Will the Prudential, Aviva and L&G share prices keep moving higher?
The three insurers have seen their shares bounce in August. But will the trio continue to see gains or will the myriad of headwinds steer their stocks of course in the weeks ahead?
Prudential, Aviva and Legal & General (L&G) have all seen their share prices rally in August, with the big question being whether they can maintain that momentum and propel their respective stocks to new heights.
All three face a myriad of challenges, king among them the economic fallout from Covid-19, which has seen premiums decline and created a barrier to growth over the last eight months. However, while the global pandemic will likely keep the insurance industry in weak health in 2020, it is serving as a catalyst for change and presents a major opportunity for Prudential, Aviva and L&G.
Prudential looks to spin-off US unit to focus on Asia and Africa
Prudential has seen its share price soar 15% so far in August, despite a disappointing set of first half (H1) results that showed the insurer suffered a 3% fall in adjusted operating profit compared with the same period last year.
Thankfully for Prudential’s share price, investors were more focused on the company’s path forward, with its plans to spin-off its US business Jackson so the group can focus on driving growth in Asia and Africa viewed favourably.
Prudential told investors in its H1 results that a minority initial public offering (IPO) for Jackson is planned for H1 2021, with ‘full divestment over time’.
The news has certainly helped Prudential’s stock rally in the near-term, but the company will need to deliver a stronger performance in the second half of this year if it wants those gains to continue over the longer term.
Prudential closed at £12.68 per share on Thursday, with the stock down 13% year-to-date.
Aviva shares surge could stutter after Covid-19 wipes out profits
Aviva shares are up 11% in August, but its recent rally has already shown signs of a slump, with the stock closing 3.5% lower on Thursday.
The surge in share price came before the company released its half-year (H1) results, with analysts from Deutsche Bank driving optimism ahead of its latest earnings, with the German lender reiterating its ‘hold’ rating for the stock and issuing a 350p price target.
However, investor sentiment clearly shifted in the wake of the insurer’s latest results which showed the coronavirus pandemic had wiped away its profits, with pre-tax profit falling 30% to £1.07 billion.
The disappointing set of results was likely a big blow for new CEO Amanda Blanc who took the helm at Aviva only a month ago. However, she promised ‘decisive action’ will be taken to improve performance.
‘We will focus Aviva on our strongest businesses in the UK, Ireland and Canada and aim to be the UK’s leading insurer,’ Blanc said. ‘We are going to focus on those businesses where we have the necessary size, capability and brilliant customer service to generate superior shareholder returns. This is where we will invest and grow.’
‘Where we cannot meet our strategic objectives, we will take decisive action and we will withdraw capital,’ she added.
Aviva closed at 293p per share on Thursday, with the stock down 30% year-to-date.
Legal & General well-positioned to move higher after ‘resilient’ H1 earnings
L&G shares didn’t climb as high as its rivals in August, up just 6% this month. But the insurer is arguably better positioned to see further gains after the company revealed a ‘resilient’ set of H1 earnings.
The UK-based investment management and pensions group announced it will maintain its interim dividend of 4.93p in its H1 results, despite regulators advising financial institutions to consider cancelling pay-outs to bolster balance sheets amid the economic fallout from Covid-19.
L&G also saw strong profits despite the challenging market conditions, with the company reporting £1.13 billion in operating profit, only slightly lower than last year.
‘In H1, Legal & General delivered resilient operating profits, a robust balance sheet and highly relevant products and services,’ L&G Group CEO Nigel Wilson said. ‘Our ambition is for a similar performance in H2.’
L&G closed at 228p per share on Thursday, with the stock down 26% year-to-date.
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