Aviva Claims To Be Insulated From ‘Brexit’ Impact
Aviva believes capital surplus built up in recent years proves their business should not be affected by ‘Brexit’.
The insurance company Aviva is publishing research and data to reassure a market in shock after the vote for the U.K to leave the E.U., which led to Aviva’s share price falling by around 130p.
Steps Taken To Strengthen The Company In Recent Years
Angharad Knill, executive at Macquarie, provider of financial, advisory, investment and funds management services, says that “we believe this (devaluation) reflects the Aviva balance sheet of three years ago rather than today, and that the insurer has taken action in line with Solvency II capital requirements for insurers. While we do not believe Aviva has a ‘fortress’ balance sheet, it does offer a compelling valuation and dividend yield.”
Aviva has tripled its capital surplus in the last 4 years. The company reports that currently, its Solvency II coverage ratio remains near the top of its working range of 150% to 180%. This means that its net income after tax is around 150% to 180% the value of its short and long term liabilities.
In 2015, Aviva amassed £2.7bn in cash generation. £0.4bn of this came from Friends Life, an internal part of Aviva, management actions and one-offs. Ms Knill expects “more management actions to come and expect more strong cash flow in 2016 as the Friends Life integration continues. Management are guiding to 5-10% of Solvency II capital generation in 2016.”
As of March 2016, Aviva published preliminary results reporting a Solvency II ratio of 180% and a surplus of £9.7bn. They therefore consider themselves among the strongest placed and most resilient of the U.K. insurers with a low sensitivity to market stress. They state that they are monitoring any technical implications and will adapt accordingly.
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