AVIVA (AV) SHARES: 2025 OUTLOOK AND 2026 PREVIEW

What is the current outlook for Aviva (AV) shares in 2025?

Aviva plc (LSE: AV), a major player in the British insurance and asset management sector, enters 2025 on the back of continued restructuring efforts, a sharpened focus on capital discipline, and stronger shareholder returns. The company has made significant progress since 2020 by selling non-core operations and concentrating largely on the UK, Ireland, and Canada.

The share price of Aviva at the start of 2025 reflects modest optimism. Recent full-year results from 2024 showed a rebound in group operating profits and higher solvency ratios, instilling confidence in a progressively stronger financial base. For long-term investors, Aviva’s relatively consistent dividend policy, supported by robust free cash flows and a fortified balance sheet, continues to be a major attraction.

According to consensus analyst forecasts, AV shares could benefit from improved top-line growth as the macroeconomic environment stabilises. Easing of inflation pressures, interest rate normalisation, and increased consumer confidence are all expected to play in Aviva’s favour, particularly in the general and life insurance segments. Additionally, a persistently high Solvency II capital ratio not only ensures financial resilience but also enables further dividends and potential share buybacks.

However, competitive pressure remains intense. Rivals such as Legal & General and Prudential continue to innovate rapidly, while the insurtech movement is reshaping consumer expectations. As such, Aviva’s ability to improve digital delivery, reduce operational complexities, and leverage its strategic investments in data analytics will be closely watched in 2025.

Valuation and earnings expectations

Aviva’s valuation remains comparatively low against sector peers. Its price-to-earnings (P/E) multiple hovers in the mid-single digits, indicating room for upside if earnings deliver. Analysts expect earnings per share (EPS) to grow modestly in 2025, driven by higher underwriting efficiency and favourable market conditions in its UK GI and life divisions.

Shareholder returns remain a primary focal point. In 2024, Aviva paid a generous dividend, and its 2025 policy indicates continuity at the same or higher levels, supported by excess capital. Nonetheless, changes in regulatory capital rules or adverse claims conditions could impact future returns.

Sector performance and market positioning

The UK insurance landscape in 2025 presents mixed opportunities. While premium volumes are expected to rise across most categories, pricing remains under scrutiny due to regulatory caps and cost-of-living constraints. Aviva’s balance between personal lines and commercial exposure positions it strategically to mitigate some of the pricing risks affecting competitors more reliant on discretionary product sales.

Aviva Investors, its asset management division, is another potential growth lever. As ESG mandates strengthen and corporate pension schemes seek secure outcomes, Aviva Investors' capabilities in liability-driven investment (LDI), real assets and impact investing will be in demand, boosting fee income.

Overall, Aviva’s 2025 presents a cautiously optimistic outlook – powered by a strong capital base and stable financial metrics – but tempered by structural sector challenges and the need for focused execution.

What are the major drivers influencing Aviva’s share price in 2025?

Aviva’s share price performance in 2025 is shaped by a combination of macroeconomic trends, internal capital efficiency, market positioning, and execution across strategic lines of business. Several key drivers are emerging as highly influential:

1. Strong capital position and returns strategy

The cornerstone of investor confidence in Aviva lies in its disciplined capital management. The group reported a Solvency II ratio above 200% in its latest earnings, well above the regulatory minimum. This allows for resilient coverage of claims liabilities while providing room for dividends and share repurchases. In 2025, surplus capital deployment will continue to dictate investor sentiment – whether routed through shareholder distributions, M&A or strategic investment.

2. Dividend reliability and upside potential

Dividend policy has stabilised as a defining feature of the investment case for AV shares. The company aims to provide sustainable and growing dividends, underpinned by free cash flow generation exceeding £1.5 billion in 2024. Analysts project a dividend yield in the 7% to 8.5% range for 2025, depending on market conditions, with potential for special dividends if surplus capital continues to build.

3. Digital transformation and efficiency gains

One of the priorities for Aviva is digitisation across client and broker channels. In 2025, it will continue rolling out AI-driven underwriting, customer self-service portals and faster claims processing. These systems are expected to reduce operational expenses, improve retention rates, and close gaps in customer satisfaction – enhancements that are directly linked to long-term share performance.

4. Growth in wealth and workplace savings

Aside from insurance lines, the growth of Aviva’s workplace pensions and wealth management segments gives it exposure to long-term structural demand. Auto-enrolment schemes in the UK continue to expand, and Aviva’s platform is gaining traction among mid-sized employers and financial advisers. Revenue within these units is expected to deliver mid-to-high single-digit growth through 2025, diversifying earnings streams.

5. ESG and sustainable investing priorities

Environmental, social, and governance (ESG) mandates are reshaping insurer portfolios. Aviva has committed to being net zero by 2040 and has aligned its investment strategies accordingly. These initiatives not only fulfil client requirements but also position Aviva as a preferred provider for institutional ESG-driven mandates, unlocking further opportunities for fee-based asset management growth.

6. Interest rate and inflation exposure

Interest rates impact both liabilities and investment returns for insurers. While central banks are expected to moderate rate hikes in 2025, elevated yields support Aviva’s annuity margins and asset returns. On the flip side, any resurgence in inflation could boost claims costs across property and casualty insurance, pressuring underwriting profitability. Effective rate and inflation hedging will remain key.

These growth drivers together create a comprehensive framework for AV’s share price evolution. Execution against these areas will set the tone for Aviva’s shareholder value creation as it approaches 2026.

What are the key risks and milestones for Aviva looking ahead to 2026?

Although Aviva enters 2025 with solid metrics and clearer strategic focus, several challenges and pivotal moments are anticipated in 2026 that could impact shareholder value and operational performance. These risks include macroeconomic, competitive, regulatory, and internal execution factors.

1. Macroeconomic instability

Persistent uncertainty around inflation, interest rate movements and geopolitical developments could affect Aviva’s investment portfolio returns and claims profiles. If volatility spikes in bond and credit markets, the group’s solvency positioning and asset profits could face headwinds. While well-capitalised, macro-driven dislocations remain an external threat.

2. Regulatory shifts

Following recent reviews of the Solvency II framework by UK regulators, additional changes may be introduced in 2026. These could affect reserving requirements and permissions to return capital. Aviva must stay agile in its compliance processes while safeguarding capital efficiency and shareholder distributions under any new norms.

3. Execution risk on transformation

Aviva’s multi-year digital and operational overhaul is resource-intensive. Missed targets in deployment, resistance to change from internal teams, or customer adoption lags could derail expected cost savings. Additionally, any IT outages or cyber-security issues related to digitalisation could harm brand reputation and elevate regulatory scrutiny.

4. Competition and market disruption

The risk of customer attrition due to pricing competition from emerging insurtech platforms or better product customisation by rivals will remain elevated. Aviva’s response via enhanced data analytics, product innovation, and intermediary partnership models will determine its scalability into 2026.

5. Key milestones for shareholders to monitor

• Q1 & Q3 trading updates: Watch for indicators of premium written growth and expense ratio improvement.
• H1 and Full-Year 2025 results: Assess dividend progression, underlying earnings growth, and outlook guidance.
• Capital allocation announcements: Any new share repurchase programmes or special dividend declarations could re-rate the stock substantially.
• Regulatory consultations: Stay alert for statements from the FCA and PRA as they finalise rule updates across pensions and general insurance.
• Strategic acquisitions or divestments: Any material repositioning in core markets may reshape the growth narrative into 2026.

Long-term outlook into 2026

The path for Aviva into 2026 hinges on sustaining operational momentum, safeguarding capital strength, and ensuring stable asset-liability management. While the insurer is unlikely to deliver exponential tech-driven growth like startups, its scale, brand trust and capital surplus offer defensive strength and dependable income, even amid economic uncertainty.

With strong execution, Aviva could become a top dividend-yielding FTSE 100 staple while also building relevance in digital-first insurance and responsible asset management. However, delivery on transformation targets and resilience to external shocks will remain vital for enhancing shareholder value in the new year.