Analysts at UBS are warning that Aviva PLC’s upcoming 2024 results may bring negative surprises, citing concerns about the life insurance business and potential for below-consensus earnings. However, they also see potential upside from the general insurance business, particularly from Intact’s decent results for its Canadian business, which could result in a £30 million boost to their estimates. Additionally, UBS notes that Aviva itself has guided for an operating profit of £1.85 billion, which is below current market consensus estimates.
UBS also sees a risk from Aviva’s position as one of the most crowded stocks in the UK life insurance sector. Despite these concerns, the analysts at UBS still consider Aviva their “preferred pick” in the sector, with potential for significant EPS and DPS upside from the Direct Line deal, which is expected to close by mid-2025. They also expect an update on the deal from management around FY25 results.
Looking ahead, UBS sees the integration and synergies driving the valuation of Aviva, with potential for additional savings of £200 million compared to the guidance of £125 million. The bank is forecasting an operating profit of £2 billion for Aviva, excluding the Direct Line business. Overall, while there may be some negative surprises ahead, UBS believes the potential upside and strong long-term prospects make Aviva a good investment choice.