UPDATE: Aviva Sees GBP33B Cash Flow From Life Ops Over 20 Yrs

2nd Jul 2010 14:06

(Adds detail, analyst, CFO comments.) By Vladimir Guevarra Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. insurer Aviva PLC (AV.LN) said Friday it expects GBP33 billion of cash flow from its life insurance business over the next 20 years. "Based on the contracts we have in place today, GBP33 billion of undiscounted cash flows and capital will be generated from our life business alone over the next 20 years," Chief Executive Officer Andrew Moss told an analyst briefing. "We have choice as to how we deploy this capital we generate--whether it's paying dividends, reinvesting in new business or... in the worst case, it's there on top of the capital we have in the balance sheet to absorb any bad news in terms of losses," he said. Chief Financial Officer Pat Regan said during his presentation that the expected cash flow from the life business over the next five years would be GBP8 billion. Regan also reiterated the company's guidance that it can generate GBP1.3 billion of net operating capital this year, up 30% from last year. "The magic trick we're looking to pull off here is to invest more efficiently, grow the internal rates of return and still write a good amount of new business in all of our business units, all three of these things. By doing the generation well and being clinical on how we use capital, this will give us the opportunity to grow (operating capital) by at least 30% in 2010," Regan said. Moss said: "We continue to sharpen our focus on disciplined capital allocation, that is to fund profitable growth. We're reinvesting on new business, with good internal rates of return, a minimum of 12% in our major markets. That's a good return in the post-crisis world," he said. Before the presentation, Panmure Gordon analyst Barrie Cornes said that if Aviva could generate capital of GBP8 billion over the next five years, "investors should take greater comfort that the dividend policy is sustainable." Cornes has a buy rating on Aviva. At 1249 GMT, Aviva shares were up 3.3% at 316 pence, while the FTSE100 index was up 1%. Oriel Securities also kept its buy rating on Aviva, noting the recent poor performance in the share price, and said that any improvement in the company's financial reporting "would help the investment case." -By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 2078429486, [email protected] (END) Dow Jones Newswires July 02, 2010 09:06 ET (13:06 GMT)