Broker snap: New Aviva CEO allows 'a break from the past'

8th May 2012 15:26

Jefferies has maintained its buy recommendation and 386p target price for insurance group Aviva following the announcement that its Chief Executive Officer Andrew Moss has quit.The move, instigated by Moss, follows last week's Aviva annual general meeting which saw a majority of shareholders vote against the remuneration report, an act seen as a protest against Moss's pay rising while the share price moved equally rapidly in the opposite direction. "A new CEO allows a break from the past," said analysts at Jefferies. The broker says however that Aviva is a loose collection of increasingly risky assets: ". Aviva's strange collection of businesses offers little strategic fit and carries too much credit risk. This is largely driven by US and UK life insurance, compounded by European life in the current macro environment. The capital position is also tight.""While the preference would be to sell the US life business, there are no obvious buyers. If the new Chairman really is focused on shareholder value then this company needs a new paradigm. There are clear buyers for UK and Canada non-life, potentially improving economic capital to among the best in the sector and still supporting a two times covered 6% cash dividend yield - all for a four times pro-forma P/E."BC