Shares in Aviva PLC (LSE:AV.) have jumped around 2% since it revealed it would be returning to the Lloyd's insurance market on Monday.
Investors will now be hoping that results on Thursday can stimulate more growth in the share price.
Through acquiring Probitas for a £242 million consideration, Aviva will acquire its fully integrated Lloyd's platform, encompassing its corporate member, managing agent, international distribution entities and tenancy rights to Syndicate 1492.
Lloyd’s of London, also known as the ‘Lloyd’s market’, is a syndicate of insurers and reinsurers that underwrite risk on complex insurance products.
“Overall the acquisition is relatively small and is not a complete surprise… but provides an alternative distribution opportunity for capital-light general insurance growth and a high-teens IRR,” said analysts at Jefferies.
Aviva’s management has already guided for operating profits (implied £1.42-1.45bn) for full-year 2023 but the actual number might be nearer the bottom than the top given the dismal weather in Britain this winter.
Analysts expect any blow on the weather claims front to be softened by more cash handouts from the insurer with more than £6 billion over time being suggested by one broker.
An internal cash generation target of over £1.6bn by 2026 might also be revised as might the planned £750 million of cost savings currently underway.
“With the Solvency II ratio at a robust 206% (above Aviva's 180% target) and a larger capital base, the company arguably now has more firepower to fund special capital returns," said Jefferies.
“As a result, we lift our share buyback assumption from £330m in 2023 to £350m with future buybacks to rise in £50m increments annually thereafter (FY24: £400m, FY25: £450m).”
Results are due on 7 March.