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Today’s RNS at 16.33 confirms Schroder have increased their stake in FSFL from below 4% to over 10%

AV/ - Good FY results

Aviva released a good set of FY 2024 results on Thursday. Adjusted operating profit of £1.8bn was +20% y/y, with strong organic capital generation helping the SII cover ratio to finish the year at 203%, down just 4ppts despite the Tier 2 redemption, higher dividends and the impact of the £300m buyback. A total dividend of 35.7p for 2024 has been declared, +7% y/y. This year will be about the integration of Direct Line, whose acquisition should close around the middle of 2025, adding 10% to EPS on a run-rate basis. New guidance will be provided by AV/ post the closing of the deal. I am a fan of AV/ - it has vast scale with a largely granular (it has 17m customers in the UK alone) customer base; it is pushing into capital light areas (last year saw acquisitions of AIG Life, Probitas, Optiom and three small UK wealth bolt-ons); and it is strongly capital generative with a large buffer to its SII minimum target of 160-180%, providing considerable optionality around distributions and M&A. In the past five years it has returned £10bn to shareholders through buybacks and dividends – this year will see no buyback due to DLG, but I expect management to take steps to begin to reduce the share count once again from 2026 onwards. Aviva is very cheap, trading on just 9.5x consensus 2026 earnings and yielding an attractive 7.4%.

Aviva (AV.) has increased its adjusted operating profit by a fifth to £1.77bn, as it prepares to buy insurance rival Direct Line (DLG).

Growth has been strong across the FTSE 100 company. General insurance premiums are up 12 per cent at £12.2bn, fuelled by new business wins and “favourable pricing”. Meanwhile, the wealth division reported net flows of £10.3bn, up from £8.3bn last year.

Aviva also reported its highest year of bulk purchase annuity sales, which drove revenue in the retirement business up by a third to £9.4bn. Bulk purchase annuities (BPAs) have become an increasingly important feature of the life insurance market. They are financial products used by defined-benefit pension trustees to offload risk onto players such as Aviva, Just Group (JUST) and Legal & General (LGEN). Higher interest rates mean more schemes are now in a position to do this, and life insurers are reaping the rewards.

Aviva expects to remain “active” in the BPA market and thinks volumes will remain at similar levels to those achieved over the past three years – “although given the exceptional market conditions in 2024 those volumes may not be repeated”.

The big news for Aviva, however, is its impending purchase of Direct Line for £2.7bn. The deal is on track to close in the middle of 2025 and management said Aviva will be more ‘capital light’ as a result. This is because the acquisition will shift Aviva more towards motor and home insurance and away from capital-intensive business such as life insurance. About 55 per cent of Aviva’s operating profit came from its capital-light businesses in 2024, but this is expected to rise to 70 per cent after the Direct Line deal.

In the meantime, Aviva has increased its total dividend for the year by 7 per cent to 35.7p a share. As announced in December, however, it has paused share buybacks in 2025 due to the Direct Line deal.

Shares in Aviva have risen by 14 per cent since January, but the main event has yet to come. The acquisition of Direct Line undoubtedly poses risks – integrating two huge businesses won’t be easy, and shareholders won’t react well to delays. However, we like the logic of the deal and the outlook for shareholder returns further down the line. Buy.

John Scott - Chairman

“As I have reported previously, the discount to which the Company's shares trade has been a clear focus of the Board, and strategic measures to add shareholder value have continued to be executed successfully during the course of the year. These measures include the completion of Phase Two of our innovative Strategic Partnership with GLIL Infrastructure in September 2024 which released c.£70 million to BSIF. The completion of the Company's £20 million share buyback programme and the reduction of the Company's Revolving Credit Facility ('RCF') to £133.5 million also represented notable milestones.

"Despite these achievements, the Company's share price discount to net asset value, whilst being among the narrowest of our peers, has continued to widen. Given this situation, the Board has concluded that it is the right time to explore strategic initiatives and options including reviewing fee arrangements, to address the share price discount and to continue to seek to maximise value for our shareholders.

The Board is committed to reviewing all options available to the Company and we will look to update shareholders on progress as appropriate.

Hi unhooked, think us smaller shareholders should be emailing TRIG and making our thoughts known. To reduce the annual management fees on one hand and then slapping an asset transaction fee and asset sale fee on top seem to me to be egregious. It’s almost like a quid pro quo the first line of their statement on fees. Absolutely outrageous that the board agreed to this.

Hi unhooked, are you happy with the Managers now imposing a 3% fee for any future asset transactions or in the event of a takeover? From this morning’s RNS……..

In order to incentivise the Managers to achieve the best result for shareholders in the event of a takeover or an equivalent asset sale, the Board has agreed a fee payable to the Managers of 3% of the value achieved in excess of net asset value and 3% of the value achieved in excess of market capitalisation (pro-rated accordingly in relation to an equivalent asset sale). Such a fee would be capped at 4.99% of the lower of net asset value or market capitalisation.

With the dividend yield providing approx 400bp over 10 year gilts SUPR shares look tremendous value on a 20% discount to nav. Also the French move looks perfectly timed given inflation looks more subdued in France than the UK.

Shareholders in healthcare real estate investment trust Assura (AGR) have said the board should engage with potential buyer KKR after so far rejecting its advances.

The mercurial private equity giant has made four bids for Assura, all of which had been rejected by its board without consulting shareholders. The latest offer of 48p per share is a 2.8 per cent discount to EPRA net tangible asset value and a 28 per cent premium to the undisturbed share price. It was unanimously rejected by the board on 15 February, which said the offer “materially undervalued the company and its prospects”.

Some shareholders expressed surprise about the decision to reject the bid.

"Public markets have failed to recognise the value [of Assura] fully," said Tom Furlong, portfolio manager at CCLA. "At 48p, it looks to be a sensible bid and we strongly encourage the board to engage with KKR," he added. CCLA holds a 4.7 per cent stake in Assura.

“The board’s reaction to KKR’s bid was somewhat surprising, given that Assura’s shares had been trading well below net asset value for some time," said Marcus Phayre-Mudge, fund manager at TR Property Investment Trust. "Shareholders will be justified in seeking further explanation from the directors given that the consensus EPS (earnings per share) for the next three years is an anaemic 3 per cent per annum. Investors should be given the opportunity to decide the future of their company." TR Property Investment held £6.8mn worth of Assura shares as of 31 March 2024, around 0.5 per cent of the issued shares at the time.

Two of KKR's offers, including the fourth, were made in conjunction with the Universities Superannuation Scheme (USS), which announced a £250mn joint venture with Assura last year. The involvement of USS raised eyebrows in the City. “Was the joint venture a due diligence exercise for USS” said Oli Creasy, head of property research at Quilter Cheviot. USS then said on Monday that it had ruled itself out of the process.

“KKR is considering whether there is any merit in continuing to try and engage with the board,” the private equity business said in a statement on Monday. KKR has an infrastructure fund that has access to a lower cost of capital than real estate specialists, and Investors' Chronicle understands the company would look to grow the Assura portfolio.

Unlike other property sectors, healthcare has good headwinds, with the current government keen to improve the condition of the NHS estate. Assura recently disposed of £48.4mn worth of properties in line with book value, giving credence to the valuations.

But a source familiar with the matter emphasised to Investors’ Chronicle that Assura's discount to net asset value (NAV) showed structural change was needed. “If the structural growth in the sector is so good, why was this not already reflected in the share price?”

Thanks Guitarsolo.

Similar position to yourself and the question I’m asking myself is this, if they are buying back 250k/500k shares each day, then who is selling in such quantity?

From this morning’s RNS……..wondering what measures other than an increased buyback the board are considering?, could the entire business be sold or piecemeal?

“The Company's existing share buyback programme of up to £60 million runs until the end of Q1 2025. At the time of writing, c.£53 million of shares have been bought by the Company. The Board acknowledges the importance of the share buyback programme and currently expects to expand and extend the programme should the Company's shares continue to trade at a significant discount to NAV. Due to the ongoing discount at which the Company's shares are trading, the Board will provide an update on or prior to the upcoming Annual Results announcement on measures to be implemented during the next year to help reduce the discount and enhance shareholder value”

QD comment: This is the latest in a long line of bids for undervalued property companies over the past few months, which exposes the absurdly wide discounts to NAV that these companies are currently trading. We have seen many a property company taken out or merged at a discount to NAV and a vast premium to share price, and yet there has been no real reaction. Until discounts start to narrow, the sector will continue to be targeted by private equity and other institutional investors that recognise the value on offer.]

AGR like other REITS are incredibly interest rate sensitive. Given rates are on a downward curve management just need to remind themselves that the share price was 70p+ not so long ago. To replicate 600 primary healthcare properties (with full occupancy levels) and 15 fully functioning private hospitals would in itself be extremely difficult and command a substantial premium.

Director buys £99,356 in INPP shares today……….

With PHP and AGR market caps almost identical, any reason why both sets of management aren’t looking at a strategic merger? Given they operate in exactly the same space, the cost savings could be significant

With AGR and PHP market caps almost identical, any reason why both sets of management aren’t looking at a strategic merger? Given they operate in exactly the same space, the cost savings could be significant

Caroline Chan, a non-executive director of NextEnergy Solar Fund (NESF), has made her first purchase of NESF shares. She has acquired 39,000 shares at 66.4p per share for a total investment of £25,986.

Disappointing given the recent share price fall that management don’t see value in the shares.

The last purchase was by the chairman back in September with few purchases prior to this.

It would be good if management were to show support and put their hands in their pocket.

The simple fact is, there are NO buyers for any of the renewable ITs.

Multitude of reasons including, higher rates, no confidence in government, funds unable to borrow/grow due to severe discounts to nav, ongoing fund fee reporting to name but a few

PENSIONS NEWS AVIVA PENSION

Aviva completes £1.7bn buy-in with National Grid pension scheme

Momodou-Touray-NEW-2024-100x100.jpg

Momodou Musa Touray

26 November 2024

Insurance giant Aviva has completed a £1.7bn pensioner buy-in with the National Grid Electricity Group of the Electricity Supply Pension Scheme.

The transaction, which was completed in October, included transitioning the group’s existing longevity swap with Zurich Assurance Ltd to Aviva. It will insure the benefits for 5,800 pensioner members of the Group.

Aon acted as the sole transaction adviser, covering actuarial, investment and broking aspects. Legal advice to the Group Trustee was provided by DLA Piper UK LLP, while the Scheme Trustee was advised by Mayer Brown International LLP.

Sean Rooney, senior deal manager at Aviva, said: “Our team worked closely with the Trustees and their advisers to support them with this important step to provide long-term security for their pensioner members.

“The transaction included the transition of the Group’s longevity swap, and throughout the process all parties have been flexible and focused on delivering a successful outcome. We’re especially proud that we can secure benefits for yet another signatory scheme of AFS’s Sustainability Principles Charter, reinforcing our commitment to this important initiative.”

Stephen Yandle, chair of the Group Trustee Board said: “The Group Trustee is pleased to have been able to take the next important step on our de-risking journey. The transaction is great news for members in the Group, adding further protection to their benefits, and on terms that are fully aligned with our strategic objectives.”

Takes two opinions to make a market…………

Stifel analyst Iain Scouller said the results were ‘poor’, with the fall in NAV meaning debt ratios increased from 86% of net assets to 93%, or from 46% of gross assets to 48%, and was critical of the speed of the sales process.

‘Taking into account the poor NAV performance over this period, we think the shares will continue to trade on a significant discount. We downgrade the recommendation to Negative, and assuming the shares trade at the wider end of the peer group discount range at around 30% to 35%, implies a share price range of 64p to 68p vs 71p yesterday.’