Aviva’s 2012 results came out 7% below expectations, even though the latter were moderate. The group’s net loss of £3.1bn includes an expected £3.3bn discount on the sale of its north American businesses. Book value was also 10% lower than expected at the year-end. However, management’s most disappointing announcement was a 44% dividend cut. We are downgrading our recommendation from PLUS to MINUS: neither the dividend nor the valuation can continue to support the share price in the short term.
Aviva’s H1 results showed a net loss of £681m. Management decided to implement the reorganisation announced in July without delay, resulting in substantial restructuring costs. The group delivered operating profit of £1.1bn - a perfectly respectable performance that was in line with expectations. Solvency is stronger than at end 2011, and the dividend has been maintained. The restructuring story has not yet been priced in: PLUS rating reiterated.
In 2008 Aviva put in hand a process of restructuring and strengthening of its balance sheet; the effects are becoming increasingly apparent. Organic capital generation more than doubled in the period to reach £2.1 billion in 2011, easily enough to pay a very generous dividend (7-8% yield). On the operational side, the cost-cutting programme of £400 million at end 2012 has already made real progress. This is favourable to the profitability of non-life business in particular. In life insurance, priority is now being given to margins even if this means divesting certain non-strategic activities. The result is already apparent after six months in the 14.4% yield on new business in 2011 vs. 13.3% in 2010.
The 2011 results posted by Aviva are better than expected with a positive operating trend. The management has revised its main objectives slightly upwards and points out that the decision to maintain a stable dividend in 2011 (instead of increasing it) concerns this financial year in particular. Solvency at the end of February is back within the target range, suggesting a more generous distribution policy in 2012. The valuation is clearly attractive at these levels. PLUS confirmed.
The group’s strategy, based on strengthening solvency and margins, even if that means getting rid of businesses whose profitability is sub-optimal, is clearly working. Its capital base is now very strong, and profitability is constantly improving across its various businesses. The discount on all multiples is going to have to narrow. PLUS rating reiterated.
Aviva posted a respectable H1 2011 operating result at £1.3 billion, 4% ahead of expectations. Furthermore, the quality of this publication is very good with an even stronger balance sheet, management objectives which have all been exceeded and strong momentum on its domestic market. Despite the good relative performance of the share since the beginning of the year (+8% against the insurance sector), Aviva is still trading at an unjustified discount of 10-15%. PLUS code confirmed.
The quality of the results of the key divisions in 2010 was very good. The management also did an excellent job of reinforcing the group’s financial strength in 2010. Shareholders’ equity benefited significantly from robust organic capital generation, without, however, penalising the return on equity (14.8%). The discount on all the multiples will have to be corrected. PLUS code maintained.
2010 results published by Aviva are excellent. The operating result stood at £2.55 billion, above expectations, and the key divisions reported results of very good quality. The management also did an excellent job of reinforcing financial strength in 2010. Shareholders’ equity benefited significantly from robust organic capital generation, without, however, penalising the return on equity (14.8%).The discount on all the multiples will have to be corrected. PLUS code maintained.
The operational improvement measures taken by Aviva have begun to yield benefits. The group’s profitability has gained all the more strongly as the commercial dynamic remained astonishingly robust in the first half. The strong fundamentals enabled the management to raise its dividend pay-out. The high dividend yield of 6.5% is not reflected in the 25% discount on the share price against its sector.
Announcing its H1 2010 results, Aviva broke with its habit of setting good news off against less encouraging developments. This time, Aviva has exceeded expectations on every indicator, notably with its operating result 10% ahead of expectations, at £1.27 billion, and shareholders’ equity also 10% better than anticipated, at £11 billion. The “cash machine” patiently built up by the management is now running flat out and enables the interim dividend to be raised by 6% (6.5% yield).
Operational improvement measures taken by the management will show their full effect from 2010 onwards. In parallel, the renewed focus on activities with stronger growth and superior margins will provide the necessary support for the attainment of an ambitious objective. The management intends to double the earnings per share between 2007 and 2012, so enabling the group to continue to pay a high dividend; this is not reflected in the current price.
The 2009 results published by Aviva are very satisfactory at operational level, even if they are rather weak measured against equity — but still at a comfortable level. The group’s capacity to generate profits greatly improved in 2009 thanks to excellent spending discipline, teamed with a robust sales dynamic on its main markets (U.K and Europe). The very attractive valuation and the yield which still exceeds the dividend payment (6.3%) validate our PLUS code.
Aviva has published an interim management statement for the first 9 months of the year. The operating figures announced are not particularly encouraging, but they are altogether in line with the best competitors, while market conditions remain unfavourable. On the other hand in areas where the management has been able to intervene (solvency, costs, balance sheet management) the group has made real progress. The markdown of around 30% on this share against the sector creates a real buy opportunity.
After a whole series of measures aimed at strengthening its capital, Aviva has dispelled fears concerning its solvency. That financial flexibility has not yet been exhausted and the partial listing of its Dutch subsidiary Delta Lloyd between now and the end of November is being warmly welcomed by investors. Aviva also has a first rate franchise in its principal lines of business as well as a solid potential for reducing costs. PLUS rating repeated.
The H1 operating result published by Aviva was much higher than expected, at £1.69 billion against the forecast £1.29 billion with a substantial strengthening of its capital surplus to £3.2 billion against £2.0 billion at end 2008. In parallel, the management has announced two measures which now give it greater financial flexibility, including a dividend reduction; this has recently been the subject of reports in the British press and had been expected by analysts. We no longer regard the markdown of around 20% on the price of this share as justified.
Today, Aviva published its interim trading statement: life insurance revenues are proving highly resilient and profitability of the non-life business activity is very satisfactory. The management has taken the bull by its horns to reassure the market over the group’s solvency. This has been greatly strengthened and many more resources can still be called upon to achieve a further improvement. The potential for share price recovery in the wake of this good news is an opportunity to buy more shares in this company. PLUS code confirmed.
Aviva’s share price has moved in line with the market’s perception of its solvency. Scrutiny of the group’s fundamentals shows that this insurer is wrongly out of favour. Improvement of non-life insurance conditions in the UK and the good business dynamic of life insurance in the United States will continue to guarantee strong operating profits. This is not reflected at all in the current price. PLUS code confirmed.
Today, Aviva published details of its annual results which had been announced on 4 February. The news items are the confirmation of an unchanged 33p dividend (as expected) and the level of provisions set aside for corporate bonds and for the UK commercial property portfolio. These are in line with standard practice and are included in the capital surplus of £2 billion at end 2008. We remain confident in the group’s fundamentals and logically expect the share to recover from today’s fall. However, we are still worried by the impact of market psychology.
Aviva has published its key figures for 2008. Commercial dynamism remains very strong with revenues even higher than in 2007 which was itself a very good year. But the market was eagerly awaiting news about the group’s solvency and ability to pay a dividend. An increase in Aviva’s surplus capital during the quarter is certainly the best answer to these anxieties. PLUS code confirmed until the full 2008 results are announced on 5 March 2009.
This morning, Aviva published its 9 months management statement. The share was heavily penalised last month by various fears which have now been lifted by the group. With stable surplus capital despite uncertain market conditions, an unchanged dividend and rising new policy value, the share will logically recover in the near future. Currently trading at 0.6x its embedded value, this is an excellent time to buy Aviva in a long-term perspective.
For two years now, Aviva's stock market performance has suffered from a negative market perception of its financial solidity. The results of first half 08 have dissipated the market’s fears on this count. Also, in the current economic climate of limited buoyancy, we especially appreciate the history of operational improvement potential that characterises this group.