What next for Aviva shares after a cracking set of 2025 results?
What happened to Aviva (LSE: AV.) shares today (5 March)? I see another great set of results, another dividend rise, another share buyback, and another happy shareholder. The latter is me, and I hope there are plenty more of us. But the share price fell 2.5% soon after the market opened.
Does it mean investors had been expecting what we saw, and were disappointed? Or is the valuation high enough at the current price? Let’s take a look how the 2025 full year went.
“Outstanding”
In the words of CEO Amanda Blanc, Aviva achieved “an outstanding performance in 2025, our fifth consecutive year of strong, profitable growth.” Operating profit is up 25% to £2.2bn. And operating earnings per share (EPS) gained 17% to 56p — though bottom-line reported EPS came in lower at 26.9p.
The business is clearly throwing off plenty of cash. There’s a new share buyback worth up to £350m, expected to happen between March and August.
And the board lifted its annual dividend by an impressive 10%, to 39.3p per share – nicely ahead of analyst forecasts. On the previous day’s closing price for Aviva shares, that’s a dividend yield of 5.9%. So we have a dividend ahead of the FTSE 100 average, and a progressive rise well ahead of inflation.
And to turn back to the enthusiastic CEO, she told us: “We have achieved our 2026 financial targets one year early, highlighting the rapid and sustained progress we are making.” She added that Aviva is “highly committed to growing our dividend.” And that appeals to long-term dividend investors like me.
What’s it worth?
The main danger probably centres on the cyclical nature of the insurance sector, and Aviva’s current valuation. On the reported EPS figure, we’re looking at a trailing price-to-earnings ratio of 24. Even on the higher operating EPS, we’re still looking at a multiple close to 12.
A few years ago, Aviva shares were on a P/E of only around six or seven. But right now? I’m not sure I see enough safety margin in that to cope with another cyclical downturn.
It’s by no means sure we’ll have a downturn. And if we do, it might not happen in the coming decade. But over all the years I’ve been following the sector, it’s shown the most ups and downs I can remember out of any in the FTSE 100. But you know, every downturn came back up again.
Stronger company now
In 2025, Aviva maintained its number one position in the UK insurance market and number three in Ireland, with over 12m customers. And in the UK and Ireland together, gross written premiums rose by 27% — through a combination of volume and profitability.
Amanda Blanc really has worked wonders for Aviva. It’s much more focused and efficient than it was when she took over in 2020.
Even if Aviva might not be on a screaming cheap valuation now, I like the underlying company. We might see a weak spell for the shares, but I’m holding. I think long-term investors should consider buying, especially on any dips.
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Alan Oscroft has positions in Aviva Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
