Goldman Sachs has trimmed its stance on Aviva (LON:AV), pointing to concerns over the group’s balance sheet. The comments come after the FTSE 100 group unveiled capital return plans earlier this year.
Aviva’s share price has been little changed in today’s session, having inched 0.09 percent lower to 528.00p as of 14:23 BST, underperforming the broader London market, with the benchmark FTSE 100 index currently standing 0.45 percent higher at 7,315.73 points. The group’s shares have gained more than 18 percent over the past year, and are up by some eight percent in the year-to-date.
Goldman Sachs lowered its rating on Aviva from ‘buy’ to ‘neutral’ today, citing the blue-chip group’s balance sheet health.
“In the last five years, management has taken numerous actions to improve Aviva’s balance sheet health. These measures have bolstered its solvency ratio, reduced leverage and raised cash remittances,” the analysts pointed out, as quoted by Proactive Investors. “However, we continue to see the group’s balance sheet restoration as a work in progress.”
The broker explained that relatively high debt leverage and a commitment to pay off hybrid debt are “likely to take Aviva’s solvency ratio lower in 2017/18”.
The blue-chip group, which recently delivered a rise in full-year operating profits, has announced plans to return capital to shareholders and Goldman Sachs reckons that the move would ‘prolong the process’ of building up the insurer’s balance sheet.
The 18 analysts offering 12-month price targets for Aviva for the Financial Times have a median target of 525.00p, with a high estimate of 608.00p and a low estimate of 420.00p. As of April 3, the consensus forecast amongst 20 polled investment analysts covering the blue-chip insurer has it that the company will outperform the market.