ii view: confident Aviva raises dividend by 10%

Full-year results to 31 December 

• Operating profit up 25% to £2.2 billion
• Operating earnings up 17% to 56p per share
• Final dividend of 26.2p per share
• Total 2025 dividend up 10% to 39.3p per share
• Capital cushion or solvency II ratio of 180%, down from 203% in late 2024

Guidance:

• Continues to target compound earnings per share growth of 11%
• Plans a £350 million share buyback to August

Chief executive Amanda Blanc said:

“Aviva delivered an outstanding performance in 2025, our fifth consecutive year of strong, profitable growth. Results have been excellent right across Aviva. 

“We have transformed Aviva over the last five years and whilst we have made significant progress, there is so much more to come. 

“We have clear strengths in artificial intelligence which are creating major opportunities to transform claims, underwriting and customer experience.”

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ii round-up:

Aviva (LSE:AV.)'s rejuvenation under CEO Amanda Blanc continued with the life and general insurer detailing progress that broadly matched City expectations.

Annual 2025 operating profits rose by a quarter to £2.2 billion, exceeding Aviva’s target of £2 billion profit one year early. A final dividend of 26.2p per share, payable to eligible shareholders on 14 May, takes the total 2025 payment up 10% to 39.3p per share. Aviva reiterated growth targets to 2028 for metrics including earnings, aided by management’s ongoing implementation of AI and its employment of more than 500 data scientists. 

Aviva shares fell 3% in UK trading having come into these latest results up by almost a half last year. The FTSE 100 rose by just over a fifth in 2025. Rival Legal & General Group (LSE:LGEN) rose by 14%. 

Aviva provides savings, retirement pension products and general insurance with the latter boosted in 2025 via its acquisition of Direct Line. 

Shareholder returns now see a £350 million share buyback programme executed through to August this year. 

Divisional performance for 2025 included an 18% rise in General Insurance premiums to £14.1 billion, a 6% gain in Wealth net flows to £10.9 billion and a 12% improvement in Health premiums to £1.1 billion. 

As for the outlook, Aviva reiterated growth ambitions though to 2028. These include compound earnings per share growth of 11% and taking its return on equity (RoE) to over 20% from 17.5% in 2025. 

The group’s AGM on 6 May is followed by a first-quarter trading update on 14 May. 

ii view:

Aviva highlights itself as the UK’s only diversified insurer with market-leading positions across the UK, Canada & Ireland. UK customer numbers of 21.7 million are flagged by Aviva as more than the 20 million UK Barclays (LSE:BARC) customers and more than the 12 million at Standard Life (LSE:SDLF).  

The FTSE 100 company operates via the four areas: Insurance, Wealth & Retirement (IWR), covering protection insurance such as life and health as well as savings; General Insurance covering items such as homes and cars; Aviva investors, encompassing its asset management operations; and international investments, taking in its business partnerships in both China and India. 

For investors, retirement related sales fell to £6.6 billion from £9.4 billion in 2024, with this year flagged as more typical for Bulk Purchase Annuities (BPA). Exposure to general insurance does mean Aviva calculates risks in relation to unknown events such as increased flooding under global climate change and wildfires in Canada. A forecast price/earnings (PE) ratio above the 10-year average may suggest the shares are not obviously cheap, while previous business sales have reduced geographical diversity. 

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To the upside, three-year growth targets for earnings and return on equity continue to be pursued. The acquisition of Direct Line has left Aviva more focused on capital light growth opportunities in general insurance. Product and geographical diversity include exposure to China and India via investments, while Aviva’s capital cushion or Solvency II ratio remains robust at 180%. 

In all, and with Direct Line adding to growth momentum and the shares offering a dividend yield of over 5%, grounds for longer term optimism continue to persist. 

Positives: 

• Targeting costs
• Attractive dividend yield (not guaranteed)

Negatives:

• Reduced geographical diversity
• General insurance is subject to events outside of management’s control

The average rating of stock market analysts:

Buy