Aviva is still in favour with Berenberg even after the curve ball thrown at the sector by motor and general insurer Direct Line’s profit warning this week.
The broker notes that Aviva’s insolvency was 2025 in the third quarter and well above a target of 180%, with the result that share buybacks to be “regular and sustainable” over the coming years.
In the life and pension business, the group still sees strong trends in workplace and protection sales while the general insurance posted a 94.3% combined ratio and profitability has remained in line with this level of performance in the current quarter - a number below 100% equals an underwriting profit.
One negative is IFRS 17 will lead to a drop in reported earnings, primarily due to a change in profit recognition of the group’s BPA business.
Overall, the broker is upbeat on the sector citing three reasons: Consistently high cash returns; exceptionally strong reinsurance pricing and very strong balance sheets.
Against that are the risks of claims cost inflation; slowing property values and the new IFRS 17 regulations.
Even so, the broker has buy recommendations on every company it follows including Aviva, with a target of 540p, and Admiral (target 2,688p).