‘Strong start’ to pension bulk annuity business in H2 following subdued H1

Aviva has seen a “strong start” to bulk purchase annuity business in H2 2021 following a “subdued” first half of the year, according to its interim results report.

The firm has secured £3.7bn of bulk annuity deals in the year to date, including £2.1bn worth of transactions secured in July, and expected a stronger H2 due to a good pipeline of transactions.

It saw “strong growth” in its savings and retirement sales, which grew by 36 per cent in H1 2021, and predicted this would continue into the second half of the year.

Annuity and equity release sales were down by 36 per cent in the first half of the year.

Although equity release sales increased by 43 per cent, this was offset by bulk annuity sales falling from £3.1bn to £1.6bn, which reflected lower volumes of transactions and a “particularly strong” H1 2020.

“Value of new business has improved from the position at Q1, as we switched a greater proportion of assets from cash and gilts into illiquids, but remains lower than prior year,” the report stated.

“This reflects a combination of lower bulk purchase annuity volumes as well as lower spreads. Both volumes and margins are expected to improve in the second half of the year helped by a good pipeline of new business and increased origination of higher yielding illiquid assets, but may not reach the levels seen last year.”

In the UK & Ireland Life businesses, operating profit decreased to £545m (H1 2020: £822m).

The firm’s own defined benefit (DB) schemes’ surplus increased by £154m to £2.19bn in H1 2021, although this was down from the surplus of £2.8bn seen in June 2020.

In the first half of 2021, scheme assets fell from £20.1bn to £19bn, although this was offset by liabilities declining from £18.1bn to £16.8bn.

The increase in the surplus was primarily due to employer contributions into the schemes and remeasurements recognised in other comprehensive income, according to the report.

"We have made good progress on all fronts in the 12 months since we launched our strategy,” commented Aviva group chief executive officer, Amanda Blanc.

“We are delivering on our commitment to make a substantial capital return to our shareholders. We intend to return at least £4bn to investors by the end of the first half of 2022, starting with a share buyback of up to £750m.

“While we've got more to do, our half year results show we have what it takes to drive growth in our businesses. We remain completely focused on transforming performance, capitalising on the breadth of Aviva, making insurance simple and easy for our customers, and creating value for our shareholders."

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