Aviva plc has several earnings tailwinds coming from several directions in 2024, analysts at Berenberg believe, adding the outlook for the insurer is “extremely strong”.
Margin improvement after the dramatic re-pricing of UK motor insurance and another leg up in pricing for UK home insurance in 2024 – in which Aviva is the market leader – are two.
But there is also improved profitability in Canada, the booming bulk purchase annuity (BPA) market, the acquisition of Probitas and a rapidly growing health insurance portfolio.
General Insurance (GI) accounts for around 50% of EPS and the division’s profits are expected to step up strongly over the next two years.
Operating profit from GI should rise from £851m in 2023 to £1.26 billion in 2025 driven by a stronger top line and a 1.8 percentage point improvement in the combined ratio.
Consensus forecasts a 94.7% undiscounted combined ratio in 2025, but given the variety of tailwinds, earnings surprises are becoming more likely.
Berenberg’s estimates are 6% above consensus, driven by the UK’s general insurance business (GI) with the rating buy and price target of 572p.