Briefing: Aviva delights shareholders, but long-term questions remain

By Content Director Saxon East

It’s a familiar story for Aviva. Cut costs, reward shareholders and have the chief executive talk up a bright future.

Chief executive Amanda Blanc is the latest in a long line of bosses to follow this path. 

During the publication of Aviva’s 2021 half year financial results this month, Blanc revealed plans to hand back £4bn to shareholders, resisting pressure from the insurer’s activist investor Cevian Capital to go even further.

As a result of the announcement, Aviva’s share price bounced 4% and there is general approval from the City.

Despite this uplift, the vision for the long-term remains in question, however. 

The challenge

Blanc wants Aviva to become a top quartile performer in its markets, but she is going to have to defy the forecast.

According to Simply Wall Street, which rounds up analyst information, Aviva is forecasted an 8.3% return on capital in three years time - well below the projected industry average. 

Aviva is historically one of the worst performers in the dowdy European life market. 

The share price has massively underperformed in the biggest bull run in the history of finance. It is well below half of its peak share price reached in 1998. 

The dividend has decreased 1.9% a year since 2011.

Now, Blanc will have shrunken down Aviva to rely heavily on the UK, which is shackled with billions in deadweight legacy policies. 

Blanc is talking about Aviva becoming a best in class industry performer and Cevian wants an 800p share price within three years.

The narrative appears compelling: a slimmed down, more operationally efficient and customer-focused Aviva can win the day. 

Yet amid all the cost-cutting and billions returned to shareholders, where is the investment going to come from to take Aviva forward? 

Something doesn’t smell right. 

So let’s say a prayer for Aviva’s long-suffering shareholders - let this time be different.