Shares in Aviva (LON:AV) have jumped in London this morning as the blue-chip insurer hiked its growth and dividend targets. The company has further pledged to spend $3 billion of excess cash in the next two years.
As of 08:26 GMT, Aviva’s share price had added 2.56 percent to 522.02p. The group is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.36 percent lower at 7,367.20 points.
Aviva hikes targets
Aviva announced in a statement this morning that it was lifting its growth target, now aiming for higher than mid-single digit percentage growth annually in IFRS operating earnings per share from 2019. The group’s remittance target meanwhile was increased from £7 billion to £8 billion, allowing the company to deploy £3 billion of excess cash over 2018 and 2019, likely to be used on repaying £900 million of debt in 2018 and fund bolt-on acquisitions and additional returns to investors.
The blue-chip insurer also increased its dividend payout ratio target to 55-60 percent of operating earnings per share by the end of the decade, underpinned by improved earnings quality and cash flows from the group’s businesses which are becoming less capital-intensive.
“We have significant surplus capital and cash and this means we will have £3 billion of excess cash to deploy in 2018 and 2019, £2 billion of which we plan to deploy next year,” the group’s chief executive Mark Wilson commented in the statement, adding that the company expected to grow business, both organically and through acquisitions.
Reuters quoted analysts at JPMorgan as saying in a note that the new targets looked ‘achievable’, as they reiterated their ‘overweight’ rating on the stock.