Aviva has boosted expectations of how fast it expects to grow its earnings and cash reserves, hinting at further acquisitions as it pays off debt.
At an event for investors today, Aviva says it expects to be able to pay out greater dividends to shareholders as the business has become “streamlined” and “focused on markets where it has high quality franchises and is gaining market share.”
Aviva is targeting higher than mid-single digit growth annually. However, it also expects to deploy £3bn of excess cash over the next two years to pay off debt and fund “bolt-on acquisitions.”
Aviva has been active in the sale and acquisition space in recent years. It bought a majority stake in robo-investment service Wealthify in October, and then acquired Irish provider Friends First a month later.
In September, it completed the sale of half of its shareholding in its Spanish life and pensions joint venture. Aviva announced the sale of offshore business Friends Provident International in July.
Analysts at Morgan Stanley reacted positively to the upgraded targets, going overweight on Aviva shares on the news.
The analyst note reads: “While the size of M&A is obviously unknown, this could be accretive to earnings given low financing costs. Taken as a package, we think this is a bullish set of goals from Aviva and, if achieved, the current multiple on the shares looks too low.”