Double broker downgrade hits shares in Aviva

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ES in insurance giant Aviva slumped four per cent yesterday after two leading analysts reduced their recommendations on the firm.

Bank of America Merill Lynch (BAML) and Deutsche Bank both cut their forecasts after concluding that the company’s stock has risen too much since executive chairman John McFarlane announced a radical restructuring plan in July.

“Aviva’s share price has lifted more than 40 per cent since its June lows,” said Deutsche’s Oliver Steel, who gave a “hold” recommendation.

“We remain strongly supportive of the group’s plans; however, even if these are delivered in full (which for the cost savings won’t be clear before 2014), the narrowing price-to-earnings ratio discount to the sector now leaves little room for disappointment.”

Meanwhile Blair Stewart at BAML issued a 360p target, just 17p above yesterday’s closing price and said the firm “looks fully valued”.

“Despite support from a high dividend yield, Aviva shares are relatively unattractive compared to its European composite insurer peer group.”