Share Centre stock of the week: Aviva
Aviva is an international insurance company that provides all classes of general and life assurance, including fire, motor, marine, aviation and transport insurance. The company also supply a variety of financial services, including unit trusts, stock broking, long-term savings, and fund management.
The group turned in another solid Q3 trading update in October, which showed it is continuing to make progress. Investors should note that within the Life Insurance division, the value of new business was £823m. Additionally, within the General Insurance division the operating ratio was 94%, compared to 95.9% during the same period last year.
Aviva will be focusing on the protection side of the business moving forward and investors should acknowledge that the company is the provider of choice to RBS and the Post Office. The group has also extended a partnership with Santander, offering life, critical illness and income protection products to Santander customers through 1300 branches. This is through both direct and online divisions, which should further strengthen protection sales. Moreover, The Friend’s Life acquisition has so far progressed well and subsequently, the company remain on target for cost synergies of £225m.
We currently recommend Aviva as a ‘buy’ for investors willing to accept a medium level of risk. We have a high degree of faith in the company’s recovery outlook, and the decline in the share price since the summer highs may prove a good entry point. The recent hike in the dividend now also makes Aviva look increasingly attractive for income investors.