Aviva boosts insurance sector after solid results
UK insurers have been bolstered by strong results from Aviva, which may give the company the strength to test recent resistance around 500p.
First-half profit surges at Aviva
UK insurer Aviva has unveiled a 14% rise in first-half adjusted profit, to £875 million, though the shares only rose 0.5% in morning trading. The share price has rallied 25% over the past year, so much of today’s good news was already factored into the price in the short-term.
Insurance premiums rose 15%, and assets under management also rose, to £186 billion. The group reiterated its full-year outlook, remaining confident in further good performance thanks to strong trading conditions.
Other insurers make gains following the news
Aviva’s news has bolstered the broader life insurance sector, which rose around half a percent in morning trading, with gains concentrated in Old Mutual and Phoenix, both of which rose over 1%.
Aviva fundamentals
The strong outlook for Aviva is underpinned by the group’s attractive fundamentals. It trades at just under 13 times earnings, and this is expected to fall to 10.2 times for the year ahead. Meanwhile, it continues to boast a solid dividend yield of 6.8%, which is covered almost twice by earnings.
Of the sixteen analysts covering Aviva, nine have ratings of either ‘strong buy’ or ‘buy’, according to data from Reuters, while six analysts have ‘hold’ ratings. Just one analyst rates the group as a ‘sell’.
The current median target price is 536.5p, a premium of 9% to the current price as of 14th August.
Aviva share price – technical analysis
Aviva shares have been on a steady run since last October, and have continued to make gains since a low in February around 420p.
Dips to 450p in April and then to 460p in early August provided buying opportunities, but for the moment more upside has been contained by the 500p level. Rallies to this level stalled in March and early April, in May and then right at the end of July.
A longer-term break higher requires a daily close above 500p. Given the strong gains since October, this seems more like consolidation rather than a topping event.
AV chart
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