Aviva Share Discussion Threads

[cwa1] 06/12/2022 08:16

* AVIVA - COMPLETES £350 MILLION BULK PURCHASE ANNUITY
BUY-IN TRANSACTION FOR COATS UK PENSION SCHEME

[fenners66] 04/12/2022 00:38

I guess the cash generated view of companies works well for such as insurers.
Whilst profits can be "massaged " cash is not so easy.

However for capital intensive companies , just generating cash can point to lower future returns
as capex postponed in order to support cash generation can then leave the business behind and
less able to fight off the competition.

[1robbob] 03/12/2022 14:44

I long ago gave up trying to understand the intricasies of Insurance Company accounting, particularly Life Assurance
Internal reserving and provisioning policies long ago rendered analasis an art not a science.
I have for some years' now relied upon cash generation as a measure of value. Fortunately most Companies seem to have now moved towards this as a measure of performance.

IRFS 17 is just one more hazard in the world of Accounting opaqueness
Although if I understand it correctly, it could aide analaysis as to the likely long-term consistancy of cash generation

Gentlemen - Stick to annual cash generation do not panic re IRFS 17
Next year (could be this year?) AV will generate £1.8bn cash = 64p+ per share
giving a valuation of less than 7x cash generated

[cjac39] 02/12/2022 14:45

an analyst write up of ifrs17. basically says if you are daft you will downgrade them but if you focus on cash / capital as you should you will ignore it as irrelevant.


IFRS17 good or bad?
The case for the prosecution
There is a straightforward case to be made that the market should downgrade its valuation of the stock as a result of the downward guidance on financial metrics under IFRS 17/9:
– IFRS 17/9 provide a more economic and a more comparable view of value creation than IFRS 4, and so the downgrade in earnings, especially when other companies are reporting unchanged earnings, is relevant.
– Algorithmic traders will use IFRS metrics to drive trading behaviour, and so the market will not be able to look through the accounting.
– Human investors will continue to use screening tools to identify investing opportunities – and these screening tools will often refer to P/E and P/B ratios, on which basis L&G will look more expensive.
– While L&G indicated that they expect rating agencies not to change their ratings as a result of IFRS 17/9, it is at least possible that they decide not to give full credit for the CSM in their calculation of leverage, which may bring down credit ratings.
The case for the defence
The case for ignoring the accounting change, and focusing on cash yield, may be obvious to the insurance specialist who is willing to focus on the fundamental drivers of value. But beyond the fundamentalist argument, we see some reasons to think the market as a whole is already at least partially looking through the accounting change:
The companies themselves are already directing investors towards cash/capital
metrics, with Phoenix, and to some extent Aviva, focused on cash remittances, and
M&G providing a full segmental P&L equivalent for surplus capital generation. L&G is
slightly late to this trend, but has recently provided more granular disclosure on capital
generation.
– The natural constituency for UK life insurers has for some time been income
investors. We expect these investors are more focused on cash distribution.
– The P/E ratios for the UK Life insurers don’t seem to correlate with expectations for
growth. But on a dividend yield basis, it looks like the market is, in fact, crediting higher
growth businesses with lower dividend yields. There are endless permutations of this
analysis, and we have not attempted to adjust for surplus capital, relative leverage, cost
of capital and the like. But we think it raises the possibility that the market is already
focusing on cash distributions rather than just earnings.
While shareholder’s equity may decline, the Contractual Service Margin is meant to
represent the present value of future profit emergence. A case can be made for seeing
it as equivalent to equity: after all, if a life insurer sold its in-force book, then the CSM
would convert into equity (depending on the multiple paid). And conversely, if an
insurer acquired identical exposure through an insurance-linked security with a market
price, that security would count towards equity, even if it provided the same cashflows
as the CSM

[cjac39] 02/12/2022 14:42

M&G will give an update on IFRS 17/9 on the 7th December, and Aviva will provide an update on the 9th.

[tourist2020] 02/12/2022 12:51

520p price target for AV and 230 for M&G

[cjac39] 02/12/2022 12:35

i totally agree. i didnt buy gilts but bought a bunch of fin tier1 bonds which are up a lot including mng and aviva sub...

[eurofox] 02/12/2022 12:30

Thanx for that cjac39; BTW, my gilt purchases when they were around 5% YTM are looking really good now ... locked in interest and plenty of capital gain in the meantime - I still think we will head towards stagflation or even deflation eventually.

[cyberian] 02/12/2022 12:24

cjac39...As always you are spot on and had thought the same after the initial reaction the other day on the LGEN video presentation which outlined the change of accounting/reporting with respect to IFSR17...phew!! Your bullet point 5 had me personally worried on the effect of any cold snap but relaxed on house prices.

[cjac39] 02/12/2022 12:23

my MNG holding is c3x my Aviva holding....i hear people are casting a slide rule over it as well for break up candidate given its cheapness...

[eurofox] 02/12/2022 12:03

Hi cjac39, do you mind my asking if you are still invested in MNG - thinking of adding but there must be a persistent seller at the moment

[cjac39] 02/12/2022 11:44

i suspect recent price moves are linked to L&G reporting IFRS17 numbers which showed big dent in equity value. but of course this is market valuation nonsense. cashflows and value hasnt changed - some accountants have just reshaped the profit profiles.

in actual fact life insurers should be very positive now given the backdrop:

1) yield on credit up
2) solvency 2 flexibility
3) pension funds are now chasing insurers for buyouts i hear
4) mortality has been running above trend since covid and now accepted by actuaries as a trend
5) 1 degree cooling in houses increases cardiovascular disease risk by 1-2% and 1 degree lower outdoor temperature increases respiratory mortality by 2.9%

[lewy1970] 01/12/2022 22:07

Most insurers will have a minimum premium so be surprised if anything lower than that figure.

[spawny100] 01/12/2022 21:48

I know all that. All I was asking is have any posters here managed to insure a car for less than £128 for a year? Simple question.

[lewy1970] 01/12/2022 21:17

Pricing is a statistical analysis based on the current book and individual insurers claims - put simply if insurer A has had a volume of claims that match a similar profile to you then they put that price up and the same the other way I.e. low claims that match your profile will see a reduction. That’s why prices differ form insurer to insurer.

Obviously the larger you are the more data you have to predict claims and price out bad risks based on claims experience.

With market COR’s around 95 the margins of success are tight as the insurer, if it gets its pricing and undergirding right, is only making 5p in the pound.

[geckotheglorious] 01/12/2022 21:00

CWA1
"LV insured me for £163 for the year with £35 cashback through Quidco. Can anyone beat that"

Seems to be car Insurance at a guess!

To get a quote that low must be a decent driver, probably 10+ years no claims bonus, low mileage per year and/or low powered engine.

[1robbob] 01/12/2022 18:56

If thy were to insure you
.....Looks like we would have to sell the shares, as undoubtedly our dividend would be under threat.

[cwa1] 01/12/2022 18:25

Without knowing what you're trying to insure, claims record, etc, etc I doubt anyone could even hazard a guess!

[spawny100] 01/12/2022 17:35

15025 anyone looking for a cheaper quote with Aviva will be lucky imo. They've never been competitive for me and now they wont even give me a quote either online or over the phone for some reason. LV insured me for £163 for the year with £35 cashback through Quidco. Can anyone beat that?

[deeker] 01/12/2022 17:01

I don't see that. You must be looking at a different chart to me.

[p0pper] 01/12/2022 08:11

any ideas why we have taken a beating the last few days? any news Ive missed?

[cyberian] 30/11/2022 23:43

Wall Street huge rebound late today could help sentiment here as well....soon find out!

[whatsup32] 30/11/2022 13:08

FT. Aviva are finding more motorist are lying to secure cheaper quotes.

[1robbob] 29/11/2022 18:05

From L&G today

.....'The Group set out an ambition at its 2020 capital markets day to grow the dividend at 3-6% per annum to FY24. Whilst dividend decisions are made annually, the Board’s aim is to continue to grow the dividend at 5% per annum to FY24'...
...the last phrase was printed in bold!!

I woulld expect AV to do the same. That would mean 32.5p for 2023 as already indicated and then +5% for 2024 = 34.125p

We should note that if there is a further Share Buy-back programme, there would be no increase in the cash cost of the increased dividends