For years, the investment case for Aviva (LSE: AV.) shares was fairly simple: buy a large FTSE 100 insurer, collect the dividend, and hope for steady growth.
I’m starting to think the story has become more interesting than that.
Between its expanding wealth business, growing retirement operations, Direct Line acquisition, and increasing use of artificial intelligence, Aviva appears to be evolving into something broader than a conventional insurance company. If that’s true, could the market eventually start valuing the business differently?
Diversified model
One reason I think the investment case is becoming more interesting is that growth is now coming from several different directions.
Insurance remains the foundation and still accounts for most profits. But wealth management and retirement products offer additional avenues for growth. Importantly, these aren’t standalone operations. Together, they allow the business to serve customers at multiple stages of their financial lives.
That’s significant because it already has more than 25m customers, with millions holding multiple products. In my view, that creates opportunities to generate higher revenue per customer over time, rather than relying solely on attracting new ones.
The company is targeting more than 75% of operating profit from capital-light businesses by 2028. If it succeeds, investors may increasingly focus on recurring fee-based income and long-term growth prospects, rather than viewing the shares primarily through the lens of a cyclical insurer.
Wealth opportunity
For me, the most compelling part of the story is wealth management.
Unlike general insurance, where profits can fluctuate with pricing cycles and claims trends, wealth benefits from long-term structural tailwinds. Workplace pension contributions continue regardless of market sentiment, and demographic trends suggest increasing demand for retirement planning over time.
The group already occupies a strong position in workplace pensions and has been growing assets faster than the wider market.
What’s particularly interesting is the opportunity to retain customers as they move through different stages of their financial lives. Someone who first joins through a workplace pension scheme may eventually require investment products, retirement solutions, or financial advice.
That gives the business exposure to a market that management expects to expand significantly over the coming years. If wealth continues growing as a share of earnings, the quality and predictability of profits could improve alongside it.
What could go wrong?
The key risk is that investors continue to view the shares through a traditional insurance lens, even if the business model gradually shifts. Wealth and other fee-based businesses are still relatively small contributors to earnings, meaning insurance profits will likely remain dominant for some time.
Execution is also critical. Delivering the benefits of the Direct Line integration, while expanding growth in wealth and retirement, will take consistent operational focus. There’s also a governance consideration, with some investors reportedly questioning whether senior non-executive responsibilities elsewhere could distract from day-to-day leadership priorities.
For now, the shares still trade largely as a conventional insurer. But if the contribution from capital-light businesses continues to rise, and the strategic plan delivers as intended, the market may eventually reassess how it values the business. That’s where the opportunity lies for me, which is why I view the stock as one to consider.
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Andrew Mackie owns shares in Aviva.
