Are Aviva shares a good investment?

Aviva shares are currently trading at the lowest exchange rate since the pandemic, but is this a buying opportunity? Saima Naveed investigates.

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 that has struggled in recent months. The collapse of Silicon Valley Bank is a prime example of extreme catastrophes that have occurred¹.

But is this lackluster performance a minor setback or 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 largest shareholder of Aviva Plc.
• Aviva remains in a strong 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 reached a huge structure of more than 18 million customers.

The categories of shareholders and the range and size of the holdings as of March 8, 2023 are set out in the following tables²

Banks and nominated companies are the main shareholders of the company. To further detail the list, Dodge & Cox International Stock Fund is the largest shareholder of Aviva Plc.

What do the finances look like?

Aviva has positioned itself as a leading UK provider and go-to brand for all customers in insurance, wealth and retirement solutions, with strong franchises in Canada and Ireland. Its diversified model has been well demonstrated in the financial statements reported for the year 2022.

Operating profit was recorded at £2,213 million, an increase of 35% on last year. In 2021, operating profit was £1,634 million. General insurance gross written premiums also increased by 8% and increased to £9,749 million from £8,807 million in 2021. IFRS loss for the year was reported at £1,139 million compared to a profit of £2,036 million in 2021.

The financial company has a strong capital position. And they started a £300 million share buyback on March 10, 2023. Currently, they have 2.738 million shares outstanding.

The company’s preference remains to return excess capital on a regular and sustainable basis. Additionally, management plans to pay a dividend of £915m by 2023, with low-to-mid single-digit growth in the cash cost of the dividend thereafter.

The bullish 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 strives to lead UK financial services on climate change, build stronger communities and embed sustainable business.

The Aviva group’s objectives include:

• Cumulative cash remittances of over £5.4 billion from 2022 to 2024.
• Solvency II will generate operating equity of £1.5bn a year until 2024.
• Controllable cost savings of £750m from 2018 to 2024 (gross inflation)

As an investor, I am even more overwhelmed by the company’s consistent growth and profitability that supports its goals.

The bearish case for the Aviva share price

Being a key part of the financial industry, the insurance company is exposed to a variety of risks that are inevitable.

Aviva plc. is a company that manages risk in accordance with its agreed risk strategy. The company has a Risk Management Framework (RMF) that comprises governance systems, risk management processes and a risk appetite framework. The RMF ensures a rigorous and consistent approach to risk management across the enterprise.

Aviva share price prediction

After initial price level maintenance, Aviva shares have continued a downward trend. From a price of 442.8p, the stock last closed at 397.2p. Year to date, the stock has fallen approximately 10.3%.

Aviva shares are at a moderate buy level, according to most market analysts.

The consensus price target for the next 12 months is 523.4p, with the highest price level of 560p and the lowest price target of 470p.

Should you buy Aviva shares today?

Aviva shares have a good price outlook, according to analysts. Furthermore, good financial performance is an indicator of strong operational efficiency. This certainly goes against the recent drop in valuation. And therefore, a buying opportunity may have presented itself for my personal portfolio. Therefore, I am tempted to start building a small position in my portfolio today.

Article sources

1. cnn, Why Silicon Valley Bank collapsed and what it could mean
2. Revive, Shareholder profile

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. The opinions expressed about the companies and assets mentioned in this article are those of the author and therefore may differ from the opinions of The Money Cog Premium Services analysts.