Aviva Earnings: Weak Solvency Raises Questions Over Operating Capital Generation

Aviva has reported a strong trading update for the start of 2023 with good growth. Unfortunately, there has been a drag on solvency and we believe that this is what the market is focusing on. Growth has been particularly strong in general insurance and the mix between rate and volume is broadly good. The same can be said for protection and health, but the wealth business still has work going on. Net flows in the platform business have dropped substantially and net outflows in the asset management business continue to be driven by strategic actions that will continue in the second quarter. The company remains on track to meet its cost-reduction plan of GBP 750 million by 2024. However, based on May 24 numbers the GBP 1.5 billion per-year capital-generation target by 2024 still looks a little way off. We maintain our GBP 4.80 per-share fair value estimate and our no moat rating.