Aviva PLC (LSE:AV.) has been drifting sideways since its strategy update earlier this month. But the pause is understandable.
Pricing in parts of the UK market has softened and investors are wary of any hint that margins might come under pressure.
UBS argues the long-term case remains firmly intact. The bank keeps its Buy rating and 750p price target, offering roughly 17% upside from 632p.
The near-term picture is mixed. Premiums in UK personal lines and commercial insurance are not rising as briskly as they were, which makes growth a little harder to come by.
Even so, UBS sees scope for earnings per share to come in slightly ahead of guidance. Management is aiming for about 75p by 2028; the analysts pencil in 77p and expect a touch of upside to the 2025 figure too.
Where Aviva looks more compelling is in the valuation tables. On headline numbers, the group trades on about eight times forecast 2028 earnings, roughly level with Axa but well below Allianz on 10.5 times.
Aviva’s weaker solvency ratio means a bit of a haircut when you adjust for capital strength, but even on a risk-adjusted basis the shares still screen cheaper than Allianz.
Dividends remain the main draw. UBS thinks Aviva can deliver a 9.5% all-in yield by 2028, helped by a high payout ratio.
After adjusting for the group’s UK concentration and narrower business mix, the analysts settle on a sustainable figure closer to 8%, which still looks competitive against the peer group.
Only Legal & General offers more on UBS forecasts, and Aviva generates that yield from a sturdier balance of capital and earnings than most of the UK life insurers.
The quality of earnings also matters. UBS expects returns on equity to remain above 20% through the forecast period and sees only modest sensitivity to a recessionary or credit shock. That combination of high returns, robust capital generation and healthy dividends leaves the risk-reward balance tilted in Aviva’s favour.
To cross-check the 750p valuation, UBS runs a sum-of-the-parts model using peer multiples for each division. It spits out about 775p for 2026.
Not precise enough to bet the house on, but close enough to support the broader case: Aviva may have paused for breath, yet the long-term value story is still moving in the right direction.