Aviva shares could hit 350p, says Deutsche Bank ahead of H1 earnings

Shares in Aviva have struggled amid the Covid-19 crisis, but analysts at Deutsche Bank think the stock will rebound after the company sold its Friends Provident International unit to bolster its balance sheet.

Aviva has seen its shares take a major hit as a result of the economic fallout from the coronavirus pandemic, with the stock down 34% year-to-date after hitting a low of 211p in March.

But analysts at Deutsche Bank remain optimistic about the insurer’s share price trajectory ahead of its half-year results on Thursday 6 August, with the German lender reiterating its ‘hold’ rating and issuing a target price of 350p in July - implying a potential upside for the stock of 26%.

Aviva is trading at 278p per share at the time of publication.

New CEO to end 'business as usual' at Aviva

Investors are eager for an update on Aviva’s performance on Thursday when the company reveals its first set of earnings under new Amanda Blanc.

Blanc took the helm in last month and faces an uphill battle at the British insurer, with the company shedding almost 50% off the value of its share price over the last five years due to poor growth in Europe.

The path that Aviva will take to strengthen its business is unclear at this stage, with some investors hoping for M&A activity in the form of a major merger or acquisition, while others would like to see the group separate its life and general insurances units to help streamline operations.

Whatever direction Blanc and her management team opt to take, the new CEO has promised to bring an end to ‘business as usual’ at Aviva in this year.

Aviva sells Friends Provident International unit in revised deal

Last month, Aviva announced it had finalised the sale of its Friends Provident International to International Financial Group (IFGL) in a revised deal valued at £259 million.

The revision of the deal terms sees Aviva sell a 76% stake in Friends Provident International rather the entire business for £340 million which it originally had considered.m

‘Aviva and IFGL have entered into a shareholders' agreement under which Aviva has certain ongoing commitments and customary rights given the minority shareholding,’ the company said in a statement.

‘FPIL will continue to serve customers, partners and intermediaries as usual and there is no change to customers' policies as a result of today's announcement,’ Aviva added.

The impact the sale has on Aviva’s capital ratios will be minor, but proceeds from the disposal will help bolster the company’s balance sheet at a time when regulators are advising businesses to raise capital to offset the economic impact of Covid-19.

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