Jefferies has downgraded Aviva PLC (LSE:AV.) to ‘Hold’ from ‘Buy’, claiming the insurer’s rerating now fairly captures its reshaped profile after the acquisition of Direct Line.
The broker, meanwhile, lifted its price target to 637p from 560p - but with Aviva trading closer to 623.6p, that leaves just 2% implied upside. The shares, Jefferies said, now offer balanced risk and reward rather than a compelling valuation gap.
“Aviva's rating now fairly reflects its conglomerate profile post Direct Line, and FY28 guidance is fully in consensus,” analysts wrote in the note.
The attraction, instead, is income. Jefferies said Aviva’s downside is underpinned by an estimated all-in yield of around 9% a year, including buybacks, which could appeal to UK income investors. “Average all-in yields are ~9% per year, including buybacks, at a ~90% payout on operating capital generation (OCG),” the broker added.
Jefferies forecasts a cumulative total yield of around 27% accross 2026 to 2028, broadly in line with Legal & General, but supported by stronger solvency and lower debt leverage.
The broker downgrade follows a strong previous rerating in 2025, when Aviva outperformed the wider European insurance sector as investors adjusted to a business mix increasingly weighted toward capital-light and general insurance operations.
Jefferies noted that Aviva has started to look more like a European composite insurer, such as Allianz or AXA, than a traditional UK life peer. But that shift is now largely reflected in the price. The broker also flagged execution risk in general insurance following the Direct Line deal. UK & Ireland General Insurance is now the group’s largest earnings and operating capital generation contributor, at just under half of the total.