Aviva to pay out around £160m in virus claims
Insurance payouts for business, travel
INSURANCE GIANT Aviva has estimated that it will pay out £160m in claims related to the coronavirus pandemic as Government lockdowns to contain the virus hit the global economy.
The firm, which employs 2,000 people at its life and general insurance business in York and 1,500 at its life and health insurance operation in Sheffield, said new business sales are down across many of its divisions.
It said the pandemic will provide additional challenges in meeting its 2022 targets.
Aviva’s chief executive Maurice Tulloch said: “In responding to Covid-19, Aviva moved quickly to support our customers, introducing a range of measures to help, including financial assistance. I am proud of how Aviva’s people have adapted and maintained excellent day-to-day service for our customers when they need us most.
“The economic outlook remains uncertain and will affect our business, however the strength of our capital and liquidity means we are well positioned to manage this crisis and continue to support our customers.”
Aviva said most of the Covid-19 claims came from business interruption and cancelled travel plans.
The insurer said the vast majority of its commercial policies did not cover business interruption claims arising from Covid-19, but it has paid some claims in Britain and Canada where cover was in place.
The group posted a sharp rise in first quarter new sales in its life business, boosted by bulk annuities, Life new business sales rose 28 per cent to £12.3bn in the first quarter and general insurance net written premiums rose three per cent to £2.4bn.
Analyst Nicholas Hyett, at Hargreaves Lansdown, said: “If you could put coronavirus to one side these would be some pretty good numbers from Aviva.
“Bulk annuities, where Aviva takes on final salary pension schemes for an upfront fee, are boosting life insurance sales while the recovery in Canadian premiums together with improved profitability is putting general insurance on a more even keel.
“Unfortunately you can’t put coronavirus to one side. The fortunes of all life insurers are intimately linked to financial markets and Aviva hasn’t escaped unscathed.”
Mr Hyett said that while Aviva’s investment portfolio has fared “rather well all things considered”, falling gilt yields and lower share prices have reduced its capital surplus.
“Limited exposure to business interruption insurance is also expected to weigh on general insurance results, reducing the ability to internally generate additional surplus this year,” he added.
“However, with the dividend already suspended and overall capitalisation relatively healthy, Aviva looks in pretty good shape. The ups and downs of the market and the economy will continue to batter the group, and could delay the return of the dividend for some time, but longer term it should be able to weather the turbulence.”
Insurers globally are likely to face more than £88bn in underwriting losses due to the pandemic this year, similar in size to major hurricane years, according to Lloyd’s of London. A number of insurers are facing possible legal action from small firms which have not received payments for business interruption insurance.