Investing.com — Aviva PLC (LON:) posted strong gains, beating consensus expectations on all key metrics. For the period under review, the company reported operating profit of £875 million, which is 5% above the consensus estimate of £830 million.
This outperformance was mainly driven by robust performance in UK general insurance (GI) and pensions.
In the UK, Aviva benefited from positive price developments and improved investment returns, although this was partly offset by an unfavorable prior year development (PYD) in the UK, which contributed 2.4 percentage points to the combined ratio. Meanwhile, the Pension segment saw a notable increase in Contractual Service Margin (CSM), which grew 10% year-on-year.
Aviva’s own Solvency II equity production reached £758 million, exceeding the consensus forecast of £700 million by 8%. This strong performance supported a solid Solvency II ratio of 205%, also higher than the consensus expectation of 199%.
The company has reaffirmed its 2026 targets and capital return guidance, underscoring its commitment to delivering long-term value to shareholders.
“In our view, Aviva remains the only UK insurer that can reliably deliver exceptional long-term capital returns, positive M&A, attractive regular dividend growth and consistent earnings per share growth,” Jefferies analysts said in a note.
Jefferies’ price target for Aviva is based on a discounted cash flow and sum-of-the-parts model, which incorporates excess capital generation under Solvency II. The valuation takes into account excess capital that exceeds the Solvency II coverage ratio of 180% for 2023 and 170% from 2024.
Risks to this valuation include possible credit defaults, stock market volatility and declining real estate values.
