Aviva PLC (LON:AV.) shares are worth buying for the consistent surprises on cash returns under new chief executive Amanda Blanc, says broker Berenberg.
In a note comparing the UK life insurance giant with Scottish-Dutch rival Aegon (NYSE:AEG), Berenberg said the argument for trading one versus the other is simple.
READ: Aviva eyes cash handouts after record year in savings and retirement
“While Aegon will keep surprising positively on earnings, which is nice, Aviva will keep surprising on cash returns to shareholders equity, which is compelling.
“Compelling beats nice, as in our experience buybacks provide a solid base for share price outperformance, particularly when we consider the scale of Aviva’s buybacks.”
Upgrading Aviva to 'buy' from 'hold' and the price target to 478p from 453p, Berenberg forecast £1.5bn of cash returns in the 2022 financial year and another £1.5bn for 2023. This is equivalent in total to 20% of Aviva’s market cap, while over the two years, the estimated buyback will be equivalent to around 15% of average daily volume for these two years.
The analysts also saluted Blanc for her speed in agreeing deals and executing the group’s strategy of focusing on its two core units of the UK and Canada.
“In the space of six months Aviva has agreed more than £4bn of deals, and this could rise further if it sells the Polish business.
“While we believe the next step – the planned turnaround of Aviva’s core unit from near average to market leaders – will also be challenging, we believe the group will be successful thanks to Ms Blanc’s decisiveness.”