Aviva Share Discussion Threads

[cjac39] 12/3/2020 10:22

i cant see an insurer falling over with the capital reserves they have built up. as above, dont forget that the solvency ratio is capital on top of the scr. the scr is a 1 in 200 year stress event that pushes spreads, interest rates, equities, property values etc to exceptional levels and that is the amount of capital you hold in your scr. on top of that insurers hold a buffer, also know as risk appetite which is typically 20-40% plus on top of that a margin to mean they can withstand shocks and not eat their buffer. its somewhat mad margins on margins but the core point is that it would take 1929, 2008 and corona virus added together to eat through the capital that your average insurance companies owns. even then if its really that bad, sadly a decent amount of their assured annuitants also no longer receive payments, and hence they actually have in life insurance a hedge to the virus. spanish flu was bad for life insurers because it hit young and old - corona doesnt seem to do that. therefore it doesnt damage their younger insured lives only annuitants

[uppompeii] 12/3/2020 09:56

I have a DFM looking after the bulk of my stuff now as I decided free time was more fun than trading. I did keep a small SIPP myself which is invested across funds and direct equities. I pay the DFM 0.5% or so, itll be very interesting to see what actions they have employed to stem the fall or whether my random effort beats them.

[lord gnome] 12/3/2020 09:51

Interesting posts cjac39. Good to have your input - not that I could translate all of it. I take it, however, that you see Aviva as one to survive and do well. FWIW - I added yesterday at 327, 9% yield, thought I'd done well and went out to play golf. Errr.....

[cool hand kev] 12/3/2020 09:48

I imagines that a few more Airlines and Travel companies will be going bust :-(

[stemis] 12/3/2020 09:45

The market hates uncertainty and that's what we've got at the moment.

[creme de menthe] 12/3/2020 09:32

Unfortunately the market is in bear mode. Good companies being trashed with the overleveraged.
I feel this will continue for some weeks as more lockdown measures are put in place.

Nobody can say when it will end or when to start buying again. Good companies will survive and hopefully this event will wash out some of these zombie companies surviving on credit.

This is going to be a once in a decade event for us to make a lot of money. There are some great airlines and travel companies that have lost 75% of their value already.

[spud] 12/3/2020 09:24

The Market is currently in voting mode and isn't liking what it's seeing. Within 6 months, it'll be weighing.spud

[cjac39] 12/3/2020 09:20

yes including in 08/09. the difference between now and then couldnt be greater. int rates went from 4-5% to zero. every bank globally was effectively bust. european top corporates traded at a spread which implied 25% were going bust. lehman defaulted on £500bln of debt. apart from aig which had stupid cdo exposures not one insurer went over.

clearly who knows where this ends and it would be silly to guess. however large companies with huge cushions of capital or cash will surely survive and in 12-24 months will be worth more than today.

[binghall] 12/3/2020 09:15

Aviva, and many other quality companies, have lost a third (or more) of their value in a month. Is that really a reflection of their future value or self-created market panic? The Stock Market used to be a viable means for companies to raise capital but it is now just becoming a punters market, with the balance of dividend income against marked capital fluctuations. The world Governments shouldn't shut down borders for a month, they should shut down the internet! This might actually allow the medical people, who do know what they are talking about, sort out the position of many in power who are clearly firing from the hip. As they say, the market doesn't like uncertainty and , by golly, it's paying us back right now.

[essentialinvestor] 12/3/2020 07:43

cj, you work in insurance I'm guessing?.

[kev0856153] 12/3/2020 07:35

This is another Monty Hedge special.
Called this right

[cjac39] 12/3/2020 07:16

someone was talking about sensitivities. what they ignore is tmtp offsets. annuity books are v interest sensitive in s2 but only because of side effects of s2 like risk margin and the tmtp asset itself. economically all insirers are hedged in full against interest rate risk. credit spreads do hurt but they get back a reasonable amount on ma portfolios and also can get back on tmtp. also, dont forget a 5% increase in mortality is 13% offset and annuity books tend to be lower socio economic , slighlty less healthy people albeit its uncertain who the virus hurts worse aside from older people.

lastly, the s2 capital includes enormous margins on margins and risk appetite on top of the base scr which is in anycase a 1 in 200 statistical outcome which arguably we are experiencing so the pra can provide relief against this if required. there has been much discussion about pro cyclical capital outcomes, ie forcing long term investors to invest counter cyclically and not force them to derisk in risky environments. i doubt pra are brave enough to do something but the govt could.

[sr2day] 12/3/2020 06:53

i am hoping to go long at 285p this week.

[eurofox] 12/3/2020 06:50

Anyone going long on margin at these levels of volatility must want their head testing

[essentialinvestor] 12/3/2020 06:42

Unfortunately would agree, at least near the open.

[eurofox] 12/3/2020 06:37

Sub £3 today

[essentialinvestor] 11/3/2020 21:49

SteM, appreciate your view, thanks.

[stemis] 11/3/2020 21:42

I don't necessarily agree with the detailed calculations but that net asset value and profit are significantly sensitive to interest rates, credit spreads and equity valuations is a fact - it's set out in the preliminary statement under B20. The problem with companies like Aviva is that they are very much a black box. Who really understands how assets and liabilities are valued? When profit and net asset value are a small difference between two huge numbers, the sensitivity to change is enormous

PBT - £3.4bn
NAV - £17bn

Compared to £441bn of liabilities

[essentialinvestor] 11/3/2020 19:58

Had a look at that video and interesting to consider different views.

It may be a slight oversimplification of the metrics?, their book is
written over time and some of the polices are years old. Would have thought the
falling rates environment was discussed in the Q&A on the recent call?, So perhaps some detail provided there?.

The point re fallimg equity valuations looks valid. Halving of the dividend?, Not sure I see that,
but not an actuary.

It is though fair to say both CEO and CFO have mentioned the future payout in the context of business performance.

[eurofox] 11/3/2020 19:11

dropping share price doesn't worry me - 85% cash at the moment, so bring it on!

[enormouswillie] 11/3/2020 19:10

Eurofox - more important than the dividend is the total return. If the share price halves, the dividend paid out cannot make up for that loss

[eurofox] 11/3/2020 19:07

my comment is not a fixation with a dividend cut, it is merely an observation that I would still invest in Aviva even if the dividend was only 4-5%

[spud] 11/3/2020 18:43

What is it with people and their fixation on dividend cuts? This is falling along with everything - It's not stock specific! spud

[eurofox] 11/3/2020 18:38

If the dividend halved for this cash cow, it would still be a fair price to pay for the yield