Aviva Is Still the New Aegon; Lowering Fair Value Estimate Though Shares Still Undervalued

Aviva has reported a rather complicated set of results for full-year 2021. That is because the business has been disposing of peripheral entities, reducing debt, and distributing cash to shareholders. This leaves a company with a very different earnings profile on a forward looking basis. However, we still think there is upside within Aviva and that many of its remaining woes orientate around operating and economic assumption adjustments within its liabilities. These have been long-standing issues much as have seen at Aegon. We expect significant managerial attention on correcting these to realistic long-term assumptions that do not require continued annual adjustments. We expect this particularly within a rising rate world but also in an environment where management takes steps to mitigate the effects of these. We lower our fair value estimate to GBP 4.4 per share and maintain our no economic moat rating.