Investment bank Peel Hunt has initiated coverage on Aviva, setting a valuation of 755p per share as the insurer completes its strategic pivot towards the UK market.
The target implies approximately 19% upside from Aviva's closing price of 636.20p on Thursday, according to Hargreaves Lansdown data. The bank's valuation sits above the analyst consensus of 682.50p but below the most bullish forecasts, with estimates ranging from 543p to 800p according to TradingView.
In a note to investors, Peel Hunt said Aviva's strategic transformation in the UK is now complete following its withdrawal from international operations.
The £3.7 billion acquisition of Direct Line Group, completed on July 1, 2025, positions Aviva as the country's leading multi-line insurer with more than 20% of the UK motor market.
Aviva has significantly upgraded its synergy targets since completing the acquisition. According to the company's Q3 2025 trading update, cost synergy ambitions have been raised to £225 million – nearly double the original target of £125 million.
The insurer also announced more than £500 million of capital synergies, which would improve its solvency ratio by more than 10 percentage points. Regulatory approval is expected around the end of 2026.
Additionally, Aviva expects to deliver more than £50 million in run-rate reduction in claims costs. Total integration costs are now estimated at approximately £350 million, up from the original expectation of £250 million.
Full run-rate savings are expected to be achieved in 2028, with approximately £40 million delivered by year-end 2025. The acquisition is expected to deliver approximately 10% run-rate earnings per share accretion.
Aviva CEO Amanda Blanc (pictured above) said in November: "The integration of Direct Line is well underway and we are increasingly confident of reaping the full benefits of this acquisition, contributing materially to Aviva's future growth and shareholder returns."
Matt Britzman, senior equity analyst at Hargreaves Lansdown, noted that the upgraded synergies matter because "freeing up capital should help restore solvency levels faster post-acquisition and bring buybacks back into play sooner."
Peel Hunt acknowledged that integration challenges remain ahead, alongside what analysts described as a tougher phase of the UK P&C cycle. However, the bank expressed confidence that underwriting margins would move structurally higher over time.
The bank benchmarked Aviva's life business against Legal & General and Phoenix, concluding that Aviva offers greater diversification and a stronger growth outlook. Workplace and the broader pensions and savings businesses are expected to underpin 5.3% average assets under administration growth over the next decade.
Peel Hunt estimates Aviva will generate a mid-teen return on capital employed of 14% over its forecast horizon, with P&C returns exceeding 20%. Adjusted earnings per share is forecast to grow at around 7% per annum over ten years, while dividend per share is expected to grow at 6% annually.
The bank identified the next catalyst as delivering on DLG integration by FY28.
