Company nets £353m cash proceeds from deal

Mark Wilson, Aviva

Aviva shares will “tread water” following the insurer’s sale of the remainder of its Delta Lloyd stake, according to Shore Capital analyst Eamonn Flanagan.

This is because the company has now taken all the big, attention-grabbing measures designed to boost its capital base, he argues, and there is little further upside in the stock price.  

Last night, Aviva announced it was selling its remaining 19.4% stake in Dutch financial services group Delta Lloyd.

The insurer achieved a price of €12.65 a share for the 32.3 million Delta Lloyd shares, generating gross cash proceeds of £353m.

Flanagan said that as a result, Aviva’s economic capital surplus coverage will increase by about 4% to 169%.

The sale of the Delta Lloyd stake closely follows Aviva’s sale of its US life arm to Bermuda-based life company Athene Holding for £1.1bn and the settlement with Spanish bank Bankia over its Spanish life and pension joint venture Aseval.

Flanagan pointed out in a research note that following the deals, Aviva has achieved its targeted economic capital surplus ratio  of between 160% and 175%.

However, he added:  “The question is now, what next? To a major extent, the ‘low hanging fruit’ has been picked with management now left with the much more mundane and laborious task of delivering real operating value from its UK and Continental European focused businesses.”

Flanagan said Aviva was now trading at a “healthy” 20% premium to its September 2012 net asset value with a 6.8% expected dividend yield.

He added: “The shares have ‘arrived’ in our view, with the ‘travelling’ complete. We now expect the shares to ‘tread water’ at best.”

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