Aviva has announced Brexit will have no significant operational impact on the company, having conducted extensive analysis of the possible implications of a vote to leave the European Union.
The firm - which saw a large fall in its share price following the vote to leave - stated despite recent market volatility following the outcome of the UK referendum on EU membership, Aviva’s capital position is resilient to market stress.
Additionally, the company estimated that as of close of the markets on Friday (24 June), its Solvency II coverage ratio remained close to the top of its working range of 150 per cent to 180 per cent.
Aviva’s preliminary results, published in March 2016, reported a Solvency II ratio of 180 per cent and a surplus of £9.7bn.
According to the firm, it has one of the strongest and most resilient balance sheets in the UK insurance sector with low sensitivity to market stress.
Over the last four years Aviva has tripled its economic capital surplus.
Aviva’s statement added that the firm will continue to monitor the technical implications of the vote to leave, which will only be resolved after several years of negotiating a new relationship between the UK and the EU.
Aviva’s share price dropped by around 130p following the announcement of Britain’s vote to leave the UK.
Angharad Knill, executive at Macquarie, provider of financial, advisory, investment and funds management services, said however that Aviva share price fell by more than other UK insurers, in line with the UK banks.
But she said: “We believe this 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.”
Across 2015 the Solvency II cash generation was £2.7bn, which includes the £0.4bn from Friends Life together, with management actions and one offs.
Ms Knill said: “However, we believe there are 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 per cent of Solvency II capital generation in 2016.”
ruth.gillbe@ft.com
