Aviva Share Discussion Threads

[eurofox] 05/11/2020 10:16

thanks for your comments and other observations - as our sages you are all in another league to that other SAGE

[wba1] 05/11/2020 10:05

Embedded value is one I had almost cast from my mind! A perfectly good approach except when you were an agency driven unit linked life business in the 80s dealing with the likes of Trevor Deaves! The methodology never really allowed for the mafia like practices and subsequent compensation claims. Good job that swamp was cleared and today's life sector is far more decent.

[cjac39] 05/11/2020 09:56

wba - was thinking about your comment on BV vs SOTP. maybe I'm getting old but i did like the old embedded value calcs in terms of calcing value of life businesses. net assets plus value in force always seemed to me a decent benchmark for the value of a life book. MCEV distorted this a bit but in a positive way to account for riskiness of guarantees. however i think taking own funds or net assets and adjusting for risk and expected profits, present valued at a decent rate, seems sensible to me.

I've certainly seen books and businesses traded on this basis and even quite recently. and certainly i have never understood the obsession with (new) business profits and trying to apply a PE multiple thereon - absolute nonsense.

so in AV case you have own funds of £24bln less debt £7 and tier 1/prefs 1.3 to give net own funds of £15bln. Add onto this expected run off of inforce. In UK life cos alone this could be £2bln for annuities plus another £1bln for heritage life. Thats before you specialist GI people get going on the bulked up reserves.

you can trade own funds for cash when they sell the European businesses as they should trade around own funds unless there are holes in here we don't know about.

so in summary i do still like tangible asset based calcs but i take your point that large numbers can move these. however in life books its less likely as they compensate on the asset side and longevity risk does move slowly.

[wba1] 05/11/2020 09:48

Thanks cjac. I was wondering about 'forced' (or semi forced) pricing as big general insurance deals with major clients often involve rules for future pricing (dictating the methodology and having dispute resolution procedures involving actuarial third parties). But not suggesting this is the same.

Interesting results and trading updates from RSA and Lancashire this morning. My main takeaways were;

* RSA comments about claims being down across geographies and lines by 8-36% due to reduced economic activity. Clearly a much bigger positive than the costs.
* Lancashire price index showing pricing hardening by 12% yoy on average across lines.

Given these comments which are more significant than the negatives (covid costs, large events etc) I am very surprised both share prices have reacted negatively. But RSA was far more overvalued than Aviva so it may reflect that more than the core message. I rather like the outlook for Lancashire in 2021/22 given the pricing index.

[eurofox] 05/11/2020 08:13

Have any of you knowledgeable posters got any read-over from the RSA results?

[cjac39] 04/11/2020 20:49

Wba I’m not sure of how much an umbrella would contain pricing margins on pre set basis so not sure I can help. Would be weird for scheme to lock in pricing. It’s prob more metrics around operational aspects, collateral, data etc and then so long as av price is testably ok. Buyins are nice as scheme takes risk on who they are insuring rather than buyout where you could end up with poor scheme records and an extra x% of liabs

[ukneonboy] 04/11/2020 20:33

poor old spud 😂, so quick and so vociferous to shout me down back in August for being NEGATIVE on RDSB at £12 per share

but who's laughing now fellah ?? 😂it must be me then😂

Are you now trying to "talk up" AVIVA too ?? 😂

[1pencil] 04/11/2020 20:14

Agreed Spud, i often (not that often) wonder how the indexes actually work with trackers involved, for example if the FTSE had two behemoths such as Apple/Amazon would it then drag up the other constituents or leave them behind.

This is a concept often touted in journalistic circles, 'a rising tide lifts all boats'.

The other observation is the FANGS don't have secondary listings that I am aware of unlike some FTSE stocks with ADR's.

[spud] 04/11/2020 19:35

FAANG in Dow and Brexit here has decoupled the two Exchanges pencil. spud

[1pencil] 04/11/2020 19:20

It's not just Aviva that's lagging, the whole FTSE is way behind Dow, just compare respective graphs for comparison .

As mentioned before, FTSE was around 6000 mark with Aviva at 300p and change, can't see that being the case now with another 150 points to go on FTSE - clearly institutional weighting has dropped for whatever reason.

[ianood] 04/11/2020 18:28

Very constructive Lako42 - not!

Discount to NAV has never been wider than in the last few months. Please name me a better, more secure place in the current market?

[lako42] 04/11/2020 14:34

This has been a fantastic opportunity for about ten years...... It's a great place to let your money stagnate that's for sure.

More exciting places to put your money....understatement of the decade.

[wba1] 04/11/2020 12:18

Interesting DB risk transfer with M&S. I am sure Aviva had no choice given the wider relationship but I would like to know how sharply the deal was priced. I assume the 'umbrella' deal did not just drop in a pre-agreed price. Just have been broadcasting about the increased pricing competition for such deals (which you would expect with the questions around changes in the mortality trend). So I would not be surprised if this deal is pretty thin although I am sure it will be priced for a marginal profit. And the mortality changes should, anyway, benefit business already held.

It would be interesting if cjac has any info on how much the pricing on such deals has tightened in the last few months.

[spud] 04/11/2020 11:23

Aviva have announced it has completed a £400 million bulk purchase annuity buy-in transaction with the Trustee of the Marks and Spencer Pension Scheme.



This is the second buy-in transaction between Aviva and the Marks and Spencer Pension Scheme, following a £925 million transaction announced in May 2018*, and it was completed using a pre-agreed ‘umbrella contract’ to support a quick and efficient process. It builds on the important wider existing corporate relationship that Aviva already has with Marks and Spencer, for which it provides health and general insurance.

Aviva will insure the defined benefit pension liabilities of a further 2,293 pensioner members, removing the investment and longevity risk of these members from the Scheme. Members will see no change in the amount of their benefits or the way in which they are paid as a result of the transaction.

spud

[eurofox] 04/11/2020 09:20

yes and yes - I started out into this crisis 90% in cash. still 80% cash.

[spud] 04/11/2020 09:15

It's a pretty safe bet here. There are more exciting shares but very few undervalued mega-caps like this on the 100! spud

[eurofox] 04/11/2020 08:45

Ready for another bite if it drops even more.

[eurofox] 04/11/2020 08:23

added again at 260. what a fantastic opportunity as share price rips through stop losses.

[jubberjim] 03/11/2020 16:40

I think the facts speak for themselves
The betrayal of thousands if not millions of both small investors and large by the cacellation of the declared dividend is hanging over this share and impacting upon the negative performance of the share price
The only way that this can be resolved is by the resignation en masse of the entire bod as they have demonstrated their complete disregard of the needs of those shareholders who hold Aviva shares to gain income by way of the dividend
Only then with a completely new bod who will act in the best interest of the shareholders will Aviva start to restore their lost integrity

Ps hold only small amount of (legacy of old Norwich union ) shares now swapped into legal and general as advised previously looking more and more like the right decision

[hhhold2] 03/11/2020 13:02

I'll take £10 a share now. thx.

[1robbob] 03/11/2020 12:01

>> You do wonder what is needed for a rerate.

If the market continues to undervalue to such an extent the Board will have no
option but to put the entire Company up for sale - in parts or entirety

[wba1] 03/11/2020 11:33

It is interesting that we see media comment about Aviva being undervalued at this point. I am no fan of conventional measures with insurers, particularly P/B ratio, as net asset value is the relatively small difference between 2 big numbers and can change dramatically given small shifts in key drivers. But what really stands out is the sum of parts - but both the visible and invisible (or at least unrecognised) parts. I think we all generally appreciate the visible parts but it is worth recapping;

Current market cap of £10.5bn
Aviva France value circa £3bn
Singapore £1.6bn (plus £0.5bn for the 25% retained)
Aviva Italy £1.5bn?
Aviva Poland £1bn?
Others £1bn

Leaving the value of core UK and Canadian holdings at no more than £2bn according to the current market cap. But that ignores other things;

Excess general insurance claims reserves. Aviva holds nearly £12bn of claims reserves against current and IBNR claims. It is usual industry practice to reserve such claims at best estimate plus 5% until settled, when any excess is released to profit (hence the regular release of prior year reserves in results). In practice the release exceeds 5% for many companies. But even at 5% this represents £0.6bn of hidden value. And that is before knowing whether Aviva are reflecting future changes meant to happen in areas such as UK PI claims - or are they using unadjusted ladders for future projections?

Mortality assumptions on pensions (and other) business. Allianz openly state in their accounts notes that they use specified actuarial tables but then make an allowance for future mortality improvements. Such assumptions already looked questionable before the pandemic, with mortality improvement having ground to a halt in recent figures, but it looks even more like hidden value given this years events. What value this represents is anyones guess, but given the size of Allianz long term business it must be substantial. That this is the case also looks supported by the recent comments (by Just among others) about the recent sharpening of price competition for new DB risk transfers.

Add all this together and I can only come to the conclusion that the current market cap pretty much throws in the core business that Blanc intends to retain as a freebie.

You do wonder what is needed for a rerate.

[dr biotech] 03/11/2020 11:32

Always a tricky one with what to do in these cases. Fine the shareholders for the executives actions seems to be the way with banks. Fine the executives twice what they earned at the time may get better control.

[1robbob] 03/11/2020 11:27

AND the Head of the FCA at the time is now
......The Governor of the BoE !!!!!