Should I Buy Aviva Plc (ADR) (AV)?

Problem play
How do you solve a problem like Aviva Plc (ADR) (NYSE:AV)
? it has been looking like a bargain buy for several years, and I’m not the only Fool dazzled by its low, low price. But now it is beginning to look more than a little shop soiled. Is it really a bargain? And should I buy more now, while it still looks cheap?

Insurer Aviva Plc (ADR) (NYSE:AV) would try the patience of a saint. I bought it three years ago at around seven times earnings, seduced by its fat yield of nearly 8%. Subsequent share price performance has been dreadful. Aviva Plc (ADR) (NYSE:AV) is down 6% in the past three years, against a 79% leap for Prudential Financial Inc (NYSE:PRU) and 95% blitz for Legal & General Group Plc (LON:LGEN). That’s what you get for over-exposure to the toxic eurozone, and underexposure to booming Asia. Aviva Plc (ADR) (NYSE:AV)’s management cut the yield by 25% in March, further reducing its charms.

The Wilson years
Yet I have admired group CEO Mark Wilson’s attempts to turn Aviva Plc (ADR) (NYSE:AV) around. He has been slashing internal debt, boosting the balance sheet by offloading non-core and underperforming assets, and taking a knife to middle management. He also delivered 18% sales growth in the first quarter thanks to a strong performance in U.K. life, Turkey and Asia. Sadly, Wilson can’t do much about southern Europe. But then, who can?

There have been signs of greater solidity, with Aviva’s share price holding firm while Legal & General Group Plc (LON:LGEN) and Prudential Financial Inc (NYSE:PRU) fell 10% and 13%, respectively, in the past month. A quieter eurozone crisis has helped, while its rivals have been hit by growing worries in China. Prudential Financial Inc (NYSE:PRU) and Legal & General Group Plc (LON:LGEN) have been praised for stealing a march in Asia and emerging markets, leaving Aviva an embarrassing straggler, but that strategy is about to be tested. At least Aviva has aired all of its bad news and is cleaning up its act. The dividend cut is out there, and hopefully won’t be repeated, yet it stands comparison with L&G (4.6%) and is a lot more generous than Prudential (2.8%).

Saint or sinner?
Trading at around eight times earnings, Aviva is a lot cheaper than L&G (12.1 times) and Prudential (13.5 times), and rightly so given recent lousy performance, which includes a 70% drop in earnings per share (EPS) in the 12 months to December 2011.