Aviva PLC (LSE:AV.), the FTSE 100-listed life insurer, drew positive reactions from analysts for its first-half 2023 results, which were seen as slightly ahead of expectations in most areas and prompting new expectations for shareholder returns.
Barclays highlighted a range of opportunities for the insurer, from the buoyant bulk annuity market to promising sectors like UK Wealth.
Meanwhile, Deutsche Bank lauded the insurer's performance, noting a 2% operational profit beat and a 12% uptick in own funds generation.
The non-life sector, as also flagged by motor and home insurer Admiral, emerged as a powerhouse, effectively counterbalancing any weaknesses observed in life.
Strength in the non-life sector was credited for the favorable rate environments in the UK and Canada. Retail life, which faced margin decreases, is anticipated to rebound as one-off delays in transaction processing subside.
Analysts at both banks spotlighted Aviva's projections for early achievement of its strategic targets, with the life co's management saying they are on track to meet its controllable costs target a year in advance, and also expecting to soon surpass its own funds generation (OFG) and cash remittance goals.
Barclays' analysis also touched upon Aviva's strategies, emphasizing no immediate changes but hinting at a probable early delivery on cost reductions.
Aviva’s solvency ratio, at 202%, exceeded the consensus of 199%, prompting queries about future capital deployment. Deutsche Bank alluded to potential moves in Aviva's debt profile and is factoring in a £300 million share buy-back for 2024.
Deutsche analyst Rhea Shah said: "We continue to find the shares attractive on a 14% 2024 free cash flow yield, with circa 12% total capital return yield."
Deutsche has a 'buy' rating and a 475p price target, while Barclays's is a more neutral 'equal weight' rating on a 470p target, with both targets implying the potential for over 23% upside from the last close of 380p.