Aviva PLC's (LSE:AV.) proposed acquisition of rival Direct Line can be a huge win, according to analysts at JP Morgan, who have upgraded the insurer to overweight with a 615p target.
According to the US bank, the deal is strongly accretive, moves Aviva to a higher-multiple non-life insurance mix and improves its scale in UK P&C [property and commercial].
“Beyond our forecasts, there is huge scope for revenue synergies, given Aviva will be the 2nd largest financial services brand in the UK with an established ability to cross-sell.
“We raise our EPS estimates by 10-12% over 2027-28 and note 'huge upside' to consensus EPS (6-17% over 2026-27).
“Aviva trades at 8.3 times 26E P/E vs UK life peers at 9 times and European composites on 10 times.”
Even if the deal does not go through, this may be taken negatively initially but it would leave Aviva in a position to deploy surplus capital elsewhere or increase capital return to offset this, JP Morgan adds.
Shares rose 3.5% to 511.2p.