Shares in Aviva PLC jumped 2.2% to 383.90p after broker Jefferies upgraded to 'buy' from 'hold' with a 480p price target.
“We forecast Aviva to deliver a best-in-class capital return yield, underpinned by excess capital and the strongest free cash flow amongst peers,” it said.
Earnings should start to shift towards capital-light business, which is well-timed given improving market conditions, and should warrant a premium valuation versus peers, Jefferies added.
Jefferies forecasts £5.3 billion of capital returns between 2023-26, equivalent to 51% of Aviva's current market cap, underpinned by a strong solvency II ratio (2023 forecast: 205%) and the best free cash flow yield versus UK life insurance peers.
It said its capital generation forecasts for 2025 (£1.69 billion) are 10% ahead of consensus largely driven by a more positive outlook in general insurance.
Further disposals are possible and Jefferies views it as “increasingly likely” that Aviva will also offload its operations in India and China, which could sell for more than £1 billion, funding additional special capital returns or M&A.