Wednesday, June 25, 2008

Aviva

Aviva - owner of Norwich Union, is an financial services company with operations in Europe, Asia and America.

The market cap. is about £14 Billion, the PE is about 11 and the dividend yield is about 6%.

Aviva is an insurance company. And that is the problem. Insurance companies are very hard to value as their accounting is more complicated than most other types of companies. Also, as an insurance company you are selling a commodity - most consumers will take the cheapest quote they can get regardless of the brand. This makes it almost impossible to build some sort of competitive moat.

If I want to invest in an insurance company I will probably choose Berkshire Hathaway.

Having said that, Aviva is cheap, the brokers love it and the yield is generous.

One to keep at the back of my mind I think.

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