Why Aviva share price is tipped to keep rising
A strong start to 2025 for this financial firm has further to run, argues one influential City broker, including a predicted uptick in the share price.
4th March 2025 13:20
by Graeme Evans from interactive investor
Aviva hype is justified, a leading City bank has declared after it backed the insurer’s strongly performing shares with a new price target 15% higher than current levels.
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Bank of America said company metrics and the impact of the “transformational” Direct Line Insurance Group (LSE:DLG) takeover led to a new estimate of 620p, an increase of 5% or 30p on its position prior to Aviva (LSE:AV.)'s annual results. At this level, Aviva would trade on 10 times forecast 2026 earnings.
The bank said: “The hype with which the business is presented is certainly compelling and we believe the fundamentals back it up.
“Aviva is in excellent shape on a standalone basis and we believe the acquisition of Direct Line will propel it into the valuation cohort of European composite insurers rather than UK Life insurers.”
The bank’s support comes as chief executive Amanda Blanc continues her repositioning of Aviva as a diversified capital-light insurer across insurance, wealth and retirement in the markets of the UK, Canada and Ireland.
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Blanc's approach since taking on the role in 2020 has resulted in a total shareholder return of 155%, including 48% in the three most recent financial years compared with 27.1% for the FTSE 100 index and 33.9% for the company's peers.
A final dividend for 2024 of 23.8p a share is due to be paid on 22 May, increasing the total for the year by 7% to 35.7p. Together with a £300 million share buyback in 2024, the company has returned £10 billion of capital to shareholders since 2020.
Last year’s adjusted operating profit rose by 20% to £1.77 billion, driven by 57% growth in UK and Ireland general insurance due to a strong underwriting performance and higher investment income. There were also strong contributions from wealth and retirement and Aviva Investors.
Blanc said in the annual report: “2024 was another year when we delivered what we said we would - strong growth, higher operating profit and an increased dividend.
“Aviva still has so much untapped potential, and I have real confidence in our ability to unlock it and deliver the next phase of growth.”
This includes through the planned addition of Direct Line, with the £3.7 billion acquisition of the general insurer set to complete by mid-2025 subject to regulatory and shareholder approvals.
Bank of America remains excited by the acquisition after forecasting scope for 15% earnings per share accretion and as much as £1 billion of capital release in 18 months.
Posting its own annual results earlier today, the FTSE 250-listed insurer reported a £395 million increase in ongoing operating profit and 12-point improvement in its net insurance margin.
Motor returned to profitability during 2024 and the company behind brands including Churchill and Green Flag also made “material progress” on its cost-savings programme.
It intends to pay a full-year dividend of 5p a share on 19 May, having resumed payments at the interim stage with 2p a share.
Bank of America said the recent impressive update by Aviva’s UK general insurance arm showed a business in excellent shape and with a strong base ahead of the Direct Line acquisition.
The bank adds that it expects Aviva to meet its targets for wealth and health insurance, which are not currently reflected in the City consensus.
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