Aviva lifts first-half profit 22% and raises dividend as Direct Line integration gets under way

Aviva reported robust first-half 2025 results, with adjusted operating profit up 22% to £1,068 million and an interim dividend increase of 10% to 13.1p per share, driven by strong general insurance performance and wealth net flows. The insurer maintained a strong Solvency II ratio of 206% and confirmed the Direct Line integration is progressing as planned, expected to deliver 10% EPS accretion and accelerate its strategic shift towards capital-light businesses, which now contribute 66% of operating profit. Aviva reaffirmed its 2026 financial targets and signaled the resumption of regular capital returns alongside full-year 2025 results.

Analysis

Aviva's first-half 2025 results demonstrate strong operational momentum and successful strategic execution. The 22% increase in adjusted operating profit to £1,068 million was primarily driven by the General Insurance division, where the undiscounted combined operating ratio improved to 94.6% and UK & Ireland operating profit surged 50%. This performance was complemented by robust growth in capital-light segments, with Wealth net flows rising 16% and Health in-force premiums climbing 14%. The strategic discipline is evident in the Retirement segment, where a 3% dip in sales reflects a deliberate choice to prioritize margins over volume in a quieter bulk annuity market. The company's financial foundation remains solid, evidenced by a Solvency II shareholder cover ratio of 206% and a 33% increase in Solvency II operating capital generation to £957 million. The integration of Direct Line is progressing as planned, with management reiterating guidance for approximately 10% run-rate EPS accretion and an accelerated shift toward capital-light earnings, which now constitute 66% of the total. Management's reaffirmation of its £2 billion operating profit target for 2026 and the signal to resume regular capital returns with full-year 2025 results provide clear visibility on future shareholder value creation.

Key Decisions for Investors

• The strong earnings growth, 10% dividend increase, and robust Solvency II ratio of 206% reinforce the investment case, suggesting the current strategy is delivering tangible results.
• Investors should monitor the upcoming November 'In Focus' event for specific details on Direct Line synergies, as the successful integration is a key catalyst for achieving the guided 10% earnings per share accretion.
• The explicit signal that regular capital returns will resume with full-year 2025 results is a significant positive catalyst that could enhance total shareholder return.
• While the outlook is positive, it is prudent to observe the performance of the Retirement segment to ensure the margin-over-volume strategy effectively translates into higher profitability and to monitor the group's leverage, which rose to 32.3%.