Aviva shares drop as upgraded medium-term targets underwhelm
By Benjamin Chiou
Date: Thursday 13 Nov 2025
(Sharecast News) - Shares in insurer Aviva fell sharply on Thursday, pulling back after a surge so far this year, as new medium-term profit and return targets underwhelmed investors, despite the company delivering on financial targets a year earlier than planned.
The company said it was on track to hit its 2026 targets for £2bn in operating profit and £1.8bn in Solvency II operating own funds generation a year early, driven by an "exceptional performance across the group" and before any contributions from Direct Line, which it acquired this summer.
Operating profits for 2025 are now expected to be £2.2bn, which includes a £150m contribution from Direct Line, Aviva said.
Meanwhile, its forecast of hitting more than £5.8bn of cumulative cash remittances over 2024 to 2026 was "comfortably on track", with £3.0bn already delivered within the first 18 months.
As for Direct Line, the £100m cost reduction programme has been completed three months ahead of initial plans, with the company now expecting to see a further £225m of cost synergies from the acquisition achieved by 2028 - nearly twice the original estimate. Direct Line is also expected to unlock at least £0.5bn of capital synergies, improving the current solvency ratio position by over 10 percentage points.
As a result, Aviva said it would resume share buybacks next year at a higher level due to a 14% increase in the share count following the acquisition.
Looking ahead, operating earnings per share are now expected to grow at a CAGR of 11% between 2025 and 2028, with the group's return on equity predicted to increase from 17% in 2025 to over 20% by 2028.
As for the third quarter, the present value of new business premiums across the insurance, wealth and retirement divisions totalled £11.27bn, down 9% over the year before, largely a result of sharp declines in the retirement arm.
Nevertheless, the stock was down 3.7% at 667.2p by 0851 GMT, which Matt Britzman, senior equity analyst at Hargreaves Lansdown, called a "harsh reaction to what looks like a solid set of results".
The stock, however, has gained more than 40% so far this year and is currently trading at levels not seen since 2007.
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