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The Aviva (LSE: AV.) share price has been doing well in 2025, up 22% year-to-date by close on Wednesday (14 May). And it’s gained 150% over the past five years.
Even after that storming run, we’re looking at a forecast price-to-earnings (P/E) ratio of 12 for 2025. The predicted 6.2% dividend yield looks pretty decent.
So what do Q1 results, released Thursday, say about the share price’s future?
Strong start
The latest figures suggest Aviva is off to a solid start to its new fiscal year, with mostly positive headline percentages across the board.
General insurance premiums are up 9% year on year. Retirement sales rose 4%, with protection and health insurance sales gaining 19%.
Net investment inflows dropped a bit from £2.7bn in the first quarter of 2024, to £2.3bn this time. With the current scary global economic outlook and many investors putting safety first, I see that as a very satisfactory result.
A company’s solvency II cover ratio measures its available capital in relation to solvency requirements. And at 201%, even though it’s down a touch from 204% a year ago, I see no problem at all there.
Happy boss
CEO Amanda Blanc enthused: “We continue to be very positive about the outlook for 2025. Our balance sheet is strong, we have a clear customer-focused strategy which we continue to deliver at pace and our market-leading businesses are growing well, especially in capital-light areas. We are increasingly confident about Aviva’s prospects and meeting our financial targets.“
The board says it’s on track to hit £2bn in operating profit by 2026, with cumulative cash remittances exceeding £5.8bn over the 2024-26 period.
The acquisition of Direct Line is apparently going well too, and targets will be updated to reflect the enlarged company.
Share price
I like what I’m reading, but as a shareholder I might be a bit biased. The market seems less impressed, with the shares barely moving — up a fraction of a percent at the time of writing. I suspect that could be down to a few things.
One is that there’s no real surprise here. Everything seems to be going as expected, in line with the company’s multi-year guidance.
Then there’s the valuation. That forward P/E might look attractive by FTSE 100 standards. But the sector is notoriously cyclical, and insurance valuations are often not typical. At the moment, I suspect large investors are seeing the Aviva valuation as about right. And I think that might be fair.
And then dividend investors have fatter targets in the sector to chase. Legal & General currently boasts an 8.9% forecast yield. And Phoenix Group is up at 9%.
So what is it?
Another risk is that insurance stocks, like the rest of the financial sector, are exposed to economic conditions more severely than most. Right now, the UK outlook appears better than we’d feared.
But until we see a prolongued spell of growth, coupled with more interest rate falls, I fear we could have weak prices with some volatility. I see that as a good time to consider buying. As it is, I think I personally have enough and I’ll hold.
