Aviva Presentation on future profit drivers, capital generation and dividend intentions

Following the dividend cut for 2009, the Aviva presentation given earlier in July 2010 provided much needed clarity to investors, in particular on:

  • how the Group generates capital
  • how that is turned into cash, and
  • what they intent to do with that cash, including guidance on dividend intentions going forward.

Aviva Presentation - summary

The presentation, hosted by Andrew Moss, group chief executive, highlighted the stability of Aviva's IFRS operating profits and its disciplined allocation of capital to fund profitable growth.

Pat Regan, Aviva's chief financial officer, showed that with 53 million life and general insurance customers - of which some 30 milion across Europe - Aviva is a significant and resilient generator of capital from which it extracts sizable returns.

In May 2010, Aviva announced that it expects to generate approximately £1.3 billion of net operating capital in 2010, a 30% increase on 2009.

Importantly, Aviva's capital surplus position based on the EU Insurance Groups Directive was £4.4 billion.

That compares favourably to Aviva's exposure of 'just' £0.9 billion to the debt securities of the governments of Greece, Spain and Portugal (including local authorities and agencies) of which Greek debt securities amount to £150 million.

Aviva also showed the stability and diversity of its IFRS profits and its disciplined approach to fund profitable new business growth.

In 2009 Aviva achieved an unlevered internal rate of return of 14% on capital re-invested in the UK and 13% in Europe, its two largest markets.

At the Aviva Presentation, Andrew Moss, group chief executive, said:

"Our presentation today demonstrates the scale and predictability of our capital generation and the diversity of our IFRS profits.

This gives our results real resilience and provides a powerful base from which we pay dividends and invest in the profitable growth of the business."

From a dividend investing perspective these are comforting remarks with Aviva clearly confirming their ability to pay dividends and even better: increase dividends from cash generation in the future.

For a video interview of Andrew Moss and Pat Regan on Aviva's investor presentation.

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