On Wednesday, JPMorgan (NYSE:JPM) increased the rating of Aviva (LON:AV) Plc (AV/:LN) (OTC: AIVAF) stock from Neutral to Overweight and raised the price target to GBP 6.15, up from the previous GBP 5.55. The upgrade comes in the wake of Aviva's proposed acquisition of DLG, which JPMorgan believes will be approved by DLG shareholders due to the appealing offer. The deal is not expected to face regulatory issues, given the competitive landscape of the UK personal lines insurance market.
JPMorgan predicts the acquisition will be beneficial for Aviva, citing the deal's strong accretive nature, its potential to enhance Aviva's insurance mix with a higher multiple non-life segment, and its ability to improve the company's scale in the UK property and casualty (P&C) insurance sector. Aviva is poised to become the second-largest financial services brand in the UK, which could lead to significant revenue synergies, especially considering Aviva's proven cross-selling capabilities.
JPMorgan has also increased its earnings per share (EPS) estimates for Aviva by approximately 10-12% for the years 2027 and 2028. The firm notes that there is a substantial upside to the consensus EPS, projecting an increase of 6-17% over the estimates for 2026 and 2027. According to the analyst, Aviva's stock is trading at roughly 8.3 times its projected 2026 earnings, compared to its UK life insurance peers at around 9 times and European composite insurers at approximately 10 times.
The analyst also mentioned that if the acquisition of DLG does not proceed, it may initially be perceived negatively by the market. However, in such an event, Aviva would still have the opportunity to allocate its surplus capital elsewhere or enhance capital returns to shareholders to mitigate any adverse reactions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.