Aviva share price: Shore Capital remains bearish despite upbeat results

Shore Capital remains bearish on Aviva (LON:AV) even as the company posted better-than-expected full-year profits yesterday and signalled that it could return cash to shareholders. The analysts, however, said that the company had delivered a set of results “with a smattering of good, bad and warnings”.

Aviva’s share price rallied in yesterday’s session, closing 1.35 percent higher at 465.80p, significantly outperforming the benchmark FTSE 100 index which ended the day 1.78 percent in the red at 6,036.70 points. In the year-to-date, Aviva’s shares have lost 9.73 percent, as compared with a 3.29-percent fall in the Footsie.
Shore Capital analyst Eamonn Flanagan reiterated his ‘sell’ rating on Aviva yesterday, without specifying a price target on the stock. Citywire quoted the analyst as noting that the ‘good’ part of the insurer’s results focused on its Solvency II coverage ratio of 180 percent, a measure of financial strength, which surpassed expectations for 155 percent, and Aviva’s forecast-beating operating profits.

The ‘bad,’ however, was Aviva’s 15-percent dividend growth to 20.8p per share, which Flanagan argues was “well below our top-end 22p forecast and the market’s expectation of 21.2p”. He added that “the dilutive impact of the Friends Life deal is becoming evident and [there are] some forex hits”. The ‘warnings’ meanwhile were about normal earnings growth which was likely to be “in mid-single digit”.
The Telegraph’s Questor also remains cautious on Aviva in the wake of the group’s results, pointing to a risk of a looming market sell-off.
“The group is clearly making progress but investors need to be wary of how returns are exposed to a market downturn,” Questor editor John Ficenec said yesterday, adding that the group’s shares had almost halved in value since the turn of the millennium, during two market slumps in 2001 and 2008.
Others, however, have been more upbeat on the blue-chip insurer, with Goldman Sachs analyst Ravi Tanna calling the update ‘a good set of results’.
“Its operating earnings are seven percent ahead of consensus, owing to a broad-based ‘beat’,” the analyst said, as quoted by the Guardian. “Its dividend growth of 15 percent is marginally below consensus expectations of 17 percent year on year, but the group expects £1.2 billion of capital benefits, which will translate in an additional £1 billion of cash remittances from UK life to group over the next three years.”
As of 07:46 GMT, Friday, 11 March, Aviva plc share price is 465.80p.