Aviva plc’s Turnaround Makes Strides As Profit Is Lifted

AvivaThe share price of Aviva (LSE: AV) (NYSE: AV.US) increased 8% to 502p this morning after the company’s turnaround picked up pace in 2013.

Profit increased to £2.2bn after a loss the previous year, while in the forthcoming 12 months financial solidity is described as paramount, underpinning a strategy of “cash flow plus growth”.

The group’s cash flow improved 40% to £1.3bn in 2013, against £904m in 2012, and operating expenses fell 7% to £3bn. Aviva noted that it was hit by £60m from flood losses in the first two months of 2014 — in line with the long-term average.

A final dividend of 9.4p per share was declared for 2013, with the full-year dividend coming in at 15p and down from 19p the year before.

The chief executive, Mark Wilson, commented:

“Following our exit from a number of low margin, underperforming or non-strategic businesses, Aviva is simpler, more focused and better managed. We have significantly improved our capital surplus, increased our liquidity and have a stronger leadership team.

“Although we have made progress in 2013, I want to guard against complacency. Aviva still has issues to address. Have we made progress? Yes, some. Is it a little faster than anticipated? Probably. Have we unlocked the full potential at Aviva? Not yet.”

Aviva shares trade at 8 times earnings based on today’s share price reaction, and taking into account analyst predictions the stock will provide a 3% income in 2014.

Of course, whether that dividend cut, the current share price and the wider prospects for the insurance sector combine to make Aviva a ‘buy’ or ‘sell’ remains up to you.

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> Mark does not own shares in Aviva.