The Rise and Fall of Aviva – where next

In hindsight, Aviva shares were a great opportunity to buy shares in March 2020, when Covid-panic was at fever pitch. They were not only lowly priced, but also because the market seemed to have ‘thrown the baby out of the bathwater’.

Covid put Aviva’s business at serious risk. Are car, life, and home insurance no longer necessary?

It was too much to sell, and the halving in share price from 410p up to 205p should have taken advantage.

Aviva shares are now fully recovered and back at pre-pandemic levels. Was this a missed opportunity? According to Cevian Capital, Aviva shares are now fully recovered. However, there are many reasons to include Aviva into your equity portfolio.

Cevian Capital, also known as an activist fund, acquires significant minority ownership in companies and works closely with management teams to promote initiatives that increase companies’ long-term competitiveness and profitability.

Cevian Capital owns a 5% share of Aviva and plans to share in the profits from recent asset disposals.

Amanda Blanc, the new chief executive, has taken a bold cost-cutting and restructuring strategy. Blanc has already signed sales agreements on eight international businesses for a total PS7.5 billion. This will leave the insurer with a range of PS3.7bn-PS6.6bn excess capital, according to analysts. Cevian Capital wants to return PS5bn to shareholders.

Cevian Capital projects that the share price will rise to 800p within the next three years. They are pushing for the dividend.

The dividend has more than doubled to 45p in the same time period. Therefore, shares bought today at 405p would pay a dividend of over 10% if the payout increases as expected.

Cevian Capital is not an expert, but it does have a clear preference for the insurance industry. Cevian Capital holds large stakes in Old Mutual Insurance Group and RSA Insurance Group, both UK-listed insurance companies.

Level of reassessment – 350p Shares would have fallen below 16-month rising support at this price.


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