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Broker snap: Aviva is Panmure's top pick

Aviva, the world's fifth largest insurer, isn't expected to reveal any surprises when 2009 results are published Thursday, says Panmure Gordon.

It's looking for a 7% drop in market consistent embedded value (MCEV) operating profit to £3.11bn, in the middle of the £2.94bn-£3.29bn range of forecasts.

IFRS operating profit is seen down 17% to £1.91bn, while an anticipated final dividend of 14.1p per share would take the total payout to 23.1p, 30% less than 2008.

But, given the recovery in the strength of the balance sheet last year, Panmure believes there's a good chance the dividend could be higher than everyone thinks.

"Aviva is our top pick in the sector with the shares trading at around Embedded Value," says the broker. "We view this as wrong, bearing in mind the ongoing potential of the business going forward."

"On an IFRS P/E basis the shares are trading on 8.0x 2010E and 7.1x 2011E. In the meantime shareholders are receiving a massive 6.2% dividend yield based on our current 2009 forecast. Buy."

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