With the Brexit and its related fallout dominating market headlines, it has been a brutal time for UK-based companies. This is especially true for firms
located in the insurance or financial industries as ultra-low rates have crushed growth prospects, while a slumping pound has sapped confidence too.
One company that has been a great example of this trend is Aviva plc (AV), an insurance and savings
giant based in London. Since the Brexit vote, shares have lost more than a quarter of their value as the factors above have sent investors running for the
This slump comes despite promises of AV boosting its dividend payout ratio in 2017 to make the company an even more attractive choice for income investors,
something that might usually help companies, but hasnt done much in this case. After all, a dividend payout ratio hike is little assistance when rates are
plungingwhich makes income payments on insurance that much weakeror considering the broad trend away from British assets.
AV has seen this exodus first hand as the company just had to suspend redemptions in a multi-billion dollar property fund that zeroes in on top-notch
assets in the United Kingdom. Clearly, the deck is stacked against AV and the rest of this market for the near-term.
That Isnt All
If this wasnt enough of a reason to be bearish on AV in the weeks and months ahead, then investors should also consider some of the fundamental metrics
for AV shares. Earnings estimates for the full year and next year time frame have been falling, while growth is expected to contract this year too.
And speaking of growth, AVs metrics on this front look especially poor in general. The companys projected EPS and cash flow growth rates have come down
significantly from historical levels, while its current ratio is far higher than the industry average.
No wonder AV gets a Growth Style Score of D, and why we are looking for more underperformance from this Zacks Rank #5 (Strong Sell) stock in the future.
Obviously, the industry at large is in a pretty horrific spot right now, and the industry rankwhich is in the bottom 30%-- reflects this sluggishness. Still, there
are a few companies that may actually be promising in this space during this difficult time.
One that stands out is Universal American (UAM) a New York-based health insurance and managed care
product provider. Not only does this company have more of a domestic focus, but it has a Zacks Rank #2 (Buy), and it has a Growth Score of A as well.
So if you are looking for a better choice in the insurance market, definitely stay close to home and take a look at UAM over AV, at least until this
Brexit-induced panic blows over.