Aviva reports strong earnings beat By Investing.com

Investing.com — Aviva PLC ( LON: ) posted strong gains, beating consensus expectations across all major metrics. For the reporting period, the company reported an operating profit of £875m, which is 5% above the consensus estimate of £830m.

This outperformance was primarily driven by robust performance in the UK non-life insurance (GI) and pensions segments.

In the UK GI, Aviva benefited from positive price trends and improved investment income, although this was partially offset by an unfavorable prior year (PYD) performance in the UK, which contributed 2.4 percentage points to the combined ratio. Meanwhile, the Pensions segment saw notable growth in Contract Service Margin (CSM), up 10% year-on-year.

Aviva Solvency II’s operational equity generation reached £758m, beating the consensus estimate of £700m by 8%. This strong performance supported a solid Solvency II ratio of 205%, also beating consensus expectations of 199%.

The company reaffirmed its 2026 targets and return on capital guidance, underscoring its commitment to delivering long-term shareholder value.

“In our view, Aviva remains the only UK insurer that can reliably deliver exceptional long-term capital returns, enhanced M&A, attractive regular dividend growth and consistent EPS growth,” said analysts at Jefferies in a note.

Jefferies’ price target for Aviva is based on a discounted cash flow and sum-of-parts model, which incorporates excess capital generation under Solvency II. The assessment takes into account surplus capital exceeding a Solvency II coverage ratio of 180% for 2023 and 170% from 2024 onwards.

Risks to this rating include potential credit defaults, stock market volatility and declining real estate values.