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    AV.   GB0002162385


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Aviva turnaround targets fail to ignite share price

07/09/2014 | 06:23am EDT
A man walks past an AVIVA logo outside the company's head office in the city of London

LONDON (Reuters) - UK insurer Aviva (>> Aviva plc) said it aimed to double the amount of excess cash it generates during the next stage of a turnaround plan, but its shares fell on concerns the plan did not go far enough.

LONDON (Reuters) - UK insurer Aviva (>> Aviva plc) said it aimed to double the amount of excess cash it generates during the next stage of a turnaround plan, but its shares fell on concerns the plan did not go far enough.

Aviva has laid off staff, spun off some businesses and shaken up its asset management arm. By promising bigger returns from those measures, the company is trying to satisfy income hunting investors who are an important part of its shareholder base.

Aviva said on Wednesday it aimed to double annual excess cashflow to 800 million pounds by the end of 2016 and lower its ratio of operating expenses to operating income to below 50 percent over the same period, from 54 percent at the end of 2013.

It wants to accelerate growth at fund arm Aviva Investors, where it is launching several investment products, manage its back book of life insurance business better, cut debt repayments and reduce restructuring costs, among other measures.

The changes at Aviva are Chief Executive Mark Wilson's answer to disgruntled investors who rebelled against previous management after a run of poor returns, forcing out the company's former CEO and chairman.

But the latest changes failed to ignite Aviva's share price. By 0901 GMT (10.01 a.m. BST), the stock was down 4.3 percent at 490 pence, putting it on course for its biggest daily fall in four months. Aviva was the second-biggest decliner in Britain's blue-chip FTSE 100 index <.FTSE>, which was down 0.5 percent.

Eamonn Flanagan, an analyst at Shore Capital, said that while the targets were "good", they were not "overly challenging", especially when compared with those of Aviva's rival Prudential (>> Prudential plc) over recent years.

"We sense the market may well be expecting a much more ambitious delivery, whilst the de-leveraging targets exclude a date for the achievement of the external leverage, which is disappointing," he added.

Flanagan reiterated a "sell" recommendation in a note to clients, citing the stock's valuation relative to peers.

Aviva said it was sticking to plans to cut debt to 2.2 billion pounds by the end of 2015 from 4.1 billion at the end of February and reduce its gross external leverage ratio to below 40 percent of tangible capital over "the medium term".

In its most recent trading update, Aviva showed a mixed performance, with a 22 percent fall in new business in the UK offset by strong growth overseas, particularly in Asia, Italy, Spain and Ireland.

The company said one area to improve was the way it managed its back book of life insurance business - policies that are no longer sold but still generate premiums - which in the UK is worth some 7.4 billion pounds.

It said it would continue to offer all forms of insurance, a market position it said would give it a competitive advantage as more customers access insurance services directly online rather than through a broker.

(Reporting by Simon Jessop; editing by Steve Slater and Tom Pfeiffer)

By Simon Jessop

Stocks treated in this article : Aviva plc, Prudential plc

ę Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
AVIVA PLC 1.39% 393.1 Delayed Quote.19.22%
BASE CO., LTD. 2.56% 4800 End-of-day quote.-21.95%
BASE, INC. -3.07% 1293 End-of-day quote.-33.76%
FTSE 100 0.88% 7078.42 Delayed Quote.8.61%
MSCI UNITED KINGDOM (STRD) 1.76% 1160.115 Real-time Quote.10.47%
PRUDENTIAL PLC 2.42% 1376.5 Delayed Quote.-0.37%
S&P UNITED KINGDOM (PDS) 0.95% 1410.42 Delayed Quote.9.09%
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Sales 2021 46 772 M 65 284 M 65 284 M
Net income 2021 2 260 M 3 154 M 3 154 M
Net cash 2021 8 664 M 12 093 M 12 093 M
P/E ratio 2021 6,96x
Yield 2021 5,58%
Capitalization 15 440 M 21 569 M 21 552 M
EV / Sales 2021 0,14x
EV / Sales 2022 0,15x
Nbr of Employees 28 596
Free-Float 97,1%
Duration : Period :
Aviva plc Technical Analysis Chart | AV. | GB0002162385 | MarketScreener
Technical analysis trends AVIVA PLC
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 21
Last Close Price 3,93 GBX
Average target price 464,14 GBX
Spread / Average Target 11 707%
EPS Revisions
Managers and Directors
Amanda Blanc Chief Executive Officer & Executive Director
Jason Michael Windsor Chief Financial Officer & Director
Mark George Culmer Non-Executive Chairman
Nitinbhai Babubhai Maganbhai Amin Chief Operating Officer
Michael Mire Independent Non-Executive Director
Sector and Competitors
1st jan.Capi. (M$)
AVIVA PLC19.22%21 136
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METLIFE, INC.22.77%50 459
PRUDENTIAL PLC-0.37%48 472