Heading towards half-year results on Wednesday, Aviva PLC (LSE:AV.) shares recently topped £5 for the first time in over six years, before being caught up in the wider market sell-off.
While there was a warning for the life sector last month that heightened scrutiny from the Prudential Regulatory Authority is likely over their use of funded reinsurance deals, the sector retails strong attractions for many investors.
As well as dividend yield appeal for income hunters, investors and analysts have also been giving appreciative glances at the sector as the Bank of England's expected policy loosening is seen as positive for the potential to reduce asset risk concerns, while growth opportunities continue from the bulk annuities market.
Aviva's first-quarter results in May revealed a strong start to 2024, with the full-year outlook kept unchanged as general insurance premiums increased 16%, retirement sales were up 13% in the bulk purchase annuity market, the workplace pensions business generated strong flows and a solvency ratio of 206% was above forecasts.
Boss Amanda Blanc (pictured), who has led the FTSE 100 company for just over four years now, said the group was in "great health" and that "clear competitive advantages" of Aviva's brand and scale were "driving consistently strong performance, and giving us real optimism about 2024".
Analysts have been positive too, with UBS recently tipping the Fenchurch Street group as one of its preferred investments due to its potential for strong shareholder returns, and Jefferies saying the insurer is the best of the bunch currently.
It forecasts that the coming half-year results should show another period of solid progress, with growth coming from its capital-light lines: general insurance (a combined operating ratio stable at 95.7%), wealth (where Blanc has set a five-year ambition of £200 million in profit) and protection (where Aviva has already announced that it completed the acquisition of AIG UK in the second quarter).
By diversifying its mix of earnings, Aviva has "enhanced its ability to consistently deliver on (and exceed) its strategic plan at results day, which we expect will continue to be a theme", the Jefferies analysts said.
But they tempered optimism for the half-year results by saying that near-term earnings growth in wealth will be held back by higher investment costs, while the recent AIG acquisition has not expected to materially boost earnings in the period due to limited integration time.