Jeremy Warner: Have the markets fundamentally mispriced Aviva?

Outlook The insurance company Aviva is another of those cases where, as the chief executive, Andrew Moss, put it yesterday, either the share price has become fundamentally disconnected from the underlying value of the company, or the management has become fundamentally disconnected from reality. In common with other insurers, the share price has bombed in recent weeks, to the dismay of Mr Moss and his team.

According to figures released yesterday, new business is still growing nicely, and the capital position, though obviously impaired by the recent fall in stock markets, still looks robust. Even if share prices were to fall another 20 per cent, Mr Moss insists, capital would still be more than adequate. There's no danger of a rights issue, he seems to be saying, or even a dividend cut. With the shares now yielding 15.5 per cent, the stock market is saying otherwise.

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Are investors right to be so negative? Insurance is no more recession-proof than any other business, but nor is it likely to be completely trounced by the downturn. Unless Aviva is hiding something, there does seem to be something of a mispricing going on here. The shares are now lower than they were during the last big insurance meltdown in 2003.