Aviva PLC's (LSE:AV.) strong 2025 results have done little to close the valuation gap that makes the insurer one of the more compelling cases in the European financial sector, according to some analysts, with the shares still trading at a meaningful discount to peers despite a track record of consistent delivery.
Deutsche Bank analyst Kailesh Mistry, who raised his target price to 765p and retained a 'buy' rating following the results, points out that Aviva trades at around 10 times 2027 earnings, a discount to both European composite insurers and UK life names, despite now targeting financial metrics that are broadly comparable to those peers.
RBC similarly flagged an undemanding valuation of 9.3 times 2027 earnings and a capital return yield of 8.2% combining dividends and buybacks, describing the results as "reassuring if not inspiring" and noting that operating earnings per share and capital returns were in line with guidance.
The group's new three-year targets, unveiled late last year, include 11% operating earnings per share growth annually through to 2028 and a return on equity above 20% by 2028.
These represent a step up in ambition that brings Aviva's goals into line with the European composites it is increasingly being measured against, Mistry said.
He also highlighted the income case, which saw the FTSE 100 group announce a 10% increase to its final dividend alongside a new £350 million share buyback, with a forecast 2026 dividend yield around 6.5% and share buyback programme adding a further 1.8% in total return.
UBS also said it prefers Aviva over other UK life names, arguing that the combination of 11% annual earnings per share growth and a dividend yield above 6% implies a total return of more than 17% over the next three years.
The strategic picture has been shaped by a string of acquisitions in recent years across general insurance, wealth and protection, with Direct Line the most significant, and management appears confident the integration is bedding in well given the decision to retire the 2026 targets a year early.
Autonomous vehicles, AI and motor insurance trends
UBS analyst Nasib Ahmed noted the company predicts it will generate more capital than it is deploying, with 20 percentage points of capital expected to be generated against 18 points of use by 2027, leaving a small surplus that supports the buyback programme.
He also highlighted that Aviva's management believes widespread autonomous vehicle adoption is still decades away, with industry analysis suggesting it is not expected until 2040, and that the company can pivot to commercial insurance if the market moves that way.
Aviva is already the UK's number one electric vehicle insurer, with three billion data points from telematics putting it in a strong position; however, the market evolves.
On UK motor pricing, the market was down 11% last year while Aviva pushed through a 1% increase on new business, with pricing now flattening out against mid single-digit inflation.
With recent news flow on the potential disruption from artificial intelligence to retail distribution and autonomous vehicles, Aviva gave a presentation on its perceived AI opportunities, arguing it had the foundations to be a beneficiary given its ability to deploy AI at scale, its capacity to invest and its proprietary customer and claims data.
In wealth management, the group stated that AI could unlock increased time for advisers to spend with clients and provide improved client insights, and flagged £1 billion in regular monthly workplace pension contributions and an £8 billion mandate won with the Mercer Master Trust, with a dedicated Wealth InFocus investor event planned for the fourth quarter of 2026.