Cashed-up Aviva eyes further deals following Friends First buy

Aviva expects to generate an extra £3bn (€3.4bn) in cash over the next two years and will make acquisitions as well as giving money back to shareholders, it said yesterday, sending its share price to three-month highs.

In November Aviva's Irish arm agreed a deal to buy Friends First Life Assurance for €130m in cash, in a move that boosts the insurer's cross selling capacity - the ability to market multiple insurance and investment products to the same customers.

The past year has seen insurers and reinsurers, among them Allianz and Swiss Re, forced to return cash to shareholders as strong competition cuts opportunities for expansion.

While it is in expansion mode here, Aviva has made a number of disposals in the past year, including in France, Spain, Italy and Taiwan, and says its Indian joint venture is under "strategic review". "The franchises we have left have a pretty decent track record," CEO Mark Wilson told an investor day in Warsaw.

"We are moving into a new phase and we have the capital to be able to do it."

Aviva expects to deploy £2bn of cash in 2018, including £900m to repay expensive debt and the rest to fund more "bolt-on" acquisitions and returning cash, it said in a statement ahead of the investor day.

Some analysts had anticipated Aviva would announce a large scale share buyback, but Mark Wilson said the firm had an "appetite for M&A".

Aviva has said it is only looking at "small purchases" following its £5.6bn. It also has an eye on technology acquisitions - including expanding in so called "insurtech" and artificial intelligence.

Morgan Stanley analyst Jon Hocking reiterated his 'overweight' rating on the stock in a note to clients. "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," he said, giving the shares a 649p price target.

Aviva lifted expectations for earnings growth to more than 5pc annually from 2019 onwards, from a previous target of mid-single-digit growth.

David Kieran