Aviva share price is on track to drop for three consecutive weeks as traders eye its earnings, which are expected to come out next week. AV stock has dropped to 456p, and is hovering near its lowest point since August 5. It has retreated by 8.50% from its highest level this year, meaning that it could move into a correction soon.
Aviva share price is being pressured
AV is not the only UK insurance company whose stock has pulled back in the past few months. Prudential, a company that focuses on the emerging market, has tumbled by almost 50% from its highest level in 2023.
Similarly, Legal & General shares have moved into a correction after falling by 13% from the year-to-date high. Direct Line Insurance remains in a deep bear market.
One of the reasons for this performance is the Financial Conduct Authority (FCA), which has intensified its regulations in the industry. In August, the agency said that it was launching an investigation into the pure protection insurance market for insurance customers.
The agency also launched an investigation into auto insurance add ons by some of the top companies in the industry.
Still, Aviva has done much better than other insurance companies for a few reasons. First, it has gone under a major transformation under Amanda Blanc, who has become one of the top female executives in the country.
One of the approaches has been to exit most of its international markets like France, Italy, Poland, Vietnam, Hong Kong, Singapore, and Spain. These actions have led to a leaner company with a clear mandate in the UK and a few international markets like Canada.
Amanda Blanc has also announced some strategic acquisitions in a bid to solidify its market share. For example, it acquired Succession Wealth in 2022 in a £385 million. The most recent major acquisition was AIG Life business for £460 million. It also bought Probitas Holdings.
These acquisitions are meant to solidify its performance in the home market and grow its market share.
Read more: Aviva share price outlook: is the 7.12% yield too good to ignore?
Turnaround is working
These turnaround measures are working. The most recent results showed that Aviva’s number of customers jumped to over 19.5 million and analysts believe that the number will get to 20 million soon.
The results also showed that Aviva’s gross premiums rose by 15%, while its wealth inflows rose by 16%, while its IWR sales jumped by 12%. These are strong numbers for a company that has been in business since 1696.
Amanda Blanc is also working to achieve her profit target ahead of schedule. Its operating profit is expected to get to £2 billion by 2026. Its cash remittances are expected to ge to £5.8 billion by 2026.
As a result, the company has continued to return funds to investors. It completed a £300 million share buyback in June and hinted to more repurchases in the future.
Aviva is also one of the top dividend payers in the UK. It boosted its dividends by 7% in the first half, bringing the yield to 7.47%. This means that a £10,000 invested in the company will bring in over £700 in payouts each year.
There are also signs that Aviva is an undervalued company. It has a price-to-earnings ratio of 10, and a price-to-book multiple of 1.40.
Read more: FTSE 100 index shares to watch: Aviva, Vodafone, ICG, Flutter
Aviva share price analysis
AV chart by TradingView
In the long-term, we believe that the Aviva stock price peaked at a record high of 497.9p in September, and then suffered a deep reversal.
The current level is along the lower side of the ascending channel shown in orange. It is also along the 200-week Exponential Moving Average (EMA).
The stock has also formed a rising broadening wedge pattern, a popular bearish sign. Therefore, there is a risk that the stock will drop sharply after its earnings, especially if it losses the 200 EMA and the lower side of the wedge. If this happens, the stock may drop to 400p, which is about 12% below the current level.
On the positive side, a rebound could see it retest the resistance at 500p, which is about 10% above the current level.
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