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Aviva weighs cash handout after beating profit forecast

Reuters
People enter and exit the AVIVA headquarters building in Dublin October 19, 2011. REUTERS/Cathal McNaughton

By Carolyn Cohn

LONDON (Reuters) - Aviva chief executive Mark Wilson said on Thursday the insurer could give cash back to shareholders, after it beat forecasts with a 20 percent 2015 operating profit rise.

Aviva reported a solvency capital ratio under new European rules of 180 percent, at the top of its 150-180 percent target range. A ratio of 100 percent shows insurers have sufficient capital to cover underwriting, investment and operational risks.

Wilson said the company's strong capital position meant it could grow businesses organically, and reiterated it could also make "bolt-on" acquisitions in markets such as Poland.

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"Capital returns to shareholders are also on our radar," he said on a media call following the results.

Aviva's shares rose 4 percent to 478 pence at 0825 GMT, the top performer in the FTSE 100 index.

Aviva bought rival Friends Life last year in a 5.6 billion pound deal, creating a market leader in life insurance.

The life and general insurer said it would achieve its target of 225 million pounds in integration synergies in 2016, a year ahead of schedule, and that it expected 1.2 billion pounds in capital synergies.

"The key question now is what will Aviva do with the additional cash - we think it will in part be used to hike future dividends," said Barrie Cornes, analyst at Panmure Gordon, in a note.

Aviva's operating profit of 2.7 billion pounds came in above expectations of 2.49 billion pounds from a forecast compiled by the insurer.

Its combined operating ratio, a key measure of performance in its general insurance business, strengthened to 94.6 percent, against a forecast of 96 percent. A level below 100 percent indicates an underwriting profit.

Aviva said floods in Britain in December had cost it 132 million pounds.

The company said it would pay a final dividend of 14.05 pence per share and total dividend of 20.8 pence, up 15 percent from 2014 but below a forecast of 21.2 pence.

(Editing by Sinead Cruise and Alexander Smith)