The Aviva (LSE: AV) share price has had a tough year falling a painful 17.39% over the last 12 months. That’s a far worse performance than the FTSE 100 as a whole, which is broadly flat.
This isn’t a one-off. Aviva shares are down a thunderous 39.47% over five years. Some 20 years ago, they traded at 529p. This morning, I’d only have to pay 386p. Should I snap them up, or avoid like the plague?
Could do better
The insurer and investment firm’s share price has resisted CEO Amanda Blanc’s commendable efforts to sharpen up the business. This isn’t good enough from a £10bn blue-chip which is still one of the most traded UK shares.
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In 2022, Aviva posted an accounting loss of £1.14bn, down from a profit of £2.04bn the year before. However, it wasn’t all bad. Adjusted operating profit from continuing operations smashed expectations by jumping 35% to £2.21bn.
In a competitive general insurance market, Aviva’s gross written premiums fell 2.5% to £19.40bn, although net premiums rose marginally. Like other insurers, it has been hit by rising repair bills which have driven up claims costs.
There was some concern about its solvency ratio, which fell to 196%. Yet nobody seriously thinks Aviva is at risk, do they?
In Q1, Aviva reported an 11% increase in general insurance premiums to £2.4bn, while private healthcare revenues grew 25% as Britons looked to bypass soaring NHS waiting lists. Yet that was undercut by troubles at its investment division where net flows fell 15% to £2.3bn, due to today’s stock market volatility.
It’s all a bit messy
Despite Blanc’s efforts this is still a sprawling business with a finger in different financial services pies, which makes it hard to get a clear steer on where things stand.
Yet management is still focused on rewarding shareholders, announcing a £300m share buy back in March and predicting low-to-mid single digit dividend growth too.
A closer look at its recent dividend history shows a fair degree of bumpiness. The pandemic didn’t help, but even so.
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Dividend per share | 51.94p | 16.45p | 35.53p | 16.76p | 31.00p |
If analysts are correct, the next couple of years should be a bit smoother. Aviva is expected to pay a dividend per share of 32.9p in 2023 and 33.5p in 2024. That should hand investors yields of 8.73% and 9.57% respectively.
Aviva shares aren’t the cheapest on the index. It trades at 9.98 forecast 2023 earnings, falling to 8.38% for 2024. I can find a heap of tempting blue-chips trading at less than 10 times earnings today.
Off the top of my head I can think of two FTSE 100 financial services stocks that look more tempting than Aviva – insurer and asset manager Legal & General Group and wealth manager M&G. I hold both in my portfolio and would be more likely to top up my holdings than buy Aviva today.
While I think Aviva will prove a good long-term buy, it still has a long way to go before things start to go right.
