Life assurer Aviva's half-year loss reflects an £876m write-down in the value of the US business - group operating profit, after £186m of restructuring costs, actually fell 10 per cent to £935m year on year. Indeed, Aviva's restructuring efforts offer plenty of potential - leaving the shares, trading 25 per cent below embedded value (EV), looking too cheap.
That restructuring plan, revealed last month following a shareholder revolt that forced the resignation of former chief executive Andrew Moss, is extensive. It envisages £400m of cost-savings, the disposal or exit of 16 businesses and involves bulking-up investment returns from a further 27 operations. Seen in this context, the US write-down - a business with a return on capital employed of just 3.8 per cent - could signal that its disposal is near. That, reckons analysts, is positive: "As more disposals occur, we believe the shares have the potential to re-rate," says analyst Kevin Ryan of Investec Securities.
Operationally, Aviva's performance looked resilient. While worldwide new business sales fell 7 per cent to £15bn, UK life profits rose 2 per cent to £469m. And, despite £40m of UK weather-related claims, the general insurance business grew profits 1.3 per cent to £461m.
Broker Investec Securities expects full-year EPS of 49.2p (53.8p in 2011), a maintained dividend of 26p and a year-end embedded value of 478p.
AVIVA (AV.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 313.8p | MARKET VALUE: | £9.16bn | |
| TOUCH: | 313.7-314p | 12-MONTH HIGH: | 385p | LOW: 251p |
| DIVIDEND YIELD: | 8.3% | PE RATIO: | na | |
| NET ASSET VALUE: | 402p | EMBEDDED VALUE: | 421p | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 15.4 | 655 | 4.10 | 10.0 |
| 2012 | 13.8 | -456 | -26.0 | 10.0 |
| % change | -10 | - | - | - |
Ex-div: 19 Sep Payment: 16 Nov | ||||
