The Aviva (LSE:AV.) share price has taken a hit in recent weeks as turmoil in the stock market doesn’t bode well for the insurance giant’s investment portfolio. However, that doesn’t seem to have shaken analyst confidence in the long-term potential of this enterprise. In fact, compared to a month ago, the share price forecasts for Aviva have actually increased.
Rising analyst projections
A central piece to management’s strategy is to reach £2bn in operating profits along with £1.8bn in Solvency II operating fund generation by 2026. At the same time, Aviva is aiming for more than £5.8bn in cumulative cash remittances between 2024 and 2026. For reference, these figures stood at £1.77bn, £1.66bn, and £1.99bn respectively, as of the end of 2024.
So far, Aviva appears to be on track to deliver. As such, its 12-month share price target now sits at 580p, up from 565p in March. Pairing this boost to outlook with a drop in the stock price following the recent stock market turmoil, investors are looking at a potential 18% gain from today’s prices. And to top things off, these prospective capital gains also come paired with a tasty-looking 6.8% dividend yield.
In other words, if this yield’s reinvested, a £5,000 investment today could be worth £6,240 by this time next year.
Can Aviva deliver?
In 2024, elevated interest rates sparked fresh life into the annuity market, driving Aviva’s profits higher. At the same time, management’s tactics of diversifying into more cash-generative property & casualty insurance also helped boost the level of gross premiums written to a record £12.2bn.
With that in mind, it’s not surprising that the stock rallied by almost 20% over the first three months of 2025. But then came the announcement of global tariffs from the US. And suddenly, almost all these gains were wiped out.
Aviva isn’t directly impacted by trade tariffs, but the indirect effects are still problematic. Should the recent 90-day pause on import tariffs end without resolution, the potential inflation on goods and services could drive up the cost of paying insurance claims. For example, higher steel and aluminium prices will drive up the cost of home construction and maintenance. It’s a similar story for car parts and vehicle repairs, putting pressure on Aviva’s margins.
As a result, customers are likely going to face higher insurance premiums as management adjusts for this risk. However, for existing insurance plans, claims could get far more expensive than expected when they were first issued. And that’s potentially bad news for Aviva’s bottom line over the next 12 months.
The bottom line
Needless to say, tariffs just hit the insurance sector with a fresh wave of uncertainty. It explains why Aviva, along with other insurance businesses, took a tumble this month.
However, it’s worth pointing out that Aviva’s Solvency II ratio sits at 203%. That’s firmly ahead of the regulatory requirement of 100% as well as the industry average of 184%. In other words, the business is well funded, more so than its competitors.
That’s likely why analysts remain bullish on this enterprise. While there may be some short-term volatility, the long-term outlook remains promising. So for investors seeking exposure to the insurance sector, Aviva may be worth checking out.
