Insurer predicts £8bn capital over next five years
Aviva’s announcement that it expects to generate £1.3bn of capital in 2010 and £8bn over the next five years has been received positively by the market.
In a presentation to analysts and investors on Friday, Aviva reiterated that it expected underlying capital to grow 30% to £1.3bn in 2010 from £1bn in 2009. It added that it expected around £8bn of undiscounted real-world cashflows over the next five years from its existing life insurance book, with a total of £33bn to be generated over the life of the book.
The firm added that there were prospects to grow general insurance capital generation from the £600m made in 2009, saying that continuing pricing action across all regions was contributing to its combined operating ratio target of 98%.
In a research note, Panmure Gordon analyst Barrie Cornes said the projected £8bn capital generation should reassure investors that Aviva’s dividend policy is sustainable. He also praised the decision to give greater clarity on cash generation.
“This will not be groundbreaking disclosure but a welcome catch-up with other companies in the sector,” he wrote.