Half-year Report - Part 1 of 4 - Press Release

RNS Number : 5538W

Aviva PLC

02 August 2018

 

Start Part 1 of 4

2 August 2018

AVIVA PLC 2018 INTERIM RESULTS ANNOUNCEMENT

Mark Wilson, Group Chief Executive Officer, said:

Aviva has grown operating earnings per share by 4% and increased the dividend by 10%.

The 10% increase in the interim dividend is our fourth consecutive half-year of double digit dividend growth and further proof of Aviva's progress.

During these choppy market conditions, it is reassuring that Aviva's results are consistent, dependable and growing.

Aviva remains financially strong with a capital surplus of £11 billion. In the first half of 2018, we started a £600 million share buy-back and paid off €500 million of expensive debt.

We remain on track to achieve our financial targets.

Profit	· Operating EPS up 4% to 26.8 pence (HY17: 25.8 pence) · Operating profit‡,#,1 down 2% to £1,438 million (HY17: £1,465 million). Excluding disposals, operating profit rose 4% to £1,421 million (HY17: £1,365 million) · IFRS profit after tax £376 million (HY17: £716 million)
Dividend	· Interim dividend per share up 10% to 9.25 pence (HY17: 8.40 pence)
Capital	· Solvency II capital surplus2 £11.0 billion (2017: £12.2 billion), including £1.8 billion of distributions to investors. · Solvency II cover ratio‡,2 187% (2017: 198%) · Operating capital generation# £0.9 billion (HY17: £1.1 billion) · IFRS net asset value per share 411 pence (2017: 423 pence)
Cash	· Cash remittances‡,# £1,493 million (HY17: £1,170 million) · UK Insurance special remittance £500 million. Cumulative special remittances from UK Insurance since 2016 totalled £1.25 billion, ahead of £1 billion target. · Holding company liquidity £1.43 billion (February 2018: £2.0 billion)

‡    Denotes Alternative Performance Measures (APMs) which are key performance indicators of the Group used to measure our performance and financial strength.

#    Denotes key performance indicators which are used by the Group to determine or modify remuneration.

1    All references throughout this report to 'Operating profit' represent 'Group adjusted operating profit', an APM which is not bound by the requirements of IFRS.

2    The estimated Solvency II position represents the shareholder view as defined in section 8.i of the Analyst Pack.

3    Stated as at July 2018 but excluding amounts set aside to meet the remainder of our ordinary share repurchase programme.

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Key Financial Metrics

Operating profit^‡,#

	6 months 2018 £m	6 months 2017 £m	Sterling % change	Full year 2017 £m
Life business1	1,392	1,296	7%	2,852
General insurance and health1	302	418	(28)%	704
Fund management	74	69	7%	164
Other1,2	(330)	(318)	(4)%	(652)
Total	1,438	1,465	(2)%	3,068

Operating earnings per share

26.8p

25.8p

4%

54.8p

Cash remittances^3,‡,# 

	6 months 2018 £m	6 months 2017 £m	Sterling % Change	Full year 2017 £m
United Kingdom3	1,226	930	32%	1,800
Canada	13	13	-	55
Europe3	217	190	14%	485
Asia & Aviva Investors	37	37	-	58
Total	1,493	1,170	28%	2,398

Operating capital generation (OCG): Solvency II basis^#,3

	6 months 2018 £bn	6 months 2017 £bn	Sterling % Change	Full year 2017 £bn
United Kingdom3	0.9	0.8	13%	2.8
Canada	-	0.1	(100)%	(0.1)
Europe3	0.4	0.4	-	0.9
Asia & Aviva Investors	-	0.1	(100)%	0.1
Other4	(0.4)	(0.3)	(33)%	(1.1)
Total	0.9	1.1	(18)%	2.6

Expenses

	6 months 2018 £m	6 months 2017 £m	Sterling % change	Full year 2017 £m
Operating expenses	1,929	1,851	4%	3,778
Integration & restructuring costs	-	52	(100)%	141
Expense Base	1,929	1,903	1%	3,919

Operating expense ratio

54.9%

53.3%

1.6pp

52.7%

Value of new business: Adjusted Solvency II basis^‡

	6 months 2018 £m	6 months 2017 £m	Sterling % change	Constant currency % change	Full year 2017 £m
United Kingdom5	198	267	(26)%	(26)%	527
Europe5	307	246	25%	24%	533
Asia & Aviva Investors	98	83	18%	21%	183
Total	603	596	1%	1%	1,243

General insurance combined operating ratio^‡

	6 months 2018	6 months 2017	Change	Full year 2017
United Kingdom5	94.3%	93.2%	1.1pp	93.9%
Canada	104.6%	98.9%	5.7pp	102.2%
Europe5	93.5%	91.0%	2.5pp	93.3%
Combined operating ratio‡	97.4%	94.5%	2.9pp	96.6%

Profit after tax

	6 months 2018 £m	6 months 2017 £m	Sterling % change	Full year 2017 £m
IFRS profit after tax	376	716	(47)%	1,646
Basic earnings per share	7.9p	14.9p	(47)%	35.0p

Interim dividend

	6 months 2018	6 months 2017	Sterling % change
Interim dividend per share	9.25p	8.40p	10%

Capital position

	30 June 2018	31 December 2017	Sterling % change	30 June 2017
Estimated Shareholder Solvency II cover ratio‡,6	187%	198%	(11.0)pp	193%
Estimated Solvency II surplus	£11.0bn	£12.2bn	(10)%	£11.4bn
Net asset value per share	411p	423p	(3)%	412p

1    Non-insurance operations relating to the UK have been reclassified to their respective market segments to better align with the segmental note as per note B5 'Segmental Information' in the analyst pack.

2    Other includes other operations, corporate centre costs and group debt and other interest costs, including coupon payments in respect of the direct capital instrument (DCI) and tier 1 notes (net of tax).

3    Cash remitted to Group and Solvency II operating capital generation are managed at legal entity level. As Ireland constitutes a branch of the United Kingdom business, cash remittances from Ireland are not aligned to the new management structure within Europe, but they are reported within United Kingdom.

4    Other includes Group activities and the Group diversification benefit.

5    Following the launch of UK Insurance which brings together UK Life, UK General Insurance and UK Health into a combined business, the Ireland Life and General Insurance businesses have been aligned to the new management structure and reported within Europe. As a result, comparative balances for HY17 have been restated.

6    The estimated Solvency II position represents the shareholder view as defined in section 8.i of the analyst pack.

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Group Chief Executive Officer's report

Overview

In the first half of 2018, Aviva has continued to deliver attractive growth from its major businesses. Operating earnings per share increased 4% to 26.8 pence (HY17: 25.8 pence), with seven of our major markets achieving operating profit‡,# growth from continuing operations ranging from 7% to 14%. Operating profit declined 2% to £1,438 million (HY17: £1,465 million) due to weak results in Canadian motor insurance, adverse weather and business divestments. As these factors are expected to abate or reverse in the second half, we remain confident of meeting our ambition of greater than 5% growth in operating earnings per share. At 30 June 2018, our Solvency II surplus1 was £11.0 billion (2017: £12.2 billion), equivalent to a cover ratio‡,1 of 187% (2017: 198%). During the first half, we deployed surplus capital to repay expensive subordinated debt and commenced a £600 million share repurchase programme. Together with the payment of the 2017 final dividend, capital returned to equity and debt holders in the first half totalled £1.8 billion. Our confidence in the full year outlook and our financial strength is reflected in the dividend, which has increased 10% to 9.25 pence per share (HY17: 8.40 pence per share). This marks the fourth consecutive interim period of double digit growth in dividend per share. Providing shareholders with a sustainable and growing dividend remains paramount for Aviva.

Managing for growth

Aviva has maintained respectable, broad based growth from its major markets in the first half of 2018. While our major markets are concentrated in developed economies, our ability to deliver growth is underpinned by attractive market dynamics coupled with Aviva specific factors. These Aviva-led initiatives can be grouped into three broad categories: distribution, product mix and expenses. We are expanding distribution and working towards improving productivity across all of our channels and markets. In the first half of 2018, we made progress diversifying distribution in Italy, where we have increased our presence in the IFA market, and Singapore, where our financial advisor network has increased in scale to 772 advisers (2017: 673 advisers) and is growing sales volumes. In France, we are focused on helping our strong distribution network fulfil its potential and we are aligning this network under a single Aviva brand. We continue to proactively manage product mix to maximise returns. In the UK, our general insurance net written premiums were stable as we grew in our preferred channels, particularly commercial non-motor and direct personal lines, offset by a reduction in motor due to the softening market. Similarly, in Ireland, we have tempered top-line growth in general insurance as the competitive environment has evolved. In France, Poland and Singapore, we've emphasised capital-light unit-linked and protection volumes in our life insurance sales. While in the UK, we've strengthened transactional capability in the bulk purchase annuity market, helping us to secure our largest ever transaction with Marks & Spencer and giving rise to a five-fold increase in new business volumes. Operating expenses have grown 4%, while total expenses (including integration and restructure costs) have risen 1% in the first half. Our expense growth has been deliberate and targeted. We have temporarily increased investment to modernise our IT infrastructure, moving to the cloud and accelerating investment in digital across a number of markets as we work towards launching simpler, more convenient and rewarding product propositions for customers. In our European markets and Aviva Investors, we have managed expenses to deliver improved efficiency and higher profit margins. We also tightened our existing criteria for classifying expenses as integration and restructure costs. While it is possible future major projects may give rise to integration and restructure costs being excluded from operating profit, spending on less material projects is being absorbed within operating expenses. As a result of these changes, integration and restructure costs were held at zero in the first half of 2018 (HY17: £52 million). Our performance shows the benefits of our diversity, both geographic and by business line, with strength in some areas compensating for weakness in others. Investment in the business is being managed based on affordability in the context of our growth. For example, in the UK business, benefits from longevity reserve releases were offset by provisions for potential redress costs, short-term weakness in annuity new business contribution and higher levels of investment in IT, IFRS 17 and other change projects.

‡    Denotes Alternative Performance Measures (APMs) which are key performance indicators of the Group used to measure our performance and financial strength.

#    Denotes key performance indicators which are used by the Group to determine of modify remuneration.

1    The estimated Solvency II position represents the shareholder view as defined in section 8.i of the analyst pack.

2    All percentage movements in this section are quoted as reported in converted sterling unless otherwise stated.

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Capital allocation	At 30 June 2018, Aviva's capital surplus was £11.0 billion (2017: £12.2 billion), equating to a cover ratio of 187%. The reduction in capital surplus is primarily attributable to our capital management initiatives, including £1.8 billion of distribution to investors from payment of the final dividend, paying down hybrid debt and buying back shares. Cash remittances‡,# during the first half totalled £1,493 million (HY17: £1,170 million). Included within this was a £500 million special remittance from UK Insurance: since 2016, these have totalled £1.25 billion, exceeding our target of £1 billion. In the first half of 2018, Aviva completed a number of acquisitions and divestments, invested organically in growing and modernising our business and used surplus funds on capital management initiatives. We have now finalised our withdrawal from Spain and Taiwan and completed the sale of our shareholding in the Avipop joint venture in Italy. We recently completed the acquisition of Friends First in Ireland for €146 million. Friends First will complement our strong existing franchise in Ireland, increasing the scale, product breadth and customer numbers of our life insurance business. This further strengthens our multi-line positioning in Ireland, where we are the leading general insurance provider. The completion of the sale of Friends Provident International Limited is expected to occur in late 2018. In our existing businesses, we are investing to strengthen our long-term competitiveness. For example, we added capacity in product segments such as bulk purchase annuities, where sales volumes have increased five-fold relative to HY17, and global corporate and specialty, which continues to deliver measured growth in premium volumes. We have invested in building capability, such as hiring in Aviva Investors to expand our equity fund management team. We are also continuing to allocate resource to our modernisation and innovation programmes. In this regard, we are using the additional profitability from releases of excess longevity reserves to accelerate spending on digital and other temporary change programmes that we believe will provide lasting benefits to Aviva in terms of cost efficiency, operational agility and customer proposition. In 2018, we are targeting £2 billion of surplus capital deployment, comprising debt reduction, bolt-on acquisitions and additional returns to investors. In the first half of 2018, we made significant progress on our deployment plans, completing the Friends First acquisition, paying down €500 million of subordinated debt and commencing a £600 million share repurchase plan (which at the end of July is just over 60% complete). In the second half, we have ear-marked a further $575 million for debt reduction, leaving approximately £400 million to be deployed to reach our £2 billion target. We remain on the lookout for attractive acquisition opportunities that can strengthen our core businesses; however, at this time it is considered unlikely that any such opportunity would be completed during 2018. Accordingly, it is likely that for the remaining £400 million we would prioritise further debt reduction or allocate funds into next year's capital deployment budget.
Digital	Digital remains a strategic focus to drive future growth. The hard work and investment of recent years is reflected in our growing customer numbers. Active Customer Registrations# at our UK Digital business are up 1.4 million to 3.5 million. June alone saw a record month for registrations, adding 190,000 customers. In turn, our digital customers are coming to us to meet more of their needs, with the number of customers with more than one Aviva product growing 16% to 1.6 million. Digital continues to play a vital role in Aviva's growth initiatives; broadening and strengthening our distribution, enhancing our business through deepening customer engagement and improving efficiency. We now have new propositions coming to market.
Outlook	Our progress in the first half of 2018 shows the strength and depth of our businesses, with attractive growth maintained across our major markets. Continuation of these major market growth trends coupled with improvements in Canada and further benefit from capital deployment reinforce our confidence in delivering our target of greater than 5% operating earnings per share growth in 2018.

Mark Wilson

Group Chief Executive Officer

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Chief Financial Officer's report

Overview

Aviva made operational and financial progress in the first half of 2018, with seven out of our eight major markets delivering attractive growth in operating profit‡,# and operating earnings per share increasing 4% to 26.8 pence (HY17: 25.8 pence). Operating profit declined 2% to £1,438 million (HY17: £1,465 million) due to the impact of divestitures, challenging market conditions in Canadian motor insurance and a significant increase in weather related claims. However, many of the factors that have adversely affected our results in the first half are temporary and should either diminish or reverse in the second half. We therefore remain confident we can reach our ambition of greater than 5% growth in operating earnings per share in 2018, subject to unexpected changes in foreign exchange, weather or regulation. Reflecting our confidence in the full year prospects, we have increased the interim dividend by 10% to 9.25 pence (HY17: 8.40 pence). Within operating profit, longevity reserve releases from our UK annuity portfolio were £200 million. This was partly offset by an additional £90 million provision relating to potential redress from historic advised sales by Friends Provident, over 90% of which relate to the period before 2002. In addition, the new business margin from UK annuities was lower than expected as we did not reach target asset mix during the period. Lastly, we have temporarily increased expenditure on IT and other projects in the UK Insurance business and at group centre, reinvesting profits from annuity reserve releases to generate long term benefits for the Group. IFRS profit after tax was £376 million (HY17: £716 million). Integration and restructure costs have been held at zero (HY17: £52 million), with spending on less material projects now classified as operating expense. Profit on disposal and remeasurement of subsidiaries was £31 million (HY17: £202 million) while investment variances were minus £688 million (HY17: minus £384 million) due to increased bond yields and widening of fixed income spreads as hedges that protected our economic and Solvency II capital gave rise to negative movements in the IFRS balance sheet. The Solvency II cover ratio‡,2 declined to 187% (2017: 198%) due to payment of the final dividend and capital deployment initiatives including repayment of €500 million of subordinated debt and the £600 million share repurchase programme. Operating capital generation# was £0.9 billion (HY17: £1.1 billion) reflecting weaker results in Canada, new business strain on higher annuity sales and completed divestitures.

United Kingdom

In UK Insurance, operating profit rose 10% to £1,040 million (HY17: £949 million) with growth in long-term savings and annuities and equity release and benefits from changes in longevity assumptions offsetting lower profits in protection and general insurance. In long-term savings, operating profit increased 19% to £106 million (HY17: £89 million) reflecting higher assets under management and administration (AUM) and continued stability in net profit margin from the in-force business. Net fund inflows increased to £2.5 billion (HY17: £2.1 billion) due to growth in workplace pensions. The advisor platform maintained positive net fund flows and increased AUM despite the major IT migration project undertaken during the period. At the end of the first half, AUM in our long-term savings business were up 11% to £121 billion (HY17: £109 billion). Operating profit from annuities and equity release rose 4% to £322 million (HY17: £309 million). New business volumes increased 83% to £2.6 billion (HY17: £1.4 billion) due to a five-fold increase in BPA sales; however, this was not fully reflected in operating profit, with the new business contribution steady at £108 million (HY17: £109 million). In view of the large increase in annuity sales, we were unable to reach our target asset allocation by 30 June and this has temporarily affected the IFRS new business margin. We expect the new business margin to improve in the second half as our long-term asset origination catches up with the sales volumes.The contribution from existing annuity business was £214 million (HY17: £200 million) with growth in annuity assets and positive experience variances offsetting the non-recurrence of a £54 million benefit in the prior year related to asset mix optimisation. In life protection, the competitive environment and claims trends remained challenging in the first half of 2018, with operating profit declining 19% to £108 million (HY17: £133 million). We have maintained a disciplined approach to underwriting as we seek to improve operating profit margins for new and existing business. This caused a contraction in volumes from individual protection that was only partially offset by higher volumes in group protection.

‡    Denotes Alternative Performance Measures (APMs) which are key performance indicators of the Group used to measure our performance and financial strength.

#    Denotes key performance indicators which are used by the Group to determine of modify remuneration.

1    All percentage movements in this section are quoted in constant currency unless otherwise stated.

2    The estimated Solvency II position represents the shareholder view as defined in section 8.i of the Analyst Pack.

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United Kingdom (continued)	General insurance continues to improve normalised underwriting profitability; however, the first half of 2018 saw higher weather-related claims costs compared with the benign prior year. As a result, operating profit declined 9% to £195 million (HY17: £214 million). We continue to proactively manage product and channel mix. Net written premiums (NWP) were stable at £2,110 million (HY17: £2,105 million) as a 5% increase in our commercial non-motor portfolios offset a 4% reduction from personal motor. The UK general insurance business has maintained attractive margins, reporting a combined operating ratio (COR)‡ of 94.3% (HY17: 93.2%) despite the higher weather claims. The legacy business of mature savings products achieved operating profit of £188 million (HY17: £187 million). We expect assets under management and operating profit from the legacy portfolio to decline gradually as policies mature. However, in the first half of 2018, we have mitigated this through active management of the portfolio. In addition to the core product lines, we have continued to generate operating profit from changes to assumptions and positive experience. In the first half of 2018, these contributed £107 million (HY17: £9 million) with releases of £200 million of longevity provisions from our annuity portfolio partially offset by an additional £90 million provision relating to potential redress for advised sales by Friends Provident. Over 90% of cases identified are pre-2002. (Further details of this provision are included in note B14 of the Analyst Pack.) As we look to the second half of the year, we remain focused on asset origination for our annuity portfolio and maintaining underwriting discipline in protection and general insurance. In the absence of a reversal of recent life expectancy trends, we would expect further releases of longevity provisions.
Canada	In Canada, the motor insurance market continues to see heightened levels of claims activity while results were also affected by elevated weather and natural catastrophe losses. Against this backdrop, Aviva Canada reported an operating loss of £13 million in HY18. This represents an improvement relative to the £25 million loss in the second half of 2017, though is significantly below the £71 million operating profit achieved in HY17. NWP increased 5% in constant currency terms to £1.5 billion (HY17: £1.5 billion). Personal lines premiums rose 6% as a result of higher premium rates while commercial lines premiums gained 1% as we adjusted our underwriting risk appetite. The COR remained elevated at 104.6% in the first half (HY17: 98.9%, 2H17: 105.3%). The normalised COR improved by 2.5 percentage points compared to the second half of 2017; however, this was offset by weather, which added 2.2 percentage points to our COR compared with long-term average experience. In response to the challenging market environment, we have increased premium rates, tightened underwriting risk appetite and adjusted distribution and claims handling strategies. As a result of these actions, underlying results are showing encouraging signs of progress and, weather notwithstanding, we expect this to be reflected in strong growth in profitability in the second half of 2018 and into 2019. Further actions on pricing should drive additional growth as we strive to return the COR to the targeted 94-96% range in 2020.
France	Aviva France has maintained positive momentum in 2018, with operating profit from continuing operations increasing 10% to £279 million (HY17: £250 million). In life insurance, operating profit rose 15% to £229 million (HY17: £196 million) due to supportive investment markets coupled with our focus on improving productivity of our multi-channel distribution network, further optimisation of business mix and tight control over operating expenses, which we reduced by 2%. Life insurance value of new business (VNB)‡ increased 9% as a result of a 6% increase in new business volumes and continued improvement in mix, with protection and unit linked comprising 49% of sales (HY17: 46%). In general insurance, operating profit declined 8% to £50 million (HY17: £54 million) with 4% growth in net written premiums offset by a modest deterioration in the COR to 95.5% (HY17: 93.2%) as a result of adverse trends in prior year reserve development partially offset by lower large losses.

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Poland	Aviva Poland made steady progress in the first half, with operating profit up 4% to £95 million (HY17: £88 million). In life insurance, operating profit rose 8% to £86 million (HY17: £77 million) due to higher AUM balances which supported increased fee income and our continued emphasis on high margin protection products. General insurance operating profit saw a modest reduction due to lower profitability in motor insurance, though the COR remained attractive at 89.0% (HY17: 86.2%).
Italy	Excluding divestments, Aviva Italy grew operating profit by 7% to £82 million (HY17: £75 million). In life insurance, VNB rose 189% due to continued success with our innovative hybrid product and initiatives to broaden distribution reach. The impact of growing sales has begun to emerge in life operating profits, though this was offset in the first half by reserve movements that are not expected to recur. In general insurance, we adjusted underwriting risk appetite which gave rise to a 10% decline in net written premium to £162 million (HY17: £176 million) and an improvement in COR to 97.4% (HY17: 98.7%).
Ireland	Aviva Ireland's operating profit rose 11% to £50 million (HY17: £44 million) with stronger results from life insurance more than offsetting a modest (£1 million) decline in contribution from general insurance. As competitive intensity returns to the Irish general insurance market, we have adapted our trading strategy accordingly, with net written premiums consistent with the prior year at £223 million (HY17: £221 million). We maintained an excellent underwriting performance, with COR of 87.1% (HY17: 84.7%), despite higher weather-related claims. During the first half, we completed the acquisition of Friends First. This acquisition will increase the scale and competitiveness of our life insurance operations in Ireland and is expected to contribute to improving operating profit.
Aviva Investors	In the first half of 2018, Aviva Investors grew operating profit 7% to £76 million (HY17: £71 million). Revenues increased 4% to £284 million (HY17: £273 million) while operating expenses rose 3% to £208 million (HY17: £202 million) as we invested to strengthen our distribution and equities capabilities. AUM ended the half year at £347 billion (2017: £351 billion1), primarily due to negative net fund flows of £3.7 billion (HY17: £0.5 billion net inflow). Internal legacy net outflows of £2.4 billion were consistent with the prior year, though we also experienced modest net outflows from internal core and external mandates. Looking forward, Aviva Investors remains focused on developing its distribution capability and product range to deliver long-term gains in operating profit.
Singapore	Aviva continues to make financial and strategic progress in Singapore. Operating profit rose 10% to £46 million (HY17: £42 million) as the 22% growth in life operating profit more than offset an increase in losses from general insurance and health. VNB rose 47% to £62 million (HY17: £44 million) as a result of higher sales volumes and a shift in product mix towards protection. In large part, this is due to the success of our Aviva Financial Advisor network, which now has 772 advisers on board (2017: 673 advisers).
Strategic Investments	In addition to its major markets, Aviva has strategic investments which are managed to produce long-term growth in operating profit and value. Collectively, the strategic investment businesses saw operating losses widen during the first half of 2018 to £59 million (HY17: £33 million loss). This was primarily due to accelerated investment into our global digital operations as we work towards launching new product propositions, which more than offset an increase in profitability from Aviva-COFCO, our joint venture in China.
Capital & Cash	At 30 June 2018, Aviva's Solvency II capital surplus2 was £11.0 billion (2017: £12.2 billion), equivalent to a cover ratio of 187% (2017: 198%). The reduction in surplus and cover ratio during the first half is attributable to our capital deployment initiatives, including repayment of €500 million of subordinated debt and the £600 million share buy-back programme. Operating capital generation was £0.9 billion, down from £1.1 billion in HY17. Operating capital generation from our business units declined to £0.9 billion reflecting the impact of weaker results in Canada, higher annuity volumes and divestments. Debt and centre costs remained stable at £0.2 billion.

1    Following a review of external funds under management, comparative amounts have been amended from those previously reported to reflect the fact that certain crossholdings had not been correctly eliminated on consolidation. The effect of this change is to reduce external funds under management by £2.5 billion.

2    The estimated Solvency II position represents the shareholder view as defined in section 8.i of the Analyst Pack.

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Capital & Cash (continued)

Cash remittances‡,# rose 28% to £1,493 million while holding company liquidity ended July at £1.4 billion (Feb 2018: £2.0 billion). It is customary for Aviva to focus on cash remittances at the full year stage given variations in the timing of dividends paid by our business units. However, we highlight that the first half included a £500 million special remittance from the UK Insurance business. This brings the total cumulative amount of special remittances to £1.25 billion since 2016, exceeding our £1 billion target. Over the course of 2018, we are targeting total surplus capital deployment of £2 billion on debt reduction, bolt-on acquisitions, and additional returns to shareholders. So far, we have deployed or earmarked approximately £1.6 billion, leaving £400 million available for the remainder of this year. Our preference remains to invest in our businesses and we remain on the lookout for bolt-on acquisition opportunities. However, if we are unable to find attractive M&A opportunities, it is likely we would prioritise further debt reduction or allocate funds into next year's capital deployment budget.

Outlook

In the first half of 2018, Aviva has continued to demonstrate its ability to deliver growth from across its major markets and we remain focused on extending this track record. Confirming our guidance for the full year result in 2018, we would note the following: · We continue to expect our major market businesses to grow more than 5% in aggregate; · Looking solely at Canada, results may be broadly comparable with the prior year given the higher than expected weather costs in the first half; and · Other factors, such as divestiture impacts, capital management and tax rate are expected to broadly offset each other. Taking these factors together, we remain confident in our ability to achieve our target of greater than 5% growth, subject to the usual caveats with respect to factors outside of our control such as foreign exchange movements, regulatory change and weather.

Thomas D. Stoddard

Chief Financial Officer

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Notes to editors

All comparators are for the half year 2017 position unless otherwise stated.

Income and expenses of foreign entities are translated at average exchange rates while their assets and liabilities are translated at the closing rates on 30 June 2018. The average rates employed in this announcement are 1 euro = £0.88 (6 months to 30 June 2017: 1 euro = £0.86) and CAD$1 = £0.57 (6 months to 30 June 2017: CAD$1 = £0.59).

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.

Cautionary statements:

This 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 difficult conditions in the global financial markets and the economy generally; the impact of simplifying our operating structure and activities; the impact of various local and international political, regulatory and economic conditions; market developments and government actions (including those arising from the referendum on UK membership of the European Union); 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 of our portfolio and impact our asset and liability matching; 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 on our business activities and results of operations; our reliance on information and technology and third-party service providers for our operations and systems; the inability of reinsurers to meet obligations or unavailability of reinsurance coverage; increased competition in the UK and in other countries where we have significant operations; regulatory approval of extension of use of the Group's internal model for calculation of regulatory capital under the European Union's 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 (including cyber attack); 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 fluctuations in share price as a result of general market conditions or otherwise; 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 government regulations or tax laws in jurisdictions where we conduct business, including decreased demand for annuities in the UK due to changes in UK law; the inability to protect our intellectual property; the effect of undisclosed liabilities, integration issues and other risks associated with our acquisitions; and the timing/regulatory approval impact, integration risk and other uncertainties, such as non-realisation of expected benefits or diversion of management attention and other resources, relating to announced acquisitions and pending disposals and 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 or elsewhere, including the implementation of key legislation and regulation. For a more detailed description of these risks, uncertainties and other factors, please see 'Other information - Shareholder Information - Risks relating to our business' in Aviva's most recent Annual Report. 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 presentation are current only as of the date on which such statements are made.

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

Registered office

St Helen's

1 Undershaft

London

EC3P 3DQ

Contacts

Investor contacts	Media contacts	Timings
Chris Esson [phone] Diane Michelberger [phone] Helen Driver [phone]	Nigel Prideaux [phone] Andrew Reid [phone] Sarah Swailes [phone]	Presentation slides: 07:00 hrs BST www.aviva.com Real time media conference call: 07:45 hrs BST Analyst presentation: 08:45 hrs BST Live webcast: 08:45hrs BST https://www.avivaresults.com/interim2018/

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