Aviva talks up strengths amid Brexit concerns, promises bigger dividend payout

* Few points knocked off capital position - CEO

* Still near upper end of 150-180 pct range

* Expecting strong cash generation

* Promises to pay out half of profits in dividends

* Considering bolt-on acquisitions, no large buys (Recasts with comments from capital markets day, updates shares)

By Carolyn Cohn

LONDON, July 6 (Reuters) - Aviva (Other OTC: AIVAF - news) said its capital position would only be slightly dented by the UK's decision to leave the European Union, as it targeted strong cash generation and promised to pay half of its profits in dividends to shareholders.

UK insurers' shares have been buffeted since the vote last month, on concern that weakness in the value of their investments will hit their capital ratios under new European solvency rules.

Aviva's fund arm was one of three to suspend its UK commercial property fund this week, in the first sign of markets seizing up since the vote sent asset prices into a tailspin.

Aviva issued a statement shortly after the Brexit vote saying its solvency ratio remained close to the top of its working range of 150-180 percent, though volatility has increased since then.

A ratio of 100 percent means insurers have enough capital to cover underwriting, investment and operational risks. Analysts say they look for a comfortable cushion above that level.

"Expect a few points knocked off", chief executive Mark Wilson (Oslo: WILS.OL - news) said of the solvency ratio at a capital markets day, which was streamed over the internet.

Chief (Taiwan OTC: 3345.TWO - news) financial officer Tom Stoddard told the event that the firm's solvency ratio was still near the upper end of the range.

Aviva's main market is Britain, but its other businesses include France, Canada and Asia.

"We do benefit from a weaker sterling and also the diversity of our earnings," Wilson said of the likely impact of Brexit.

Companies with overseas businesses have seen their earnings rise in sterling terms after the pound plunged to its lowest in more than 30 years against the dollar and nearly three years against the euro following the vote.

Aviva said in a statement earlier on Wednesday it planned to increase the proportion of earnings its pays out in dividends to 50 percent in 2017. The pay-out ratio was 42 percent in 2015.

The company said it was targeting mid to single digit operating profit growth in the medium term and was looking to generate 7 billion pounds in cash remittances over the period 2016-18, compared with 1.5 billion pounds in 2015.

Analysts at JPMorgan Cazenove said Aviva's statement sent a "reassuring message".

Aviva's shares were down 4.8 percent at 1139 GMT, underperforming peers and one of the FTSE 100's biggest losers. The stock is down more than 19 percent since the Brexit vote.

Wilson said the firm would consider "bolt-on" acquisitions, but was not planning large-scale buys following its 5.6 billion pound ($7.25 billion) purchase of rival Friends Life (Other OTC: RSLLF - news) last year, which helped boost its capital position.

($1 = 0.7728 pounds) (Editing by Simon Jessop and Elaine Hardcastle)