Berenberg has started coverage of Aviva Plc with a "buy" recommendation and set a price objective of 800 pence per share, according to a note from analyst Carl Lofthagen. The initiation is built on a sum-of-the-parts approach that implies a fair value of £24 billion for the insurer, compared with a market capitalisation of £18.82 billion at the London close on May 27.
In its baseline forecast, Berenberg expects Aviva's total operating profit to climb from £2.20 billion in 2025 to £2.54 billion in 2026, £2.80 billion in 2027 and £3.01 billion in 2028. Net income is projected to move from £1.03 billion in 2025 to £1.63 billion in 2026, then to £1.89 billion in 2027 and £2.05 billion in 2028.
The research house also laid out dividend expectations, forecasting dividends per share of 41.85 pence in 2026, 44.58 pence in 2027 and 47.47 pence in 2028. Berenberg calculates this represents a compound annual growth rate of 6.5% over the period, which it notes is above the sector consensus average of 5.7%.
On shareholder distributions, Berenberg includes a recurring £350 million buyback in its modelling. With that buyback in place, total cash yield is forecast at 8.5% for fiscal 2026 and 9% for fiscal 2027, placing Aviva in the top quartile of the insurance sector compared with a 2027 sector yield average of 7.3%.
Across the 2026-28 window, the bank expects cumulative cash remittances of £7.10 billion. Of that total, £4.80 billion would be returned directly to shareholders, split into £3.80 billion of dividends and £1.00 billion of buybacks. Berenberg's modelling shows a total cash coverage ratio of 1.7 times in 2026 and 1.8 times in 2027.
Relative to consensus, Berenberg's estimates are broadly aligned but differ in specific metrics: the bank is 2% to 5% higher on Solvency II own-funds generation for FY26-28, and 3% to 5% lower on general insurance gross written premiums for the same period, per the note.
Berenberg's note highlights Aviva's UK property and casualty (P&C) franchise as a significant contributor to group profitability. The UK P&C business represents 38% of group operating profit and, as of 2025, held a 17% market share - roughly double the 8% share of second-placed Admiral - following completion of the Direct Line Group acquisition in July 2025.
The bank estimates Aviva's UK P&C market share has increased by about seven percentage points since 2019, with roughly four percentage points attributable to organic gains and about three percentage points to the Direct Line transaction. Aviva is targeting £225 million of cost synergies from the acquisition to be realised by fiscal 2028.
On underwriting performance, Berenberg projects the UK P&C combined ratio will improve from 90.6% in 2025 to 89.5% by 2028.
Valuation assumptions in the note include applying a multiple of 12 times 2027 post-tax earnings to Aviva's insurance, wealth and retirement operations and 14 times to the general insurance unit. For context within the note, these multiples compare with a peer median of 10.5 times and 14.1 times respectively.
Capital strength metrics are forecast to improve under Berenberg's base case. The economic solvency ratio is projected at 185% in 2026, rising to 192% by 2028, versus 180% reported in 2025. Return on equity is modelled to increase to 15.2% in 2026, 17.3% in 2027 and 18.2% in 2028, up from 9.7% in 2025.
The note flags key risks that could alter this trajectory. Deterioration in UK and eurozone macroeconomic conditions is cited as a potential drag that could reduce solvency and slow capital returns. In addition, further regulatory intervention in the UK is identified as an uncertain factor that could be either beneficial or detrimental to Aviva depending on the specifics of any measures taken.
Analytical perspective - The initiation frames Aviva's near-term outlook around improving operating profitability, enhanced capital generation and an explicit plan for shareholder distributions, supported in the modelling by a recurring buyback and targeted synergies from the Direct Line acquisition. Berenberg's sum-of-the-parts valuation and the projected solvency uplift underpin its buy recommendation and 800 pence target.