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1. Company Snapshot

1.a. Company Description

Aviva plc provides various insurance, retirement, investment, and savings products in the United Kingdom, Ireland, Canada, and internationally.The company offers life insurance, long-term health and accident insurance, savings, pension, and annuity products, as well as pension fund business and lifetime mortgage products.It also provides insurance cover to individuals, small and medium-sized businesses for risks associated with motor vehicles and medical expenses, as well as property and liability, such as employers' and professional indemnity liabilities.


In addition, the company provides investment management services for institutional pension fund mandates; and manages various retail investment products, including investment funds, unit trusts, open-ended investment companies, and individual savings accounts for third-party financial institutions, pension funds, public sector organizations, investment professionals, and private investors.It markets its products through a network of insurance brokers, as well as MyAviva platform.The company was formerly known as CGNU plc and changed its name to Aviva plc in July 2002.


Aviva plc was founded in 1696 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on AV

Aviva's recent performance has been impacted by several negative drivers. The company's credit ratings have a negative outlook, according to AM Best, which removed Aviva Insurance Limited's ratings from under review with developing implications. Additionally, Aviva's Direct Line takeover cost savings target was nearly doubled, which may indicate increased expenses. Some analysts have also raised concerns about the company's financial prospects, suggesting it may be overpriced. Furthermore, Aviva's shares have been added to the Zacks Rank #5 (Strong Sell) List multiple times.

1.c. Company Highlights

2. Aviva Delivers Strong Full-Year 2024 Results with Diversified Growth and Strategic Acquisitions

Aviva reported a robust financial performance for its Full-Year 2024 results, underscored by a 20% increase in operating profit to nearly £1.8 billion and an 18% rise in underlying own funds generation to £1.5 billion. The company also announced a 7% increase in the total dividend per share, with a final dividend of 23.8p, reflecting its commitment to shareholder returns. Amanda Blanc, Aviva’s CEO, highlighted the strength of the company’s diversified business model, which drove growth across all segments, including a 16% increase in U.K. and Ireland General Insurance and double-digit growth in Canada despite severe weather events. The Wealth and Retirement segments also performed exceptionally well, reaching £200 billion in assets and record BPA volumes, respectively.

Publication Date: Mar -01

📋 Highlights
  • Strong Financial Performance:: Aviva reported a 20% increase in operating profit to nearly £1.8 billion, with underlying own funds generation up 18% to £1.5 billion, driven by diversified growth across all business segments.
  • Direct Line Acquisition Strategic Benefits:: The proposed acquisition of Direct Line is expected to enhance Aviva's market position, offering £125 million in cost synergies and capital benefits, aligning with strategic ambitions for growth and shareholder value.
  • Robust Capital Position:: Aviva's capital cover ratio stands at 203%, with leverage reduced to 29%, positioning the company for disciplined investments and sustainable growth while maintaining financial stability.
  • Diversified Growth Across Segments:: The company saw significant growth in key segments, including 16% growth in U.K. and Ireland General Insurance, double-digit growth in Canada, and robust performance in Wealth and Retirement, reaching £200 billion in assets and record BPA volumes.
  • Focus on Shareholder Returns:: The total dividend per share increased by 7%, with a final dividend of 23.8p, supported by strong earnings growth and a shrinking share count, contributing to a 12% return on equity.

Strategic Initiatives and Acquisition Highlights

The proposed acquisition of Direct Line is expected to further enhance Aviva’s market position, offering £125 million in cost synergies and capital benefits. Charlotte Jones, CFO, noted that the acquisition aligns with Aviva’s strategic ambitions and positions the company for continued growth and enhanced shareholder value. The integration of Direct Line is expected to be completed by mid-2024, with regulatory approvals and internal processes underway. The combined business is anticipated to generate over £5.8 billion in cash remittances from 2024 to 2026, further supporting Aviva’s dividend growth strategy.

Valuation and Financial Strength

From a valuation perspective, Aviva’s price-to-book (P/B) ratio of 1.77 suggests the stock is fairly valued relative to its peers, considering the company’s strong capital position and disciplined investment approach. The company’s combined ratio improved, reflecting better underwriting profitability, and the dividend yield of 6.28% is attractive for income-focused investors. However, the free cash flow yield of -8.73% raises concerns about short-term cash generation, though this is likely a temporary effect given the company’s strategic investments and acquisitions.

Future Outlook and Growth Drivers

As Amanda Blanc emphasized, Aviva’s unique model, geographic diversification, and track record of delivering superior shareholder returns position it as a leader in the insurance and wealth management sectors. With a strong capital position, a cover ratio of 203%, and a clear strategic vision, Aviva is well-positioned to deliver sustainable growth and enhanced shareholder value in the coming years.

3. NewsRoom

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How The Narrative Around Aviva (LSE:AV.) Is Shifting With New Targets And Sector Views

Feb -09

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£1bn London Cancer Hub extension gets go-ahead amid UK life sciences push

Feb -06

Source:

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Planning approval secured for London Cancer Hub, paving the way for next stage of growth and innovation on site

Feb -05

Source:

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Invacare Europe and Asia Pacific Combine with Direct Healthcare Group Creating DHCare - Combination to Better Serve Individuals with Reduced Movement

Feb -04

Source:

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NXP Refocuses On Auto Connectivity With MEMS Exit And Aviva Links Deal

Feb -03

Source:

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NXP Semiconductors Reports Fourth Quarter and Full-Year 2025 Results

Feb -02

Source: globenewswire.com

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Best Value Stocks to Buy for February 2nd

Feb -02

Source: zacks.com

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Best Income Stocks to Buy for February 2nd

Feb -02

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.29%)

6. Segments

Long-term Business

Expected Growth: 5.4%

Aviva plc's long-term business growth of 5.4% is driven by increasing demand for life insurance and pension products, expansion into emerging markets, and strategic acquisitions. Additionally, the company's focus on digital transformation, cost savings initiatives, and strong brand recognition contribute to its sustained growth.

General Insurance and Health

Expected Growth: 7.88%

Aviva's General Insurance and Health segments have driven 7.88% growth, primarily due to increased premiums in the UK and Canada, as well as expansion in the Asian markets. Additionally, the company's digital transformation efforts and strategic partnerships have enhanced customer engagement, retention, and acquisition, contributing to the segment's growth.

Other

Expected Growth: 8.4%

Aviva plc's 8.4% growth in 'Other' segment is driven by increasing demand for digital insurance products, expansion into emerging markets, and strategic partnerships. Additionally, the company's focus on cost savings and operational efficiencies has led to improved profitability. Furthermore, Aviva's diversified business model and strong brand reputation have enabled it to capitalize on growth opportunities in the market.

Fund Management

Expected Growth: 7.9%

Aviva plc's 7.9% growth in Fund Management is driven by increasing demand for sustainable investments, expansion into emerging markets, and strategic acquisitions. Additionally, the company's digital transformation efforts, cost savings initiatives, and strong brand reputation have contributed to its growth. Furthermore, the rising popularity of passive investing and the need for diversification have also fueled the segment's growth.

7. Detailed Products

General Insurance

Aviva provides a range of general insurance products, including motor, home, travel, and health insurance, to individuals and businesses.

Life Insurance

Aviva offers a range of life insurance products, including term life, whole life, and endowment policies, to provide financial security to individuals and their loved ones.

Pensions and Retirement

Aviva provides a range of pension and retirement products, including personal pensions, group pensions, and annuities, to help individuals plan for their retirement.

Investments

Aviva offers a range of investment products, including unit trusts, open-ended investment companies, and structured products, to help individuals and institutions grow their wealth.

Health and Protection

Aviva provides a range of health and protection products, including private medical insurance, income protection, and critical illness cover, to help individuals and families protect their health and wellbeing.

Wealth Management

Aviva offers a range of wealth management services, including financial planning, investment management, and estate planning, to help individuals and families manage their wealth.

8. Aviva plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Aviva plc operates in a highly competitive industry, and customers have various alternatives to choose from. However, the company's strong brand reputation and diversified product offerings mitigate the threat of substitutes to some extent.

Bargaining Power Of Customers

Aviva plc's customers have significant bargaining power due to the availability of numerous insurance providers in the market. This forces the company to maintain competitive pricing and high-quality services to retain customers.

Bargaining Power Of Suppliers

Aviva plc has a diversified supplier base, which reduces the bargaining power of individual suppliers. The company's strong financial position and long-term relationships with suppliers also mitigate the risk of supplier concentration.

Threat Of New Entrants

The insurance industry has high barriers to entry, including regulatory requirements, capital requirements, and the need for specialized expertise. These barriers limit the threat of new entrants and provide Aviva plc with a relatively stable market position.

Intensity Of Rivalry

The insurance industry is highly competitive, with numerous established players competing for market share. Aviva plc faces intense rivalry from competitors, which drives the company to focus on innovation, customer service, and cost management to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 46.28%
Debt Cost 8.58%
Equity Weight 53.72%
Equity Cost 8.58%
WACC 8.58%
Leverage 86.16%

11. Quality Control: Aviva plc passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Value: 8.4

Growth: 4.3

Quality: 7.9

Yield: 9.4

Momentum: 9.0

Volatility: 9.7

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Aviva

A-Score: 7.4/10

Value: 6.5

Growth: 5.4

Quality: 5.8

Yield: 9.4

Momentum: 8.0

Volatility: 9.3

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Value: 5.7

Growth: 4.1

Quality: 6.2

Yield: 9.4

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A-Score: 6.9/10

Value: 5.0

Growth: 4.1

Quality: 6.4

Yield: 8.8

Momentum: 9.5

Volatility: 7.3

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A-Score: 6.8/10

Value: 4.8

Growth: 3.4

Quality: 4.8

Yield: 8.8

Momentum: 10.0

Volatility: 9.0

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NN Group

A-Score: 6.7/10

Value: 3.9

Growth: 3.4

Quality: 5.9

Yield: 8.8

Momentum: 9.0

Volatility: 9.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.26$

Current Price

6.26$

Potential

-0.00%

Expected Cash-Flows