Aviva (LSE:AV.) shares are among the many hottest shares to purchase proper now. And with a dividend yield of 6.5% alongside a double-digit share value rise during the last 12 months, it isn’t arduous to see why.
Even when zooming out to the final 5 years, the insurance coverage group appears to be on a roll. Fun reality: anybody who put cash to work in March 2021 has since loved a 115.4% complete return – sufficient to show £5,000 into £10,770.
Of course, as all skilled traders know, previous efficiency doesn’t assure future returns. So can Aviva shares proceed to ship in 2026 and past?
There are fairly a number of tailwinds filling Aviva’s sails proper now. And one of many largest is its 2025 turnaround acquisition of Direct Line. The deal marked a key strategic shift for the enterprise, with the objective of additional diversifying its operations in direction of extra capital-light operations. And to date, this transfer appears to be working flawlessly.
Direct Line contributed £174m of working earnings throughout the second half of 2025, forward of the £150m anticipated. And subsequently, Aviva ended up delivering £2.2bn of working earnings in 2025, beating its £2bn goal a 12 months sooner than anticipated.
But this could possibly be simply the tip of the iceberg. With an extra £225m in annual value synergies anticipated to materialise between now and 2028, Direct Line’s revenue contributions are seemingly on observe to get even larger as time goes on.
At the identical time, lengthy NHS ready lists proceed to function a robust incentive for personal medical insurance merchandise. That’s one other tailwind administration’s efficiently capitalising on with premiums rising by 12% to £1.1bn in 2025.
Overall, the enterprise appears to be firing on all cylinders proper now. And with management now aiming to ship a mean annualised earnings progress fee of 11% alongside a 20%+ return on fairness between now and 2028, Aviva shares look properly positioned to proceed flourishing.
While the medium-term outlook’s promising, there are a number of threat elements for traders to fastidiously contemplate. With Aviva’s latest efficiency observed by each retail and institutional traders, the valuation at present means that a lot of the anticipated future progress may already be baked into the present share value.
As such, if the enterprise falls wanting expectations, Aviva shares may flip risky. And proper now, there are some looming headwinds that might sluggish the enterprise’s tempo.
Insurance pricing in the automotive sector has weakened whereas inflation in restore and labour prices has continued to rise. At the identical time, persistent weak point inside the UK macroeconomic panorama may additionally apply some stress to the group’s funding portfolios backing its insurance coverage liabilities.
