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For me, Aviva (LSE: AV) shares are the ones that got away. When I was looking for a FTSE 100 insurer to add to my SIPP three years ago, I shunned them in favour of rival blue-chip Legal & General.
At the time, Legal & General offered the higher yield, around 10% compared to 6%, but its shares had underperformed. I decided that, as well as the dazzling dividend income, Legal & General offered more recovery potential. Was I right?
It’s given me bags of income, but growth has disappointed. Legal & General shares are up 20% over three years, while Aviva climbed around 70%.
My time could still come. Legal & General is up 21% over the last 12 months, while Aviva is roughly flat. So I’m sticking with what I’ve got. I also get a higher trailing dividend of 7.55%, compared to Aviva’s 5.76%.
But I’m also intrigued about where Aviva goes next.
FTSE 100 turnaround play
Amanda Blanc has done a terrific job of overhauling Aviva’s business, selling non-core overseas operations, strengthening the balance sheet, simplifying the group and sharpening its focus on the UK, Ireland and Canada.
Full-year operating profit jumped 25% to £2.2bn in 2025. In the first half of 2026, it rose another 24% to £1.3bn. Aviva is targeting 11% annual growth in operating earnings per share between 2025 and 2028.
Yet the shares have stalled. They’re flat over the last year and trade at around 680p today. Consensus one-year broker target is 737p, just 8.4% higher.
There are much more optimistic forecasts. Berenberg raised its target from 800p to 820p in August and rates Aviva a Buy. It anticipates strong earnings, healthy cash generation and continued dividend growth, as Aviva builds on its increasingly dominant position in UK general insurance.
JPMorgan Cazenove recently set an 800p target and RBC Capital Markets was close behind with 780p. JPMorgan argues Aviva has a relatively attractive valuation compared to its peers, with strong capital generation and dividend cover.
Can this stock hit new heights?
Citigroup is much less convinced. It has a 721p target and suggests the shares are already close to fair value.
There are reasons to be more optimistic. Aviva’s Direct Line aquisition could confirm its general insurance dominance, while its wealth business is growing strongly. It has 25m customers, valuable proprietary data and is starting to deploy AI across underwriting, claims and customer service.
Aviva looks a bit expensive with a price-to-earnings ratio of 25.2. But the forward P/E is a far more tempting 13x, reflecting expectations that earnings will keep rising.
There are risks. The UK economy could weaken, insurance remains fiercely competitive and Direct Line synergies may not come through. A stock market crash or AI-driven correction could drag down the wider FTSE 100.
Great for income and growth
In the short term, Aviva shares can go anywhere. Over the longer run, I still think this is an attractive income stock worth considering. The shares could easily hit 800p, but so much depends on the wider mood.
Anybody worried about falling markets might hold off and look for an opportunity to pick up Aviva at a lower price than today. Otherwise, there are some really tempting UK income stocks out there right now…
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Harvey Jones owns shares in Legal & General.
This story originally appeared on Motley Fool
