Aviva Share Discussion Threads

[wba1] 29/11/2020 19:28

Ascribing a value to GI business is a black art but ratios of price to premium tend to fall into a common band in the absence of other factors. The ratio for RSA was circa acquisition price = 61% NWP. For the Allianz purchase of LV it was 1.1/1.6,just over 2/3. Allianz purchase of L&G GI brought £330m GWP for £242m price - just over 70% ratio. And the Allianz buys were pure retail (private motor/household) which is less valuable than commercial lines. Hence the £5bn for Aviva.

[spud] 29/11/2020 19:27

Hopefully a predator!!spud

[cjac39] 29/11/2020 18:25

Blimey wba that just highlights the lunacy of the share price I struggle with how to value gi businesses but if that is 20% close it’s incredible.

Simple maths : U.K. life 13, gi 5 , agi 3 , platform etc 0.5, eur + Asia life 8 less debt = 2x share price

Eurofox will be having a field day for months to come!

[cjac39] 29/11/2020 18:25

Blimey wba that just highlights the lunacy of the share price I struggle with how to value gi businesses but if that is 20% close it’s incredible.

Simple maths : U.K. life 13, gi 5 , agi 3 , platform etc 0.5, eur + Asia life 8 less debt = 2x share price

Eurofox will be having a field day for months to come!

[wba1] 29/11/2020 17:57

One other way of approaching the company value is to ask what value should be ascribed to the remaining operations after disposals. I think cjac is best placed to comment on the value of the life and investors units, but the general insurance unit is interesting. RSA have just accepted a bid which values their UK and Canadian GI units (plus a bit in Denmark, but that is peripheral) at £2.8bn (the other £4.4 is for their Scandi operations). RSA (in 2019) had NWP of £1.7bn in Canada and £2.9bn in the UK. Aviva, in 2019, had £3.1bn in Canada and £4.2bn in the UK. I am not aware of anything in the Aviva GI operation to suggest it is less valuable than RSA (relative to size) and so, based on the RSA deal, I would expect the core Aviva GI operation to have a takeout value of circa £5 billion. I could make out a case for a higher number as any buyer would get scale and market position not present with RSA. Add in the takeout value of the life and investor operations (plus the disposal proceeds already discussed) and, using yet another method, you get some very tasty numbers.

[1wenty] 29/11/2020 16:58

With all this potential jam on its way eventually to us shareholders. The logical next step for The Co is to scoop up as many shares under 350-375 as they can before the inevitable vaccine, Brexit resolution and re-rating arrives.

[spud] 29/11/2020 16:57

Some great in-depth posts here chaps!spud

[salver2] 29/11/2020 14:56

I believe myself in your analysis muscle trade and in reality had a 6 handle in my mind but didn’t want to get ahead of myself - well done on your and cjac thiughts

[salver2] 29/11/2020 13:40

So the value of the co should be around 5 pounds presuming sales go through as expected- it is of constant surprise to me at the lowly level of this share. - I suppose they’ve disappointed so long that a lot of people cannot see the value

[muscletrade] 29/11/2020 13:14

@cjac, thanks for that. It is interesting that we come up with similar result pretty much using diff methodology.
I too have calculated further savings if scr falls which it should but didn't want to muddy the waters until there until some kind of consensus could be reached in just disposal benefits in combo with reduced debt.
Yes the numbers some incredible numbers compared to mcap.

@pol123, no not quite £2 a share, more like 150p or so. That is before any further possible benefit mentioned by cjac39 should scr fall as it should when Aviva light is settled down, so it could get close to £2 per share.

[cjac39] 29/11/2020 12:46

some good numbers in there mt. i come at it from a slightly different angle.

per FY 2019 the eurlife and asialife own funds are 6.1 and 1.6 respectively.

lets assume they sell flat to own funds this reduces regulatory own funds from 28 to 20 or so which means debt at 30% needs to be reduced from 9.2 to 6.1 which is the £3bln. as you say this rolls off 21,22,23 but 22 is 0.8 tier 1 so they might have to refinance that.

the scr should also fall but that's hard to predict but if they are selling 35% of operating own funds and its mainly in Europe quite risky life business you could imagine it falling by say 20% if they lose some diversity benefit.

therefore there is potentially another release of 2bln of scr capital along with sold own funds and they are moving down from 195% to 160-180% which is another £1.5-2

so to add it up its sales of nearly 8 of life businesses alone of which they've sold own funds so far of 1.15 (Singapore was 2x own funds + 350 Italy). they do also have GI of course in some of these so maybe another 7 to go.

8 less 3 of debt and as you say self funding divi means in theory 5+2-3 scr release + 1 extra cash at central and you get to some truly incredible numbers relative to mcap.

[pol123] 29/11/2020 12:28

Based on the above are you estimating ~£2 per share return to shareholders over the 2-3 yrs, exc std dividend payments

[muscletrade] 29/11/2020 11:21

@cjack39, yes I think there would be widespread agreement to your view.

At the risk of flogging a dead horse I have been reviewing my figures on likely excess capital that could/should find its way back to long suffering shareholders.This reflects the more aggressive debt reduction of c£3Bln rather than the £1.5Blns that was quoted in the "fixed income investor presentation" in September 2020.The rebased div of 21P and the comments in conference call last week ,and in particular the current level level of central liquidity of £2.8B and its longer term target of £1.5B(average) after the dust settles following disposals and debt reduction.It should be noted that in the conf call the current central liquidity does not include the £2B disposals already announced and is 100% accretive

Central. 2.8
disposals to date. +2.0 (announced)
redemtions 2021. (0.6)
dividends 2021. (0.8)
sub total. 3.4

further disposals. 6.2...france 3.5 poland 1.5 remaining italy and JVs 1.2 Estimates

Redemptions 2022. (1.3)
Redemptions 2023. (1.04)

Nett central. 7.26
Avergage central 1.5

total excess captl. £5.76 Billions

I have not included dividends cost for 2022 and 2023 as have assumed for the purpose of this exercise that they would be offset by earnings into central.

Cjac I think you will note that my estimated/guesstimates for further disposals is slightly different to the ones that you suggested on 24th November. Would welcome your thoughts.

[mo123] 29/11/2020 11:15

Aviva is also reviewing its joint ventures in India, China and Turkey, according to a spokesperson.

Anyone have a rough idea what they are worth?

[cjac39] 28/11/2020 20:46

It’s curious the golden ticket came up again. I thought they’d bought them out but maybe not.

Either way, after shifting out the Europe assets aviva is going to be a nice and simple business to analyse and evaluate. Basically Phoenix like but with more positive growth prospects. A boring income stock that becomes steady as she goes and will rerate once they sell France.

[muscletrade] 28/11/2020 20:05

Im not qualified to give an opinion on this except to say it has been going on for years and years, I think if you google it the latest info is 2017. However Insurance companies have form when it comes to not paying up.

Due diligience/ logic would seem to indicate that a settlement of some sort would need to be reached before the company could be sold to a new owner but who knows, I don't know if Aviva was involved with the french Company before the contract was issued so maybe a new owner would be equally relaxed as Aviva appear to be.

[ianood] 28/11/2020 19:42

muscletrade - Thanks for the info/secretarial work - much appreciated :)
Out of interest and purely from a personal perspective does it concern you, or, are you treating it as merely noise? Personally, I have been alert to it for some while however, and AV's management don't display any concern. Maybe we should do likewise?

[muscletrade] 28/11/2020 19:36

Intersting footnote to those redemtions I mentioned. they are both expensive with a yield of 6.125% so AV would save best part of a £85m a year (assuming they are not replaced with new issue).

[muscletrade] 28/11/2020 19:20

@pol, cash payback depends upon at least 4 major points, sales price, capital benefit, debt reduction level/redemptions and the only ones we know for certain are redemptions. There is a big one 2022 of £800m and another in 2023 of Euro650m, both of which they will want covered before paying shareholders anything but they should be swimming in money if all goes well. he says hopefully.

[karv1] 28/11/2020 19:15

I have never heard of that before today those numbers look scary, did I read AVIVA has lost 17 court battles over it.

[muscletrade] 28/11/2020 19:06

@ianwood, yes you are a pain...my secretarial work finished yesterday

Jason Windsor

"On golden ticket, I mean there's nothing to say on that. That’s actually -- there's no new news on this, it’s behaving very much in line with what we've seen for many, many years now. So there’s no new news on that".

[pol123] 28/11/2020 18:21

SP is just settling after results. I expect it to start to push up towards NAV. That will reflect value of the core business and the spin offs. Special divs should be ~30p-50p with the rest paying down debt