Is Aviva Plc (ADR) (AV) an Exciting Emerging-Market Play?

Page 1 of 2

LONDON — While crippling austerity in Europe has put the brakes on growth rates in Europe, a backdrop of accommodative central-bank action, elevated commodity prices, and rising personal-affluence levels has created an exceptional investing opportunity in developing countries.

The divergence between traditional and emerging markets is borne out by the latest International Monetary Fund projections, which put U.S. growth at 1.9% in 2013, while eurozone GDP is set to dip 0.3%. Conversely, emerging markets are anticipated to expand 5.3% this year.

Aviva Plc (ADR) (NYSE:AV)

Bubbly activity in developing geographies can create large opportunities for many London-listed firms. Today, I am looking at Aviva Plc (ADR) (NYSE:AV) and assessing whether its operations in these regions are likely to underpin solid earnings growth.

Operating profit slides across the board
Aviva Plc (ADR) (NYSE:AV) reported in March that operating profit declined 15% in 2012 to 2.1 billion pounds, with weakness reported across the entire group. In life insurance and the general insurance and health division, profit dropped 5% and 4%, respectively. Fund management profit fell 16% to 51 million pounds.

The company is still highly geared toward European markets. About 48% of 2012′s operating profit from its life insurance business was generated from its operations in the U.K. and Ireland. Domestic activities also accounted for 55% of profit within general insurance and health.

Although the company has exposure to lucrative emerging markets, these areas account for less than 13% of total group operating profit, and they performed badly in 2012. Life insurance operating profit from its Poland division fell 8% to 153 million pounds, while in Asia profit collapsed 36% to 69 million pounds. Profit from other higher-growth geographies doubled to 8 million pounds, but this is measly in relation to group totals.

The drop in profits from developing markets came despite life insurance operating profit from Singapore rising 25% last year to 65 million pounds. In Eastern Europe, for example, the impact of a difficult economic backdrop and regulatory changes affected product sales. Elsewhere, operating losses from life and general insurance businesses in Turkey extended to 22 million pounds from 9 million pounds the previous year; regulatory changes affected revenues from India; and high interest rates in China whacked the popularity of its savings products there.

In my opinion, enduring difficulties in Aviva Plc (ADR) (NYSE:AV)’s key Western European markets, as well as a lack of respite due to its already-small exposure to developing regions, is likely to keep Aviva Plc (ADR) (NYSE:AV) under the cosh.

So is Aviva a buy?
City analysts expect earnings per share to keep edging lower in the near term — this is anticipated to fall to 43 pence in 2013 from 45 pence last year before rebounding modestly to 46 pence in 2014.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!