Questor share tip: Aviva a buy as overdue changes arrive Shares in Aviva, the UK's largest insurer, have underperformed as investors demanded more action to get the business back on track. This long-awaited process now appears to have arrived. The group's third-quarter results were in line with market expectations. Total sales fell 5pc in the first nine months of the year. Its combined ratio was 97pc - with any figure below 100pc indicating profitability. This could be as low as 0.6 times book. Although selling the business for less than was paid is disappointing, there are advantages to a swift sale. It will increase Aviva's capital, bringing its solvency ratios up to near its targeted level. The "economic capital ratio," a measure of financial strength, is currently at 146pc and the company is targeting 160pc to 175pc. Reassuringly, the insurer said it expected to have made £250m of cost savings by the year end out of its target of £400m. This is better progress than expected - and actions speak louder than words. The company is currently without a chief executive, as the scalp of former chief executive Andrew Moss was taken during the so-called Shareholder Spring. Aviva's chairman, John MacFarlane, is believed to be close to appointing a successor. The lead internal candidate is Pat Regan, Aviva's well-respected finance director, although external candidates are also being considered and they are in the interview process. Mr MacFarlane plans to slash red tape - something that investors see as overdue - and make the business less cumbersome to manage. This can only be good news and the disposal programme is part of this plan - with eight other units close to sale. Analysts expect that Aviva's dividend will be trimmed next year. The prospective yield in the current year is 7.9pc, falling to 7.77pc in 2013. Even if a cut is deeper than currently expected, the yield is attractive. Disposals are likely to strengthen the group's balance sheet and the shares trade at a discount to the sector. As a new broom takes the helm and the restructuring is delivered, the shares look likely to rerate. This is despite a potential hit to the top line from the sale of non-core assets. The current year earning multiple is 10.7, falling to just 6 next year. The shares have recovered sharply since Mr Moss's departure and they are now a buy - and an income and recovery play.