Aviva (LSE:AV.) shares are among the most popular stocks to buy right now. And with a dividend yield of 6.5% alongside a double-digit share price rise over the last 12 months, it isn’t hard to see why.
Even when zooming out to the last five years, the insurance group seems to be on a roll. Fun fact: anyone who put money to work in March 2021 has since enjoyed a 115.4% total return – enough to turn £5,000 into £10,770.
Of course, as all experienced investors know, past performance doesn’t guarantee future returns. So can Aviva shares continue to deliver in 2026 and beyond?
Catalysts for growth
There are quite a few tailwinds filling Aviva’s sails right now. And one of the largest is its 2025 turnaround acquisition of Direct Line. The deal marked a key strategic shift for the business, with the goal of further diversifying its operations towards more capital-light operations. And so far, this move seems to be working flawlessly.
Direct Line contributed £174m of operating profits across the second half of 2025, ahead of the £150m expected. And subsequently, Aviva ended up delivering £2.2bn of operating earnings in 2025, beating its £2bn target a year earlier than expected.
But this could be just the tip of the iceberg. With a further £225m in annual cost synergies expected to materialise between now and 2028, Direct Line’s profit contributions are seemingly on track to get even bigger as time goes on.
At the same time, long NHS waiting lists continue to serve as a powerful incentive for private health insurance products. That’s another tailwind management’s successfully capitalising on with premiums growing by 12% to £1.1bn in 2025.
Overall, the business seems to be firing on all cylinders right now. And with leadership now aiming to deliver an average annualised earnings growth rate of 11% alongside a 20%+ return on equity between now and 2028, Aviva shares look nicely positioned to continue flourishing.
What could go wrong?
While the medium-term outlook’s promising, there are a few risk factors for investors to carefully consider. With Aviva’s recent performance noticed by both retail and institutional investors, the valuation today suggests that much of the expected future growth could already be baked into the current share price.
As such, if the business falls short of expectations, Aviva shares could turn volatile. And right now, there are some looming headwinds that could slow the business’s pace.
Insurance pricing in the automotive sector has weakened while inflation in repair and labour costs has continued to rise. At the same time, persistent weakness within the UK macroeconomic landscape could also apply some pressure to the group’s investment portfolios backing its insurance liabilities.
Volatile gilt yields, lacklustre GDP growth, and stubborn inflation could all trigger portfolio underperformance for the group. And combining higher insurance claims costs with falling investment returns could apply significant short-term pressure on the group’s financials.
So where does that leave investors?
The bottom line
Aviva undeniably has several financial hurdles to overcome. Yet management’s demonstrated an impressive knack for solid execution even during tough economic conditions. So with an attractive yield on offer, income investors may want to consider taking a deeper dive. But it’s not the only opportunity on my radar right now.
