Aviva targeted for buy-up and carve-up by rivals because of low share price

The persistent interest in acquiring Aviva is being driven by the insurer's low share price relative to its valuation, according to Oriel Securities analyst Marcus Barnard.

It has emerged that four rival insurers – RSA, Resolution, Zurich and Allianz – had discussed breaking up Aviva. According to reports, the plan fell through because Resolution was unable to get the value it needed.

“Aviva’s shares are trading at a considerable discount to any sensible valuation of its business, which creates an opportunity,” Barnard said. He added that Aviva’s low valuation is in part due to its use of the market-consistent embedded value accounting standard (MCEV), which Barnard said “hides a lot of the value”. Aviva opted to de-emphasise MCEV’s importance this year in recognition of its unpopularity.

Under the recent plan, RSA would have taken GI, Resolution domestic life and pensions and Aviva Investors, and Zurich and Allianz would have shared European and Asian businesses.