First-quarter numbers from Aviva PLC (LSE:AV.) were weaker than expected, said Deutsche Bank, which sees trouble ahead for the life insurer.
The trading update earlier this week showed “evidence of the tougher economic climate as well as worse weather”, analysts at Deutsche said in a note on Thursday.
Such headwinds were expected, but the quarterly figures were “on balance a bit worse than we'd hoped”.
Most targets were reiterated by the FTSE 100 financial group, but the absence of its target for a combined operating ratio (COR) of below 94% was highlighted.
Aviva's general insurance business was blown off course by £70mln of costs from storms Dudley, Eunice and Franklin in the quarter, which pushed up the COR to 96.4% from 90.6%. Anything over 100% would mean Aviva was making a loss from writing general insurance.
Overall, analyst Oliver Steel said it does not change his longer-term view, nor 'buy' rating and 520p target price, backed by “substantial valuation support” of an expected 8% dividend yield.
Rather he said it “cements our sense that the shares lack momentum near-term”.
Earlier in the week UBS also kept its 'buy' rating but noted that Aviva is now focused on generating income rather than growth for investors, and that leverage was a touch above expectations to allow for the £3.75bn capital return and debt repayment in April.
Jefferies rated Aviva as a ‘hold’ with a 460p price target.