The Motley Fool

Are Aviva plc & Prudential plc Targets For Warren Buffett & Private Equity?

Aviva (LSE: AV) (NYSE: AV.US) and Prudential (LSE: PRU) could do with an investment from the Oracle of Omaha, but will Mr Buffett target the two UK-listed insurers following its latest deal? 


 “Warren Buffett’s Berkshire Hathaway has bought a 3.7% stake in Insurance Australia Group for A$500 million (£249 million) as part of a partnership that IAG said would reduce its capital requirements and support its return on equity targets,” Reuters reported on Tuesday. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Assuming no discount to their market price, Berkshire Hathaway could take a 3.7%% stake in each of Aviva and Prudential for a total of up to £2.2bn — after all, neither stock is particularly expensive at present. If Mr Buffett is not up for it, there remains a chance that private equity may eye stakes in either British insurer, in my view.

The market doesn’t seem to price in such an outcome, though — and here lies the opportunity. 


High synergies is the name of game at Aviva following its £5.6bn takeover of Friends Life. It’s not to say that such a strategy earned it a round of good publicity, but that’s the inevitable way forward, which appeared clear since first deal rumours emerged at the end of November. 

A “capital raising in disguise”, as the deal was labelled by some analysts, the tie-up is more than that — it’s an attempt aimed at rendering Aviva an even more efficient entity on its cost base. The market has yet to be convinced that its strategy would work: Aviva’s stock price has gone nowhere in the first half of the year. 

Its lowly relative valuation, however, could make it an appealing target for Mr Buffett and private equity. When Mr Buffett makes a move, others tend to follow (as usually happens when the laggards try to catch up with the leaders).

An example? 

Apollo Global Management is mimicking Warren Buffett’s investment strategy by using its recent $1.8bn takeover of Aviva’s US fixed annuity business to build an insurance operation with more than $60bn in assets,” the Financial Times reported in November 2013. 

Now it may not be too different: a 4% stake in Aviva would cost up to £800m.  


There’s a lot of interest in the private sector for insurance assets, and Prudential would benefit from an investor like Buffett after the departure of its chief executive,” a senior rainmaker in New York told me in the wake of the IAG deal. “Private equity interest also makes a lot of sense.

Prudential has not done much better than Aviva in recent months on the stock exchange. A 4% stake in Prudential would cost up to £1.6bn, although eager buyers would have saved a fortune had they invested 12/24 months ago. 

The story could repeat in a couple of years’ time,” my source concluded. 

Investors are not entirely convinced that Aviva and Prudential will draw the attention of strategic buyers, but Buffett’s latest move signals that the valuation of the sector’s leaders may appreciate at a faster pace than in the past on the back of investment targeting some of the biggest players in the industry. 

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.