Broker snap: UBS upgrades Aviva to buy

17th Oct 2011 12:13

Shares in insurance group Aviva were higher on Monday helped by an upgrade by UBS, which raised its rating on the stock from neutral to buy.The Swiss broker said that while the company is the most exposed to the Eurozone out of all the UK insurers - which has driven underperformance over the summer - if policymakers take steps in the fourth quarter to "restore order", then the recent trend should reverse."A recapitalisation of the banking system followed by an orderly default in Greece looks like a benign outcome for insurers, particularly relative to the banks. An "ordinary" recession in the Eurozone also implies less operating pressure for Aviva's continental operations than a currency break up and sovereign defaults," said analyst James Pearce.The target price is raised from 290p to 380p to reflect the reduce macro tail risks."If more stable asset markets follow progress on sovereign concerns, then Aviva's high asset leverage and above average Euro exposure imply upside rather than downside," Pearce said.By 12:13, shares were up 2.8% at 348.5p.Bc