Aviva PLC (LSE:AV.) may shock investors next week when it releases results for 2024, that’s the view from analysts at UBS.
The Swiss bank’s team has previewed the upcoming results due next Thursday, 27 February, warning there’s “potential for negative surprises”.
Nevertheless, the analysts also see the UK’s leading life insurer as the ‘preferred pick’ in the sector.
“We see potential for negative surprises at Aviva at FY24 results, mainly driven by the life insurance business, where we remain below consensus expectations,” UBS said in a note.
“However, we see potential upside from the general insurance business, where Intact reported decent results for its Canadian business, which could result in c.£30mln upside to our estimates.
“We also see positioning as a risk, as Aviva remains one of the most crowded stocks within our UK life insurance coverage.”
UBS noted that Aviva itself indicated an operating profit of £1.85 billion, which would be beneath current market consensus estimates, and, would represent some ‘7% downside risk’, albeit, the analyst team reckon this inhouse projection is conservative.
The Swiss Bank forecasts £2 billion of operating profit for Aviva, excluding the Direct Line business.
Looking further ahead, UBS sees the integration and ‘synergies’ as drivers for the Aviva valuation – with the transaction predicted to close in the coming months.
“Aviva remains our preferred UK life insurance pick, followed by L&G over the long-term,” the UBS analysts added.
“We see significant EPS and DPS upside from the Direct Line deal. The deal is expected to close by mid-2025, and we expect an update from management around FY25 results.”
UBS reckons there’ll be upside to Aviva's cost synergy estimates, with the bank predicting £200 million of savings compared to the guidance of £125 million.