Aviva PLC

I would now like to hand the conference over to Aviva's group CEO, Amanda Blanc.

Thank you very much. Good morning, everyone, and welcome to Aviva's first quarter update. As usual, I'll give a short overview and then hand over to Charlotte to give you the details before we move to questions. Aviva has delivered another quarter of strong trading and profitable growth across the group, once again demonstrating the benefits of our diversified capital light model against the backdrop of global market volatility. Let me just share a few highlights. In general insurance, premiums are up 19% with an improved combined operating ratio. This shows our ability to effectively manage through the cycle and get ahead of emerging inflationary impact. In UK general insurance, strong premium growth has been driven by the addition of direct line and underlying performance in UK personal lines. In Canada, Our new management team is building momentum with growth across personal lines and commercial lines. And in wealth, where we are the number one player, we secured 3.3 billion pounds of net flows at 49% year on year. And flows have continued to be strong since the end of Q1. On strategic delivery, we are making excellent progress on the direct line integration and remain firmly on track to meet our synergy targets. And the improvements we are making to underwriting and pricing are paying off with better profitability and direct line branded PCW policies nearly doubling since the fall year. Looking ahead, our continued strong trading momentum, real progress on the direct line integration and market leading businesses give us confidence in our 2026 outlook, including the guidance that we've given around combined operating ratios. And we are equally confident in delivering our medium-term group targets and continuing to deliver value for our customers and our shareholders. I'll now hand over to Charlotte to take you through the numbers.

Thanks, Amanda, and good morning, everyone. I'll first cover the business highlights, starting with general insurance. We achieved strong growth with £3.4 billion of premiums across the UK, Ireland, and Canada. I'm pleased with the core development across all markets. a result of our discipline in pricing, strong rate adequacy and cost focus. Weather was more consistent with first quarter long-term averages compared with the prior year, which had been adverse. Overall, this led to an undiscounted core of 94.1%, which was a two and a half points better than Q1 25. In UK general insurance, premiums grew 28% to 2.4 billion pounds. We have remained disciplined in pricing across the portfolio and rate adequacy remains strong. Personal lines premiums were up 62% to £1.5 billion. This was naturally higher with the addition of direct line alongside growth across the rest of the portfolio, including intermediated business and our new home partnership with Nationwide. We added two and a half points of rate across the motor portfolio in March to help manage inflationary impact. Commercial lines premiums of £834 million reflect strong retention and our continued focus on deliberate underwriting discipline to manage profitability through the cycle amid softer market conditions. So to unpack this a little bit more for you, Mid-market, which makes up about 60% of the SME channel, was up 1%, benefiting from high retentions of close to 90%. This offset lower top line in digital and intentional profitability actions taken in scheme. Probitas was up a little, driven by the addition of new lines of business. And although GCS volumes were lower, primarily where UK market conditions have softened the most and competition is the highest. This is because we have chosen price adequacy over volume. Across all segments, quote flow and broker engagement is strong. We continue to grow selectively, protecting earnings quality. This is more important to us than defending short-term volume in parts of the portfolio where prices would not clear our return thresholds. Finally, April renewals have gone well, and we expect the top-line trend seen in Q1 to moderate over the rest of the year. The UK undiscounted core was 94.8%, a half-point improvement on Q1 2025, and we expect further improvement in the core throughout the year, particularly as the pricing actions we have taken on the Direct Line book earn through. In Ireland, premiums of £157 million were up 8% in constituency, with personal lines up strongly. Ireland saw its core improve by 18.5 points, reflecting more normal weather compared to 2025, which had been significantly affected by Storm Eowyn. So looking at the UK and Ireland together, the Q1 core of 95.1% is 1.8 points better than last year. And as you'll remember, Q1 core is typically higher than other quarters due to a higher weather loading. And the weather experience was in line with this loading and therefore is consistent with the expectations we had when we set the sub 94% guidance for the full year. And to confirm, we remain firmly on track to meet this. In Canada, premiums of £907 million grew 3% at constant currency. Personal lines premiums grew 4%, supported by continued rate actions across both auto and personal property. Commercial lines premium grew 1%, as lower average premiums in SME property were offset by some large wins in GCS. Canada's un-discounted core was 91.8%, an improvement of 4.4 points. This strong performance reflects the actions we have been taking to improve profitability across all lines and more favourable CAT experience than last year. This is a great start to the year in Canada, and we remain on track to meet our guidance to achieve a core approaching 94% for the full year, remembering that Q3 is the peak quarter for CAT activity in Canada. Moving to IWR. Wealth flows were up 49% to £3.3 billion, representing 6% of opening AUM, another excellent performance. Workplace flows of £2 billion were up 71%, benefiting from strong retention and new business wins in 2026, compared with the loss of a large workplace scheme in Q1 last year. Platform continues to perform really well, up 24% to 1.6 billion pounds. Tax year end was another success with strong inflows in both advisor platform and direct wealth. Our wealth business continues to demonstrate its resilience as it has done through a number of periods of volatility over recent years. And we are confident in our ambition to deliver 280 million pounds operating profit by 2027. and in the continued growth trajectory beyond that. In the insurance business, protection sales were broadly consistent year-on-year, as growth in group protection was offset by a lower result in individual protection. You may recall that Q1 2025 benefited from strong sales in advance of stamp duty changes last April. For health, in-force premiums increased by 9%, supported by large corporate. which more than offset some reduced demand across SME and consumer channels. We remain focused on achieving our ambition of £100 million of operating profit for health this year. Moving to retirement, sales were £1.1 billion in the quarter. Within this, individual annuities increased by 10% and equity release sales were up 8%. In BPA, we wrote volumes of £619 million across 20 schemes within the quarter. As of today, this has extended to £1.1 billion. We have maintained our discipline in a highly competitive market and continue to exceed our hurdles and achieve at least low teens IRR. Finally, in Aviva Investors, AUM was stable as we saw improved flows across both external and internal channels. supported by wealth and the additional transfer of direct line assets. We'll now move on to the balance sheet metric. Solvency was 171% at the end of Q1, in line with our expectations. This was after using 13 points of capital for the final 2025 dividend of £800 million and the share buyback of £350 million. Cash generation in the quarter added six points. This included around 2.5 points from beneficial market movements, mainly from higher interest rates in the UK and Canada. It was partially offset by the expected two-point reduction following the end of Solvency II grandfathering rules for £200 million of Tier 2 debt. Our previously published Solvency II sensitivities demonstrate we have relatively low exposure to market volatility. Therefore, recent market turbulence hasn't had a material impact on our solvency position. We remain absolutely on track to deliver at least £350 million of further capital synergies from the direct line transaction by the end of this year. And as you'll recall, this is equivalent to seven points of solvency and is in addition to the three points we delivered at the end of 2025. As always, we maintain a high quality asset portfolio. Our credit portfolio continued to perform well in Q1 and to date. We experienced no downgrades below investment grade. Almost all the assets outside of public debt on our balance sheet are sourced in-house by Aviva investors using a robust risk management framework. They are predominantly real estate and high quality UK productive assets, including infrastructure. And we have no exposure to the types of investments you have seen in the headlines. And we've provided more color on our portfolio in this morning's announcement. The assets are high quality, almost all investment grade, and provide predictable matching adjustment eligible cash flows under the Solvency II framework. So to summarize, we've had another good quarter. Aviva continues to have a firm grip on performance management, and we are on track to deliver our ambitious plans. The direct line integration is making excellent progress with improving profitability and strong PCW volume momentum. We are absolutely on track to meet all our integration milestones and to deliver the expense and capital synergies previously announced. We are well positioned for the period ahead, and despite the ongoing geopolitical uncertainty, we have observed limited changes in customer behavior. The insurance sector generally, and Aviva more specifically, have consistently proven to be resilient, and we have successfully navigated periods of uncertainty in the past. While we are not complacent, we remain confident in the outlook for our group. With that, I'll hand over to the operator so we can start question and answers.