Aviva PLC's (LSE:AV.) first-quarter update failed to lift its own shares on Thursday, but helped drive gains for UK insurance sector rivals as investors took encouragement from resilient wealth inflows and signs of continued discipline in the pensions market.
Shares in Legal & General Group PLC (LSE:LGEN) rose 4.9% to head the FTSE 100 risers, while Standard Life PLC (LSE:SL.) gained 1.9%, while Aviva traded lower initially before climbing to just above flat.
Analysts pointed to weaker-than-expected general insurance growth and pressure on annuity margins.
Derald Goh at Jefferies highlighted softer areas in the update, saying general insurance premiums were below forecasts and bulk annuity margins “seem to have collapsed to 1.2% owing to increased competition”.
Andreas Van Embden at Peel Hunt said that while higher-margin bulk annuities (BPAs) were weaker, with new business down 35% during the quarter, this was partially offset by a 10% increase in individual annuities.
The read-across on BPAs appeared positive for rivals with strong exposure to pensions and retirement products, particularly Legal & General and Standard Life.
Bright spots for Aviva
Van Embden said improving underwriting performance in UK general insurance showed progress integrating Direct Line.
Aviva reiterated expectations for more than £350 million of capital synergies by the end of the year.
Panmure Liberum analyst Abid Hussain said Aviva’s general insurance business was “clearly on track” to meet its 2026 profitability target after delivering a stronger combined ratio helped by favourable pricing and benign weather.
He also pointed to “impressive growth” in workplace pensions inflows and said the market was likely to welcome progress on Direct Line capital synergies, expected to add 7 percentage points to the solvency ratio by year-end.
Goh said a “bright spot” for Aviva was its wealth business, where net inflows rose nearly 50% and came in about 20% ahead of expectations, and Van Embden added that healthy net inflows in wealth were helping offset the weaker annuity volumes as the group continues its shift towards more fee-based assets under administration.
Hussain noted that Aviva still trades on about nine times forward earnings while offering a dividend yield of 6-7%. He reiterated a 'buy' rating with a target price of 543p versus the last close at just under 618p.
Peel Hunt values the shares at about 13.5 times expected 2026 earnings, compared with the shares currently trading on around 11 times forward earnings, while offering around a 7% dividend yield.
He said the broker maintained a “positive view” on the stock and continued to expect “sustainable profits and cash”.