Health and Group Protection was partially offset by a more subdued Individual Protection market due to lower volumes, as the first half of 2021 benefitted from stamp duty relief, coupled with higher interest rates have adversely impacted sales³. Our Group Protection business saw a 31% increase in sales³ which included a significant scheme win in the first quarter while Health volumes grew 8% as we saw continued momentum from the Expert Select proposition launched last year.

Ireland Life PVNBP grew 5% driven by strong sales³ in unit linked business, partially offset by lower protection sales³. Our single product range has improved margins and driven VNB up significantly over the year.

1 UK Life Other represents changes in assumptions and modelling, non-recurring items and non-product specific overheads | 2 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section. | 3 References to sales represent present value of new business premiums (PVNBP) which is an Alternative Performance Measure (APM) and further information can be found in the 'Other information' section | 4 Wealth and Other

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	Net flows			Assets under management
	6 months 2022 £m	6 months 2021 £m	Sterling % change	30 June 2022 £m	30 June 2021 £m	Sterling % change	Full year 2021 £m
Wealth	4,962	5,173	(4)%	140,425	141,234	(1)%	152,207
of which: platform	2,547	2,834	(10)%	40,280	39,012	3%	43,101
of which: workplace	2,699	2,697	-%	88,463	89,154	(1)%	95,798
of which: individual pensions	(284)	(358)	21%	11,682	13,068	(11)%	13,308

Wealth net flows were down 4% to £5.0 billion (HY21: £5.2 billion), reflecting lower flows due to the current market uncertainty. Within our platform business, our adviser platform saw net flows down 9% to £2.4 billion (HY21: 2.7 billion) driven by subdued new business activity owing to market volatility. Workplace net flows were flat at £2.7 billion despite lower new business as the prior year benefitted from schemes that were delayed from 2020.

Wealth assets under management reduced by 8% to £140 billion during the first six months (2021: £152 billion) due to adverse market movements.

General Insurance

Operating profit	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m
UK	159	169	(6)%	318
Ireland	12	22	(45)%	38
Canada	204	229	(11)%	406
General Insurance Total	375	420	(11)%	762

Operating profit¹ decreased to £375 million (HY21: £420 million), a good performance despite higher claim costs, as the level of claims returned to a more normal level following lower claim frequency from COVID-19 restrictions in the prior year, and less favourable weather compared with the first half of 2021. This was partially offset by volume growth and an improvement in long-term investment return due to higher yields from reinvestment in hedged equities and corporate bonds.

General Insurance Solvency II OFG of £367 million (HY21: £315 million) was up 17% in the first half. UK & Ireland GI Solvency II OFG of
£193 million (HY21: £121 million) was up 60% driven by a strong performance in commercial lines and a higher long-term investment return due to re-risking. In Canada, Solvency II OFG of £174 million (HY21: £194 million) was down 10% due to less favourable weather and
non-recurrence of COVID-19 frequency benefits.

										GWP				COR
	Personal lines			Commercial lines						Total				Total
	6 months 2022 £m	6 months 2021 £m	Sterling % change	6 months 2022 £m	6 months 2021 £m	Sterling % change	6 months 2022 £m	6 months 2021 £m	Sterling % change	Full year 2021 £m	6 months 2022 %	6 months 2021 %	Sterling % change	Full year 2021 %
UK	1,198	1,213	(1)%	1,430	1,280	12%	2,628	2,493	5%	4,943	95.6%	93.9%	1.7pp	94.6%
Ireland	93	105	(11)%	119	107	11%	212	212	-%	409	96.2%	89.9%	6.3pp	91.7%
Canada	1,138	1,047	9%	716	614	17%	1,854	1,661	12%	3,455	91.7%	88.8%	2.9pp	90.7%
Total	2,429	2,365	3%	2,265	2,001	13%	4,694	4,366	8%	8,807	94.0%	91.6%	2.4pp	92.9%

UK, Ireland and Canada COR increased to 94.0% from 91.6%. UK COR increased by 1.7pp to 95.6% (HY21: 93.9%) following a return to more normal claims frequency together with higher UK weather costs relative to a benign 2021 weather experience, partly offset by improvements in underwriting performance from commercial lines supported by strong rate momentum. Canada COR deteriorated 2.9pp to 91.7%
(HY21: 88.8%) due to increased claims costs, as the prior year result benefitted from higher COVID-19 frequency benefits and benign weather, partly offset by lower commission and favourable prior year development compared to the first half of last year.

Total GWP across UK, Ireland and Canada grew 8% (6% in constant currency) to £4.7 billion (HY21: £4.4 billion), including 5% growth in the UK and 12% in Canada (6% in constant currency). Ireland was flat on the prior year.

UK commercial lines GWP grew 12% to £1,430 million (HY21: £1,280 million), reflecting a favourable rating environment, high retention levels and strong new business growth, benefiting from our investment in underwriting talent and strong broker relationships. Canada commercial lines GWP increased 17% (11% in constant currency) to £716 million (HY21: £614 million) due to increased rate in the prevailing hard market and new business growth in mid-market and large corporate accounts.

UK personal lines GWP was 1% lower at £1,198 million (HY21: £1,213 million). Retail premiums were stable with growth in household business partly offsetting a reduction in motor, as we maintained pricing discipline in a soft rating environment. Intermediated premiums were 2% lower as we continue to reshape the portfolio towards more profitable segments. Canada personal lines GWP of £1,138 million (HY21: £1,047 million) was up 9% (4% in constant currency) due to rate increases against the current inflationary environment and new business growth in our direct business.

1 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section.

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Aviva Investors

Operating profit	6 months 2022	6 months 2021	Sterling % change
Aviva Investors	14	19	(26)%

Aviva Investors operating profit¹ reduced to £14 million (HY21: £19 million), but increased to £25 million (HY21: £24 million) excluding cost reduction implementation and strategic investment costs, driven by a bigger impact of cost reduction initiatives which included the completion of the first phase of the transition to a new scalable real assets operating model with loan servicing successfully outsourced to Mount Street. Cost efficiency measures and streamlining of the business resulted in a 2% reduction in baseline controllable costs to
£165 million (HY21: £168 million). The cost income ratio remained flat at 87% (HY21: 87%).

	Net flows			Assets under management
	6 months 2022 £m	6 months 2021 £m	Sterling % change	6 months 2022 £m	6 months 20213 £m	Sterling % change	Full Year 2021 £m
Aviva Investors	(4,253)	829	(613)%	231,742	258,382	(10)%	267,780
Of which: Aviva Investors external assets2	202	1,084	(81)%	40,464	53,052	(24)%	51,332

Aviva Investors outflows, excluding cash and liquidity funds, totalled £(4.3) billion compared to net inflows of £0.8 billion in the first half of 2021. This reflected expected outflows from internal assets, mainly Heritage, and withdrawals by clients previously part of the Group, mainly in France. External net inflows, excluding strategic actions and cash and liquidity funds, were £0.2 billion (HY21: £1.1 billion). AUM reduced by £36 billion during the first half of 2022 to £232 billion, predominantly driven by adverse market movements across all asset classes in the period.

Our long-term outlook remains positive as we continue to build and deliver growth through our strengths of environmental, social and governance (ESG), real assets, infrastructure, credit and sustainable equities.

International Investments

International Investments comprises our joint ventures and associates in Singapore, China and India, providing us with value creation potential and optionality in attractive and fast-growing markets.

	6 months 2022 £m	6 months 2021 £m	Sterling % change
Operating profit	55	55	-%
PVNBP	569	617	(8)%
VNB	46	59	(23)%

Operating profit¹ was flat at £55 million (HY21: £55 million). PVNBP of £569 million (HY21: £617 million) and VNB of £46 million
(HY21: £59 million) were down on the prior year due to the impact of COVID-19 restrictions in China impacting volumes and strong prior year comparatives from new product launches in Singapore in 2021. Solvency II OFG was down 11% to £75 million (HY21: £84 million).

Corporate centre costs, Group debt costs and Other

Corporate centre costs and Other operations of £138 million (HY21: £134 million) increased due to higher cost reduction implementation, IFRS 17 costs and project costs. Excluding these costs, corporate centre costs of £68 million were down 7% versus HY21.

Group debt costs and other interest reduced to £128 million (HY21: £180 million). External debt costs reduced 23% as a result of £1.9 billion reduction in external debt in 2021. Internal lending arrangements are lower than prior year due to early repayment of capital towards the end of 2021 and partially offset by higher interest rates. Net finance income on the main UK pension scheme increased due to an increase in interest rates and opening assets.

1 Operating profit represents Group adjusted operating profit which is a non-GAAP APM. Operating profit is not bound by the requirements of IFRS. Further details are included in the 'Other information' section. | 2 External net flows above exclude net flows from strategic actions. | 3 Assets under management at 30 June 2021 have been re-presented in line with disclosures at 31 December 2021 to reflect movements in continuing and discontinued business, and a re-classification of certain funds between internal and external.

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Cautionary statements

This document should be read in conjunction with the documents distributed by Aviva plc (the 'Company' or 'Aviva') through The Regulatory News Service (RNS). This announcement contains, and we may make other verbal or written 'forward-looking statements' with respect to certain of Aviva's plans and current goals and expectations relating to future financial condition, performance, results, strategic initiatives and objectives. Statements containing the words 'believes', 'intends', 'expects', 'projects', 'plans', 'will', 'seeks', 'aims', 'may', 'could', 'outlook', 'likely', 'target', 'goal', 'guidance', 'trends', 'future', 'estimates', 'potential' and 'anticipates', and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aviva believes factors that could cause actual results to differ materially from those indicated in forward-looking statements in the announcement include, but are not limited to: the impact of ongoing uncertain conditions in the global financial markets and the local and international political and economic situation generally (including those arising from the Russia-Ukraine conflict); market developments and government actions (including those arising from the evolving relationship between the UK and the EU); the effect of credit spread volatility on the net unrealised value of the investment portfolio; the effect of losses due to defaults by counterparties, including potential sovereign debt defaults or restructurings, on the value of our investments; changes in interest rates that may cause policyholders to surrender their contracts, reduce the value or yield of our investment portfolio and impact our asset and liability matching; the unpredictable consequences of reforms to reference rates, including LIBOR; the impact of changes in short or long-term inflation; the impact of changes in equity or property prices on our investment portfolio; fluctuations in currency exchange rates; the effect of market fluctuations on the value of options and guarantees embedded in some of our life insurance products and the value of the assets backing their reserves; the amount of allowances and impairments taken on our investments; the effect of adverse capital and credit market conditions on our ability to meet liquidity needs and our access to capital; changes in, or restrictions on, our ability to initiate capital management initiatives; changes in or inaccuracy of assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, lapse rates and policy renewal rates), longevity and endowments; a cyclical downturn of the insurance industry; the impact of natural and man-made catastrophic events (including the longer-term impact of COVID-19) on our business activities and results of operations; the transitional, litigation and physical risks associated with climate change; failure to understand and respond effectively to the risks associated with environmental, social or governance ("ESG") factors; our reliance on information and technology and third-party service providers for our operations and systems; the impact of the Group's risk mitigation strategies proving less effective than anticipated, including the inability of reinsurers to meet obligations or unavailability of reinsurance coverage; poor investment performance of the Group's asset management business; the withdrawal by customers at short notice of assets under the Group's management; failure to manage risks in operating securities lending of Group and third-party client assets; increased competition in the UK and in other countries where we have significant operations; regulatory approval of changes to the Group's internal model for calculation of regulatory capital under the UK's version of Solvency II rules; the impact of actual experience differing from estimates used in valuing and amortising deferred acquisition costs (DAC) and acquired value of in-force business (AVIF); the impact of recognising an impairment of our goodwill or intangibles with indefinite lives; changes in valuation methodologies, estimates and assumptions used in the valuation of investment securities; the effect of legal proceedings and regulatory investigations; the impact of operational risks, including inadequate or failed internal and external processes, systems and human error or from external events and malicious acts (including cyber attack and theft, loss or misuse of customer data); risks associated with arrangements with third parties, including joint ventures; our reliance on third-party distribution channels to deliver our products; funding risks associated with our participation in defined benefit staff pension schemes; the failure to attract or retain the necessary key personnel; the effect of systems errors or regulatory changes on the calculation of unit prices or deduction of charges for our unit-linked products that may require retrospective compensation to our customers; the effect of simplifying our operating structure and activities; the effect of a decline in any of our ratings by rating agencies on our standing among customers, broker-dealers, agents, wholesalers and other distributors of our products and services; changes to our brand and reputation; changes in tax laws and interpretation of existing tax laws in jurisdictions where we conduct business; changes to International Financial Reporting Standards relevant to insurance companies and their interpretation (for example, IFRS 17); the inability to protect our intellectual property; the effect of undisclosed liabilities, separation issues and other risks associated with our business disposals; and other uncertainties, such as diversion of management attention and other resources, relating to future acquisitions, combinations or disposals within relevant industries; the policies, decisions and actions of government or regulatory authorities in the UK, the EU, the US, Canada or elsewhere, including changes to and the implementation of key legislation and regulation (for example, FCA Consumer Duty and Solvency II). Please see Aviva's most recent Annual Report and Accounts for further details of risks, uncertainties and other factors relevant to the business and its securities.

Aviva undertakes no obligation to update the forward looking statements in this announcement or any other forward-looking statements we may make. Forward-looking statements in this report are current only as of the date on which such statements are made.

This report has been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to who this document is shown or into whose hands it may come, and any such responsibility or liability is expressly disclaimed.

Aviva plc is a company registered in England No. 2468686.

Registered office

St Helen's

1 Undershaft

London

EC3P 3DQ

Page 12

Notes to editors

• All figures have been retranslated at average exchange rates applying for the period, with the exception of the capital position which is translated at the closing rates on 30 June 2022. The average rates employed in this announcement are 1 euro = £0.84
(6 months to 30 June 2021: 1 euro = £0.87) and CAD$1 = £0.61 (6 months to 30 June 2021: CAD$1 = £0.58).

• Growth rates in the press release have been provided in sterling terms unless stated otherwise. The following supplement presents this information on both a sterling and constant currency basis. All percentages, including currency movements, are calculated on unrounded numbers so minor rounding differences may exist.

• Throughout this report we use a range of financial metrics to measure our performance and financial strength. These metrics include Alternative Performance Measures (APMs), which are non-GAAP measures that are not bound by the requirements of IFRS and Solvency II. A complete list and further guidance in respect of the APMs used by the Group can be found in the 'Other information' section.

• We are the UK's leading Insurance, Wealth & Retirement business and we operate in the UK, Ireland and Canada. We also have international investments in Singapore, China and India.

• We help our 18.5 million customers make the most out of life, plan for the future, and have the confidence that if things go wrong we'll be there to put it right.

• We have been taking care of people for 325 years, in line with our purpose of being 'with you today, for a better tomorrow'. In 2021, we paid £30.2 billion in claims and benefits to our customers.

• Aviva is a market leader in sustainability. In 2021, we announced our plan to become a Net Zero carbon emissions company by 2040, the first major insurance company in the world to do so. This plan means Net Zero carbon emissions from our investments by 2040; setting out a clear pathway to get there with a cut of 25% in the carbon intensity of our investments by 2025 and of 60% by 2030; and Net Zero carbon emissions from our own operations and supply chain by 2030. Find out more about our climate goals at www.aviva.com/climate-goals and our sustainability ambition and action at www.aviva.com/sustainability

• Aviva is a Living Wage and Living Hours employer and provides market-leading benefits for our people, including flexible working, paid carers leave and equal parental leave. Find out more at www.aviva.com/about-us/our-people

• As at 30 June 2022, total Group assets under management at Aviva Group are £353 billion and our Solvency II shareholder capital surplus is £10.3 billion. Our shares are listed on the London Stock Exchange and we are a member of the FTSE 100 index.

• For more details on what we do, our business and how we help our customers, visit www.aviva.com/about-us

Click on, or paste the following link into your web browser, to view the complete Press Release and Half Year Report PDF document:

http://www.rns-pdf.londonstockexchange.com/rns/4764V_1-2022-8-9.pdf

The document is available to view on the Company's website at https://www.aviva.com/investors/reports/ and
copies have been submitted to the National Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

Enquiries:

Investor contacts		Media Contacts		Timings
Rupert Taylor Rea	[phone]	Andrew Reid	[phone]	Presentation slides:	0700 hrs BST
Joel von Sternberg	[phone]	Sarah Swailes	[phone]	Real time media conference call:	0800 hrs BST
Michael O'Hara	[phone]	Steve Whitelock	[phone]	Analyst conference call / audiocast:	0845 hrs BST
				https://www.aviva.com

 

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