Aviva Share Discussion Threads

[spcecks] 06/10/2020 17:04

wba1 Thanks for sharing much appreciated.

[cjac39] 06/10/2020 15:53

hi wba - i worked for a while in credit derivs in 2000s. what was going on then is unlikely to ever happen again in terms of the extraordinary leverage being created in cdos and fin gtees via rating arbitrage so i woudlnt worry too much if u see an insurer mention cds or even clo which are more benign.

when funding markets are very dysfunctional like after gfc and again in 2012, buying bonds and hedging with cds can be good thing to do otherwise known as negative basis, where you basically get paid a funding spread. however at the moment its not that interesting as you pay away most of the bond spread over swaps to buy protection. therefore i doubt they have much. from time to time insurers may take out macro credit hedges like tranches on broad credit indices but at the margin again.

most insulation to spreads comes from insurers have a matching adjustment portfolio where they can back annuities with credit of same duration and then spread movements arent counted but transition risk and default is.

a complicated topic but suffice to say aviva are prob more worried about rating downgrades than spreads moving

[eurofox] 06/10/2020 15:30

Perhaps negative interest rates for corporates will change all of that

[1robbob] 06/10/2020 15:28

Re Reserving
In my experience across all quoted industies it is a complete 'black art'. CEOs always manage to find a reason for over providing in good times and over releasing in bad times.

[edmundshaw] 06/10/2020 15:21

Thanks wba, that is great information.

I guess the insurers can claim that due to the uvprecedented nature of the fallout from this and next year the standard methods of reserving are not reliable and must be buffered generously...

[wba1] 06/10/2020 15:10

Thank you all for the kind comments. I am very much a GI man and have some life background but no grounding in the investment side. With this in mind something occurred to me to ask cjac (which he may have covered and I missed). I assume Aviva do not write CDS's although I know some insurers do still, even after the AIG fiasco? And related to that question; do you know if Aviva have bought CDS's against any of their bond holdings and would I be (broadly) correct that MTM would tend to balance out where a bond and a CDS hedge coexist?

[1robbob] 06/10/2020 14:57

wba1 thanks for that resume

Looks like a very benign environment for the Insurers and probably for a few years hence.

If AB can re-set the dividend at circa 24p pa (well covered and room to grow from), it will be interesting to see where the price could move up to?
...my guess is that a 24p div would put the share price at circa 340p ie a 7% yield. Anything paid re 2019 would be an added bonus.

I don't think the market has taken on board at all, what the income yield on Aviva could be be over the next 6(ish) months. With the whole 2020 Div to be paid plus any balance of the outstanding 15.4p 2019 final

[eurofox] 06/10/2020 14:41

I have noticed much more radio advertising by Aviva for Life Insurance recently.

[eurofox] 06/10/2020 14:38

good stuff wba, much appreciated.

[jordaggy] 06/10/2020 14:26

That's an excellent post wba.

Some on here would appear to be a little pugnacious at times, but otherwise a great informed thread.

[1pencil] 06/10/2020 13:54

Trackers seem to have a major influence rather than day to day news, you can see this with the ebb and flow of the FTSE.

You would need to work out the exact FTSE weighting the project that at various levels, 5000, 6000 and 7000

There's other driver of course but that feels like the underlying current (very sea worthy post today : )

[wba1] 06/10/2020 13:50

I selected posters who, from my reading of the posts I missed when away, seemed most focused on non-Aviva and Boris topics. If I was in error I apologise. I also represent the middle aged (I consider 65 middle age rather than elderly). I must admit to finding it difficult to relate to much of the discussion around Covid although I am very concerned about the suggestions floating around that all over 65's could be rated high risk and told to isolate. I have just played my 50th (half) season of senior cricket and still get in the gym 4 times a week. Putting party matters to one side, a broad brush approach risks isolating some who are fitter than 25 year olds.

Returning to Aviva (and retail GI generally), I have just touched base with a couple of ex-colleagues who are now directors at UK insurers and focused on retail risk. I asked them about what they are seeing around the factors various insurers have raised and got the following responses;

* motor claims frequency remains well below pre Covid levels and they now expect this trend to remain in place for some time. Their best guess is that frequency will not get back to the old levels until 2022.

* the inflation risks flagged, around such as repair shop, hire and parts costs, have yet to materialise. If anything repair shops seem more ready to compete for business than before (although most insurers will be committed to deals agreed pre Covid for set periods). Any increased costs for suppliers seem to be offset by their need for business

* there is no obvious significant uptick in claims from such as cyclists.

* increased fraud remains a concern but is not yet obvious. My contacts are confident that the improvements in fraud management of the last few years mean that substantial cases will be detected and any increase will be in small cases which have a marginal effect on loss ratio.

* the biggest risk to loss ratio is insurer competition, with most insurers reducing prices on a selective basis to secure new business from a reduced market. But the reductions are not as significant as the cost benefits. More significant (for some insurers) will be the inability to maintain account size leading to an increase in expense ratio (and onto COR).

So my conclusion from all this is that motor (and to a lesser extent household) accounts will be significantly more profitable in 2020 (and probably 2021) ex any cost effects related specifically to the virus such as cleaning, extra staff etc. There may even be compensatory general savings in areas such as travel and hospitality.

But (!) apparently everyone expects the CEOs to deliberately overreserve to dampen declared profits this year (both to avoid appearing to be taking advantage and to build up the piggy bank to smooth profits in future years. But this should be obvious when looking at the reserving triangles (even the basic ones which appear in annual reports).

And finally, one non-insurance comment. Better to be second division with aspirations and a solid balance sheet than the plaything of Russian or Saudi crooks :)

[cjac39] 06/10/2020 12:49

haha all very amusing. i can represent the sub 50 age group on here!

seems to have gone bit quiet on leaks and news around fr and others. generally a good sign that detailed work and negotiations underway.

i guess the most likely outcome is they will be pushing hard to have at least something to announce at their q3 update 26/11. however obviously if something is done before then they will have to announce it immediately.

either way, it seems unlikely we will see sub 3 again afterwards but this share price does surprise me in so much as how little people bake in potential upside vs needing to be slapped in the face with the upside.

i guess overtime the register has drifted towards passives and income funds with the latter losing faith when they cancelled the divi.

[chinese investor] 06/10/2020 11:44

56p To 350p (my break even price) !

[eurofox] 06/10/2020 11:23

a good cat's name

[jubberjim] 06/10/2020 10:14

Lovely word curmudgeon
My wife would say it fits me to a T
Gla

[whatsup32] 06/10/2020 09:33

Curmudgeon’ s convention here.

[1robbob] 06/10/2020 09:00

Very sensible comments from all recently
It must be a measure of the calm that is Aviva at the moment, that there is very little to say Good or Bad....until 26th November that is
Some of us are in our 70s !!!!

[whatsup32] 05/10/2020 21:05

SteveD jubberjim

Cjac and WDA are excellent posters and have many times provided invaluable information and dissected information provided by the company . Both of you are also very much welcomed and we all provide what we can to help each other.

It’s not always possible to talk about just Aviva as it would get repetitive so every now and then we digress and talk about other topics. Yesterday you will agree it got a bit out of hand and it was pretty much all politics

This board is actually very good thanks in no small part to spud making time to keep an eye on things.

I am like you over 60 Steve and like jubber in at the deep end @ 475p . Let’s all respect each other as we have been Hopefully we see better days

[steved] 05/10/2020 20:16

Wba

I've been a keen PI for several decades. I invested in Aviva during the recent Covid induced downturn. I did my research and decided it was an excellent vehicle for the income portion of my portfolio as well as having good potential for steady capital growth, especially if the strategy changed to make a sleeping giant more efficient. Following this investment I started following this BB as I began to feel comfortable with several knowledgable posters with seemingly much experience and understanding of the insurance world. Their contributions are appreciated and valuable. I post here rarely but have been more active on other BB's on occasions when I feel I have something of value to add.

Several days ago I came across several posts relating to BJ and covid. I tend to keep my political views to myself. However when I read the posts I couldn't help but give a view as I feel so strongly that the country has been badly let down by those in charge. When I wrote I apologised in advance for moving off topic and thanked the BB for allowing me to vent my frustrations. I received 1 or 2 supportive replies, including cjac (a really excellent contributor) with whom I exchanged a couple of messages. That was it, nothing more, nothing less.

I have never been singled out to be "moderated" on a BB or treated similarly throughout my life (I'm in my late 60's) in my working and social life. More importantly I have never acted as judge and jury to isolate a fellow human being. Just needed to put the record straight as you've singled me out unfairly in my view.

[jubberjim] 05/10/2020 18:49

WBA
Second division with aspirations

Am I not allowed to comment on a company that goes back on its word

I once worked in the square mile and the ethos was your word was your bond
When a company declares a dividend I think it is honour bound to pay it as an act of good faith

When the dividend was withdrawn it hurt the share price and it has still not recovered so yes I am very irate

I am long a few thousand at above £4 and it will take some time to get out of it

I make a point of not commenting on fellow posters everyone is entitled to their opinion but out of courtesy I do not seek to denigrate any other poster
You have no such qualms
It is unfortunate to say the least
I have stated my opinion of Boris Johnson as I think and continue to think he has done nothing to alleviate this crisis but has made it far worse due to ineptitude
Please keep your unwarranted opinions about my postings to yourself if ego allows

[1pencil] 05/10/2020 17:55

I thought Aviva had done quite well considering the global 'wobblyness' indicator.

News events over the weekend didn't bode well for world markets imo, but here we are again with a tinge of blue.

[whatsup32] 05/10/2020 16:13

Every dog has its day. Before end of year we should have positive news on dividends, hopefully sold France and Singapore , further interest for Italy and Turkey and share price £4.

But then I’m overly optimistic today

[linton5] 05/10/2020 16:02

Lol even itv better looking chart than av you cannas make it up