Aviva tipped as a ‘buy’ as investors are cheered by upbeat set of results

7th March 2014

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Brokers are tipping Aviva as a stock to snap-up following the publication of the insurer’s better-than-anticipated full-year results writes Philip Scott.

Following a £2.9bn loss after tax last year, Aviva has delivered a £2.2bn profit in its latest update.

Investors were also cheered by the news that it has reached an agreement to ease internal debt from £4.1bn to £2.2bn by the end of 2015, which suggests positive news for future dividends.

Mark Wilson, group chief executive officer, commenting on the results, says: “We have focused the business on ‘cash flow plus growth’ and the benefits are starting to be reflected in our performance. Cash flows to the Group are up 40%, operating expenses are down 7%, operating profit is up 6% and Value of New Business is up 13%.”

While the business has taken a hit as a result of the spate of claims over severe flooding, the shares are up by 20% in the past three months and by 40% over the last year.

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Formed by the merger of CGU and Norwich Union, Aviva is today the UK’s largest insurance company and the market consensus has the shares listed as a ‘buy’. Just this week, analysts at broker Panmure Gordon warmed to the stock, upgrading its recommendation to a ‘buy’ while The Share Centre has re-affirmed its positive view on the stock.

Sheridan Admans, investment research manager at The Share Centre says: “We continue to recommend Aviva as a ‘buy’ for investors on its recovery outlook.

“It is an opportunity for investors seeking exposure to the insurance sector as we hope to see further cost savings, improving cash generation and chance of restoring dividend growth. Investors need to be comfortable with the majority of exposure to the UK and Europe, and some in Asia, however, after plans to reduce its debt we have moved its risk levels down to medium risk from medium/high.”

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