Aviva share price: 4 things to watch out for in its half-year results

Aviva will unveil its results for its first six months of trading on Thursday, with investors expecting a stable performance as it continues to execute its cost-cutting programme.

IG takes a look at the key things to focus on ahead of its half-year results.

Aviva to offload Asia unit

Late last week, reports circulated that Aviva was looking to sell its Asia business, which is valued at around $2 billion (£1.65 billion).

In a report by Reuters, the UK-headquartered insurer is reviewing its Asia unit with multiple options, including a sale process that is likely to kick-off in Q4 of this year on the table.

Aviva’s Asian business is comprised of operations based in China, Hong Kong, India, Indonesia, Singapore and Vietnam, with the unit recording a 26% increase in operating profit in 2018 to £284 million.

Investors await update on cost-cutting programme

The news coincides with the company announcing a major overhaul of its UK-based operations in June that sees the insurer to save around £300 million per annum in costs.

The company announced plans to cut around 1,800 jobs over the next three years as part of its cost-cutting drive. The insurer also looking to hit its annual target by also reducing capital expenditure and making improvement in overall operational efficiency.

‘But there are also clear opportunities to improve,’ Aviva CEO Maurice Tulloch said. ‘Reducing Aviva’s costs is essential to remain competitive and this means tough decisions and job losses which I do not take lightly.’

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Aviva earnings expected to fall

Aviva is expected to report operating profit of £1.38 billion, while earnings per share are expected to fall 0.9% to 26.6p. The firm has beaten forecasts for earnings in four of the last seven updates.

However, investors remain enamoured with Aviva due to its strong fundamentals that have allowed it to maintain a healthy dividend pay-out to shareholders.

The full-year number for 2019 is expected to be around 7.7% The yield also comfortably exceeds the average 4.5% yield to be found on the FTSE 100 as well.

Will inorganic growth reap real results?

Aviva’s string of acquisitions has so far failed to boost to earnings, with the insurer incumbered by £9 billion in debt as a result if its organic growth plans, which will take time to reduce.

Cost-cutting and job reductions are still integral to the firm’s plans, as it separates the general and life insurance industries in its UK division, undoing the 2017 merger of these two businesses.