Aviva Plc (LSE:AV) shares are currently trading at the lowest rates, the lowest since the Covid-19-led pandemic. The insurance business is certainly not the only financial services company to land in trouble in recent months. The collapse of Silicon Valley Bank is a prime example of extreme catastrophes that have occurred1.
But is this lacklustre performance a small setback or some serious bad news for Aviva?
Key Points
- Aviva shares are currently trading at the lowest rates, the lowest since the Covid-19 pandemic.
- Dodge & Cox International Stock Fund is the major shareholder of Aviva Plc.
- Aviva remains in a robust capital position.
What does Aviva do?
Aviva is one of the UK’s oldest multinational insurance companies. For more than 300 years, the company has been serving the community, which has risen to a huge setup of more than 18 million customers.
The categories of shareholders and the range and size of shareholdings as of 8 March 2023 are set out in the tables below2
| Number of Shares | Percentage (%) | |
|---|---|---|
| Individual | 170,075,523 | 6.05 |
| Bank and Nominee Companies | 2,619,322,272 | 93.25 |
| Pension fund managers and insurance companies | 138,486 | 0.01 |
| Other corporate bodies | 19,389,818 | 0.69 |
| Total | 2,808,926,099 | 100 |
Banks and Nominee companies are the major shareholders of the company. Further detailing the list, Dodge & Cox International Stock Fund is the major shareholder of Aviva Plc.
How do the financials look?
Aviva has positioned itself as a leading UK provider and go-to customer brand for all insurance, wealth, and retirement solutions, with strong franchises in Canada and Ireland. Their diversified model has been demonstrated well in the financials reported for the year 2022.
Operating profit was reported at £2,213m, with a 35% increase from last year. In 2021, operating profit was at £1,634m. General Insurance gross written premiums also increased by 8% and rose up to £9,749m from £8,807m in 2021. IFRS loss for the year was reported at £1,139m as compared to a profit of £2,036m in 2021.
The financial company has a robust capital position. And they have commenced a £300m share buyback on 10 March 2023. Currently, they have 2.738 billion outstanding shares.
The company’s preference remains to return surplus capital regularly and sustainably. Also, the management plans to pay a dividend of £915m for 2023, with low to mid-single-digit growth in the cash cost of the dividend thereafter.
The bull case for the Aviva share price
Aviva Plc is focused on transforming and growing its business. The company has a clear strategy with a focus on execution, which includes Customer, Growth, Efficiency, and Sustainability.
Aviva is delivering on its cost commitment by simplifying, automating, and digitizing its business. The company is striving to lead the UK Financial Services on climate change, building stronger communities, and embedding a sustainable business.
Aviva’s group targets include:
- Cumulative cash remittances of over £5.4bn from 2022 to 2024.
- Solvency II operating own funds generation of £1.5bn per annum by 2024.
- Controllable cost savings of £750m from 2018 to 2024 (gross of inflation)
As an investor, I am further overwhelmed by the company’s consistent growth and profitability supporting its targets!
The bear case for the Aviva share price
Being a key part of the financial industry, the insurance company is exposed to a whole variety of risks that are unavoidable.
Aviva plc. is a company that manages risk in line with its agreed risk strategy. The company has a Risk Management Framework (RMF) that comprises systems of governance, risk management processes, and a risk appetite framework. The RMF ensures a rigorous and consistent approach to risk management across the business.
Aviva Share price prediction
After an initial maintenance of price level, Aviva shares have been on a declining trend. From a price of 442.8p, the stock last closed at 397.2p. To date, the stock has declined by approximately 10.3%.
Aviva Shares are set at a moderate buy, according to the majority of the market analysts.
The consensus on the price target for the next 12 months is at 523.4p, with the highest price level of 560p and the lowest price target of 470p.
Should I buy Aviva shares today?
Aviva shares have a good price forecast, as per the analysts. Moreover, good financial performance is an indication of strong operational efficiency. That certainly goes against the recent downfall in valuation. And therefore, a buying opportunity may have just presented itself for my personal portfolio. Therefore, I’m tempted to start building a small position in my portfolio today.
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Article Sources
Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.
