Hargreaves Lansdown believes Aviva (LON:AV) needs to prove it can deliver long-term growth, Citywire reports. The comments came after the blue-chip insurer updated investors on its full-year performance yesterday, posting a rise in profits and dividend for the 12 months ended December 31, 2017.
Aviva’s share price close little changed in the previous session, despite posting a slump in early trade, inching 0.20 percent higher to close at 508.60p. The shares nevertheless underperformed the broader UK market, with the benchmark FTSE 100 index adding 45.40 points to close 0.63 percent higher at 7,203.24.
‘Not all plain sailing’
Citywire quoted Hargreaves Lansdown analyst Nicholas Hyett as commenting yesterday that it had not been ‘all plain sailing’ for Aviva due to deteriorating underwriting performance and climbing expenses in the life business.
“[Chief executive] Mark Wilson’s move to simplify Aviva has done wonders,” the analyst pointed out, adding, however, that “with the groundwork now complete the next job is to prove a slimmed down diversified insurer can deliver long-term growth as well as cash today”.
Wilson reiterated yesterday that the blue-chip insurer was planning to deploy £2 billion of excess cash this year, specifying that £900 million would be spent on debt reduction, in excess of £500 million on capital returns to shareholders, while about £600 million has been earmarked for bolt-on acquisitions.
“The group’s targeting over five percent earnings growth a year from 2018, if that’s deliverable there’s scope for the already sizeable 5.8-percent dividend yield to swell over the years to come,” Hyett continued.
Other analysts on Aviva
Citigroup reiterated its ‘buy’ rating on Aviva today, with a price target of 603p, while Royal Bank of Canada continues to see the blue-chip insurer as an ‘outperform,’ without specifying a price target on the shares. According to MarketBeat, Aviva currently has a consensus ‘buy’ rating and an average price target of 573.27p.