Sunday, December 9, 2018

Aviva Facing Tough Decisions As Investors Bail Out

Investors clearly don’t like what’s going on with Aviva (OTCPK:AVVIY, AV.L), as these shares have been pounded down 25% over the past year, with most of that damage coming in the last six months. The similarly weak results from Prudential plc (PUK) and Legal & General Group (OTCPK:LGGNY), particularly when compared to Allianz (OTCPK:AZSEY), Ageas (OTCPK:AGESY), and other non-UK insurers, would certainly argue for a strong Brexit uncertainty/risk component, but I believe Aviva shares are also suffering from a lack of confidence tied to the recent departure of the CEO and uncertainty over the future direction of the business.

Whoever takes the top job at Aviva, he or she will have some difficult decisions to make. The company’s leverage is higher than that of its peers (and higher than it may appear on casual observation), and its hodgepodge of businesses outside of the U.K., France, Canada, and (maybe) Poland don’t necessarily make sense for the long term. While I understand that Aviva may well be untouchable until the Brexit situation is resolved and there’s a new CEO in place, today’s valuation assumes a very weak run of financial results that I think are unlikely to materialize.

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Aviva Facing Tough Decisions As Investors Bail Out

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