Interactive Investor

ii view: Aviva – a work in progress

Aviva reports headline progress, but there is still much to do.

8th August 2019 09:21

Keith Bowman from interactive investor

Aviva reports headline progress, but there is still much to do. 

Half-year results

  • Operating profit up 1% to £1.45 billion
  • Operating earnings per share up 2% to 27.3p 
  • Interim dividend payment up 3% to 9.5p per share

Chief executive Maurice Tulloch said:

“Aviva has strong foundations to build upon but there is much to do to improve our performance.

Our performance is mixed, with operating earnings per share up 2%. We have delivered strong general insurance results with a combined ratio of 95.9%. In life insurance and asset management, operating profits declined due to challenging market conditions and the absence of a longevity reserve release.

In June we announced a plan to improve Aviva's performance and deliver an excellent experience for our customers. We have made a quick start; separating management of our life and general insurance businesses in the UK and bringing together UK Digital and UK General Insurance.”

ii round-up:

Tracing its history back to 1696, Aviva today provides life insurance, general insurance, health insurance and asset management to 33 million customers.

In the UK it serves one in every four households and has strong businesses in selected markets in Europe, Asia and Canada.

The company appointed Chief Executive Maurice Tulloch back in March this year. 

For a round-up of these half-year results, please click here.

ii view:

The future vision for the company involves making it simpler, more competitive and more commercial. A focus on cost cuts is being made. As such a reduction of around 6% of the group’s 30,000 workforce over the next three years is being pursued.

For investors, fresh direction and purpose under the new Chief Executive, we believe, look sensible. A historic dividend yield of over 7% (not guaranteed) and a forward price earnings ratio at a discount to the ten-year average provide additional encouragement. But Aviva, is for now, a work in progress. Much still needs to be achieved with competition in the group’s markets both fierce and increasingly global. 

Positives: 

New Chief Executive has provided renewed clarity of purpose

Cost cuts are being made

Targeting a reduction in debt

Negatives:

Operating profit for both Life Insurance and Fund Management divisions fell

Underperforming Asian business

German insurer Allianz recently added to its UK general insurance operations 

The average rating of stock market analysts:

Strong buy

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