Aviva upgrades targets as position strengthens

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Insurance giant Aviva has upgraded its earnings, cash and dividend targets following what it called a transformation of its financial and strategic position.

The group said that it is now targeting higher than 5% annual earnings growth from 2019, as well as bumping up its dividend payout ratio target to between 55% and 60% by 2020.

Explaining the upgrades, the insurer said: “Aviva’s financial and strategic position has been transformed.

“The capital surplus has tripled; the group has been streamlined and Aviva is now focused on markets where it has high-quality franchises and is gaining market share.

“As a result Aviva is upgrading the financial objectives it set out previously.”

Aviva has also increased its remittance target from £7 billion to £8 billion, which will allow the firm to deploy £3 billion of excess cash over 2018 and 2019.

This is expected to be used to repay £900 million of debt next year and fund bolt-on acquisitions and additional returns to investors, Aviva added.

Boss Mark Wilson said: “We are upgrading our cash flow and growth targets.

“After a few years of restructuring, our businesses are now high quality and we expect good, sustainable growth from each of them.

“We have improved the consistency and quality of our profits and so we are raising our expectations for earnings growth to more than 5% annually from 2019 onwards.”

In August, Aviva reported a steep rise in first-half profits after it was boosted by its general insurance division.

The insurer said operating profit grew 11% to £1.46 billion in the first six months of the year.

Aviva’s general insurance and health profits increased 25% to £417 million, aided by the acquisition of RBC Insurance in Canada last year, as well as foreign exchange benefits.