Aviva weighs cash handout after beating profit forecast

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By Carolyn Cohn

LONDON, March 10 (Reuters) - Aviva (Other OTC: AIVAF - news) chief executive Mark Wilson said on Thursday the insurer could give cash back to shareholders, after it beat forecasts with a 20 percent 2015 operating profit rise.

Aviva reported a solvency capital ratio under new European rules of 180 percent, at the top of its 150-180 percent target range. A ratio of 100 percent shows insurers have sufficient capital to cover underwriting, investment and operational risks.

Wilson (Oslo: WILS.OL - news) said the company's strong capital position meant it could grow businesses organically, and reiterated it could also make "bolt-on" acquisitions in markets such as Poland.

"Capital (Other OTC: CGHC - news) returns to shareholders are also on our radar," he said on a media call following the results.

Aviva's shares rose 4 percent to 478 pence at 0825 GMT, the top performer in the FTSE 100 index.

Aviva bought rival Friends Life (Other OTC: RSLLF - news) last year in a 5.6 billion pound deal, creating a market leader in life insurance.

The life and general insurer said it would achieve its target of 225 million pounds in integration synergies in 2016, a year ahead of schedule, and that it expected 1.2 billion pounds in capital synergies.

"The key question now is what will Aviva do with the additional cash - we think it will in part be used to hike future dividends," said Barrie Cornes, analyst at Panmure Gordon, in a note.

Aviva's operating profit of 2.7 billion pounds came in above expectations of 2.49 billion pounds from a forecast compiled by the insurer.

Its combined operating ratio, a key measure of performance in its general insurance business, strengthened to 94.6 percent, against a forecast of 96 percent. A level below 100 percent indicates an underwriting profit.

Aviva said floods in Britain in December had cost it 132 million pounds.

The company said it would pay a final dividend of 14.05 pence per share and total dividend of 20.8 pence, up 15 percent from 2014 but below a forecast of 21.2 pence. ($1 = 0.7047 pounds) (Editing by Sinead Cruise and Alexander Smith)