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Would I buy shares in Aviva for my Stocks and Shares ISA now?

Insurer Aviva (LSE: AV) has come a long way since the dark days of the financial crisis. Under previous chief executive Mark Wilson, the balance sheet was strengthened, but the share price didn’t improve enough for its long-suffering shareholders. And then an ill-advised attempt to cancel £450m of high-performing preference shares drew heavy criticism from investors. This was probably the final nail in the coffin for Wilson.

A new team

Aviva looked for a new direction and sought to improve shareholder returns, and promoted from within for the top job. Maurice Tulloch took over in March and has imposed a new vision on the sleeping giant. Part of this has been to cut costs by £300m a year over the next three years, involving 1,800 job losses. Painful stuff.

The insurer has also confirmed plans to manage its life and general insurance businesses in the UK separately, presumably part of a move to try to streamline the business and improve productivity. If it works, this would clearly be a good move, as Aviva can at times feel like a super-tanker that’s hard to steer and lacks agility.

Another upside for investors is that the insurer has reiterated its commitment to a progressive dividend policy and debt reduction of at least £1.5bn. Both of these aims are good news for shareholder returns. The former boosts the income-appeal of these already high-yielding shares and the latter should boost profits as interest payments are reduced.

The end result of all this is that the share price, given the potential for a turnaround under new management, looks very good value in my eyes with the shares trading on a P/E of just over 11 and a dividend yield 7%.

All change

Fellow FTSE 100 insurer, Prudential (LSE: PRU) is going through even more transformative changes. It’s de-merging to form two businesses. One will be a life insurer focused on Asia and other emerging markets, which should offer exciting growth opportunities. The other business is a mature UK/European life insurer and asset manager.

Investors will end up with shares in both companies — and that offers an exciting combination of a faster-growth Asian-focused business with a higher-yielding, mature developed markets business. It feels to me like the best of both worlds, which could pay off well. The downside is that it’s unclear when the de-merger process will be complete and uncertainty may, in the short term, hamper the share price.

But longer-term, Prudential has the presence to take advantage of trends towards more people buying insurance in emerging markets and using asset managers to look after pensions and savings. The yield isn’t as high as some, as it’s around 2.8%, but there is plenty of potential for growth as the dividend cover is around three and its P/E is almost exactly the same as Aviva’s at just over 11.

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Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.