Aviva has suffered a £100m hit from claims for storm damage in Ireland and the UK in the last three months of the year, but the insurer's overall performance in 2009 was in line with expectations.
So despite a 12% fall in life sales to £32bn, this was marginally better than the City had been expecting and its shares have edged up 0.8p to 398.8p. Its capital position is strong with a £4.5bn surplus. During the year it successfully floated its Dutch business Delta Lloyd. Andrew Moss, the chief executive, said the insurer had made a strong start to 2010:
Our focus remains on growing our business profitably and improving our operational efficiency so we can fully benefit as our major markets return to economic growth.
Panmure Gordon analyst Barrie Cornes issued a buy note on the business. He said:
Aviva has reported 2009 life and pensions new business at £32bn, which was 2% ahead of consensus. The fourth quarter performance at £7.9bn although 15% lower than the fourth quarter of 2009 was 21% ahead of the third quarter of 2009. Non-life impacted by £100m exceptional weather hit in Ireland and UK [£80m in Ireland and £20m in the UK] but should come as no surprise. Solid performance and importantly a strong capital position to enter 2010.
Aviva is our 2010 top pick amongst large cap life insurers. In our view the valuation is compelling. We believe that both Prudential (buy, 732p target price) and Aviva offer potential investors substantial growth and diversity opportunities away from the competitive UK market. However, in the short term a valuation gap has opened between the two companies leading us to highlight the relative upside potential of Aviva in the short term.
