Aviva [AV.LSE] was quick out of the blocks this year, its share price rising more than 22% in the first three months of 2021. Since then, growth in Aviva’s share price has stalled, despite positive half-year results. But with new activist investors Cevian Capital targeting a doubling of Aviva’s share price in the next three years, is further growth on the cards? We should get some indication of whether Aviva’s share price is set to make gains when the company releases its Q3 results on Thursday.
Aviva share price up year-to-date, but below August highs
Aviva’s share price currently sits just under the 400p mark, having risen 30.4% in the last year. Fellow insurer Legal & General Group’s share price is up by the same amount in that period, while non-life insurance provider Admiral Group’s share price has increased only 3% in the last 12 months. And although Aviva’s stock is up 21.6% year-to-date, most of that growth came in the first three months of the year, when Aviva notched up record quarterly savings and retirement net flows and reported its highest Q1 sales of general insurance for a decade. Since the end of March, Aviva’s share price has bumped along close to 400p. Since closing at a 52-week high of 426.20p on 13 August, the day after the company announced positive results for the six months to June, Aviva’s share price has fallen 7%.
Aviva looking to build on half-year results, as investors demand shareholder value
On 12 August, Aviva posted decent numbers for the first six months of the year. Inflows to its UK and Ireland savings and retirement business increased 24% year-on-year to £5.2bn, as the company added 100,000 members to its workplace pension scheme, while operating profits from continuing operations rose 17% to £725m. The week those half-year results were released, Aviva’s share price climbed more than 6% to close the week at its highest level since November 2019. However, the most encouraging bit of news for investors was arguably management’s announcement that, having refocused on its core markets, it intends to return up to £4bn to shareholders by next June. The pay-outs are to be funded by the £7.5bn Aviva will earn from selling eight non-core assets, including businesses in France, Italy and Asia. The disposals are due to be completed by the end of the year.
Earlier this year, Aviva CEO Amanda Blanc came under pressure from activist investor Cevian Capital to improve shareholder returns. Sweden-based Cevian Capital, Europe’s largest activist investor fund, has built a 5% stake in Aviva, Britain’s largest general insurer. Cevian, founded in 1996 by Christer Gardell and Lars Förberg, is pushing for cost cuts of at least £500m by 2023, with Aviva having said it will cut costs by £300m by 2022, according to a report in The Guardian. That report quoted Gardell’s claim that a “ focused and high-performing Aviva should be able to have a value in excess of £8 per share within three years, and more than double the dividend to 45p”.
Will Q3 results satisfy activist investor Cevian?
After posting robust results for the first half of 2021 and talking of “significant strategic progress”, Aviva’s leadership team will be keen to report another strong set of numbers for the three months to September. It will be worth keeping an eye out for any update on plans to return money to shareholders, plus potential movements in the share price in reaction to any comments that may be forthcoming from Cevian, who so far have seemed broadly supportive of steps taken by Aviva’s senior bosses. Whether that will continue to be the case should become a little clearer after the release of Aviva’s Q3 earnings at 7am on Thursday 11 November.
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