Aviva Earnings: Good Results; Shares Undervalued

There isn’t a lot of disappointment in Aviva’s Aug. 14 results as the business has delivered ahead of company-compiled consensus. IFRS operating profit is GBP 875 million, which is ahead of consensus' GBP 830 million. Similarly, general insurance's gross written premiums of GBP 6.0 billion are ahead of consensus' GBP 5.8 billion. The general insurance undiscounted combined ratio is 95.4% for the first six months of the year, a 10-basis-point beat. Solvency own-fund generation is GBP 758 million, a 10% rise on the same period last year and ahead of the GBP 700 million estimated by consensus. Capitalization looks good at 205%, a small deterioration since the end of the last full year. Net income attributable to shareholders is GBP 643 million with EPS of GBX 22.8. That stacks up quite well against our GBP 1.038 billion and GBX 38.3 forecasts for the full year. The business has declared a dividend of GBX 11.9 per share, 7% growth on the interim last year. We maintain our fair value estimate and no moat rating.